The Changing Role of HR

and The Challenges Faced

Sabnam Basu Lecture 2
• The HR function hardly had any decision making role
• Compared to finance and marketing, HR function has been
disadvantaged
• In finance: clear distinction between professional practices and
strategic decision making
• Accounting covers the professional practices and strategic
decision making falls into the domain of strategic finance
• Likewise, advertising and sales make up the professional
practices and marketing represents the decision making domain

 Traditional Human Resource Management (HRM):

emergence of HRM starting from the early 1900 to 1980s
the significant phases of HRM,
focal issues and underlying major theoretical frameworks Changing Role of HR
during this phase
 Changing trends in HRM:
the period between the 1980s and 2010
highlighting the emergence of strategic HRM
 Human resource (HR) analytics phase:
the HR analytics stage, also known as people analytics
use of data and analytics
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Traditional Human Resource Management

• Traditional HRM is considered as a reactive approach to HRM

• Included major HRM functions such as
• recruitment and selection, training of employees, payroll administration, performance management
system, salary and compensation benefits, maintaining other compliances
• However, lacked the strategic orientation
• Traditional HR managers were followers of the top management and the strategic
think tank
• Inputs were received from the top management, and HR managers used to comply
with the broad directions with little or no personal inputs
• There are three phases in traditional HRM:
a) personnel management phase
b) industrial relations phase
c) HR maintenance phase
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a) Personnel Management Phase (1900–1935)
• Rapid growth in industrialization, mainly manufacturing economy
• Period of WWI: Upsurge in the establishment of personnel management departments
• Shifted the focus of engineers to productivity and efficiency of work
• Principles of Scientific Management by F.W. Taylor marked a critical landmark in personnel
management
• Primary objective: Figure out the best and fastest way of doing work  enhanced productivity Sub-division of
work into simpler tasks
• Piece-rate pay systems: the total number of tasks completed in a day by a worker formed the basis of his or her
compensation
• The emergence of the personnel system in India around 1920s
• India a labor surplus country had pathetic working conditions of workers
• The Trade Unions Act 1926: formation of trade unions ensuring welfare schemes for workers
• The Royal Commission of 1932 and the Factories Act of 1948 strengthened the welfare conditions of
workers by providing the appointment and chartering duties of a welfare officer in all the factories

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b) Industrial Relations Phase (1935– 1945)

• Period of Great Depression (1929-1939)

• Undermined the role of HR, separate departments not viable
• However, this fall was temporary as firms frequently witnessed unionized struggle
from workers
• With the passage of the Wagner Act of 1935, under which workers got the right to
form a union, employers were compelled to give importance to HR
• By the mid-1950s, unionism increased to 35% from a mere 10% in the 1930s
• HR became a prominent function in organizations, but the nature of functions had
changed
• HR was now mainly involved in dealing with unions and industrial disputes
• The industrial relations (IR) aspect of HR was more significant now, and personnel
activities were only observed as administrative or maintenance oriented
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c) HR Maintenance Phase (1945 to 1970s)
• After World War II  the economy was in the booming phase more and more employment and labor
laws were passed so that a peaceful and sustainable business environment was ensured
• HR witnessed a relatively stable mode for both personnel management and IR
• Personnel management: now more involved in record keeping and maintenance of personnel-related
data such as recruitment, training, and benefits
• IR: was more engaged in maintaining legal compliances and coordinating with government offices for
the smooth functioning of the business
• The personnel management and IR practices had started showing impact on the bottom line, and
hence advancement in the HRM department was bound to happen
• Rationalization of the internal labor market (ILM), which meant building leaders from within and
ensuring job security to employees
• HR functions ensured a fixed time-based promotion and increase in compensation to employees
joining at the entry level
• Negligent attitude towards the external labor market  bottleneck situation

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Emergence of Strategic HRM (1980s)
• In the tradition phase, HRM mostly acted as a supportive function with no significant implications for
business strategy
• Many HR activities were easily chopped off during the time of recession
• Period of 1980s
• Stiff competition
• Challenging environment
• Changing nature of business from manufacturing to service based
• Seasoned managers were compelled to reassess the business value that HR could offer
• The only organizational resource which can give them a competitive advantage
• Gave rise to strategic HRM (SHRM)
• SHRM as a discipline is concerned with the planning and deployment of human resources (people) and
HRM (functions) to increase organizational effectiveness
• Thus, we can say that all activities and functions of HR that add business value and enhance its
efficiency can be termed SHRM

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HR Analytics Phase (2010 Onward)

• Businesses and organizations of all kinds are learning that data-driven decision
making often trumps “gut feel”
• Traditionally, analytics were used mostly in finance (e.g. forecasting), sales &
marketing (e.g. customer targeting) and risk analysis
• Today analytics is everywhere, in HR, manufacturing, customer service, security,
crime prevention etc.
• This is just the beginning
• HR has the potential to become one of the leaders in analytics (Thomas H.
Davenport, Harvard Business Review)
• HR is using one of the most analytical functions in business and even a bit ahead of quantitate oriented
functions like Finance

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New Trends
Workforce Demographics

• Increasing women employees

• Minority group members
• Older workers: “the aging workforce” a big
problem
• Not enough younger workers to replace
• Millennials: e.g., China
• However, Indian’s millennial and young
workforce is an asset
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New Trends
Nature of Job

• Increase in on-demand workers

• Freelancers and independent contractors
• Uber, Airbnb, Amazon’s Mechanical Turk

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New Trends
Human Capital

• The economic value of a worker's experience and skills.

• Human capital includes assets like education, training,
intelligence, skills, health, and other things employers
value such as loyalty and punctuality.
• The more investment a company makes in its
employees, the chances of its productivity and success
becomes higher.
• Some governments recognize that this relationship
between human capital and the economy exists, and so
they provide higher education at little or no cost. People
who participate in the workforce with higher education
will often have larger salaries, which means they can
spend more.

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 New Trends
Globalization Trends

• Extending to new markets abroad

• Free trade areas—agreements that reduce tariffs and
barriers among trading partners—further encourage
international trade.
• Globalization vastly increased international
competition: to lower costs, to make employees more
productive, and to do things better and less
expensively
• Managing the “people” aspects of globalization is a
big task for any company that expands abroad—and
for its HR managers

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New Trends
Economic Trends

• Although globalization supported a growing global

economy, finding some disturbance in economy is
common
• Stagflation
• The unbalanced labor force
• Most of the jobs that the economy added in the
past few years don’t require college educations,
and the Bureau of Labor Statistics says that will
probably continue
• In some occupations (such as high-tech)
unemployment rates are low, while in others
unemployment rates are still very high
• Many people working today are in jobs “below”
their expertise

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 New Trends
Technology Trends

• Increasingly use social media tools such as Twitter,

Facebook, LinkedIn and Glassdoor
• Transparency prompted sensible human resource
(and other) managers to redouble their efforts
• Cloud computing
• Data analytics basically means using statistical
techniques, algorithms, and problem-solving to
identify relationships among data for the purpose of
solving particular problems (such as what are the
ideal candidate’s traits, or how can I tell in advance
which of my best employees is likely to quit?)
• Use information technology to work from remote
locations at least once per month.
• “Co-working sites” offer freelance workers office
space and access to Wi-Fi and office equipment.
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 HR’s Changing Environment
• Increase in the unskilled workforce
• High rates of immigration
• Shift to non-traditional workers
• Aging of the workforce
• Workers with eldercare responsibilities
• More workers with both childcare and eldercare
responsibilities
What does this mean?

• Flexible hours and childcare

• Part time work arrangements
• Literacy training
• Eldercare benefits
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 Challenges to HRM
StrategicChallenges

• Provide a set of services that make sense in terms of

the company’s strategy
• A strategy is the company’s plan for how it will
balance its internal strengths and weaknesses with
external opportunities and threats in order to
maintain a competitive advantage
• HR must be more involved in designing—not just
implementing—companies’ strategies

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The New Human Resource Manager
• More complicated than ever
• Society for Human Resource Management (SHRM) introduced a new
“competency model”
• Leadership & Navigation: The ability to direct and contribute to initiatives and
processes within the organization.
• Ethical Practice: The ability to integrate core values, integrity, and accountability
throughout all organizational and business practices.
• Business Acumen: The ability to understand and apply information with which to
contribute to the Organization’s strategic plan.
• Relationship Management: The ability to manage interactions to provide service
and to support the organization.
• Consultation: The ability to provide guidance to organizational stakeholders.
• Critical Evaluation: The ability to interpret information with which to make business
decisions and recommendations.
• Global & Cultural Effectiveness: The ability to value and consider the perspectives
and backgrounds of all parties.
• Communication: The ability to effectively exchange information with stakeholders.

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ThankYou

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