Chapter 2

Context of
Human Resource Management
Learning Objectives

• Delineate Environmental Factors

• Describe each Factor and its Impact on HRM
 External

Economic
Te
Po
c
liti
ca hn
l-L
eg o log
al ica
l

Bodies
HRM
Cultural

Professional
HRM and its Environment

Or
ga
n
an isat
Un
d C ion ion
on Cu s
flic ltu
ts re
Leadership
Strategy, Task &

Internal
External Forces Internal Forces

• Political-Legal • Strategy, Task and

– Legislature Leadership-
– Executive • Unions
– Judiciary • Organisational Culture
• Economic and Conflict
– Suppliers • Professional Bodies
– Competitors
– Customers
– Economic Growth
– Industrial Labour
– Diversity
– Globalisation
• Technological-Skill Building, HRIS
• Cultural-People from different
culture, attitude towards work,
traditional and modern, work
ethics, right and wrong,
 HR and Technology

Consideration of adopting a
new technology

Strategic Issues Strategic HR issues

• Impact on productivity
• Impact of quality of output
• Impact on training/delivery of
output
• Cost of equipment/technology
• Adequacy of current facilities
• New market opportunities
afforded
• Impact on productivity
• Necessary expansion/
contraction of workforce
• Training needed to utilise new
technology
• Costs for hiring, severance,
training
• Effective management of
change
• Impact on work group dynamics
Scanning the Environment

• Enacted Environment(create a relevant environment which

the company want)
• Domain and Domain Consensus (consensus with all
stakeholder )
• Task Environment (significant portion of the environment
which highly effect the organisation)
• HR Department to play major role in Scanning Environment
1-21

HRM in the new millennium

HRM strongly supports the view that when opportunities for growth
and enhancement of skills are available in an organisation, people will
be stimulated to give their best, leading to greater job satisfaction and
organisational effectiveness.
HR managers in the new millennium are expected to successfully
evolve an appropriate corporate culture, take a strategic approach to
the acquisition, motivation and development of human resources and
introduce programmes that reflect and support the core values of the
organisation and its people.     
    Size of work force
Demands for better pay, benefits, working conditions
1-21

HRM in the new millennium

Composition of workforce
Equal pay for equal work
Breaking down of glass ceiling
Constitutional protection to minority groups
Importance to factors such as age, sex, religion, region, caste especially while
dealing with multifarious, heterogeneous, culturally diverse work groups

 Employee expectations
Better educated, more knowledgeable, emotionally strong and demanding
workforce
Demand for educated, trained, experienced and knowledgeable workers growing
Understand individual differences and develop appropriate policies to meet their
growing expectations.
1-23

HRM in the new millennium

 Changes in technology
Modernisation, computerisation, sophistication increasing by the day
Knowledge and skills need to be refined constantly
Training, retraining and mid-career counselling important
Equip employees so as to cope with dramatic challenges brought forward by rapid
advances in science and technology
  Life style changes
 Environmental challenges
 Personnel function in future
Job redesign
Career opportunities
Productivity
Recruitment and selection
Training and development
Rewards
Safety and welfare       
1-23

HRM in the new millennium

 Changes in 21st century affecting HRM

HR as a springboard for success
Talent hunting, developing and re-training
Lean and mean organisations
Labour relations to Employee Relation
Health and benefit programmes
 The Changing Environment of Human
Resource Management

Globalization Trends

Technological Trends
Changes and Trends
in Human Resource
Management Trends in the Nature of Work

Workforce Demographic Trends

3-3
External and internal factors influencing
the Personnel function

External factors Internal factors

 Technological factors v Mission

v Economic challenges v Policies
v Political factors v Organisational culture
v Social factors v Organisation structure
v Local and Governmental issues v HR systems
v Unions v Employers’ demands
v Workforce diversity
3-4

Technological Changes And HRM

Technology includes tools, machinery, equipment, work procedures

and employee knowledge and skills. The impact of technology on HR
can be profound, as the following things clearly reveal:

 New skills, knowledge, experience and expertise required to gain

the edge over rivals.
 Downsize operations, cut organisational layers and cut the extra
fat to survive in a competitive world
 Collaborate and achieve teamwork
 Relocate work from the office to the home
 Internet and intranet revolution
3-5
How to deal with a human resource
surplus situation?

Why? Consequences? Managing Survivors of

 Automation  Cuts payroll expenses
 Restructuring  Eliminates extra layers
 Mergers  Improves functioning if
firm’s product and
service profile is good
downsizing
Bitterness, anger, disbelief
and shock need to be
handled properly
 Give information as to why
the action had to be taken

  Tell how it is going to help

 Acquisitions Shocks those left out
the firm and employees in
 Competitive  Shattering impact on the long run.
Pressures employee motivation
and morale if not managed
properly
3-6

Role of HR in a virtual organisation

A virtual organisation is a network of companies or employees

connected by computers. Virtual workers work from home, hotels,
their cars, or wherever their work takes them. The human resource
function plays a unique role in a virtual organisation:
 Psychological fit: The lack of face-to-face interaction in a virtual
organisation, virtually compels HR professionals to determine the
psychological fit between different units initially.
 System alignment: Given the lack of physical proximity, it
becomes even more critical that the organisation's mission, vision and
measures be aligned and that all parties are familiar with these
issues; the HR function can play an important role in this task.
 Reconsider rewards: In a virtual unit, very few permanent
positions exist. In many cases, the organisation will be staffed with
workers having different motivational forces. So rewarding each
entity in an effective way becomes an important job.
Cont…
3-7

Role of HR in a virtual organisation

 Reconsider staffing needs: In a virtual organisation, most

employees work on a contractual basis. Finding people with
requisite skills, knowledge and motivation levels becomes an
important activity.
 Build partnerships: Virtual, teams have to be built from scratch
paying attention to their unique requirements. The concept of
employment needs to be replaced by the concept of 'partnership'
especially when most tend to work independently away from the
permanent employees or owners of the organisation
 Develop leaders: Leaders become the major forces for building
trust, creating a mission and instilling a sense of belonging to the
organisation. HR can play a major role in ensuring that leaders
assume these responsibilities and meet them in an effective way.
3-8

Total Quality Management

Programmes

TQM is a way of creating an organisational culture committed to the

continuous improvement of skills, teamwork, processes, product and
service quality and customer satisfaction.
3-9

TQM: The main ideas

 Do it right the first time

 Be customer oriented
 Make continuous improvement a way of life
 Build teamwork
 Empower people
 Create a climate of trust, an atmosphere for innovation
3-10

Total Quality HR Approach

The Total Quality HR Approach is all about employee

participation and empowerment, carried out in a sincere
and wholehearted manner. Rewards are designed to
meet employee needs. Employees are treated like
customers. 360 degree appraisals are carried out
before picking up the best performing teams. Small
ideas and improvements are encouraged.
3-12

Benchmarking

Effective implementation of TQM requires benchmarking. The

essence of benchmarking is striving to be the best of the best in one’s
area of operations.
It is a continuous process of measuring products, services and
practices against the toughest competitors or industry leaders with the
aim of mutual improvement.

Reengineering
The primary focus of TQM is on continuous improvement or ongoing
incremental change. Reengineering is all about achieving this.
Reengineering takes place when more than 70 per cent of the work
processes in an organisation are evaluated and altered. The focus is
on simplifying operations and making them more efficient and
customer oriented.
3-15

Economic, Political And Social

Challenges And HR

Now-a-days, people, goods, capital and information are moving

around the globe as never before.
Global competition is making every firm to think in terms of gaining
an edge over rivals by producing high quality goods at a very
competitive price.
Here the ‘people’ dimension comes into being.
Incentives, favorable work climate, team spirit, freedom to think
and act independently, and a host of other HR initiatives are
needed to keep talent from flying away.
3-16

What HR managers can do ?

 Use workforce skills and abilities in order to exploit environmental

opportunities and neutralise threats.
 Employ innovative reward plans that recognise employee contributions and
grant enhancements.
 Indulge in continuous quality improvement through TQM and HR
contributions (training, development, counselling, coaching etc.).
 Utilise people with distinctive capabilities to create unsurpassed
competence in an area (Xerox in photocopier, 3M in adhesives, Telco in
trucks, Britannia in biscuits, Nestle in coffee, McDonald’s in fast foods,
etc.).
 Decentralise operations and rely on self managed teams to deliver goods in
difficult times (Motorola is famous for short product development
cycles. It has quickly commercialised ideas from its research labs).
 Lay off workers in a smooth way, explaining facts (IBM, Kodak, Xerox,
AT&T, Steel and Textile firms in India etc.) to unions, workers and other
affected groups. HR generally plays a key role, these days, in
planning and implementing corporate downsizings, and then in
maintaining the morale of the remaining employees.
 The Changing Role of
Human Resource
23 Management

Strategic Human
Resource
Management

Managing with the New Creating High-

HR Scorecard Responsibilities Performance Work
Process for HR Managers Systems

Measuring the HRM

Team’s Performance

© 2009 Dorling Kindersley (I) Pvt. Ltd. All rights reserved.

High-Performance- Work System Practices

24
• Employment security
• Selective hiring
• Extensive training
• Self-managed teams/decentralized decision making
• Reduced status distinctions
• Information sharing
• Contingent (pay-for-performance) rewards
• Transformational leadership
• Measurement of management practices
• Emphasis on high-quality work
Benefits of a High-Performance Work System
(HPWS) 25

• Generate more job applicants

• Screen candidates more effectively
• Provide more and better training
• Link pay more explicitly to performance
• Provide a safer work environment
• Produce more qualified applicants per position
• Hiring based on validated selection tests
• Provide more hours of training for new employees
• Conduct more performance appraisals
 Measuring HR’s Contribution

• The HR Scorecard 26

– Shows the quantitative standards, or

“metrics” the firm uses to measure HR
activities.
– Measures the employee behaviors
resulting from these activities.
– Measures the strategically relevant
organizational outcomes of those
employee behaviors.
The Human Resource Manager’s Proficiencies
27

• New Proficiencies
– HR proficiencies
– Business proficiencies
– Leadership proficiencies
– Learning proficiencies
The Human Resource Manager’s Proficiencies
(cont’d) 28

• Managing within the Law

– Equal employment laws (US)
– Occupational safety and health laws
– Labor laws
• Managing Ethics
– Ethical lapses
– Sarbanes-Oxley in 2003
– Securities and Exchange Board of India (SEBI)
– Ministry of Corporate Affairs (MCA)