Emerging Trends in Hrm Final (2)

8/2/2019 Emerging Trends in Hrm Final (2)

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INTRODUCTION

Human resource management, if we see it from definition perspective it is a process of bringing

people and organizations together so that the goals of each others are met.

If we see in practical situation the above definition its just one side of a coin which has limitedHRM involvement but HRM today is a different story, it have changed the way we work, andalso it helps an organization to survive in recessionary period. Managing and attracting thehuman resource in todays time is very difficult task. The role of HR manager has changed a lot

(Dancing differently on changing tunes of life) from being protector and screener to the role ofSavior who acts as planner and change agent affecting bottom of the pyramid where it is bluecollar workers & at the Top & Middle level executives.

The trends in human resource industry are dynamic in nature which contributes towards toachievement of organization goals. Over the years, highly skilled and knowledge based jobs haveincreased while low skilled jobs are decreasing. This calls for skill mapping through proper

HRM initiatives.

Change is inevitable as said and thats what Indian organizations are witnessing in managementcultures, systems and working style. Alignment with global companies has forced Indianorganization accept and incorporate change in every day life which makes role of HRM all themore important.

Human Resource Management has evolved considerably over the past century, and experienceda major transformation in form and function primarily within the past two decades. Driven by anumber of significant internal and external environmental forces, HRM has progressed from alargely maintenance function, with little if any bottom line impact, to what many scholars and

practitioners today regard as the source of sustained competitive advantage for organizationsoperating in a global economy.

CHANGES IN HRM

Some of the significant changes that are likely to take place in the human resource managementare as follows:

1.Increase in education levels: Due to technological progress and the spread of educational

institutions workers will increasingly become aware of their higher level needs, managers willhave to evolve appropriate policies and techniques to motivate the knowledge of workers. Bettereducated and organized workforce will demand greater discretion and autonomy at the workplace.

2.Technological developments: This will require retraining and mid-career training of bothworkers and managers. Rise of the international corporation is proving new challenges forpersonnel function.


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3.Changing composition of work force: In future, women and minority groups, SCs andSTs would become an important source of man power in future on account of easy access tobetter educational and employment opportunities. Therefore manpower planning of everyorganization will have to take into consideration the potential availability of talent in thesegroups. Changing mix of the workforce will lead to new values in organizations.

4.Increasing government role: In India, personnel management has become very legalized.In future private organizations will have to co-ordinate their labour welfare programmes withthose of the government private sector will be required increasingly to support governmentefforts for improving public health, education training and development and infrastructure.

5.Occupational health and safety: Due to legislative presence and trade union movement,personnel management will have to be more healthy and safety conscious in future.

6.Organizational development:In future, change will have to be initiated and managed to

improve organizational effectiveness. Top management will become more actively involved inthe development of human resources.

7.New work ethic:Greater forces will be on project and team forms of organization. Aschanging work ethic requires increasing emphasis on individual. Jobs will have to redesigned toprovide challenge.

8.Development planning: Personnel management will be involved increasingly inorganizational planning, structure, composition etc. Greater cost-consciousness and profit-orientations will be required on the part of the personnel department.

9.Better appraisal and reward systems: organizations will be required to share gains ofhigher periodicity with workers more objective and result oriented systems of performance,appraisal and performance linked compensation will have to be developed

NEW TRENDS OF HR

(A)International Human Resource Management (IHRM)

1. Ethnocentric approach

2. Polycentric approach

3. Geocentric approach.

(B) Human Resource Outsourcing: It consists of three types

1. Application Service Provider


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2. Business Process Outsourcing

3. Total HR Outsourcing

(C) Human Resource Information System (HRIS) has three types

1. Strategic HRIS

2. Transformational HRIS

3. Tactical HRIS

(D) Use of SIX SIGMA in HR

THE ROLE OF HR IN ORGANIZATIONS

Boosting Productivity Preparing the Organization for Change Building Employee Commitment and Morale Involvement in Determining and Implementing the Strategic Direction of the

Organization

FUTURE ROLE OF PERSONNEL MANAGERS

Some of the emerging trends in the role of personnel manager are as follows:-

(i) Personnel managers of future will have to stress upon overall development of humanresources in all respects.

(ii) The scope of human resource management will be extended to cover career planning anddevelopment, organization development, social justice etc.

(iii) Enlightened trade unions will become an active participant in the organization andmanagement of industry.

(iv) The personnel manager will be required to act as a change agent through greater

involvement in environment and scanning and development planning. They will have to devotemore time to promote changes than to maintain the status quo.

(v) The personnel function will become more cost-conscious and profit oriented. Instead ofmerely administering personnel activities, the personnel department will have to search outopportunities for profit improvement and growth.


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(vi) Greater authority and responsibilities will be delegated to personnel managers particularly inthe field of employee welfare services.

(vii) Personnel managers will have to continuously retrain themselves to avoid obsolescence oftheir knowledge and skills.

Thus, the job of personnel managers will become more difficult and challenging in future. Theywill have to be experts in behavioral sciences. They will play a creative and development role.

They will thus have play a creative and development role. They will have to acquire new skills,values, attitudes to discharge their new responsibilities successfully.

HR IN THE 21ST CENTURY

Becoming the employer of choice

Winning the war for talent Contributing to the organization as a strategic business partner

Cultivating leadership through e-learning and development

Recognizing the workforce as a profit center

Thinking globally while complying locally

Incorporating flexibility and adaptability into the organization

Embracing technology as the underlying facilitator

The policies of many companies have become people centric

Attracting and retaining of human resource has become difficult as loyaltyfactor is losing its shine.

Human Resource Outsourcing is the new name in the industry to replace theredundant traditional HR department.

With the increase of global job mobility, recruiting competent people is alsoIncreasingly becoming difficult, especially in India.

COMPETENCIES FOR 21ST CENTURY HR PROFESSIONALS

Developing Effective Reward and Recognition Systems

Creating and Becoming Transformational Leaders Engaging the Workforce in Continuous Change and Innovation Collaborating in Resolving of Strategic Problems Partnering with Community Groups and Business Organizations Encouraging Real Employee Involvement Coaching and Counseling Individuals and High Performance Teams Empowering and Facilitating Learning, Change, and Decision-making Creating the "Learning" Organization


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Designing Organizations, Processes, and Performance Systems Keeping Up-to-Date on Technological Advances in HR Applications Maintaining a Global Business Perspective

HR Managers today are focusing attention on the following

a) Policies:HR policies based on trust, openness, equity and consensus.

b) Motivation: Create conditions in which people are willing to work with zeal, initiativeand enthusiasm; make people feel like winners.

c) Relations: Fair treatment of people and prompt redress of grievances would pavethe way for healthy work-place relations.

d) Change agent:Prepare workers to accept technological changes by clarifyingdoubts.

e) Quality Consciousness: Commitment to quality in all aspects of personneladministration will ensure success.

HUMAN RESOURCE MANAGEMENT IN A CENTURY OF

GLOBALIZATION

APPROACHESTOMANAGINGANDSTAFFING

SUBSIDIARIES

1. Ethnocentric: The home country practice prevails with this approach. Headquarters fromthe home country makes key decisions, employees from the home country hold important jobs,and the subsidiaries follow the home country resource management practice.

2. Polycentric: Each subsidiary manages on a local basis. A local employee heads asubsidiary because headquarters managers are not considered to have adequate local knowledge.Subsidiaries usually develop human resource management practices locally.

3. Geocentric or global: The company that applies the global integrated business strategymanages and staffs employees on a global basis. For example, Electrolux (the vacuum cleanercompany) has for many years attempted to recruit and develop a group of international managersfrom diverse countries. These people constitute a mobile base of managers who are used in avariety of facilities as the need arises.

In the ethnocentric approach, the cultural values and business practices of the home country are

predominant. Headquarters develops a managing and staffing approach and consistently applies


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it throughout the world. Companies following the ethnocentric approach assume the home

country approach is best and that employees from other parts of the world can and should follow

it.

MAJOR FUNCTIONS OF INTERNATIONAL HUMAN RESOURCE

MANAGEMENT

RECRUITMENTANDSELECTION

Recruitment and selection are the processes through which an organization takes in new

members. Recruitment involves attracting a pool of qualified applicants for the positions

available. Selection requires choosing from this pool the candidate whose qualifications most

closely match the job requirements.

In companies that function in a global environment we have to distinguish different types of

employees. Traditionally, they are classified as one of the three types:

1. Parent country national:The employees nationality is the same as the organizations.

2. Host country national:The employees nationality is the same as the location of the

subsidiary.

3. Third country national:The employees nationality is neither that of the organization

nor that of the location of the subsidiary.

DEVELOPMENT AND TRAINING

The overall aim of the development function is to provide that adequately trainedpersonnel in a company are capable to fulfill their goals, as well as to contribute to better

performance and growth with their work Creation and transfer of international human resource

development programs may be carried out in two ways:

1.Centralized2.Decentralized

With a centralized approach, training originates at the headquarters and corporate trainers travel

to subsidiaries, often adapting to local situations. This fits the ethnocentric model. A geocentric

approach is also centralized, but the training develops through input from both headquarters and

subsidiaries staff. Trainers could be sent from various positions.

In a decentralized approach, training is on a local basis, following a polycentric model. Whentraining is decentralized, the cultural backgrounds of the trainers and trainees are usually similar.

Local people develop training materials and techniques for use in their own area.

PERFORMANCE EVALUATIONIn companies, the performance evaluation is most frequently carried out for administration or

development intentions.


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REMUNERATION AND BENEFITSRemuneration of employees has a key role in acquiring new employees and is important for

employees as well as for the employers. Pay is the basic resource of living of the employees,

while benefits cover better health care, the possibility of spending holidays in the companys

holiday facilities at a favorable price and also other advantage

MANAGEMENTOFEXPATRIATES

One of the most challenging tasks for any company operating internationally is to manage itsexpatriates. The statistics showing their efficiency on that matter are not encouraging. Forexample, the failure of U.S. expatriates (the percentage who return prematurely, withoutcompleting their assignment) is to be in the 2040% range. In Japan, the failure rate is less than5% for their expatriates.One of the reasons for the difference is that Japanese expatriates receivefar more orientation and language instruction than U.S. expatriates do.

1. The reasons for expatriate failureIn international companies, it is important to understand the reasons behind expatriates highfailure rates so that preventive measures can be taken. Six factors account for most failures,although their relative importance varies by firm.These are: career blockage, culture shock, lackof cross-cultural training, an overemphasis on technical qualifications, a tendency to useinternational assignments as a way to get rid of problem employees, and family problems.

2. Cross-cultural adjustmentExpatriates and their families need time to become familiar with their new environment and tobecome comfortable living there

3. Expatriate reentry

After the expatriate completes his assignment and returns home, he must adjust in the same wayas when going abroad.. The disorientation experienced by a returning expatriate is known asreverse culture shock.

4. Selection of expatriates

To choose the best employee for the job, management should: Emphasize cultural sensivity as a selection criterion Establish a selection board of expatriates

Required previous international experience Explore the possibility of hiring foreign-born employees who can serve as

expatriates at a future date Screen candidates spouses and families

5. Expatriate trainingexpatriates are more successful when their organizations train them to prepare for their life andwork abroad. Lack of training is a major cause of expatriate failure.


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6. Expatriate evaluation and remuneration

The performance evaluation of expatriate managers is particularly difficult. The job a persondoes abroad can include much more than what he does at home. A manager often steps into the

role of counselor, trainer, troubleshooter, or diplomat, in addition to his assigned jobresponsibilities. With the need for adapting to a new culture, a different way of doing business,and often a new language, many factors influence expatriate performance.

An organizations general policy influences expatriate remuneration. Three common approaches

are: a home-based policy, a host-based policy and a region-based policy.With a home-basedpolicy, emloyees remuneration follows the scale of their home countries.

The host-based policy sets salaries at the level of the host country, with benefits usually tied tothe home country. Finally, region determines the third approach. Remuneration for employeesworking outside their home countries reflects whether their relocation is within their home

region or in another regio

HUMAN RESOURCE INFORMATION SYSTEMS

With the changing world and constant new technology that is available, managers need to beaware of the technology that will increase effectiveness in their company. Human resourceinformation systems (HRIS) have increasingly transformed since it was first introduced atGeneral Electric in the 1950s. HRIS has gone from a basic process to convert manualinformation keeping systems into computerized systems, to the HRIS systems that are usedtoday.

Human resource professionals began to see the possibility of new applications for the computer.The idea was to integrate many of the different human resource functions. The result was thethird generation of the computerized HRIS, a feature-rich, broad-based, self-contained HRIS.The third generation took systems far beyond being mere data repositories and created tools withwhich human resource professionals could do much more.

Applications of HRISThe efficiency of HRIS, the systems are able to produce more effective and faster outcomes thancan be done on paper. Some of the many applications of HRIS are Clerical applications,applicant search expenditures, risk management, training management, training experiences,

financial planning, turnover analysis, succession planning, flexible-benefits administration,compliance with government regulations, attendance reporting and analysis, human resourceplanning, accident reporting and prevention and strategic planning. With the many differentapplications of HRIS, it is difficult to understand how the programs benefit companies withoutlooking at companies that have already benefited from such programs.

Human Resources Information Systems (HRIS) is an integration of HRM and Information

Systems (IS). HRIS or Human resource Information system helps HR managers perform HR


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functions in a more effective and systematic way using technology. It is the system used to

acquire, store, manipulate, analyze, retrieve, and distribute pertinent information regarding an

organization's human resources. The HRIS system is usually a part of the organization's larger

management information system (MIS)

HRIS can be applied in the following areas of HRM

HR planning Succession planning Work force planning Work force dynamics analysis Staffing Applicant recruitment and tracking Employee data base development Performance management Learning and development

Compensation and benefits Pay roll Job evaluation Salary survey International compensation Benefits management Develop innovative Org. Structure Develop IT

Barriers to the success of an HRIS

Lack of management commitment

Satisfaction with the status quo

No or poorly done needs analysis

Failure to include key people

Failure to keep project team intact

Politics / hidden agendas

Failure to involve / consult significant groups

Lack of communication

Bad timing (time of year and duration

SIX SIGMA IN HRM

Six Sigma is a logical and methodical approach to achieving continuous improvements in areas

critical to the success of any manufacturing or service-oriented business.


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This process improvement methodology was developed in the 1980s in Motorola's high-volume

manufacturing environment. This has contributed to the creation of the general opinion that Six

Sigma is only applicable to high-volume, manufacturing processes. Actually, Six Sigma is

applicable to both manufacturing and service industries, and to both high- and low-volume

production environments.

The Six Sigma HR team was established, involving HR process owners, facilitator (Six Sigma

Black Belt) and mentor (HR Director). Internal customers were identified as critical stakeholders

and their participation was secured through their direct/indirect representation or through

feedback communication.

The analysis started with the development of HR process maps, which effectively revealed

shortcomings in the processes with immediate remedies and benefits. Communication,

resourcing, rewarding and development were selected as the first process.

Use of SIX SIGMA

Improve

Development and implementation of improvement solutions followed identification of vital input

parameters that affect selected process measures of performance (MOPs). Monitoring of

improvement actions is realized through implemented HR database. Vital process inputs and

process results were monitored and correlation verified. The focus has gradually shifted from

monitoring MOPs to measuring and controlling inputs that control MOPs and reporting MPOsTrends. .

Control

The key control objective is to sustain and get a continuous improvement process embedded into

HR processes. A quarterly HR review report is developed and issued and presented by HR. It

contained process analysis results (control charts, histograms, trends and other monitoring

charts), conclusions, observations and improvement actions to be completed by the next review

and a Six Sigma score chart.

TENTATIVE TOPICS

New Conceptualisation of Jobs

Alternative Work Arrangements


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Balancing Work and Family

Career-Related Issues and Workforce Diversity

Organizational Learning and Knowledge Management

Loyalty and Commitment of Employees: Attracting and Retaining Employees

The High Involvement Workplace

Teamwork in the Workplace

New Pay Practices

Multi-source Performance Feedback (360 degree Feedback)

Downsizing (Rightsizing) Issues

Expected Issues Relevant to HRMEnvironmental or labour market changes with which the HR function must addressExpected changes in HRM practices in the firmBiggest HRM challengesLegal challenges or concerns

Use of New HRM Programs and Practices

Changes in design of jobsChanges in work structure from individuals to teams, empowering workers

Alternative work arrangements (flexitime, job sharing, telecommuting, etc.)Contingent workforce (temporary workers)Diversity of workforceAttracting and retaining employeesWork-life balance programsRestructuring & downsizingEmployee attitude surveysCareer planning programs (e.g., developing skills, mentoring, succession planning)Continuous learning cultureKnowledge of management programs/issues

HUMAN RESOURCE MANAGEMENT OUTSOURCING

The use of outside bussiness to perform necessary business activities and process in lieu of

internal capabilities. Outsourcing basic human resource services can be the key to achieving a

more influential and strategic role for the HR function.


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ADVANTAGES OF OUTSOURCING

Reducing costs: Key determinator in many outsourcing decisions, but should not to be

considered in isolation from other costs/ benefits;

Increasing effectiveness of HR delivery: Experienced outsourcing providers can oftendeal with HR processes more effectively. For example, recruitment may be undertaken more

quickly, reducing employee turnover costs and speeding up the pace of growth;

Providing greater expertise: External providers may offer greater levels of specialist

knowledge or experience than affordably available in-house;

Moving HR up the value chain: Outsourcing human resource administration can lead to a

shift in HR focus towards policy and decision making;

To aid organizational growth: Fast-growing organizations can lack the HR capacity todeliver business objectives, making HR outsourcing an attractive solution.

Outsourcing & its HR Dimensions:

In to-days global village, growth is evident and important for survival of any organisation.During the 1990s, there has been a movement away from vertical growth strategies toward co-operative contractual relationships with suppliers and even with competitors.

These relationships range from outsourcing, in which resources are purchased from outsidethrough long-term contracts instead of being made in house (for example Hewlett- Packard buysall its laser engines from Canon for HPs laser jet printers), to strategic alliances, in which

partnerships, technology licensing agreements, and joint ventures supplement a firms

capabilities (for example, Toshiba has used strategic alliances with GE, Siemens, Motorola andEricsson to become one of the worlds leading electronic companies).

Outsourcing simply means hiring someone from outside the company to perform tasks that couldbe done internally. Companies often hire the services of accounting firms, for example, to takecare of financial services. They may hire advertising firms to handle promotions, software firmsto develop data- processing systems, or law firms to handle legal issues.

There are several HR concerns with regard to outsourcing, not the least of which is that ifemployees are likely to lose their jobs when the work is outsourced, morale and productivity candrop rapidly.

To minimise problems, line and HR mangers have to work together to define and communicatetransition plans, minimise the number of unknowns, and help employees identify theiremployment options.


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clerical staff to the McBer Company, a temporary employment agency. McBer hired most of

Kelloggs secretarial staff, so even though the people were employed by a different company,

their job and locations stayed the same. This process is known as employee leasing. In some

cases, the outside vendors may actually hire the displaced employees. For example, M. W.

Kellogg Inc., a petroleum services company based in Houston, recently outsourced its entire

Employee leasing has been growing rapidly. The value of employee leasing lies in the fact that

an organisation can essentially maintain its working relationships but shift the administrative

costs of health care, retirement, and other benefits to the vendors.

The market for providers of outsourced service of all types is growing rapidly. In 1996,American firms spent over $100 billion in outsourced business activities. Globally, outsourcingusage grew by 35 percent for the 12 months during the year 1997. It was estimated that by 2000,expected to increase to $200 billion. According the Hewitt Associates survey of large employersconducted during 1996 found that 93 percent of respondents outsourced some of their HRfunctions. Another survey conducted by American Management Association (AMA) during1996 confirms that 77 percent of firms outsourced their HR activities up from 60 percent in1994.

The 1997 survey of Human Resource trend in 1700 organization reported that 53 percent plannedto outsource more in the future. HR Departments are facing the classic make or buy decisionsthat other functional areas confront when considering the outsourcing of services or products.From the review of literature, it has been found that there are five competitive forces that aredriving more companies to outsource some or all of their HR activities (1) Downsizing (2) Rapidgrowth or decline (3) Globalization (4) Increased competition and (5) restructuring. Over the pastdecade, these factors have significantly altered the strategy and structure of many firms.

The Sourcing Decision

Outsourcing is becoming an increasingly important part of strategic decision-making and an

important way to increase efficiency and often quality. Organisations competing in global

industries must in particular search worldwide for the most appropriate suppliers.

We should now discuss outsourcing in the Indian context. About 60 percent by value of a Bajaj

vehicle was outsourced. Virtually no components were imported and 70 percent of Bajaj Autos

requirement was sourced from within the State of Maharashtra. Compared to its competitors,

Bajaj Autos dependence on vendors was relatively low: over 90% of Hero Hondas components,

for example, were outsourced.

At the same time, the level of outsourcing had begun to creep upwards. According to Arvind

Gupta of Bajaj Auto, we used to take 1.9 man-days to make a scooter. Now because of


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outsourcing it has come down to between 1.4 & 1.5 man-days. Of this reduction, 40% is from off

loading and 60% from productivity increases.

TI Cycles had set itself an ambitious target of becoming the number two bicycle manufacturer by

2000 with sales of 35 lakhs bicycles in the domestic market while at the same time achieving

40% ROI. TI Cycles singled out a few areas of the value chain for special attention and thrust.

The company tied up its outsourcing arrangements with Avon Cycles in Punjab and Hamilton

Cycles in Mumbai with a view to expanding its reach in the northern and western markets

respectively. With these arrangements, TI reached a stage where its outsourcing was much

higher than Hero and Atlas, who were more vertically integrated. In the late 1990s, Philips

along with Sony took the outsourcing route.

Organisations can benefit from the new concepts of outsourcing by generating maximum return

on investment through better productivity.

Outsourcing lead to reduction in fixed cost, hence a lowering of breakeven point on capacity

utilisation leading to higher sustainability of the company in recessionary market. This also leads

to improved cash flow as the investment in fixed cost on tangible fixed assets is reduced.

The outsourcing programme is also being practiced in Public & Private Sector enterprises to

raise productivity. Nowadays many companies have outsourced the car-pooling services.

Many leading PSEs have outsourced their maintenance activities (for example annual over

hauling, major repairs work etc) thus saving huge cost on HR.

Outsourcing is a fast and flexible approach to cover resource gaps. As expectations continue to

rise to higher standards, any business will doubtless continue to benefit from outsourcing

technical skill. It is a new coinage of an old decision-making model known as make or buy,

but outsourcing has enlarged the dimension of make or buy concept.

Quality assurance and cost reductions have become the prerogative for the competitive

sustenance in an open international market. Power of outsourcing lies not only, in its capacity to

effect a rapid, instant solution to an organisations problems but also in its potential to help the

organisation to re-think its entire way of doing business, even its reason for existence.


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The two terms contracting and outsourcing are used interchangeably but they are not same at

all. Contracting is when a company (buyer) purchases goods or services from another company

(supplier or vendor). In this situation the buyer has the control over the situation and instructs the

vendor to work accordingly but in the case of outsourcing the buyer turns over the control

(ownership) or the process to the supplier. The buyer asks the supplier what results it wants and

the supplier decides how to achieve that. In outsourcing the supplier has the expertise and the

economies of scale During the year 2002, HP Services the software services arm of Hewlett

Packard (HP), got a contract for handling consumers product major Procter & Gambles global

IT outsourcing. At $ 3.5 billion and across 160 countries, this was a large and beautifully

structured deal. While HP gets the IT services part of the deal. P & G will allot the building and

real estate management to another player and employee payroll management and accounts

payable to two others.

Dont allow sacred cows. Except for core competencies, all other HR activities should be

considered as candidates for outsourcing.

Determine whether the desire to outsource an activity is driven by its low contribution to core

competencies, influences from the external environment, or poor management of the activity.

Recognize that performance is more important than low HR department head counts or lower

costs.

Beware of vendors that supply off-the shelf solutions that do not fit the companys needs.

Avoid excessive reliance on vendors.

Decide how much control is needed for various HR activities and whether control can beretained with outsourcing.

Identify critical personal benefits of outsourcing.

Selecting and Negotiating with Outsourcing Vendors

Assign a high weighting to vendors knowledge of the industry.

Perform reference checks of potential vendors.

Understand the costs involved in switching vendors for outsourced services.

Managing the outsourcing Transition

Expect the internal HR team to resist outsourcing and develop ways of managing this resistance.


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Anticipate conflict and develop a plan for resolving it in a manner that supports the relationship

with the vendor.

Anticipate changes to HR culture and careers.

Managing Vendor relationships

Develop long-term relationships with outsourcing vendors where such continuity is critical.

Develop staff members to become effective mangers of vendor relationships.

Maintain stability of the in-house staff who oversee vendor relationships and understand the

performance expectations originally negotiated.

Require competitive bidding for each outsourced service at regular intervals.

Monitoring and Evaluating Vendors Performance

Establish expectations, measures, and reporting relationships up front for both outsourcing

parties.

Insist on high quality performance by HR vendors. Insist on accurate and frequent status reporting by

HR vendors and immediate notification when problems arise.

Establish performance targets for vendors with the assistance of outside consultants whennecessary.

Consider internal customer surveys to evaluate vendor performance.

The choice to outsource some or the entire HR domain is becoming increasingly important for

most organisations. Macro-economic and environmental forces have compelled organisations to

restructure and re-examine all management processes, including HR management.

In order to contain costs, organisations have been downsizing, outsourcing and leasing

employees, and enhancing productivity. HRs role is to maintain the relationship between a

company and its employees, while implementing the changes.


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HUMAN RESOURCES PLANNING & DOWNSIZING

Over the past decade downsizing has been in full swing and reductions in the work force becamea fact of life in the world of work. For many organizations, these actions were necessary toimprove profitability, eliminate obsolete functions and reduce overstaffed areas. Asorganizations move to-wards more strategic workforce management, downsizing will remainpart of the work force landscape, but the catalyst for it will change.

Downsizing began as the strategy of sickly companies shedding workers in the face of weakdemand, but soon strong firms looking to boost shareholder value also adopted the policy.Downsizing can be used as a strategic option that management can exercise in order to boostequity value. Downsizing sometimes called rightsizing refers to the planned elimination of

positions, operations or jobs. This programme is often used to implement retrenchmentstrategies. A good retrenchment strategy can thus be implemented well in terms of re-organizingbut poorly in terms of staffing.

VOLUNTARY REDUNDANCY & WAYS OF DOWNSIZING

There was a time when voluntary retirement used to be the last resort for organizations facing

compelling business conditions. But to-day voluntary retirement schemes (VRS) have become an

in-thing for surviving in the fiercely competitive market.

The ultimate objective is to reduce the total manpower for savings in wage cost to bring down

the cost of product or services. If this is the ultimate objective, one has to examine how much thewage cost constitutes as a percentage of the total cost and how much the other factors of

production contribute to the total cost of production.

Except for highly labour intensive manufacturing or process units, major contributors to the cost

of production are basic raw materials and consumables, power and fuel, maintenance and spares,

the depreciation charges for plant and machinery and of course the cost of servicing the loans

from the banks or servicing the debentures.

In many large size organizations, there is no more lifetime employment. Companies have been

downsizing through the process of a compensation package based on Voluntary Retirement

Schemes (VRS). VRS is viewed as one of the methods for the turnaround of the company whenbusiness cycle is on a declining curve.

The symptoms of such decline are seen in gradual decline in profits, reduction of market shares,

loss of monopoly, fast emergence of new technology, etc. When these symptoms are round the

corner, management must initiate action through strategic planning.


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This chapter focuses mainly on the four major ways of direct downsizing of workforce and also

covers practices adopted by different corporate houses in India and abroad. The major ways of

downsizing are as follows: -

Lay-off

Retrenchment

Closure

Voluntary Retirement


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Lay off: It is a temporary measure to reduce workforce in case the organisation faces problems

like shortage of fuel or power, accumulation of raw material and finished stock due to recession,

shortage of working capital, breakdown of machinery or natural calamity. The reasons under

which employers can lay-off workers are very specific and limited in number. According to

Section 25-m of the Industrial Disputes Act, 1947 unless the lay-off is due to shortage of Power

or natural calamity no worker can be laid off without the prior permission of the Appropriate

Government, in case the number of workers exceeds 100.

A well-known manufacturer of textiles, Mafatlal Industries had declared a 35 days lay-off in its

spinning, weaving and grey-folding departments which would have affected 1,200 workers. It

was aimed at cutting production due to recession in the textile industry and cutting costs.

The lay-off was declared illegal by the Labour Department. Another Company, Hindustan

Motors, one of the key players in Automobiles, in the recent past entered into a legal course

against the order of refusal of permission of lay-off. The issue is still pending before Calcutta

High Court. Ashok Leyland, a leading manufacturer of automobiles, decided to shut down itsEnnore plant for 12 days in June, 1998 when stock piled up due to recession, in the commercial

vehicle sector. It was done with the cooperation and approval of the union. That period was not

treated as lay-off technically and workers were entitled to full wages and allowances except

incentives.

According to a study of the top 100 Fortune 500 companies by Kenneth, Paul and Thomas

(1994) to track their lay-off announcement Motorola and Texas Instruments, both US-based

companies adopted different strategies to cope up with recession. Texas Instrument terminated

the jobs of several thousand employees and had to rehire, retrain, and motivate the employees

when things improved. Motorola adopted a different strategy. The employees were required towork one day less in every two weeks during the recession period. The Philosophy behind this

was We are in the boat together.

Retrenchment:Under the Industrial Dispute Act, 1947, an organization can retrench

employees for any reason other than termination of employment due to disciplinary action. It

does not mean retrenching all the employees due to closure.

The employer can prune the workforce using this method and pay them the retrenchment

compensation as stipulated in the Act. But the employer has to retrench the junior- most

employees even if they are competent based on the LIF (Last in First out) principle. Very

recently the Union Cabinet has approved the retrenchment of 218 workers in Hindustan

Vegetable Oils Corporation a public unit based in Delhi.

The unit was ordered to shut down by the High Court a few years back and it had been incurring

a monthly expenditure of Rs.25 lakhs on idle wages (Human capital Oct. 199). In February 1994


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113-crore Modern Food Industries was allowed to close down its Ujjain factory and retrenched

126 employees. Such cases of Government approvals in case of large companies are few and far

between.

Retrenchment is not just a simple means to downsize workforce. It involves a tricky and complex

process for identifying the non-performers, who are required to be separated from theorganization permanently.

Closure: An employer can close down the whole or part of a unit if the circumstances that lead

to closure are beyond the control of the employer. The Government has to be notified at least 90

days before the intended closure, citing reasons there for. Section 2 (cc) of the Industrial

Disputes (Amendment) Act, 1982 defines closure to mean the permanent closing down of a

place of employment or part thereof . Section 25 (FFF) imposes a liability on the employer who

closes down his business, to give one months andpay compensation equal to days average pay

for every completed year of continuous service or any part thereof in excess of six months. In

case of closure on account of unavoidable circumstances beyond the control of employer, the

maximum compensation payable to a workman is his three months salary (Srivastava, 3).

The Ghatkapor (Maharashtra) unit of BOC has been given permission by the Maharashtra

Government shut down on grounds of continuing losses and poor productivity. The losses were

to the tune of Rs. 8 crores in the past seven years (Human Capital, March, 1999). In1994, The

Bhandup plant of Hindustan Ciba-Geigy in Maharashtra was closed down and the employees

were offered VRS.

Levi Strauss & Co., the renowned manufacturer of Jeans has planned to shut down around 11 of

the North American facilities and cut 5900 Jobs by shifting most of its production activities

overseas to reduce labour costs (Human Capital March, 1999)(4).

One of the most important drawbacks of these methods of downsizing is that they cannot be used

at the discretion of the employer in case of large organisations (where the number of employees

exceed100). Approval of the Government before lay-off, retrenchment and closure is

compulsory. In a country like India, where unemployment is a big problem, the Government is

very reluctant to give permission for cutting jobs even if the reasons are genuine. Very often,

long battles are fought in the court of law where the balance may tilt in favour of any one of the

parties. Trade Unions also offer stiff resistance. J.K. Synthetics had closed down its fibre plant in

Kota. A case was filed against the company and the legal battle continued for 14 years. TheSupreme Court eventually declared the closure illegal and ordered the reinstatement of 1,100

workers with full compensation.


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Human resource planning vs. VRS: Perhaps the most important but generally most

neglected aspect of VRS is detailed human resource planning. The basic assumption for

introducing VRS is that a number of employees shall leave the company and therefore, for

maintaining an efficient and optimum level of production, the retained employees are to be

effectively utilized. The issue is not as simple as it appears to be. The first and immediate

reaction of the employees is about their traditional concept of work, and the existing work

culture perpetuated for long years to which the workers have been accustomed with. For

example, in most industries, the skilled workmen or technicians do not attend a job unless they

are given a helper to assist them. Human resource planning must take into account as to how

such issues are dealt with. A proper work-study would reveal that most of the times while

technicians attend to their jobs, the helpers stand idle and their presence is not required

technically. But nevertheless being assisted by helpers satisfy their unconscious esteem needs,

based on hierarchical concept in the industry.

The other aspect of human resource planning is to identify old and ineffective persons who are

perpetually sick, alcohol or drug addicts and habitual absentees and thus have least or very low

productivity. Along with this, lazy but, self-proclaimed group leaders are also to be identified.

For each of these cadres and categories of organisational members different approaches are to be

thought of and in this process resorting to administrative actions through the specific provisions

of the Standing Order may well be considered, before initiating discussions on VRS.

The most vital aspect of human resource planning is to prepare a skill inventory. Persons with

specific skill and expertise have to be retained. An important aspect is polyvalent or multi-

disciplinary skill development programme, which should be organized in a planned manner

before VRS is introduced. Job rotation and redeployment are unavoidable and for this, time-

bound training programmes are extremely necessary. Investments in such programmes give goodreturns. With the advent of the e-commerce and fast development of technology, organizations

are bound to have flatter organisation structure by reducing the number of layers for their

survival. A well worked out manpower plan shall be an important pre-requisite to convince the

collectives that after the VRS is implemented, the retained workers shall not be unjustifiably

burdened with excessive workload. Management must deliberately avoid engaging some chosen

retired, employed on contractual basis for availing their skill and expertise. If such practice is

followed, possibilities of discrimination and favouritism will not only disrupt the credibility of

the management but also will adversely affect the morale of the existing employees.

Benchmarking VRS practices and Compensation Management: Having identified

the reasons for the present downtrend of the organization and also having decided the

probablactions required for rectification, the company must compare its vital data for all the


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factors with the best company in the same or similar trade. Such benchmarking helps in

understanding the level of efficiency at which the company is presently working.

The compensation package normally determined on existing salary, past service, future service,

types of compensation packages being offered in the industry / region and also the financial

situation of the existing company. By and large, the pay back period of the compensationpackage in companies is less than three years.

Voluntary retirement is the golden route to retirement and has become one of the more favoured

ways of dealing with the redundant workforce in an organization. The most human technique for

downsizing the workforce in an organization is the VRS. The golden handshake, as it is often

called, is virtually corporate Indias only option today for shedding manpower. The method

offers employees a lucrative severance package: they cannot refuse particularly since law makes

it tax-free so that they retire of their own volition. Voluntary separations cause less pain and

agony. It gives people choice and discretion rather than making them the victims of management

decisions. VRS is considered to be a softer option compared to retrenchment because of legal

difficulties, trade union opposition, and obligations under the existing collective agreements and

considerations of good industrial relations.

Thus, Voluntary Retirement Scheme (VRS) has become one of the ways of dealing with

redundant human resources in an organization. As the name implies, opportunity is given to

employees to retire voluntarily. As an inducement, higher compensation than is paid under

retrenchment /normal retirement is paid along with, in most cases, some allowance for settlement

at native place or any place of the persons choice if such settlement/resettlement occurs with in a

stipulated time. If this is not adequate, some fringe benefits like medical

reimbursement/insurance are offered even after voluntary retirement. The VRS is also commonly

referred to as Voluntary separation Scheme (VSP) or the Golden Handshake Programme (GHP),

Venkat Ratnam.

In this context, INDALS Belgaum Smelter case is a unique success story of dealing with 472

redundant workers when 187 operating pots at Belgaum were de-energised and went off

production during 1992. This was the sharp escalation in power costs imposed by KSEB. Power

is an important input in aluminum smelting and is considered almost a raw material for the

production of the metal world over. In the year the smelter was losing Rs. 6 lakhs. Reflecting its

old value system and respect for its people, INDAL handled the situation in a very human and

compassionate manner. It is worthwhile to mention that the VRS that the company designed and

implemented was unique. Before designing and introducing scheme the company did a lot ofpreparatory work. A team of senior officers was sent to Bombay to visit some of the well-known

companies, namely, Premiere Automobiles, Ciba-Geigy, Hindustan Lever, etc. with a view to

collect their VR schemes. The team also studied the strengths and weaknesses, success and

failures of the different VR schemes, before developing, designing and implementing their own

scheme. The decision to implement the VRS though painful was carried out as the last available


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alternative to reduce surplus manpower. What was unique about VRS (policy) adopted by the

company was that over the benefits payable as per public sector enterprises, the company built in

additional incentives based on age-like medical insurance, etc. The scheme was designed to

enable the retired employees to identify with the company. It provided adequate medical and

insurance coverage for the employees in the post- retirement years. The company also granted

education scholarships to the children of retired employees. Entrepreneurial Development

Programmes were developed for employees accepting VRS. This covered counselling, arranging

loans, helping them with project profiles, tax and investment planning, organising relevant

training, etc.(for details please see the enclosed case on Belgaum Smelter.

CARE FOR THE SURVIVORS

The survivors experience an emotional shock that prevents them from suddenly changing

direction. They freeze like a deer in the head lights. The familiar pattern is broken and the

momentum that comes from routine and repetition will take time to recover. Not knowing whatto do people will wait and see what happens. They are waiting for leadership, some one to tell

them what to do. People fell at seeing their friends leaving or their positions eliminated. It feels

very much like a death in the family and needs the compassion and time for mourning we expect

whenever a loved one is lost. A good manager will have the compassion for the human need to

cope with the shock and fear that people feel, combined with a sense of optimism direction and

mission will help them through the often painful transition from what was to what is to be.

Thus, planned separation is not an end itself. It is a means to an end and the end result

contemplated is to rejuvenate the company is in the highly competitive market place. It is

therefore essential to plan for working out schemes that the retained organisational members arenot demoralised. A fall out of VRS is that the retained employees are a scared lot, always afraid

and apprehensive that anyone or some of them may be asked to retire at any time. Though in

reality it is not possible to assure all the retained employees about their retention for all time in

future, management should demonstrate by its action that retained employees are considered and

treated as valued members of the organisation. It is important to maintain the morale of the

retained staff. It is therefore, necessary to maintain close communication with them and dispel

rumours that are generally rampant in such condition.

COUNSELLING SERVICES

From the very beginning initiation of VRS, it is to be realised that for making the scheme

successful, efforts to be made to build a good deal of counselling services. Counselling should be

used as a process to communicate effectively with the orgasnisational members so that they

realise that the VRS is last resort for the revival and survival of the organisation.. A good

couselling session must include practical advice about how to use


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or invest the sum received as compensation under VRS. The retained employees shall also need

advice not only on investment but also on income tax implications.

It is evident that if a decision is taken for downsizing the organisation, a good amount of

planning and preparation is essential. All the issues pertaining to it must be considered

concurrently in tandem. Transparency in the management actions and fairness in its dealings areextremely necessary.

CONDITIONS FAVORING THE EFFECTIVE USE OF VR

The fact that management to use or willing to use VRS is a prerequisite for introduction of the

technique, but certain conditions encourage or perhaps are necessary for its deployment.

The facilitating factors comprise:

Availability of sufficient finance

Favourable workforce characteristics

Absence of union opposition of control; and

Availability of work for non-volunteers

It seems clear that more money is needed if an individual is to be persuaded rather than forced to

leave. Age profiles, length of experience, employment pattern and earnings levels may be

relevant to the effective use of VR. An age profile of employees with a high proportion of people

in the early retirement age group means that what is typically the best financial deal is available

to a relatively large proportion of workforce.

On the other hand, a relatively old workforce, with substantial length of service in individual

cases will increase the size of retirement packages because the statutory formula is based on

partly upon age and length of service.

The question of union attitude towards VR and the extant which a union can prevent its members

volunteering it thinks it is necessary to communicate directly to employees in the hope of

bringing forth volunteers. If the union has little control over its members, this may prove

successful.

The initiative for VR may come from the union rather than the employer. VR assumes that workis available for those who want to stay. VR should be applicable to any company for slimming

exercise rather than closure.


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MANAGING HUMAN RESOURCES ACROSS THE GLOBE

What kind of a new form of glue helps to manage human resources worldwide? Two ideas

emerging from organizational behaviour literature in recent years will help to find the answer.The first comes from the work of Paul Evans and Yves Doz from INSEAD business school in

France.

The secondfrom research conducted by Meridith Belbin in UK, Cambricge university. Evansand Doz have described the managerial challenge in complex international organizations in termsof balancing opposing dualities (Hoecklin, 1996). They believe that the pace of change and thenew complexity of globally operating companies create the need for harmonizing seeminglyopposing forces, such as:

Thinking globalActing localDecentralization Centralization

Planned OpportunisticDifferentiation IntegrationChange ContinuityTop-down Bottom-upDelegation ControlCompetition Partnership

They urge that such forces should be considered not as binary, either/or decisions, but rather ascomplementaryforces that need to be balanced. The analogy of the human personality is a usefulone. Instead of trying to maximize anything (decentralization, teamwork, formality, and so on),an organization should seek to ensure that it maintains a minimalthreshold of desirable attitudes.

This conceptual framework itself is a useful one in which to consider differences in culture. Thewhole challenge of managing across cultures is about balancing seemingly opposing values andpractices in such a ways as to create advantages from them.

The Cambridge university professor Meridith Belbin (Sparrow, 1994) provides another usefulframe in which to consider the impact of culture on various aspects of HRM. In his originalresearch with high-performing teams, Belbin identified eight team roles that individuals canplay when working in teams and that are required for effective team working. He suggested thateach individual has a primary role that he or she tends to feel most comfortable playing, and oneto four back-up roles that they are able to play, but which they are less comfortable with.

Such research are particularly relevant to all the areas of strategic HR across cultures and aredirectly related to the work of Evans and Doz. In addition to recognizing that dualities exist andmust be balanced, Belbins work adds the necessary dimension of considering diversity, or

dualities, constructively. If Belbins findings can be generalized to broader organizational

functioning in complex, diverse organizations, it is clear that HRM requirements become less amatter of having the right people at the right place at the right time, and more a matter ofintegrating selection, reward and appraisal practices within organizational values which willallow a balanced outcome under a range of cultural conditions.


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TRENDS AND VALUES IN HRM IN THE UNITED KINGDOM, USA AND

JAPAN

UNITED KINGDOM

(labour force 29.4 million, unemployment s rate 5 per cent in 2004).

The general context within which HRM changes have taken place in the UK is a reflection,primarily, of changing regulatory frameworks, globalization and strong pressures to drive costsdownwards. The latter are often focused on labour issues, because labour costs make up asignificant proportion of total costs in many sectors of economic activity. The key role of labour,and thus HRM, in modern organizations is emphasized by Becker (Bercker, 1998). He concludesthat getting the people issues right is critical. This perspective is reflected in the increasedprofessionalism of the HRM function in the UK.

Regulation:HRM practices in the UK are influenced by increasing levels of regulation arising both from theUK government and from membership in the EU. The UK governments tighter legislative

controls on labour unions are the major contributory factor in the dramatic fall in strike activity.Working days lost annually per 1000 workers plummeted from 330 between 1980 and 1983 toonly 11 days in 1999/2001.

HRM practitioners, for the most part, have less concern with organized labour. The

establishment of more employee supportive legislation is found in the introduction of theminimum wage. Nevertheless, much of the current UK employment legislation remainsrestrictive and controlling of labour. Policies emanating from the EU have worked in theopposite direction and seek to emphasize employee welfare, involvement and commitment.

Incentive compensation:In addition to well established incentives for equal pay between men and women, there arestrong pressures to move away from standard pay scales towards systems which reflectindividual performance and behavior and the specific demands and characteristics of particular(regional) labour markets. Despite the 1970 Equal Pay Act and the subsequent 1983 amendmentincorporating the concept of equal value, a gender gap still exists in the UK (Sparrow, 1994).

For example, in 2002, in manufacturing the average wage of full-time male employees was 415per week compared with 273 per week for women (Institute for Employment Studies, 2003).Such contrasts are typical of all sectors. The monitoring the equal opportunities on the basis ofsex, raceand disability remains a high priority for HRM professionals. The continued movetowards increased use of performance related pay presents a particular challenge to the HRMprofessionals.


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Globalization:Owing the globalization, the UK economy has been driven by a push for greater productivity

with the resultant outcome of downsizing or total closure of plants (Parker, 1998). A secondmajor challenge arising from globalization has been foreign investment in the UK.In manufacturing, almost one-fifth of UK workers are employed in foreign companies. Foreigninvestment has brought with it new HRM practices, which can spill into domestic forms.Employment in Japanese manufacturing firms has risen from fewer than 5 000 in 1980to over60000 in 2000 (Institute for Employment Studies, 2003). Japanese plants have brought newHRM strategies focused around team working and total quality management.

Labour shortages. Like many advanced economies, the UK has an ageing population. By theyear 2040, one in four will be a pensioner and barely half the population will be under 45(Institute for Employment Studies, 2003). It may become a necessity to make fuller use of the

older employee. Hiring older employees is a strategy already adopted by some UK companies.Employees work longer hours per week than employees in other EU countries. The averageworking week is 44 hours with only 28 days holiday per year. Breaking this long hours culture

may become a major task for the HRM professional.

From October 2000, changes in the UK work permit system have made it easier for immigrantsto fill gaps in the labour market. Act 2004 sets out a progressive policy of welcoming immigrantswhere that helps UK economy.

Flexible working:A particular interest in the UK has been the debate about the extent of new forms of working,

which include outsourcing, flexible working patterns and the emergence of new forms of work.

Outsourcing:The move towards the flexible firm has seen a trend towards the outsourcing of activities ousidethe core (Gooderman, 1999). This may take the form of outsourcing to new suppliers orchanging employment contracts to hire individuals as consultants rather then employees.Increasingly too, UK firms are externalizing actual HRM activities. For example, a period ofdownsizing often sees the hiring of outplacement specialists. Flexible working patterns. Anindicator of the importance of numerical control of labour costs is seen in patterns of short termcontacts, temporary working and parttime working. The proportion of workplaces characterizedby the first two forms of flexible working increase from 19 per cent to 36 per cent between 1980

and 2000. Similarly increases have been recorded in the numbers of part-time workers. By 2000,the UK had over 6.7 million part-time

New forms of work. The most striking new types of workplaces are called centres. These tend tobe located where labour costs are low. Because of their newness, they have employed femalewith little experience of office work.. Teleworking is another emerging trend. In the UK, thenumber of teleworkers is now estimated to more than 1.6 million. HRM practitioners need todevelop skills appropriate to the recruitment, selection, and motivation of the workforce of a


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virtual office. In conclusion, todays HRM professional in the UK needs the ability to operate

within an increasing degree of labour regulation and to simultaneously respond to a wide rangeof changing individual and organizational needs in new and creative ways.

USA

(148.6 million labour force, 6.2 per cent unemployment rate in 2004)

Labour shortages:US economic prosperity during the 1990s has led to labour shortages, which are pushingorganizations to engage in creative recruitment and retention practices and to employ workersfrom non-traditional sources, leading to a more diverse workforce (Becker, 1999). HRprofessionals are realizing that they need to update their technological skills and develop systemsfor managing more virtual organizations. In the 2000 Society of Human Resource Managementcarried out Survey on HR Priorities, 64 percent of respondents indicated that recruitment would

be a top issue and 46 percent said that training would be a top priority due to labor shortages(Konrad, 2001).

Labor shortages have turned companies attention to retention practices, including fostering asense of community, identifying and investing in the organizations best people, making it easy

to move within the organization, hiring very selectively, providing decision-making authority toall employees. The reason why US labour shortages have remained manageable is an expandinglabour supply, as firms tap previously overlooked groups such as people with disabilities, formerwelfare recipients, older workers, ex-convicts, and foreign students. A more diverse workforcerequires organizations to change practices, attitudes to enhance performance.

Globalization:MNCs are becoming increasingly important players in a global economy, and their HR practicesare increasingly influenced by diverse cultures. A certain degree of fit between HR practices andlocal culture enhances performance, because congruent HR practices are consistent with existingbehavioural expectations and routines that transcend the workplace (Parker, 1998). Managementpractices that are congruent with the nationalculture have been associated with enhanced firmfinancial performance. US firms seem to have learned this lesson.

Variable compensation:Companies in the USA are moving toward pay systems that are flexible and strategically alignedwith complex and changing business environments. Examples include the increasing use ofcompetency based pay, in which pay is geared more to individual skills and abilities thatcontribute to company success than the job individuals perform, and broadbanding.

The most significant trend is the increasing use of variable pay plans which conventionallyrefer to payments that are based on an objective or quantitative assessment of individual, group,or company performance, that do not add to base salary (for example, gain sharing plans, profitsharing, and stock based plan). According to a report by Hewitt Associates (Konrad, 2001), 78


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percent of surveyed organizations currently have at least one type of variable pay plan in place,up from 70 percent in 1999 and 47 percent in 1990. Perhaps the most interesting variable paytrend is theincreased use of stock option plans not only for top executives but for lower level employees,too. Stock options are a way to link employee pay to firm performance.

Strategic HRM:HR is increasingly seeking a strategic role in business to help firms create value and gaincompetitive advantage in the marketplace. Effective HR practices that competitors cannotduplicate easily or quickly provide a competitive advantage to firms. HR can create value bydeveloping systems to make an employer of choice to attract and retain top quality talent.

Becoming an employer of choice is costly, however, and these costs are only justifiable if thefirms workforce demonstrates high productivity. In addition, HR can become a strategic partnerby providing tactical support for implementing a business strategy (Becker, 1999).

Future directions:In late 2000 the US economy is slowing. Though workers may become easier to find in generalas the economy slows, recruitment is likely to continue to be challenging in areas where skillshortages exist, such as IT. The US workforce will continue to become more diverse, so firmsare likely to continue experimenting with variable compensation and high performance worksystems to enhance productivity.

JAPAN

(68 million labour force, 5.3 per cent unemployment rate in 2004).

During an extended period of economic recession for the most of the 1990s, broad and strikingchanges have been made to the Japanese employment system. How fundamental or reversiblethey are is harder to evaluate. Japans economy finally began to show signs of a recovery in1999. If the economic recovery prevails, a considerable stabilization of Japanese HR practicescan be expected, although at a higher level of market-oriented flexibility than previously existed(Selmer, 2001).

Traditional practices:Employment is based on lifetime system, hiring of workers and managers into entrylevelpositions directly out of college is common. Pay rises and promotions are automatic. In the wage

system based on seniority, status and seniority are tied to length of service, rather than to jobduties or merit. Although subordinates know that they can influence decisions, the ultimatedecision comes from the top. Japanese managers make an active commitment to preserveharmony, through intricate53 social rituals like gift giving, bowing to superiors, and usinghonorific language to show deference (Bechler, 1995). Workers often gain a broad perspectiveon production by being rotated through different departments. Such investments in breadth ofskill and overall understanding of the production process are justified by the strong lifetime


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employment guarantees bonding workers to their companies and allowing the skilled andexperienced production workers to contribute to management decisions.

Changing HR practices:The breakdown of the inter firm network system of cross shareholding and preferential trading

among member corporations of a business group has badly hurt the safety net of supporting thelong-term growth strategy of Japanese firms and their ability to protect employees fromdownside market risks. Deregulation is another force for change. It has made Japanese marketsmore accessible to competitors, foreign as well as domestic. The aging population also has clearimplications for corporate HR practice. With an aging workforce, the permanent employmentand seniority system burdens firms with rising numbers of higher-paid and less productiveworkers (Selmer, 2001).

Recently, growing numbers of companies are explicitly weighting ability and performance overtenure and age in salary decision. Finally, the transition to a service economy combined withsocio-cultural and socio-economic changes has had a profound effect on Japans employment

institutions. Although leading-edge manufacturers are still competitive, their contribution toJapanese domestic employment and income is shrinking, in favor of the emerging service sectoras the next great engine of jobs and wealth. Employment practices of sales and service firms aredifferent from those of manufacturing. Their younger workforce is more mobile, less committedto work and the firm. Furthermore, since the organization of work in service firms is less teambased, individual performance is more easily evaluated. Accordingly, occupational skills arevalued over firm-specific skills, so that broad job experience becomes the main driver of wagesand performance rather than loyalty to one employer.

Gender issues are rapidly surfacing in the Japanese traditionally male dominated corporateworld. Japanese women, long locked in the crouch of tea serving office ladies or contract

workers performing low-skilled work on the assembly line, are standing up. Professional youngwomen are flocking to new high-tech ventures, where gender does not seem to matter much.Such opportunities have been increasing steadily over the past few years and the EqualOpportunity Law, passed in 1985, which requested employers to make efforts not to

discriminate, was recently revised to make discrimination illegal. In conclusion, there are broadand striking changes sweeping the Japanese employment system. How fundamental they are, it isdifficult to evaluate. No matter whether it regards performance pay or reductions of theworkforce, the change of HR practices in Japanese companies seems to be slow and incremental,carefully avoiding abrupt or traumatic breaks with the past.

THE EMERGING TRENDS COULD PLAY A CRUCIAL ROLE IN

Selection of employees requires careful evaluation of the personal characteristics of thecandidate and his/her spouse.

Training and development extends beyond information and orientation training to includesensitivity training and field experiences that will enable the manager to understand


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cultural differences better. Managers need to be protected from career development risks,re-entry problems and culture shock.

To balance the pros and cons of home country and host country evaluations, performanceevaluations should combine the two sources of appraisal information.

Compensation systems should support the overall strategic intent of the organization butshould be customized for local conditions.

Six- sigma uses rigorous analytical tools with leadership from the top and develops amethod for sustainable improvement.

Human resource outsourcing is a new accession that makes a traditional HR departmentredundant in an organization.

Organizations are also required to work out a retention strategy for the existing skilled

manpower by enabling culture organization

CONCLUSION

I never predict. I just look out the window and see what is visible but not yet seen (Peter Drucker)

Trends in Human resource management have changed the way we work, as organizations are moredepended on HRM to increase the success ratio in todays competitive global environment. Trends willcontinue to come as time and opportunities will keep you guessing whats next.


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Emerging Trends in Hrm Final (2)

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