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We discussed:

• Business organisation and its ecosystem.

• Business organisation has to run for profit.
• But, running business only for profit tends to be
• Profit with values is the right approach.
• Purpose of business is to create customer and add
value to him.
• Employment is a contract: perceived expectations ~
psychological relationship
• Effective manager needs to show performance
efficiency and performance effectiveness.
• In any company:
– Corporate strategy, competitive strategy and
functional strategy has to be in sync.

Functional strategy: HR Strategy

External/internal contexts Business strategy

Three related dimensions of HRM
Functions •Legal
-The entry and •Interpersonal
exit processes •Cognitive
-The growth & •Technical
development of
-The reward and
recognition HR
systems strategy
-The total
organizational Matching Ps
climate for how Policies
people are treated Processes

External context Strategy Internal context

Certain definitions
• Philosophies: overarching values and guiding
principles adopted in managing people
• Strategies: direction in which HRM intends to go
• Policies: guidelines defining how these values,
principles and strategies should be applied and
implemented in specific areas of HRM
• Processes: formal procedures and methods used to
put strategic plans and policies into effect
• Practices: informal approaches used in managing
• Programmes: enables strategies, policies and
practices to be implemented according to plan

Each HR strategy represent a distinctive HR paradigm,
or a set of beliefs, assumptions and values that guide the
managers . One example:

Acquisition of
employees External

Outcomes Commitment Collaboration

HR Strategy (sales HR Strategy (IT)
Locus of
Workplace Paternalistic Traditional
control HR Strategy
HR Strategy (Govt
dept) (manufacturing?)

Exercise: Link each strategy with external context.

The Competency

The Competency Approach

•Job or Role?
job: collection of tasks drawn together for
completion by a person. Tasks are fixed and ways of doing
the same are prescribed.

job keeps changing in dynamic environment but role


role: part that the person is expected to play in

the organisation.

Ex: Accenture knowledge management services:

knowledge mediators
Inputs : what the employee brings to the
job in the shape of knowledge and skills.
Attributes necessary for effective

Process: behaviour of job holders in

applying their knowledge and skills to
delivery of results.

Outputs : measurable/observable results of
the behaviour exhibited ~ efficiency

Outcomes : the ultimate impact of the job

holders on the results of their teams/dept and
their overall contribution to achieving the
objectives of the orgn ~ effectiveness

What one knows, what one does & how one does that
leads to a positive outcome.

The Competencies

“What does a star performer looks like in a

specific setting?”

An underlying characteristic of a person that

results in effective or superior performance.

The Competencies
• It is a behavior, not a skill or knowledge.
• Specific as well as generic.
• Emphasis is on similarities that exist in
competencies to do many jobs.
• Ensure consistency across the organization
through the creation of a common language to
describe performance.
• These are a means of defining where the 20
percent of effort needs to be put in order to
achieve an 80 per cent return.

The Competencies
Why do organisations use competencies?

• application of competencies to appraisal,

training and other HR processes helps to
increase the performance of employees
• competencies provide a means of articulating
corporate values so that their requirements can
be embodied in HR practices, and be readily
understood by all in the organisations.
• to achieve culture change, and raising skill

The Competencies

Competency template:
core and specialist.

Dimensions: the level at which competency needed to

be performed with regard to the demands and
requirements of the role.

Threshold competencies: basic competencies needed

to do a job
Performance competencies: those that differentiate
between high and low performance
Success factor: individual excellence Ref: Microsoft case
Competency: Intellectual horsepower (is bright, intellectually sharp,
learns quickly)

Level 1: Structures basic information accurately and draws informed

Level 2: Analyses and organises complex information from a specific content
area, identifying key issues, assessing impact, and drawing reasonable
Level 3: Analyses, explains and draws logical conclusions based on complex
data from multiple content areas
Level 4: Rapidly identifies the significance of information and insightfully
determines strategic action

Sample questions:
• Tell me about your most intellectually challenging or difficult problem. Why
was it difficult? How did you work through it? How did it turn out?
• Tell me how you went about learning the business at your last job. What
would you do to learn the business at Microsoft?
The Competencies
A large pharma company set out its competencies as follows:
2. Personal qualities :
i. Personal accountability
ii. Personal organisation
iii. Self development
iv. Creativity and innovation
v. Flexibility
vi. Continuous improvement

• Planning to achieve :
ix. Gathering, analysing and interpreting data to produce
x. Problem solving and decision making
xi. Establishing a Plan
xii. Implementing and monitoring acheivement 15
The Competencies

A large pharma company set out its competencies as follows:

3. Business and customer focus:

i. Company environment
ii. Business environment
iii. Customer Focus

4. Supportive Leadership :
vi. Effective leadership
vii. Empowering

The Competencies

A large pharma company set out its competencies as follows:

3. Working with others:

iv. Team working, managing conflict and being supportive
v. Developing colleagues
vi. Giving and receiving feedback
vii. Networking and building relationships
viii. Communication

Means Ends
knowledge process results
skills measurements
attributes Behavior applied to task standards

or or

Focus Focus Focus

Psychological Contract
The notion implies that there is an unwritten set of
expectations operating at all times between every
member of an organisation and various managers and
others in that organisation.
Dynamic two-way exchange of perceived promises and
obligations between employees and firm.
Because this represent how people interpret promises and
commitments, both parties in the same employment
relationship can have different views.

Identify from Microsoft case such instances of perceived


Psychological Contract
These are shaped by the social and economic context,
leadership, communication and HR practices.

Challenges for managers: disbalance

– Managing Expectations
– Communication through different voices ~ different
beliefs about reciprocal promises and obligations.
– Ensure that anticipated exchange of value is confirmed.
Eg: opportunities for self actualisation and challenging work in exchange for
higher productivity.
• Boss promises, but cannot deliver.
• Learning requirements vs scant attention to it
• Involvement and influence vs hands on management
HR Planning,
& Selection

Human Resource Planning
• Linked with business strategy
• Longer term perspective
• Integration with business planning, centered on core
• Looks at the broader issues of how people are employed
and developed.
– Resourcing plans, Flexibility plans and Retention plans
• How many people and what sort of people

What competencies the company needs for present and


Microsoft used to be a techy company till early 1990s, when Bill Gates
started consciously inducting managers with experience in a variety
of industry to bring in the market focus and effectiveness focus.
Human Resource Planning

Strategy for the acquisition, utilisation, improvement and

preservation of human resources

Ex: ONGC, Intel

The business strategy may be evolutionary rather than deliberate; it

may be fragmented, intuitive and incremental. HR planning could
be then “sensible anticipation”.

Human Resource Planning
Generally, the model should have the flexibility of:

• Functional: a firm’s ability to adjust and deploy skills

of its employees to match the tasks required by its
changing workload, production methods, technology
and/or strategy. Multiskilling, internal work
environment. Ex, CPT, South West.
• Numerical: a firm’s ability to adjust the level of labour
input to fluctuations in output. Permanent Part timers,
• Distancing strategies: the replacement of internal
workers with external subcontractors
• Financial: support for the achievement of flexibility
through the pay and reward structure. Ex: GoI
A process of attracting people who might make a
contribution to the firm

But, what happens when recruitment is a never

ending process?

Nurses in USA, UK (nursing schools in Kerala)
Fast-food industry – unskilled position but
turnover rates are 300 percent. (3 incumbents for
every job in a year)

• Internal vs External
- irrational commitment to past “sunk costs”
- misdirected persistence
- escalation bias

- costly
- takes time to learn
- negative effect on morale of insiders
- less data available on candidature
Ex: Intel deliberately recruited an ‘external
architect of change’: its marketing head from
Samsung 26
• Selection: process of gathering and assessing information
about job candidates and ultimately making decisions
about personnel.
– Detailed standardised biodata, tests – aptitudes, psychological,
group exercises, interviews, assessment centers.
• Selection process:
– Individual differences
– Prediction
• Selection methods:
– Reliability- consistency of measurement
– Validity: extent to which these predicts one or more
important criteria
– Utility: economic gains derived from using a particular
selection method. (eg, assessment centers? Usage of
internet to do campus recruitment?) 27
Psychometric tests: generally self-report questionnaires
that indicates traits, intelligence, values, interests, attitudes
and preferences.
There are no right/wrong answers but a range of choices
between possible answers.
It provides valid data that enable reliable predictions of
behavior to be made, and thus assist in the process of
making objective and reasoned decisions.

Match competencies:

The set of behavior patterns that the incumbent needs to

bring to a position in order to perform its tasks and
functions with competence.

Person – job role fit.

What am I looking for? Where do I find the right people?

Match value system:

- ‘The HP Way’ : people processes had integrity

- value system which guides the day to day action;

percolates across; the company’s each action
reinforces the shared values.

Hiring a sales person : sell based on inherent strength of

product vs sell using the inefficiency of the system.

Person – culture fit.

Will they fit in?

Match Need:
- A person looking for a cutting edge
technology work……….
- A person not comfortable with team based
- Unrealized expectations about exciting
careers can lead to disillusionment and

Person – his need.

Can the company meet up his expectations?

Is the company busy selling the present, and not the future?
Match Image:
- Image projected vs perception outside.
- Image projected vs experience inside
Argument : people are attracted to an organisation on the
basis of their own interests and personality.

- People of similar type will be attracted to the same

- The attraction of similar types will begin to determine
the place.
- Socialization process.
- An attraction – selection – matching - attrition
framework takes over.
Person – his image of organisation has to fit
Is this where I wanted to work?
Management System

Appraisal: a process that provides an analysis of a person’s
overall capabilities and potential, allowing informed
decisions to be made for particular purposes.

Assessment: Data on person’s past and current work

behavior and performance are collected and reviewed.

assessment is a subprocess of appraisal

Performance appraisal is the formal process, generally at

the end of year, with bureaucratic, top down approach.

But, why have a performance appraisal system?

• As part of employment contract, employer differentiates –
and appraisal system is one way to differentiate.
Ex: raja and his council of ministers
• Differentiation happens through usage of one or more criteria;
Performance is one of them.
Ex: ministry expansion.
• The common factors of all assessment systems is collection
of evidence.
Ex: formal or informal
• Review and analysis of evidence leads to a judgement and
may be, a decision.
Ex: Judgement: he is worthless so promote him so that others can also
find him out!

• Objectivity is expected.
Ex: but never assured.
Means Ends
knowledge process results
skills measurements
attributes Behavior applied to task standards

or or

Focus Focus Focus

Which area can you, as manager, control/understand/replicate?

Framework for the design of performance
appraisal mechanisms
Knowledge of the transformation process

Cell 1 Cell 2
Behavior Or Output Outputs
Ability (manufacturing,
service orgn) (sales)
outputs Cell 4 Cell 3
(creative problem
LOW Behavior Solving)

Performance Management
Performance Management System is a continuous, and
much wider, comprehensive and natural process of
management that clarifies mutual expectations, emphasizes
the support role of managers who are expected to act as
coaches rather than judges, and focuses on the future.

It provides for expectations to be defined and agreed in

terms of:

- role responsibilities and accountabilities (expected to do)

- skills (expected to have)
- behaviors (expected to be)

PA helps when jobs are well defined, PMS helps in roles.

Performance Management
An attempt to show a strategic integration of HRM
processes with assessment and appraisal central to
a set of interrelated activities, which together can be
linked to the goals and direction of an organisation.

Any such system is a information-processing system,

bothered about evidence in providing vital data for rational,
objective and efficient decision-making related to ….
• critical success factors
• performance measures
• reinforcements
• development plans
• internal staffing
• managing careers
• reward & recognition 39
Performance Management
The primary elements are:

• agreement
• measurement
• feedback
• positive reinforcement
• dialogue

- Planning: performance and development agreement –

defining role requirements & setting objectives
- Acting: managing performance throughout the year
- Reviewing: assessing progress and acheivements so
that action plans can be prepared and agreed and, in
many schemes, performance rated. Ex: Escorts
Performance Management
The five issues that you may like to remember that
makes for a successful PMS:

• the meaning of performance: what results and how

they were obtained
• the significance of values: upholding values of the
• the meaning of alignment: alignment of individual and
organisational objectives
• managing expectations: shared understanding
• the significance of discretionary behavior: choices
people make about how they carry out their work and the
amount of effort, care, innovation and productive behavior
they display.

Conflicts inherent in any PMS system
information for Individual seeking valid
developing performance feedback

Organisation seeking Individual seeking

information on which important extrinsic
to base rewards reward

What constitutes
counselling ?
Asking & Development
k Commu
Helping Mutuality

Identifi Influen Reinforce
cation cing
Reward Management
Reward refers to all of the monetary, non-
and psychological payments that an organization
provides for its employees in exchange for the work
they perform.

Pay: an actual income in exchange for


Recognition: psychological income, or what

coming to work really worth while.

Reward Management
Employment as a contract:

- Cooperation is essential if anything is to be

- Tensions and conflict are engendered through the
logic : buying of labour power is reward for one
group and cost for other.
- Fundamental tension:
- orgn performance ~ pay incentives or pay cuts
- ‘effort’ of labour ~ pay is a ‘effort controller’

Reward Management
• Reward people fairly, equitably and consistently.
• The amount of pay and way it is packaged & delivered ~
motivate, energize and direct behavior.
Eg IBM: redesign in late 1990s. Performance linked pay. HR makes the
framework, but day to day administration to line managers.
Redesign was aimed at changing the way IBMers thought about their
work, focused their energies and directed their performance.
• Shape the composition of workforce. Eg, Microsoft
• A good reward strategy can influence firm’s success:
• Motivates
• Equity feeling : Input, effort, performance, outcomes.
• Support, communicate, reinforce firm’s culture,
values, competitive strategy.

Reward Management
Reward strategy has to take into account:
• context of particular management system and
• tailored to particular work situations and internal
and external contexts
• high-probability estimates by employees
concerning their effort and their performance, and
their performance and desired outcomes.
• a system of trust

Pay for Performance:

- Sears mechanics were paid bonuses as a percentage of
repair receipts.
- Paying teachers for higher student scores.
- Merrill Lynch analysts pushing as strong buys, that they
internally blasted as poor choice. (lawsuit of $100 million)
Model of Total Reward
Pay Benefits
• Base pay • Pensions
• Contingent pay • Holidays
• Cash bonuses • Health care
• Long term incentives • Other perks
• Shares • flexibility

Individual Profit sharing Communal
Learning and Work Environment
•Core values of the organisation
development •Leadership
• Workplace learning and •Employee voice
• Training •Acheivement
• Performance management •Job design and role
• Career development development
• Quality of working life
• Work/life balance 48
Organisational Design

What should I be doing?

How should I be doing it?
• roles and accountabilities
• communications and clarifications

What’s in it for me? How am I doing?

• base pay Strategy, vision How can I grow?
• incentive pay and values • learning and
• benefits development
• flexibility • performance culture
• recognition • coaching

Reward Performance
Integrated Reward Model: an example
Integrated model: individual
performance and satisfaction
Instrumentality: probability
that performance will
produce desired results

Individual Extrinsic
Attributes Rewards

Motivation Work effort Equity

Performance Satisfaction
Organisational Intrinsic
Support & rewards

Valence: value of outcome

to individual

Expectancy: probability that efforts will lead to desired performance

Case Summary : United Airlines

ESOP was the reason for downfall and bankruptcy of UA

• Survey suggest that half of the companies are planning to limit

broad based options program with limited participation. Eg,
Kodak, Time Warner.

Are they justified?

Many studies prove that broad based ownership does make a difference.

Case Summary : United Airlines

What went wrong?

• Adopted under duress in 1994.

• Shown as a lieu of compensation foregone. Less than 2% of the
firms link ESOPs so.
• Not universally accepted by workforce.
• Opposed by the new management.

Case Summary : United Airlines

What went wrong?

• In a big organisation, employees cannot see link between their

effort and company’s results.
• Free rider problem.
• More interest in short term benefit at the expense of investment
in future growth and profitability.

Case Summary : United Airlines

• Employees must think that the amount they hold can significantly improve
their financial prospects. Were they puzzled? Did they think as another

• Managerial policies and practices must reinforce the plan.

– Believe in what you propose.

• Employees must face a true sense of company ownership.

– That is, they have to “own” responsibilities once they start owning employer’s
– Communicate the meaning of ownership
– Training program to teach about financial statements and how to read and
understand them
– Sharing of managerial information
– Frequent communication a la board members/shareholders.

Case Summary : United Airlines

• Large number of employees

• Make it worth while financially. – ensure participants have
enough to feel like owners.
• Turn owners into decision makers.
– Prerogatives of ownership.
– “participatory management” QCs, self managing teams, ad hoc task
forces, etc.

ESOP is a commitment by the company, not just throwing in a few stocks.

Case Summary : United Airlines
• Does the reward strategy reflect corporate goals?
• Are the messages sent by the pay system aligned to other management
• Has the organisation been sharing profits in a way which creates a sense of
fairness at all levels of the company?
• What does people value with regard to pay and benefits?
• Salaries : competitive?
• Pay structure : segmented? Transparent?
• Job evaluation? Equity?
• Is reward only way to build up commitment to performance, teamwork, etc?
• Is the reward system flexible enough to cope with change?