Contents Preface Acknowledgements v viii

CHAPTER 1 Strategic Human Resource managemt:An Introduction 1

2 5

13
4. Strategic Fit: A Conceptual Framework 5. Distinctive Human Resource Practise

18

27
6. Theoretical Prespectives on SHRM

29 33 36

7. SHRM Approaches: The Indian Context

CHAPTER 2 Human Resource Environment 50 1. Human Resource Environment: A Brief Overview 51 2. HRM in Knowledge Ecomony
3. HR Outsourcing 4. Technology and HRM 5. HRM and Change

80 88 94 99

Case Study

Organisational Redesign at Bharat Petroleum Corporation Limited: The Challenge of Privatization CHAPTER 3 1. HRM Evaluation : A Background 122 111 121

2. Human Resource Evaluation : Defination & Overview 123 3. HRM and Firm Performance 4. Rationale for HR Evaluation X Contents Measures of HRM Performance Approaches to HR Evaluation Contemporary Approaches to HR Evaluation Case Study Kodak Measurement of Human Resource Management at Eastman 173 134 148 133 126 132

CHAPTER 4 Human Resource Planning

180 181 182

3. Significane of HRP in a Changing Environment 186 4. Perspective of HRP 5. Objectives of HRP 6. Job analysis 7. Job Analysis and SHRM 8. Competency based Job Analysis 9. HRP Horizons

191 193 195 206 210 212

10. HRP Process 11. Special Challenge : HRP and Out Sourcing

214 242

Case Study Human Resouce issues in private Participation in infrastruture-A Case study of orisa power reforms CHAPTER 5 Acquiring Human Resources Human Resouce A 261 cquisition An Overview 250 260

External Influences on Staffing 265 Internal Influences on Staffing 267 Recruitment Sources Internal versus External Methods of Rccuitment New Approaches to Recrunltment Methods of Employee Selection New Approaches to Excutive Selection Staffing Process : Recruting and Selecting Emloyees Evaluation of Staffing Process Selection Outcomes Strategic Recruitment and Selection 317 Hirting for a Diverse Workforce 323 Alternatives to Hiring Permanent Employees Hirting Considerations in BPO firms Case Study 327 334

268 269 280 287 295 302 314 316

Hiring for Excellence at Cisco Systems CHAPTER 6 Training and Development of Human Resources 355 The Need for Training and Development Training and Development : Basic Concepts 357 Purposes of Training and Development Significance of Training and Development 364 HRM Approaches to Training and Develoment Linkage between Bussiness Strategy and Training 369 The Process of Training and Develoment Special Forms of Training and Development 397 New Development in Training and Development 408 Case Study McDonalds CHAPTER 7 Performance Management and Develoyment System 433 Performance Manegement 434 Objectives of Performance Mnegement System Developing Performs Manegement System Problems in Performance Manegment Effective Performance Manegment System

346

356

361

368

373

426

437 443 464 467

Devlopments in Performance Management Technology and Performance Manegment 492 Stialegic Linkage of performance management 496 Case Study Performance Appraual at Amber limited

469

504

CHAPTER 8 Compensation and rewards Management 510 Compensation and rewards Compensation and rewards-Determinants 511

Xii Contents Compensation and rewards Approaches Pay-for-performanace Approaches Equity in rewards Deeisions Compensation and rewards-new Developments Trends in Top-level Executive Compention 542 Business Strategy and Compensation 547 Total Compensation and rewards Strategy 560 Case Study Rewards System of a university 569 530 531 535 ``538

CHAPTER 9 Managing Careers Careers-Contemporary Notions Career Planning, Development, and Management Career Stages Career planning Career Development 584 590 607 574 575 577

Career Management Systems 598 Desigh and implementation of Career management syatems Urganizational career management :A typology 612

Career management for Specific HR Issues:HRD Approacch 617 Career Management :An SHRM Approach Case Study Career Development at Dataware and systems CHAPTER 10 Mentor Relationships THE Concept of Mentoring Perspectives of Mentoring Alternatoring Mentoring Models The Mcntoring Rclationship Outcomes of Mentoring Programmes 666 Berriers to Mentoring Mentoring Relationship :A Strategic HRM Approach Special Issues in Mentoring Case Study 679 681 686 637 644 647 650 656 636 632 613

Desingh and Implementation of formal Mentoring Programmes

Mentoring at Case Foods Contents CHAPTER 11 Work-Life Integration 708 Changing Notions of the Work-Family Relationship 709 Work Life Issues Work- Family Relationships: Some Related Terms 719 Work- Family Conflict Work Life Balance Work-Life Integrations Family-friendly Workplace Work-Family Culture HRD Perspectiveson Work-Life Integration 738 Development of Work-life Initivates Towards a Strategic Approach to Work Life integration 745 Case Study Narmada Bank International CHAPTER 12 International Human ResourceManagement 761 Types of International Organization 762 International Human Resource Management xiii

701

710

720 723 724 733 735

742

764

External Environment and IHRM IHRM Practices Case study Natural Pharmaceuticals Ltd Index

767 769

793 797

Strategic Human Resources Management :An Introduction

2. Strategic Human Resources Management Chapter also present the conceptual framework explaining the strategic fit between bussiness strategy and HR and highlights the theoretical prespectives on SHRM. Finally, the chapter addresses the indian applications to understanding the management of human resources.

HUMAN RESOURCES STRATEGY Human resources refer to the people who works in an organization . the tem seeks to communicate the belief that the employees of an organization are not just people,but valuable resources that help an organization to achive its objective s. People are central to organization. The financial capital, technology, or processes of the organization , by themslves, cannot accomplish organizational goals. These resources depends on human resources for their effective and efficent utilization. At the same time,human resources also needs to be managed. Fig1.1 depicts the centrality of human resources for the achive ment of organizational goals. Human resource management (HRM)is concerned with a holistic approach Towards the management of peaple working in an organization,who contri bute to the achievement of organizational objectives.human resource management ensures the most effective and efficient use of human talent for accomplishing the goals of an oranization in order to successfully utilize and manage the human resource of an organization to achieve organizational objective,each organization needs to develop a well-defined HR strategy Chandler (1962) defined strategy as the determination of the long term goals and objectives of an organizational, and the allocation of resources necessary for carrying our these goals. Line strategy out;HR strategy is concerned with two key elements (Richardson and Thompson1999)

1.Determining the strategic objectives (what goals is the strategy sup posed to achieve? For example,the goals may be high productivity, reduced accidents,etc) Strategic human resource Management :An Introdution 3 2.Developing a plan of action (How will the human resources be orga nized and allocated to accomplish the objectives of the organization?) Human resource strategy ,therefore,involves the planned and effective use of human resources by an organization to help it to gain or maintain an edge over its competitores.this definition indicates the central role that the people of the organization play in the organizational pursuit of a competitive advantage.An organization is said to achieve competitive advantage when it is able to gain and maintain an edge over its competitors by differentiating its products or sevices from those of its competitors thereby increasing its market share.The centrality of people is most evident in knowledge-based organizations,such as software and information services , where the difference between success and failure depands on the skills and knowledge of its workforce rather than on the level of techonology. Strategic Human Resource Manegement: Definition and Components Given the increasingly singnificant role of human resources in an organization,HRM has become strategic in nature. Strategic human resource management(SHRM)is concerned with the relationship between HRM and strategic management in an oranization. Strategic human resource manegement is an approach which relates to decisions about the nature of employment relationship, recrutment,training,development,performance management ,reward,and employee realations. Wright and McMahan (1992) defined SHRM as the patten of planned human resourec deployment and activties intended to enable the firm to achive its goals. This definition implies the follwing four components of SHRM(Figure1.2):
1.

It focuses on a organizations human resources(people)as the primary source of competitive advantage of the organization .

2. The activaties highlight the HR programmes, policies, and practices as the means through which the people of the organization can be deployed to gain competitive advantage.

3. The patten and plan imply that there is a fit between HR strategy and the organizations business strategy(bertical)and between all of the HR activities (horizontal fit). 4. The people,practices, and planned patten are all purposefull, that is, directed towards the achievement of the goals of the organization.

On the whole ,SHRM is concerned with people issues and practices that affect or are affected by the strategic plan of the organization. The critical issues facing an oragnization in the contemporary environment are mainly human issues,such as ensuring the availability of people, retaining, motivating,

Strategic Human Resource Manegement

and developing these resources. To stay of its competitors,an organization will continuously look for ways to gain an edge others. Today , an organization competes less on products or marks, and more on people. In the 21 st century there is increasing recognition among manegement thinkers and practitioners of the potential of human capital resources in providing competitive advantage. Two organization using the same technology may show different levels of performance. What leads to this difference? The quality of human resources and their contribution to the organization determinethe performance and therfore , the success of the organization . An organization uses a combination of several resources-tangible and intangible-in the pursuit of its objectives. These resources can be grouped into there basic types: (a) Physical capital resources-the plant ,equipment,and finances
(b) Organizational capital resources-the organizations structure

planning , HR system, history ,and organizational culture Figure 1.2: Four Components of SHRM Strategic Human Resource Manegement:An Introduction 5

(c) human capital resourcesthe skills, knowledge, judgement, and

intelligence of the organizations employees

An organizaation may have huge capital and the most advanced machinery, but if it does not have capable, motivated, and high performing employees, the organization is not likely to demonstrate sustained levels of high perfomance. Since all physical and capital resoureces depend on people for their efficient use, maintenance, and manegement, the quality of the people of an organization is important in attaining competitive advantage. HUMAN RESOURCES AS ASSETS

Of all the resources available to an organization, human resources are considered the most important for attaining the objectives of the organization. Hence, employees are now variously referred to as human capital, human assets,or human resources.

Human Capital The term capital refers to wealth,money, or property. Capital is used generate more wealth for an organization. When employees are referred to as human capital,it is implied that they are the resources that generate more wealth.Hunan capital refers to the collective skills and knowledge of total workforce of an organization that hold economic value for the organization. It enhances the productivity and profitability of the organization. In order to ensure that human capital genrates more wealth as well as leads to value creation,it is important that human capital is utilized and managed efficiently and effectively. When the value of people is enhanced, it enhances the value of the organization. For example,when an organization provides opportunities for development and an environment conducive to performance, it will result in higher

levels of retention. This aspect is explored in more detail in a letter chapter of the book. Today, it is possible for any organization to buy machienry and equipment comparable to that available in leading global organizations. Therefore macinery or finance, and access to these resources ,are no longer the factors that differentiate between organizational success or failure. Rather, it is the ability to use these tangible resoures (money, machinery, etc.) that serves as the distinguishing factor. An organization taht holds on to and build on the skills, competencies, and knowledege of its workforce can bounce back into business rather quickly,even if it loses all of its equipment. However, an organization that loses its workforce but holds on to its tangible assets has little hope of recovering . The emphasis on human resources has become all the more important as there is a marked movement towardsa knowledge-based economy and 6.Strategic Human Resource Management Organizations.The knowledge economy refers to those jobs organizations and industries in which the skills, knowledge, and capabilities of people, rather than the capabilities of machines,technollogy,ect,determine the competive advantage.(lengnick-Hall and Lengnick-Hall,2003) Along With physical and capital resources, the human capital canstitutes the decisive copability of an organizations since it prepares the organization to adapt in future.the use f new and improved technology and lowering of overhead costs are the obvious methods of attaining competitive advantage that can be used by an organizations.the quality of human capital of an organization and its efficient management can also cantribute to higher levels of productivity and lower costs.In fact,human capital helps the organizations attain sustain campetitive advantage in a manner that is neither too obvious,nor accessible,to all organizations This truim has come to be recognized by many organizations over the last two decades.human resources are viewed as the most important asset of an organizations-an asset that creates value for the organizations Anasset is something that is owned and has an exchange value.today, human resources are cansidered as assets of an organizations.In the traditional sense,however,human resources can walkand are not owned by the

organizations,unlike physical assets. Human assets may walk over to other organizations,taking with then their accumulated knowledge,skills,and experience. The vaue of people as human assets the sum of an individuals knowIedge,experience,skills,and competencies that are matched with the individualjob.The value of people is dynamic,not static.It grows with time as the individual gains experience,and as organizations invest in the training and development of people. However, under certain conditions, the value of human assets can also depreciate. Some of these conditions are as follows: placing an individual in a job that does not fit with the individuals skills, comptencies, etc.
An individual performing below his/her potential owing to reduce

motivation and satisfaction. Thus, the manner in which the human recources are manage determines their value as assets. Human assests, unlike physical and capital assets, cannot be duplicated, and therefore, become the competitive advantage of an orgnization. This quality of nonduplication of human assets has gained greater significance in the knowledge economy, where organizations rely more on conceptual and knowledge-based skills rather than manual skills. The information technology(IT) revolution has brought about a situation in which knowledge workers are replacing blue collar workers. In such a scenario, an organization needs to invest more in human assets in order to gain acompetitive 8 Strategic Human Resource Management

Value value is created either by decreasing the cost of product/service, or by providing a unique product/service to the customer that allows the organization to charge a premium price, or by a combination of the two. Human resources can create value and hence become a sorce of competitive advantage by either decreasing costs of increasing revenues, or both. Thus, people can contribute to the efficiency of the orgnization. Human resource practices can be designed to enhance employee commitment, thereby impacting the orgnizations revenues positively. Empowerment programmes, continuous improvement efforts, total quality initiatives that are used

by organization to increase the contribution of the employee on the bottom-line performance.

Rareness Human resources may be of value to an organization, but if the same characterstic of human resources is found in competing organization also, then it can only provide competitive parity in ensuring that it is not at a is importantto develop and exploit rare characterstics of the human resources of the organization. Thus, an organization should try to ensure that it has an edge over competing organizations in terms of the skills, knowledge, and abilities of its people. This can be achieved by hiring and training the best availiable talent. Imitability People provide competitive advantage to an organization when HR characterstics cannot be easily imitated by competitors. An organizations unique history of culture is difficult to imitate and can be used to get highlevels of performance and commitment from the employees. Organization Finally, for people to provide competitive advantage to an organization,it is important for the organization to have its systems and practices in place that aloow HR characterstics to be exploited fully. Teamwork is a way to ensure an organized workforceone that can be deployed to work on new assignment at short notice. In this context,HR activities need to be viewed as integrated activities rather than viewing them in isolation. This is discussed later in the chapter. The VRIO framework provides the criteria for determinig the types of human resources which can be the source of sustainable competitive advantage for an organization. Organizations have recognized the significant role played by human resources. This is evident from the corprate philosophies of firms which reiterate that human resources are the most valuable assets of the firm. Eicher Goodearth Limited, Microsoft, Hewlett-packard, Texas Instruments,Infosys,and Singapore Airlines are but a few firmsthat state this. Considering employees as assets has implications for adopting an investment perspective on human resources. It is important to take this perspective

Strategic Human Resource Manegement: An Introduction

on human assets other physical assets, such as technology, facilities, etc., can be easily imitated by competitors. The Investment Perspective of Human Resources Traditionally, human resources have been viewed as a cost to the organization. The other resources, such as capital, technology, material, etc., are treated as investments. Keeping with the cost view of human resources, an organization accounted for all HR related budget, such as salaries, employee training, etc., as expenses in the balance sheet that resulted in no returns for the organization. Recent times,however, have been a change in the cost view of human resources. In order to remain competitive an organization needs to invest in its human resources. Organization have begun to consider employees as valuable investments. This view is especially significant because of the emergence of the knowledge economy, which needs highly skilled knowledge workers. In knowledge economy,and not goods,Services,or technology,is important for all econmic activitoes.Human skills and knowledge are crucial to everything that is produced,including goods and service.from retail sales to computer tobiotechnology,jobs are becoming more knowledge intensive in their demands on workers and organzations.Though the service sector is obviously more knowledge intensive in character,the manufacturing sector is also becoming more dependent on knowledge and human canbilities ascomputers pervade all facets of work.Agricultural and industrial jobs are increasingly becoming knowledge based .for example some of the agriculltural equipments are now computer cantrolled and their operation requires specific knowledge.Further,skill requirements change over time in all indus tries,companies,and jobs. Therefore,invastment in human resources is important to attain competitive advantage.in the knowledge economy ,the winners will be thoseorganizions that canstantly reach out to knowledge that can lead to the development of new products and develop the skills, capabilities, and competencies of its emplovees to keep pace with the change in technology,processes,etc. The physical and capital assets of an organizition are acquired and subse- quently managed by treating them as investments.the strategic objectives of the organizition determine the optimal type and quality of

physical and capital assets needed. An analysis of the cost and benefit, extent of risk involved,and the potential returns on expenditure on these assets is also undertaken.when human resources are viewed from an investment perspective, an organizition goes on to determine how best to invest in its people.Therefore just as an organizition determines the expenditure allocation for physical and capital asset,it also cansiders the expenditure allacation for human assets to meet its 10 . Strategic human Resource Management Long-term performance goals. For example,if an organizition plans to expand its operation ,it needs to consider the kind of training and development to extend its current employees as well as the number and types of new recruit- ments that will be required.Rapidly growing organizition,such as those in the IT sector (e.g.,Wipro, Infosys,TCS,etc.)often state the nimber of people they are likely to hire in the next two years based on their business growth projection. In taking a decision related to expenditure on a new training programmes, an organizition needs to consider not only the cost of training (with respect to the training material cost trainers fees, etc.)but also the related costs such as time spent away from work by the employees during training (time lost on the job). At the same time, the potential benefits of training should be considered. These include improved job performance,enhanced commitment to the organization, and increase in employee motivation. The cost of training should be weighted against the benefits. The training also needs to be assessed in relation to the associated risk such as enhanced employability of employees that makes them more desirable to competitors. Risks Involved in Investing in Human Assets Investment in human assets is not without risks, and is a source of dilemma for organization.When an organization does not invest in its employees, it is regarded as less attractive by prospective employees. The organization also finds it more difficult to retaincurrent employees who see no opportunities for growth and advancement.Frequent employee turn over weakens thecompetitive position of an organization by diverting the attention of the organization to the recruitment and hiring of new employess. On the hand , an organization that invests in its employees also faces the likelihood of losing them to its competitors. Trained employees are more sought after , especially by competitors. Competitors are often willing to pay more to these employees because they save employee training costs. Thus there is a risk involved in human asset investment.Organization and contribute to an

acceptable return on investment (ROI) relative to the skills and knowledge they have acquired. In certain types of organizations, employee mobility may not be alarming For instance when the skills needed by an organization are not rare or valuable, thier transferability may not matter much to the organization . The fast food industry is an example of such an organiation. An organization needs to be concerned about both employee mobility and skillmobility. Steven (1994) defined skill mobility as the ease with which employees with a particular skill set can move one employer to another with little loss in pay or Strategic Human Resource Manegement:An Introduction 11 Responsibility . Employess who have a particular skill set that is valuable to the organization, but still easily transferable to its competitors, can be the target of competing organization. Therefore, investment in the set of employees has a high degree of associated risk. For example, employees with an IT skill set can easily move from one organization to another, where the cost of switching jobs os quite low. This has compelled IT firms to frequently adjust and improve their employment packages and design HR strategies to stay ahead of their rivals. Factors Determinng the Investment Orienation of an Organization Not all organization view human assets from an investment perspective. Mello(2003) identified five major factors that affect how investment oriented a company is in its management of human resource: 1. management values 2. attitude towards risk 3. nature of skills needed by employees 4. utilitarain or bottom-line perspective 5. availability of outsourcing Management values The extent to which management values its people is a critical factor that determines an organization an organizations willingness to invest in human assets. The values of the senior management play an important role in decisions regarding the investments in human assets. An organization is more likely to be

investment oriented if it considers its people as central to its mission, and if the organizations mission statement emphasizes the role of human assets in achieving organization goals. For example, an organization which values its employees will engage in extensive communication programmes when significant events such as ,mergers are planned. The manner in which the employees are treated postmerger is also a reflection on the people values of the organization. Attitude towards risks An important aspect of investment is that it is accompanied by risks as well as returns. As a general rule, investments with higher risks generally result in greather potential return, while those with lower risks are expected to have a more modest return(e.g., investment in bonds versus investment in stocks an shares). Investment in human assets is considered more risky for an organization than investment in physical assets. An organization with a risk-averstive management philosophy is less likely to invest heavily in people. Other organization willing to take higher levels of risk will invest more in employees.They will, alongside, develop strategies to minimize the potential risks of losing their investments. For example, they can institute employment contracts , offer stock ownership proprammes as 12 Strategic Human Resoures Manegement Incentives for employees, and also offer further developmental opportunities, such study leave, etc. Thus, an organization can gain employee ownership through these strategic, reducing the possibillity of employee turn over,or losing their investment in human assets. Nature of skills The nature of skills needed by the employees of an organization also determines the extent to which investment in human assets is risky and the willingnes of the organization to invest in its employees. When an organization requires the employees to develop and utilize specialized skills that any not be applicable ot transferable to other organization, the investment in people is less risky. However,when an organization needs employees who have skills that are highly marketable in human assets involves more risk. The high-risk employee invetment requires an organization to develop a strong retention strategy,since the trained employees are sought after by organiztion that do not invest in employee training . For instance, Infosys was the first Indian company to start an employee stock option plan to retain employees. The company now offers variable compensation packages as well as cutting-edge training programmes. HCL Technologies and Patni

computers, ar among the innumerable companies that have developed retention strategies when the problem of employee turnover turned acute. Utilitarian/bottomline perspecthive Investment orientation of an organi- zation is also determined by the utitarian,that is bottom-line perspective. Organization which adopt the utilitarian perpective evaluate all investments through a cost-benfit analvsis.in cost-benfit analvsis.the costs of any invest-ment are compared with its benefit to determine whether that investment is profitable.The utilitarian approach quantifies all costs and benefits. For example,in delivering a training programme,it will comsider nit only the direct cost of delivering a training programme,but also costs such as employee time spent away from work,unfinished job during the train-ing period,and so on.The problem with cost-benefit analysis with reference to investment in people arises because many benefits of HR programmes and policies are difficult to quantify.For example,in a firm that provides internet services, it is difficult to assess objectively the measures of effective service and to determine how much service may be necessary to prevent customers from switching loyalties to other service providers. Availability of outsourcing A final factor that determines an organization readiness to invest in employees is he availbility of outsourcing. The organization can determine whether employee investment can produce a sustainable competitive advantage over time. When specialists are available outside the organization,who may be more efficient than internal employee resources, 13.Strategic Human Resource Management:An introduction The internal human investment is likely to be limited Further,an organization will invest in human resources to such an extent that it results inthe greatest potential return when compared against investments in market and product development,physical facilities,or technology.When investment in human assets is not expected to give higher retuens it is unlikely for an organization to invest in the employees at the cost of other resources.For example,in the fast food industry, there is high tuenover of workers and the skill set they require is casily developed, requires minimal experience,and dose not require high levels of invest little intraining employersin the fast food industry,therefore,invest little in trei employees and to invest more in competitive advertising,physical expansion,etc.

Just as human resources have come to be perccived as valuable assets over time,the HR function has also transformed from being a routine admonis- trative function to a strategic one.The next scction briefly discusses this trans-formation. EVOLUTION OF SHRM The HR function has evolved over time .The history of the function pre-dates Taylors theory of scientific management and fayols administrative theory.howeve,it was only during the 1930s and 1940s that function grew in signiticance, largely due to the war-time imneratives At this Lune,the HR functions matured and focused largely on labour relations and staffing.In India,the Tata lron and steel Company (TISCO)was one of the fast orgamzations to set up a persound department in the year 1947. Figure 1.5 presents the evolution of the Hrfunction. 14. Strategic human Resource Mnagement From Personnel Management to HRM The early 1970s withessed the emergence of the term HRM as replacement for personnel management.the change in terminology also suggests a change in the obhectives and boundaries of function the main obective of HRM is to ensure the achievement of orgam zational goals through people. The HRM function cmphasizes the following two aspects

The importance of gaining the commitment of the people to the goals of the organization The need for a strategic fic fit between business strategy and HR strategy

Personnel management and HRm differ from each other on several counts.one major difference being that while personnel management is part of the more mechanistic form of of orgamzation, HRM is aligned with the organic design of the orgamzation.Thus,personnel management is more bureaucratic with high levels of centralization and formalization and lower levels of flex- ibility.Human resource management,on the other hand, is decentralized,flexible (with low levels of formalization) and has crose functional and cross- hierarchical teams.Another differnce between personal management and HRm that has been pointed out is the strategic nature of HRM personnel man-agement is nat viewed as

involved in the strategic arecas of busmess Despitc these differences,it is often believed that HRM is just a more midern term for personnel management.Hence,HRM may be seen as approach rather than as an alternative to the traditional personnel management. From HRM to SHRM:SHIft in Focus The dynamic and compeitive business environment resulting from globaliza- tion has led management to bring a new focus on how human resources should be orgamzed and managed .The HR function now has to develop a more strategic role The eaely 1980s saw the eenergence and incerase in the use of the term strategic HRM.The late 1980s and early 1990s withessed a visible convergence between HRM and busincss strategy .In the 21st century this convergence has become startlingly obvious with the use of terms such asknowledge networkedknowledgebased firm and the virtual organiza-tionwhcn the adjective stralegic is prefixed to HRM it puts an cmphasis on the ways in which HRM contributes to the organizational effectiveness. Strategic human resource management focuses on the relationhip of HRM with the strategic management of the organization,as defined carlier.It goes beyond the functional role of HRM and emphasizes proactive HRM at the strstegic level of the organization Strategic human resonrce management is concerned with organizational effectiveness and performance, changes in structure and culture, matching resources to the present and future requirements 15.Strategic Human Resource management: An Introduction of the organization capability development, employment relationship, and change management Since coporate plans implemented through people and because human resources provide competitive advantage to the organizatio, it is important to integrate HR considerations with the development of the stralegic corporate /business plans. Hendry and Pettigrew (1986) put forward four meanings SHRM. 1.the use of planing in human resource management. 2.an integrated approach to the design and implementation of HR systems. 3.matching HRM policies and activities with the business strategy of the organization 4.viewing people as a strategic resource for the achievement of competitive advantage

Fomburn, Tichy, and Devana were the first to formulate the concept of stralcgic HRM and corporate strategy. The concept of fit is discussed later in the chapter. Objectives of SHRM The major objectives of SHRM are as follows: To ensure the availability of a skilled, committed , and highly motivated workforce in the organization to achieve sustained competitive advantarge. To provide direction to the organization so that both the business needs of the organization and the individual and collective needs of its workforce are met. Thus is achieved by developing and implementig HR practies that are strategically aligned.

The extent of application of SHRM within organization, as well as the form and content of SHRM, vary from one organization to another. Strategic human resource management is practiced in only those those organization that have a clearly articulated corporate or businees strategy. Organization that lack a corporate plan cannot have SHRM Rather, in such organization, HR personnel carry out the traditional administrative and sevise roles and are not conccrned with stratic business issues. Difference between SHRM and Traditional HRM Strategic human resource management and the traditional HR function differ from each other in several ways. The major points of differences between the two are highlighted in Table 1.1

Strategic human resources ,management deals with macro concerns such as quality, commitment, performance, culture, and management development . It defines the areas in which specific HR strategic need to be developed. Human resource strategies, on the other hand, are concerned with ensuring the availability of an efficient workforce, training, rewards, good employee relations, etc. Huaman resources strategies are more specific and facilitate the successful

achivevement of the coporate objectives and goals. The major differences between SHRM and HR strategies are presented in Table1.2. Link between HR Strategy and Business Strategy Central to the concept of SHRM is the idea of strategic fit. In order to ensure that HR strategic facilitate the achievment of business strategic , a strategic intergration between strategy and HR strategy is the organizations quest to attain competitive advantage. An organization may pursue severaldifferent strategic to achieve its goals. Three types of business strategic that may be adopted by an organization are cost leadership,differntiation, and focus. This classification of businees strategies was advanced by Porter (1985), and has been extensively used in SHRM literature. According to porter, an organization may adopt any one of the three businees strategice in order to compete successfully in a particular market,and gain and sustain superior performance as well as an advantage over its competitors.The three businees strategies and their characteristics are presented inTable1.3. Each of the business strategic presented in Table 1.3. requires different types of HR Strategic or strategic approaches to managing people. That is, there should be a congruence or fit between the organizations businees and HR strategies. The fit perspective provides a conceptual framework for SHRM ans is discussed next. STRATEGIC FIT: A CONCEPTUAL FRAMEWORK Organization are offen confornted with a dilemma-should they adopt business strategic that fit the available competencies and capabilitiesin the firm, or should they first decide their businees strategy, and then stretch and modify their competencies and capabilities to fit the businees strategy? The strategic fit proposes that if an organization seeks to maximize its competitive advantege,it must match its internal resoures and skills(organization competencies) Strategic Human Resources Management:An introduction 19 With the opportunities available in the external enviornment. When an organization attempts to implement new strategic with outmoded or inappro-

priate HR strategic, it can face problems. Strategic human resource , management is largely about integration. Guest (1989) emphasized that it is important to ensure that HRM is fully integrated into strategic planning. In 1997, Guest identified the following five types of fit (Figur 1.6.): 1. fit as strategic interaction(best fit approach)HR practices linkage with the external context
2. fit as contingency- HR approaches to ensure that internal practices of

the organization respond to external factors such as the natureof the market, skill availability, etc. 3. Fit as an ideal set of practies(best practive approach)- there are best practices which all firms can adopt 4. Fit as gestalt emphasizes the improtance of finding an appropritate combination of practices
5. fit as bundles(the configuration approach)suggests for distinct

configuration or bundles of HR practices that complement each other, in other to determine which bundle is likely to be most effective

20

Strategic Human Resources Management

Three of the above fives of fit provide the following possible approaches to SHRM: the best fit approach the HR bundles or configuration approach the best practice approach Best Fit Approach The focus of the best fit approach is on the linkage of HR Strategies with business strategic. This linkage is also referred to as external fit or vertical intergration. Differences in business orientations or strategies of organization give rise to the

need for different tyes of people as well as diverse approaches towards investment in human captital. Best fit also means that HR strategies should match the stages of development of the firm, namely startup, maturity, decline ot degeneration, and regeneration or transformation. Business strategic, and therefore HR strategies will differ between a Greenfield firm and one that is in the transformation stage. Whenever an organization embarks upon a change or a transformational programme as part of its business strategy, appropriate change strategies need to be developed. Human resource strategies, supportive of business initives, should be developed to manage the organization trabsition from the present state of the future state. Bases of Classification of HR Stratgic: There are various conceptualizations of the relationship between business streegy and HR strategy in SHRM literature. Beaumost (1992) noted three bases of classification of HR strategies: Different types of business strategies When an organization selects a strategy of becoming a low-cost producer, it adopts different HR approaches to compensation as compared to an organization that adopts a product innovation strategy. Taking a similar approach, earlier,Schuler and Jackson (1987) had proposed that the different business strategies described by porter (1985) will result in variations In HR practices. Stages in the business ot produst cycle According to this classification, HR practices are related to variations in ther life cycle stages of a businessstart up, growth, maturity,and decline. Different diaensions of HR practices are important at various atages of the business life cycle. For example, in the growth stage, an organization recruits an adequate number and mix of qualified people. In the maturity stage, the organization encourages sufficient turnover to minimize layoffs and facilitae reorganization. At the decline stage, the organization plans and implements workforce and reallocation . The HR practices corresponding to the four stage of an organizations life cycle are provided in Table 1.4

Types and number of products Fombrun et al.(1984) suggested that the strategy aimed at achieving variations in product focus (the number and types of products), results in structural modifications and influernces HR strategy for example, an organization with a single product stategy having a functional structure is likely to ne subjective in its selection criteria and appraisals,and rewards are rather unsystematic and allocated in a paternalistic manner. On the other hand, an organization that follows a strategy of growth by acquisition(holding company) of unrelated businesses, with seoarate self-contained businesses, different criteria of selection that vary form business to business. Performance appraisals and rewards are impersonal and are nased on the return on investment and profitability.Development is crossfunctional but not cross business .

22

Strategic Human Resource Management HR Strategy Classification

Of these bases of classification of HR strategy, the most popular approach is the tyes of business strategy and the adoption of complementary HR strategies. Some approaches linking business strategy with HR strategy are discussed. Porter emphasized the fir point of view by stating that all the activities of an organization must be tailored to fit its business strategy. Schuler and Jackson focused on Porters classification of the three generic business strategies, I,e., cost leadership, differentiation, and foucs. They argued that HR practices should ne designed to reinforce the behavioral implication of the behaviorural implication of these generic strategies. Based on the role requirements,each competitive strategy is defined in terms of a matching HRM Strategy, as shown in Table 1.5.

Strategic Human Resource Management: An Introduction 23

Miles and Snows Classifiction of Buisness Strategy and HR Strategy Miles and Snow (1984) suggested that HRM practices should tailored to the demands of the business strategy. They indentified four types of organizational strategiec on the basis of the dominant culture of the organization. These are defendevs, prospectors, analysers. The first three strategies pursue consistent business strategies. The reactors do not have consistency in their strategies. The types of HR practices that are likely to be adopted by an organization with the three consistent strategies are presented in Table 1.6. Other Frameworks Linking Business Strategy with HR Strategy Two other frameworks linking business strategy with HR Strategy that have received a great deal of attention in the literature on the subject are presented in Table1.7.

24 Strategic Human Resource Management

Table 1.7 : Frameworks Linking Business and HR Streategy

Drawbacks if the best Fit Approach The best fit approach implies that an organizations performance will improve when HR practices reinforce the organizations competitive position. The best fir approach and its prposition that HR practices should be driven by the competitive strategy of the organization have been criticized on a number of grounds. First, the approach is seen as failing to align employee interests with those of the organization.Secondly , the criticism of

the model relates to viewing the competitive strategy in the form of a typology. The competitive strategy is multidimensional and subject to important variations across industries. Hence,devising HR Strategic based on a typology of competitive strategy that may not be appropriate in a particular context can be misleading. Thirdly, and related to the second criticism, the approach is viewed as lacking attention to the dynamic scenario. Strategic Human Management: An Introduction 25 It is suggested that the model needs to go beyond a fit between HR and competitive strategies, to simultaneously incorporate flexibility in the range of skills and behaviours that may be important for coping with the changing and dynamic competitive scenarious of the future, such as technological advances or changes in customer expectations. This criticism leads to the notion of inernal coherence of HR practices around a desirable theme,that is bundling. The HR Bundles Approach Approach

Bundling refers to the development and implementation of several HR practices together so that they are interrelated and internally consistent. Each HR practice complements and reinforces the other. MacDuffe (1995) referred to bunding as the use of complementarities, while Delery and Dosty and Doty (1996) called it the adoption of a configurational mode. In general terms, the bundles approach is also termed as internal fit or horizontal integration. The purpose of bundling is to bring about coherence between HR practices. Coherence exists when a mutually reinforcing set of HR practices is developed to contribute to the matching of resources to the needs of the organization, and bring about improvement in performance and quality. Coherence is achieved when the firm has an overriding driving force or strategic imperative. For example, the driving force for a firm may be quality, or high performance, or it could be the development of competencies. This driving force leads to various HR practices that are designed to operate in concert with each other to achieve this imperative. If high performance is the driving force, recruitment standards can be specified, development needs identified,and the required standards of behiaviour and performance specified.

MacDuffie conducted research in flexible production manufacturing plants in the United States, and on the basis of his findings pointed out that flexible production techniques need to be supported by bundles of high commitment human resource practices such as performance contingent pay , employment security ,etc. The research also indicated that plants which use flexible production systems that bundles HR practices into a system outperform plants which use more traditional mass production system in both productivity and quality. Based on the research work in 43 automobile plants in the US, Pil and MacDuff (1996) established that when a highinvolvement HR practice that is complementary to other HR practices, is introduced in a firm, the new practice produces an improvement in performance. At the same time, the other complementary HR practices also lead to incremental improvement in performance. Integration between HR practices is more likely to take place if HR personnel and line managers share their values on how HR policies should be implemented. Integration is also about ensuring that when any innovation in a particular HR practice is planned,its implications on other aspects of HR 26 Strategic Human Resource Management

Policies and practices are understood in order to work out how innovation can support these practices. Drawnacks of HR Bundles Approach However, there are provlems associated with the achievement of internal fit also. These provlems atise when , for example, senior managers call for changes in a particular HR practice as a quick fix, and the changes are isolated from complementary HR practices. Provlems can also arise when performancerelated pay is introduced without the existence of a related performance management system or when there is difficulty in determining which bundles are likely to be most appropriate in a situation. In gereral, however, both, the internal and external fit models propose that HR strategy becomes more effective when it is designed to fit the contingencies within the specific context of the organization. The best Practice Approach Contrary to the internal and external contingency perspectives, is the view that organizations should adopt the best practice irrespective of the context. According to this view, superior management practices are readily identifiable and are transferable acroos organization. An organization,

therefore, should identify any organization with a reputation for excellence in some function, and copy its practices in order to perform well. That is , all organization can attain performance improvements if they identify and implement the best practice or benchmark. However , the notion of nest practice is not new. It was an important theme in personnel management literature in the 1970s. Pfeffers (1994) list of sixteen practices has been the most significant influence on the definitions of best practice. Subesquentlly , pfeffer summarized this list down to seven, viz : 1. employment security 2. selective hiring 3. teamworking 4. high pay contingent on company performance 5. extensive training 6. reduction of status differences 7. information sharing Drawbacks of the Best Practive Approach Most definitions of best practice draw from four functions of personnel pshchology , that is , selection, training , appraisal , and pay. Aspects of best practices are widely acknowledged by researchers and practitioners. For example, not many scholars advocate a traitbased performance appraisal over

Strategic Human Resource Management: An Introduction 27 appraisals that are behaviour or outcome based. Beyond this, however, agreements are relatively few. For instance, the list of desirable best practices varies significantly in literature. Morever, advocates of the approach do not answer what goals are being served by best practices, nor do they specify whose goals are being served. An important point of disagreement with the best practice approach relates to the fact that many successful organization refuse to adopt these practices. Hence , the assumption that perhaps , competitions will drive out

firms that do not adopt the best practices, leading to the failure of these firms, does not hold ground . There is, thus a counterpoint to the best approach that argues that the notion of a single set of best practices may be overstated. This view adopts the premise that distinctive HR practices lead to the competitiveness of a particular firm.

DISTINCTIVE HUMAN RESORCE PRACTICES In virtually every industry, there are firms that follow very distinctive HR practices. Cappelli and CrockerHefter (1999) suggested that these HR practices help to create unique competencies that differnitiate a firms products and sevices. An essential function of strategic management is to bring about product differentiation. This differentiation leads to competitiveness of the firm. Hamel and Prahalad (1993, 1994) argued that competitive advantage of a firm, over the long run, results from building the core competencies in the firm that are superior to those of fits rivals. According to these management thinkers, the chief executive officers (CEOs ) of multidivisional and international firms need to identify the underlying clusters of expertise in their companies that cut across all the strategic business units. The distinctive human resource practices shape the core competencies that determine how firms compete with each other. This notion of a fit between business strategy and HR practice has already been discussed. What is unique in this approach is the view that , to business are the drives that lead to core competencies, and, in turn , to business strategic. Cappelli and CrockerHefter (1999) examined pairs of successful organizations competing in the same industry. For instance, Sears and Nordstrom in the reatiling insustry , Boston Consulting Group (BCG) and Mckinsey Company in strailing consulting, and Harvard Business School and Wharton School, among business schools. Each organization in the pair had very different HR practices . The distinctive competencies and competitive advanteges of each organization were identified. In most organization, the competencies were clearly associated with particular employee groups, for example customer servise, marketing etc. The HR distinctive competencies and competencies and competitive advantage of each organization were identified. In most organization, the competencies were clearly associated with particular employee groups ,for example, customer were service ,

marketing , etc. The HR practices of the relevant employee group were also described. The paired comparisons revealed clear patterns In the relationship between business strategies and HR practices. For example, organization that move rapidly to seize new opportunities to get the first mover advantage , or to quickly respond to changing customer preferences, compete by being flexible. These firms do not develop employee competencies from within since it does not pay to do so . Examples of such organization include BCG ,and Pepsi, which rely on the outside market to take in new competencuies. Such organization are called propectors (Figure 1.7). On the hand, organization that compete through their dominance in an established/stable market rely on capabilities that are specific to the organization and are developed internally. Mckinsey Company and Coca Cola are example of firms belonging to this category. These firms are called defends (Figure 1.7). According to Cappelli et al., flexible organization like Pepsi exist in part because they have competitors with estanlished markets ,such as CocaCola, that do not , or perhaps cannot ,respond quickly to new opportunities. Organizations like Mckinsey company succeed because they have competitors such as BCG that cannot match the depth of competencies and longterm investments that the former has established. It has been suggested that it is difficult for firms to change strategic , from a flexible business strategy/ outside development to established markets /inside selection and vice versa . When a firm invests in a particular for the firm to change strategies. Hindustan Lever Limited(HLL) is an example of such firms. General Electric (GE) is one of the firms that did make this transition is its business strategy (from established market to flexibility) and HR strategy (from the inside approach to the outside approach). However, it took HE a decade to make this transition While start-up firms can make the transition in their HR strategy from the outside approach to the inside approach more readily, it is much more difficult for nature organization to change their HR strategy. Some of IBM to respond to the changing market due, in part , to the lack of new talent. Since HR practices are so difficult to change and transfer, it explains the basic premise underlying the notion that the core competencies should drive the business strategy of the firm and not vise versa. According to Cappelli and Crocker Hefter, it is easier for firms to find a new business strategy to go with the existing HR practices and competencies, than to develop new HR practices and competencies to match new business strategies. This is especially true for firms that rely on inside competencies (firms that develop employee competencies from within). However, firms

that secure skills from the outside market (rely outside market to get new competencies) have HR strategies that can be reproduced y other firms. That is , these competencies are available to everyone in the open market. To obtain competitive advantage in this case , a firm need to be better at spotting talent in the open market than its competitors, who may also be trying to secure the same competencies. For example, BCG achieves competitive advantage because it is able to hire new consultants at salaries somewhat lower than those of its leading competitors. Literature on the approaches to SHRM has multiplied,. So much so that it is now possible to identify the emergent SHRM perspectives. The following section descusses the different perspective on SHRM that have evolved over time. THEORETICAL PERSPECTIVES OF SHRM Swiercz (2002) identified four perspectives on SHRM, namely, fit, functional, economic, and typological perspectives. This classification is proposed to organize a range of related yet distinct view on SHRM (Figure 1.8). A bried discussion of each of these perpectives follows. The Fit Perspective In a literal sense, the term fit means congruity. In HR literature, Dyer was the first to discus the idea of fit in 1983. Baird and Meshoulam (1988), took it further and argued that HRM practices should be integrated with the strategic planning process of the organization. They also distinguished between the two types of fit internal and external. These have already been discusses in the prevous section. The primary proposition of Baird and Meshoulam (1988) was that an organizations performance can be enhanced if it adopts HRM practices the (internal fit), as well as the strategis of the organization(external fit). Empirical investigations of the proposed benefits of th internal fit perspective are limited. However, the proposed benefits o the external fit perspective have been examined by a number of scholars. They have reported that HRM practices varied systematically with the type of manufacturing system, firm environment , etc. Studies also indicate a significant relationship between the adoption of high-performance. HR practices and organization performance indicatiors. The fit perspective, therefore, proposes HR as a critical success vatiable that must be integrated into all phases of organizational planning. Moreover, even the best laid strategic plans cannot be implemented without taking into account the HR practices.

Functional Perspective Strategic human resource management functional has two characteristics. literature classified as

1- Human resource is seen as a staf function and , therefore, as advisory and subordinate to the core line functions. This is in accordance with the classical organization design theory. 2- The sub-functional strategies, such as the compensation recruitment strategies, are equated with the overall HR strategy. and

This perspective relies on the principle that an organization performs best when each departmental unit maximizes its contributions, limited to its unique area of expertise. It futher accepts that organizations should be structured around differences in rank or grade, resulting in the creation of staff functional specialists. General managers at the top have the responsibility of giving directional to the firm, functional managers with independent expertise (HR functional staff specialist ) are in the middle. And subordinates who carry out supervisors directives are at the bottom. Schuleer and Jacksons (1987) frame work is representative of this perspective. Strategic HRM, according to this perspective, is defined as a carefully planned effort by functional HR managers to shope subordinate behavior so as to make it consistent with the desires of top management as exprersses in the strategic plan. This approach represents the dtraditional definitions of HR wherein HR was proposed to be a staff activity. The second characteristic of the functional perspective treats funtinal substrategies as equivalent with the overall concept of strategic HR. These substrategies include recruitment, training, job analysis, and international HRM. Accdording to this perpective, the difference between strategic staffing and conventional staffing is that strategic staffing helps the organization to procure long-term human assets, while conventional staffing ulfils the immediate operational objectives. Similarly, strategic compensation aligns compensation aligns compensation practices with the critical contingencies facidng the firm. Any HR practice, therefore, becomes a strategy when it is carefully selected to complement the pressing concerns faced by the management. Economic Perspective This perspective views human resources as a unique and distinguishable source of competitive advantage. Barneys resource-based VRIO framework, discusses earlier, takes an economic perpective on SHRM.

Wright and MC Mahan (1992) extended Barneys view and argues that huma resources can be a source of sustained competitive advantage when four basic requirements are met-human resources must add value to the firms production processes, skills sought by the firm must be rare, human capital must not be easily imitable, and human resources must not be subject to replacement by technological advances or other substitutes. Typological Perspective Typologies help in developing systematic comprehensive theories for the study of new innovations in managerial thought. Dyer and Holder (1988) identifies threideal HR strategic types based on their observations of HR practices in several firms in the US. They intended their typology to specify the content of HR strategc decisions and also to highlight the underlying phiolosphical considerations that are the major determinants of strategy. The three distinct types of HR strategies indentified by them were as follows: Inducement strategy It is used by firms to support a business environment that is highly competitive with respect to price and/or quantity. In this strategy, the decision making power of emplovee initiative while discouraging innovation and spontagneity. Human resource strategies focus on cost, expecting high performance in a minimally staffed organization. Loyalty and commitment are rewarded by the dorganzation to discourage high employee turnover. Investment strateg It is most likely to be found in firms wherr the business stategy is based on differentiation, such as quality, featurers or service, rather than price. Tdhe organization is characterized by a tell structure, power is centralized and the technology is modern and adaptable. The HR strategy encourages creativity, initiative, and high performance standards. Formal rudles and procedures are minimal. The organization is comfortably staffed, jobs are broadly defined, and continuous employee development is encouraged. Compensation is a balance of fixed and variable components. The Compensation programs enocourage and reward creativity and initiative. Involvement strategy It is found in firms with a business strategy based on innovation and flexibility when they are confronted with a market that is characterized by a highly competitive price and/or quality. This strategy is also found in firms that use innovation and flexibility when they are confronted with a market that is characterized by a highly competitive price and/or quality. This strategy is also found in firms that use innovation to continuouslty provide differentiated products or services, and also

respond fast as there is a change in markets or when their competitors catch up. Involvement firms are usually smaller, but is the size of these firms is large. They employ decentralized units with flat structures. The HR strategy seeks to provide autonomy and challenge to the employees to motivate them for high and meaningful performance. The firm expects high levels of commitment from its employees. Decision making is pushed down to the lowest levels and performance by compensation that links personal outcodmes to the organizational perfrormance. There is empirical evidence that suggests a causal relationship between the SHRM orientation, business strategy, and financial performance of an organization. The typological perspective has generated a log of enthusiasm. A primary reason for this is that the perspective is directly linked to the resource-based view of the firm by the assumption that the unique bundles of HR practices distinguish firms from each other, and are also a source of sustainable competitive advantage for some organizations. The typologies, in fact, provide a tool to capture the bundle of HR practices that are associated with particular business strategies. By extension, then, it also agrees with the fit perspective. For it agrees with the assumption that improved performance will result when there is a congruency between the organizations overall competitive strategy and its strategies HR orientation. The linkage between HR strategies and business strategies are complex and multi-faceted. The questions being raised pertain to the manner in which HR strategies relate to business strategies, and what the organization expects to accomplish through the design of new HR strategies. However, all approaches to SHRM agree on one point, that is, particular HR strategies should (or will) vary with the type of business strategy. Also there is no best approach to SHRM. One particular combination of HR strategy cannot be applied to all situations. Therorists who follow a typological perspective have emphasized that a particular business strategy can have a single or a range of HR strategies approapriate to that business strategy. Thus, a cost reduction strategy will have different implications for HR strategy than an innovation strategy. SHRM APPROACHES: THE INDIAN CONTEXT As is evident, conceptual and theoretical developments in the management of human resources have largely been limited to the contributions made by Western scholars. However, the concept and practice of HRM, as also the linkage of HRM with the overall goals of the organization, are not entirely new to India. Three major approaches to understanding the people function developed in india are presented in figure 1.0.

The Integrated Systems Model As proposed by Rao (1986), this model has development at its core, which suggests that the development of motivated, dynamic, and committed employees is a means dt akchieve bettend organzaional performace this perspective views HRM as a process, and not merely as a set dof practices, mechanisms, or techniques. Human tesorce practices such as performance appraisal, tranining, rewards, etc. ar used to inintate, facilate na dpromote this process in a continuous way. These subsystems are designed to work together in an integrated system. Although nay one of these practices may exist in isolation in an organization that does not have a long term plan in isolation these subsystems lack the synergistic benefits of integrated systems. Thus, the viewpoint agrees with the internal fit or horizontal integration approach to SHRM discuses earlier. It is also close to the resource based view which suggests a bundling of HR practices or subsystems. On the basis of years of work in the field of Human Resource Development (HRD), Pareek and Rao (1992) developd a systems framework that is useful for an in depth understanding of HRD/HRM. The component systems of HRD, according to them, are the career system (manpower planning, recruitment, retention, continuous potential appraisal and caeer planning, and development activities), work planning system (helping individuals understand organizational needs, plan and improve their work), development system (training, counseling, and other development mechanisms), self renewal systm team building survey feedback, research, and culture system (a climate that sets norms, values, and culture, and ensures a high level of motivation for employees). It is not necessary for a firm to use all the systems at the same time. An organization can facilitate the process of development by allocating resources for the purpose and by exemplifying and HRD philosophy that values human being and promotes their development. The model also emphasized a linkage between the HRD subsystems and corporate plans of the organization . Thus, the framework also incorporates the external fit perpective. The basic themes underlying these subsystems are as follows:

Human resources are the most important assts of the organization A healthy climate is essential for the development of human resources Employee commitment is enhanced with the opportunity to discover and actualize ones potential in ones work.

Human resource development practices can be monitored so as to make them beneficial to both the individual and the organization

A periodic evaluation of the functioning of these systems or practices helps in re-engineering and realigning HRD to the organzations business needs. Rao proposed a model to explain the linkages between HRD instruments (put in operation they become practices), processes, outcomes, and organizational effectiveness, In this model, the HRD instruments include various tools, that is , subsystems such as performance appraisal, training, compensation, etc. The HR practices, if effectively used, can create a conducive HRD culture and learning processes. Human resource development processes are intermediate variables and affect the HRD outcodmes. They are less easily observable and are softer dimensions that indicate the effectiveness of HR practices. Human resource development process variables include role clarity, communication, and the practice of HRD values such as openness, collaboration, trust, autonomy, confrontation, etc. Such HRD culture and process can result in more observable and quantifiable outcomes. The HR outcomes may include a higher level of employee competence and better utilization of human resources through higher motivation and commitment. These outcodmes can influence the business goals of the organization, which may be in terms of higher productivity, more profits, better image, and more satisfied customers and stakeholders. According to the model, HR, by itself, cannot contribute to profits. The strategies, technology, finances, markets, etc., also need to be in place. However, good HR practices may build the competencies and commitment of employees to such and extent that they make sure that the other variables are taken care of to a great extent. Thus, it is the people who can provide competitive advantage to an organization. This model suggests that, other things being the same, an organization that has a better HRD climate and processes, and competent and committed employees, is likely to do better than an organization that scores low on these counts. Also, various HR practices/subsystems contribute to the organizational effectiveness through HRD climate and HR outcodmes. The HRD Framework According to Athreys (1998), the ultimate aim of HRD is full participation of the individual in his/her job and life. The starting point for moving towards fuller employee participation is the reaffirmation of the HR philosophy. The HR philosophy has an underly belief in the employees

potential for growth. A positive HRD climate is important to make the organization more receptive to the introduction of relevant additional systems, and to make the existing systems more effective. In order to sustain HRD on a logn-term basis, it is important to support the improved climate through the introduction of a comprehensive HR system. An integrated HRD system has many potential benefits, such as moving from alienation to participation, enhancing individual effectiveness, improving organizational climate and organizational effectiveness. The very concept of a system implies that one may intervene at any point of the system, but it will logically lead through the other subsystems towards the total system. The point of entry depnds on the needs of the organization. HRD as an Approach This perspective has been put forward by Dayal (1993), who advocates that HRD is an approach, and not a function. This perspective highlights that the underlying belief of all HR programmers o an organization is individual growth and development, which lead to improved organizational performance. Dayal propounds that HR programmers are need based and may vary significantly in their approach and emphasis in this following ways: Emphasis an philosophy: When an organization articulates its beliefs about people and operationalizes them in personnel systems and managerial practices in the organization, it view HRD as a way of life, and lot as a programme. Emphasis on programmes. Human resource initiatives by an organization are integrated with the problem areas identified by the organization. Emphasis on leader behavior. In some situations, leader behavior is regarded as the central feature of HR initiatives. Transformational leaders create an environment in which employees can improve their capabilities and achieve and impressive growth.

Growth of individuals without that of the organization is not sustainable. Hence, HR initiatives should aim at the development of the system as a whole. The Indian Approach vis--vis the Western Approach It is apparent from the above discussion that the Indian HRM frame works suggest that HR practices should be aligned with the

business plans of the organization and with each other, and that HR approaches should be adapted to the specific business strategies followed by the organization. The main distinguishing feature o the Indian approach is that is anchored in valves. However, both the Indian and the Western perspectives agree on the point that HR programmes should contribute towards both individual development and organizational effectiveness. Moreover, there needs to be a judicious blend between concern for the organization and that for the people. Other points of similarity between these perspectives are as follows; People are no important resource of the organization. Human resource systems and practices are integrated. Changes in business strategy corresponding changes in HR strategy. strategically necessitate

Human resource system lead to high employee commitment, cost effectiveness, low turnover, as also enhanced organizational effectiveness and profitability. There is a reciprocal interaction between HR practices and content, on one hand and the climate of the organization, on the other. A supportive culture characterized by dominant values is proposed as essential for the successful implementation of HR practices in such a manner that both the individual and organizational objectives are achieved.

Over the last decade, the importance of HRM has increased, and it has become closely associated with business strategies. Thus, SHRM can be defined as a particular approach to the management of the employment relationship with a distinctive set of HR practices designed to produce specific individual and organizational outcomes-to secure the greate commitment of emplovees and promote synergy in orde to increase organizational effectiveness. Since SHRM is an approach to manage the employment relationship, it follows that in seeking to gain competitive advantage, alternative strategies to the management of the workforce can be adopted by organizations. This has been discusses in the following section. ALTERNATIVE HR STRATEGIES Following are some examples of the business-HR linkage and the alternative HR strategies adopted by firms in different industries.

Contract Companies in the Manufacturing Sector The use of contract workers has increased significantly at the production sites in the electric and auto industries since the 1990s. The purpose is to reduce personnel costs by transforming employee costs into a variable for manufacturing goods at many production sites. Accordingly, there has ben a spurt of contract firms since the 1990s. Contract firms have managed to increase their client base through price competition and their ability to supply the needed personnel speedily to client firms. Client firms also expect the needed personnel speedily to client firms. Client firms also expect the contract firms to handle more skilled and technically challenging operations, and also to provide onsite operation management. Therefore, it has become workers, raise the skill levels of contract workers , and train the onsite production managers by devising training programmes and compensation systems. It has become important programmes and companies to practice strategic management so that they can utilize their resources most effefctively. It is also important for contract companies to establish HRM practices that suit their business strategies if they are to generate high profits. Business Strategies of Contract Firms Fujimoto and Kimura classified the business strategies of contract firms on the basis of two criteria: Worketss skill levels: Whether the firm focuses on operations that require highly technical skill to add value to its services (development type), or on those operations that do not require highly advanced skills (acquisition type). Assigning onsite managers and improving operation management: Whether operation management is administered by the contract company (Contractor-managed type) or the client company (client managed type).

A firm that attaches importance to high skill levels, that is, development type of fims, will have an HRD system for its contract workers that will be

characterized by training programmes emphasizing skill development, skillbased wage systems, promotion and pay-raise schemes, and encouragement to workers for lnng-term commitment. In contrast, a firm that has an acquisition type of policy on workers skills will not feel the need to invest n an HRD system, or in other measurers such as promotion/pay increase schemes. Such a firm cannot differentiate itelf by the quality of human resources since it does not emphasize highly advanced skills instead, it adds value to its services by offering low contract fees. Contractor managed firms generate more value by providng operation management as well, even if they do not handle high skill operations. These firms also add value to their services by raising their productivity levels. Client managed firms find it easier do not have to assign personnel for administering operation management. Based on the two criteria just discussed, four possible business strategies by contract firms, will require appropriate and matching HR strategies. Some of these have been discussed below: Develoment/contractor-managed type Thse firms add value by handling high skill contract work improving their operation management. The HRM practices o these firms include careful screening during selection to increase relenition, providing candidates a realistic job preview, skill-based evalutions, wage increases based on skill evaluations, offer of regular employment contracts to employees, and job rotations to expand the skill range of workers. Acquisition/client-managed type These firms stay competitive through the speedy supply of contract workers and by handling contract operations that can be executed at the current skill level in a wide range of industries. The HRM practices include maintaining a human resource database of workers wishing to work as contract workers, but these firms have no evaluation and wishing to work as contract workers, but these firms have no evaluaton and no system for rewarding the skill development of the contract workers. They are not active in providing training for their workers. Restructuring and SHRM in Healthcare Organizaions The healthcare industry is in a growth mode and there is a high level of focus on healthcare costs. As part of the strateg, the hospital industry is likely to engage in downsizing and restructuring. Rectructuring and downsizing have largely been associated with job loss and other psychological consequences. More recently, there have been attempts to

understand the effectiveness of resturing as an organizational tool for increasing profits, readucing costs, and increasing shareholder returns on investments. Wooten and Decker (1996) proposed a strategic HRM modeld for downsizing/restructuring bases on best-case practices. This model has three major components, that isprestucturidng resturing, and post restructuring activities. Wooten and decker suggested that if hospital and healthcare organ-zations are engages in strategies involving these three components, they can adopt the practices that are known to be successful during restructuring. According to the strategic HRM mode proposed, the following steps should be adopted by hospitals that plan to restructure: 1. Environmental scan prior to developing and restructuring activities given the turbulent nature of the hospital industry. The scan should involve collecting, categorizing, and interpreting environmental information related to competitors and regulatory agencies and a SWOT (strengths, weaknesses, opportunities, and threats) analysis. 2. The environmental scan will result in defining the business strategy cost leadership, differentiation, or focus. 3. Pre-structuring should involve clarifying the core issues and the mission related to the strategy. The specific HR issues to be considered at this stage are: Deciding the organizational design (hospitals generally use hybrid forms of structure due to the unique environmental conditions). Conducting human resource audit (examining the dknwolege, skills, and abilities of the mpyes and workforce utilization). Conducting risk analysis. Examining the existing culture and articulating what aspects of the culture and culture need to be changed. The culture should support the proposed new mission and the strategy of the firm. Deciding on reward systems and linking them to the business strategy (these reinforce the culture of the organization).

Deciding on support systems to assist employees, for instance, outplacement services for dismissed employees. Training communicators within the firm to systematically disseminate information about the restructuring to employee and to anseer their queries and concerns.

4. Restructuring involves communicating decisions and implementing policies. At this stage, the following issues are important:

Communication from the top leadership about the plans for the restructuring, and the need to communicate a sense of justice Rduction fo workforce, job sharing, and voluntary separation incentives occur at this time. Providing support and transition services after the downsizing . These range from hiring outplacement firms and establishing in house career centres to involvement in community based employment services. The transition services affect the commitment of the employees remaining with the organization. Re-assignment of responsibility. The need to alter the maner in which employees are recruited and retained.

5. The post-restructuring stage involves helping the organization evolve

and adapt, rebuild trust, and clarify rewads. Several issues ned to be addressed at this stage. These include the following: Reinforcing the new mission, culture, and values of restructured healthcare organization by redefining beliefs, structures, and practices. Since change is usually accompanied by disenchantment and disorientation, it is important to provide assistance to the employees in the form of workshops, stress management,and a general awareness of the stages of change. Human resource activites directed towards survivors and other employees who may subsequently leave. Realistic future expectation should be provided. Recruitment and selection should support the new culture. Rewards should support mission related performance.

The above model renforces the view that business strategy changes need to be accompanied by concomitant SHRM initiatives to ensure the success of the business strategy. Competition-rlated HRM Changes in the Retail Banking Industry Since the mid-1990s, the retail banking divisions of commercial banks are under pressure to change the way they do business. Banks are faced with an extremely ecompetitive environment as well as threats from nonbanking institutions. Informations technology has changed the way people interact with their banks. In the 1970s, the manufacturing industry had difficulty in switching over from the established methods of managing people when faced with inceased competition. Manufactuin firms were seen as having failed to adopt HR strategies that could have produced higher quality products and made these organizations more flexible and cost effective. In the 1990s, the retail banking sector was confronted with similar challenges. The intensely competitive environment has resulted in changes in HRM practices in retail banks. It is important for firms to manages people in ways that are consistence with their organizational strategy. At the corportate level, retail banks are typically owned by a holding company hat has it sown strategic agenda sometimes the retail banks may be strong and have independent lines of busisnss the strategy of the holdning company must be understood along wth the rold of the retailbank in carrying out that strategy. In addition to its contribution to broder corporate aims, a retail bank may also have its own competitive strateghy. Focus or Niche Strategy The consumer financial services industry is characterized by mergers and the likelihood of merger activity shapes much of the linking o typ management in most banks. New technologis for delivering financial services continue to be developed rapidly. The environment is increasingly dynamic and notbanking competitiors are increasingly attracting investment funds and other products(such as laternatives for auto and home equity financing). This environemtn ahs encouraged retail banks to move to sales oriented practices 9n orde r to compete successfully. Larry hunter (1995) fro thw Wharton school, university of Pennsylvania, concluded that retail banks mostly used the foucus strategy in terms of porters classification of usiness strateghy. While al banks claim to be cutting costs cost advantage strategy none fof the banks follow the goal of being the lwest cost provider. Moreover, true differentiation is nearly impossible to

achieve is consumer oriented financial services the feratures can easily be imitated by competitiors and there are very fiew barrierts to the introduction of few products. Therefore, most banks follow the foucs the niche strategies, the typical initiatives are as follow. Being a one stop financial service provider Aggressive selling to new customers Aggressive cross selling of products to exisiton customers Establishing a resence in chosen gergraphical markets Establishing alternative channels of delivery of financial services Developing a reputation for providing the highest quality service.

Each strategy has implications for human resource imperatives. For example, the stragegy focusing on gaining market share by selling a broader range of financial servces to young professionals, will result in success for retail banks w hen the corespondidng HRM strategies include incentive pay and performance appraisal systems that reward these kind of sales, specific training programmes aimed at these goals, the hiring and promotion of staff based on their ability to make such sales, and job designs that encourage customer contact. Thus it is evident fromthis discussion that strategic decisions should be backed by appropriate HRM practices for an organization to succed.

Summary All physical capital resources depend on people for their efficient utilization, mainence, and management. Hence, there is an increasing recognition among management thindkers of the importance of human resources in providing competitive advantage to organizations. As a result employees are neow rerred to as

human capital or human assets. Instead of viewing human resources as a cost to the organization firms have begun to consider employees as investments since business objectives are achieved through people it is important to integrate HRM with the business strategy of the organization. In this chapter, we discussed the meaning of SHRM and the evolution of HR function over time into a strategically foucused one. According to the esource based view rbv of the firm human resources become a source of sustained copeitive advantage for a firm when the four criteria of value rareness non imitability and organization are me Factors that determine how investment oriented a firm is in its managedment of human resources were highlighted three conceptual approaches to shrm that is the best

practice best fit and hr bondles approach were exmined to under stand the concept of fit between business strategy and HR strategy. The prmise that distinctive hr practive are the drivers that lead to core competencies, firm competitivencs and, in turn, business strategies, was also disussd, four theoreticlal perspectives of shrm viz fit functional economic and typological perspective, were presented and the relationship beween business strategy and hr strategy was examined the chapter discusses three bases of classification of HR strategies, that is, stages of business life cycle type of business strategy, and types and numbers of products. The Indian perspective on shrm was alo presented. Tdhe chapter ends with a few examples of the business hr strategy linkage from the manufacturing, hospital and retail banking industries.

Keywords Administrative Theory is a classical organization theory proposed y henri fayol th foucus of this approach wa on the most efficient way of structuring organizations. This approach attributed managerial success to certain principles of manangent. Asset is omething that is owned by the firm and that has an exchange value. Best Practices are superior management ractices that ar reaily idntfibale and transferable across organizations irrespective of the context. All firms will

attain performance improvements only if they identify and implement best practice or bench mark. Change Management rfers to specific efforts undertaken by a fim to steer a planned change in a specifid direction with the help of a change agent. Competitive Advantage is a situation where an organization is able to differentiate its products or services from those of its competitors to increase its market share and gains, and maintains an edge over its compectitors. Dictinctive HR Practices refer to unique HR practices that help to create unique competencies that differenftiate the products and services this differentiation leads to competitiveness of the firm. Employee Stock Option Plasn (ESOP) give employees the right to purchase a fixed number of sharers of the company stock at a specified, unually lower, price for a limited period of time. ESOPs are used by firms as an incentive for exective and as a retention tool. External Fit is a theory that proposes that differences is business orientations or strategies or organizations call for different types of people as well as diffenent HR strategies . this is also called vertical integration. Greenfield Firms are high performing firms that are started from scratch at a new site. HR Strategy refers to the planned and effective use of Human resources by an organization to facilitate. It is concerned with ensuring that the organization has the required people, training, rewared, and good employee relations. Human Capital is a term used to refer to the collective skills and knowledge of the totoal workforce of an organization that have an economic value to the dorganization and enhance its productivity and profitability. Human Resource mnangement (HRM) is an overall approach towards the management of people working in the organization for accomplishing the goals of the organization. Human Resources is a term to refer to the people who work in an organization. These are the resources on which other resources depend for their effective and effiecient utilization. Internal Fit refers to the development and implementation of several HR practives together so that they ar interrelated and inernally consisten wit

each HR practice, complementing and reinforcing the order. This is also known as horizontal integration or bundling. Knowledge Economy refers to all jobs, companies, and industrie in which the knowledge and skils of people, rather than the capabilities of machines and technologies, determine competitive advantage. Resource Based View(RBV) is a view that holds that human resources contribute to sustanined copetitiv advantage for a firm when they are valuable, non-tradable, non-limitable, and nonsubstitutable This view is popularly called the VRIO framework. Scientific Management is an early approach to management and organizational behavior proposed by F.W. taylor. The approach focused on the role of employees as individuals and emphasized the importance of designing jobs as efficiently as possibl. Skil Mobility refers to ease with which employees with a particular skill set can move from one employer with little loss in pay or responsibility. Strategic Fit is a theory that proposes that if an organization seeks to maximize competitive advantage, it must match its internal resources and skills(organizational competencies) with the opportunities available in the external environment. Strategic Human Resource Management (SHRM) is the relationship between HRM and strategic management is a firm. It is the pattern of planned human resource deployment and activities intended to enable the firm to achieve its goals. Strategy refers to the determination of the long- term goals objectives of an organization,and the allocation of resources necessary for carrying out these goals. The mission statement of company is abrief statement that represents why the organization exists.it is a statement of the purpose of the firm.

Concept Review Question

1. Define

strategic human resource management (SHRM)what are the main points of differ-ence between

SHRM and human resource strategies?

2. Are

people always an organizations most valu-able

asset?Why or why not? Discuss with ref erence to the growth of knowledge-based organization.Give examples.

4.Compare and contrast the best fit and best prac-tice approaches to management of human resources. 5.Describe the Indian perspective on SHRM.how is it different from the Western view of SHRM 6.I dentify and discuss the different bases for classifying HR strategies. How can HR strate-gies help an organization to create campeti-tive advantage?

3. Should

organization view human resource from an investment perspective? Discuss the factors that determine the extent to which an organization is invetment oriented in its Management of human resources.

Critical thinking questions 1. strategic human resource management is largely about integration orstrategic fit between HR strategy and business strategy .Do you agree?Differentiate beween external fit and internal fit.give examples of organization you know of that have Achieved a fit between busi-ness strategy and HR strategy.Describe and evaluate the type of fit that exists in each of these organization 2. Read the section on Barney, resource-based view (RBV).According to the VRIO frame-work, which type of human resources can be a source of competitive advantage for a firm? How can the application of VRIO transform HR function from being a castinto a strate-gic function that cantributes to the performance of an organization 3. Describe the business strategy classification proposed by porter.Which types of HR Practices are likely to adopted by organiza tions for each of the three generic business strat-egies proposed in this classification?Give examples

of a few firms firms you know of that prac-tice each of the three business strategies. Also, examine the corresponding HR strategies for each firm.compare the HR strategies of thefirs and explain how they depend on the char- acteristics of the husiness strategy of the firm 4. According to one viewpoint, it easier for a firm to find a new business strategy to go with 45.

the existing HR practices and competencies,than to develop new HR practices and compe-tencies to match with the new business strategies.Do you agree?Explain the rationnale behind this viewpoint.Cite examples of orga-nization that have relied on distinctive HR practices to attain competitive advantage.

strategic human Management:An Introduction Simulation and role play 1. Mr Apte has recently been deputed from a large public sector manufacturing firm to head the HR department of a national airline. He does not have prior experiance in the airline industry. However, he has extensive experiance as an HR person and has high level of functional expertise. He has proved himself by successfully aligning HRM with the strategic objectives of the organization in his parent firm .The national airline has lost its monopoly with the entry of private players in the airline industry. As the read of HR, Mr Apte has resolved to bring up this issue in a meeting with the top management and highlight the need to build business strategy around the distinctive competencies of firm. Six students should volunteer for the role play,each playing the role of a member of the top management team. One player play the role of Mr Apte. The other five play the following roles respectively: Head of Marketing,Head of business strategy, Head of finance, Head of operations, and the CEO. As Mr Apte, the student should convience the members of the team about the importance of designing the business strategy around the distinctive competencies of the firm.Further, he should emphasize that instead of attemping to imitate the strategy of its competitors, the airline should focus on its

distinctive competencies. The other team members should raise questions about the suggestion and discuss its pros and cons. All the membersshould keep the contemporary scenario of the air line industry in mind. The role play should end witha draftpreparetion that identifies the distinctive competencies of the airline and suggests the business strategy that would be most appropriate . Alternatively, the members may suggest Jwhat business strategy(according to porters classification) the airline should adopt and why. They should also suggest the HR strategy that will match the suggested business strategy. 2. Assume that you are an external consultant hired by a firm that is planning a restructing exercise. After an

extensive study of the firm, you discover that it continues to be traditional in its approach to managing human resources. You have taken an appointment with the vice President(HR) of the firm to discuss your findings and to suggest changes. Structure your discusion around the following aspects: The need to view human resources as anasset and a source of competitive advantage The need toward a perspective function to move strategic of HR

Major HR issues during and after the restructing Changes in the HR strategy of the firm

Classroom Projects

1. The purpose of this activity is to discuss the direction of business-HR Strategy linkage.Half the students in the class should take position 1 and the other half should take position

2with respect to the nation of fit between business strategy and HR practices:

Position1:The competitive strategy of the firm should determine the HY strategy Position2: Distinctive HR practices of the firm determine the core competencies that determine the competitive strategy of the 46.

Each student should individually develop and write his/her ideas in support of the position taken. The students of the class can be divided into two groups according to the posution they take.The members of each group should share

Strategic Human Resource Management should belong to the fol-lowing industries:FMCG pharmaceutical air-lines,hospitaliy, or software.The information should relate to the various aspects on which traditional HR differs from strategic HR to obtain this information, the student can use Internet resources as well as available company documents .The students should prepare and Submit this report to the class instructor prior to the class For the second part of the project the stu-dents should be divided into small groups based on their chosen industry .Each group should Consist of the students who choose the same industry .Each group member shoud identify and discuss the nature of the HR function and practices followed by the organization he/she selects within the particular industry.They should also compare the organizations within the industry

Their individual ideas and develop arguments in support of their chosen position.After allowing 15minutes time for group discussion each group should present its arguments.Each group Can have presentation time of 10 minutes .An open discussion with the class should highlight the pros and cons of each position. The Students should also be encouraged to cite examples of successful firms that have relied on either of the above positions to support their arguments. 2. This exercise needs some out-ofclass prepara tion.As the first part of the project students are asked to read the descrition of traditionalHR versus strategy HR presented in the chap-ter.Each student should choose an organza- tion and collect information about the HR function and strategy of this organization.the organizations

and discuss the similarities and differences,and the causes for the same.class presentations should follow discussions on the importance of SHRM,transformation of HR function from a traditional to a strategic func- tion, significance of linking business strategy and HR strategy and intra-industry and inter-industry differences with respect to HR strategy

discuss whether human resources are a cast or an investment for an organization report your discussion to the class.

3.Form groups of four to five members and dis-cuss the significance of human resources for achieving competitive advantage with respect to the manufacturing as well as the service sec- tor.Also,

4.Apply the resource-based view (RBV)model to your institute/university.In group of four,determine the value of the institutes human resources in terms of Barneys four criteria for achieving competitive advantage.compare your institute /unversity with a competitor on these criteria.Develop an HR strategy to best deploy and utilize the human resources of the institule. Prepare a report for class dicussion. Field projects

1.For this project,the instructor should divide the class into groups of five each.Each proup should visit two organization,both of which should be at the same stage of development in the business life cycle that is, strt-up,growth, maturity, or decline.The group members should canduct interviews with HR managers as well as a few senior line managers of the organization to obtain information about the business strategies and HR strategies of these

organization.ach group should prepare a report class presentation as well as a written report for submission to the instructor.Thegroups should make presentations in the class highlighting the development stage of the or- ganizations they visit, their business strategy, and the nature of the HR strategy of these organizations. When all groups have made their presentations,the instrutor should engage the class in a discussion about the

need to match the HR strategies with the stage of develop-ment of the organization.The discussion should also Focus on how and why HR strategies of organization at different stages of business life cycle differ from each other.

Did the HR strategies change post merger/ acquisition? What wear the main HR aspects related to the mergers and acquisitions that wear faced by these banks ?How wear these issues handled? Wear the HR practices andstrategy congruent withthe business strategy in the newly formel entity as a result of the merger/acRefernces

quisition? You may also mterview four to five man-agers to obtain their perception of and satisfac- tion with the merger/acquisition . Find out what human resource practices were used and ob-tain their evaluations on what was helpful or harmful.Also obtain their annraisal about the success or failure of the merger /acquistion On the basis of the above information present a critical appraisal of the role of HR strategy in thesuccess or failure of business decions such as mergers and acquisition .prepare a written report for classroom submission

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Human Resource Enviornment

OBJECTIVES

After studing this chapter, you will be able to: Understand the significance of global buisness trends and their implications for human resource management disuss the human resource management challeges resulting from the changing nature of workforce and of employment relationship acquire an overview of the demographic and societal trends that affect human resource management understand the significance of human resource management in the knowledge economy explain the trend towards outsourcing of human resource management activities describe the impact of technology on human resource management appreciate the role of human resource management in managing organizational change

INTRODUCTION Several factors in the buisness environment(increased competition, corporate downsizing, and rapid technological advances) and the social enviornment (changing values regarding work/ nonworklife balance and changing workforce demographics) have brought about a new employment relationship. These changes have had major implications for the management of the workforce within organization. The transformation of the economy from a primarily manufacturing economy to a knowledge in job performance. As people become the most valuable asset of a firm, there had emerged a new class of highlyskilled knowledge workers. High demand for knowledge workers coupled with their limited availability in the workforce has created a war for talent among organization. With firms competing for skilled workers, employee mobility has increased. Therfore, organization have to develop new strategic to attract, retain, motivate, and develop employees. Human resources management challenges have become more significant witha an increase in the number of knowledge workers, inter firm competition , changes in technology, and societal and business trends. The present chapter discusses significant environmental trends and the uniqe challenges as a result confronted by the HR function and professional

as result of these trends. It examines the increasingly important role of HRM in the knowledge economy and in managing knowlede workrs. Within the context of the impect of the knowledge econom, the chapter examines the changing role of HRM professionals, such as That of strategic buisness partener, and HRLine Manager partnership. It is emphasized that in contemporary organization, the HRM manager has multiple roles to play. It also provides an insight into the trend towards outsourcing of HRM activities. The impect of technology on the way HRM managers work and the manner in which the HRM function is structured has also been reviewed. The chapter ends with a discussion on the role of HRM in managing organizational changes as well as in developing a change-ready organizational culture. HUMAN RESOURCE ENVIRONMENT :a BRIEF OVERVIEW From the industrial era or the machine age to information age the evolution of the business environment goods in a plant The manufacturing process was organization around the concept of assembly-line production This resulted in job specialization in factories.The blue-collar worker performed his or her part of the job without any idea of how it the end product There was a separation of planning and doing .the worker was hired to do and not tothank and plan.The white-collar workers were rewarded for loyalty. The end of the twentieth century heralded the era of the post-industrial economy that is the emergence and evolution of the service economy.this era of the service economy came to be called the age of information and knowledge. Rather than producing goods,the service firms produce ideas.organizations in the services era, such as software,Financial service, and biotechnology firms,depend onintellectual capital. People create intellectual capita, and are therefore the most valuable assest of a firm. The shift from am manufacturing economy to a services economy, from productionof goods to production of ideas, and from the machine age to the information age han been accompated by many transformation. The environment within which firms conduct business today is very different and much more complex and dynamic when compared to the environment 15 years ago. Firms no longer compete or operate nationally only. Organizations are no longer governed by the business , legal and political environment of their own nations only. As the world beomes one global playing field, the environmental changes in the country of firm affect business decicions and the performances of firms. Several socities and global ph enomena have challenged the management of

human resources. Changes in the economic, business, social, and cultural environment in the roles and responsiblities of HR profesionals. Some of the signficiant environment trends and changes faced by HR managers that pose major challenges are (see figure 2.1) as follows:

trends in the buisness environment. The changing nature of work. Demographic, societal and workforce trends. The changing nature of the employment relationship

The next section discusses each of these trends in detail. A breif overview is presented in table2.1

Trends in business environment several changes in the business environment have been taking place during the past two decades. These include globlization of business, mergers and acquisitions, and downsizing. Each of these trends has set forth unique HRM challenges. Globalization of Business A manjor envirormental change that has taken place in the last 15years is the globalization of business The world has become a global village, and business has become global in character.Organization are venturing beyond national boundaries in the pursuit of business the opportunities.Goods and services are produced and marketed around the word production and marketing are no longer canstrained by national boundaries.Toyota Motor Corportion makes cars in USA and India, Mcdonald,s sells hamburgers in India and china,and Marks &spcnces sell products in India.Every other product sold by Wal-Mart storcs Inc (wal-Mait) is made in India. Some of the US the European Union and other parts of the word .this is the when buildings are conceptualized in the US, designed in India and built in China very recently,Ford Motor Company (Ford) announced its plans to invest &1 billion in products and plants in the Asia Pacific region in the next few years to main-tain its presence in fast growing markets. Domestic firms are competing with foreign companies the world over.Global Competition has resulted in a high level of cost cansciousness on the part of

Companices.A number of companies from the US japan and other countries have set up their manaufacturing plants in countries that provide them labour cost advantage outsourcing has made india a manufacturing hub especially for the automobile sectur with cheap labour providing one of the competitive advantages .Government policy reforms and growth against an appreciating rupee have also facilitated this trend.Large numbers of manufacturing assembly jobs that require low skills have moved from the US and western Europe to developing countries like china ,Thailand,Malaysia and India.This is primarily becaus wages are much lower in developing countries.while the lobour cost in other developing countries is about 3035%of sales,it is only abour 8-9% in India.This results in a lower total average cost of production Business Process outsourcing (BPO) firms are also part of the cost advantage strategy of firms .At the same time Indian Firms are also investing abroad .India,s Manufacturing and services companues invested &10 billion overs in 2004.The top 15 indian IT software and related service companies have invested mostly in developed countries.Like the IT and automobile industries domestic hospital chains from India such as Apollo hospitals Group, FortisnHealthcare and may Healthcare Institute Private Limited also have ambitious expansion plans in markets as far away as the US, UK, Mauritius and South-east Asia. A major impetus to the globalization of business was provided by changes in economic policies. For India, June 1991 marked the beginning of economic liberalization. Lowering of customs duties, more liberal foreign exchange regulations, and fewer restrictions on foreign trade have all integrated India into the world economy. Therefore, today India is affected by exogenous developments more than it was int the past. Indian business is also thinking global, and needs to be more vigilant about the global economy. As Indian companies move aggressively to capture overseas markets, they have been forced to raise product standards in order to meet world-class quality. There is benchmarking, a requirement for health checks, drive towards productivity improvements, a policy framework that encourages flexibility in labour markets, and trade policy. These clearly indicate the impact of the global economy on Indian business. Today, multinational corporations (MNCs), those that maintain significant operations in two or more countries, have become a norm rather than an exception. Multinational corporations require employees who can adapt to different cultures, customs, social practices, values, economic and political systems, and management approaches, and who can work with other employees from differing backgrounds. Th8s has caused new challenges for HR managers. The HRM function of a company must develop systems that will help

individuals from different cultural backgrounds to work together. Human resource managers must ensure that employees with the requisite knowledge, skills, abilities, and cultural adaptability are available so that they may be successful in global assignments. The globalization of business also requires firms to comply with th legislation of the country they wish to conduct business in. For instance, the apparel production industry of Industry of India has been affected by the norms imposed by global retailer, imposes stiff conditions which cost a lot in implementation. Gl9bal buyers are quick to cancel contracts if they find that compliance norms have bee4n violated. Since compliance is too expensive for small apparel production firms, many, in Mumbai, the hub of small apparel production firms, have gone out of business. They are either switching over to apparel trading or venturing into new businesses. Another example is that of Indian pharmaceutical majors who have postponed their plans to acquire German generic pharmaceutical companies because of the new German Healthcare Bill. The Bill effective 2006, mandates all pharmaceutical companies selling generic products in Germany to price them 30% lower than patented products, and cap prices for two years. Companies not meeting 6his mandate will need to cut prices on generic products. Cutting prices will lower the valuations of German generic companies, and so, Indian companies who were scouting for acquisitions of companies in; Germany have had to shelve their plans for the moment. Thus, globalization of business brings with it several HR challenges. These include issues such as managing a global workforce, focus on cost to enhance a firms competitiveness, and ensuring legal compliance while conducting business abroad. Mergers and Acquisitions A major consequence of globalization has been a spate of mergers and acquisitions (M&A). As geographical boundaries break down for business, this is one way firms ensure their presence in different parts of the world. The trend was started by IBM when it bought Daksh (a BPO firm, now IBM Daksh) and HR services leader Adecco took over Bangalore-based HR services company people One. Teva pharmaceutical Industries Limited (Teva), the worlds largest generic drugs maker, made its firs investment in India in 2003when it acquired Regent Drugs Limited from JK Drugs and pharmaceuticals Limited. Since then Teva has also entered into alliances with other Indian firms to source raw materials. Three global companies at the top of their respective sectors have been on an acquisition spree in India . Merrill LynCh and company Inc ., the financial services powerhouse ,

bought out HemendraKothari in their joint venture, DSP Merrill Lynch Limited. Oracle Corporation (Oracle) acquired a 41% stake in i-flex solutiohs ijn 2005.Axis Computers, a subsidiary of the US-based knowledge process outsourcing (KPO) firm Axis Group, and NOida-based call centre IT&T merged to create a Rs 400 million integrated IT services company. Foreign investment is no longer something that flows only from developed country to a developing one. Indian companies are on an expansion drive. Indian business houses, like the Tata Group and firms like Ranbaxy Laboratories Limited (Ranbaxy), Wipro Limited (Wipro), Sun pharmaceutical Industries Limited, Crompton Greaves Limited , Asian Paints , and Cognizant Technology solutions, have struck merger and acquisition deals worldwide to become global players. The Aditya Birla Group , along with an overseas joint venture partner, bought Canadas St. Anne-Nackawic Pulp Company Limited for $100 million, one of the biggest acquisitions in Canada by an Indian company. Many of these firms belong to industries that a are witnessing tough worldwide completion .Hence , gaining scale is important for them and one way they achieve this is through acquisitions. Acquisitions by Indian companies have now become strategic in nature, by which they gave been able to take leadership positions in Asia. Though most of Indias investment overseas has been dominated by the manufacturing sector, huge investments have been made by the IT sector as well. There are more than 400 Indian firms in Britain alone, many of which are in the IT sector. IN 2005, BPO firms were on a buying spree, with Tata Consultancy Services Limited (TCS) leading the way on the acquisition front. The acquisition deals are likely to help boost the revenues of TCS in transacttion processing and call centre services from&45 million in 2005 to more than &200 millon in 2007. Mergers and problemsacquisition can create certain problems for an organization one of the problems associated with m& As is the retrenchment of staff that becomes surplus due to rationalization of operation.Managers look at re-trenchment as an opportunity to cut cost and increase profit.For example,in the financial services sector,M&A activity between 1996 and 2006 caused an aggregate employment decline. This industry has traditionally been associated with stable and even lifetime employment . Due to M&A, sector experts predicted a loss of more than 300,000 jobs in the banking sector between 1992 to2002 . When negotiations for M&A are on, employees of the concerned firms are subject to several rumours that cause insecurity about the future. Longtime loyal employees learn suddenly that teir jobs are on the line. This results in lower morale and productivity.

Employees may respond by looking for alternative jobs and voluntarily leaving the firm, or there may be instances of organizational cvonflict as each individual tries to protect his/her own job. Thus, HRM is faced with several challenges before, during, and after the M&A decision. Downsizing Downsizing is the elimination of jobs in a planned manner. A more appropriate term would be rightsizing , or matching employee needs to organizational requirements . Downsizingis part of the larger goal of affirm to balance its staff to be able to meet changing needs. These include early retirement and voluntary retirement schemes (VRS). For example , when Gillette India Limited (Gillette) announced its merger with procter and Gamble India early in 2006, the firm started a restructuring exercise. The new cost-efficient structure and processes are likely to make some employees redundant. Gillette has planned a VRS package for redundant staff. Even though there is a shortage of skilled labour, firms are going in for layoffs. The percentage of the skilled unemploued has gone up. Earlier, the rule followed by organizations was to hire in good times and fire in bad times. This rule is no longer true for most of the worlds organizations. The past decade has seen many firms in most industuialized nations making significant cuts in their overall staff. These include IBM, AT&T, and more recently Ford. Ford, faced with adeepening financial crises, has announced that it will cut 25,000-30,000 jobs from plant payrolls by 2012. The German Usauto giant DaimlerChrysler also plans to axe up to 6,000 general and administrative jobs by 2008 in order to cut annual costs by 1.5 billion euros. General \motors Corporation (GM) announced in November 2004 that it would cut 30,000 manufacturing jobs. West Virginia, the former Weirton steel Corp, and since December 2005 part of Mittal steel Co.,had 13,000 employees in 1986 . It had just 1,300 workers left on the job in January 2006. Indian firms too have gone in for a planned reduction of workforce. The steel Authority of India Limited (SAIL) offered VRS to its employees. Histotically, layoffs have affected manufacturing firms, and line workers in particular. Recently, however, white-collar and managerial employees have also faced layoffs. Vanguard Info Solutions , provider of IT and BPO services case in the BPO sector, a sector that is plagued by high employeeturnover. Vanguard closed down one of its functions in its functions in its Gurgaon operations and asked anumbert of employees to resign.

Firms downsize for a number of reasons: to increase flexibility so that it responds o change better; and need fewer employees due to enhanced efficiency resulting fron work redesign, but mainly to increase productivity and profit. Technological advances have resulted in higher productivity. Therefore, fewer people can do more work. Maruti Udyog Limited had cut its workforce fron 5,000to 4,000 by 2004 even as production soared. Many firms find it necessary to reduce workforce due to a decline or crisis In the firm, for example, reduced demand for products/services. Fords intention to slash many jobs and shut dpwm 14 manufacturing sites is directed to cut costs and stem losses in market share.Organizational restructuring has resulted in firms that are less hierarchical, and therefore require fewer employees. Human resource Mangers play ever important role during organizational downsizing .A major HR challenge resulting from downsizing is to manage the organization relationship with the survivors. Downsizing is often companied with low marale and commitment among survivors- employes who stay with the fim. This is because employes became anxious about job security whem they see their colleagues leaving. Human resource managers need to re-establish morale, firms are making efforts to retain employee for new position when their jobs are eliminated. Outplacement efforts have increased. Firms may provide outplacement services for employees who lose their jobs, or help them with relocation , or provide them personal and firms to help place executives in need of attrition. While responsible companies in the west have followed career transition services the trends is now picking up with Indian firms and arms of MNCs. In India , the triggers for out placement has ben merges and acquisitions , rather than recessions, as in the west. Following the merger of two leading fast moving consumer goods (FMCG) companies in early 2006 the merger of entity approached an HR consultancy firmfor outplacing more than 35%of its existing manpower. Human resources consultancy firms are helping organizations with outplacement or career transition management of their executives. Transitioning employees are helped by consultancy firms to find an alternative job to successfully plan practically implement, and effectively conclude the job change process. They are also helped with insight on career fits and counseled on coping with change to make the reputation of the firms as a quality employer.

Changing nature of work Traditionally, the signing of a contract of employment between an individual and a firm suggested that the employee had a job to do. But the way jobs were done was not given importance. Though the contract of employment still exixts, it is accompanied with ac contract competitive global business environment, there is an expectation of performance from individuals, terams as well as businesses. This has resulted in practices such as performance related pay, profit-related pay, objective setting, and the intangible of employee commitment. Some of the work related trends and concomitant HR challenges are discussed here. Industry and Occupational Shifts Globally, there has been a shift in the predominance of industry, from manufacturing to services, Industrialization was characterzed by mass production, specialized jobs, and structured and formal workplaces. Bluecollar workers performed routine repetitive jobs. Since world War II, there has been a shift from manufacturing jobs to service jobs. This is true of india also with india being the first major developing economy to become servicesled, with services outpacing manufacturing and agriculture. Services played a supporting role to production of goods in the decade between 1981 and 1990. Annual industrial growth during 1981-1990 was 6.8% and annual services growth was 5.8% however during 1991-2000, the order got reversed; services grew by 7.8% annually against 5.8% for industry manufacturing . At the end of 2004, indias services to GDP gros domestic product ration stood at 51% , which is similar to that of other Asian counties like Pakistan (53%), Sri Lanka (54%), and Bangladesh (51%). The services to GDP ratio for high income countries stood 71% in the same year. More jobs are being created in the services sector than in the manufacturing sector. Employment in the services sector touched one million at the end of 2004, which is by no means large if compared with a total workforce of 400 million. However, it is projected that the services sector in India will have an employment growth of around 20% per year, which means that jobs will double by 2008 (over 2004), and quardruple in eight years by 2012, to a total of 16 million. Employment in software/BPO is projected to rise from 0.8 million in 2004 to 3.2 million in 2012, according to a NASSCOM-McKinsey report. Further growth is expected in the services sector. The growth in services is fulled not only by software, but also by high- skill outsourcing in legal services, engineering services, film animation, biotechnology, etc. The present rapid growth of the services sector and its demand fo engineers has resulted in a shortage of engineers in the manufacturing sector. Larsen &

Tourbro Limited(L&T), a heavy industries and infrastructure giant, is fnding it difficult to fulfill its demand for engineers since most engineering graduates go to work in the IT sector. According to an estimate, about 3, 000 engineers gradute annually from the Indian Institutes of Technology in India, and abou 2,400 of thee opt for jobs in IT and BPO. Only 5% work in frastucture. Manufacturing jobs have decreased. According to the Statistical Outline of India 2001-2002, employment in the manufacturing sector as a percentage of the total employment in the organized sector in India stood at approximately 28% in 1999, while for the services sector it was 58%. A major factor has been rising productivity. While production has been rising in companies, the number of workers has been steadily declining. Use of highproductivity technology and adoption of new organizational techniques, such as just-in-time management, have contributed to increases productivity. Tata Motors Limited produced 129,400 vehicles with 35,000 workers in 1994, but 311, 500 vehicles with 21, 400 workers in 2004. Similarly, Bajaj Auto Limited while in 2004 it produced 2.4 million vehicles with just 10,500 workers. At Bajaj, production rose from 1.21 million units in 2001 to 1.52 million in 2004, and exports rose by 16%. The workforce reduced from 21, 273 in 1997 to 13,819 in 2001 and to 11, 531 in 2004. Productivity per worker more than doubled. Output per employee in 1997 was 67.7 vehicles in 1997, which rose to 87.8 in 2001 and was further up in 2004 at 131.5 the story has been repeated at other firms like Maruti the manaufacturing industry in India which earlier used protoectionist barriers, today welcxomes competition, Indian manufacturing is becoming world class, which is likely to lead to a higher growth rate in the manufacturing sector, Ind 2004-2005, th manufacturing sector in India grew at 8.9%; it is expected pressure, but the main reson that the manufacturing sector is becoming glosbally competitive is the brain power. Manufacturing has also become knowledge intensive, as highly skilled brain power, which initially boosted the services sector, is spilling into manufacturing through research and development (R&D). Industries like pharmaceuticals and automobiles are using R&D as a key input to develop indigenous technology. Moreover, many newly competitive Indian export-led manufacturing sectors like auto ancillaries are also becoming knowledge and skill intensive with new innovations resulting in qualityimprovemnt and cost reduction thus, even if india becomes a manufacturing led economy again, there will be continued dmand for knowledge workers from both services and manufacturing. The proportion of manufacturing jobs to total jobs is highest in Japan at about 20%. In 2001 employment in the manufacturing sector (as a percentage of total employment was 30% in Japan and 17% in China. The

corresponding figures for the US in the year 2002 were 22%. In contrast, services made up about 75% of the total workforce in the US in 2002. Employment in services sector for Japan was 39% in 2001 and 13% for China. Job growth in services is rising. According to the world investment Report of 2004, total employment in the ITeS sector in India has grown from 106,500 in 2001 2002 to 245500 in 2003-2004. Manpower Incs Global Employment Outlook Survey during the second quarter of 2005, which takes into account employers intentions to increase or decrase the number fo employees in their workforce, revealed that all seven sectors that were part of the survey had positive hiring intentions during the first quarter of 2006. The most optimistic picture was for the finance, insurance, and retail industries with a net employment outool(NEO) of 32% for the first quarter of 2006 as against 43% for the fourth quarter 2005 , followed by the services industry (30% for the first quarter of 2006 as against 45% for the fourth quarter of 2005). The NEO is the percentage of employers anticipating increase in total employment minus the percentage of employers expecting decraease in employment. The NEO for the manufacturing sector was 25% for the first quarter of 2006 against 38% for the fourth quarter of 2005. The changing pattern of industrial employment affects the pattern of different occupational group. Thus, while there is an overall growth in employment, manual and skilled jobs are decreasing in the knowledge economy. The growth in demand for labour is expected to be concentrated among the higher skilled occupations, and in particular among professional, managerial, scientific, and technical occupations for work arrangement also. The servie sector has different requirements from those of the manufacturing sector,especially in a 24 hour work scenario. Occupations, particularly in the service sector, are more likely to offer flexible terms of employment to professional employees, as well as flexible working patterns. The shift from the manufacturing era to the knowledge era has been accompanied by a shift rom the labour model to the talent model. The labour model was prevalent in the manufacturing era. However, talent in important for knowledge-based firms today. The adherents of the labour model hired for skills, intelligence, attitudes, and behavior. Human resource strategies are very important for the talent model. Talent would prefer salaries to be linkd with performance, incentive based compensation, and proactive employee development programmes. Technological Advancements Technological advancements and the use of computers have permanently altered the way organizations and people work. Twenty years

ago no one had altdered the way organizations and people work. Twently years ago no one had heard of . leave alone seen, a celluar phone or a loptop. E-mail, the use of computers ranges from simple recordkeeping to controlling complex processes. The advanced power of networks and greater bandwidth has also influenced the world of work. The ability to connect to the head office by cell phones or wireless laptops has changed the way business is conducted. Use of the intenet to conduct business has resulted in growth of e-business and virtual organization. Virtual organizations are those firs that are onnected via compute mediated relationships The traditional hierarchical organizations of the past held all assets internally. On the other hand, virtual organizations are increasingly organized as network, focusing on their core competencies and outsourcing peripheral work to other firms that enables them to expand their scope and adaptability in a dynamic environment. These virtual firms are able to simultaneously increase efficiency. Flexibility, and responsivencess. A new generation of virtual workers has emerged. A virtual workforce, which operates on-site with clients rather than on-site in the office, is a common reality. Earlier, the workplace and working hours wer clerly specified. This is no longer true for the contemporary workforce.The internet economy, with its 24/7 culture, has put a lot of pressue on people. Many take work home. They log on to their email and the internet at home at night and work for another 2-3 hours. Technology has thus casued work to invade life and ensured that one is always working. Though people always worked long and put more work pressure on people. Mobile phones, instant a click away. People worry that if they do not put in more hours they may not have a job or they may lose out on careet growth. Organizations are also asking employees to out in longer hours. The competitive are also asking employee to put in loger hours. The competitive business environment has increased competitive pressures on employees. It is important that firms take initiatives to reduce this compulsion to cary work home. The intrusion of technology into life has taken another jump with the global distribution of work-as services are carried out from offshore locations. Distribution of employees worldwide, as in BPO firms, means that it is no longer possible to work to the next cabin or floor to get an update on the progress of some project. Globalzation of support services, or back-end work, means that both customers and vendors have to adjust to working in each others time zones. Technology has drastically changed the scope of working hours. A global client base and delivery schedule in different time zones has brought about longer working hours. Long working hours have become integral to the global IT industry Many employees of global firms are on call

24 hours a day to teleconfer with colleagues in a different time-zone. Wheather it is work that is done offshore, near shore, or even outsourced in the same city, there is a flattening or leveling of work hurs, since difeent people from different locations work on the same project in different people from different ocations work on the same project in different time zones. Globalization and outsourcing of services has resulted in most executives working harder than they ever did. Initiatives by firms towards providing a less stress ful environment help employees creativity. To provide an outlet for employees who work very ahard in a stress ful environement HR managers in BPO firms are creating a fun filled environment at work by organizaing varios social events, like cricket competitions, cultural programmes by employees, etc. Managing a remote workforce presents a number of challenges. One of the challenging is to maintain connectivity amog workers. As virtual workforce has become common, organizations must provide employees with opportunities to be together physically. These opportunities to be together physically. Thes opportunities let employees share the corporate culture and reinforce their relationships with others. The use of advanced more knowledge workers are required. Hence, there is a need for training programmes to provide employees with skils so that they can move into technical and/or service oriented jobs. Technology has made many existing skills obsolete by creating a need for new skills. This has made it important for firms to re-train their current employees. Technology Training has become an important part of all formal training. Firms also need to ensure the supply of tech-savvy people in future. For this , firms need to intract with educational institutions. Two large firms that have developed ties with educational institutes are IBM and Infosys Technologies Limited (Infosys). Thus technology and its use in the workplace have an impact on the management of human resourses. Outsourcing Outsourcing is hiring someone outside the company to perform tasks that could be done internally. For example, firm hire advertising firms to handle product promotions, law firms to handle leagal issues, and specialized testing agencies to screenpotential employees. Outsourcing has resulted for firms efforts to focus their activities on their core competencies to lower overhead costs, increase organizational flexibility, and access others expertise. It is a response to increased competition. Several HR concerns emerge with regard to outsourcing. A major one is that employees are likely to lose their jobs when the work is outsourced. This results in lower morale and productivity in the firm. The HR personnel must respond to these challenges by developing appropriate initiatives.

Flexible Work Arrangements Conventionally, employment is view in terms of full time work. But, fulltime employment has seen steady decline over the past few years. A range ofoptional forms of working has emerged. Part time work is seenm as a way of hired. Firm in seasonal businesses, such as retail stores, prefer temporary employees so that is possible for them to employ more people when required without increasing their fixed employee cost. Temporary work and flexible work hours provide employees with greater control over their personal lives. This coincides with changing social values. For the older generation nearing retirement, work was a mean of sustenance and loyalty to the employer was primary. On the other hand, the younger generation is more materialistic, and looks for a career , rather than just a job, they are more likely to change jobs if their jobs do not satisfy their career aspirations. India has seen significant growth in the number of temporaries. Insurance, telecom, IT, and ITeS companies currently employ over 50,000 of them. Teamlease , a tempting firm providing temporaries to firms, has over 10,000 on its rolls. This growth in the number of workers seeking temporary jobs has been driven by the service sector. However globally, it is the traditional or light industrial sectors that account for 65-70% of temporaries. Labour laws stand in the way of growth in temping in the manufacturing sector in 66 Strategic Human Resource Management India. A modification in labor laws to make them more contemporary will extend the benefits of flexi-staffing to manufacturing companies as well. Permanent employees are also being offered greater flexibility in their work Hours . organization are moving away from the typical 9-to-5 eight hour day To flexible working ho urs