STUDENT ZONE

Chapter 2
Strategic Human Resource Management

John Bratton
CHAPTER OVERVIEW

In Chapter 1, we examined the theoretical debates on the nature of

the HRM. Chapter 2 discusses the concept of strategic HRM (SHRM)
and explores various themes associated with SHRM. It begins with
introducing the student to the traditional prescriptive strategic
management model, the SWOT model. The chapter then goes on to
examine competing SHRM models: the ‘matching’ model, the
‘control-based’ model, the ‘resource-based’ model and an ‘integrative’
model, before reviewing some important dimensions associated with
SHRM: organizational performance, re-engineering, leadership,
workplace learning and trade unions.

Chapter objectives

After reading this chapter, you should be able to:

 Explain the meaning of strategic management and give an

overview of its conceptual framework.
 Describe the three levels of strategy formulation and comment on
the links between business strategy and human resource
management.
 Explain three models of HR strategy, control, resource and
integrative.
 Comment on the various strategic HRM themes of HR-
performance link, re-engineering, leadership, workplace learning
and trade unions.

CHAPTER OUTLINE

Introduction

1
Strategic planning model shows how corporate and business level
strategies, as well as environmental pressures determine the choices
of HRM structures, policies and practices.

A number of important questions are addressed: How do higher-level

corporate decisions affect HRM? Is it possible to identify a cluster or
‘bundle’ of HR practices with different strategic competitive models?
Do firms that adopt certain bundles of HR practices experience
superior performance?

Strategic management

Definition: strategic management refers to a pattern of managerial

decisions and actions that determines the long-run performance of
the organization.

Strategic management requires constant adjustment of three

interdependent poles, figure 2.1.

HRM in Practice 2.1 ‘Raising the Profile of the HR Agenda’ this

example emphasizes the importance for managers and HR
professionals of understanding the links between business strategy
and HR strategy.

Model of strategic management

The prescriptive management literature describes many different

strategic planning models. Most however replicate what we have
done, they reduce the basic idea to the SWOT model.

Model reduces the strategic management process into five neatly

delineated steps (see figure 2.2).

Hierarchy of strategy

The prescriptive model depicts different levels of strategy: corporate,

business, and functional. Strategies must be integrated.

Business-level strategy and HRM

2
At functional level, HR strategy is formulated and implemented to
facilitate the business strategy goals.

Business-HRM links are classified in terms of low-cost,

differentiation and focus. Four simple business-level strategies are
discussed with relevant examples: low-cost leadership strategy
(e.g. Wal-Mart), Differentiation strategy (e.g. Tommy Hilfiger),
Focused low-cost leadership strategy (e.g. Rent-a- Wreck car hire)
and Focused differentiation (e.g. Mountain Equipment Co-
operative).

Miles and Snow’s (1984) strategic models are examined: Defenders,

Prospectors, Analyzers and Reactors. Proactive - HR specialist
helps formulate strategy. Reactive - HR function is fully subservient.

Some models emphasize the importance of the environment as a

determinant of HR policies and practices.

HRM in Practice 2.2 - ‘Culture Shift Invigorates Dell’

This report illustrates a culture change and the adoption of an
alternative business strategy at Dell computers.

Strategic HRM

SHRM literature is rooted in manpower [sic] planning.

Strategic HRM is described as the process by which managers seek

to link human assets to the strategic needs of the organization.

HR strategy is discussed in terms of an ‘outcome’ – the pattern of

decisions relating to HR policies and practices.

The Four-task model of HRM provides the rationale that guides the
strategic choice of HR policies and practices.

The environment as a determinant of HR strategy is examined as is

the notion of ‘upstream’ or ‘first-order’ strategic decisions. HR
approaches are ‘third-order’ strategic decisions.

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The matching model

In Devanna’s et al model, HRM strategy and structure are linked to

and influenced by environmental forces, figure 2.6.

This model proposes that SHRM should be concerned with matching

the “five ps” which reinforce employee role behaviour for each
generic Porterian competitive strategy.

The notion of ‘fit’ is also a central tenet of Beer’s et al model (refer

you back to chapter 1 and figure 1.3)

Limitations of the matching model.

Conceptual - predicted upon the rational view of strategic decision-
making.
Empirical - limited empirical support for the model

Human resource strategy models

This section of the chapter examines the link between business

strategy and HR strategy. HR strategies are the pattern of decisions
regarding HR policies and practices used by management to design
work, select, train and develop, appraise, motivate and control
employees.

Three models to differentiate ‘ideal types’ of HR strategies:

a) Controlled-based model
b) Resource-based model
c) Integrated model

Controlled-based model discusses management structures and HR

strategy as instruments to control all aspects of the labour process in
order to secure higher efficiency and profitability. Individual,
bureaucratic and technical controls are discussed.

a) Process-based control adopted when mean-ends relation are

certain
b) Outcome-based controls adopted when means-ends are less
certain

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Resource-based model emphasizes the strategic value of human
assets and continuous workplace learning. Whereas the matching
SHRM model focuses on external ‘Opportunities’ and “Threats’ (from
SWOT), the resources-based SHRM model focuses on the strategic
significance of internal ‘ Strengths’.

Organizations can identify which resources are potentially strategic

by using Barney’s (1991) criteria: a) valuability b) rarity c)inimitability
d) substitutability. The organization’s resources and capabilities
shape strategy (see figure 2.7).

a) Limitations of resource-based model –

conceptual: conceptual vagueness, imbalance giving too much
attention to internal resources at the expense of external
competition.
Empirical: little evidence that many firms have adopted the
‘learning organization’ or ‘soft’ SHRM model.

b) Integrative Model characterizes two dimensions of HR strategy:

a) Acquisition and development focuses on internal human capital

b) Locus of control focuses on monitoring employees’ compliance

Two dimensions (a and b) yield four ‘ideal types’ of dominant HR

strategies: commitment, collaborative, paternalistic and
traditional.

HRM in Practice 2.3 – ‘Airline hopes to cut costs, regain market

share’
Case illustrates how a North American airline, Air Canada, introduced
a low-cost leadership business strategy (Zip Air Inc) and a low-cost
HR strategy to achieve its strategic goals. Can you think of any
European examples of low-cost leadership business strategies?

Evaluating SHRM and HR Strategy

Critical organizational theorists have questioned the linear and

‘rational’ choice model because lack of information, time and
‘cognitive capacity’.

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SHRM and HR strategy thesis focuses too much on the link between
external marketing strategies the HR function and pays insufficient
attention to internal operating strategies.

The notion that a commitment HR strategy follows from a real or

perceived ‘added value’ competitive strategy is plausible in theory but
problematic in practice. Managerial behaviour is influenced also by
the indeterminacy of the employment contract.

Achieving the goal of ‘close fit’ of business and HR strategy may

contract the goal of employee commitment and cooperation. The
foregoing analysis suggests that there is ‘no one best way” of
managing contradictions.

Dimensions of Strategic HRM

This part of the chapter examines five important themes associated

with SHRM. With the exception of leadership, they provide an
introduction to the following chapters in the text.

1. Organizational performance - examines the HRM-firm

performance link and introduces you to some of the methodological
challenges of measuring the impact of HRM that are examined in
more detail in Chapter 14.

1. Organizational architecture - it is claimed that the process leads

to flatter organizational structures, ‘reengineering’, redesigned work
teams, use of IT, senior management commitment.

2. Leadership - considered important in the ‘soft’ HRM model in order

to develop a high level of employee commitment and cooperation.

3. Workplace learning - posited to be a central building block in the

resource-based SHRM model and in the ‘learning organization’.
See also Chapter 9.

4. Trade unions - draws attention to the contradictions between the

normative HRM model and trade unions and introduces the debate

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 on ‘partnership’ between management and unions see also chapter
11.

ENGAGING IN CRITICAL THINKING

 RELECTIVE QUESTION/ESSAY QUESTION

Is the resource-based SHRM model distinctive? How does this model

relate to the debate on ‘hard’ and’ soft’ variants of HRM?

 HELP

This question requires you to evaluate strategic HRM models. You

may wish to suggest that a comprehensive answer would define
strategy and explain HRM-business strategy links. One way for you to
explain the difference between the SHRM models is to use the
SWOT approach. The matching model emphasizes external
‘opportunities’ and ‘threats’ facing the firm, whereas the resource-
based model draws attention to internal ‘strengths’. Barney’s (1991)
four criteria for identifying potential strategic resources should be
discussed: a) volubility b) rarity c) inimitability (d) substitutability. It
may be suggested that a focus on external forces mirrors the ‘hard’
HRM model. The resource-based approach, with its focus on
‘knowledge capital’ and learning reflects many of the features
contained in the ‘soft’ version of HRM. Look at Figure 2.8 and
consider the merits of ‘commitment HR strategy’ versus ‘traditional
HR strategy’.

CHAPTER CASE STUDY: AIR NATIONAL

This case can be used to illustrate the HRM-business strategy links.

The case is based upon Trevor Colling’s 1995 article, “Experiencing
turbulence: competition, strategic choice and the management of
human resources in British Airways” and post September 11, 2001
newspaper reports on restructuring in the airline industry. Look at
‘HRM in Practice 2.3’, which discusses a new business and HR

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strategy recently introduced by Air Canada. Visit Air Canada’s Web
site and, in particular, the company’s new services. Note the union-
management implications and the different reward systems for Air
Canada’s new business strategy. Also link case study to four HR
strategies depicted in figure 2.8

Human Resource Management - Nature, Scope, Objectives And

Function
Published by ankur | July 24, 2009 - 1 year 26 weeks ago

Human resources may be defined as the total knowledge, skills,

creative abilities, talents and aptitudes of an organization's workforce,
as well as the values, attitudes, approaches and beliefs of the
individuals involved in the affairs of the organization. It is the sum
total or aggregate of inherent abilities, acquired knowledge and skills
represented by the talents and aptitudes of the persons employed in
the organization.

The human resources are multidimensional in nature. From the

national point of view, human resources may be defined as the
knowledge, skills, creative abilities, talents and aptitudes obtained in
the population; whereas from the viewpoint of the individual
enterprise, they represent the total of the inherent abilities, acquired
knowledge and skills as exemplified in the talents and aptitudes of its
employees.

Human Resource Management: Defined

Human Resource Management has come to be recognized as an
inherent part of management, which is concerned with the human
resources of an organization. Its objective is the maintenance of
better human relations in the organization by the development,
application and evaluation of policies, procedures and programmes
relating to human resources to optimize their contribution towards the
realization of organizational objectives.
In other words, HRM is concerned with getting better results with the
collaboration of people. It is an integral but distinctive part of
management, concerned with people at work and their relationships
within the enterprise. HRM helps in attaining maximum individual
development, desirable working relationship between employees and

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employers, employees and employees, and effective modeling of
human resources as contrasted with physical resources. It is the
recruitment, selection, development, utilization, compensation and
motivation of human resources by the organization.

Human Resource Management: Evolution

The early part of the century saw a concern for improved efficiency
through careful design of work. During the middle part of the century
emphasis shifted to the employee's productivity. Recent decades
have focused on increased concern for the quality of working life,
total quality management and worker's participation in management.
These three phases may be termed as welfare, development and
empowerment.
Human Resource Management: Nature
Human Resource Management is a process of bringing people and
organizations together so that the goals of each are met. The various
features of HRM include:
• It is pervasive in nature as it is present in all enterprises.
• Its focus is on results rather than on rules.
• It tries to help employees develop their potential fully.
• It encourages employees to give their best to the organization.
• It is all about people at work, both as individuals and groups.
• It tries to put people on assigned jobs in order to produce good
results.
• It helps an organization meet its goals in the future by providing for
competent and well-motivated employees.
• It tries to build and maintain cordial relations between people
working at various levels in the organization.
• It is a multidisciplinary activity, utilizing knowledge and inputs drawn
from psychology, economics, etc.
Human Resource Management: Scope
The scope of HRM is very wide:
1. Personnel aspect-This is concerned with manpower planning,
recruitment, selection, placement, transfer, promotion, training and
development, layoff and retrenchment, remuneration, incentives,
productivity etc.
2. Welfare aspect-It deals with working conditions and amenities such
as canteens, creches, rest and lunch rooms, housing, transport,
medical assistance, education, health and safety, recreation facilities,
etc.

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3. Industrial relations aspect-This covers union-management
relations, joint consultation, collective bargaining, grievance and
disciplinary procedures, settlement of disputes, etc.
Human Resource Management: Beliefs
The Human Resource Management philosophy is based on the
following beliefs:
• Human resource is the most important asset in the organization and
can be developed and increased to an unlimited extent.
• A healthy climate with values of openness, enthusiasm, trust,
mutuality and collaboration is essential for developing human
resource.
• HRM can be planned and monitored in ways that are beneficial both
to the individuals and the organization.
• Employees feel committed to their work and the organization, if the
organization perpetuates a feeling of belongingness.
• Employees feel highly motivated if the organization provides for
satisfaction of their basic and higher level needs.
• Employee commitment is increased with the opportunity to
dis¬cover and use one's capabilities and potential in one's work.
• It is every manager's responsibility to ensure the development and
utilisation of the capabilities of subordinates.
Human Resource Management: Objectives
• To help the organization reach its goals.
• To ensure effective utilization and maximum development of human
resources.
• To ensure respect for human beings. To identify and satisfy the
needs of individuals.
• To ensure reconciliation of individual goals with those of the
organization.
• To achieve and maintain high morale among employees.
• To provide the organization with well-trained and well-motivated
employees.
• To increase to the fullest the employee's job satisfaction and self-
actualization.
• To develop and maintain a quality of work life.
• To be ethically and socially responsive to the needs of society.
• To develop overall personality of each employee in its
multidimensional aspect.
• To enhance employee's capabilities to perform the present job.
• To equip the employees with precision and clarity in trans¬action of

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business.
• To inculcate the sense of team spirit, team work and inter-team
collaboration.
Human Resource Management: Functions
In order to achieve the above objectives, Human Resource
Management undertakes the following activities:
1. Human resource or manpower planning.
2. Recruitment, selection and placement of personnel.
3. Training and development of employees.
4. Appraisal of performance of employees.
5. Taking corrective steps such as transfer from one job to another.
6. Remuneration of employees.
7. Social security and welfare of employees.
8. Setting general and specific management policy for organizational
relationship.
9. Collective bargaining, contract negotiation and grievance handling.
10. Staffing the organization.
11. Aiding in the self-development of employees at all levels.
12. Developing and maintaining motivation for workers by providing
incentives.
13. Reviewing and auditing man¬power management in the
organization
14. Potential Appraisal. Feedback Counseling.
15. Role Analysis for job occupants.
16. Job Rotation.
17. Quality Circle, Organization development and Quality of Working
Life.
Human Resource Management: Major Influencing Factors
In the 21st century HRM will be influenced by following factors, which
will work as various issues affecting its strategy:
• Size of the workforce.
• Rising employees' expectations
• Drastic changes in the technology as well as Life-style changes.
• Composition of workforce. New skills required.
• Environmental challenges.
• Lean and mean organizations.
• Impact of new economic policy. Political ideology of the
Govern¬ment.
• Downsizing and rightsizing of the organizations.
• Culture prevailing in the organization etc.

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Human Resource Management: Futuristic Vision
On the basis of the various issues and challenges the following
suggestions will be of much help to the philosophy of HRM with
regard to its futuristic vision:
1. There should be a properly defined recruitment policy in the
organization that should give its focus on professional aspect and
merit based selection.
2. In every decision-making process there should be given proper
weightage to the aspect that employees are involved wherever
possible. It will ultimately lead to sense of team spirit, team-work and
inter-team collaboration.
3. Opportunity and comprehensive framework should be provided for
full expression of employees' talents and manifest potentialities.
4. Networking skills of the organizations should be developed
internally and externally as well as horizontally and vertically.
5. For performance appraisal of the employee’s emphasis should be
given to 360 degree feedback which is based on the review by
superiors, peers, subordinates as well as self-review.
6. 360 degree feedback will further lead to increased focus on
customer services, creating of highly involved workforce, decreased
hierarchies, avoiding discrimination and biases and identifying
performance threshold.
7. More emphasis should be given to Total Quality Management.
TQM will cover all employees at all levels; it will conform to
customer's needs and expectations; it will ensure effective utilization
of resources and will lead towards continuous improvement in all
spheres and activities of the organization.
8. There should be focus on job rotation so that vision and knowledge
of the employees are broadened as well as potentialities of the
employees are increased for future job prospects.
9. For proper utilization of manpower in the organization the concept
of six sigma of improving productivity should be intermingled in the
HRM strategy.
10. The capacities of the employees should be assessed through
potential appraisal for performing new roles and responsibilities. It
should not be confined to organizational aspects only but the
environmental changes of political, economic and social
considerations should also be taken into account.
11. The career of the employees should be planned in such a way
that individualizing process and socializing process come together for

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fusion process and career planning should constitute the part of
human resource planning.
To conclude Human Resource Management should be linked with
strategic goals and objectives in order to improve business
performance and develop organizational cultures that foster
innovation and flexibility. All the above futuristic visions coupled with
strategic goals and objectives should be based on 3 H's of Heart,
Head and Hand i.e., we should feel by Heart, think by Head and
implement by Hand.

Human resource management

From Wikipedia, the free encyclopedia
"Human Resources Manager" redirects here. For the 2010 Israeli
film, see The Human Resources Manager.
Human resource management (HRM) is
the strategic and coherent approach to the management of an
organization's most valued assets - the people working there who
individually and collectively contribute to the achievement of the
objectives of the business.[1] The terms "human resource
management" and "human resources" (HR) have largely replaced the
term "personnel management" as a description of the processes
involved in managing people in organizations. [1] In simple words,
HRM means employing people, developing their capacities, utilizing,
maintaining and compensating their services in tune with the job and
organizational requirement.

13
 Contents
 [hide]

 1 Features
 2 Academic theory
 3 Business practice
o 3.1 HRM strategy
 4 Careers and education
 5 Professional
organizations
 6 Functions
 7 See also
 8 References
[edit]Features
Its features include:

 Organizational management
 Personnel administration
 Manpower management
 Industrial management[2][3]
But these traditional expressions are becoming less common for the
theoretical discipline. Sometimes even employee and industrial
relations are confusingly listed as synonyms,[4] although these
normally refer to the relationship between management and workers
and the behavior of workers in companies.
The theoretical discipline is based primarily on the assumption that
employees are individuals with varying goals and needs, and as such
should not be thought of as basic business resources, such as trucks
and filing cabinets. The field takes a positive view of workers,
assuming that virtually all wish to contribute to the enterprise
productively, and that the main obstacles to their endeavors are lack
of knowledge, insufficient training, and failures of process.

14
Human Resource Management(HRM) is seen by practitioners in the
field as a more innovative view of workplace management than the
traditional approach. Its techniques force the managers of an
enterprise to express their goals with specificity so that they can be
understood and undertaken by the workforce, and to provide the
resources needed for them to successfully accomplish their
assignments. As such, HRM techniques, when properly practiced, are
expressive of the goals and operating practices of the enterprise
overall. HRM is also seen by many to have a key role in risk reduction
within organisations.[5]
Synonyms such as personnel management are often used in a more
restricted sense to describe activities that are necessary in the
recruiting of a workforce, providing its members with payroll and
benefits, and administrating their work-life needs. So if we move to
actual definitions, Torrington and Hall (1987) define personnel
management as being:
“a series of activities which: first enable working people and their
employing organisations to agree about the objectives and nature of
their working relationship and, secondly, ensures that the agreement
is fulfilled" (p. 49).
While Miller (1987) suggests that HRM relates to:
".......those decisions and actions which concern the management of
employees at all levels in the business and which are related to the
implementation of strategies directed towards creating and sustaining
competitive advantage" (p. 352).
[edit]Academic theory
Research in the area of HRM has much to contribute to the
organisational practice of HRM. For the last 20 years, empirical work
has paid particular attention to the link between the practice of HRM
and organisational performance, evident in improved employee
commitment, lower levels of absenteeism and turnover, higher levels
of skills and therefore higher productivity, enhanced quality and

15
efficiency [6]. This area of work is sometimes referred to as 'Strategic
HRM' or SHRM ([7].
Within SHRM three strands of work can be observed[8]: Best practice,
Best Fit and the Resource Based View (RBV).
The notion of best practice - sometimes called 'high commitment'
HRM - proposes that the adoption of certain best practices in HRM
will result in better organisational performance. Perhaps the most
popular work in this area is that of Pfeffer [9] who argued that there
were seven best practices for achieving competitive advantage
through people and 'building profits by putting people first'. These
practices included: providing employment security, selective hiring,
extensive training, sharing information, self-managed teams, high pay
based on company performance and the reduction of status
differentials. However, there is a huge number of studies which
provide evidence of best practices, usually implemented in coherent
bundles, and therefore it is difficult to draw generalised conclusions
about which is the 'best' way (For a comparison of different sets of
best practices see Becker and Gerhart, 1996 [10]
Best fit, or the contingency approach to HRM, argues that HRM
improves performance where there is a close vertical fit between the
HRM practices and the company's strategy. This link ensures close
coherence between the HR people processes and policies and the
external market or business strategy. There are a range of theories
about the nature of this vertical integration. For example, a set of
'lifecycle' models argue that HR policies and practices can be
mapped onto the stage of an organisation's development or
lifecycle[11]. Competitive advantage models take Porter's (1985) ideas
about strategic choice and map a range of HR practices onto the
organisation's choice of competitive strategy. Finally 'configurational
models' [12] provide a more sophisticated approach which advocates a
close examination of the organisation's strategy in order to determine
the appropriate HR policies and practices. However, this approach
assumes that the strategy of the organisation can be identified - many
organisations exist in a state of flux and development.

16
The Resource Based View (RBV), argued by some to be at the
foundation of modern HRM [13], focusses on the internal resources of
the organisation and how they contribute to competitive advantage.
The uniqueness of these resources is preferred to homogeneity and
HRM has a central role in developing human resources that are
valuable, rare, difficult to copy or substitute and that are effectively
organised.
Overall, the theory of HRM argues that the goal of human resource
management is to help an organization to meet strategic goals by
attracting, and maintaining employees and also to manage them
effectively. The key word here perhaps is "fit", i.e. a HRM approach
seeks to ensure a fit between the management of an organisation's
employees, and the overall strategic direction of the company (Miller,
1989).
The basic premise of the academic theory of HRM is that humans are
not machines, therefore we need to have an interdisciplinary
examination of people in the workplace. Fields such
as psychology,industrial relations, industrial
engineering, sociology, economics, and critical
theories: postmodernism, post-structuralism play a major role. Many
colleges and universities offer bachelor and master degrees in
Human Resources Management or in Human Resources and
Industrial Relations.
One widely used scheme to describe the role of HRM, developed
by Dave Ulrich, defines 4 fields for the HRM function:[14]

 Strategic business partner

 Change Agent
 Employee champion
 Administration Expert
[edit]Business practice
Human resources management involves several processes. Together
they are supposed to achieve the above mentioned goal. These
processes can be performed in an HR department, but some tasks

17
can also be outsourced or performed by line-managers or other
departments. When effectively integrated they provide significant
economic benefit to the company.[15]

 Workforce planning
 Recruitment (sometimes separated into attraction and
selection)
 Induction, Orientation and Onboarding
 Skills management
 Training and development
 Personnel administration
 Compensation in wage or salary
 Time management
 Travel management (sometimes assigned to accounting rather
than HRM)
 Payroll (sometimes assigned to accounting rather than HRM)
 Employee benefits administration
 Personnel cost planning
 Performance appraisal
 Labor relations
[edit]HRM strategy
An HRM strategy pertains to the means as to how to implement the
specific functions of Human Resourse Management. An
organization's HR function may possess recruitment and selection
policies, disciplinary procedures, reward/recognition policies, an HR
plan, or learning and development policies, however all of these
functional areas of HRM need to be aligned and correlated, in order
to correspond with the overall business strategy. An HRM strategy
thus is an overall plan, concerning the implementation of specific
HRM functional areas.
An HRM strategy typically consists of the following factors:-

 "Best fit" and "best practice" - meaning that there is correlation

between the HRM strategy and the overall corporate strategy. As

18
 HRM as a field seeks to manage human resources in order to
achieve properly organizational goals, an organization's HRM
strategy seeks to accomplish such management by applying a
firm's personnel needs with the goals/objectives of the
organisation. As an example, a firm selling cars could have a
corporate strategy of increasing car sales by 10% over a five year
period. Accordingly, the HRM strategy would seek to facilitate how
exactly to manage personnel in order to achieve the 10% figure.
Specific HRM functions, such as recruitment and selection,
reward/recognition, an HR plan, or learning and development
policies, would be tailored to achieve the corporate objectives.

 Close co-operation (at least in theory) between HR and the

top/senior management, in the development of the corporate
strategy. Theoretically, a senior HR representative should be
present when an organization's corporate objectives are devised.
This is so, since it is a firm's personnel who actually construct a
good, or provide a service. The personnel's proper management is
vital in the firm being successful, or even existing as a going
concern. Thus, HR can be seen as one of the critical departments
within the functional area of an organization.

 Continual monitoring of the strategy, via employee feedback,

surveys, etc.
The implementation of an HR strategy is not always required, and
may depend on a number of factors, namely the size of the firm, the
organizational culture within the firm or the industry that the firm
operates in and also the people in the firm.
An HRM strategy can be divided, in general, into two facets - the
people strategy and the HR functional strategy. The people strategy
pertains to the point listed in the first paragraph, namely the careful
correlation of HRM policies/actions to attain the goals laid down in the
corporate strategy. The HR functional strategy relates to the policies
employed within the HR functional area itself, regarding the

19
management of persons internal to it, to ensure its own departmental
goals are met.
[edit]Careers and education
Further information: Graduate degree programs in human resources
management

Cornell University's School of Industrial and Labor Relationswas the

world's first school for college-level study in HRM
Several universities offer programs of study pertaining to HRM and
broader fields. Cornell University created the world's first school for
college-level study in HRM (ILR School).[16] University of Illinois at
Urbana-Champaign also now has a school dedicated to the study of
HRM, while several business schools also house a center or
department dedicated to such studies; e.g., University of Wisconsin-
Madison, University of Minnesota, Michigan State University, Ohio
State University, Roosevelt University,and Purdue University.
There are both generalist and specialist HRM jobs. There are careers
involved with employment, recruitment and placement and these are
usually conducted by interviewers, EEO (Equal Employment
Opportunity) specialists or college recruiters. Training and
development specialism is often conducted by trainers and
orientation specialists. Compensation and benefits tasks are handled
by compensation analysts, salary administrators, and benefits
administrators.

20
[edit]Professional organizations
Professional organizations in HRM include the Society for Human
Resource Management, the Australian Human Resources Institute
(AHRI), the Chartered Institute of Personnel and
Development (CIPD), the International Public Management
Association for HR (IPMA-HR), Management Association of Nepal
(MAN) and the International Personnel Management Association of
Canada (IPMA-Canada), Human Capital Institute. National Human
Resource Development Network in India.
[edit]Functions

The Human Resources Management (HRM) function includes a

variety of activities, and key among them is deciding what staffing
needs to have and whether to use independent contractors or hire
employees to fill these needs, recruiting and training the best
employees, ensuring they are high performers, dealing with
performance issues, and ensuring your personnel and management
practices conform to various regulations. Activities also include
managing your approach to employee benefits and compensation,
employee records and personnel policies. Usually small businesses
(for-profit or nonprofit) have to carry out these activities themselves
because they can't yet afford part- or full-time help. However, they
should always ensure that employees have—and are aware of—
personnel policies which conform to current regulations. These
policies are often in the form of employee manuals, which all
employees have.
Note that some people distinguish a difference between HRM (a
major management activity) and HRD (Human Resource
Development, a profession). Those people might include HRM in
HRD, explaining that HRD includes the broader range of activities to
develop personnel inside of organizations, including, e.g., career
development, training, organization development, etc.

21
There is a long-standing argument about where HR-related functions
should be organized into large organizations, e.g., "should HR be in
the Organization Development department or the other way around?"
The HRM function and HRD profession have undergone major
changes over the past 20–30 years. Many years ago, large
organizations looked to the "Personnel Department," mostly to
manage the paperwork around hiring and paying people. More
recently, organizations consider the "HR Department" as playing an
important role in staffing, training and helping to manage people so
that people and the organization are performing at maximum
capability in a highly fulfilling manner.

Factors Influencing Global Talent Acquisition Approaches

Introduction

As with all other Human Resource Management decisions and

practices, global staffing should be linked to the overall strategy and
objectives of the multinational enterprise. These strategies and
objectives are of course influenced by and set within the context of
the overall global business environment. Thus, employee recruitment
and selection decisions comprising the process of immediate staffing
to meet work demands are influenced by such important general
factors as the firm’s business strategy, stage of international
development, specific foreign market experience, host government
restrictions and incentives, host country socio-cultural restrictions,
and plans for individual and organization development. There also
can be various situational factors such as economic trends and
conditions, the nature and duration of the international work itself,
MNC resources available for staffing and availability of willing and
able candidates. In this article, we will discuss each of these factors
as they relate to staffing decisions.

1. MNC Business Strategy

22
The primary focus of a firm’s human resources agenda throughout all
of its processes and activities should be the optimal support and
reinforcement of company strategy, in efforts and activities involving
both strategy formulation and implementation. The staffing function
itself has a potentially huge impact on strategic management,
including the recruitment and selection of key MNC leaders who have
primary influence in formulating MNC strategy, and the selection and
placement of middle managers throughout the MNC who have a vital
role in implementing and carrying out the strategic direction of the
firm.

Staffing should seek to fit and reinforce the purposeful direction and
priorities of the MNC, such as being consistent with its ethnocentric,
polycentric, region-centric, and geocentric general strategic
approaches in operating foreign wholly owned subsidiaries. Or where
an MNC desires to follow a strategic alliance strategy of focusing on
its core competencies and reducing labor costs, the staffing function
will likely employ outsourcing to support this strategy, such as
through increasing the outsourcing of non-core back-office
operations, or even resort to a broader level of external partner
selection in complementary alliances, typically noted in international
joint-ventures.

An organization’s approach to
global talent acquisition (or staffing) must support its way of doing
business. Perlmutter (“The Tortuous Evolution of the Multinational
Corporation,” 1969) studied this process and identified three primary
ways in which global organizations are staffed. A fourth staffing
approach was added several years later. We now will discuss specific
implications for the staffing function, especially for upper levels of
management, held by ethnocentric, polycentric, region-centric, and
geocentric strategic approaches. We will also discuss as how an

23
 organization’s global orientation affects talent acquisition and how
global HR practitioners can provide leadership toward effective
globalization.

a) Ethnocentric Approach

Key note: Tight control of international operations; little autonomy;

key positions held by headquarters (HQ) personnel.

Impact of approach on Staffing:

1. Headquarters country personnel manage all operations.

2. Home Staffing policies are replicated in countries.
3. Talent skills transfer essentially one-way

Staffing that is consistent with an ethnocentric approach is typically

characterized by all or most of the key positions at a foreign operation
being filled by Headquarter (HQ) Personnel.  Headquarter (HQ)
Personnel are often utilized in earlier stages of globalization to
optimize control for the purpose of transmitting company culture and
instituting and implementing company procedures and methods. Or
for much more experienced MNCs, the company might desire to
retain a heavy use of headquarter personnel for managing foreign
operations due to the perceived lack of qualified local home-country
national (HCN) talent.

As in all international HR decisions, MNCs electing to follow an

ethnocentric staffing approach should keep in mind several potential
disadvantages and costs.

I)                    Expatriates represent a considerable direct cost for the

MNC compared to HCN and typically third-country national (TCN)
managers. Many estimates of the cost of expatriates run from three to
as much as five times the expatriate’s normal salary. In addition, the
adjustment process of expatriates to their host country surroundings,
as well as of the HCN’s to the new expatriate, often takes
considerable time. This adjustment period, or “learning curve”, itself
represents a time span of costly suboptimal performance and a
chance for costs to be greatly expanded by mistakes and poor
decisions.

24
 II)                  As an additional potential disadvantage, an ethnocentric
staffing approach limits the promotional and developmental
opportunities of HCNs, which might lead to their increased
dissatisfaction and related costs of lower productivity and increased
turnover. Also, due to headquarter-nation compensation typically
being based on home country rates and often increased by
inducement premiums and allowances, there may be a significant pay
gap with HCNs whose compensation is based at a lower local rate,
potentially causing additional dissatisfaction due to perceptions of
inequity. These potential sources of HCN dissatisfaction are likely
linked to general negative attitude towards headquarter-based
personnel.

Staffing Practices that promote Globalization:-

1. Rotate coaches into countries to develop talent.

2. Require returning personnel to bring back lessons learned.
3. Refine talent acquisition policies to reflect local country input.

b) Polycentric Approach

Key note: - Subsidiary treated as own entity; local personnel manage

operations; few promotions to headquarter.

Impact of approach on Staffing:-

1. Headquarters country personnel have little impact on other

countries.
2. Talent acquisition policies are unique to each country.
3. Little cross-border movement of talent and skills occurs.

A polycentric strategic approach is similar to what is often described

as a multi-domestic strategy and

25
 involves  customizing company
products, services, and practices to meet the often differing market
and nonmarket circumstances, needs, laws, and accepted practices
of individual countries or regions. Here each major overseas
subsidiary is usually somewhat independent and is typically managed
by a local HCN who is very familiar with the competitive demands of
this local market. Some major advantages of the staffing of foreign
operation management with HCNs consistent with this approach
include a strong familiarity of operation management with  local social
norms and customs, language fluency, costs that are typically less
than an expatriate assignment, and no foreign adjustment problems
for an employee and any accompanying family members. And
despite being a multinational corporation with headquarters in some
distant country, the heavy use of HCNs from top management down
in the operation can win the support and confidence of the local
government and people who see the operation as benefiting their
citizens.

Staffing Practices that promote Globalization:-

1. Encourage cross-border knowledge sharing.

2. Encourage trading complementary talent between countries.
3. Develop common processes where similarities exist.

c) Regio-centric Approach

Key note: – Operations managed regionally; communication and

coordination high within the region, less so between regions.

Impact of approach on Staffing:-

26
1. Employees circulate within regions, with a focus on regional
business results.
2. Talent acquisition policies are developed and coordinated
within regions.
3. Talent and skills are developed within regions, with minimal
inter-region transfer.

A staffing policy may also be in operation under a prevailing regio-

centric strategic approach, where the firm’s operations or particular
functions are structured by multiple country areas or major economic
regions. Here we often see a predominance of HCN staffing at a local
subsidiary, however, with an increased movement of senior HCN
managers to head up operations in other countries of the economic
region. In these cases we also often see headquarter personnel
represented at regional headquarters, which provides opportunities
for cross-cultural interaction beyond what is found in the polycentric
approach. The former HCN managers themselves with these cross-
border assignments also gain useful albeit less culturally distant
international career experience; however, they are still generally
limited to this regional level with little chance of promotion to the top
management strategic team back at present company headquarters.

Another possible advantage of the regio-centric approach is that it

may contribute, through this expanded level of cross-border
assignments, to building useful international competencies,
representing a helpful transition to an eventual global strategy
featuring a geocentric approach to staffing.

Staffing Practices that promote Globalization:-

1. Support succession planning among selected regions.

2. Encourage cross-region knowledge sharing.
3. Encourage trading of complementary talent across regions.
4. Develop global approaches where a business case is strongest.

d) Geocentric Approach

Key note: - Organization seen as single international enterprise;

management talent comes from any location; strategic plan global in
orientation.

27
 Impact of approach on Staffing:-

1. Employees circulate throughout the global organization.

2. Talent acquisition policies maximize long-term strength of the
global organization.
3. Talent and skills are deployed globally to achieve global goals
while meeting local requirements.

MNC staffing policy driven by a geocentric approach considers and

selects the best talent for important jobs throughout the world
operations of the MNC, regardless of nationality. This staffing policy
works well especially within industries whose products or services
involve minimal cultural differentiation.

Besides aiming to secure the best human talent regardless of

national passport for positions throughout the MNC, both at MNC
headquarters and its other operations and foreign subsidiaries,
several significant advantages of the geocentric approach exist.
These include increased global leadership development opportunities
for HCN’s who were heretofore held back, especially by ethnocentric
and polycentric staffing policies; increased opportunity for cross-
cultural learning and knowledge sharing throughout the firm, with
meaningful cross-border interactions; greater opportunity for
developing a common MNC identity and mind-set; and a more
widespread development of key global competencies throughout the
MNC leading to a distinct competitive advantage in human capital.
Nevertheless, a geocentric staffing policy may be restricted in cases
where local governments require certain levels of HCN professional
and managerial presence in their host country operations or place
significant documentation and qualification requirements for hiring
foreign nationals.

Staffing Practices that promote Globalization:-

1. Evaluate and refine global talent acquisition processes based

on organizational impact.
2. Adjust the global plan to reflect changing global requirements.
3. Leverage local talent and tools for cost-effective global talent
acquisition.

2. Global Growth Strategies

28
Talent acquisition is also directly impacted by how a global enterprise
decides to expand its international presence. In some cases, the form
of expansion adds to the overall talent pool; in some cases, it does
not. In all situation, however, the overall complexion of the
organization’s talent pool changes with new acquisitions or locations.
Let’s discuss some of the implications the different types of
expansion have for talent acquisition.

1)      Expansion: - The reason for expansion will drive the best

approach for staffing – whether to use international assignees, local
nationals, or globally mobile employees.

2)      Merger and acquisition: - (a) new talent resources become

part of the organization. (b) Retention of key talent is a major issue.
(c) It is critical to have global HR practitioners play a major role in due
diligence to ensure that all potential costs are identified beforehand.

3)      Joint Venture: - The type of joint venture, what the partnership

agrees to, and the people that the partner contributes (e.g. number of
employees, skill sets) all influence talent acquisition.

4)      Greenfield operation: - (a) A new site needs to be staffed from

the ground up. (b) Due diligence also is important to understand local
laws and employment regulations. (c) This can be a huge effort,
especially when the local labor market is underdeveloped.

5)      Strategic alliance: - (a) Depending on the type of alliance, this

could have no or considerable staffing impact. (b) In many strategic
alliances, employees remain with their own companies. (c) If a new
venture is formed in the alliance, then talent acquisition plans are
directly affected.

 3. Specific Foreign Market

Experience

As in the very early stages of internationalization, multinational firms

that have little experience with a specific foreign market are likely to
staff these new foreign operations to a significant degree with local

29
management that is very familiar with the specific market. This staff
may be local Host Country National (HCN) managers who have been
instrumental in the planning for this new market entry, or Third
Country National’s (TCNs), perhaps from a neighboring country, who
have considerable experience and expertise with the local market.

Although Headquarter Personnel might be involved to ensure proper

communication and coordination with company headquarter, local
HCNs or experienced TCN’s can more effectively address initial
critical decisions faced by the new foreign operation, including the
complete staffing of this operation most likely with HCN employees.
In some cases, especially where the firm is reluctant to hire an
experienced HCN or TCN from outside the MNC on a long-term
basis, this experienced manager might be hired on a short-term or
full-time consultancy basis until the firm has had enough time to
develop internal talent for effectively managing the foreign operation.

4. Stage of International Development

Several studies have supported a general concept of progression of

business through various stages of international development, or
“internationalization”, beginning with export activity and progressing
through the development of foreign sales offices, licensing
agreements and foreign direct investment with manufacturing
facilities, international division formation, multinational status, and
finally integrated global enterprise. However, firms of all sizes differ
greatly in the pace of their evolution toward increased
internationalization, and some bypass stages through acquisitions
and joint ventures. And some “born global” new ventures even begin
with a primary focus on the global marketplace, skipping the earlier
traditional forms of internationalization. Staffing decisions at each of
these stages of internationalization can differ significantly due to the
unique work demands of each stage.

At the simple export stage a firm is likely interested in obtaining the

contracted services of an export agent and eventually a sales firm or
independent sales representatives to promote product distribution.

At the more advanced level of the multinational enterprise, firms are

often greatly interested in transferring company knowledge and

30
technical expertise to foreign wholly owned subsidiaries, as well as
coordinating with headquarters and controlling foreign operations to
ensure consistency with parent company policies and procedures.
MNC’s frequently accomplish these knowledge transfer and control
purposes through expatriate headquarter personnel assigned to
these operations.

Finally, at the stage of integrated

global enterprise the firm has a large assortment of internal talent to
consider for its staffing of both domestic and global operations.
Following the geocentric approach discussed earlier, the MNC at this
stage recruits and selects internal talent based on a determination of
the best talent available and representing the highest return on
staffing investment, regardless of national boundaries. External and
non-standard or contingent sources of employees are also frequently
considered at this level, again depending on the nature of the
particular work demand and the comparative advantage of these
sources.

5. Maturity of the Global Location

Maturity pertains to the experience, local market development, and

skill sets for a particular international location. Each location has its
own history, tradition, and patterns. In Compensating Globally Mobile
Employees (1995), Calvin Reynolds identified a common pattern
among global organization. He noted that expatriates are used for
initial staffing, perhaps of a Greenfield operation, because local talent
is not yet ready. Then, as the local labor force becomes more skilled,
the percentage of local nationals increases significantly. Over time,
local nationals can be sent to other global locations to fill specific
needs, just as employees from headquarters did before them.

31
According to Reynolds, the primary reasons for this changing staffing
pattern are:

a)      The high relative cost of expatriates.

b)      Pressure by local staff to advance at home and abroad as they

become qualified.

c)       The difficulty of hiring good local staff at reasonable salary

levels if they perceive that expatriates hold most top jobs.

d)      Pressure by local governments to maximize participation by

local nationals.

e)      Desire to present the image of a good employer by offering

local nationals the opportunity to advance.

This exact pattern may not pertain in all global locations. Some
organizations have expressed strategies that keep international
assignments high. In some regions, country or local policies may
restrict the number of international assignees and place a cap on
them that is proportional to local hires. However, Reynolds’s findings
are instructive as another key variable to understanding in designing
and developing global talent acquisition plans.

6. Host Government Restrictions and Incentives

Host governments, in following their traditional safeguarding

responsibility on behalf of their working citizens, often require MNC’s
to demonstrate that Host Country National’s (HCNs) are not available
to fill certain managerial or technical professional positions before
they grant entry visas and work permits to headquarter personnel (or
parent country national’s) and TCN’s selected by the MNC. With
regard to labor available to staff lower-level employment positions, 
Western European governments and their political movements are
actively moving to restrict and reduce the number of foreign asylum
seekers and immigrants, who are perceived as low-wage threats to
existing national employment opportunities. Often new business
development abroad can be significantly delayed due to governments
blocking work permits for expatriates selected for heading up this new
international work. Or, because a work permitted is granted generally

32
only for an expatriate and not for an accompanying spouse or
partner, expatriates might be reluctant or even refuse to accept a
foreign assignment without an accompanying spouse or partner who
also desires employment. However, many governments have begun
to change their laws or quota restrictions related to employment-
related immigration to better meet their local economic-development
demands, especially for higher-skill jobs, thus facilitating international
transfers and cross-border staffing.

Governments and NGO’s also might place demands or lobby for

staffing requirements for MNCs that are making foreign direct
investment, especially in developing countries, such as specifying
that certain numbers of HCNs be hired and at particular levels. These
requirements might also stipulate what minimal percentage of
supervisor and management level positions must be staffed by HCNs
at a future date, giving the MNC some time to develop this
managerial expertise among the HCNs. Governments can also
provide significant tax, tariff, local labor force training, and other
incentives to encourage MNCs’ foreign direct investment, leading to
significant HCN staffing.

7. External Factors

Crossing a border has significant ramifications in global talent

management. Global HR practitioners must understand the
ramifications of the laws of different countries and local and regional
practices. There is no substitute for researching each country’s
practices and consulting with local experts to ensure that these
factors are considered in the talent acquisition plan. It is also very
important to be apprised of demographic trends in both local and
regional labor markets. Now, we will be discussing a list of external
factors that can directly impact a global talent acquisition plan.

a)      Local labor markets: Global talent acquisition must do more

than move people to fill in local skill gaps; it also must develop local
talent to be a resource to the entire global organization.

b)      Global labor markets: Global talent acquisition requires a

strategic focus on the global labor mix to ensure that staffing

33
decisions reflect strategic global needs rather than short-term
fluctuations in local markets.

c)       Local culture and values: Talent acquisition decisions have

strong cultural components because they affect the lives of
employees and their families. Talent acquisition plans must recognize
that a staffing decision can be perceived differently across cultures.

d)      Legal issues: These can stipulate who can be hired and what

process needs to occur if staffing changes are made. The use of
international assignees also may be regulated by legal policy.

e)      Relationships with alliance partners: Alliances with foreign

subsidiaries, joint ventures, partners, vendors and others can create
unique staffing challenges that often need to be dealt with on a case-
by-case basis.

f)       Competitive factors: Competition for local labor can create

unexpected shortages and may result in poaching of talent from
companies that have invested in employee development. Competition
for critical resources may require exceeding country and industry
benchmarks to ensure that quality talent is retained and available
when needed.

g)      Security: Terrorism is a constant threat, and unstable parts of

the world make global acquisition problematic.

Conclusion

Global organizations differ in the extent to which they value global

integration or local responsiveness in their operations, growth, and
governance. Global integration is akin to centralized management –
there is standardization and consistency across all global operations.
Local responsiveness is a decentralized approach that promotes
more local decision making and entrepreneurship and strives to be
responsive to local markets and conditions.

Most organizations have elements of both. Some rules, policies,

procedures, and planning activities, may

34
be  maintained through
integration to address overlapping needs. At the same time, there
may be informal mechanisms for coordination at the local level.
Evans, Pucik, and Barsoux (The Global Challenge, 2002) describes
these as “glue technology” tools – lateral relationships, best practice
transfer, leadership development, shared frameworks, project
management, and the socialization of employees into shared values.
They note that the majority of these tools are really the application of
global HR management. Standardization expectations for a global
talent management system can be made personal for local talent by
incorporating solutions that still work for organization as a whole. The
balance between global integration and local responsiveness can
change over time.

Finally, to increase the likelihood of foreign assignment success,

MNC’s should more broadly consider other candidate characteristics
besides technical competence, including interpersonal skills, personal
intent and motivation for obtaining international work experience,
cross-cultural sensitivity, adaptability, tolerance for ambiguity, overall
inquisitiveness, and the viability of a positive experience for
accompanying family members.

We hope that this article will be of equal use to staffing managers that
are involved in staffing up teams for various international
assignments and also those who are seeking new international
assignments. Feel free to write to us for any clarification or if you
have any query pertaining to any point or concept mentioned in this
article.

35
Third Country National
From Wikipedia, the free encyclopedia
This article needs
additional citations for verification.
Please help improve this article by
adding reliable references. Unsourced material
may be challenged and removed. (November
2006)
The examples and perspective in this
article deal primarily with the United States
and do not represent a worldwide view of the
subject. Please improve this article and discuss
the issue on the talk page. (December 2010)
Third Country National (TCN) describes and individuals of other
nationalities hired by a government or government sanctioned
contractor who represent neither the contracting government nor the
host country or area of operations. This is most often those
performing on government contracts in the role of a private military
contractor. The term can also be used to describe foreign
workers employed by private industry and citizens in a country such
as Kuwait in which it is common to outsource work to non-citizens.
Generally speaking, governments classify contract personnel under
one of three headings:

 Ex-pat - those personnel who are of the same nationality as the

contracting government. (In Iraq, foreign nationals working as a
member of a US contractor are regarded as Ex-pats)
 TCN or Third Country National – those personnel of a separate
nationality to both the contracting government and the AO or "Area
of operations".
 HCN's (Host country nationals), LN's (Local Nationals), Indigs
(Indigenous Personnel) – those personnel who are indigenous to
the area of operations.
Examples of this hierarchy are as follows:

36
Contract personnel being used by the US government to fight the
global war on terror in Iraq consist of Expats, namely those personnel
of US citizenship that represent a private military contractor being
contracted by the US Government, Indigenous Iraqi and Kurdish
personnel and TCNs such as are currently being employed by many
of the Private Military Contracting Firms currently under contract.

A TCN living on a US military base near Fallujah, Iraq

TCNs such as have been employed by the United States military
(through contractors) for operations in the Middle East for many
years. The accommodations, security, and treatment of TCNs can
vary greatly from the way that U.S. and multinational coalition
personnel are treated. Their contracts often require them to work for
four years continuously without a break to return to their home
countries. Many TCN contractors have also been lured by
preemployment deals that have guaranteed them the job as long as
they give a percentage of their pay to an 'employment agent' or
'representative'. TCN housing compounds are generally in less
secure areas outside of the main base. As a result many TCNs in
such high-risk areas have been injured or killed, however most
military installations will provide life-saving medical care as required.
Since April 2006, the Pentagon now demands that contractors fight
labor trafficking and low quality working conditions in Iraq endured by
tens of thousands of low-paid south Asians working under US-funded
contracts in Iraq.

37
In an April 19 memorandum[1] to all Pentagon contractors in Iraq and
Afghanistan, the Joint Contracting Command demands that the
widespread practice of taking away workers passports come to end.
Contractors engaging in the practice, states the memo, must
immediately "cease and deist."
"All passports will be returned to employees by 1 May 06. This
requirement will be flowed down to each of your subcontractors
performing work in this theater."
Despite the Pentagon crack down, civilian contractors still report
problems of poor working conditions and paltry working conditions.

38