STRATEGIC HRM

MODULE -1

UNDERSTANDING STRATEGIC HRM:

INTRODUCTION:

Globalization has put pressure on governments and businesses to carry out structural alterations
or adjustments, diversify businesses, specialize processes, optimize ‘efficiency,’ sustain and
augment productivity, maintain competitive edge all in the face of increasing cost constraints.
There is need for economical utilization of human capital through right capacity building
strategy for desired organizational performance. To cut costs, unplanned retrenchment of human
resource has become a frequent though by no means a desirable organizational practice. Strategy
should be evolved to maximize the utility of the HR function. HRM management per se may not
be targeted or specific enough to achieve desired accuracy of policy.

For example how targeted are employee benefit policies? What is the impact on productivity?
What modifications are needed? Correlations based on empirical analyses would need to be
drawn.

Therefore, combining human capital regulation with overall business strategy; economizing
operations to maximize ‘efficiency,’ is what is understood in common parlance as strategic
human resource management. Strategic human resource management is relevant to all
organizations- public or private, irrespective of form, hierarchic or networked fluid or command-
control etc.

SHRM has both policy and operative aspects. Understanding of SHRM ranges from a 'reactive'
management field where human resource management is a tool with which to implement
strategy, to a more proactive function in which HR activities can actually create and shape
organizational strategy. Human resource management being an architectonic activity may not be
targeted or specific enough to achieve desired levels of accuracy and economy in policy making
and implementation. There is therefore need for strategic human resource management for cost
effectiveness of HR programmes.

Hence, SHRM is predicated on two fundamental assertions. First, an idea that an organization’s
human resources are of critical strategic importance; that the skills, behaviors and interactions of
employees have the potential to provide both the foundation for strategy formulation and the
means of strategy implementation. Second, the belief that firms’ HRM practices are instrumental
in developing the strategic capability of its pool of human resources.

Definition: (Colbert, 2004). New perspectives continue to emerge on Strategic Human Resource
Management (SHRM).
ASPECTS OF SHRM

Strategic human resource management (SHRM) includes;

1. All those activities affecting the behavior of individuals in their efforts to formulate and
implement the strategic needs of business.

2. The pattern of planned human resource deployment and activities intended to enable the
organization to achieve its goals.

3. That part of the management process that specializes in the management of human capital. It
emphasizes that employees are the primary resource for gaining sustainable competitive
advantage, that human resource activities need to be integrated with corporate strategy, and that
human resource specialists help management meet both efficiency and equity objectives.

DIFFERENCE BETWEEN TRADITIONAL Vs. STRATEGIC HR:

Point of Traditional HR Strategic HR

distinction
Focus Employee relation Partnerships with internal and external
customers
Roles of HR Transactional change Transformational change leader and initiator
follower and respondent
Initiatives Slow, reactive, fragmented Fast, proactive, integrated
Time horizon Short term Short, medium, long ( as required)
Control Bureaucratic role Flexible
Job design Division of labor on the Flexible and cross-training
basis of specialization
Responsibility Staff specialist Line manager
HR

Typology of HR:

Typology means: a classification according to general type, especially in archaeology,

psychology, or the social sciences.

Using the given typology of practices, HR managers can follow costs of individual practices and
policies in connection with the level and stage of their development and implementation.
Especially in cases where the costs of operation and monitoring are minimal, the implementation
of such policies is extremely useful.

FEATURES OF SHRM:
Features of strategic human resource management could be inferred as mentioned below:

• Organisational level - Because strategies involve decisions about key goals, major policies and
the allocation of resources, they tend to be formulated at the top;

• Focus - Strategies are business-driven and focus on ‘organisational effectiveness’; people are
seen primarily as resources to be managed towards the achievement of strategic business goals;
and

• Framework - Strategies by their very nature provide a unifying framework that is broad,
contingency-based and integrative. They incorporate a full complement of the HR goals and
activities designed specifically to fit extant environments and be mutually reinforcing and
synergistic.

THE BEST PRACTICE APPROACH:

This approach is based on the belief that there exists a set of best HRM practices which
potentially lead to superior organizational performance.

List of the seven Best HR practices in successful organizations.

1. Employment Security: This implies employee security in the face of exigencies like
economic downturns or the strategic errors of senior management on which they have
little or no control. It is fundamental to the implementation of such high-performance
management practices as selective hiring, extensive training, information sharing and
delegation. Companies are unlikely to invest in the screening and training of employees
who are not expected to stay long enough for the firm to recoup its investment
2. Selective Hiring: Selective recruitment is needed to minimize training costs.
Organizations should look for people with the right attitude, values and cultural attributes
that may be hard to inculcate by training. Management should also be able to predict the
employee’s performance and the likelihood of the employee remaining with the company
for a long time.
3. Self-Managed Teams: These are a critical component of high performance management
systems. They: (i) Substitute peer-based control for hierarchical control of work; (ii)
Lessen tiers in hierarchy; and (iii) Permit employees to pool their ideas in order to
produce better and more creative solutions to work problems.
4. High Compensation Contingent on Performance: Compensation offered to
employees is made contingent on organizational performance, for example, gain sharing
or profit- sharing can be related to individual or team performance or even unique or
particular individual skills.
5. Training: Virtually, all descriptions of high-performance work practices emphasize the
role of training in providing needed skills and creating a motivated workforce that has the
knowledge and the capability to perform required tasks.
 6. Reduction of Status Differentials: The fundamental premise of high performance work
systems is that organizations should be able to tap ideas, skills and efforts of its
employees. For this to be possible, status differentials should not be emphasized to the
detriment of team spirit in an organization.
7. Sharing Information - This is an essential component of high performance work
systems for two chief reasons. First, the sharing of information on the firm’s financial
performance and business strategies sends a positive message across to employees that
they are valued. Second, even motivated and trained people cannot contribute to
organizational performance if they do not have information on important aspects of
performance and training in interpreting and using that information.

BEST FIT APPROACH:

For the reasons given above, ‘best fit’ is considered more appropriate than best practice’.
This is not to say that ‘good practice or ‘leading-edge practice’, (practice that does well in
one successful environment) should be ignored.

Benchmarking has its uses as a means of identifying areas for innovation or development
practice applied to good effect elsewhere. But having learnt what works and what does
not work in similar situations, the organization has to decide what general policy should
be adopted and what lessons can be learnt to make the adopted idea fit its own particular
strategic and operational requirements.

The requirement is an analysis of the business needs of the organization within its own
particular context, (culture, structure, technology and processes) indicating clearly what
has to be done. Thereafter, it may be useful to adopt a mix of various ‘best practice
ingredients’, to develop an approach which applies practices that are appropriate in a way
that is conducive to identified business needs.

INVESTMENT PERSPECTIVE OF HUMAN RESOURCE

ADOPTING AN INVESTMENT PERSPECTIVE:

1. Characterizing employees as human assets implies the strategic management of human

resources should include considering HR from an investment perspective.
2. Cost/Benefit basis analysis may be used to evaluate HR programs, such as training and
development.
3. Investment perspective toward human assets facilitates their becoming a competitive advantage
as most other resources/assets can be cloned, copied or imitated by competitors.
4. A strategic approach to HR, however, does not always involve a human relations approach to
employee relations, as noted in the Managing Employees at United Parcel Service example
5. Investments in employees must be undertaken in tandem with strategies to retain employees long
enough to realize an acceptable return on investments in employees. This requires valuation of the
employee as an asset, which can be difficult to do.

INVESTMENT CONSIDERATION:

Human resources is sometimes considered a "soft" industry, because it can't always provide
quantifiable financial data about its workload and doesn't typically create revenue either.
Investment in HR can make executives nervous, because projects and programs often provide no
tangible results -- although the idea of "improved morale" or "greater employee satisfaction"
seems like a good thing, whether that translates to a significant increase in revenue or improved
productivity remains questionable.
"Return on Investment," or ROI, is the term given to a mathematical calculation used in the
finance industry and business in general. The ROI measures the financial return on an investment
made, or it can be applied to a business measuring the performance of the firm by assessing the
net profit compared with the overall net worth of the company. In more recent years, the ROI
concept has been adopted by other industries to evaluate projects and programs on a smaller
scale.
Importance of ROI to HR
Using quantifiable metrics improves the credibility of HR as a profession, and allows upper
management to identify specific, measurable ways that HR services benefit the organization. It's
no longer enough to state that a certain program is believed to be beneficial -- you need to be
able to prove the worth of your actions. In difficult economic times, the value of support services
-- often seen as tangential to the organization's core mission or product -- comes under increasing
scrutiny. Consequently it becomes even more important for HR professionals to show how HR
services directly impact the bottom line, while identifying and eliminating programs that are not
financially efficient.
INVESTMENT IN TRAINING AND DEVELOPMENT:

Essentially, investing in employee training increases profits by lowering expenses, which

happens in the form of benefits like reduced turnover or fewer fines due to incompliance.
Training also helps to increase revenue, which comes in the form of accelerated sales growth and
higher productivity.

Training can demonstrably increase profits through a strategic process that aims to:

 Lower turnover rate

  Increase productivity
 Shorten the sales cycle
 Increase upsells
 Improve client retention

Training must be effective to create a significant ROI. The job of training program managers
isn’t just to administer training, but to optimize their program around best practices so that each
training event is as effective as possible, along with the training process overall. One of the most
effective practices is to get managers involved in their employees’ development. Not only will
this practice improve the efficacy of your training program, you’ll also allow leadership and
management to see first-hand the potential that training can offer.

INVESTMENT PRACTICES FOR IMPROVED RETENTION:

Managing for employee retention involves strategic actions to keep employees motivated and
focused so they elect to remain employed and fully productive for the benefit of the organization.
A comprehensive employee retention program can play a vital role in both attracting and
retaining key employees, as well as in reducing turnover and its related costs. All of these
contribute to an organization's productivity and overall business performance.

Retention of productive employees is a major concern of HR professionals and business

executives. It is more efficient to retain a quality employee than to recruit, train and orient a
replacement employee of the same quality.
Fairness and transparency are fundamental yet powerful concepts that can make a lasting
impression on employees. According to SHRM's employees identified these five factors as the
leading contributors to job satisfaction:

1. Respectful treatment of all employees at all levels;

2. Compensation/pay;
3. Trust between employees and senior management;
4. Job security; and
5. Opportunities to use their skills and abilities at work.

Employee job satisfaction and engagement factors are key ingredients of employee retention
programs. The importance of addressing these factors is obvious, but actually doing so takes time
and these tasks are often left for another day. However, the payoff of focusing on employee
retention—in terms of increased performance, productivity, employee morale and quality of
work, plus a reduction in both turnover and employee-related problems—is well worth the time
and financial investment. The bottom line is that by managing for employee retention,
organizations will retain talented and motivated employees who truly want to be a part of the
company and who are focused on contributing to the organization's overall success.

PLANNING AND IMPLEMENTING STRATEGIC HR POLICIES:

To be successful, firms must closely align their HR strategies and programs (tactics) with
environmental opportunities, business strategies, and the organization’s unique characteristics
and distinctive competence.
 Strategic human resource planning: It is the process of formulating HR strategies and
establishing programs or tactics to implement them.
 The benefits of strategic HR planning:
Encouraging proactive rather than reactive behavior: being proactive means looking ahead and
developing a vision of where the company wants to be and how it can use human resources to get
there. In contrast, being reactive means responding to problems as they came up.

Explicit communication of company goals: strategic HR planning can help a firm develop a
focused set of strategic objectives that capitalizes on its special talents.

Stimulation of critical thinking and ongoing examination of assumptions: Managers often depend
on their personal views and experiences to solve problems and make business decisions. That
can led to success but serious problem can arise when assumptions no longer held. Strategic HR
planning can stimulate critical thinking and the development of new initiatives only if it is a
continuing and flexible process rather than rigid procedure.

Identification of gaps between current situation and future vision: Strategic HR planning can
help a firm identify the difference between “where we are today?” and “where we want to be
tomorrow?”

Encouragement of line managers’ participation: For HR strategy to be effective, line managers at

all level must buy into it. If they do not, it is likely to fail.

Identification of HR constraints and opportunities: when overall business strategy planning is

done in the combination with HR strategic planning, firms can identify the potential problems
and opportunities with respect to people expected to implement the business strategy.

Creation of common bonds: A strategic HR plan that reinforce, adjust, or redirect the
organization’s present culture can foster values such as customer focus, innovation, fast growth,
and cooperation.
 Core competencies are the resources and capabilities that comprise the strategic advantages of a
business. A modern management theory argues that a business must define, cultivate, and exploit
its core competencies in order to succeed against the competition.

Linking HR to Corporate strategy

 1) Recruit correctly : Align people to company goals.
 2) Job Definition: Clearly tell people what they need to do.
 3) Goal setting: Help employees in goal setting.
 4) Incentives: Inform employees what is important.
 5) Use the Bench: The bench can be productive.

Linking HR with Business Strategy:

There are various models that attempt to explore the link between business strategy and HR
policies and practices.
(i) Life cycle Model
(ii) Competitive Advantage Model
Life cycle Model
This model was developed by Kochan and Borocci. According to this model, the policies and
practices of the organization should fit the relevant stage of an organization development or life
cycle.
 Introductory stage
At this startup phase of the business, there is an emphasis on 'flexibility' in HR to
enable the growth of business and faster entrepreneurialism.
 Growth stage
At this stage, when the business grows beyond a certain size, emphasis moves to the
development of formal HR policies and procedures.
 Maturity stage
At this stage, as the market matures, margins decrease the performance of certain
products or the organization plateaus, and then the focus of HR strategy is on cost control.
 Decline stage
At this stage, the emphasis shifts to rationalization, downsizing and redundancy
implications for the HR function. (see figure below)
Life Cycle Stages HR Practices

Start-up  Flexible patterns of work

 Recruitment of highly motivated and committed employees
 Competitive pay
 Little formality
 No unions
Growth  More sophisticated recruitment and selection

 Training and development

 Performance management processes

 Reward systems

 Focus on high commitment

 Developing stable employee relations

Competitive Advantage Model

This model was developed by Porter in 1985. It has three major parameters:
(i) Cost leadership, (ii) Differentiation, and (iii) Focus.

(i) Cost leadership focuses on the delivery of efficiency mainly through 'hard' HR
techniques
(ii) Differentiation is focus on the delivery of added values through 'softer' HR
techniques and policies
(iii) Focus is on softer HR techniques/policies for the delivery of added value

According to the model, the business performance will improve when HR practices mutually
reinforce the organization's choice of competitive strategy. Herein, the mission and values are
expressed through their desired competitive strategy.
 (Competitive Advantage Model and HR)

The best fit model is the one in which SHRM becomes more effective when it is designed to fit certain
critical contingencies in the organization's specific context. A major criticism on both the models
is that they tend to ignore the employees' interest in pursuit of enhanced economic performance
and they endanger diversity rather than uniformity in SHRM. When SHRM advocates universalism,
the organizations are better off identifying and adopting the 'best practices' for managing people.

SHRM has to be aligned with the corporate strategy and various functions of HRM. The process
has to be in the context of internal and external factors that influence the organization.

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 Module - 2
Aligning HR Systems with Business Strategy
A business strategy is a future-oriented plan for creating and maximizing competitive advantages
to accomplish the organization's mission. To successfully execute that strategy, each function
within the business needs to align its departmental strategy with the overall business strategy.
After all, each function has distinct areas of responsibility - finance and accounting, sales and
marketing, operations, HR, information technology and production. But aligning individual
departmental strategies with the overall business strategy helps the business plan to be executed
efficiently.
The HR function, more than other functions, is involved in and affects the operation and
execution of all the other business functions. This is identified most readily in HR's enterprise-
wide staffing responsibility, but extends to the entire life-cycle of employment. The HR function
intersects and affects the other business functions in the following areas:

 Talent acquisition;
 Performance management;
 Training and development;
 Employee retention and engagement;
 Employment law compliance;
 Compensation and benefits; and
 Safety and security.
Therefore, properly aligning the HR strategy with the organization's business strategy is critical
to achieving the organization's mission.
Alignment is the connection of strategy and execution through communication. Aligning
strategies requires HR to:

 Understand the business strategy;

 Assess current conditions;
 Plan and implement the HR strategy; and
 Measure and evaluate results and adjust as needed.
Communication within the HR department and with leaders of the other business functions is key
to accomplishing the following steps.

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HR’s take home points:

1. HR must be included in setting the business strategy, and its objectives embedded within it

2. Practitioners have to understand HR’s role in the business and where it can deliver benefit

3. An HR strategy model that compliments business objectives is needed

4. Action plans and measurement are needed to turn strategy into outcomes

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The universalistic perspective

The universalistic perspective is the simplest approach to the analysis of human resource management
strategies. It starts, in all its explanations and prescriptions, from the premise of the existence of a linear
relationship between variables that can be extended to the entire population Researchers can, therefore,
identify best human resource management practices are characterized by:
(1) having demonstrated capacity to improve organizational performance and
(2) having to be generalizable.
Regarding the level of analysis, universalistic models have focused mainly on a subfunctional point of
view, analysing how certain isolated HR policies are linked to organizational performance. In other cases,
they analyse more than one best practice, defining what have been called high performance work systems.
Nevertheless, we can observe that, contrary to the other approaches that will be described below, the
universalistic perspective does not study either the synergic interdependence or the integration of
practices, and the contribution of these practices to performance is analysed only from an additive point
of view. As a result, this view implicitly denies that the different elements that build the system could be
combined in different patterns of practices that could be equally efficient for the organization.

The contingency perspective

The contingent model introduces a different starting assumption in relation to what the relationship
between variables means. Contrary to the linearity argued by the universalists, they propose a
model based on interactivity, bringing to the HRM. The relationship between the dependent and
the independent variable will no longer be stable, and it will vary depending on other third
variables, named contingency variables. Those factors moderate the link between human
resource management and performance and, therefore, deny the existence of best practices that
could lead to superior performance under any circumstance. Contingency research does not
differ from the universalistic work in terms of level of analysis. Also, in this case we can observe
contributions analyzing both single functional areas and groups of practice. But, again, when
systems are proposed, neither the internal synergic mechanisms nor the integration of practices is
considered.

The configurational perspective

The configurational perspective contributes to the explanation of SHRM with a useful insight
about the internal aspects of the function, by means of the analysis of the synergic integration of
the elements that build it. In this sense, the HRM system is defined as a multidimensional set of
elements that can be combined in different ways to obtain an infinite number of possible
configurations. From among them, researchers can extract management patterns that represent
different ideal possibilities for managing human resources. Thus, the system must not only be
consistent with the environmental and organizational conditions, but also internally coherent. It
is important to notice that these configurational patterns, rather than empirically observable
phenomena, are ideal types in the same way as those proposed by sociological theory

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The contextual perspective

The contextual perspective proposes an important shift in the point of view of the analysis of
SHRM. Unlike the previous approaches, it introduces a descriptive and global explanation
through a broader model, applicable to different environments encompassing the particularities
of all geographical and industrial contexts. This group of argues that it is necessary to expand the
concept of SHRM so as to offer a complex explanation, not only of its internal working and how
it can reinforce the achievement of business goals.

DESIGNING CONGRUENT HR SYSTEM

The Congruence Model was developed in the early 1980s by organizational theorists David A. Nadler
and Michael L. Tushman. It's a powerful tool for identifying the root causes of performance issues. It
can also be used as a starting point for identifying how you might fix them.

The Nadler-Tushman Congruence Model is a diagnostic tool for organisations that evaluates how well the
various elements within these organisations work together. The result is the identification of performance
gaps. These gaps have to be closed in order to improve the organisation’s productivity and profitability.
The gaps are identified because the Nadler-Tushman congruence model looks at the way the company
processes information and input from both internal and external sources. Furthermore, it analyses
communication structures to make them process the information as effectively as possible.

The Nadler-Tushman Congruence Model is based on four elements. These elements are work, people,
structure, and culture. According to this model, then, an organisation’s performance is the result of the
way these elements work together. The model provides a step-by-step plan with six steps. This step-by-
step plan, further explained in this article, can be used to identify a performance gap. This allows you to
compare the current situation with the desired situation and forms an important first step in developing a
concrete strategy in order to close the performance gap. The goal and result of this model is to realign
company activities so that everyone strives for the same goals.

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The Organization As an Interacting Whole
As can be seen from the image, an organization in fact consists of four elements that work together in
order to process input into output. This process is referred to as the transformation process: natural
resources, components or other means are processed and turned into something new. This includes the
financial means, used to purchase all the other means. This transformation process takes place
continuously within the organization. The organization’s environment is not as stable. Organizations are
exposed to countless threats and opportunities and need to use their means in such a way as to achieve
maximum profitability. Threats and opportunities can be identified using the SWOT model.

The finished products or services are then delivered to the external market. The market’s reaction is
important to the organization, which will always consider and process it in the form of feedback. The
transformation process itself, which can be made more efficient using the Nadler-Tushman Congruence
Model, consists of the following four elements.

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Work

Work refers to the tasks carried out by employees. It’s important that the result of these tasks are
aimed at the company objectives. It should be apparent which skills or knowledge are required for
tasks and company activities, and these should be present to a sufficient degree within the
organisation.

People

People are an important part of the organisation and the congruence within it, and form an
important part of the Nadler-Tushman Congruence Model. A company aimed at innovation is
looking for pioneering, fast-thinking people. A sales company is mostly focused on finding sales
talent. It should be known of employees which skills and knowledge they possess, whether they
have experience, and what education they have followed. It should also be known how they
would like to be individually rewarded and compensated for their work. For motivated staff, it’s
also important that they should be able to develop potential within themselves.

Structure

Although aligning the work from the first of the four elements is important, aligning
the organizational structure is even more important. Structure is the third component of the
Nadler-Tushman Congruence Model. It creates consistency between what an organisation wants
and what it does. A company that responds to new market developments needs a flexible
corporate structure that is able to quickly adjust to the changing market. A company chain with
outlets in various regions would benefit more from a hierarchical structure with regional
managers.

Culture

The corporate culture consists of values and norms, behavioural patterns and rules, both written
and unwritten. The corporate culture also has great influence on the way it supports and
stimulates the corporate results. Sometimes, an organisation’s culture needs to change before the
organisation is able to adjust to a new business focus. A relaxed, informal corporate culture may
work well for a startup, but will need to become somewhat more mechanical upon growth. There
are also organisations where the focus is on employees and their well-being. This happens
in altruistic organisations.

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Step-by-step plan for organisational congruence

We may derive several steps from the Nadler-Tushman congruence model, which can be gone through in
order to achieve congruence and improved performance in the organisation.

The first step of the Nadler-Tushman Congruence Modelwill not need to be gone through by every user.
Reasons for carrying out such a process may vary. Sometimes a performance gap is suspected and the
organisation wants to run an analysis in order to be sure. When there is no suspicion of incongruence, the
step-by-step plan may still be gone through in order to improve any inefficiencies.

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1. Identify symptoms

Collect data that show possible failings in the organisation’s functioning. These may be disappointing
results, undesirable behaviour on the part of employees, or something else. Make sure all symptoms are
noted down.

2. Note down input

Investigate the exact means used in the organisation. Consider the organisation’s environment in the
assessment as well, and note down important aspects relating to financial input, human resources, and
history.

3. Identify output

Then, identify what the organisation is producing as its output on various levels. Investigate individual,
departmental, and organisational performance. In the next step, compare the performances achieved to the
desired performances.

4. Identify problems

Assessing and comparing performance, one may find various causes for problems. In this step of the
Nadler-Tushman Congruence Model, use the root cause analysis to identify the causes. It’s important to
compare the results achieved to the desired results, as well as selecting areas where the difference is
substantial. For each problem, the consequences it brings should be noted down. This means direct costs,
indirect costs, and opportunity costs.

5. Describe company elements

In this step of the Nadler-Tushman Congruence Model, the four elements explained above are described.
Make sure the descriptions are clear, concrete, and focused on the element’s core functions. If needed, use
corporate models like the Business Model Canvas.

6. Assess congruence

Assess the relative congruence between the various elements of the company. Think of how information
streams flow, what the communication structure looks like, who has been invested with which powers,
and which people are responsible.

Carefully consider the various ways in which the elements interact. Tasks and people, people and
cultures, structure and culture, they all relate to one another and may provide useful insights into the
manner and degree of efficiency of working.

7. Make action plan

Note down how the problems from step 4 of the Nadler-Tushman Congruence Model may be anticipated
and how problems should be dealt with in the future. By linking the problems to output and finding out

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what’s causing the discongruence, the exact cause may be traced. Then, use Business Process Re-
engineering (BPR) in order to reshape the processes.

LINKING HRM PRACTICES TO ORGANISATIONAL OUTCOMES:

HR STRATEGY FORMULATION:

These are eight key steps in the quest towards delivering a successful HR strategy.

1. Aligning business and HR needs

The business’ goals – that is its strategic imperatives – sit at the heart of any HR strategy and in order to
align business and HR needs one key question must to be answered, “Can your organisation’s internal
capability deliver its business goals?”

This is where HR receives most criticism. The function is frequently accused of failing to fully
understand its business, goals and strategy for achieving these goals, and its business model and how it
delivers to its customers. For those who already understand the demands of their business, it is easy to
identify where the business has strong core competencies and where the business is weakest.

Sometimes these weaknesses are related to essential systems or processes, but more often – and
significantly for HR – these weaknesses relate to the quality of the workforce, its motivation and ability to
deliver organisation performance. Taking steps to understand your business and where it has competitive
advantage is an essential first step towards determining the key HR interventions that form the basis of an
HR strategy.

2. Developing your HR strategy

Deeper knowledge and understanding of your business goals and business model can identify potential
threats and opportunities in the quantity and quality of human resource required by your organisation.
This in turn identifies the key components of your HR strategy and the virtuous circle of providing
whatever your organisation needs for success.

It is also critical that the HR team has a high level of expertise in aligning major HR interventions and
their relevance to business performance. This calls for expert HR thinking and identifies the requisite
interventions and, equally important, how they fit together to leverage organisation performance.

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If there is a strong need for the organisation to develop its management capability, for instance, should
you align your compensation strategy to reinforce this objective? If the organisational structure defines
the accountabilities clearly at every level of the organisation, is your HR team selecting and developing
against them? This is joined-up HR at work.

Another concern for HR is when it should make strategic interventions. Easy, it either follows your
business cycle, or is triggered by other key events such as a merger, an acquisition or a change in business
direction.

3. Organisational performance
Organisational performance is the process by which business goals and objectives are cascaded and
managed across and down an organisation. It provides a link and rationale for all other HR activity and, in
addition, the greatest opportunity to directly impact business success, enhancing HR’s reputation and
contribution.

HR needs to create and install a robust performance management process that sets out performance
objectives for all levels of staff within a business. This is an opportunity to develop line managers’ skills
in being able to disseminate and set stretch targets for their business.

A critical part of this process is a robust performance review process, which gives people feedback about
what has been achieved – what people have done well and not so well.

The third element is a personal development review process where individual strengths and weaknesses
are identified for the purposes of assessing and meeting organisational development needs.

4. Organisational design and structure

Organisational design is the shape, size and structure of the organisation required to meet customers’
needs. It reflects the management processes that drive the business model and determines organisational
agility and flexibility. These processes can be a source of competitive advantage or sources of frustration,
unnecessarily absorbing time, cost and resources.

Decisions affecting the shape, size and cost of the organisation will be aligned with the business strategy.
It should be relatively easy to see whether an organisation invests in marketing, sales or manufacturing,
for instance, and whether the organisation is maximising its work flow capability.

As people experts, the role of HR is to add value to the structure and operation of the business. Structural
weaknesses offer an opportunity to revamp any part of the organisation by identifying and making
appropriate changes, reductions in size or cost; or improvements to the quality of the operation.

Conversely, structural strengths are a signal to the HR team to reinforce organisational competence.

5. Strategic resourcing
Achieving clarity throughout the organisation’s structure is critical in order for resourcing strategies to
work well. If the organisation is transparent about its key roles and accountabilities, this will define the
skills and knowledge required to undertake the work and determine strategic resourcing requirements.

Deciding on your resourcing strategy means identifying a number of critical components. These range
from the processes needed to determine resourcing needs, the processes to attract the right people and the
processes for assessing and selecting the right people. HR has a strong traditional involvement in all of

30
the above. In addition, it is essential to ensure each stage of the resourcing activity is aligned and in direct
response to the strategic imperatives.

Another important component determining the effectiveness of any resourcing strategy is the need to
create a ‘recruitment brand’ – how the image (or brand) of the organisation appears to the recruitment
market can either support or undermine the success of a resourcing strategy.

6. Organisation development
If strategic resourcing is about providing a pipeline for importing external talent, then an organisation’s
development strategy is the way in which the HR team decides what changes and improvements need to
be made to the current workforce.

Usually these responses work at three levels – the individual, team and organisation – and all are geared
to achieve high levels of organisational performance. It requires a close examination of the strategic
imperatives and clarity about the capabilities to execute it.

Development responses will aim to increase business skills, the application of business skills (sometimes
called competencies) and the behavioural elements – all of which contribute to an organisation’s effective
performance. It is important at an individual level, particularly for senior people, that they feel their
development needs are agreed and that they are provided with the skills to do their jobs.

At a team level, it defines individuals’ ability to work with others flexibly and align individual and team
skills and activity to business goals – all of which ensure that the organisation is equipped to deliver its
goals.

7. Compensation and benefits

Often called reward strategy, the purpose of compensation and benefits systems is to align the
performance of the organisation with the way it rewards its people, providing the necessary incentives and
motivation required for an organisation to deliver its goals.

Its components are a combination of base pay, bonuses, profit sharing, share options, and a range of
appropriate benefits, usually based on market or competitor norms and the organisation’s ability to pay.
Typically, the components of an organisation’s reward strategy will reflect the particular performance
culture of a business.

There is evidence that organisations see compensation as a strategic management lever and are
increasingly experimenting with new practices – team bonuses, for example, aimed at improving team
performance or skills/behaviour payments to upskill the workforce or reinforce culture or behaviour
change. A company’s reward policy in particular benefits from clarity about which other elements of the
HR strategy it aims to support.

8. Organisation culture
Culture is usually described as the “way we do things round here” – the way the organisation acts, reacts
and interacts. The trend in the last 10 to 15 years has been to align organisational behaviour more strongly
with customers’ needs, creating customer-facing units and customer-sensitive behaviours. This has been
as a direct result of the increased competition around product, quality, prices and packaging. In re-
aligning an organisation’s culture there can be real benefit and competitive advantage through improved
service.

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HR teams which are closely involved with the organisation’s cultural ambitions can lead these initiatives
through their knowledge of organisation psychology such as describing new behaviours and work styles;
and through their skills in organisational development and being able to provide development solutions to
deliver the improvements.

Production of the HR strategy

The eight components described here form a generic model of the most commonly used elements of HR
strategies. It is important to select those that are most relevant to any particular organisation.

When the key elements are decided, there are a number of simple questions that the HR team should be
asking itself as each element of the strategy is considered in turn:

START – What are we not doing yet, that the business needs from us?

STOP – What should we stop doing because it does adds not value?

CONTINUE – What are we already doing that supports the business plan?

HR STRATEGY IN WORKFORCE UTILIZATION:

 Workforce Engagement

 Talent Management

 Job Analysis

 Policy Making

 Cross Training

 Provide Flexibility

 Teamwork Management

STRATEGIC PERFORMANCE MANAGEMENT:

Strategic performance management is defined as: the process where steering of the organization takes
place through the systematic definition of mission, strategy and objectives of the organization, making
these measurable through critical success factors and key performance indicators, in order to be able to
take corrective actions to keep the organization on track

The strategic performance management process consists of various sub-processes: strategy development,
budgeting/target setting, forecasting, performance measurement, performance review and incentive
compensation. These integrated sub-processes create the performance driven behavior of employees that
is needed to become and stay world-class.

 Strategic development

The strategy development process results in clear strategic objectives and action plans for measurable
performance improvement. These are based on a through understanding of the key value drivers that are

32
aimed at achieving a competitive advantage. Business issues that drive organizations to improve the
strategy development process are the lack of focus of the strategic plans and the low quality of the
strategic targets. The strategy development process often focuses too much on meticulously calculating
future financial results instead of planning for value creation. Strategic plans tend to look inward,
resulting in unrealistic long-term views that do not take environmental developments into account and
that focus insufficiently on competitive advantage and true differentiation.

 Budgeting/target setting

The budget/target setting process results in clear operational action plans for improving the key value
drivers, for committing resources, and for setting financial targets for the coming year. Business issues
that drive organizations to improve the budgeting/target setting process are the low reliability of the
budget data and the too high level of detail of the budget. Because of the volatility of the business
environment and the organization itself and the early start of the budgeting process in the year, the targets
in the budget tend to be out of date the moment it is set. In addition, the budget tends to be detailed with
too many parameters on all management levels, and therefore takes too much time to prepare.

 Forecasting

During the forecasting process organizational members execute the activities that have to lead to the
desired results. Regular forecasts are made to predict whether the organization is still on track or whether
corrective and/or predictive actions are needed to solve current or predicted problems.

 Performance measurement

The performance measurement process collects, processes (including consolidation), and distributes data
and to allow an effective execution of the other sub-processes. The information is represented in the form
of critical success factors (CSFs) performance indicators (KPIs). A business issue that drives
organizations to improve the performance measurement process is the low quality of management
information and management reports. Often management information does not fully satisfy
management’s needs and does not stimulate proactive behavior because the reports lack non-financial
information, are not sufficiently exception-based, do not include corrective and preventive actions, and
are incomplete because data collection is very time consuming.

 Performance review

The performance review process periodically reviews actual performance, targets, and forecasts in order
to ensure that timely preventive and corrective action is taken to keep the company on track. Business
issues that drive organizations to improve the performance review process are the low quality of forecasts
and bad timing of performance reviews. The added value of forecasts is relatively low because their
accuracy is often insufficient, they are usually too financially oriented, they do not provide enough
explanatory information about future issues, and it takes too much time to prepare them. Performance
review meetings generally take place on a regular basis rather than as an exception when there really is a
problem. As a result the performance reviews take up too much time when there are no problems in the
organization and when there are real performances issues and problems the reviews are either not held or
held too late.

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  Incentive compensation

This process links strategic and operational actions for key value drivers, in a balanced way with
compensation and benefits policies. The main business issue that drives organizations to improve
the incentive compensation sub-process is that this process is not sufficiently aligned with the
other sub-processes; therefore it does not reward the right performance-driven behavior of
organizational members.

HR STRATEGY FOR TRAINING AND DEVELOPMENT

Analyze Your Needs

The first step in putting together a training strategy is to look at the needs of your business. What
are the types of skills, knowledge, and expertise that the employees of a successful company in
your industry need to have? What are your company’s business goals and strategies? What
knowledge, skills, and abilities do employees need to achieve those strategies?

Identify Skill Gaps

Next, take a look at the gaps that may exist between needed knowledge, skills, and abilities, and
employee competencies. Which of the critical skills you identified do employees have? Which
are they lacking? This analysis can be done on both an individual employee basis and
companywide.

Prioritize
Ideally, your training program will imbue your employees with all the skills needed to make your
company a strong competitor in your industry. But, in reality, you are going to be faced with
finite resources—time and money—and there are likely some skills that are more important than
others. Your prioritization should, again, be based on your company’s strategic initiatives as well
as potential bottom-line impact (related to reducing costs or increasing revenue) and impacts on
risk.

Plan and Deliver the Training

The final step in developing a training function is execution. The best strategy will be useless if it
isn’t executed properly, so it’s important to spent sufficient time dedicated to execution once the
strategy is crafted.

Training is a key element to a successful company; a formal training function can benefit most.
Keep in mind, though, that “some training” is not, necessarily, better than no training. Poor
training can have significant negative consequences, so it is essential that adequate thought and
planning go into the development of a training strategy.

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 Module -3

International and Comparative Human Resource Management

International and comparative human resource management (HRM) are related but distinct areas
of enquiry. Comparative HRM is largely concerned with questions about why and to what extent
there are differences in HR practices across countries. International HRM is more focused on
issues associated with the management of employees across national borders in multinational
corporations (MNCs). IHRM has therefore been interested in questions about the extent to which
multinational companies reproduce similar sets of HR practices across their subsidiaries.

Difference between international and comparative HRM

The growth in international trade and globalization has encouraged firms to expand their
operations worldwide, which has resulted in the emergence of new markets such as China, India,
South East Asia and Latin America. This trend has also been accompanied by an increased level
of competition amongst firms at both national and international level. The challenge of managing
a workforce worldwide with different cross-cultural skills, competencies and demographic
characteristics means that managers can no longer rely on traditional HRM models developed for
Anglo-Saxon countries. Many firms underestimate the complexities involved in international
operations, and there is some evidence to suggest that business failures in the international arena
may often be linked to poor management of human resources (Desatnick & Bennett, 1978).
Western academics and practitioners have thus moved from traditional international HRM issues
to the area of comparative HRM. In order to maximize cross-national management capabilities,
there is need to understand how employees in different national settings respond to similar
concepts within their particular functions. This essay has been structured as follows. In the next
section, I will examine the difference between international and comparative HRM. I will then
look at the way comparative HRM assist academics and practitioners appreciate the differences
in the strategies and processes in MNCs. A conclusion is then presented.

 International HRM has been defined as HRM issues, functions, policies and practices that
result from the strategic activities of MNEs (Scullion, 1995). IHRM deals principally
with issues and problems associated with the globalisation of capitalism. It involves the
same elements as domestic HRM but is more complex to manage, in terms of the
diversity of national contexts and types of workers. The emphasis is on the MNCs’ ability
to attract, develop and deploy talented employees in a multinational setting and to get
them to work effectively despite differences in culture, language and locations.
International HRM tends to mitigate the impact of national culture and national
employment practice against corporate culture and practices.
 Comparative HRM, on the other hand, is a systematic method of investigation that seeks
to explain the patterns and variations encountered in cross-national HRM rather than
simply describe HRM institutions and practices in different societies. According to
comparative HRM literature, different national business systems arise from differences in
specific historical, cultural and institutional heritage in certain countries. Comparative
differences occur due to decisive historical events such as the process of industrialisation

35
 or due to the legacy of pre-modern forms of social organisation. Hofstede’s (1980)
adopted the ‘culturalist’ perspective where he argued that national business styles emerge
due to ingrained cultural attitudes and mental schemas. He described culture under five
dimensions which are power distance, individualism, masculinity, uncertainty avoidance
and long-term orientation. Other researchers claim that HR management practices differ
between nations due to the presence of specifically national institutions such as
education, banking services or state/legal support.

Global Human Resource Management

Meaning
Global human resource management, sometimes referred to as global HRM, is an umbrella term
that includes all aspects of an organization’s HR, payroll, and talent management processes
operating on a global scale. As technological innovations make it easier for organizations to
conduct business across the world, global expansion has become an increasing reality. Likewise,
it’s essential for these multinational organizations to have the right HRM software in place that’s
capable of serving employees working around the globe.

Definition
The process of employing, developing and rewarding people in international or global
organization. An organization in which operations takes place subsidiaries overseas, or manages
its business internationally.

It combines knowledge of business, culture, history and social practice to help companies find
their niches in the international community.

Differences and Similarity between HRM and GHRM

35
36
Differences between International and domestic HRM
The practice of HRM in the international context is different from its domestic counterpart in a number of
ways. This includes the IHR department in a multinational firm

(1) Being responsible for a greater number of activities, such as the management of international
assignees that includes such things as foreign taxes and work visas and detailed assistance with family
relocations to foreign locales;

(2) Having to expand its areas of expertise to include a much broader perspective, including knowledge
of foreign countries and their employment laws;

(3) Having to get much more closely involved – than is ever necessary in a purely domestic situation –
with employees’ (and their families’) lives as the firm moves employees from country to country;

(4) Being involved with a greatly expanded and constantly changing mix of employees, adding
considerable complexity to the IHR management task;

(5) Having to cope with more external influences, such as having to deal with issues stemming from
multiple cultures and countries; and, as a result,

37
 (6) Having to face much greater exposure to problems and difficulties, and, thus, exposure to much
greater potential liabilities for making mistakes in HR decisions

Geert Hofstede’s Cultural Dimentions Theory

 Power Distance: the inequality among the people of a nation.

 Individualism: the moral stance, political philosophy, ideology or social outlook that
emphasizes the moral worth of the individual.
 Masculinity/Femininity: the degree to which “masculine” values prevail over
“feminine” values.
 Uncertainty Avoidance: reflects the extent to which members attempt to cope with
anxiety by minimizing uncertainty.
 Long Term orientation: stands for fostering of virtues oriented towards future rewards
through perseverance and thrifty.

Evaluation of HR functions in International context

Balanced scorecards and HR scorecards
One direct way in which the effectiveness of both domestically based and international HR
functions is assessed is through the balanced scorecard approach. HR lies at the heart of the
method. Whilst the financial, internal and customer perspectives identify where the business
stands now and where it needs to be in the future, learning and growth identify how it will get
there. As we have seen throughout this book, a critical task for both HR and line managers in
global organizations is the need to create an organizational infrastructure that empowers people
to give their best. Developing people to be able to meet the challenges of the future is also a
critical imperative. The discipline of a balanced scorecard approach also reinforces more
sophisticated approaches to performance management, which helps align HR outcomes with
strategic objectives. An alternative to the use of balanced scorecards is the adoption of high-level
performance promises. This was seen, for example, in Diageo. A similar system based on a
balanced scorecard approach exists within Ford of Europe.

The global role of the IHR professional

In order to enhance the competitive advantage of global firms, their human resource
professionals (managers and staff) need to focus on developing their own international

38
competencies.At the same time, the IHRM function needs to shift from an administrative
orientation to one that places primary attention on the processes of internationalization, so that it
can help reconcile the types of organizational paradoxes described above that are inherent in the
activities of global firms. This not only creates new demands on how specific HR activities are
performed but also sets a new agenda for HR professionals and their global roles.

First, HR professionals need to learn about the fundamentals of global business. They cannot
assume a global strategic role without understanding global strategy. Second, a solid knowledge
of strategy must be complemented by the globalization of their individual professional
expertises. This rests primarily on the acceptance and understanding of the cultural relativity of
many HR practices. And that in turn is complemented by an understanding of how their firms’
principal global competitors plan and execute their global HR strategies, what tools and methods
they use to build their organizational competencies, and what implications for competitiveness
arise from their actions.

This understanding of global strategy, cultural differences, and HR capabilities requires a

thorough globalization of the HR function by developing a cadre of HR professionals with
international perspective, knowledge, and experience. Presently, however, the number of HR
executives with multicounty experience or who are on an international promotion and
development track is quite limited, even in the largest of MNEs.

The lack of international experience among US HR professionals is not surprising, but this must
change if IHRM is to be recognized as a strategic partner in the management of global firms.
Global firms will need not only to set up regional HR positions and assign global responsibilities
to corporate HR managers but also to select, develop, and motivate IHR professionals with very
much the same intensity and approach that is currently used for global executives in other areas
of management.

Firms that have successfully globalized their human resource activities share several important
characteristics:

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  The global HR role has the strong support of top management in terms of high
expectations about the contributions the IHRM function can make to the formulation and
implementation of effective global strategies and the readiness of the IHRM function to
step up to its responsibilities.
 The expectations and support of top management for the IHRM role are usually derived
from a longstanding commitment to dedicate management energy and resources to
human resource issues as a reflection of a people-oriented corporate culture.

 Cultural diversity (including national diversity) is encouraged as a natural way of life.

 Ambiguity as a way of dealing with the many paradoxes imbedded in global HR issues is
also accepted as normal. Not much is seen or accepted as “black or white.”
 The final condition for a successful implementation of IHRM strategies is the
competence and credibility of the IHRM staff. To earn that credibility, IHR managers
must accept the risk and responsibility for putting forward policies and practices that
make a difference in the achievement of corporate global strategies.

Strategic IHRM
In an ideal world, a firm conducting international business will be actively engaged in strategic
planning and strategic management. The firm will regularly perform an environmental analysis
or scan (of its external threats and opportunities and its organizational strengths and weaknesses)
and from that analysis develop its global strategies which are then implemented for global
success. Still in this ideal world, all components of the firm will be closely integrated into that
planning and will be involved with similar strategic planning within their own areas of
responsibility.

40
Strategic management, in general, is the array of competitive moves and business approaches
that managers employ in running a company and that are derived from the firm’s vision and
objectives. In crafting a strategic course, management is saying that “among all the paths and
actions we could choose, we have decided to go in this direction and rely on these particular
ways of doing business.”A strategy signals an organization’s commitment to specific markets,
competitive approaches, and ways of operating. A company’s strategy is thus the “game plan” its
management has for positioning the firm in its chosen market arena, for investing money and
people in the development of particular business capabilities, for developing sustainable
competitive advantage, for pleasing its customers, and, thus, for achieving superior business
performance. These strategies are developed in either or both of two ways: proactively, as a
forward-looking plan to deal with anticipated market forces, or reactively, as a response to what
the firm is experiencing in the marketplace. In most firms, strategies that are developed stem
from a combination of these forces.

Among all the things managers do, nothing affects a company’s ultimate success or failure more
fundamentally than how well its management team charts the company’s long-term direction,
develops competitively effective strategic moves and business approaches, and implements what
needs to be done internally to produce good day-in/day-out strategy execution. Indeed, good
strategy and good strategy execution are the most trustworthy signs of good management.

There are various strategies or stages to understanding international business strategy are
interrelated. Just as firms differ in their stages of international development, so too do they differ
in terms of the structures they adopt in their international operations. The specific international
strategy chosen or developed influences the choice and design of organizational structure.
Coping with the complexities of the design of global enterprises turns out to be one of the most
difficult areas in which IHRM can make a strategic contribution to a firm’s international business
strategy. Thus, this section includes some of the issues related to international organizational
structure.

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Internationalization
At this stage, a firm makes the initial decision to “go international.” In the beginning, this choice
will probably involve only export to foreign customers in one country, or import of one or a few
products, again probably from only one supplier or one country. The international business
activity at this level will have very little impact on the overall business and will not receive much
management attention. In recent years, this level of strategic involvement has extended beyond
concerns for finding new markets or cheap raw materials to licensing and subcontracting of
manufacturing and sourcing of manufacturing inputs, in order to meet rising cost pressures
caused by increased global competition. The HR impact will be fairly limited, with the firm
relying on a few key managers and technical experts to negotiate overseas linkages and to
transfer technology, if necessary, to a licensee or subcontractor.

Multi-country/multi-domestic/ Multinational
At this level of international strategy, a firm decides to establish subsidiaries in multiple
countries, with these subsidiaries typically operating independently within each country,
independently of operations in other countries, and often fairly independent, even, of the parent-
company headquarters. This is referred to as a “multi-domestic” or “multi-country” strategy.

As independent as subsidiaries often become, in this strategy the organization’s operations in a

number of countries may reach such size and importance that there is increased need for
integration with corporate headquarters. The firm may develop global product divisions that
provide global coordination of finance, HRM, marketing, and research and development. Or the
MNE may organize into major country subsidiaries with regional headquarters to coordinate
operations on a regional basis. Nevertheless, at this level of international strategy, the MNE will
have significant operations (assembly, manufacturing, service centers, R&D, branch offices) in
many countries and may well reach the condition where half or more of its sales and employment
is in foreign countries.

The HR department’s role at this stage becomes even more complex and difficult. Now HRM
must not only provide services – such as relocation, compensation, and benefits for often

42
hundreds of employees (international assignees) working in foreign (to them) locations – but it
must also coordinate the HRM activities and practices of the many subsidiaries, seeking both
consistency with the culture and policies of the parent company and accommodation of local
values and practices. In addition, training for international assignees (from the parent company
or from foreign locales), local nationals, and parent-company employees to handle foreign
assignments and interaction with foreign counterparts will increase dramatically.

The global firm

In recent years, many MNEs have reached the state of internationalization where their
operations are becoming blind to national borders. Even though most businesses still organize on
a regional basis and adaptation to local customer preferences may still be necessary, products
and services are increasingly designed for and marketed to customers all over the world. This is
particularly true for industrial products, that is, for products sold from business to business, such
as computer chips. The best technology and innovative ideas are sought everywhere and applied
to markets throughout the world. Products and services are created where costs are the lowest,
quality is the highest, and time to delivery is the shortest, and delivered wherever demand is
sufficient. And resources (money, material and parts, insurance, even people) are sought from
wherever the best quality for cost can be found.

These firms are increasingly referred to as “global.”Reaching this stage of development is not
merely a matter of company size or experience in internationalization. Sometimes it is a
reflection of the nature of the pressures of the particular industry, but often, it reflects a
purposeful, strategic, decision to “go global.”

The experiences of global MNEs suggest that running a global company is an order of magnitude
more complicated than managing a multinational or international firm. The global corporation
looks at the whole world as one market. It manufactures, conducts research, raises capital, and
buys supplies wherever it can do the job best. It keeps in touch with technology and market
trends all around the world. National boundaries and regulations tend to be irrelevant, or a mere
hindrance. Corporate headquarters might be anywhere.

43
At this level of development, the role of the HR department must again shift. Employees are
hired everywhere in the world, wherever the necessary skills, training, and experience can be
found. Worldwide policies are developed and implemented for many aspects of HR
responsibility, possibly based on practices followed in numerous places around the world.
Management promotions will require international experience and managers and executives will
be developed from all major countries or regions of operation. At the same time, increased
sophistication in locating certain HRM practices will become even more important, as the firm
tries to be a global enterprise.

The transnational firm

A decade ago, Bartlett and Ghoshal suggested that many firms were evolving into a new form of
international business, that they termed “transnational.” In the sense that the transnational firm
has a global focus, it is similar to the global firm, described in the previous section. But it differs
from the global firm in that, rather than developing global products and services, the
transnational works hard to localize, to be seen, not as a global firm, but as a local firm, albeit
one that draws upon global expertise, technology, and resources.

Sustainable Competitive Advantages:

Definition:
Sustainable competitive advantages are company assets, attributes, or abilities that are difficult
to duplicate or exceed; and provide a superior or favorable long term position over
competitors.

Sustainable Global Competitive Advantages:

Competitive advantage is increasingly found in knowing how to do things, rather than in having
special access to resources and markets, knowledge and intellectual capital have become both
the primary bases of core competencies and the key to superior performance. In recent years,
the development of “hypercompetition” and shortened product lifecycles has reduced the
degree to which much special knowledge can provide companies with sustained competitive
advantage.

44
Shrinking logistical and communication costs, along with new organizational designs, have
enabled multinational corporations (MNCs) to function as truly global companies. Global
companies introduce their newest products worldwide and effectively share knowledge across
country units. Fueling hypercompetition, many industries now have several MNCs competing
against each other on a worldwide basis, rather than a few local companies and only one MNC
competing in each market. New product innovation has become the key to competing
successfully. MNCs use their deep pockets to fund research and development (R&D), and they
reverse engineer each other’s products and turn to consultants to learn about best practices in
their industry. Companies develop or acquire new knowledge so rapidly that having special
knowledge is no longer a basis for sustainable competitive advantage. To provide sustained
competitive advantage, one needs knowledge that is difficult for outsiders to copy as well as
the ability to rapidly develop new knowledge.

Example
In a graphic demonstration of the transient value of much knowledge, Michael Tushman began
his courses at Columbia Business School by asking what the following list of products had in
common: watches, cars, cameras, color TVs, hand tools, radial tires, industrial robots, machine
tools, electric motors, financial services, food processors, microwave ovens, stereo equipment,
athletic equipment, computer chips, optical equipment, medical equipment, and consulting
services. The answer: each of these industries was initially dominated by a company with
specialized knowledge, but that company rapidly lost its lead as other companies acquired the
knowledge required to compete.

Expatriation and Repatriation Management in Global HRM

Expatriation

An expatriate is an employee who has left his native land and is working and temporarily
residing in a foreign country. An expatriate can also be a citizen who has relinquished citizenship
in their home country to become the citizen of another country. The term originates from the
Latin words, ex (out of) and patria (fatherland).

A firm’s employees who are transferred out of their home base into some other area of the firm’s
international operations are referred to as expatriates. The practice of global mobility of a
company’s workforce helps in building competitive advantages. All expatriate employees are
entitled to receive an expatriate premium while working in a foreign country. This includes
monetary benefits and non-monetary incentives like housing and education.

45
When the initiative for expatriation comes from individuals rather than employers, it is called
self-initiated expatriation (SIE). An illustration of this is the fact that some sian Companies
A
have recently hired a number of Western managers.

Dubai is a country where the population is composed predominantly of expatriates from

countries like India, Pakistan, Bangladesh and Philippines, with only 20% of the population
made up of citizens. Most popular expatriate destinations are Spain, followed by Germany and
Britain.

Repatriation

Before elaboration on the stages in the repatriation process, it is useful to understand that on
completion of the overseas assignment, the MNC brings the expatriate back to the human
country, although not all foreign assignments end with a transfer to home- rathe the expatriate ris
re-assigned to another international assignment. Some employees are made to travel around the
globe frequency in which case they form part of the MNC’s international cadre of managers.
Even with such managers, repatriation is essential, particularly at retirement.

 Preparation involves developing plans for the future and gathering information about the
new position. The firm may provide a checklist of items to be considered before the
return to the home(e.g. closer of bank accounts and settling bills) or a through preparation
of the employee and his r her family foro the transfer to home.

 Physical relocation refer to saying good

s bye to colleagues and friends, and traveling to
the next posting, usually the home country.

46
  Transition means setting into temporary accommodation, where necessary , making
arrangement for housing and schooling, and carrying out other administrative tasks such
as renewing driving license, and opening bank account.

 Readjusting involves coping with reverse culture shock and career demands. Of all the
steps in the repatriation process, re-adjusting is the most difficult one. The re-entry
adjusting is a tough task because of multiple factors. First there is anxiety experienced
when he or she returns home, the apprehensive being accentuated by the uncertainly
about the placement in the firm, career prospects and a sense of isolation, feeling of
devaluing the international experience, coping with new role demands and probable loss
of status and pay.

MNC respond to the repatriation problem in several ways. Many firms have formal repatriation
programs. Some companies assign the expatriate to a mentor, popularly called as the godfather.
The mentor is usually in a more senior position than the expatriate and knows him or her
personally. The purpose behind the use of a mentor is to remove the sense of alienation through
the provision of information (e.g. workplace changes) on a regularly basis, so that expatriate is
better prepared for the conditions he or she is likely to face upon re-entry. The mentor should
also ensure that expatriate is not sidelined when important decisions are made regarding
positions and promotions.

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