Postgraduate Course

Contents Unit-I Lesson-1 : Concept and context of SHRM Lesson-2 : Corporate Strategy of SHRM Lesson-3 : Evolution of Strategic HRM and its Relationship with the Resource-based

View of Firm Lesson-4 : SHRM and HR : Relationship and challenges Lesson-5 : Competencies of HR Professionals

Unit-II Lesson-1 : Strategic Human Resource Planning and Recruitment Lesson-2 : Strategic Selection, Training and Development Lesson-3 : Reward and Compensation Strategy Lesson-4 : Corporate Strategy; Career Development; Organization Development

Industrial Relations; Workforce Diversity Lesson-5 : Employee Separation, Retrenchment and Retention

Unit-III Lesson-1 : Identifying Strategic Positions Lesson 2 : HR Analytics Lesson 3 : What is Employee Engagement? Lesson 4 : Matching Culture with Strategy Lesson 5 : Behavioural Issues in Strategy Implementation

Edited by: Written by: Sh. K.B. Gupta Dr. Savita Rastogi

 

SCHOOL OF OPEN LEARNING UNIVERSITY OF DELHI

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Unit-I

Chapter-1

Concept and context of SHRM Dr. Savita Rastogi

Concept and context of SHRM

About HRM The concept of human resource management (HRM) has generated a lot of interest among academics and practitioners alike since its emergence in the mid-1980s. The overall purpose of HRM is to ensure that the organization is able to achieve success through people. Ulrich and Lake (1990) point out the importance of HR systems in an organisation when they say: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities’.

Storey (1989) believes that HRM can be regarded as a ‘set of interrelated policies with an ideological and philosophical underpinning’. He suggests four aspects that constitute the meaningful version of HRM:

1. A particular constellation of beliefs and assumptions;

2. A strategic thrust informing decisions about people management;

3. The central involvement of line managers;

4. Reliance upon a set of ‘levers’ to shape the employment relationship.

There have been many theoretical models of HRM that have been proposed to aid the understanding of the field and many are constantly being envisioned.

One of the first models proposed to understand HRM was the Matching model of Fombrun et al (1984). They held that HR systems and the organization structure should be managed in a way that is congruent with organizational strategy (hence the name ‘matching model’).

According to this model, the typical human resource cycle is generally understood to consist four generic processes or functions that are performed in all organizations. These are:

1. Selection - matching available human resources to jobs or procuring such resources

2. Appraisal- (performance management).

3. Rewards - ‘the reward system is one of the most under-utilized and mishandled managerial tools for driving organizational performance’. It must reward short- as well as long-term achievements, bearing in mind that ‘business must perform in the present to succeed in the future’.

4. Development - developing high-quality employees

This is by no means a comprehensive list of HR functions but is merely a generic common one that lists the functions required in most if not all organisations. Depending on the industry and organisation, the HR functions also include retention and exit management of employees, facilitation

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of understanding about the organisational culture and its assimilation by employees, management of workforce diversity, ensuring ethical treatment and well being of employees among others.

Another of the many models of HRM proposed by the academia is the Harvard framework of Beer et al (1984). The Harvard model believes that HRM had two characteristic features:

1. line managers accept more responsibility for ensuring the alignment of competitive strategy and personnel policies;

2. personnel has the mission of setting policies that govern how personnel activities are developed and implemented in ways that make them more mutually reinforcing.

Thus, this model emphasises ‘A longer-term perspective in managing people and consideration of people as potential assets rather than merely a variable cost’. It also underscores the view that HRM primarily belongs to line managers.

All models have their own strengths and weaknesses and are generally found to be normative in the sense that any and all models need to be customised in order to be rendered suitable for implementation by practitioners. However, it is important to note that this diversity and variety does not detract from the need for the underlying concept of HRM. There is only a difference of opinion regarding the exact definition, scope and role of HRM in different situations.

Thus, the need for HRM is understood to be indispensable in today’s work organisations. However, the importance of the role of HRM in strategy formulation and its implementation is a relatively new concept and as such needs to be clearly understood in order to better understand the nuances of this relationship. But in order to do so we must first understand about the underlying concept of strategic management and how it manifests in the corporate world.

Understanding strategic management

The word ‘strategy’, derives from the Greek noun strategus, meaning ‘commander in chief’. The development and usage of the word suggests that it is composed of stratos (army) and agein (to lead). In a management context, the word ‘strategy’ has now come to denote a specific pattern of decisions and actions undertaken by the top management of the organization in order to accomplish performance goals. Wheelan and Hunger (1995) define strategic management. as ‘that set of managerial decisions and actions that determines the long-run performance of a corporation’. Hill and Jones (2001) take a similar view when they define strategy as ‘an action a company takes to attain superior performance’. This indicates that the aim and objective of strategic management is more long term and performance oriented. In other words, this indicates that the field of strategic management looks at the long term bottom line impact of managerial decisions and actions.

Strategic management is considered to be a continuous activity that requires a constant adjustment of three major interdependent poles: the values of senior management, the environment, and the resources available. In both the descriptive and prescriptive management texts, strategic management appears as a cycle in which several activities follow and feed upon one another. The strategic management process is typically broken down into five steps:

1. Evaluation of organisation’s mission and goals

2. SWOT analysis of the organisation with respect to the environment

3. Strategy formulation

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4. Strategy implementation

5. Strategy evaluation.

The first step in the strategic management model begins with senior managers evaluating their position in relation to the organization’s current mission and goals. The mission describes the organization’s values and aspirations; it is the organization’s very reason for existence and indicates the direction in which senior management is going or wishes to go. Goals are the desired ends sought through the actual operating procedures of the organization and typically describe short-term measurable outcomes.

The second step involving SWOT analysis of the environment looks at the internal organizational strengths and weaknesses and the external environment for opportunities and threats. The factors that are most important to the organization’s future are referred to as strategic factors and can be summarized by the acronym SWOT - Strengths, Weaknesses, Opportunities and Threats.

The third step of Strategic Formulation involves senior managers evaluating the interaction between strategic factors and making strategic choices that guide managers to meet the organization’s goals. Strategies are formulated at the corporate, business and specific functional levels. The term ‘strategic choice’ raises the question of who makes decisions and why they are made. The notion of strategic choice also draws attention to strategic management as a ‘political process’ whereby decisions and actions on issues are taken by a ‘power-dominant’ group of managers within the organization. Child (1972) validates this interpretation of the decision-making process when he says: When incorporating strategic choice in a theory of organizations, one is recognizing the operation of an essentially political process, in which constraints and opportunities are functions of the power exercised by decision-makers in the light of ideological values. In a political model of strategic management, it is necessary to consider the distribution of power within the organization. According to Purcell and Ahlstrand (1994), we must consider ‘where power lies, how it comes to be there, and how the outcome of competing power plays and coalitions within senior management are linked to employee relations’. The strategic choice perspective on organizational decision-making makes the discourse on strategy ‘more concrete’ and provides important insights into how the employment relationship is managed.

Strategy implementation, fourth step in the process, is an area of activity that focuses on the techniques used by managers to implement their strategies. In particular, it refers to activities that deal with leadership style, the structure of the organization, the information and control systems, and the management of human resources. Many of the established management consultants and academics emphasize that leadership is the most important and difficult part of the strategic implementation process.

The last step Strategy evaluation is an activity that determines to what extent the actual change and performance match the desired change and performance.

The strategic management model depicts the five major activities as forming a rational and linear process. It is, however, important to note that it is a normative model, that is, it shows how strategic management should be done rather than describing what is actually done by senior managers (Wheelen & Hunger, 1995). As we have already noted, the notion that strategic decision making is a political process-- implies a potential gap between the theoretical model and reality.

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Concept of strategic human resource management SHRM as a concept is very difficult to pin down with a definition and as such there have been as many attempts at its definition as there are points of view about it. Some define it as: A distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques (Storey, 2001). While others have taken a more system oriented view like Boxall and Purcell (2003) do when they describe ‘Human resource management (alternatively employee relations or labour management) includes the firm’s work systems and its models of employment. It embraces both individual and collective aspects of people management. It is not restricted to any one style or ideology’. Some have simplified it with the opinion that Strategic HRM focuses on actions that differentiate the firm from its competitors (Purcell, 1999).

Just like strategic management, SHRM can also be understood by the three underlying concepts of competitive advantage, distinctive capabilities and strategic fit.

Competitive advantage: As already discussed above, human resources are a ready source of sustained competitive advantage. This is so because by their very nature human resources are individuals with various backgrounds, experiences and motivations and are thus unique and individual in their own right. No employee can perfectly dissociate from their identity and personal life and hence bring one or more aspects of it to the workplace with them. This makes them unique and thus inimitable. This uniqueness receives a boost when the personalities and idiosyncrasies of the employees are in line with organisational values and culture. This boosts the sustainability of the competitive advantage that the human resource represents.

Distinctive capabilities: In terms of human resources, the distinctive capabilities of an organisation can be thought to primarily refer to the knowledge, skills, expertise and commitment of the employees. This means that if the organisation is aware of the unique capabilities of its human resources or has in fact proactively collected such resources for their capabilities then they can harness these for strategic gains. SHRM advocates that these distinctive capabilities be strategically acquired or developed with planned efforts in order to gain sustained advantage over long term.

Strategic fit: Even the best plants would fail to produce if they are put in a hostile environment without support for long. Similarly, even the most carefully chosen human resources will not provide any permanent results if they are misfit in the organisation or simply have no place in the long term strategy of the organisation. It is very crucial for the right capabilities to be nurtured in order to promote maximal realisations of opportunities in the external environment while minimising the threats. The right capabilities are those that play on the strengths of the individuals as well as the organisation and ignore the weaknesses of the same. This is the strategic fit between the human resources and organisational strategy which needs to be managed in order to efficiently practice SHRM.

Importance and Relevance of SHRM

Strategic Human Resource Management has been, and remains, one of the most powerful and influential ideas to have emerged in the field of business and management during the past twenty-five years. It has had implications and applications in all spheres of management. Policy makers at government level have drawn upon the idea in order to promote ‘high performance workplaces’ and ‘human capital management’. Within business corporations, the idea that the way in which people are

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managed could be one of, if not the most crucial factor in the whole array of competitiveness inducing variables, has become a widely accepted proposition during this period.

The idea of SHRM is to promote high performance workplaces and human capital management. SHRM can be defined as the linking of human resources (HR) with organisations’ strategic goals and objectives so as to improve business performance and develop organisational culture that nurture innovation, flexibility and competitive advantage. In an organisation, SHRM means accepting and involving the HR function as a strategic partner in the formulation and implementation of the company’s strategies through HR activities such as recruiting, selecting, training and rewarding personnel. It basically centers on HR programs with long-term objectives i.e. instead of focusing just on internal HR issues, the major focus is on addressing and solving problems that affect people management programs in the long run. Therefore, the primary goal of strategic HR is to increase employee productivity and to identify key HR areas where strategies can be implemented in the long run to improve the overall employee motivation along with productivity.

Strategic orientation of human resource management (HRM) is important for all organisations irrespective of its size and domain. It simply requires the alignment of every HR function with business strategy. It establishes relationship between HRM and strategic management of the organization and facilitates the HRM to change its image as a “cost center” to that of a “strategic business partner”. SHRM pertains to not just one or two but all the dimensions of traditional HRM and each of these dimensions needs to be looked through the eyes of strategic management in order to truly understand not just the concept SHRM but also the practitioner’s view of the same.

Dimensions of the Role of SHRM

Other lesson notes will discuss each of the major dimension and its role and relationship with SHRM in detail. However, given below is a brief overview of few of the selected dimensions to aid better understanding of the concept of SHRM as viewed by managers.

SHRM and Performance SHRM is all about long term gains made in the bottom line through strategic alignment and sustained competitive advantage. This requires optimal performance in order to succeed. Performance, in an SHRM context, is not just a dimension as in traditional HRM where the HR manager monitors the appraisal and uses it to facilitate other functions. performance , in a strategic context, is the very bedrock of success for indeed any efforts to gain strategic advantage will always fall short of success in the face of suboptimal performance. Also it is very important to note here that when a firm plans its HRM strategically then not just performance of individual employees or teams but the whole performance management system needs to be aligned with the strategic planning and overall business goals. It is when there is true congruence in the performance management systems and the overall strategy of the organisation that the best benefits of SHRM can be gained.

SHRM and Leadership

SHRM has been understood as a top-driven practice. The very concept of managerial leadership permeates and structures the theory and practice of work organizations thereby influencing SHRM a great deal. Most definitions of managerial leadership reflect the assumption that it involves a process whereby an individual exerts influence upon others in an organizational context. Within the literature, there is a continuing debate over the alleged differences between a manager and a leader: managers

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develop plans whereas leaders create a vision (Kotter, 1996). Paradigms like ‘transformational leadership’ and ‘charismatic leadership’ may be explained by understanding the prerequisites of the resource-based SHRM model. Managers are looking for a style of leadership that will develop the firm’s human endowment and, moreover, cultivate commitment, flexibility, innovation and change.

There are explicit links between learning, leadership and organizational change. Thus, it would seem that a key constraint on the development of a resource-based SHRM model is leadership competencies. Apparently, ‘most re-engineering failures stem from breakdowns in leadership’ (Hammer & Champy, 1993). In other words, the ‘transformational’ leadership is all about empowering the workers. These models emphasise that the psychological contracts of the employees and their relationships with the organisation can be manipulated by a successful leader. The employees when thus manipulated to believe that they owe the organisation for empowering them and they are a part of the ‘family’ are more likely to adhere to strategic directives than those who feel alienated or underappreciated by the leadership. This does not mean that the power structures at workplace are much different but effective strategic leadership can shift the focus of employees towards a long term mutually beneficial outlook thereby aiding the bottom line.

SHRM and Workplace learning

Existence and exploitation of distinctive capabilities is one of the basic underlying concepts of strategic management. Formal and informal work-related learning has come to represent a key lever that can help managers to achieve the substantive HRM goals of commitment, flexibility and quality (Beer et al., 1984; Keep, 1989). From a managerial perspective, formal and informal learning can, it is argued, strengthen an organization’s ‘core competencies’ and thus act as a lever to sustainable competitive advantage - having the ability to learn faster than one’s competitors is of the essence here. There is a growing body of work that has taken a more critical look at workplace learning. Some of these writers, for example, emphasize how workplace learning can strengthen ‘cultural control’ (Legge, 1995), strengthen the power of those at the ‘apex of the organization’ and be a source of conflict when linked to productivity or flexibility bargaining and job control (Bratton, 2001). Thus, it is very important to understand and orient the learning systems towards the planned strategic outcomes. Failure to ensure availability of competent workforce at strategically critical points is a recipe for disaster that needs to be avoided at all costs.

SHRM and Industrial relations

Worker commitment is firmly embedded in the SHRM model as a requirement for gaining sustained competitive advantage. Many argue that there is a contradiction between the objectives of the SHRM model and trade unions. In the prescriptive management literature, the argument is that the collectivist culture of trade unions, defined by their ‘them and us’ attitude, is not aligned with the HRM’s goal of high employee commitment and the individualization of the employment relationship. He critics argue that ‘high-commitment’ HR strategies are designed to provide workers with a false sense of job security and to obscure underlying sources of conflict inherent in capitalist employment relations. While on the opposite end of the spectrum, other scholars have argued that trade unions and the ‘high-performance-high-commitment’ HRM model cannot only coexist but are indeed necessary if any high performance work system is to succeed.

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SHRM and Diversity There is a lot of diversity in today’s workplaces. Diversity can be cultural, geographical and even ethical. The corporate world is marked by the prevalence of multinational organisations today. This phenomenon is increasing as the proverbial distances in the business world shrink each day. This, however, brings its own set f issues. The employment relationship is necessarily shaped by national systems of employment legislation and the cultural contexts in which it operates. Thus, as the corporate world is becoming more globalized, variations in national regulatory systems, labour markets and institutional and natural contexts are likely to constrain or shape any tendency towards ‘convergence’ or a ‘universal’ model of best HRM practice. This has necessitated a need for the management to move from international HRM towards a more comparative HRM.

International HRM has been defined as ‘HRM issues, functions and policies and practices that result from the strategic activities of multinational enterprises and that impact the international concerns and goals of those enterprises’ (Scullion, 2001). Of considerable interest to HR academics and practitioners is the question of the extent to which an HR strategy that works effectively in one country and culture can be transplanted to others. International HRM tends to emphasize the subordination of national culture and national employment practices to corporate culture and HRM practices (Boxall, 1995). This can lead to potential disasters when such presumptions backfire. It is hardly fair to expect managers and workers in culturally different places like Mexico, Chile, India, Pakistan, South Africa and elsewhere to accept the underlying ideology and embrace the HRM paradigm prevalent in the USA. Indeed, recent comparative research suggests that there are significant differences between Asian, European and North American companies with regard to HR strategies (Brewster, 2001; Kidd et al., 2001; Scullion, 2001). A diligent HRM system should seek to explain the patterns and variations encountered in cross-national HRM rather than being simply a description of HRM institutions and HR practices in selected countries. For any strategy to succeed, it is imperative that the implementation be excellent. Implementation needs actual people. Thus any SHRM initiative is dependent on people for its success and thus it should be sensitive to and aligned with the diversity inherent in work.

Thus, the SHRM can be defined as the organisations action plan to align HRM with strategic business objectives so that the competitive advantage can be achieved through its skilled, committed and well-motivated workforce. This can only be possible if every HR function is strategically aligned.

Context of Strategic Human Resource Management

No man is an island’. The same is true for any entity that interacts with the world we live in and organisations are no exceptions. Indeed organisations are much more complex systems that not only interact with the external environment but also the internal environment as well. Thus, the context in which SHRM needs to be understood has to be considered at the two levels of external and the internal.

On an external level, there are many factors that may govern or influence the environment in which an organisation functions. Some of the aspects of the factors are evident like most of those mentioned below while some are not immediately apparent in their influence.

1. Technological factors

2. Economic factors

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3. Sociocultural factors

4. Politico-legal factors:

Technological factors: The existing technological know-how and the rate of advancement and innovation in the same is an important influencer of strategy as is the rate at which the old technology is rendered useless or uncompetitive. One such example is that of the software industry where the rate of both innovation and obsoletion has accelerated at an exponential pace and innovative turnarounds are measured in number of years if not months instead of decades. The impact of technology on businesses is nothing new. Industrial revolution is a testament to this statement. Assembly lines and then automation paved the way for future prosperity at the cost of present of many. Automation, robotics, advanced technical tools not only changed the key skill requirements for roles across organisations they also rendered many previously valuable roles obsolete. Worker resentment is directly proportional to their fear of change and insecurity. As such the SHRM practice needs to carefully align expectations with strategic goals and plan to manage the expected changes in order to prevent backlash and promote acceptance of changes.

Economic factors: The cost of factors of production and their impact on market needs to be factored in any robust strategy. Also the macro economical indicators are important sources of precious information for strategists. Global economic trends and national economic conditions both can substantially influence the business strategy of any organisation. There are international platforms like the World Trade Organisation and the World Bank which wield considerable influence over nations too. The economies of the world are no longer independent but are increasingly interdependent as was evident in the overall struggle against decline faced by the leading world economies in the face of economic recession in USA. Costs of production too are mostly driven by international markets and as such as susceptible to international events. The resources available in the global village of business today are also much different than those of the past with improved transportation and communication. The increased ease of mobility of all resources including HR has the potential to be both greatly advantageous if managed well as well as detrimental if ignored. Thus any robust strategy needs to consider economic factors in order to be successful.

Sociocultural factors: The world is changing rapidly and so are societal norms and cultures. This dynamism if further aided by the multicultural workplaces of today that are a direct consequence of globalisation. This necessitates the need for factoring in values and attitudes of society in general and workforce in particular when contemplating any strategy. This has also been highlighted in the context of diversity many times. As culture is a dynamic entity in itself, the influx of foreign elements of other cultures brought in by the global exposure, ease of communication and multiethnic workforce has only added to this dynamism. Societal norms are changing especially acceptance of previously marginalised sections of society like women and minorities in workplaces has changed drastically with increasing focus of equal participation being important to the image as well. Organisations are seen going beyond the legal requirements to court society’s good opinion regarding the same. With increased global communications and presence of social media, organisations can no longer afford to antagonise the society in which they exist.

Politico-legal factors: Any business is subject to the local laws and governing bodies. This influence is further compounded when we take into account the fact that globalisation means nations also interact at a business level and there may be political and legal pressures or requirements that put constraints on the freedom of business across political borders. Trade agreements and trade sanctions

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between nations are an example of such constraints that may impact strategy of organisations located in member nations. There are global forums that dictate the rules of business at the international level and all organisations must account for these potentialities in their strategy. At local level too, the increased exposure to information and global practices has led to changing political and legal dynamics. Governments are also much more conscious of their duties and failure to deliver. Transparency in governance has led to openness in policy making and this has been driven towards a more inclusive attitude that has resulted in several changes in how the businesses used to interact with the political bodies. Protective laws have also forced many a organisation to adapt or perish.

Thus, the external environment is fraught with potholes that can pull down any strategists who are not prepared for such contingencies. These factors are also not in control of the organisation and as such can only be addressed in the contingency plans of strategists. The factors that are somewhat in their control are the internal factors.

In the context of internal organisational environment, any strategic intervention, SHRM is no exception to this, needs to be aligned with its internal drivers. In the context of SHRM, it needs to be aligned with each and every system of human resources. This is so because implementation of any strategy is always going to happen at a human level and if there is no buy-in created for the strategy or if the strategy if in contrast to the existing systems then there are going to be clashes which hamper growth and success. Thus, the organisations need to align their entire employee life cycles around the strategy. The four most common systems are

1. Selection/Promotion/Placement

2. Compensation and rewards

3. Development

4. Appraisal

Strategies require distinctive capabilities in turn demand that the best fit of each role be identified and made available whether through transfer, promotion or selection. They also require that the strategic resource be then nurtured and suitably rewarded to implement the strategy. Development of resources aids in customisation of resource skill-sets to organisational requirements and enhances the inimitability or uniqueness of the skills leading to increased sustainability of competitive advantage. The appraisal process is indeed the most critical of all from the implementation perspective as this is the process that can provide valuable feedback information about the success of strategy and pave the way for corrective measures or contingencies to be enacted well in time.

Thus, the context is crucial to any strategic initiative and SHRM practice too needs to be seen in the context of its external and internal environments and include the same in its formulation of strategies.

Conclusion

In this lesson, we reviewed the concepts of HRM and strategy. We briefly discussed the concept of strategic management in general before moving onto the topic of strategic human resource management. The concept of SHRM is an amalgamation of the concepts of HRM and strategic management. SHRM, we found, should be long term, top driven and oriented towards bottom line. It aims at harnessing the inherent inimitability of skilled human resources to generate a difficult to duplicate and thus sustained competitive advantage. The three part concept of strategy comprising of

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competitive advantage, distinctive capabilities and strategic fit lends itself well to a human resource based interpretation for this very reason. SHRM has not only the potential to revolutionise the business but it is also essential for any organisation that seeks to strategically plan and direct its future. Strategic outlook is necessary for each and every dimension of human interaction and needs to be carefully formulated with respect to each. All the strategy in world may be rendered useless if an organisation fails to take into account the performance or the trade unions or other equally important aspects of HRM. It is also critical to note the context in which SHRM exists. Externally, the technological, economical, sociocultural and the politico-legal factors need to be considered and internally each and every HR system including but not limited to the Selection/Promotion/Placement, Compensation and rewards, Development, and Performance appraisal needs to be aligned with organisational objectives and overall corporate and business strategy in order to create a robust strategic initiative that will stand the test of time and change.

After understanding the concept of SHRM and the context in which it exists, we will now take a look at how the corporate strategy interacts with the concept and practice of SHRM in detail in the second lesson.

References

Barney, J (1991), “Types of Competition and the theory of strategy: towards an integrative approach”, Academy of Management Review, Vol. 11(4), pp.791-800.

Beer M, Sector B, Lawrence, P, Quinn M.D., Walton R, (1984), Managing Human Assets, New York: The free press

Boxall, P. and Purcell, J. (2003) Strategy and Human Resource Management, Basingstoke: Palgrave Macmillan.

Boxall, P. (1995). Building the theory of comparative HRM. Human Resource Management Journal, 5(5), 5-17.

Bratton J, Gold J, (2001) HRM - Theory and practice, London : Routledge

Brewster, C. (2001). HRM: the comparative dimension. Human resource management: A critical text, 255-71.

Child, J. (1972), “Organisational structure, environment and performance: the role of strategic choice” Sociology, Vol. 6(3), pp.1-22.

Fombrun, C. J., Tichy, N. M., Devanna, M.A. (1984) strategic Human Resource Management, New York : Wiley

Hammer, M. and Champy, J. (1993) Reengineering the Corporation, London: Nicholas Brealey.

Hill, C, Jones, G. (2001), Strategic Management: An integrated approach (5th ed), Boston, M.A.: Houghton Mifflin.

Keep, E. (1989), “Corporate training strategies”, in Storey, J. (Ed.), New Perspectives in Human Resource Management, Routledge, London, pp. 109‐36

Kidd, J.B., Li, X. and Richter, J. (eds.) (2001), Advances in HRM in Asia. Basingstoke: Palgrave.

Kotter, J (1996), Leading Change, Boston : Harvard Business School Press

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Legge, K. (1995). HRM: rhetoric, reality and hidden agendas. Human resource management: A critical text, 33.

Porter, M.E. (1985) Competitive Advantage, New York : Free Press.Purcell J. (1999)

Purcell, J, Ahlstrand, B. (1994), Human Resource Management in the Multidivisional Company, Oxford: Oxford University Press.

Scullion, H. (2001) International Human Resource Management: In J., Stores (ed) Human Resource Management: A critical text (2nd ed.), London: International Thompson Business Storey, J (1989) “From personnel management to human resource management” in ed Storey J. New perspective on human resource management, London : Routledge.

Storey, J. (2001) ‘Human resource management today: an assessment’, in Storey, J. (ed.), Human Resource Management: A Critical Text, London: Thomson Learning.

Ulrich D., Lake, D. (1990), Organisational Capability: Competing from inside out, New York: John Wiley & Sons.

Wheelan, T. L., Hunger, J.D. (1995), Strategic Management and Business policy, 5th ed, Reading : Addison - Wesley Longman.

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Chapter-2

Corporate Strategy of SHRM

About corporate Strategy

Corporate strategy describes a corporation’s overall direction in terms of its general philosophy towards the growth and the management of its various business units. It refers to decisions on what business to enter, what businesses to retain in the portfolio and those to exit from. It specifically directs attention at how the corporate office can add value to the diverse businesses in the portfolio so that their value as a part of the corporation exceeds the value they would have as free-standing businesses (Armstrong, 1994). Such strategies may determine the types of business a corporation wants to be involved in and what business units should be acquired, modified or sold. Thus, this strategy addresses the fundamental question, ‘What business are we in’?’

Devising a strategy for a multidivisional company involves at least four types of initiatives:

1. establishing investment priorities and steering corporate resources into the most attractive business units

2. initiating actions to improve the combined performance of those business units with which the corporation first became involved

3. finding ways to improve the synergy between related business units in order to increase performance

4. making decisions dealing with diversification. Corporate strategies as described above are expected to operate at a broad level and are more fundamental in their outlook. They are operationalised through business strategies which are more practically oriented towards achieving the objectives of the corporate strategies. If a corporation has just one business, there is no difference between corporate strategy and business strategy.

Business strategy focuses on achieving competitive advantage on a sustained basis. Organisations may take different approach to achieve the same. Superior efficiency, superior quality, superior customer responsiveness and superior innovation are all considered to drive competitive advantage in different ways. Companies achieve these drivers of competitive advantage through the creation of distinctive competencies. Some academics consider four modes of strategic orientation: defenders, prospectors, analyzers and reactors. Defenders are companies with a limited product line and management focus on improving the efficiency of their existing operations. Commitment to this cost orientation, makes senior managers unlikely to explore new areas. Prospectors are companies with fairly broad product lines that focus on product innovation and market opportunities. These sales orientations makes senior managers emphasize ‘creativity over efficiency’. Analyzers are companies that operate in at least two different product market areas, one stable and one variable. In this situation, senior managers emphasize efficiency in the stable areas and innovation in the variable areas. Reactors are companies that lack a consistent strategy-structure-culture relationship. In this reactive orientation, senior management’s responses to environmental changes and pressures thus tend to be piecemeal strategic adjustments.

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Distinctive competencies are built through resources and capabilities. Capabilities are a company’s skills at coordinating its resources and using them productively. These capabilities get embedded in an organisation’s routines and processes. By their very nature, capabilities are more difficult to copy or imitate as they are often the result of a complex interaction between the structure, systems and values of an organisation. Though, it is sometimes difficult to explain post facto how exactly a capability was created, it is possible for an organisation to take deliberate actions to create capabilities. Competing companies within a single industry can choose anyone of the above four types of strategy. But they then need to adopt an appropriate combination of structure, culture and processes consistent with that strategy in response to their environment. The different competitive strategies influence the ‘downstream’ functional strategies and the deliberate actions taken to create resources and capabilities spring from these functional strategies of the organisation.

Functional strategy pertains to the major functional operations within the business unit, including research and development, marketing, manufacturing, finance and HR. This strategy level is typically mostly concerned with maximizing resource productivity and addresses the question, ‘How do we support the business strategy?’

Thus, it is at this functional level that the HRM policies and practices are expected to support the business strategy goals. Afterall, as someone aptly stated, ‘A good business strategy is always informed by people factors’.

Types of Corporate Strategies

Corporate strategies are driven by long term organizational goals and the environment in which the organisation operates. There are mainly three types of corporate strategies commonly found in the strategic management literature viz. growth strategy, stability strategy and renewal strategy.

Growth strategy A growth strategy is when an organization expands the number of markets served or products

offered, either through its current business(es) or through new business(es). Because of its growth strategy, an organization may increase revenues, number of employees, or market share.

Growth platforms are specifically named initiatives selected by a business organization to fuel revenue and earnings growth. Growth platforms may be strategic or tactical. Strategic growth platforms are longer-term initiatives for high-scale revenue increases. Generic examples of commonly selected strategic growth platforms include pursuit of specific and new product areas, entry into new distribution channels, vertical or horizontal integration, and new product development. With growth strategy, types of commonly associated business level strategies are:

Horizontal integration strategy - The merger or acquisition of new business operations. An example of horizontal integration would be Apple entering the search-engine market or a new industry related to laptops and smartphones.

Vertical integration strategy - Integrating successive stages in the production and marketing process under the ownership or control of a single management organization. An example might include a gas-station company acquiring a oil refinery.

Diversification strategy - A corporate strategy in which a company acquires or establishes a business other than that of its current product. Diversification can occur either at the business-unit level or at the corporate level. At the business-unit level, diversification is most likely to involve

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expansion into a new segment of an industry in which the business already competes. At the corporate level, it generally means entrance into a promising business outside the scope of the existing business unit.

Market Penetration strategy - Market penetration occurs when a company penetrates a market in which current products already exist. This strategy generally requires great competitive strength, a strong brand, or both, as most market penetrations demand actively taking market share from current incumbents. It is an aggressive and often risky approach to growth.

Market Development Strategy - Market development strategy entails expanding the potential market through new users or new uses for a product. The strategy is best accomplished through identifying unique niche needs in a specific type of user and filling those needs. Market research is critical in development strategies. New users can be defined as new geographic segments, new demographic segments, new institutional segments, or new psychographic segments.

New Product Development strategy - In business and engineering, new product development (NPD) is the process of developing, researching, and bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (for example, a service, experience, or belief). Identifying new needs or new ways of filling them and developing a new process or product that accomplishes this aim are the goal of this growth strategy. NPD requires investment in research and development, usually over the long term, and extensive trial and error.

Renewal strategy

Renewal strategy is a direct response to performance issues in an organisation. Managers need to develop strategies that address declining performance. A corporate renewal strategy is a response to a decline in the corporation’s performance. If customers start buying less of a company’s products, or the company has unexpected cost increases for materials and labor, the corporation can create a strategy to alleviate these problems. Another corporation can buy out a poorly performing firm, and use a corporate renewal strategy to make it more productive.

The status-quo is no longer acceptable and high level strategic interventions are required. The two main types of renewal strategies are retrenchment and turnaround strategies.

A corporation does not have to be bankrupt or incur a loss to use a corporate renewable strategy. A turnaround strategy can involve purchasing a competitor, especially if the competitor has useful patents or popular products. The corporation has more options available if it implements its renewal strategy before other negative events happen, while it can still take out loans and attract new stockholders. Management can use a corporate renewal strategy while the business is still profitable to make sure it stays profitable. When the corporation has multiple divisions, the turnaround strategy considers the future profitability of each division. If a division is losing money now, but it has the potential to earn high profits in the future, the corporation can fix the problems with that division. The corporation can sell off unprofitable divisions with less future income potential. This is retrenchment strategy and maybe useful in ‘cutting one’s losses short’. Retrenchment strategy is often used in order to cut expenses with the goal of becoming a more financially stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial renewal. Retrenchment strategies are harder to implement in

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some industries. A manufacturing company has to pay for equipment repair, maintenance, and energy bills to continue making new products, so it is difficult for the company to reduce its expenses.

Stability strategy

A stability strategy is a corporate strategy in which an organization continues to do what it is currently doing. Examples of this strategy include continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining the organization’s current business operations. The organization does not grow, but does not fall behind, either.

This strategy is actually an overarching term for many sub-strategies that an organisation follows in times where focussed growth and renewal are not its primary concerns. The strategies that an organisation follows when it seeks to consolidate or exploit its strengths are a part of this group. We discuss below few of the strategies that can be pursued by a stable organisation in order to ensure its future growth and stability.

Global Strategy

Global strategy, as defined in business terms, is an organization’s strategic guide to pursuing various geographic markets. A global strategy can be used for the following benefits among others:

Cost Leadership - A global strategy may be appropriate in industries where firms face strong pressures to reduce costs but weak pressures to respond locally; globalization therefore allows these firms to sell a standardized product worldwide. By expanding to a broader consumer base, these firms can take advantage of scale economies and learning-curve effects because they are able to mass-produce a standard product that can be exported.

Market Expansion - Differentiation strategies also enable economies of scope, either fulfilling different needs in different markets with a similar series of products, or developing new products based upon the needs and consumption habits of a new market. Differentiation as part of a global strategy will often require localization, as organizations must adapt to consumer tastes better to compete in the new country. For example, Coca Cola tastes different depending on the country where it is bought because of differences in local preferences.

Sourcing - Other popular and primary strategic reasons for globalization include building supplier relationships, improving access to raw materials (unique to a given region), and cutting costs by using other regions’ specializations. Starbucks sources coffee beans from all over the world, as climate dramatically affects the type and quality of the bean. The globalization strategy of Starbucks is hugely dependent on global sourcing, and strategic managers must carefully monitor this process for costs and benefits.

Global strategies require firms to coordinate tightly their product and pricing strategies across international markets and locations; therefore, firms that pursue a global strategy are typically highly centralized.

With global markets in mind, strategic managers must expand their perspective and use varied models to generate different strategies for different places. Managers must conduct a cost/benefit analysis to identify which country actually offers the best profit potential. These analyses are how strategists incorporate global concerns into strategic management.

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Cooperative Strategy A strategic alliance is a relationship between two or more parties to pursue a set of agreed-upon

goals or to meet a critical business need while remaining independent organizations. This form of cooperation lies between mergers and acquisitions and organic growth.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. Strategic alliances allow each partner to concentrate on its own best capabilities, learn and develop other competences, and assure adequate suitability of resources and competencies.

Upper management is tasked with the partner assessment and developing complex interactive strategies when entering a strategic alliance. Aligning stakeholders from different businesses and ensuring the costs do not outweigh the benefits requires careful managerial consideration. It is also essential to align alliance objectives with the overall corporate strategy.

A carefully planned and executed cooperation strategy has a high potential for delivering synergistic gains for all involved parties.

E-Business Strategy

In the emerging global economy, e-business has become an increasingly necessary component of business strategy. The integration of information and communications technology (ICT) has revolutionized relationships within organizations and among organizations and individuals. E-business methods enable companies to link their internal and external data-processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of customers. E-business refers to a strategic focus with an emphasis on the functions that occur using electronic capabilities. E-business involves business processes that span the entire value chain: electronic purchasing and supply-chain management, electronic order processing, customer service, and business partner collaboration.

E-business enhances three primary processes:

1. Production processes including procurement, ordering and replenishment of stocks; processing of payments; electronic access to suppliers; and production control processes

2. Customer-focused processes including promotional and marketing efforts, Internet sales, customer purchase orders and payments, and customer support

3. Internal management processes including employee services, training, internal information-sharing, video-conferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales-force productivity. It improves the efficiency of work-group communications and electronic publishing of internal business information.

This is a strategy that is a must for any organisation in today’s technological environment.

Consolidation Strategy

Consolidation occurs when two companies combine to form a new enterprise altogether, eliminating competition and creating broader economies of scale or scope.

Mergers and acquisitions (M&A) is an aspect of corporate strategy dealing with the buying, selling, dividing, and combining of different companies and similar entities that can help an enterprise

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grow rapidly in its sector or location, or acquire new sectors or locations. Because of the costs involved, consolidation is a very high-level strategic decision. The logic driving consolidation is the creation of economies of scale, economies of scope, new locations, new technology, or some other form of increased competitive capacity. Other motives for merger and acquisition that may not add shareholder value include diversification, manager overconfidence, empire-building, and management compensation. Though it may seem that acquisition is more of a turnaround strategy, it is not so from the perspective of the acquirer. For any merger or acquistion to be considered, the organisation must first be stable on its own.

Link between Corporate Strategy and HRM

Recognition of the link between corporate and business strategies and strategies related to the people function is not new. McKinsey’s 7-S framework that emphasised the need for the alignment of seven organisational variables (superordinate goals, strategy, structure, systems, staff, skills, and style) for organisational effectiveness is about twenty years old (Krishnan, 2005). Thus, business strategy, more or less, guides HR strategy in a strategic environment. This is not to suggest that strategic human resource management stems solely from the organisation’s business strategy. The two must inform one another. The way in which people are managed, motivated and deployed, and the availability of skills and knowledge, should all shape the business strategy. It is now increasingly common to find business strategies that are inextricably linked with, and incorporated into, strategic HRM, defining the management of all resources within the organisation. Individual HR strategies, however, may be shaped by the business strategy. Most organisations today recognise that people are what drive value, which is why human capital is often referred to as a business’ most important asset. Individuals’ knowledge, skills and abilities are assets which the organisation should invest in and leverage to create sustainable value for the organisation and its various stakeholders. The intangible value of an organisation relating to the people it employs is gaining recognition among accountants and investors, and its implications for long-term sustained performance is now generally accepted.

In the 21st century HR is no more a departmental function. It is a core process determining the viability of your strategies. Strategies fail if they are not supported by the appropriate human resource. For corporate, business and HR strategies to be integrated well, it is apparent that the top management, business heads and HR professionals need to work closely with each other. This requires a different set of tasks for the HR managers than the traditional HRM requires. Some of them are:

1. HR professionals must spend more time and effort understanding the business environment and the key strategic issues faced by the company

2. HR professionals must get more involved in the nitty-gritty’s of the business, i.e., in operational details and issues

3. HR professionals must move towards taking an integrated look at the people in the organisation, bridging the gap between HR and IR

4. HR professionals must see themselves as knowledge workers and facilitators of knowledge flows within the organisation

5. HR professionals need to change from a support paradigm to a value creation paradigm

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We have discussed many possible corporate strategies in this lesson earlier. We now need to understand how the overall strategy interacts with the HR strategy. We will try to understand the same for each major strategic outlook. But before we proceed to discuss each case, it is very important to keep in mind that any practical application of strategic management and SHRM deviates significantly from theory and as such these discussions are only to give conceptual clarity to the reader and not to act as guidelines or aids for practical implementation.

Growth strategy and SHRM

A growth strategy is that when an organization engages in pursuit of specific and new product areas, entry into new distribution channels, vertical or horizontal integration, or new product development. This requires intense input from the HR perspective as it is concerned exploring new areas or systems. A strategic HRM perspective in this case can help an organisation better prepare its implementers viz. the managers and employees, to better set their future expectations and also better equip themselves for thriving in the coming changes. The exact SHRM initiatives will vary with the exact combination of strategies employed and also the environment. We will discuss each growth strategy listed earlier on a theoretical level but the actual practical application varies significantly due to dynamic factors not the least of which is the environment.

Horizontal integration strategy and SHRM - Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger. Any of these options has major HR implications and as such a suitable SHRM initiative should preempt the needs of whichever option the organisation undertakes. Competencies of HR in this case would be to manage the employee expectations of change and equip themselves and others to be best prepared for adjusting to it. Change must be presented as an opportunity instead of threat.

Vertical integration strategy and SHRM - Vertical integration is a strategy where a company expands its business operations into different steps on the same production path, such as when a manufacturer owns its supplier and/or distributor. In following this strategy, the organisation again enters into related but different work. The domain is same but the perspective of a supplier and receiver is different anywhere. This difference in perspectives can lead to change resistance if not managed well. SHRM in such a scenario must plan and account for appropriate resource availability as well as change management.

Diversification strategy and SHRM - Diversification can occur either at the business-unit level by exploring a new segment or at the corporate level by exploring outside the current scope of business. Thus, there is significant change of domain possible in diversification. SHRM needs to plan and account for this change and its impact. The HR themselves should also don the ‘change agent’ cap and help equip line managers and employees for the tasks ahead. This may include preparing for upgradation or acquisition of suitable resources.

Market Penetration strategy and SHRM - This strategy generally requires great competitive strength, a strong brand, or both, as most market penetrations demand actively taking market share from current incumbents. Thus, the focus of the SHRM should be to enhance these facets of the organisation while ensuring that the core resources necessary for successful strategy are amply provided for or planned.

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Market Development Strategy and SHRM- This strategy is best accomplished through identifying unique niche needs in a specific type of user and filling those needs. This requires presence of skilled and experienced resources. The SHRM tasks here is more of human capital management.

New Product Development strategy and SHRM - New product development is the process of developing, researching, and bringing a new product to market. This strategy requires investment in research and development, usually over the long term, and extensive trial and error. This makes it primarily dependent on the human resources for its success. The SHRM initiative should focus on creating a culture of innovation and availability and retention of skilled resources over a long term for this strategy to yield maximum gains.

Renewal strategy and SHRM

Renewal strategy is a direct response to performance issues in an organisation. The status-quo is no longer acceptable and high level strategic interventions are required. There is inevitable change eminent in this situation and the role of SHRM is to facilitate this change management. At times of crisis or major environmental shift, it is the goodwill and commitment of employees that can be a major source of resilience. Such goodwill and commitment can not be engendered through a confrontational human resource policy. Transparency and fairness on a continuing basis are essential to create the reservoir of goodwill that makes employees willing partners in organisational transformation.

Stability strategy and SHRM

In these strategies, the SHRM initiative and the HR role is not heavily involved with change management but more focussed on being the enabler and the employee champion.

Global strategy and SHRM - Primary strategic reasons for globalization are to build supplier relationships, to improve access to raw materials, and to cut costs by relying on other regions’ specializations. Thus, this strategy involves a lot of inter-cultural interaction and can backfire if handled poorly. Creation of cultural sensitivity and adjustability is a key factor that may influence its success. The role of SHRM is to anticipate the required behavioural changes and to ensure that the HR managers are well enabled to facilitate the creation of appropriate human resource pool.

E-business strategy and SHRM - In the emerging global economy, e-commerce and e-business have become increasingly necessary components of business strategy and strong catalysts for economic development. As such a major role of SHRM is to enable the organisation equip itself with resources equipped with the correct skills and to create a culture that promotes these new technologies.

Cooperation strategy and SHRM - This strategy aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance often involves technology transfer (access to knowledge and expertise), shared expenses, and shared risk. This indicates that the knowledge residing in the human resources is a key variable for cooperation and thus needs to be strategically managed through a well planned SHRM initiative.

Consolidation (or M&A) strategy and SHRM - Because of the costs involved, consolidation is a very high-level strategic decision. All stakeholders in both organizations should be consulted, and

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agreements will often take many months or years to conclude. Cultural conflicts between two different organizations are not uncommon, as the mission, vision, and values of the individuals and groups within them are likely to differ. Managing this type of change strategically is complex and rife with conflict. Mismanagement during these processes can minimize the potential synergistic gains and reduce the efficacy of the new strategic plan. Thsu, SHRM is of utmost importance in this strategy’s success.

For corporate, business and HR strategies to be integrated well, it is apparent that the top management, business heads and HR professionals need to work closely with each other.

Strategic HRM can be seen as the means through which human capital is converted into organisational value. Human capital evaluation is useful in that it provides information about the current and potential capabilities of human capital to inform the development of strategy. Business success will be achieved if the organisation is successful in managing this human capital to achieve this potential and embed it in products and services that have a market value. Strategic HRM could then be viewed as the defining framework within which these evaluation, reporting and management processes take place and which ensures that they are iterative and mutually reinforcing.

Examples from the business world

The American steel manufacturer, Nucor, is an excellent example of a company that has integrated its human resource strategy tightly with other functional strategies to create inimitable capabilities and drive competitive advantage. Nucor’s competitive advantage is based on cost leadership. It achieves this through all the four building blocks – efficiency, quality, innovation and responsiveness. At the base is a well-matched human resource strategy. Nucor hires goal-oriented, self-reliant people who are motivated by striving for continuous improvement that yields them increasing monetary compensation. Since the production of quality steel depends on teamwork, workers within the plant are eligible for substantial incentives based on the output of their group. But, plant manager’s compensation depends not only on the performance of the plant they are managing, but of the company as a whole – this is to provide an incentive to transfer best practices and innovations to other parts of the organisation. To keep costs down, it has very few layers, all managers travel by economy class, and even frequent flier miles are used by the company. Nucor builds small plants, close to locations where there is demand for its products – this is to reduce transportation costs, but also to be more responsive to its customers. Every time it has to build a new plant it assembles an in-house group to build it so that it can take advantage of its learning from earlier projects as well as prevent diffusion of its innovations to others.

Nucor undertakes little research and development on its own, but maintains close links with technology suppliers the world over and keeps a close watch on developments that could affect its competitiveness. It is willing to experiment with new technologies that have been proven at the pilot plant level by using its plant design skills to scale these technologies up to a commercial scale. (Krishnan, 2005)

McKinsey and Company is a good example of a differentiator. It offers premium management consulting services to clients internationally. This is a case in which people are really at the core of the value proposition. McKinsey hires the best people out of the top business schools (and in recent years, engineering and other disciplines as well). To ensure that it can have a steady inflow of such new talent, it follows an “Up or out” policy; associates who don’t make the grade have to leave the firm after a few years. Yet, this policy has not created an army of embittered ex-McKinseyians. This

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is because of the extensive feedback McKinsey employees get almost from the day they enter the firm, as also the close mentoring by senior McKinsey partners. McKinsey puts tremendous emphasis on the credibility and integrity of its performance measurement and feedback system because they have recognised that this is critically important to running a meritocracy. And it doesn’t hurt business either – many McKinsey assignments come through the McKinsey alumni network who are often senior managers in large corporations. (Krishnan, 2005)

In the context of Indian corporate world, HR has gained centrestage in traditional business houses which were exposed to global competition for the first time in the last few decades. The focus has increased on the value addition aspect that a corporate house brings to each of its constituent business. This focus on corporate strategy has led to an increased scrutiny of various business functions as well.

Most groups have focused on HR as an area for change – the Aditya Birla group and the RPG group are two examples of prominent business houses that have made visible and substantive interventions in the HR arena towards increasing professionalisation, independence in operational decision-making, greater transparency in performance measurement, and market-linked compensation. Some groups like the Tatas recognised early that HR initiatives were a powerful way for the group to create value – the creation and running of the TMTC; the Tata Administrative Service; support for XLRI; and an industry renowned graduate engineer training scheme at Tata Steel and Telco. (Krishnan, 2005)

References

Armstrong, M., Long, P. (1994), The Reality of Strategic HRM, London: Institute of Personnel and Development.

Krishnan, Rishikesha T. “Linking Corporate Strategy and HR Strategy: Implications for HR Professionals,” In R. Padaki, N.M. Agrawal, C. Balaji and G. Mahapatra (eds.) Emerging Asia: An HR Agenda, New Delhi: Tata McGraw-Hill, 2005, pp. 215-223.

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Chapter-3

Evolution of Strategic HRM and its Relationship with the Resource-based View of Firm

The Concepts of Personnel Management and Human Resource Management

The need to manage the workers has been around as long as there have been workers. The need for a separate entity dealing with the issue, however, arose with the advent of industrial progress that made delegation necessary in the face of ever increasing workloads on line managers and ever increasing worker expectations. Initially, personnel management came into being with the primary focus on the administrative aspects of worker interactions and to ensure that the work policies dictated by the management were smoothly implemented. The role was more concerned with the practical and utilitarian aspects of a worker’s interface with management and was not considered to be a main player. It was a functional role that had to be fulfilled and had no strategic importance at all.

Some believe that modern human resource management evolved from this view of personnel management (Storey, 1989; Legge, 1995) whereas others (Guest, 1989) are of the opinion that human resource management and personnel management are just two names for one and the same thing. According to Storey (1989), the comparison of human resource management and personnel management literature yields slight differences between their definitions. They believe that while personnel management is more individualistic in the sense that it focusses on the day to day practical aspects of an employee’s work life, human resource management is more functionally oriented in the sense that its purpose is to facilitate the business goals through its management of human resources.

The nomenclature of the two also suggests personnel management looked at employees as personnel who worked with resources to produce results whereas human resource management in its very name acknowledges that employees too are resources that are available to an organisation. It increases the worth attached to the notion of employees and duly recognises that their input is at least as much, if not more, critical than that of other resources deployed by the organisations.

Concepts of Human Resource Management and Strategic HRM

The growing competition due to immense globalisation, most organizations have begun to recognise that their human resources are an incredible source of competitive advantage in the current scenario. Human resource departments have evolved from being a simple functional role to become ‘strategic partners’ responsible for the direct contribution to organisation’s objectives.

Strategic human resource management (strategic HRM) is a relatively new field, which has evolved out of the parent discipline of human resource management. Walker (1992) defined Strategic HRM as “the means of aligning the management of human resources with the strategic content of business” and Boxall (1996) expressed the view that “the critical concerns of human resource management are integral to strategic management in any business” (Armstrong, 2006)

Organisations which invest in their human resources as their strategic and sustainable competitive advantage are the most successful ones. They recognize their personnel as the soul of their business. In addition, they adopt a set of practices and innovative technologies which are designed to develop,

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deploy and connect employees with professional skills and knowledge in order to achieve business priorities which represent the performance at an individual level (performance management) and as a consequence of that, the business performance.

Strategic HRM in any organization means the ultimate acceptance of its functions in the formulation and implementation of its strategies. In particular, objectives of strategic HRM are recruiting, selecting, training and rewarding personnel to increase the capacity of a business to execute its strategies.

Strategic HRM helps the organization in achieving its objectives by;

1. Training the managers to effectively handle subordinates

2. Creating awareness regarding the importance of various means of effective communication

3. Planning an efficient and most importantly fair rewarding system

4. Preventing the phenomenon of square pegs in round holes

5. Maintaining motivational levels of employees at an optimum

6. Taking appropriate steps to counter tardiness, absenteeism and high turnover

7. Aligning employee goals with the organization

8. Quantifying the contribution of employee costs to the total costs of the organization and taking steps to optimize them

9. Proactively identify the strategic needs of the organization

Evolution of Strategic HRM

The full concept of human resource management emerged in the mid-1980s against the background of the populist writers on management who flourished in that decade. Many produced lists of the attributes that they claimed characterized successful companies. These popular ‘school of excellence’ writers may have exerted some influence on management thinking about the need for strong cultures and commitment but there was no real clarity in the concept provided.

According to Legge (1995), the concept of human resource management has gone through three stages:

1. The initial concepts developed by American writers in the 1980s.

2. The take-up of these comments by British writers in the late 1980s and earlier 1990s who were often sceptical about the reality beyond the rhetoric and dubious about its morality.

3. The assimilation of human resource management into traditional personnel management.

Some experts believe that there are two variations of human resource management namely the ‘soft’ and the ‘hard’ model. Truss (1999) states that ‘soft’ and ‘hard’ models of human resource management are “diametrically opposed along a number of dimensions”. On the other hand some like Armstrong (2006) opine that the two models cannot be distinguished precisely. This seems to be true for at least some theoretical dimensions such as strategic integration. From a practical perspective, the lines are much more blurred with most practical implementations of the concept having a liberal mixture of elements of both.

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Some aspects of the basic philosophy of ‘soft human resource management’ can be traced back to the writings of McGregor (1960) who, as mentioned by Truss (1999), even used the terminology ‘hard’ and ‘soft’ to characterize forms of management control McGregor’s theory X essentially describes the ‘control’ model of management as described by Walton (1985), while McGregor’s theory Y emphasizes the importance of integrating the needs of the organization and those of the individual the principle of mutual commitment. Let us first consider the theoretical outline of these two concepts.

In ‘hard’ human resource management models people in organisations are a business resource and economic factor among others (Guest 1989; Legge 1995). People are regarded as human capital in which the organisation invests, and from which the organisation expects return on its investment to achieve competitive advantage. Employees are seen as a resource to be utilized and, at the same time, as a cost to be minimised. The emphasis on ‘hard’ models is on “quantitative, calculative and business-strategic aspects of managing the headcounts resource” (Storey 1989).

‘Hard’ models are strongly focused on the strategic integration of human resource management with business goals (Legge 1995). They highlight management interests and regard employees as a means to achieve organisational objectives. Therefore, people are resources to be strictly directed and controlled through quantitative performance management and HR databases.

‘Soft’ models stress the human aspect of the human resource (Guest, 1989; Truss, 1999). In ‘soft’ human resource management employees are “valued assets” and a “source of competitive advantage.” (Legge 1995). They are regarded as capable and worthy. Direct forms of supervision, pressure and control as are typical for ‘hard’ human resource management models and conventional personnel management are not considered as correct practices .

The Harvard model hinges on a multiple stakeholders theory whereas the Warwick model is a contextual model hinging on a political and change process theory and that the New York model is a contingency model hinging on a variation of the strategic matching theories.

The Harvard model of human resource management sees employees as resources. However, they are viewed as being fundamentally different from other resources as they cannot be managed in the same way. The stress here is on people as human resources .i.e. are not like any other resources as the former can be motivated or demotivated, they can cooperate with management or resist it. They can think, create, imagine, plan, learn, feel emotion and perform a huge number of tasks.

The model postulates that human resource management emphasises that employees are critical to achieving sustainable competitive advantage, that HR practices need to be integrated with corporate strategy and that the specialists help organisational controllers to meet both efficiency and equity objectives (Bratton & Gold, 2001).

The Warwick model on the other hand consists of inner and outer context and places more emphasis on strategy. However, Hendry and Pettigrew (1992) argue that the Warwick model is based on the Harvard model only that the former concentrates more on strategy. Both are the same in that regard they argued. The Warwick model has business strategy content, while the Harvard model has business strategy in situational factors. The Harvard model has task-technology in the situational factors part whilst the Warwick model has task-technology in the inner context.

The New York model on the other hand (which happens to be a variation of the strategic matching theory) sees human resource management as a menu of strategic choices to be made by HR

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executives intended to promote the most effective role behaviours that are consistent with the organisational strategy. Proponents of this model were Schuler and Jackson (1987) who stated that the strategic choices to be made by executives include Planning Choices, Staffing Choices, Appraisal Choices, Compensation Choices and Training and Development Choices.

Strategic HRM is essential an integrated process that aims to achieve ‘strategy fit’. A strategic HRM approach produces HR strategies that are integrated vertically with the business strategy and are ideally an integral part of that strategy, contributing to the business planning process as it happens. Walker (1992) defines strategic HRM as ‘the means of aligning the management of human resources with the strategic content of the businesses.

Vertical integration helps in ensuring that the organisation has the best skilled, committed and well-motivated workforce which it needs to achieve its business objectives. This can be attained by linking HR strategies to basic competitive strategies. As defined by Porter (1985), these are innovation, quality-enhancement and cost leadership. Some of the steps involved are:

1. To develop the required skills of its employees

2. Allowing occasional failure

3. Giving them more discretion - using minimum controls (empowerment)

4. Providing more resources for experimentation;

5. Assessing performance on the basis of its potential long-term contribution.

Horizontal integration is accomplished by developing a well-knit range of interconnected and mutually reinforcing HR policies and practices. This may be achieved by the use of share process, such as competence analysis, which provides a common frame of references and performances management, which is concerned with role definition, employee development and reward.

Approaches to Implementing Strategic HRM

Strategic HRM models demonstrate how an organization links its business strategies and HR function to achieve its goals. Although, strategic HRM adopts resource based philosophy, there are three different models described in literature viz. Control based, Resource based and Integrative model.

Control based approach generally deals with control of workplace and direct monitoring of employee performance. According to this approach, HR strategies and management structure are used as instruments and techniques to enhance labour productivity and thereby increasing profitability.

Resource based approach satisfies the human capital requirements of the organization (Armstrong, 2006). It was observed by Bratton and Gold (2001) that sustained competitive advantage is not achieved by external market position but careful assessment of their own skills and capabilities that competitors cannot copy. Main objective of this approach is improving resource capability and effective utilization of resources to achieve the goals set by the organization. Within this model there are three different approaches by which organization can implement strategic HRM practices (Armstrong, 2006). They are called High performance management approach, High commitment management approach and High involvement management approach and are focussed on performance, commitment and involvement as the names suggest.

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The integrative approach is an amalgamation of the above two and seeks to obtain the benefits of both the approaches. Ulrich (1997) stated strategic HRM as an outcome of mission, vision and priorities of HR department. Strategic HRM is identified in three levels namely Strategic, Managerial and operational level. Strategic level looks to the long term future, Managerial level looks at the mid-term and the operation level looks at the short term focus. Different models and approaches help understand the functionality of strategic HRM and how organizations are able and keen to implement it to achieve competitive advantage.

Resource-based View of the Firm

We will discuss the resource based view (resource based view) of firm and its relationship with strategic HRM in detail. First, let us understand the concept of resource based view in relation to the product based view.

For the firm, resources and products are two sides of the same coin. Most products require the services of several resources and most resources can be used in several products. By specifying the size of the firm’s activity in different product markets, it is possible to infer the minimum necessary resource commitments. Conversely, by specifying a resource profile for a firm, it is possible to find the optimal product-market activities. ‘The traditional concept of strategy (Andrews, 1971) is phrased in terms of the resource position (strengths and weaknesses) of the firm, whereas most of our formal strategic tools operate on the product-market side (opportunities and threats). While these two perspectives should ultimately yield the same insights, one might expect these insights to come with differing ease, depending on the perspective taken.

According to resource based view proponents, it is much more feasible to exploit external opportunities using existing resources in a new way rather than trying to acquire new skills for each different opportunity. In resource based view model, resources are given the major role in helping companies to achieve higher organizational performance. There are two types of resources: tangible and intangible.

Tangible assets are physical things. Land, buildings, machinery, equipment and capital – all these assets are tangible. Physical resources can easily be bought in the market so they confer little advantage to the companies in the long run because rivals can soon acquire the identical assets.

Intangible assets are everything else that has no physical presence but can still be owned by the company. Brand reputation, trademarks, skills, intellectual property are all intangible assets. Unlike physical resources, brand reputation is built over a long time and is something that other companies cannot buy from the market. Intangible resources usually stay within a company and are the main source of sustainable competitive advantage. Human resources are, however, unique in this regard as when employees leave they take their skills and capabilities away from the organisation.

The two critical assumptions of resource based view are that resources must also be heterogeneous and immobile.

Heterogeneous resources: The first assumption is that skills, capabilities and other resources that organizations possess differ from one company to another. If organizations would have the same amount and mix of resources, they could not employ different strategies to outcompete each other. What one company would do, the other could simply follow and no competitive advantage could be achieved. This is the scenario of perfect competition, yet real world markets are far from perfectly competitive and some companies, which are exposed to the same external and competitive forces

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(same external conditions), are able to implement different strategies and outperform each other. Therefore, resource based view assumes that companies achieve competitive advantage by using their different bundles of resources. This is certainly true in the context of human resources as each individual is unique.

Immobile resources: The second assumption of resource based view is that resources are not mobile and do not move from company to company, at least in short-run. Due to this immobility, companies cannot replicate rivals’ resources and implement the same strategies. Intangible resources, such as brand equity, processes, knowledge or intellectual property are usually immobile. This assumption is not set in stone in case of human resources and hence sustained effort is needed to retain strategically important resources.

In the resource-based view, the organisation is viewed as a collection of both tangible and intangible resources and capabilities required for succeeding against market competition. In line with human capital theory, resource-based theory emphasizes that investment in people adds to their value in the firm.

Strategic HRM and Resource based View

In the search for competitive advantage, strategy researchers acknowledged human capital, intellectual capital and knowledge as critical components. Strategic HRM recognises core competencies, dynamic capabilities and knowledge based view of firm as central to its concept in the sense that these are the aspects of a firm’s HR that can lend it a significant strategic advantage. resource based view also focuses on these aspects of HR in order to exploit market conditions or opportunities even if they arise unexpectedly.

Though the field of strategic HRM was not directly derived from the resource based view, it has clearly been instrumental in its development. This was largely due to the resource based view shifting emphasis in the strategy literature away from external or environmental factors toward internal firm resources as the source of competitive advantage. Growing acceptance of internal resources as sources of competitive advantage brought legitimacy to HR’s assertion that people are strategically important to firm success. Thus, given both the need to conceptually justify the value of HR and the propensity for the strategic HRM field to borrow concepts and theories from the broader strategy literature, the integration of the resource-based view of the firm into the strategic HRM literature was a natural consequence. Over a period of time, the positioning of resource based view within the strategic HRM literature as a foundation for both theoretical and empirical examinations has become firmly entrenched. Within the strategic literature, the resource based view has helped to put “people” (or a firm’s human resources) on the radar. Concepts such as knowledge, dynamic capability, learning organizations, and leadership as sources of competitive advantage turn attention toward the intersection of strategy and HR issues.

Developing strategic capability, in other words, achieving strategic fit between resources and opportunities and obtaining added value from the effective deployment of resources is a fundamental aim of resource-based HR strategy. A resource-based approach will address methods of increasing the firm’s strategic capability by the development of managers and other staff who can think and plan strategically and who understand the key strategic issues. The resource-based approach is founded on the belief that competitive advantage is obtained if a firm can obtain and develop human resources that enable it to learn faster and apply its learning more effectively than its rivals. Human resources

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are defined by Barney (1996) as follows: ‘Human resources include all the experience, knowledge, judgement, risk-taking propensity and wisdom of individuals associated with the firm.’ The strategic goal will then be to ‘create firms which are more intelligent and flexible than their competitors’ (Armstrong, 2006) by hiring and developing more talented staff and by extending their skills base. Resource-based strategy is therefore concerned with the enhancement of the human or intellectual capital of the firm. This is especially true for the knowledge based enterprises. As Ulrich (1997) comments: ‘Knowledge has become a direct competitive advantage for companies selling ideas and relationships. The challenge to organizations is to ensure that they have the capability to find, assimilate, compensate and retain the talented individuals they need.’

A convincing rationale for resource-based strategy has been produced by Grant (1991):

When the external environment is in a state of flux, the firm’s own resources and capabilities may be a much more stable basis on which to define its identity. Hence, a definition of a business in terms of what it is capable of doing may offer a more durable basis for strategy than a definition based upon the needs (eg markets) which the business seeks to satisfy.

Unique talents among employees, including superior performance, productivity, flexibility, innovation, and the ability to deliver high levels of personal customer service, are ways in which people provide a critical ingredient in developing an organization’s competitive position. Barney (1991) noted that the resources which are rare, valuable, inimitable, and non-substitutable can provide sources of sustainable competitive advantages. People also provide the key to managing the pivotal interdependencies across functional activities and the important external relationships. It can be argued that one of the clear benefits arising from competitive advantage based on the effective management of people is that such an advantage is hard to imitate. An organization’s HR strategies, policies and practices are a unique blend of processes, procedures, personalities, styles, capabilities and organizational culture. One of the keys to competitive advantage is the ability to differentiate what the business supplies to its customers from what is supplied by its competitors. Such differentiation can be achieved by having HR strategies that ensure that the firm has higher-quality people than its competitors, by developing and nurturing the intellectual capital possessed by the business and by functioning as a ‘learning organization.

Wright et al. (1994) further distinguished between the firm’s human resources (i.e., the human capital pool) and HR practices (those HR tools used to manage the human capital pool). In applying the concepts of value, rareness, inimitability, and substitutability, they argued the HR practices could not form the basis for sustainable competitive advantage since any individual HR practice could be easily copied by competitors. Rather, they proposed that the human capital pool (a highly skilled and highly motivated workforce) had greater potential to constitute a source of sustainable competitive advantage. In order to constitute a source of competitive advantage, the human capital pool must have both high levels of skill and a willingness (i.e., motivation) to exhibit productive behavior. In contrast, Lado and Wilson (1994) proposed that a firm’s HR practices could provide a source of sustainable competitive advantage. Coming from the perspective of exploring the role of HR in influencing the competencies of the firm, they suggested that HR systems (as opposed to individual practices) can be unique, causally ambiguous and synergistic in how they enhance firm competencies, and thus could be inimitable. Boxall (1996) further expounded on the resource based view/strategic HRM paradigm, suggesting that human resource advantage (i.e., the superiority of one firm’s human resource management over another) consists of two parts. First, it refers to the potential to capture a stock of

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exceptional human talent “latent with productive possibilities.” and also, human process advantage can be understood as a “function of causally ambiguous, socially complex, historically evolved processes such as learning, cooperation, and innovation.”

Thus, one major task of organizations is the ensuring that the mutuality of interests is managed in order to create a talented and committed workforce resulting in human capital advantage. Also, they need to develop employees and teams in such a way as to create an organization capable of learning within and across industry cycles to gain organizational process advantage. There is, however, another important aspect of human resources that needs to be kept in front by the strategists. Not all human resources in a firm are of equal strategic value and one strategy may not help optimisation efforts. Also, it is important to note that the human capital pool refers to the stock of employee skills that exist within a firm at any given point in time. This can and does change over time in actual practice and, therefore, must constantly be monitored for its match with the strategic needs of the firm. Another important factor to consider the strategic aspect of human capital pool is that of employee behavior. Distinct from skills of the human capital pool, employee behavior recognizes individuals as cognitive and emotional beings who possess free will and make decisions regarding the behaviors in which they will engage. Firms may have access to valuable human capital, but either through the poor design of work or the mismanagement of people,may not adequately deploy it to achieve strategic impact. This discretionary behavior recognizes that even within prescribed organizational roles, employees exhibit discretion that may have either positive or negative consequences to the firm. Focus of strategic HRM on discretionary behavior recognizes that competitive advantage can only be achieved if the members of the human capital pool individually and collectively choose to engage in behavior that benefits the firm.

People management systems rather than HR practices lend themselves as more beneficial to strategic HRM ideology. Systems point the spotlight on the need to manage multiple practices impacting employees as a whole. And focus on people rather than HR highlights the need to look beyond traditional HR department functions into work aspects like communication, work design, culture, leadership, and a host of others that impact employees and shape their competencies, cognitions, and attitudes. The important aspect of these systems is that they are the means through which the firm continues to generate advantage over time as the actual employees flow in and out and the required behaviors change due to changing environmental and strategic contingencies. It is through the people management systems that the firm influences the human capital pool and elicits the desired employee behavior which is the basic premise for attaining sustainable competitive advantage that strategic HRM seeks.

Thus, the firms should not only ensure that proper skills and behaviours mutually support each other, they also need to put in place appropriate people management systems to align with these and augment them.

Resource based view and strategic HRM thus are enmeshed together from a human resource perspective. The advocacy of need for core competencies and dynamic capabilities is a hallmark of both. Any competency or capability attributed to a firm is invariably grounded in its employees for any action in any organisation can ultimately be traced back to a human decision. Any knowledge in a firm is accumulated by its employees and is used by them too. Though the individual accumulating and using the knowledge may change, it is still the human component that exploits it. Thus, both

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concepts stand in contrast to the earlier schools of thought which labelled HR as a cost function and made it the scapegoat for cutbacks at the earliest signs of distress.

Conclusion

Effective systems for managing people evolve through unique historical paths and maintain interdependence among the components that competitors cannot easily imitate. Thus, they are a ready source of competitive advantage. Both strategy and strategic HRM seek to optimally engage these for long term benefits. Resource based view is an approach that advocates the importance of nurturing such resources. The resource based view has significantly and independently influenced the fields of both strategy and strategic HRM. More importantly, however, it has provided a theoretical bridge between these two fields. By turning attention toward the internal resources, capabilities and competencies of the firm such as knowledge, learning, and dynamic capabilities, it has forced strategic planners to invariably acknowledge the importance of understanding and including effectiveness of various specific HR tools and techniques for managing people, and addressing these issues with necessary specificity. This internal focus also has provided the traditionally a theoretical field of strategic HRM with a theoretical foundation from which it can begin exploring the strategic role that people and HR functions can play in organizations (Wright & McMahan, 1992). The resource based view provides the framework from which HR researchers and practitioners can better understand the challenges of strategy, and thus be better able to play a positive role in the strategic management of firms. This interaction should be deeper than simply reading the other’s literature. Once unified, strategy and strategic HRM have the potential to exploit the unique knowledge and expertise of both fields, and synergistically contribute to the generation of new knowledge regarding the roles that people play in organizational competitive advantage.

References

Andrews, K. R. (1971). The concept of corporate strategy. New York.

Armstrong, M. (2006) Strategic Human Resource Management: A Guide to Action 3rd Edition, Kogan Page, London

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management¸17 (1), 99-120.

Barney J. (1996). The resource-based theory of the firm. Organizational Science, 7, 469.

Boxall, P. F. (1996). The Strategic HRM Debate and the Resource-based View of the Firm. Human Resource Management Journal, 6(3), 59-75

Bratton, J. & Gold, J. (2001). HRM - Theory and practice, Routledge, London.

Grant, R. M. (1991). The resource-based theory of competitive advantage: implications for strategy formulation. California management review, 33(3), 114-135.

Guest, D. (1989). Personnel and HRM. Personnel management, 21(1), 48-51.

Hendry, C., & Pettigrew, A. (1992). Patterns of strategic change in the development of human resource management. British Journal of Management, 3(3), 137-156.

Lado, A. A., & Wilson, M. C., (1994). Human Resource Systems and Sustained Competitive Advantage: A Competency-based Perspective. Academy of Management Review, 19(4), 699-727

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Legge, K. (1995). HRM: rhetoric, reality and hidden agendas. Human resource management: A critical text, 33.

McGregor, D. (1960). Theory X and theory Y. Organization theory, 358-374.

Porter, M.E. (1985) Competitive Advantage, New York : Free Press.

Schuler, R. S., & Jackson, S. E. (1987). Linking competitive strategies with human resource management practices. The Academy of Management Executive (1987-1989), 207-219.

Storey, J (1989) “From personnel management to human resource management” in ed Storey J. New perspective on human resource management, London : Routledge.

Truss, C. (1999). Soft and hard models of human resource management. Strategic human resource management: Corporate rhetoric and human reality, 40-58.

Ulrich, D. (1997). Measuring human resources: an overview of practice and a prescription for results. Human Resource Management, 36(3), 303-320.

Walker, J.W. (1992). Human Resource Strategy, New York, McGraw-Hill.

Walton, R.E. (1985). From control to commitment in the workplace. Harvard Business Review, 63(2), 76-84.

Wright, P.M., & McMahan, G.C. (1992). Theoretical Perspectives for Strategic Human Resource Management. Journal of Management, 18(2), 295-320.

Wright, P. M., McMahan, G. C., & McWilliams, A. (1994). Human Resources and Sustained Competitive Advantage: A Resource-based Perspective. International Journal of Human Resource Management, 5(2), 301-326.

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Chapter-4

SHRM and HR : Relationship and challenges

SHRM and Its Relationship with HR

Strategic HRM is a concept that talks about improving business performance through strategic interventions and these strategic interventions are dependent on people for their implementation. All organizations have to be business-oriented as they each have their own purpose of existence, be it profits, public service or charity. The major concerns of SHRM are to meet the business needs of the organization and the individual and collective needs of the people employed in it. Indeed, CIPD (2016) defines it as, ‘Strategic human resource management (strategic HRM, or SHRM) is an approach to managing human resources that supports long-term business goals and outcomes with a strategic framework. The approach focuses on longer-term people issues, matching resources to future needs, and macro-concerns about structure, quality, culture, values and commitment.’

SHRM and HR definitely are connected in the sense that SHRM may encompass a number of individual HR strategies, for example: to deliver fair and equitable reward, to improve employee performance or to streamline organisational structure. In themselves these strategies are not strategic HRM. Rather, strategic HRM is the overall framework that determines the shape and delivery of the individual strategies, systematically linking people with organisations by integrating HRM strategies into corporate strategies to deliver organisational value. Boxall and Purcell (2003) describe strategic HRM as being concerned with explaining how HRM influences organisational performance. In fact, a considerable amount of research has been conducted recently on how HRM impacts on organizational performance. Ulrich (1997) has observed that: ‘HR practices seem to matter; logic says it is so; survey findings confirm it. Direct relationships between investment and attention to HR practices are often fuzzy, however, and vary according to the population sampled and the measures used’. Thus, there is a need to establish that a clear positive link between HRM practices and organizational performance exists. The fuzziness in this relationship needs to be done away with before we can move forward.

According to Armstrong (2006), the Bath People and Performance Model discussed by Purcell (2003) is quite effective in demonstrating the link between performance and HR. He says, ‘Central to this model is the concept that performance is a function of Ability + Motivation + Opportunity (AMO). On the outside ring, 11 policy or practice areas are identified to feed into and give meaning to AMO. The second crucial feature of the model is the central box – front-line management – which draws attention to the fact that nearly all HR policies are applied through and by line managers. It is these managers who bring policies to life. Organizational commitment, motivation and job satisfaction all lead to discretionary behaviour, which in turn generates performance outcomes, which in themselves contribute to commitment, motivation and job satisfaction’.

Because strategies tend to be expressed as abstractions, they must be translated into tangibles by clearly stating objectives and deliverables. This translation of strategy into actionables is not simple.

The term ‘SHRM’ has been downgraded by many to mean no more than a few generalized ideas about HR policies and at other times to describe a short-term plan.

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It is imperative to understand that HR strategies are not just programmes, policies, or plans concerning HR issues that the HR department happens to feel are important. Stopgap arrangements to achieve a short term goal do not constitute strategy. The problem with strategic HRM as noted by many is that, too often, there is a gap between what the strategy states will be achieved and what actually happens to it.

According to Gratton et al (1999), the factors that contribute to creating this gap include:

1. the tendency of employees in diverse organizations only to accept initiatives they perceive to be relevant to their own areas

2. the tendency of long-serving employees to cling to the status quo 3. complex or ambiguous initiatives may not be understood by employees or will be perceived

differently by them, especially in large, diverse organizations 4. it is more difficult to gain acceptance of non-routine initiatives 5. employees will be hostile to initiatives if they are believed to be in conflict with the

organization’s identity, eg downsizing in a culture of ‘job-for-life’ 6. the initiative is seen as a threat 7. inconsistencies between corporate strategies and values 8. the extent to which senior management is trusted 9. the perceived fairness of the initiative 10. the extent to which existing processes could help to embed the initiative 11. a bureaucratic culture that leads to inertia.

HR professionals must learn to be both strategic and operational, focusing on the long and short term. Activities range from managing processes (HR tools and systems) to managing people. Ulrich (1997) proposed a two dimensional model to explain the roles of HR professionals.

Ulrich’s model of HR roles in strategic context

These two dimensions in conjunction outline the four principal HR roles:

(1) management of strategic human resources

(2) management of firm infrastructure

(3) management of the employee contribution

(4) management of transformation and change.

To understand each of these roles more fully, we must consider these three issues for each of them: the deliverables that constitute the outcome of the role, the characteristic metaphor or visual image that accompanies the role and the activities the HR professional must perform to fulfill the role.

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Role 1: Management of Strategic Human Resources The strategic HR role focuses on aligning HR strategies and practices with business strategy. This means that the role of HR in this instance is more of that of a strategic partner and increasing the capacity of business to execute its strategies to ensure their success. This translation of business strategies into HR practices helps a business in three ways. First, the time from the conception to the execution of a strategy is shortened as the business is more adaptable to change. Second, translation of customer service strategies into specific policies and practices helps the business better meet customer demands. Third, effective execution of strategy results in the business achieving financial performance targets. Thus, the deliverable from the management of strategic human resources is strategy execution and this role if consequently given the moniker of ‘strategic partner’. HR professionals become strategic partners when they participate in the process of defining business strategy, when they ask questions that move strategy to action, and when they design HR practices that align with business strategy.

Role 2: Management of Firm Infrastructure Creation of organizational infrastructure has always been a role assigned to the traditional HR

function. HR professionals are expected to design and deliver efficient HR processes for staffing, training, appraising, rewarding, promoting, and otherwise managing the lifecycle of employees in the organization. As a caretaker of the corporate infrastructure, HR professionals should ensure that these organizational processes are designed and delivered efficiently. In the context of strategic rhetoric, this role has been relegated to the back seat more often than not. But it is important to note that successful execution of this role ensures strategic success in its own way. The deliverable from the infrastructure role is administrative efficiency and it has been given the moniker of ‘administrative expert’. HR professionals accomplish this administrative efficiency in two ways. Firstly, they ensure efficiency in HR processes and secondly, HR improves overall business efficiency by hiring, training, and rewarding managers who increase productivity and reduce waste. It can be said that the motto of this role is to do ‘more with less’. Thus, HR professionals acting as administrative experts ferret out unnecessary costs, improve efficiency, and constantly find new ways to do things better. This required continual re-engineering of the work processes has led to a new concept viz. shared services. Outsourcing HR activities has also been an attempt at reduction of costs and improvement of quality. Information technology too, has increased the automation potential of various administrative tasks and this has even more potential efficiency gains in future.

Role 3: Management of Employee Contribution

The employee contributions role for HR professionals encompasses their involvement in the day-to-day problems, concerns, and needs of employees thereby developing this capital. HR professionals aid employees’ cause by linking employee contributions to the organization’s success. The deliverables from management of employee contribution are increased employee commitment and competence and the role can consequently be thought of as ‘employee champion’. HR function can aid the employees by supporting their competence to do good work and their commitment to work diligently. HR executives can be business partners by paying attention to employee needs, thereby championing their cause and help line managers make them more comfortable in an uncertain environment that is the characteristic of today’s competitive workplaces. This role has undergone the most transformation in the shift from traditional to strategic HR perspective. Employee commitment is no longer predominantly the purview of HR as in the past. Increasing the responsibility is being given to line

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managers. Thus, line managers are expected to equip themselves with skills needed to respond effectively to employee grievances and employees themselves are expected have the skills to overcome challenges. The role of HR then becomes listening, responding, and finding ways to provide employees with resources that meet their changing skill demands. With employee champions who understand the needs of employees and ensure that those needs are met, overall employee contribution goes up. Employee contribution is a key feature that affects a business’s ability to change, meet customer expectations, and increase financial performance. Employee intellectual capital, in form of competent and committed employees, is a significant appreciable asset that is reflected in a firm’s financial results.

Role 4: Management of Transformation and Change

Transformation entails fundamental cultural change within the firm; HR professionals managing’ transformation become both cultural guardians and cultural catalysts. Change refers to the ability of an organization to improve the design and implementation of initiatives and to reduce cycle time in all organizational activities; HR professionals help identify and implement processes for change. The deliverable from management of transformation and change is capacity for change and the HR role is that of ‘change agent’. Traditionally, HR professionals have been distant from the change process and even HR systems were viewed as impediments to it. The responsibility for transformation then rests with external consultants, with many firms delegating responsibility for driving change to external consulting firms. External consultants were thought to offer disciplined, objective approaches to transformation, with the competence and confidence to make the change happen. HR executives act as strategic business partners in a transformational context when they facilitate change by helping employees let go of old and adapt to a new culture but at the same time ensure that any proposed change is always grounded in the past. SHRM professionals may need to force or facilitate a dialogue about values as they identify new behaviors that will help to keep a firm competitive over time. The action of change agents include identifying and framing problems, building relationships of trust, solving problems, and creating-and fulfilling action plan. Thus, the competencies related to managing change maybe the most important for success as an HR professional in a strategic context. HR professionals, whether employees or external consultants, who are change agents help make change happen; they understand critical processes for change, build commitment to those processes, and ensure that change occurs as intended.

Challenges in SHRM

There is a popular saying that anything worth having is not free. Similarly, somethings as potentially growth supporting as strategic interventions are not without their own challenges. Some of the challenges are inherent in the construct of strategic HRM while others are behavioural and/ or environmentally driven. Listed below are few of the challenges that strategic HRM faces:

1. Strategy formulation is informal, politically charged and subject to complex contingency factors. While theory and academic understanding of the concept of strategy may portray it as a rational tool in the hands of management, it is hardly if ever so in reality. There are a lot of factors that subtract from the rationality of this concept. a. As with all human behaviour, managerial behaviour is more likely to be uncoordinated,

frenetic, ad hoc or fragmented. This directly impacts the rational strategy as a strategy is only as good as its implementers.

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b. Managers are but humans. Hence, managerial rationality is limited by lack of information, time and ‘cognitive capacity’. They do not have unlimited access to time and resources to make the perfectly rational decisions and in actuality it may not be required as well. The concept of bounded rationality talks about such situations.

c. Also, in practice, individual managers usually have to fiercely compete for resources, status and power within the structure of overall management. They are expected to rationally act in favor of synergistic gains of overall organisation but it is hardly ever done at the cost of their individual gains.

d. The pursuance of specific strategies can signal changes in power relationships among managers. Having the focus of a strategy on certain department may be viewed as a triumph of that department head over others instead of a rational decision to augment organisational growth.

e. The dynamic and unpredictable nature of environment, be it internal or external, lends a notable lack of clarity in terms of environmental influences and objectives

f. Strategic decisions are located within the context of social practice within which it is located and as such they need to be constantly re-communicated, monitored and reinforced until they become embedded in action

2. Most contingency analysis relies exclusively on external marketing strategies (how the firm competes) and disregards the internal operational strategies (how the firm is managed) that influence HR practices and performance. This can lead to challenges in strategic role of HR in managing contingencies.

3. A major limitation of a simple SHRM model is that it privileges only one step in the full circuit of industrial capital viz. the human resources.

4. The basic premise of the typologies of HR strategy approach is that a dominant HR strategy is strongly related to a specific competitive strategy. This may not always be true as each situation in the real world is unique and theoretical constructs of anything involving human input should always be treated as broad guidelines instead of factual roadmaps.

5. Despite all the planning, one strategic decision and action might, however, undermine another strategic goal. In a market downturn or recession, for example, there is a tendency for corporate management to improve profitability by downsizing and applying more demanding performance outcomes at the unit level. In such cases, achieving the goal of ‘close fit’ of business and HR strategy can contradict the goal of employee commitment and cooperation.

6. In a pessimistic view of reality, there are external conditions and internal ‘structural contradictions’ at work that will constrain management action and hence, there is not a “single best way” of managing these contradictions, only different routes to partial failure. This can be the result of a failure to understand the strategic needs of the business or inadequate assessment of the environmental and cultural factors that affect the content of the strategies, and the development of ill-conceived and irrelevant initiatives, possibly because they are current fads or because there has been an ill-digested analysis of best practice that does not fit the organization’s requirements.

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7. Any SHRM initiative is bound for failure if insufficient attention is paid to practical implementation problems. If insufficient attention is paid to the important role of line managers in implementing strategies then there is little use in combining all the knowledge and resources to geenrate the best strategy. For even the most robust strategy will fail when the people actually dealing with the target base (employees) are not properly included in the same.

8. Sometimes, the strategy is good and implementation is thought out but there is insufficient attention is paid to the need to have established supporting processes for the initiative. This is the case when the strategy calls for performance based pay and rewards but there is no supporting performance management system to provide inputs for the same.

A most fundamental of all challenges that SHRM initiatives face is also the paradox inherent in the multiple roles of HR described above.

Paradox Inherent in the Strategic Partner versus Employee Champion Roles

Success in the multiple-role framework requires that HR professionals balance the tension inherent in being a strategic partner on the one hand and an employee champion on the other. As strategic partners with managers, HR professionals partner with managers and are seen as part of management. Taken to an extreme, this may alienate employees from both HR and management. Employees at one company that was moving its HR function into strategic partnership saw the HR professionals, whom they felt provided the only channel through which their concerns were voiced to management, participating in more management meetings, becoming active in strategic planning, and becoming synonymous with management. As a result, the employees felt betrayed and rated the HR function as not meeting their needs.

As employee champions in partnership with managers and employees, HR professionals ensure that the concerns and needs of employees are voiced to management. Taken to an extreme, this may alienate the HR function from management, who may not want to work with HR people whom they see as insensitive to business realities and advocates of employees.

Thus, a conflict arises in the expected role of HR wrt the perspectives or expectations of employees and management. Resolving this conflict requires that all parties-HR, management, and employees recognize that HR professionals can both represent employee needs and implement management agendas, be the voice of the employee and the voice of management, act as partner to both employees and managers. Shaikh (2014) provides a classic example of a successful response to this paradox by quoting Doug Fraiser, who joined the Chrysler board of directors in the late 1970s as part of a plan for employee investment in the firm. When union members challenged Fraiser’s new “management” commitment, he retorted with something like, “How can I better meet your needs than by sitting with and influencing management?” To be a successful partner to both employees and management requires that both sides trust the HR professional to achieve a balance between the needs of these potentially competing stakeholders.

When HR professionals are not called on to represent employees’ concerns to management, uninformed decisions may be made. It is not uncommon, for example, for merger and acquisition decisions to be made based solely on financial and product/strategic analyses that demonstrate the value of the venture; only after the decision is made is HR asked to weave the two companies together. Sadly, more ventures fail because of cultural and human differences than because of product

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and strategic differences. Where HR professionals are asked to represent employee and organizational concerns during pre-merger diagnosis, more informed decisions are made about all costs of merger activities, including the merger of cultures and people.

Change Agents versus Administrative Experts

HR professionals must also balance the need for change, innovation, and transformation with the need for continuity, discipline, and stability. This tension between their roles as change agents and as administrative experts yields a number of paradoxes that must be managed. Businesses must balance stability and change. A business must have stability to ensure continuity in products, services, and manufacturing. Businesses that change constantly loses identify and chase mythical successes that never materialize. On the other hand, businesses that fail to change in the end simply fail.

Businesses must balance the past and the future. A business must honor its past but also move beyond it. It must recognize that past successes ensure current survival but that only by letting go of the past will the future arrive. Old cultures should ground new cultures, nor become impediments to change.

Businesses must balance the benefits of free agency and control. A business needs to encourage free agency and autonomy in making decisions, sharing information, and soliciting ideas. Conversely, a business requires discipline among employees to make the value of the whole greater than that of the parts, to forge individual efforts into team accomplishment, and to create boundaries for freedom.

Businesses must balance efficiency and innovation. New ideas and programs require risk capital, both economic and human. HR professionals need to encourage risk and innovation while maintaining efficiency. Thus, risks need to be bounded, nor haphazard. To resolve these and other paradoxes, HR professionals dealing with cultural change need to be both cultural guardians of the past and architects of the new cultures. In practice, this means that in discussions with those who want to move slowly, HR professionals need to drive for dramatic change. On the other hand, in discussions with those who want to demolish history and tradition, HR professionals need to be advocates of moderation and respect for earned wisdom. It means that when working to create new cultures, HR professionals should simultaneously consider the impact of the new culture on administrative processes (for example, how to hire, train, and reward employees in a manner consistent with the new culture) and recognize the hold that the old culture retains over both employees and company practices.

This balancing act requires that new cultures lead to new administrative practices and that administrative practices support culture change. Sometimes, advocates of dramatic culture change, not realizing the infrastructure required to support the change, may make bold statement that stretch credibility and exceed a business’s capacity for implementation. Part of the role of the HR professional as change agent is to moderate such statements. The administrative infrastructure may be the last thing to change as companies forge ahead in new strategic directions.

Overcoming the Challenges

There are many ways to overcome the challenges that SHRM faces,

Firstly, it is necessary to: conduct a rigorous preliminary analysis of needs and requirements of the organisation; formulate the strategy; enlist support for the strategy; assess barriers; prepare action plans; manage implementation; and follow up and evaluate progress so that remedial action can be taken as necessary.

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There is also a need to accept the bounded rationality of human beings and hence the need for contingency planning in strategy. Transparency and honest clarity within the managerial interactions also aid in achievement of the goal of acceptance of strategy by all and helps negate its political connotations.

Before moving forward with the implementation of any strategy, it is important to conduct a careful assessment of all the parameters like the organisation’s business needs, existing successful strategic models in use by others and its current and expected long term environment is needed in order to generate a robust SHRM policy.

Once a policy has been finalised it still needs to be scrutinised for its robustness in the face of expected contingencies. An assessment of existing and required support systems required for successful implementation of such strategy is also a must in order to succeed.

The multiple roles played by the HR further complicate the situation and there is a need to carefully consider the following from the practical SHRM perspective:

Comparing HR and Line Manager Views of the HR Function

Asking both HR professionals and line managers to rate the current state of HR performance in each of the four roles yields an audit of the extent to which the two perspectives align. Examination of the results can contribute to improved understanding of the HR function and company expectations in a number of ways.

Matched expectations mean that HR professionals and line managers see the HR function in the same way. Alignment of HR and line expectations may be good news’ since it indicates agreement on the roles and delivery of HR services. Alignment may, however, be bad news. Meeting low expectations implies that neither HR professionals nor line managers have a strategic vision for HR. The multiple-role framework here presents a way to define strategic goals to raise expectations, and to specify value-added targets for HR professionals.

Mismatched expectations occur when the perceptions of line managers and of HR professionals differ. The most common mismatch is HR professionals rating themselves higher than do their line managers. In these cases, HR professionals perceived their work to be better than did the clients of that work. Such positive self-rating, isolated from correction by client perceptions, may lead to self-deception and denial, where HR professionals believe that their services are appropriate and add value to a firm but the clients do not.

In a number of firms, client surveys include assessments of HR not only by line managers but also by employees. In one case, such client surveys found the HR function to be the lowest-rated function in the firm. The firm’s HR professionals felt they were designing and delivering excellent services, but these services were either misunderstood by employees or failed to meet their needs. The HR professionals had been judging their services by their own good intentions, while their clients were judging them by the impact and results of the services received. (Shaikh, 2014)

HR Function versus Individual HR Professionals A business may find that individual HR professionals do not have competence in all four roles,

but at the same time, it should find that the function-as an aggregate of individuals-does share a unified vision and competency. In one company, for example, it was found that the individuals fulfilling the components of the HR function were committed and competent; the field HR

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professionals were strategic partners with business leaders; HR functional leaders were administrative experts in their domains; employee relations experts worked effectively to understand and meet employee need and organizational effectiveness experts appropriately managed change. As a team, however, this group of talented individuals was woeful. In one-on-one interviews, these HR professionals acknowledged that they did not respect or even like one another. (Shaikh, 2014)

A team of HR experts needs to forge individual talent into leveraged competencies. At the above firm, the-individual HR experts began to share their concerns, openly discuss differences, and focus on common goals and objectives. With focus, time, and commitment, tensions and distrust were overcome; resources and lessons were shared. They began to speak with one voice about the purposes and value of the HR function. They began to call on each other and leverage each other’s strengths. In brief, they began to work as a team.

Clarifying Responsibility for Each Role

Each time a business reviews the multiple roles of HR, we must ask: What is the line managers’ responsibility in each one? The answer is that

Firstly, HR professionals in a business have unique responsibility and accountability for ensuring that the deliverables from each role are fulfilled. If, for example, a rating of 10 represents the complete accomplishment of the deliverables for each role, it is HR professionals who own the achievement of a 10 rating.

Secondly, accomplishing the goals and designing the processes for achieving the goals are different issues. While HR professionals own the accomplishment of each of the four roles, they may not have to do all the work of the four roles. Depending on the process established for reaching the goal, the work may be shared by line managers, outside consultants, employees, technology, or other delivery mechanisms for doing HR work. Even though in many cases, responsibility for delivering the four roles is shared, HR professionals need to guarantee the outcome and to help define the shared responsibility for delivering it.

Business Partners Play Multiple Roles

Ulrich et al (1997) sum it up the best when they say that HR need to be business partners in the modern context. They argue that business partners exist in all four roles and define it as

Business partner = Strategic partner + Administrative expert + Employee champion + Change agent

Strategic partners are business Partners because they align HR System with business strategies and set HR Priorities for a business entity. Administrative experts are the business partners because they save business money through efficient design and delivery of HR Systems. Employee champions are business partners because they ensure that employee contributions to the business remains high, in terms of both employee commitment and competence, also the Change agents are business partners because they help business through transformations and to adopt to changing business conditions.

Thus, HR is closely interrelated to SHRM and should be involved at all levels. Also, careful assessment of all potential challenges is essential in order to gain the maximum benefits of the strategic approach. Strategic success is, thus, in an organisation’s own hands.

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References

1. Armstrong, M. (2006) Strategic Human Resource Management: A Guide to Action 3rd Edition, Kogan Page, London

2. Boxall, P. and Purcell, J. (2003) Strategy and Human Resource Management, Basingstoke: Palgrave Macmillan.

3. CIPD (2016, Oct 4). SHRM Factsheet: Strategic human resource management. Retrieved from https://www.cipd.co.uk/knowledge/strategy/hr/strategic-hrm-factsheet on 16/10/2017

4. Gratton, L., Hope-Hailey, V., Truss, K. & Stiles, P. (1999). Strategic human resource management (pp. 79-100). Oxford: Oxford University Press.

5. Purcell, J. (2003). Understanding the people and performance link: Unlocking the black box. CIPD Publishing.

6. Shaikh, M. (2014). Essentials of strategic HRM. Lulu. com 7. Ulrich, D. (1997). Measuring human resources: an overview of practice and a prescription for

results. Human Resource Management, 36(3), 303-320.

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Chapter-5

Competencies of HR Professionals

Introduction

Humankind has always sought to better its prospects throughout the evolutionary process. The quest for betterment gained a distinct materialistic edge with the industrial revolution and the formation of large companies that sought profits from mass production. Rapid growth of consumerism and globalisation has further worsened the race for profits and added impetus to the drive for competitive advantage. The industrial environment today is characterised by ‘crisis, uncertainty, and suspense, which combine to test the ability and performance of the manager in coordinating and controlling a diverse selection of workers, over which he/she may have little direct authority’ (Dainty, Cheng & Moore, 2005). Organisations today continue to seek newer and more effective ways to seek competitive advantage. Competency based human resource systems are one of the newer concepts in a long line of such endeavours that seek to enhance managerial effectiveness and enhance the acceptability and justice of the performance measurement systems by focusing on behaviours that are under control of the individual as opposed to the outcomes, the occurrence of which may be influenced by external factors. As pointed out by Dainty et al. (2005), ‘Using behavioural competencies to influence human resource management decisions is gaining popularity in business organisations’.

The term competency generates varied emotions and perceptions in people. There is confusion in definition, perception and interpretation of its various forms. The most prominent of these variations is the perceived difference in the terms ‘competence’ and ‘competency’. Many authors believe that the term competence should and does refer to the functional aspects of a job role and the term competency should refer to the behavioural aspects required to deliver those functionalities. This means that competence is the ability to do a job well and competency is the presence of the underlying behaviour that enables a person to do the job well. Competency has been attributed to both individual employees and the organisations as a whole. According to Dainty et al. (2005), competencies are ‘an array of different characteristics, behaviours, and traits necessary for effective job performance’. It has been argued that a human resource system that is based on a sound and dynamic competency framework will give sustained competitive advantage to the firm (Lado & Wilson, 1994). The concept of organisational core competencies is the basis for this prediction. The creation of a robust competency framework has been the topic of many discourses and many methods have been suggested to ensure feasible deployment of such systems. Firm specific, immobile competencies are touted as the hallmarks of future success. However, there is also the irony of arguments in support of generic and mobile competencies being the order of the day (DeFillippi & Arthur, 1994). They argued a case for job oriented competencies being the order of the day in the modern context and put forward the concept of ‘boundaryless careers’. They classified career competencies into know-why, know-how and know-whom competencies and suggested that all three are required for career progression. They studied the feasibility of promoting competencies aimed at assisting realisation of ‘boundaryless careers’ but found that they were constrained by tradition and perception. Leadership quality of a manager and their ability to encourage their subordinates to superior levels of performance is one such generic competency that may be useful in all contexts.

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Today’s dynamic work environment ‘places demands upon managers to respond flexibly to rapidly changing circumstances in order that they can re-plan and refocus their strategies for meeting competing objectives’ (Dainty et al., 2005).

Key Definitions

Competence. The Oxford dictionary defines the term competence as ‘the ability to do something successfully or efficiently’. It is in this sense that we will be using it. It is apparent functional ability present in the individual that translates into desired successful outcomes.

Competency. Where competence is considered to be the functional ability to do something, the competency is defined as the underlying behavioural aspect that allows this functional ability to manifest. There are many works that use these words & capability interchangeably but that is not conducive to the purpose of this work. Richard Boyatzis, one of the pioneers in the field, defines competencies as ‘underlying characteristics of the person that led to or caused effective or superior performance’ (Boyatzis, 1982). Spencer and Spencer (1993) define competency as ‘an underlying characteristic of an individual that is causally related to criterion-referenced effective and/or superior performance in a job or situation’. Thus, for our understanding, competency shall refer to all behavioural aspects that are required to get the job done successfully.

Competency modelling. Competency modelling is defined as the process of writing out the results of competency identification by creating a narrative to describe the competencies or in other words creating a competency framework.

Competency framework. Competency framework is the framework that defines the competencies in clear and concise terms. It lists the levels and associated behaviours for each competency and also links them to various unique job roles in the organisational structure. It is an essential starting point for all efforts that seek to incorporate competency based human resource management.

Competency based human resource management. Lado and Wilson (1994) define a human resource system as ‘a set of distinct but interrelated activities, functions, and processes that are directed at attracting, developing, and maintaining (or disposing of) a firm’s human resources’. A competency based system of human resource management is one in which all the above mentioned activities, functions, and processes of the system like selection and recruitment, performance management, learning and development and career planning etc. are driven by competencies or rather the underlying competency framework.

The development of competency based approach is credited to David McClelland (1973) who was on a quest to identify reliable means for early talent identification that were not biased against minorities, women or people from lower socioeconomic classes. He is said to have been so dissatisfied with the traditional emphasis and value attached to ‘intelligence’, school grades, academic aptitude and knowledge content tests as a way to measure applicant’s worth that he sought validation of a completely different approach (McClelland & Boyatzis, 1980). He argued that such measures were not a guarantee of success. Instead he advocated the use of behavior based concept of competency as a much more reliable indicator of future success as competency was thought to be an inherent ability that was the part of personality. Richard Boyatzis advanced the acceptance of competency based approach to assessment by authoring the first empirically based extensively researched book called ‘the competent manager: A model for effective performance’ (Boyatzis, 1982). The practical usage and popularity of the competency based approach also owes a great deal to

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the researcher duo of Lyle Spencer and Signe Spencer who co-authored a detailed book called ‘Competence at Work: models for superior performance’ in 1993 about the theory and practice of competency modelling and also included detailed manual like chapters for practical implementations.

The literature believes that a competency based system of human resource management is one in which all the activities, functions, and processes like selection and recruitment, performance management, learning and development and career planning etc. are driven by the underlying competency framework. Competencies, taken as behaviours and traits, when used as key measurement criteria for predicting the performance provide HR with a durable and reliable tool with which to leverage potential. The concept of competency itself however can be understood at multiple levels.

Organizational and Individual Competencies

Increased globalisation and opening up of world economies has vastly mutated the concept of competition around the world. Indeed organisations continue to search for the fabled panacea for their competitive woes and are eager to try all possibilities. Many authors have advocated the effectiveness Resource Based View of the firm in creating a sustained competitive advantage (Barney, 1986; DeFillippi & Arthur, 1994; Lawler, 1994). It becomes all the more relevant in the context of competency frameworks. This is apparent in Lado and Wilson’s (1994) statement that ‘resource-based view suggests that human resource systems can contribute to sustained competitive advantage through facilitating the development of competencies that are firm specific, produce complex social relationships, are embedded in a firm’s history and culture, and generate tacit organizational knowledge ... (by promoting a) set of role behaviours that result in lowering costs, enhancing product differentiation, or both’. He argues that sustained competitive advantage can be gained through competencies that are ‘heterogeneous and immobile’ and further defines heterogeneous competencies as those competencies that are differently distributed and used across the organisation and immobile competencies as those that cannot be perfectly copied or transferred to others. He quotes Barney (1986) to establish the threshold criteria for organisational competencies to be factors awarding competitive advantage viz. they should be valuable to the firm against competition and that only a small number of firms must boast of them in any given environment. Relative immobility of any competency adds to the robustness of any competitive advantage it bestows and existence of substitutes renders any advantage redundant and obsolete. Some examples of such competencies are listed in the literature as organizational culture, organizational routines and a firm’s reputation and image. Lado, Boyd and Wright (1992) classify organizational competencies as managerial competencies, input-based competencies, transformational competencies and output based competencies and provides a model that clearly indicates their inter-linkage with each other and the environment.

Individual competencies like strategic vision and orientation when present in top management or leaders and aiding their strategic actions are referred to as managerial competencies. Such managerial competencies are sources of sustained competitive advantage as they govern resource handling and value generation in the organizational context. Lado et al. (1992) include physical resources, organizational capital resources, human resources, knowledge, skills, and abilities in the purview of input based competencies and believe that these can facilitate organisation’s transformational process that will enhance the product and service delivery and will improve perception of value addition by the customers. These competencies may also enable people to take advantage of market

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imperfections. As Barney (1986) claims, ‘given information asymmetries in the strategic factor markets, a firm whose members have unique skills and capabilities and/or are lucky may earn superior returns by purchasing undervalued resources and using these resources to implement strategy, or by not buying overvalued resources’. Lado and Wilson (1994) also advocate creation of internal labour market as a way to create input based competencies and states that ‘Human asset specificity refers to the unique knowledge, skills, and abilities (KSAs) learned on the job. Because such competencies entail nontrivial replacement costs, there exists an economic rationale for their continued utilization in current employment’. He also reflects on the heterogeneity in the demand and supply of human resources faced by the organizations that highlight the variation in distribution of KSAs in people and their abilities.

Innovation, entrepreneurship and development focus are transformational competencies and they provide strategic advantage to the organisation that cannot be substituted. Lado and Wilson(1994) state on innovation that ‘firms that possess the unique resources, skills, and capabilities needed to generate Schumpeterian revolutions in the industry and/or that possess the unique abilities to rapidly adapt to these revolutionary changes can earn and sustain supra-normal returns relative to firms that lack these competencies’. It is also claimed that scientific temper and learning enhances flexibility in organisations as employees have freedom to think and respond differently to various environmental stimulate.

In view of these four competencies, HR systems that enhance competence are the ones that prompt top management to address strategic issues, champion people’s business rather than people at the strategic decision making level, exert upward influence through regulation of information about organizational capital and hiring employees for the firm from a holistic view of both the firm and the employee as a person. They also aid innovation and entrepreneurship, nurture learning and create a positive reputation by advancing commitment and engagement in employees. Behavioural psychological perspective of HRM also provides sturdy foundation for the HR-strategy linkage as bedrock of sustained competitive advantage.

A competency based system of human resource management is one in which all the activities, functions, and processes like selection and recruitment, performance management, learning and development and career planning etc. are driven by the underlying competency framework.

Impact of HR Competencies on HR Effectiveness

Han, Chou, Chao & Wright (2006) studied the impact of HR competencies on HR effectiveness as perceived by line managers and employees of High-tech firms in Taiwan. They theorised that effective HR managers in their survey based study would have three main competencies viz. Business knowledge, Field expertise and Change management. They defined business knowledge as knowledge about the firm’s business interests, for instance in this case of high-tech firm it would involve technological knowledge. Field expertise meant having good understanding and grasp of core HR responsibilities and change management simply meant the ability to adapt to changing environment and facilitation of change acceptance in the organisation so as to minimise resistance. They found that field expertise and change management had strong positive relationships with perceived HR effectiveness after adding controls based on a firm’s size but business knowledge was not correlated with perceived HR effectiveness.

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Competencies of HR professionals We discussed Ulrich’s (1997) two dimensional model for multiple roles of HR in the earlier

lesson. The four role based competencies required in HR professionals to support SHRM were viz. Strategic partner, administrative expert, employee champion and change agent. It is argued that presence of all the above four role competencies was required for optimal implementation of any SHRM initiative as HR professionals must learn to be both strategic and operational, focusing on the long as well as short term. Their proposed activities range from managing processes (HR tools and systems) to managing people. Human resource management responsibilities, thus, require an overlapping set of skills and competencies. Apart from role specific competencies, there are a few generic competencies that all HR professionals must seek to inculcate in order to achieve optimal success. Understanding and developing these is the key to success.

From a strategic perspective, high-quality HR practitioners have advanced skill sets in the critical competencies needed to work our most pressing talent issues of today and to deliver HR strategy to enable businesses to evolve in the future. Now HR professionals are expected to be valued team members and contribute as business partners for the growth of the organization.

In ‘Defining HR Success’, Strobel et al. (2015) provide nine critical HR competencies that practitioners need to be successful within the field of HR and be the leaders of their organizations. These are

1. HR Expertise (HR Knowledge) 2. Business acumen 3. Communication 4. Consultation 5. Critical evaluation 6. Ethical practice 7. Global and cultural effectiveness 8. Leadership and navigation 9. Relationship management

Let’s understand these:

Human Resources Expertise/Knowledge: Today’s job seekers have access to more information than ever before. Therefore, the best HR professionals must be prepared to meet these informed candidates with industry expertise of their own. Understanding how and why individuals enter and move within an organization is at the core of everything else that HR managers will do in human resources. HR managers who truly add value are always attuned to “the big picture” of how HR practices relate to a successful business. Today’s business world is complex and the field of HR is dynamic. Our ability to process and understand it needs self-motivation. Growing in the job means being receptive to new ideas, wherever they may come from. HR professionals who never stop learning are well-positioned to translate well thought out industry trends and data into actionable insights.

Business Acumen: Being an HR professional means being able to hire the right talent and develop them to achieve organizational goals. Business acumen is a must have for this. HR Knowledge will only help one be operational. Understanding business is a must in order to be strategic and a business partner. Business acumen is a core competency of HR professional, they need to develop the keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome. They need to understand business operations and its

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influencing factors (Like Political, Social, Economic, Technological, Legal and Environmental) and align HR practices to the organization’s vision and mission. Business acumen also helps build the case for HR to other business professionals. In other words, market HR within the organization and showcase how HR can have a direct impact on organizational performance.

Communication Skills: The primary function of the typical HR professional’s job involves facilitating discussion between employees and employers. If a human resources manager can’t communicate clearly they will not be successful. Both oral and written skill are required to effectively relay information. One aspect of communication that gives people an edge is a strong ability for conflict resolution. Even in the most agreeable workplaces, problems arise that need a diplomatic ear, an eye for assessment, and a hand for getting the problem settled. This particular skill is invaluable when negotiating solutions and keeping things on track.

Consultation: As internal consultants, HR professionals provide advice, counsel, and guidance to their organizational business partners and all stakeholders. As trusted advisors, they help address challenges in areas such as staffing, employee engagement, CSR, business and HR strategy development, global workforce, and employee relations. In essence, an HR professional needs to work in a consultative role with the organization and business units, thus developing and executing HR activities that are aligned to business strategies and goals.

Critical Evaluation Skills: Critical evaluation/ thinking is also a sought after ability in HR especially in a strategic context. HR professionals, in particular, frequently need to balance complex situations and take their time to think with a combination set-in-stone processes and outside-the-box thinking. Employees come from a breadth and depth of backgrounds and experiences. HR professionals need to strategically cultivate an environment in which all can work together toward the improvement of the business. HR practitioners are also involved in the problem-solving and decision-making processes. This requires a thorough analysis and critical evaluation of the issues at hand. Critical evaluation for HR professionals means not taking anything for granted and, where necessary, challenging propositions.

Ethical Practice: The importance of ethics as an HR core competency cannot be overstated. Every day, HR professionals face ethical challenges related to everything from managing private employee information to protecting the reputation of their organizations. Adopting an unwavering and unilateral commitment to ethics not only helps attract top talent while safeguarding your organization, but also fosters a culture of trust and loyalty. Part of being ethical is truly caring about people. Empathy for tough situations and “real life” goes a long way to setting you apart from those who just do it “by the book”. This is where the employee champion role takes precedence. Some ethical principles are enshrined in law. Making sure your company’s policies and practices are in legal compliance is a mainstay in the world of human resources. Laws are always changing, sometimes incrementally, sometimes as part of a great cultural shift. Therefore, staying up to date on national news, trends, and laws is particularly important; ignorance of the law is not a winning defense. Legal compliance, of course, also protects the company and its officers.

Global and cultural effectiveness: In a world where organizations operate with fewer national boundaries, HR professionals must have a global mindset and an appreciation of diversity. Having proficiency in global and cultural effectiveness means HR professionals value the perspectives and backgrounds of all the parties they interact with. SHRM states that HR professionals must be able to effectively and respectfully interact with colleagues, customers, and clients of varying backgrounds

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and cultures. This is true for not only multinational operations but also for businesses operating in multicultural environments or dealing with customers/ employees from multiple cultures.

Leadership and navigation: It is defined as the ability to direct and contribute to initiatives and processes within the organization. Navigation is understanding the most effective and efficient ways to accomplish tasks within the parameters of organizational hierarchy, processes, systems, and policies. Irrespective of the placement of a manager on the HR org chart, there’s a way to be a leader. The best leaders know how to operate within their organization’s culture to get things done. This is critical for HR managers especially in a strategic context as HR needs to act as a business partner and be a leader in order to ably demonstrate the strategic role of HR.

Relationship management: HR professionals need the ability to build strong and effective relationships with their business partners and other stakeholders within and outside the organization. Relationship management competency helps HR professionals in creating a positive work environment, ensuring more support, and contributing positively to both individual and organizational success.

Ulrich et al. (2016), too, proposed a revised model of HR competencies that defines nine major competencies of a HR professional but in a wholly different manner. They define them as:

1. Strategic Positioner: This domain captures the extent to which the HR professional can evaluate both the external and internal business contexts and translate those evaluations into practical insights that help position the organization to be successful. The authors define the subdomains of this competency and its key features as:

● Interprets Business Context ○ Understands changes in organisation’s external environment (e.g.,

technological, economic, political, demographic, etc.) ○ Understands who makes key decisions in your organization (e.g., people who

control important resources) ○ Understands expectations of external customers ○ Understands how organisation makes money (e.g., who, where, how)

● Decodes Stakeholder Expectations ○ Understands investor expectations ○ Aligns organizational brand with customers, shareholders, and employees ○ Knows how investors value organisation ○ Helps investors recognize the quality of leadership within organisation

● Understands Internal Business Operations ○ Accurately anticipates organisation’s risks ○ Contributes to creating organisation’s strategy (e.g., help shape the vision of

the future of the organization) ○ Identifies problems that are central to organisation’s strategy

2. Credible Activist: This domain carries over from prior studies and captures the extent to which HR professionals achieve the trust and respect they need within the organization to be viewed as valued and valuable partners. The authors define the subdomains of this competency and its key features as:

● Influences and Relates to Others ○ Shows a genuine interest in others

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○ Acts with appropriate balance of confidence and humility ○ Seeks to learn from both successes and failures ○ Demonstrates personal integrity and ethics

● Earns Trust Through Results ○ Has earned trust with key internal stakeholders ○ Frames complex ideas in simple and useful ways ○ Persists through adverse circumstances Has history of delivering results

3. Paradox Navigator: HR professionals are increasingly asked to maximize ideas and outcomes that may be inherently in opposition with each other. These professionals must constantly manage the paradoxes or tensions that exist in work settings. The authors define this competency as central to the whole gamut of HR competencies and believe its key features are that HR manager:

● Effectively manages the tensions between high-level strategic issues and operational details

● Effectively manages the tensions between internal focus on employees and external focus on customers and investors

● Effectively manages the tension between taking time to gather information and making timely decisions

● Effectively manages the tensions between global and local business demands ● Effectively manages the tensions between the need for change (flexibility,

adaptability) and stability (standardization)

4. Culture and Change Champion: HR professionals need to manage both change and culture. By championing both change and culture, HR professionals help make things happen consistently. The authors define the subdomains of this competency and its key features as:

● Designs Culture ○ Crafts the right organizational culture to deliver organizational results ○ Measures the influence of organizational culture on achieving sustained

organizational performance ○ Makes managing organizational culture a priority for organisation

● Manages Change ○ Innovates HR systems based on changing business demands ○ Helps set the direction of change with clear outcomes Identifies the key steps

for initiating change ○ Helps people understand why change is important (i.e., creates a sense of

urgency)

5. Human Capital Curator: HR professionals offer integrated and innovative HR solutions for managing people within their organization. These HR practice areas ensure human capital. The authors define the subdomains of this competency and its key features as:

● Develops Talent ○ Develops talent based on organisation’s needs ○ Facilitates meaningful developmental work experiences ○ Assesses key talent Identifies and prioritizes key positions

● Develops Leaders ○ Assesses leaders against established leadership metrics

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○ a business case for investing in leaders ○ Manages succession plans for key leadership positions

● Drives Performance ○ Establishes clear performance standards ○ Designs measurement systems that distinguish high-performing individuals

from low-performing individuals Facilitates the design of organizational structure (e.g., roles, responsibilities)

● Develops Technical Talent ○ Builds opportunities for promotion for technical experts ○ Provides developmental programs for technical experts ○ Differentiates leadership potential from technical expertise

6. Total Rewards Steward: HR professionals must be able to create total reward systems which include compensation and benefits (financial rewards) as well as meaning from work (non financial rewards). The authors define the subdomains of this competency and its key features as:

● Designs Meaningful Work ○ Helps employees improve physical health ○ Effectively balances employee well-being and business performance

● Manages Compensation and Benefits ○ Designs non-monetary reward/recognition systems ○ Balances monetary and non-monetary rewards for employees ○ Designs appropriate benefits systems

7. Technology and Media Integrator: HR professionals must be able to leverage technology and technological tools to support their efforts to create high performing organizations. They also rely on social media to recruit, retain, develop and engage human capital. The authors define the subdomains of this competency and its key features as:

● Leverages Social Media Tools ○ Coordinates policies for how people use social media at work ○ Leverages social media for business purposes ○ Uses social media to enhance collaboration at work

● Integrates technology ○ Uses technology to facilitate remote and mobile workforce ○ Applies technology to HR practices (e.g., HRIS) ○ Incorporates new technologies that improve workforce productivity

8. Analytics Designer and Interpreter: HR Professionals must be able to use analytics to impact decision making. Analytics goes beyond collecting data and having scorecards to using data to improve business decisions. The authors define the subdomains of this competency and its key features as:

● Gets the Right Data ○ Accurately interprets statistics ○ Excludes low quality data from decision processes ○ Understands the limitations of data in ambiguous situations ○ Incorporates rigorous data analysis when interpreting information

● Interprets Business Data

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○ Effectively uses HR analytics to create value for organisation ○ Identifies organisation’s problems that can be solved with data ○ Translates data into useful insights for organisation ○ Uses data to influence decision making in organisation

9. Compliance Manager: HR Professionals must be able to manage the processes related to compliance by following regulatory guidelines. By its very definition, the compliance function varies by geography and its key features as:

● Ensures that HR practices comply with government laws ● Stands up for employee rights ● Actively educates employees and managers on how to stay within legal guidelines

regarding on-the-job behavior As is evident from a comparative study of the above two proposed models, they do not differ

much in essence and basically both highlight the importance of HR functions in facilitating use of an organisation’s sustained competitive advantages for strategic success.

Behavioral competencies help people, specifically HR professionals, in performing their jobs effectively and applying HR principles and practices to the success of the organization.

We can, thus, conclude that competency based systems can provide sustained competitive advantage to the organisations if they are developed with care and maintained well to adapt to changing environmental cues. As we have already discussed, sustained competitive advantage is the hallmark of strategic HRM initiatives. Thus, formulated competencies and the systems governing them are indispensable for the success of strategic HRM initiatives.

Also, in order to implement and maintain these systems, HR professionals must themselves develop or otherwise acquire certain core competencies that will facilitate the same. These competencies can be sought at an individual level or at a functional level but they need to be all present to some degree in a successful HR team. Although, ensuring right selection to maintain a surplus pool of these competencies in the HR function would be more beneficial as it will generate redundancies that will make the organisation robust against unexpected attrition. Competencies thus are an important tool for the strategic manager and need to be understood at all levels viz. Individual, functional and organisational.

References

1. Barney, J. B. (1986). Organizational culture: can it be a source of sustained competitive advantage? Academy of management review, 11(3), 656-665.

2. Boyatzis, R. E. (1982). The competent manager: A model for effective performance. John Wiley & Sons.

3. Dainty, A. R., Cheng, M. I., & Moore, D. R. (2005). Competency-based model for predicting construction project managers’ performance. Journal of Management in Engineering, 21(1), 2-9.

4. DeFillippi, R. J., & Arthur, M. B. (1994). The boundaryless career: A competency‐based perspective. Journal of organizational behavior, 15(4), 307-324.

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5. Han, J., Chou, P., Chao, M., & Wright, P. M. (2006). The HR competencies‐HR effectiveness link: A study in Taiwanese high‐tech companies. Human Resource Management, 45(3), 391-406.

6. Lado, A. A., Boyd, N. G., & Wright, P. (1992). A competency-based model of sustainable competitive advantage: Toward a conceptual integration. Journal of management, 18(1), 77-91.

7. Lado, A. A., & Wilson, M. C. (1994). Human resource systems and sustained competitive advantage: A competency-based perspective.Academy of management review, 19(4), 699-727.

8. Lawler, E. E. (1994). From job-based to competency based organizations. Journal of Organizational Behavior, 15(1), 3–15.

9. McClelland, D. C. (1973). Testing for competence rather than for” intelligence.”. American psychologist, 28(1),1.

10. McClelland, D. C., & Boyatzis, R. E. (1980). Opportunities for counselors from the competency assessment movement. The Personnel and Guidance Journal, 58(5), 368-372.

11. Spencer, L. M., & Spencer, S. M. (1993). Competence at Work: models for superior performance. New York: John Wiley & Sons.

12. Strobel, K.R., Alonso, A., Cohen, D.J. & Kurtessis, J. N. (2015) Defining HR Success: 9 Critical Competencies for HR Professionals. SHRM Publishing

13. Ulrich, D. (1997), Human Resource Champions, Harvard Business School Press, Boston, MA 14. Ulrich, D. (2016). 2016 HR Competency Model. Presented at the human resource

competency conference. Retrieved from: http://www.apg.pt/downloads/ file954_pt.pdf

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Unit-II

Lesson-1

Strategic Human Resource Planning and Recruitment Dr. Savita Rastogi

Human resource planning is a process that identifies current and future human resources needs for an organization to achieve its goals. Human resource planning should serve as a link between human resource management and the overall strategic plan of an organization. Ageing work force population in most western countries and a growing demand for qualified workers in developing economies have underscored the importance of effective human resource planning.

The planning processes of most best practice organizations not only define what will be accomplished within a given time-frame, but also the numbers and types of human resources that will be needed to achieve the defined business goals (e.g. number of human resources; the required competencies; when the resources will be needed; etc.).

Competency-based management supports the integration of human resources planning with business planning by allowing organizations to assess the current human resource capacity based on their competencies against the capacity needed to achieve the vision, mission and business goals of the organization. Targeted human resource strategies, plans and programs to address gaps (e.g. hiring/ staffing; learning; career development; succession management; etc.) are then designed, developed and implemented to close the gaps.

These strategies and programmes are monitored and evaluated on a regular basis to ensure that they are moving the organizations in the desired direction, including closing employee competency gaps, and corrections are made as needed. Human resource planning is a ongoing process of systematic planning to achieve the best use of an organisation's most valuable asset – its human resources. The objective of human resource (HR) planning is to ensure the best fit between employees and jobs, while avoiding workforce shortages or spares. The three key elements of the HR planning process are forecasting labour demand, analysing present labour supply, and balancing projected labour demand and supply.

Steps in the Process of Implementing Strategic Human Resource Planning

1. Assessing the current HR capacity: Develop a skills catalogue of employees so as to have a clear understanding of what staff currently holds.

2. Forecasting HR requirements: Projecting what the HR needs for the future will be based on the strategic goals of the organization. External challenges that can affect the organization are also to be kept in mind.

3. Gap analysis: Identifying the current employee count and skills and comparing with future needs.

4. Developing HR strategies to support the strategies of the organization: 5 HR strategies that can be followed to meet organizational goals are:

Restructuring strategies: Reducing staff, regrouping tasks to create well-designed jobs, and reorganizing work groups to perform more efficiently.

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Training and development strategies: Providing the current staff with training and development opportunities to encompass new roles in the organization.

Recruitment strategies: Recruiting new hires that already have the skills the organization will need in the future.

Outsourcing strategies: Outreaching to external individuals or organizations to complete certain tasks.

Collaboration strategies: Collaborating with other organizations to learn from how others do things, allow employees to gain skills and knowledge not previously available in their own organization.

Business Strategy and HRP

Business strategy is defined as the determination of the long-term goals and objectives of an organization and allocation of resources necessary for carrying out these goals. An organization achieves its objectives through its human resources. Therefore, HRP is guided by organizational goals and objectives.

Significance of HRP

1. Projections about future manpower needs are available.

2. Allows organization to cope with change.

3. Recruitment and selection of talented personnel is possible.

4. Development of human resources to impart the required skill and ability in employees to perform the task efficiently and effectively.

5. Proper utilization of human resources focuses on the optimum utilization of human resource to minimize the overall cost of production.

6. Reduces the impact of uncertainty

Objectives of HRP

1. Ensure adequate supply of manpower as and when required.

2. Ensure proper use of existing human resources in the organisation.

3. Forecast future requirements of human resources with different levels of skills.

4. Assess surplus or shortage, if any, of human resources available over a specified period of time.

5. Anticipate the impact of technology on jobs and requirements for human resources.

6. Control the human resources already deployed in the organisation.

7. Provide lead time available to select and train the required additional human resource over a specified time period.

The ultimate objective of human resource planning is to relate future human resources to future enterprise need so as to maximise the future return on investment in human resources.

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Job Analysis – an Essential Prerequisite of HRP

Job analysis may be defined as a process of discovering and identifying the pertinent information relating to the nature of a specific job like:

(1) Identification of the job;

(2) Characteristics of the job;

(3) Operations involved in doing the job;

(4) Materials and equipment’s to be used in doing the job;

(5) Personal attributes required to do the job, e.g. education, training, physical strength, mental capabilities, etc.; and

(6) Relation with other jobs.

Process of Job Analysis

1. Organization Analysis First of all, an overall view of various jobs in the organization is obtained. This is required to judge the linkages between jobs and the organizational goals, inter-relationships among jobs, and the contribution of various jobs to efficiency and effectiveness of the organization. For this purpose, background information is collected in the forms of organization charts, class specifications, work flow charts, etc. Organization charts show the relation of the job with other jobs in the organization. Class specifications describe the general requirements of the job family. Work flow charts indicate the flow of activities involved in a job.

2. Obtaining Information about Jobs An important preliminary step in securing information is the gathering of full list of job titles, arranged by departments. All job titles should then be reviewed carefully. In many cases, similar titles do not denote similar jobs and like jobs are often referred to by different titles. This type of adjustment helps jobs analysis information. Once the titles have been arranged, the next task is to go about collecting the necessary data. The nature and amount of information shall be based primarily upon the purpose for which this exercise is undertaken. In general, the information should concentrate on:

(i) What the worker do physically and mentally?

(ii) How does he do it?

(iii) Why does he do it?

(iv) Skills involved: Job knowledge, mental applications – initiative, ingenuity, dexterity, accuracy, etc.

(v) Physical demands: Physical activities, working conditions, hazards.

3. Selecting Representative Jobs for Analysis It would be highly time consuming and costly to analyze all the jobs. It is, therefore, desirable to select a representative sample of jobs for the purpose of detailed analysis. Priorities of various jobs, needing analysis, can also be determined.

4. Responsibility for Collecting Information Having described the kinds of job information to be collected, two alternatives are available to collect the information. Either trained help may come from outside, or members of the staff having relevant ability may be used. The advantage of former choice is that competent specialists are secured at once, but its disadvantage is that the analyst must learn

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about the company and its special problems. The latter choice reverses the advantages and disadvantages of the former. Whichever choice is made, preliminary training is called for. Specialists must learn about the company and members must learn about the technique. Generally, a combination of the two is suggested to have the benefit of both – outside expertise and internal information.

5. Collection of Data In this step, data –on the characteristics of the job, and qualifications, qualities, and behaviour required to do the job effectively –is collected. Data may be collected from the employees, who actually perform the job, or from their supervisors or from outsider-called job analysts appointed to watch employees performing the job. Several techniques are available for job analysis. Care should be taken to use only those techniques which are acceptable and reliable in the given situation.

6. Development of Job Descriptions The information collected in the previous step is used in preparing job descriptions. A job description is a written statement that describes, in brief, the tasks, duties, and responsibilities which need to be discharged for effective job performance.

7. Preparing Job Specifications The last step in job analysis is to prepare job specifications for different jobs. A job specification is a written statement which specifies the personal attributes in terms of education, training, skills required, work experience, mental and physical requirements, personality, etc.

Techniques of Data Collection for Job Analysis

1. Questionnaires 2. Written narratives 3. Observation 4. Log records 5. Interviews

(1) Questionnaires: It is a widely used method of analyzing jobs. A set of questions pertaining to the nature of duties, tasks and responsibilities is developed and given to the employees, supervisors and managers to provide the answers. The questionnaires are filled up by the employees as well as by the supervisors/managers. The relevant information thus collected helps in identifying the following in respect of each job:

(i) nomenclature of job;

(ii) description of duties;

(iii) machines and equipment used;

(iv) supervision received and given;

(v) regular contacts;

(vi) working conditions; and

(vii) additional information which helps narrate the specific nature of the concerned job.

(2) Written Narratives: A detailed description containing the nature of the job can be obtained both from the jobholder and the supervisor. In an organization where the supervisors are required to maintain daily diary or log book in respect of their jobs are in a position to furnish such narratives more comfortably. Under this system, the employee keeps a daily record of

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major duties performed, marking the time when each task is started and finished. This forms the basis of narratives which are used in collecting information in relation to various jobs.

Written narratives suffer from the limitations of being unorganized and incomplete. Hence, there is need for supplementing it by other methods such as observation and follow-up interview.

(3) Observation: Under this method, the job analyst watches and observes the individual performing the job and takes notes to describe the tasks and duties performed. If a particular job is simple and repetitive, observation may be the only technique required.

Use of the observation method is limited because many jobs do not have complete and easily observable job cycles. For example, to analyze the job of a pharmaceutical salesperson would demand that the analyst follows the salesperson around for several days. Furthermore, many managers may not be skilled enough to know what to observe and how to analyze what they see. However, interviews coupled with observation constitute the preferred approach. The interview will provide information not only readily observable, but also the verification of information obtained by means of other techniques.

(4) Log Records: Under this method, a diary or a logbook is given to each job holder. The job holder is asked to daily record the duties performed marking the time at which each task is started and finished. The record so maintained provides information for the purpose of job analysis. This method is time-consuming. Moreover, it provides incomplete data because information concerning working conditions, equipment used and supervisory relationship is not available from the logbook. Most employees are not disciplined enough to maintain a regular diary. But if kept up to date, the diary would provide useful information on the job. This method is useful for jobs that are difficult to observe, e.g. engineers, scientists, researchers, senior executives, etc.

(5) Interviews: The interview method requires that the manager or job analyst visits each job site and talks with the employee performing the job. Usually a structured interview form is used to record the information. Frequently, the employee and the employee’s supervisor must be interviewed to obtain complete upstanding of the job. During the job analysis interview, the manager must make judgment about the information to be included and its degree of importance.

Job Description

• The preparation of job description is necessary before a vacancy is advertised. It tells, in brief, the nature of a job. In other words, it emphasizes the job requirements. As the title indicates, the document is descriptive in nature and constitutes a record of job facts in an organized way.

• Job description is a by-product of job analysis. It basically describes the duties and responsibilities of a specific job. A job description, broadly speaking, contains three major parts:

• Identification section It deals with the employee’s job title, department, and the reporting relationship.

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• General summary statement It is a concise summarization of the general responsibilities and components that make the job different from others.

• Specific duties section It contains clear and precise statements on the major tasks, duties and responsibilities performed.

Job Specification

• A job specification, a logical outgrowth of a job description, attempts to describe the key qualifications necessary for someone to perform the job satisfactorily. Specific factors identified may include education, experience, work, skill requirements, personality requirements, mental and physical requirements, working conditions and hazards.

• In writing any job specification, it is necessary to list the essential qualifications for satisfactory job performance. Only direct job-related items which are non-discriminatory should be included. For example, a university degree should not be required for a job unless the job analyst can demonstrate that an individual with less education cannot perform the job well. In some technical jobs, the exact educational skills can be indicated, e.g. “Must have thorough knowledge of Java.”

• Laying down educational and professional qualifications and work experience is a matter of controversy. One may argue that do we necessarily need a University degree for this particular job? What is the minimum degree of intelligence required? What experience is required? To overcome some of these controversies, it is suggested that each requirement be classified as ‘mandatory’ or ‘desirable’.

• Once job descriptions and specifications are prepared, the manager should provide feedback to the current jobholders, especially those who assisted in the job analysis. One feedback technique is to give employees a copy of their own job descriptions and specifications for review. Giving the current employees the opportunity to make corrections, ask for clarification, and discuss their job duties with the concerned manager or supervisor is one way to enhance manager–employee communication. Questions about how a work is done, why it is done that way and how it can be changed are the topics that arise. When employees are represented by a union, it is essential that union representatives be included for reviewing the job descriptions and specifications. Otherwise, the possibility of future conflicts will increase.

• An important use of the job descriptions and specifications is to generate performance standards for each job. As performance standards list what is satisfactory performance in each area of job description, the employee will have a clear identification of what is expected of him. The development of clear and realistic performance standards can tackle some problems which often arise when employee’s performances are appraised. The mutual setting up of performance standards serves as the basic foundation for the development of management by objectives system.

Strategic Recruitment

RECRUITMENT can be defined as the process of searching potential candidates and stimulating them to apply for jobs. Theoretically, recruitment process is said to end with the receipt of applications. In practice, it extends to the screening of applications so as to eliminate those who are not qualified for the job.

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Factors Influencing Recruitment The process of recruitment is influenced by a number of factors. They can be categorized as internal and external factors.

External Factors

• Demand and supply of specific skills in the labour market: If the demand for a particular skill is high in comparison to its supply, extra-ordinary recruiting efforts may be needed. On the contrary, if the supply of labour is more than the demand, recruiting will be much easier

• Unemployment rate in a given area: If such a rate is high, the recruitment process will be simpler. On the other hand, if the unemployment rate drops, recruiting efforts must be increased and new sources explored.

• Geographical factors: Local market conditions are more dominant in case of recruitment of non-managerial positions. In case of managerial positions, the labour situation in an entire country, in a region, or the world is to be seen.

• Political and legal Considerations: In almost every country, the government follows the policy of giving preference to people hailing from less advantaged sections of the society. Besides, political leaders clamor that preference in matters of employment should be given to the people of their respective states (known as the policy of sons of the soil). However, such a policy comes in the way of treating India as one country and hence, should not be encouraged.

• Company’ Image: in the minds of the job seekers affects the availability of labour, and thus recruitment.

Internal Factors

• Recruiting policy of the organization: If the personnel policies of the organization are unfavorable, they hold no attraction to the prospective candidates. For example, a firm following preferring internal candidates to external candidates will have not many external applicants.

• Policy regarding temporary and part-time employees: An organization that follows the practice of appointing part-time and temporary employees will not have many applicants seeking permanent or long tenures.

• Extent of HRP’s use: HRP greatly facilitates recruiting efforts. An organization not giving due importance to HRP will find it difficult to attract candidates.

• Size of the organization: A bigger organization (for example employing 1,000 employees) will find it easier to recruit than a smaller organization (employing 100 employees).

• Union interference: Unions may compel management to recruit people not on the basis of merit, but on some extraneous grounds like friends, relatives etc.

• Job attractiveness: Good remuneration, good working conditions, opportunities for promotion and career development, make the job attractive and hence, attract good candidates.

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Process of Strategic Recruitment (Guidelines for Effective Recruiting)

An effective process of recruitment comprises five interrelated stages:

a. Planning

b. Strategy Development

c. Searching

d. Screening

e. Evaluation and control

These stages are discussed as under:

a) Planning: It involves translating information about job vacancies, both in terms of number and skills required, into the number and type of applicants to be contacted. Organizations, nearly always, plan to attract more applicants than they will hire, as some of those contacted will be uninterested, unqualified, or both. Type of applicants refers to the qualifications and experience expected of people who should be informed about job openings. Such details depend on the tasks and responsibilities involved which can be known through job description and job specification.

b) Strategy development: After determining the number and type of recruits required, the next step is to develop strategy which involves deciding –

Make or buy employees: i.e. hire less skilled workers and impart them training, or hire skilled and professionally qualified employees.

Geographical distribution of job-seekers (where to look): Generally, companies used to look for national labour market for managerial and professional employees, regional or local markets for technical employees, and local markets for clerical and blue-collar employees. Such practices may be modified in the light of factors like location of the firm, supply status of the labour market, and size of the organization. In the final analysis, organizations may adopt an incremental strategy where initial efforts to recruit are concentrated at local level, gradually increased to regional, national and international levels.

Deciding the sources of recruitment (where to look): There are many sources of recruitment which can broadly be categorized as internal and external sources. They will be discussed in detail later.

When to recruit. Here, the Time Lapsed Data (TLD) will be highly helpful. TLD show the average time that elapses between major decision points in the recruitment process. Suppose an organization normally gives fifteen days to the candidates to apply, five days for invitations for interviews to be issued, five days to arrange for interviews four days for the concern to make up its mind, ten days for the applicants offered jobs to make up their minds, and fifteen more days for those accepting offers to report for work. This data suggest that job vacancies must be advertised two months before they are required to be filled.

c) Searching: The third step in the recruitment process is searching, which consists of two steps: source activation, and selling.

• Source Activation starts only after receiving requisition from managers.

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• Selling: This step is concerned with communicating the available job vacancies to the prospective candidates. Here, the attempt of the organization must be to avoid both under-selling and over-selling of jobs.

d) Screening: Some consider screening of applications as an integral part of the recruiting process, whereas others take it as the first step in the selection process. Though even the definition of recruitment excludes screening as its part, there are some valid reasons for its inclusion in recruitment process. The selection process can begin only after applications have been scrutinized and shortlisted. The purpose of screening is to eliminate visibly undeserving candidates. However, it must be done with care, so that potentially good candidates are not lost, and special groups receive full and fair consideration.

Clear job specifications are invaluable in the correct screening of applications. Screening techniques vary depending on the sources and methods used for recruiting. For example, interviews and application blanks may be used to screen walk-ins; campus recruiters and agency representatives use interviews and resumes. Screening can also be done with the help of reference checks.

e) Evaluation and Control: Recruitment process involves a number of costs, like salaries of recruiters; managerial time spent on preparing job descriptions, job specifications, advertisements, and so forth; cost of producing supportive literature, among other things.

The cost-benefit analysis of various heads of monetary and time expenditures should be carried out. Validity of the recruitment methods and the effectiveness of the recruitment process should be questioned particularly.

The evaluation of recruiting process can be carried out in terms of total applications collected, the number of candidates found suitable for selection, performance of the selected candidates, the retention rate of such selected candidates, costs of the recruiting process, length of the Time Lapsed between occurrence of job vacancy and filling it up, etc.

Sources of Recruitment

Internal Sources

They can be of two types: Closed internal recruitment system and Open internal recruitment system.

Closed Internal Recruitment System: In this system, employees do not have the opportunity to apply for jobs formally as they are not informed about the vacancies. The most common form is nomination of employees by management for a specific job opening. Though simple, this method enables the management to favour some employees over others. Such favouritism may be caused unintentionally as management may be ignorant about the meritorious employees. Such mistakes and intentional favouritism can be avoided by making such systems systematic and objective. For instance, by introducing Recruitment Information System, which employs a long questionnaire to be filled by employees, describing their background and qualifications. Such updated data bank can be used as the basis of this method.

Open Internal Recruitment System: Under this system, employees are made aware of the jobs available. One such practice is known as “job postings”, which entails informing the employees about job openings through bulletin boards, electronic media, and such other

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methods. This method attempts to remove the bottlenecks of closed internal system, i.e. favoritism (intentional or unintentional). However, it suffers from certain disadvantages.

Forms of Internal Sources

These include present employees, employee recommendations, former employees (retired, quitted, dismissed or retrenched), and former applicants.

a) Present Employees: Present employees (permanent, temporary, or casual) may be considered for filling up vacancies through promotions, transfers, upgrading, and even demotion at times.

b) Employee Recommendations: This method is a combination of internal and external way of recruitment. Internal – as the probable candidates are recommended by the existing employees – and external, because the employees who come to work are actually outsiders. In this method, job openings and request for referrals are announced on the wallboards, intranets and in the bulletins of the organization. Prizes or cash rewards are offered for referrals that culminate in successful hiring’s.

When used wisely, the method of employee recommendation offers a number of benefits:

A number of prospects can be reached at a very low cost.

Most employees know from their own experience about the requirements of the job and what sort of persons the organization is looking for. So, they suggest only those friends and relatives who meet such requirements.

The reputation of employees who suggest some names is at stake, so they take utmost care while suggesting the names of their friends and relatives.

The need for providing training to such employees is much less.

The practice of rewarding current employees for successful referrals enhances the effectiveness of this method.

c) Former Employees: Until recently, rehiring former employees was considered unwise as quitting was seen as a form of betrayal, retired employees used to be considered too aged to work, dismissed and retrenched employees were seen with suspicion that if hired back, they might exhibit disloyalty or a bad attitude. Now, rehiring of former employees takes place in good number as it offers the advantage of their prior knowledge of the organization and hence less need for orientation and socialization. However, such employees may return with less than positive attitudes. Further, if such employees are hired back at better positions, it may indicate a wrong signal to the current employees that one of the ways to move up is to leave the firm. However, to make rehiring more successful, it may be enquired as to what they did during the time they were not with the organization; and how they feel about coming back to the organization. Rehired employees may be given the credit of their earlier stay in calculating certain benefits, like vacation time, this would positively impact their morale.

d) Previous Applicants: This method, like employees’ recommendations method, is a combination of internal and external sources, but more external and less internal. This method entails that those who had previously applied for jobs but not selected can be contacted the second time any vacancy occurs. The use of this method is possible only when the organization maintains a databank of unselected candidates. This method reduces the cost and efforts of recruitment.

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Advantages of Internal sources

Insiders are supposed to be more committed to the organization.

Insiders’ skills can be judged from their actual work and hence better judgement than those of the outsiders, who are evaluated through tests and interviews.

The use of these sources improves the morale of present employees as they see promotions as the reward for their contribution to the organization.

Inside candidates require less training, both orientation and in-service training, than outsiders.

The use of these sources motivates the employees to remain with the organization.

The time and cost of recruitment is much less as compared to external recruitment.

Industrial relations improve.

Disadvantages of Internal Sources

It perpetuates the old way of doing things, and thus creativity may be hindered due to the lack of new talents.

Disqualified applicants may become discontented.

The chances of favoritism increase.

Choice in selection is restricted to insiders and outsiders, who may be more talented, are not employed.

The existing employees may not be fully fit for some job openings; hence the so-called benefit of less need for training may not be available.

All vacancies cannot be filled up using internal sources only.

These sources cannot be used by a newly established enterprise.

Guidelines for Improving the Effectiveness of Internal Sources

Publicizing the vacancies through job postings (discussed earlier).

Maintenance of Proper Personnel Records as examination of such records can reveal those employees who are working in jobs below their educational or skills level; employees having the potential for further training; and employees with the right background for the opened job.

Skill-banks, listing the specific skills of current employees, can also be developed.

Computerization of personnel records can help in ensuring selection of qualified inside candidates.

External sources

External sources far outnumber the internal sources.

Professional or trade associations: Many associations provide placement services for their members, like compiling job seekers’ lists, providing access to members during national or regional conventions. Most of such associations publish/sponsor journals which include

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classified advertisements for jobs. This source offers the advantage of enabling recruiter to zero in on specific job seekers, especially for hard to fill technical/professional posts.

Advertisements: Advertisements in newspapers, trade/professional journals, television, radio, internet are widely used sources for recruitment of different positions within the organization. The selection of medium depends on the positions for which recruitment is being done. For instance, the local newspapers usually the best source for blue-collar employees, clerical employees, and lower-level administrative employees; technical/ professional journals can be used for attracting skilled employees; and internet advertising can be used for all types of jobs.

In the present times, telecasting is becoming a good way to let the candidates know about the availability of jobs. Special programmes like “job watch”, “youth pulse”, “employment news”, etc., are being telecasted. However, this source of recruitment is used mainly by the government. Private organizations desist from using radio and television ads mainly because:

High costs;

The ad appears for a short time, is not repeated, cannot be stored.

The candidates who were not watching T.V. at that time cannot use them.

The candidates not having access to T.V. cannot come to know about the availability of job.

The candidates may not be able to get the information because of power failure at that time.

A number of factors influence the response rate, the three important ones are identification of the organization, labour-market conditions, and the degree to which specific requirements are included in the advertisement. Advertisements must be effectively drafted before publishing/ releasing them. Construction of ad should be done keeping in mind a four-point guide – AIDA – attract attention; develop interest in the job; create desire; and propel the job seeker into action.

Experts suggest that ads should normally contain the following information – the contents of job (main tasks and responsibilities), realistic description of working conditions, compensation (monetary, non-monetary), job specifications, growth, where, to whom, and how to apply, and so forth. Besides informative, the ad should be able to sell the job as well as the organization. Moreover, recruitment ads can also serve as corporate ads (ads to build up the corporate image).Cost-wise also this arrangement suits organizations as there is not much difference between the two.

Employment Exchanges: The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 requires all industrial establishments, each employing 25 workers or more, should notify the vacancies before filling them to the Employment Exchanges that have been established all over the country. The major functions of exchanges are to increase the pool of desirable candidates and to do preliminary screening. Thus, these exchanges act as linking pin between the prospective employers and prospective employees. Theses exchanges are particularly useful in recruiting blue-collar workers, and technical workers.

Casual Callers (walk-ins, write-ins, talk-ins): Job seekers visit the offices of some companies on their own (walk-ins). Write-ins are those who send written enquiries. They are asked to fill application forms for further processing. Talk-ins, becoming popular now-a-days, means

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aspirants are asked to meet the recruiter on a specific date for detailed talks. No application is required to be submitted. A waiting list of all such unsolicited candidates can be prepared to fill, normally, temporary and lower level jobs. But now-a-days, they are also being used to fill skilled jobs. It is a very inexpensive source of recruitment.

Educational and Training Institutions: Colleges, universities, research laboratories, sports fields, and institutes are fertile grounds for recruiters. Until recently, only Institutes of Management (IIMs) and Indian Institutes of Technology (IITs), and post graduate departments used to attract recruiters. Now due to increasing talent shortage, increasing cost of compensation to be offered to the pass-outs of such institutions, campus recruitment has started even at the under-graduate degree colleges, and at all the private institutions that have emerged after the recent policy of privatization. Even the smallest agency offering any course, like a computer course, advertises campus placement as a way to lure candidates to seek admission. The result of increasing popularity of campus recruitment has resulted in almost every tertiary level educational institution having a placement officer.

Consultants and Executive search agencies: For instance, ABC consultants, Human Resource Consultants, Head Hunters and many more such agencies are contacted by organizations for recruiting managerial and executive personnel.

Labour Contractors: Manual workers can be recruited through contractors who maintain close links with the sources of such workers.

Acquisitions and mergers: However, it requires a proper personnel planning and selection process in place.

Competitors: Popularly called “poaching” or “raiding”, this method involves identifying the right people in rival organizations and luring them by offering better terms.

Displaced Persons: Establishment of a project in an area normally results in displacement of inhabitants of that place. Such displaced persons are the source of recruitment not only to the company that caused displacement but also to other companies located elsewhere.

E-recruiting: Recent wave of internet is having a revolutionary effect on recruitment practices. It enables organizations to screen candidates’ soft skills, assess their skills, conduct their background checks, interview the candidates through video-conferencing, and manage the entire process with web-based software.

Benefits of External Sources

They make the availability of new skills, talents, and experiences possible to the organization.

They enable the organization to fulfill the legal and social responsibility of reservation for under-privileged sections of the society.

They enable the organization to have a wider choice in recruitment.

This source of recruitment never dries up and is available even to new enterprises.

These sources are the best when suitable people from within are not available.

There is no scope for resentment, heartburn and jealousy with people from within.

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Disadvantages of External Sources

They are more expensive and time consuming.

Detailed screening is necessary as the candidates are unknown.

More orientation and training are required for such personnel.

The motivation level of the existing staff is adversely affected if higher level jobs are filled from outside.

Alternatives to Recruitment

Overtime: If the requirement to have more employees is temporary, present employees may be asked to work extra.

Employee Leasing (staff outsourcing): It involves paying a fee to a consulting firm that handles payroll, employee benefits and routine HR functions for the client company. This practice is useful to those organizations which do not want to maintain a regular HR staff, specifically small and medium sized enterprises.

Temporary Employment: Historically, temporary employment was used to fill some temporary vacancies of semi-skilled workers during peak periods. Today, “just-in-time” employees are used to fill vacancies of all types – including professional, technical, and executive positions.

Summary

Human resource planning is a process that identifies current and future human resources needs for an organization to achieve its goals. Competency-based management supports the integration of human resources planning with business planning by allowing organizations to assess the current human resource capacity based on their competencies against the capacity needed to achieve the vision, mission and business goals of the organization. Implementing strategic human resource planning requires assessing the current HR capacity, forecasting HR requirements, analysing the gap, and developing HR strategies to support the strategies of the organization. HRP is significant as it determines future manpower needs, develops ways for the organization to cope with change, and helps in talent management. An essential prerequisite of HRP is job analysis. This process of job analysis requires organization analysis, obtaining information about jobs, selecting representative jobs for analysis, collection of data, and lastly, development of job descriptions and job specifications. Techniques of data collection for job analysis are questionnaires, written narratives, observation, log records, and interviews.

Recruitment is a linking activity that brings together those who have jobs to fill (organizations) and those seeking jobs. It aims at generating a pool of potentially qualified job candidates. The process of recruitment plays a central role in the success of an organization and is a visible function, both inside and outside the organization. It is influenced by a number of internal and external factors. An effective process of recruitment comprises interrelated stages: Planning, Strategy Development, Searching, Screening, Evaluation and control. Recruiting involves answering two questions: (1) Where are the suitable candidates available in required number? The answer to it deals with sources of recruitment; (2) How can they be informed about the availability of jobs, about the jobs, and about the organization? The answer to this question deals with techniques of recruitment.

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References

1. https://en.wikipedia.org. “Talent Management”, updated December 2010, accessed October 2018.

2. Collings, David G. and KamelMellahi. “Strategic Talent Management: A review and Research Agenda”, Human Resource Management Review, Volume 9, Issue 4, December 2009, 304-313 pp. Accessed in October 2018 from https://www.sciencedirect.com.

3. https://en.wikipedia.org. “Strategic Human Resource Planning”, updated October 2018, accessed October 2018.

4. SHRM Foundation (2016), Talent Acquisition: A Guide to Understanding and Managing the Recruitment Process, SHRM, USA. Accessed online at www.shrm.org in October 2018.

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Lesson 2

Strategic Selection, Training and Development

Strategic Selection

Selection is the process of picking individuals with requisite qualifications and competence out of the pool of job applicants to fill jobs in the organization. Right selection is strategically important as:

The performance of the superior as well as the organizational performance depends on the performance of the subordinates.

Recruitment and selection are costly processes. So they should be done effectively.

There are many laws governing the selection of employees. For example, representation of minority and under-privileged sections of the society in India. Selection has to be done considering all such Acts.

Right selection increases the stability of the workforce by reducing labour turnover.

It increases job satisfaction, and decreases absenteeism.

Types of Selection Processes

Selection process can be of two kinds, mentioned hereunder:

Discrete Selection Procedure

Normally followed more often, this process is designed in such a manner that rejection in each stage/hurdle puts the candidates out of the race.

Comprehensive Selection Procedure

Discrete selection procedure may not be the most effective selection procedure for every job, as it can lead to elimination of potentially good employees, simply because they receive a poor evaluation, even if at one single selection step. In comprehensive selection, all the applicants are put through every step in the selection process and the final decision is based on the comprehensive evaluation of the results in each stage.

Selection process consists of a number of steps, though how many steps will be taken and in what order will vary with every organization and job requirement. In other words, there is no standard selection procedure for all the jobs in all the organizations. Differences in selection techniques occur because of differences in the sizes of organizations, nature of businesses, kind and number of persons to be employed, government regulations to be adhered to, etc. A normal selection procedure has the following steps:

Preliminary Interview

Application Form

Written Examination

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Employment Interview

Medical Examination

Reference Checks

Final Approval

Steps in a Strategic Selection Procedure

Strategic selection procedure is designed with a long-term focus in mind.

1. Preliminary Interview is a short process in which interested candidates are given the necessary information about the nature of the job and the organization. Necessary information is also elicited from the candidates about their education, skills, experience, expected salary, etc. These interviews are also known as stand-up interviews or sizing up of the candidates, or screening interviews. The purpose of such interviews is to eliminate obviously unqualified candidates. However, due care is required so that desirable workers are not eliminated. Selected candidates are then asked to fill the application form.

2. Application Form

Also known as application blank, an application form is a traditional and widely accepted medium for securing information from prospective candidates. Organizations follow different practices regarding the designing of forms. Small firms may decide not to design any specific form at all; they ask the candidates to leave the required information on a blank page; medium-sized organizations design a form used for all the jobs; while big ones design different forms for different jobs. Generally, an application form contains – personal information, salary and other benefits expected, references, miscellaneous, i.e. extra-curricular activities, hobbies, games and sports, membership of professional bodies, etc.

3. Screening of Applications

A screening committee is formed for screening of applications. The forms can be screened using two methods – clinical method and weighted method.

Clinical Method: This method takes the help of psychology to analyse application forms to get clues about the candidate’s leadership ability, emotional stability, assertiveness, writing ability, and attitude towards co-workers, superiors, subordinates and the organization.

Weighted Method: Weights are assigned to different types of information provided in the application form according to their importance for the success of the employees.

Successful candidates at this stage are issued letters for employment tests.

4. Employment Tests

Different types of written examinations are conducted to measure the candidates’ ability in arithmetical calculations, to know their attitude towards the job, to measure their aptitudes, reasoning skills, knowledge in various disciplines, general knowledge, and English language. Intelligence tests, aptitude tests, trade or proficiency tests, interest tests, and personality tests are used for this purpose. These tests are based on the presumption that job-related traits of an individual can be measured. These tests also reduce favoritism in selection.

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Tests help to reduce bias in selection by serving as a supplementary screening device. They help in better matching of the candidate and the job, and may reveal information which remains covered up in application form and preliminary interview.

Types of tests

A. Tests of Cognitive Abilities

They can be of two types – general reasoning ability (intelligence) tests and tests for specific mental abilities like memory and inductive reasoning.

General reasoning ability (intelligence) tests: are tests of general intellectual abilities. They measure not a single trait, but a range of abilities like memory, vocabulary, verbal fluency, and numerical ability. They are also called IQ tests which measure intelligence as a quotient. For example, if a candidate’s age is 20 years and he answers questions as a 25-year-old might, his IQ would be 25 (his mental age) divided by 20 (his chronological age) multiply by 100, or 125.

Specific mental abilities tests: measure specific mental abilities, such as inductive and deductive reasoning, verbal comprehension, memory, and numerical ability. They are also called “aptitude tests” as they purport to measure the aptitude for the job in question.

B. Tests of Motor and Physical Abilities

Tests of motor abilities measure abilities such as finger dexterity, manual dexterity, and reaction time. They are used for screening applicants for jobs such as designers, drafts-people, or engineers.

Tests of physical abilities include tests for static strength (such as lifting weight), dynamic strength (like pull-ups), body coordination such as jumping rope, and stamina. For e.g., a candidate before being hired as a lifeguard must prove he knows how to swim.

C. Personality and Interest Tests: A person’s cognitive and physical abilities alone can seldom explain the performance he/she delivers. For that, a person’s personality and interests too are to be measured.

Personality Tests: These tests are given to measure the results that a prospective employee will show in a particular working environment. They measure the many basic aspects of an applicant’s personality, namely, introversion versus extroversion, emotional stability versus moodiness, friendliness versus criticalness, extent of motivation, concern for people versus concern for production, etc. The lengths of these tests vary depending on how important it is to measure personality; they can have from four to five items up to 300 items. Industrial psychologists often emphasize on five personality dimensions – extroversion, emotional stability, agreeableness, conscientiousness, and openness to experience. These personality tests are also of three types:

Objective tests: They are measured objectively. The candidate has to say yes/no, true/false, or rate items on certain scale. Items like dominance, attention to detail, empathy, openness, trust, etc.

Projective Tests: An ambiguous stimuli (like an ink-blot or clouded picture) is presented to the candidate and his reactions are sought. His values, motives and personality get reflected in the way he responds. Closely resembling a projective test is a “graphology test” (handwriting analysis), which assumes that handwriting closely reflects basic personality traits like lack of

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control, inner disturbance, etc. Though studies suggest that use of graphology is not valid, some organizations still use (even swear by) it. It is suggested that graphology tests can be used as an additional device as it can provide rich insights into all those facts about a candidate that conventional interview selection techniques cannot reveal.

Situation Tests: They measure a candidate’s reaction when placed in a peculiar situation, his ability to undergo stress, and his demonstration of ingenuity under pressure. For example, a problem is posed to a group which is leaderless and solutions are sought. Group discussion and in-basket methods are used to judge the personality.

5. Employment Interview Generally, application blank and employment tests do not provide sufficient information to decide the selection or rejection of candidates. Employment interview helps the organization:

to find out the suitability of the candidate,

to cross check the information obtained through application and tests,

to seek more information about the candidate,

to give him an accurate picture of the job requirements, terms and conditions of the job, and some idea about the organization’s policies,

to establish friendly relations between the employer and the candidate, so as to motivate the successful applicants to work for the organization,

Interview is an essential element of selection and no selection procedure is complete without one or more personal interviews.

6. Medical Examination

The last step before final selection or rejection in most cases may be having the applicant take a physical examination. For most of the jobs, this is a screening device in the selection process; that is, the results of such examination can only be used to reject candidates as the fitness of candidates who pass the earlier stages is presumed. Sometimes organizations require the candidates to produce medical fitness certificate in the first or initial stages itself so that the cost of selecting an unfit employee can be avoided. Currently, the vast majority of physical examinations are required to meet the minimum standards for the organization’s group life and medical insurance plans. The purpose is also to provide base data in case of workers’ compensation claims in future. However, exceptions are there where the job requires rigorous medical examination to be conducted, for example in the police, semi military and military.

Physical examination should disclose the physical characteristics of the individual that are important for the performance of the current job that may be assigned to him or the future jobs to which he may be promoted or transferred. A proper medical examination results in reduced absenteeism, accidents, and labour turnover, and thus ensures higher standard of health and physical fitness of the employees.

A proper physical examination also helps in preventing spread of communicable diseases.

7. Reference and Background Checks Many application forms require references (names, telephone numbers, and addresses), normally two, for the purpose of verifying information or gaining additional background information of the

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applicant. Normally, these references are not checked and cannot be much reliable, as they tend to be biased in favour of the applicant. When the labour market conditions are tight (supply is less than the demand), these references may not be checked at all.

Previous employers, known public figures, university professors, neighbors or friends can act as references. In India, applications in government and public sector organizations are to be routed through the present employers of the applicants. The referees can be approached either by mail or telephone. The telephone contact has the advantage of soliciting immediate candid comments, and attitudes can sometimes be inferred from hesitations and inflections in speech.

While seeking information from referees, they are assured of the confidentiality of the information that they provide

Final Selection

After a candidate has crossed all the hurdles, he/she is offered the employment. Normally, such candidates are shortlisted by the human resource department, but finally approved by the line managers of the concerned department which had made the requisition. Employment is offered in the form of an appointment letter mentioning the post, the rank, the salary grade, the date by which the candidate should join and other terms and conditions in brief.

Problem of “No Shows”

Currently, a new development of “no shows” has become a serious concern for HR managers. No shows are the individuals who pass through the selection process, receive employment offers, but fail to report to duties. It so happens as talent is becoming scarce, and every talented candidate sits on multiple job offers, out of which he chooses one while disappoints others.

HR managers need to understand “how people choose jobs” to increase the probability that selected people join. Here, the knowledge of personality and goals of individuals selected become important:

Personality: Research indicates that people like to match their work with their personality. For example, social individuals like jobs in clinical psychology, foreign service, social work and the like; careers in management, law, public relations are liked by enterprising people; investigative individuals are compatible with jobs in biology, mathematics, oceanography, and so on.

Personal Goals: People desire to work where their expectations are positive and where they believe their goals can be achieved.

So job offers should be made to those individuals whose personality and goals match with the jobs that are offered to them.

Concept of Strategic Training

Corporate strategy’s execution requires synchronized HR strategies. After acquisition, human resources require strategic training, which can involve change in skills, knowledge, attitudes or social behavior. It can also be defined as the acquisition of knowledge, skills and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies.

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Contextual Terms: Education and Development

The terms training, education, and development differ from one another in many ways, though at times that difference blurs.

The difference between education and training can be depicted as shown in Exhibit 1.

Exhibit 1 : Difference Between Training and Education

Despite the above differences, training and education are complementary to each other. For example, an employee who undergoes training is presumed to have had some formal education. Further, no training is complete without an element of education nowadays as more and more employees are expected to exercise independent judgement to job problems. So, their horizon is broadened by imparting education.

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Need of Strategic Training

(a) Employees have to adapt themselves to turbulent technological changes occurring in the business environment.

(b) Organizations have to stay competitive (improve organizational viability) in the ever-increasing competition in the contemporary business environment. For that, products have to be improved continuously as product life is becoming very short; quality of service, both sale of service and after sale service, has to be improved; and productivity has to be boosted.

(c) Training is also required to enable employees to work in teams. It requires skills in team-building, team decision-making, and communication skills.

(d) Training is also required to update computer skills.

(e) The need of training is being felt increasingly to enable human resources to play a strategic role in the management of enterprises. HR manager sits with top management and has a say in the laying down of strategic objectives, and then it is seen whether human resources are equipped with skills to attain them. If not, the gap is filled with training.

(f) The need of training is also felt to facilitate internal mobility, i.e. transfer of a person from job to job.

(g) In addition to the basic training required for a trade, occupation or profession, there is a need to continue training beyond initial qualifications to maintain, upgrade and update skills throughout working life. It is sometimes referred to as professional development.

Strategic Importance of Training

Importance of training can be discussed from the view points of both employer and employee. Employer stands to gain in terms of (a) Higher productivity, (b) Less learning periods, (c) Better quality of work, (d) Less supervision, (e) Reduction in costs, (f) Low rate of accidents, (g) Increased morale of employees, (h) Reduction in employees’ dissatisfaction, complaints, absenteeism, and turnover, (i) Provides career path to employees, (h) Effective training leads to better management as training needs of employees are to be spotted, which, in turn, requires effective discharge of managerial duties to plan, organize, direct, etc. Employees gain in terms of (a)Increase in self-confidence, (b) Acquisition of new skills, (c) Increased chances of promotion,(d) Increased earnings, (e) Increased adaptability to changing conditions, and(f) Reduced rate of accidents.

Principles of Learning

(a) Making learning meaningful at the start of the training provide a bird’s eye view of the material to be presented as it facilitates learning. Also use a variety of familiar examples and use as many visual aids as possible.

(b) Learning is enhanced when the learner is motivated. A learner can be motivated to learn by providing realistic training (which can be practiced), letting them learn at their own pace, letting them perceive that they need training, scheduling training conducive to learning (normally half-day training should be enough as the learning curve goes down after that), and providing immediate reinforcement (positive).

(c) Make transfer learning easy, from the learning site to the job site, through maximizing similarity between training situation and work situation, providing adequate practice, labelling

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or identifying each feature of the machine or step in the process, and directing trainee’s attention to the important aspects of the job, etc.

Designing a Strategic Training Programme

It involves the following steps:

1. Identification of training needs

2. Setting training objectives

3. Organization of training

4. Evaluation of training outcomes or results

1. Identification of Training Needs

Training needs can be identified by trying to find out the answers to five questions:

(a) What are the organizational goals?

(b) What tasks must be completed to achieve such goals?

(c) What are the skills, abilities, and behaviours required of human resources to perform the needed tasks?

(d) What skills and abilities are possessed by the present employees and the behaviour displayed by them?

(e) What are the deficiencies, if any, in the skills, knowledge, or attitudes required to perform the tasks?

The answer to the fifth question determines the extent and type of training needs.

Reasons for Identifying Training Needs

(a) Adoption of new techniques in an organization and introduction of modern working methods. For Example, computerization of the office.

(b) Poor performance by the workers, reflected by low output, lack of initiative, incompetence, and bad decisions.

(c) Wide gaps between what workers should be doing (desired behaviour) and what they are doing (actual behaviour).

(d) Analysis of the strengths and weaknesses of an organization may reveal the areas of weakness of an organization, which need to be handled seriously.

Process of Identifying Training Needs

Training needs can be identified through the following types of analysis:

(i) Organizational analysis

(ii) Task analysis

(iii) Manpower or Human Resource analysis

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(i) Organizational Analysis: It is a systematic study of the organization in terms of its objectives, resources, resource allocation and utilization, growth potential and its environment. Its purpose is to determine where training emphasis should be placed in the organization for increasing organizational effectiveness. Organizational analysis involves the following elements: (a) Analysis of Objectives: The long-term and short-term objectives and their relative

priorities should be properly analyzed. Specific goals for various departments should be stated, which will serve as means for achieving the overall organizational objectives. The management would have to examine the specific training inputs that would contribute towards the achievement of such objectives.

(b) Resource Utilization Analysis: The allocation of human and physical resources and their efficient utilization in meeting the operational targets should be analyzed. In order to examine the need for training, the following questions need to be answered: Whether adequate number of personnel are available to ensure the fulfillment of the goals? Whether the personnel performance is upto the required standards?

(c) Climate Analysis: Organizational climate reflects the attitudes of organizational member as regards trust, loyalty, openness, and commitment to organizational goals. Analysis of organizational climate should aim at determining whether the environment in different departments is conductive to fulfillment of their goals. This will help in knowing areas where training is needed to improve the climate of the organization.

(ii) Task Analysis: It is a systematic analysis of jobs to identify job contents, knowledge, skills and aptitudes required to perform the job. Particular attention should be paid to the tasks to be performed, the methods to be used, the way employees learn these methods and the performance standards required in employees. Questionnaires, interviews, personnel records, observation and other methods can be used to collect information about jobs in the organization.

In task analysis, the main focus is on the job or task. Task analysis requires the study of various types of skills and training required to perform the job effectively.

(iii) Manpower Analysis: The quality of manpower required by the organization has to be done in the light of both, internal and external environment of the organization. The economic, social, technological and political environment of the organization should be properly scanned to determine the quality of human resources desired. To achieve these quality standards, specific training needs should be determined on the following lines:

(a) The capability of present workforce to learn new skills and behaviours,

(b) The time frame within which training must be imparted, and

(c) Job designing and redesigning, introduction of new work methods and technology.

2. Setting Strategic Training Objectives

Once the training needs are identified, the next step is to set training objectives in concrete terms and to decide the methods to be adopted to achieve these objectives. The overall aim of any training programme is to increase organizational effectiveness. However, each training programme must also have specific objectives, such as to increase productivity, to improve quality, better human resource planning, better health and safety, prevention of obsolescence and enhanced personal growth. These

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objectives contribute to organizational effectiveness as explained in the beginning of the chapter. The relationship between specific objectives and overall purpose of training is shown in Exhibit below.

3. Organization of Training Programme

Every training programme includes trainees, trainers, a training period and training material. These constituents of training are discussed below:

(a) Selection of the trainees: The proper selection of trainees is of major importance if permanent and gainful results are to be obtained. A trainee should be trained for the kind of job he likes and is fit to perform. In this respect, training is closely related to the selection of personnel. Careful screening of candidates for training will raise the effectiveness of the training programme.

While giving training to an employee, the first step is to attempt to place him at ease. It is generally seen that many people are somewhat nervous when approaching an unfamiliar task. The instructor should not forget the newness of the training programme to the trainee. In addition to minimizing any possible apprehension, the trainer should emphasize the importance of the job, its relationship to the work-flow and the importance of rapid and effective learning. Thus, the trainee must be given proper background information before he learns the new skills and knowledge.

In case of supervisory training, it is better to include all the supervisors and other employees who are considered suitable for promotion to such posts. Excluding some employees on the basis that they do not need the training or that they are already doing their work satisfactorily is a poor policy. Even outstanding persons benefit from well-managed training programmes and their presence assists the other trainees in many ways.

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(b) Preparation of the instructor: The instructor or trainer is a key figure in an effective training programme. He can contribute immeasurably to its success. Qualified instructors may be obtained from inside or outside the organization. However, many insiders are not good instructors because they may not possess the ability to teach the skills. A trainee needs many qualifications besides knowing how to do the work. He must be able to divide the job into logical parts so that he may take up one part at a time, without losing his perspective of the whole. He must be tolerant and patient. He must be able to appreciate the value of training for the enterprise and an understanding of what the employees would go through in order to acquire the skills and knowledge as envisaged by the programme.

The trainer needs professional expertise in order to fulfill his responsibility. If he is ill-informed about the training process, or if he knows little about possible connection between training and good management, then he may indeed deserve the casual treatment that he frequently receives. Therefore, it is desirable that the trainer must have at least the basic knowledge about the job for which he is going to instruct the trainees.

An effective instructor or trainer can present the operations involved in doing a particular job by various ways. In most of the cases, method of explanation is favoured. In addition, an instructor may illustrate various points through the use of pictures. Demonstrations on-the-job is an excellent device. While demonstrating the operation, the trainer should stand beside the trainee rather than in front of him so that the latter may better adopt the movements of the trainer. The trainer should explain and demonstrate the operations step by step, and should allow the trainees to repeat these operations. He should also encourage questions from the trainees in order to be sure that the trainees understand the job.

(c) Determination of training period: The length of the training period depends on the skill to be acquired, and the trainees’ learning ability. For instance, a simple indoctrination programme for clerks may require an hour a day over a period of one week, while a course in computer programming may be given two hours a week for 15 weeks. The use of effective and visual material usually helps to reduce the training time. To maintain interest and secure maximum accomplishment, no single session should last longer than two hours.

Additionally, if the training is given during working hours, productivity will suffer, and the organization will have to pay for this time. But if the training is arranged after the working hours, employees may not be able to make full use of training programmes, because they are already tired. So, any personnel manager should try to reconcile these situations. It is beyond doubt that a trained employee is an asset for the organization. A big organization can afford to send their employees for full time training on full pay. The cost incurred on training an employee will be more than compensated by the benefits obtained from training in the form of increased productivity, less wastage, heightened morale, etc.

(d) Training methods and materials: There are several on-the-job and off-the-job methods of training as discussed later in this chapter. The choice of any method would depend upon the specific objectives of the training programme.

To increase the effectiveness of training, some written material is usually desirable as a basis for instruction, review and reference. The training section of the HR department may prepare the training material with the help of line supervisors to be used for different jobs. A complete outline of the whole course should be made with the main topics included under each

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heading. The training material should be distributed among the trainees well in advance so that they may come prepared in the lecture classes, are able to understand the subject quickly and can clarify their doubts by asking questions.

4. Evaluation of Training

Training is indispensable for both, the organization and the employees. At the same time, it is a very costly and time-consuming process. It is essential to determine its effectiveness in terms of achievement of specific training objectives. Individuals like to know how much they have learnt or how well they are doing. The sooner employees know the results of a quiz or test, the sooner they can assess their progress. The sooner employees receive positive feedback from the trainer, the less time they will waste.

Self-graded tests and programmed learning kits provide the necessary feedback to a person about his progress on a particular subject. This principle does not necessarily mean frequent testing, but the more immediate the feedback on learning, the more motivating it is likely to be.

Evaluation of training would provide useful information about the effectiveness of training as well as about the design of future training programmes. It will enable an organization to monitor the training programmes, and also to modify its future programmes of training. The evaluation of training also provides useful data on the basis of which relevance of training and its integration with other functions of human resource management can be determined. Evaluation of training has been discussed in detail later in this chapter.

Types of Training

1. Orientation Training (to adjust new employee to the work situation): It consists of familiarizing the new employee with the work environment, which consists of rules and regulations to be followed, the work to be done, the team (superior, subordinate, peers), facilities at the work place, etc. It helps the employee in overcoming the initial jitters of the new place.

2. Job Training: It is provided to increase the knowledge and skills of an employee for improving performance on the job.

3. Safety Training: Teaching of correct methods of handling equipment and machines to reduce accidents, wastage of materials and damage to machinery.

4. Promotional Training: It refers to the training provided to the employees before their promotion so that they are able to shoulder the higher responsibilities of the new position.

5. Refresher Training: It is intended to revive and refresh the knowledge to update the skills of the existing employees. It is needed to avoid obsolescence of knowledge which may occur due to rapid changes in technology and work methods.

6. Remedial Training: Such training is imparted as a way of remedy to correct the behaviours and styles of working of some of the employees.

Methods of Training

The most popular training methods used by the organizations can be classified as either “on-the-job” training methods or “off-the-job” training methods. Though some methods may be classified as being

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either of the above, it is very difficult to categorize them. The list of such methods is very long, but some of them are discussed asunder:

On-the-job Training

It involves learning by doing. Employees learn in actual work situations. It is very suitable for those jobs which are either difficult to stimulate or easy to learn by observing and doing. The advantage of these methods is that actual work does not suffer when employees learn. Problems relating to transferability of learning from the place of learning to the place of work do not arise. However, these methods suffer from certain drawbacks also. Namely, low productivity when employees are learning, damage to machinery, and wastage of raw materials. Still, these demerits get offset by the merits of these methods when the personnel are limited or costly, and where it is desirable for the employees to learn on-the-job. On the job training can be either formal or informal.

The procedure for informal on the job training is:

1. At the beginning of or during the training, no specific goals or objectives are developed;

2. Trainers usually have no formal qualification or training experience for training;

3. Training is not carefully planned or prepared; and

4. The trainers are selected on the basis of technical expertise or area knowledge.

Methods of on-the-job training are Job Instruction Training (step by step learning), Understudy (the superior gives training to a subordinate as his understudy or assistant), Position Rotation (the trainee is periodically rotated from job to job), Apprenticeship Training is given to people who seek to enter skilled trades to become for example, plumbers, electricians, or ironworkers.

On-the-job training is the most effective method of training the employees because it is in complete accord with the three basic laws of learning: (i) The law of readiness (as the learner has to do learn, (ii) The law of exercise, (he gets the opportunity to apply the learning, and (iii) The law of effect (learner will be more satisfied as he/she is not left to learn by trial and error).

Vestibule training

The term ‘vestibule training’ is used to designate training in a classroom for semi-skilled jobs. It is more suitable where a large number of employees must be trained at the same time for the same kind of work. Where this method is used, there should be well qualified instructors in charge of training programmes. Here, the emphasis tends to be on learning rather than production. It is frequently used to train clerks, machine operators, typists, etc.

Off-the-Job-Training

It requires the worker to undergo training for a specific period away from the workplace. They are concerned with imparting both knowledge and skills in doing certain jobs. The advantages of these methods are that workers are free from the tensions of work when they are learning, no damage to machinery, and no excessive wastage of raw materials. However, these methods suffer from difficulty of transferring the learning from the place of learning to the place of work. Some such methods are: special lecture cum discussion, audio-visuals, simulation.

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Role Based and Competency Based Training

Role Based Training puts the training in the context of the role and what it takes to perform that role. You can look at a role as it correlates to a defined work activity to which the staff member has been assigned. These staff members also have to follow processes, procedures, use enterprise tools and adhere to reporting structures and cycles. A competence-based programme needs to focus on building the knowledge and skills needed in a particular job.

Evaluating Training Effectiveness Training needs to be evaluated from three perspectives:

(i) in terms of effectiveness of costs;

(ii) in terms of learning on the part of learners; and

(iii) in terms of change or impact it has made on the individual’s and organizational performance.

Most commonly, following methods are used to evaluate the effectiveness of training:

(a) Reaction Method: Most typical evaluation of training programmes across organizations, it involves asking some managers and a group of trainees their opinions about training effectiveness through a questionnaire. Such reactions, while easy to acquire, are the least valid as they are affected by the subjectivity of those who give such information. Such opinions are influenced by factors which have little to do with the training’s effectiveness. The other three approaches which are an improvement over subjective assessment are as under:

(b) Test-retest method: Participants are given a test before they begin the programme. After completion, the participants retake the test. Improvement in test scores is taken as indicative of effectiveness of training. Four problems arise here: First, tests may not be valid. Secondly, increase in test scores may be due to causes other than training given. Third, difficulty arises in attempting to substantiate that changes in the test scores will be reflected in performance. Fourthly, attributing the change fully to the instruction may be a fallacy.

(c) Pre-post performance method: This approach attempts to correct the flaws of the first approach. In this method, each participant is evaluated prior to training and rated on actual job performance. After instruction is complete, the participant’s performance is re-evaluated. As with test-retest method, the increase is assumed to be attributable to the training. However, in contrast with test-retest method, pre-post performance method deals directly with job behaviour.

(d) Experimental-control group method: This is the most sophisticated evaluation approach. Two groups are established – comparable as to skills, intelligence, and learning abilities – and evaluated on actual job performance. Members of the control group work on the job, but do not undergo training. The experimental group is given the training. At the conclusion of training, the two groups are re-evaluated. If the training is really effective, the experiment group’s performance will have improved, and its performance will be substantially better than that of the control group. This approach attempts to correct factors other than the training programme that influence job performance.

Of the four methods mentioned above, the experimental-control group method is preferred. But costs, time, and questions about the ethical activity of withholding training from some employees may make

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this method inappropriate. Does this mean one should use subjective methods? The answer is “no”. The opinions should be kept as the base, implying that a combination of different methods should be used.

Training Process Outsourcing

Organizations most successful in outsourcing their training function follow some variation of an industry recognized seven (7) steps process. The “Seven (7) Stages of the Outsourcing Process” include finding potential partners, gathering and sharing data necessary for structuring a deal, negotiations and documentation of a contract, handing over the assets and resources to the partner and the ongoing management of the relationship.

Managerial Development

Management development is the overall concept that describes the many ways in which organizations help employees develop their personal and organizational skills, either as managers in a management job or with an eventual management job in mind.

Guidelines for Effective Management Development

1. A person’s development is 90 percent the result of “on-the-job” experience.

2. The three most effective development tools are clearly defined responsibility, parity of authority and responsibility, and the necessary feedback of one’s performance.

3. A person grows and develops to the extent he or she exercises increasingly refined control over his or her thought processes, actions and behaviour, bringing their performance closer to some acceptable standards.

4. The focus of management development should be on an individual’s work, rather than on personality.

5. Management development programmes aim at creating an environment in which executives can grow.

6. Either people develop according to the particular demands of their lives and in line with their potential, or they do not develop at all.

7. The methods and tools used are not as important as a sincere interest, both of the organization and of its employees.

8. Education courses, when properly designed and presented, can help executives learn job related skills quickly and easily.

9. There is no panacea, miracle, or shortcut method for the development of management ability.

Reasons for Management Development are Ever Changing Business Environment, Developing Technical Specialists to Become Generalists, Younger Manager must be Developed Sooner, Increasing Professionalization of Management, Warding off Obsolescence, New Researches in the Area of Learning.

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Summary

Selection is the process of picking individuals, out of the pool of job applicants, with requisite qualifications and competence to fill jobs in the organization. Selection process consists of a number of steps, though how many steps will be taken and in what order, will vary with each organization and job. Job seekers who pass the screening and preliminary interview are called for employment tests, which are also called psychological tests, as they are designed by psychologists. A selection process uses interviews as selection device twice – one initially (preliminary interview) and one at a later stage towards the end of the process. Interview is a formal, in-depth conversation conducted to evaluate the applicant’s acceptability. It is considered to be an excellent selection device, basically because of its flexibility. There are several problems which are often encountered by interviewers while using interviews as a selection technique. There are two ways to avoid the interview problems. First is very obvious – keep them in mind and avoid them (for e.g., interviewers should guard their own beviour). The second one is not so obvious. It involves structuring the interview and following some guidelines for effective interviewing.

Training refers to the methods used to give new or present employees the skills they need to perform their jobs. The terms training, education, and development differ from one another in many ways, though at times, that difference blurs. Though training had always been necessary in every kind of organization for every kind of job, to improve the job-related skills of an employee, today its importance has increased due to turbulent changes in the environment. Every stakeholder stands benefitted from training in many ways. As training is a learning experience, some principles of learning should be kept in mind while designing and imparting training. Training needs can be identified by trying to find out the answers to certain questions. Besides, there are some indicators in the environment that help in identifying the need of training, like drop in productivity or inadequate job performance. There are many methods for determining training needs. Observation and analysis of job performance in one such method. Training programme may be of different types, depending on the reason for which it is required, like orientation training, job training, etc. The most popular training methods used by organizations can be classified as either on-the-job or off-the-job training.

Training designed may be either role-based or competency-based. Evaluation of training is a must and there are many methods of doing it. Still, many problems are faced in such evaluation. Certain steps to be followed for effective outsourcing of training function have also been discussed in the chapter.

The three terms “management education”, “management training” and “management development” are used interchangeably in practice, though their literal meanings differ. Most business leaders agree that management development is a necessary requirement for the long-term success of their organization. There are a number of methods of executive training and development. However, certain guidelines are required to be followed to make their full use.

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Lesson-3

Reward and Compensation Strategy

Meaning of Strategic Compensation Management

Armstrong & Helen (2005) have defined strategic compensation management as the process of looking ahead at what an organisation needs to do about its reward policies and practices in the future.

Strategic compensation management deals with both ends and means.

As an end, it describes a vision of what reward policies will look like in a few years’ time. As a means, it shows how the vision will be realised. Therefore, strategic compensation management is also called visionary management. However, it is also called empirical management, which decides how, in practice, it is going to get there.

Strategic reward management, according to Armstrong et al, is concerned with:

(i) understanding the needs of the organisation and its employees;

(ii) understanding how such needs can best be satisfied;

(iii) developing the values of the organisation on how people should be rewarded; and

(iv) formulating guiding principles that will ensure that these values are followed.

The fundamental idea behind strategic compensation management is to match compensation policies and strategies with business strategy as any incongruence between the two affects the organisational performance adversely.

Meaning of Compensation Strategy

Compensation or reward strategy can be defined as all that an organisation wants to do in the long term to develop and implement reward policies practices, and processes that will further the achievement of its goals. It is a declaration of intent, which establishes priorities for developing and acting or reward plans that can be aligned to business and HR strategies and to the needs of the people in the organisation.

According to D. Brown (2001), reward strategy is ultimately a way of thinking that can be applied to any reward issue arising in the organisation resulting in value creation.

Reward strategy is also being defined as a plan for allocating reward resources in a manner that directs the business to the successful execution of its objectives. There are three main factors involved in developing and managing this plan:

i) a thorough understanding of the total value of all of an organisation's reward elements vis-a-vis its stated market competitive objective (money),

ii) the strategic allocation and distribution of money to each element (mix),

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iii) and the articulation and delivery of specific and deliberate expressions to employees about what a company values and expects (messages).

These three defining dimensions of Total Rewards Strategy are explained as follows:

1. Money: This is the "what" dimension, or the elements that are considered to be rewards in the marketplaces where you compete for talent, and the competitive levels that you establish for yourself in those marketplaces. This is the content and level of rewards, and it is where Total Rewards in the employment contract are defined.

2. Mix: This is the "how, who, when, and where" dimension. It determines how programme eligibility is established, who participates in the plans, and how rewards are delivered. It organizes rewards into the most efficient means of delivery. Money and mix together are the architecture of rewards, and they are used to create the blueprint for developing reward plans.

3. Messages: Messages are the "why" dimension, conveying the value and expectations that need to be delivered through rewards. Purposefully articulating specific messages allows a company to steer the focus of employees on desired business outcomes and the competencies to be successful. Messages forge alignment of both plans and people's efforts.

Aims of Compensation Strategy

Reward strategy is an undertaking about what is going to be done in the future. It is concerned with the direction that should be followed in developing the right mix and levels of financial and non-financial rewards to support the business strategy. It will set out:

(i) the underlying guiding principles (the reward philosophy);

(ii) the intentions - what is proposed;

(iii) a rationale - why is it intended to be done; and

(iv) a plan - how we propose to do it.

According to Henry Mintzberg et al (1988), there are five different meanings that can be attached to strategy:

(i) Plan - a unified, comprehensive, integrated plan designed to ensure that the objectives are achieved;

(ii) Ploy - a maneuver to outwit on opponent or a competitor;

(iii) Pattern - consistency in behaviour over time;

(iv) Position - how the organisation wants to be seen in the marketplace, whether as a leader or a follower; and

(v) Perspective - an organisation's fundamental way of doing things. Also called the corporate culture, it permeates internally within the organisation so that all employees see the strategy and feel a part of it.

Features of Compensation Strategy

The features of reward strategy are as follows:

(1) Reward is characterised by diversity. Though aspects covered in reward strategies are the

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same, they are treated differently in different organisations according to their contexts, overall strategies and cultures.

(2) Reward strategy helps a firm in gaining competitive advantage over its competitors. Human resources are the only resources that can give an organisation such an edge. Through reward policies, it can be ensured that:

(a) the firm has higher quality people than its competitors;

(b) the unique intellectual capital possessed by the business is developed and nurtured; and

(c) a culture is created that encourages commitment.

(3) Reward strategy is a main and important component of HR strategy. It affects all other aspects of human resource management, right from human resource planning until the employee leaves the organisation.

(4) Reward management is increasingly becoming line managers' responsibility, though HR still initiates policies. Therefore, it is becoming HR and reward specialists’ responsibility to develop line management capability.

(5) Strategy has to take account of the mutual expectations of both the management and the employees.

The Structure of Compensation Strategy

The basic strategic planning questions that need to be answered while developing the structure of a reward strategy are:

(i) Where are we going?

(ii) How are we going to get there?

(iii) Why do we want to get there?

(iv) What values or guiding principles should be adopted in implementing the strategy?

The structure of a reward strategy could be built around the four pillars as follows:

(1) A definition of guiding principles – the values that are believed to be necessary in formulation and implementation of strategy.

(2) A statement of intentions – the reward initiatives that are proposed to be undertaken.

(3) A rationale – the reasons why the proposals are being made, how they will meet the business needs, and how people issues would be addressed.

(4) A plan – how, when and by whom the reward initiatives will be implemented. The plan should take account of resource constraints and the need for communications, involvement and training. The priorities attached to each element of the strategy should be indicated.

The Contents on Compensation Strategy

Strategic rewards embrace everything that employees value in the employment setting, and the term refers to the complete bundle of all employee reward elements. What makes these rewards strategic is the care employers must take to align their design and effects with strategic objectives. One view of

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Strategic Rewards as depicted here shows four quadrants of a strategic rewards framework:

The top two quadrants, compensation and benefits, cover the areas that we traditionally think of as rewards the employer provides. These are sometimes referred to as transactional rewards because they include the tangible results of the agreement between the employee and employer. In this agreement, or transaction, the employee agrees to provide time, labour and skills in return for salary and benefits. Therefore, these rewards are readily viewed in terms of having a monetary value, such as the employee's base salary or the Federal Employees Health Benefits Program. Transactional rewards play an important part in an employee's decision about where to work and whether to stay with an organisation. The bottom two quadrants – development and learning, and the work environment – cover areas that are increasingly recognized as critical contributors to employee satisfaction. They are sometimes referred to as relational rewards because they tend to represent the relationship (vs the transaction) between the employee and employer.

A reward strategy may be broadly stated indicating the general direction for the reward management to follow. Or it may be laid down in specific terms for different aspects of reward management as discussed below:

1. Broadly Stated Strategy (Broad-brush Reward Strategy): It may commit the organisation to the pursuit of a total reward policy.

Some examples are:

(a) strategy to achieve an appropriate balance between financial and non-financial rewards;

(b) encouraging continuous personal development and spelling out career opportunities;

(c) developing a more flexible approach to reward, including the reduction of artificial barriers as a result of over-emphasis on grading and promotion;

(d) generally rewarding people according to their contribution;

(e) supporting the development of a performance culture and building levels of competence; and

(f) clarifying what behaviours will be rewarded and why.

2. Specific Reward Strategy: The selection of reward initiatives and the priorities attached to them will be based on an analysis of the present circumstances of the organisation and an assessment of the needs of the business and its employees in future. The following are examples of possible specific reward initiatives, one or more of which might feature in a reward strategy:

(a) the replacement of present methods of contingent pay with a pay for contribution scheme;

(b) the introduction of a new grade and pay structure, e.g., broad-banded or job family structure;

(c) the replacement of an existing decayed job evaluation scheme with a scheme that more clearly reflects organisational values and needs;

(d) the improvement of performance management processes so that they provide better support for the development of a performance culture and more clearly identify development needs;

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(e) the introduction of a formal recognition scheme;

(f) the development of a flexible benefits system;

(g) the conduct of equal pay reviews with the objective of ensuring that work of equal value is paid equally.

(h) Communication and training programmes designed to inform everyone about the reward policies and practices of the organisation and ensure that those who conduct performance reviews or make, or influence pay decisions have the necessary skill.

Developing Compensation Strategy

Armstrong et al have described formulation of corporate strategy as a logical step-by-step process for developing and defining a sense of direction. This incorporates ample provision for consultation, involvement and communication with stakeholders; these include senior managers as the ultimate decision makers as well as employees in general, and line managers in particular.

In practice, however, reward strategy is hardly formulated, following the linear and logical process as shown in the figure. Therefore, another concept stated is that of “logical incrementalism”, which states that strategy evolves in several steps rather than being perceived as a whole. Another view is that strategy formulation is not necessarily rational and continuous. Though normally, strategic planner should first formulate strategy and then implement, but often, he may act first, then think, i.e. those formulating reward strategies have to keep taking note of changes occurring in the organisation's internal and external environment. The financial considerations of affordability and profitability loom large in the minds of chief executives and financial directors.

Compensation strategists must also track emerging trends and may modify their strategies accordingly. It is necessary to have reward strategies laid down as a basis for planning and communication. But such strategies should be changed according to changes taking place in the environment. There are certain criteria that can be used to determine whether the present strategy will be effective in the present form only or some change is required:

(1) They have clearly defined goals and well-defined link to business objectives;

(2) There are well designed pay and reward programmes, tailored to the needs of the organisation and its people, and consistent and integrated with one another; and

(3) There are effective and supportive HR and reward processes in place.

Considerations in Developing Strategies For New Salary Programmes The entire area of compensation and benefits is changing dramatically due to increased globalisation and fast-changing environment in which an organisation operates. Mary F. Cook (2001) suggests that the following points should be considered while developing strategies for new salary programmes:

(1) Find more tangible ways of linking employee productivity goals to corporate profits so that pay-for-performance objectives can be actualised.

(2) The move to multiple compensation objectives allows a company to save in some areas by putting that money into programmes that will provide a better return on investment. For example, an organisation might decide to move to a third quartile pay level in "hard to fill technical jobs” but remain at first quartile pay levels in “staff” jobs where the first quartile is externally competitive.

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(3) Many companies are moving to multiple policy lines in salary programmes. For example, there may be one policy line for hourly non-exempt employees, another for salaried exempt professionals, and a third for executives.

(4) There is a trend to pay salaries instead of wages, even in manufacturing plants. The purpose is to increase self-worth and self-esteem of the employees. However, overtime may be paid on hourly wages basis.

(5) There is an increasing trend towards innovative pay-for-performance proqrarnrnes. Scheduled pay increases are being linked to specific measurable productivity improvements, even in a profession like teaching.

(6) Deferred compensation is becoming more popular. Management employees, and professionals, given the option, prefer to defer taking pay increases until retirement.

(7) Gain sharing is replacing profit sharing. Gain sharing supports the idea of affordability and makes sense in many businesses.

(8) Comparable worth claims are becoming more frequent as more women enter the workforce. The companies that employ large number of low-paid female workers have to keep it in mind.

(9) High-tech industries are often more innovative in terms of pay, benefits, and perks. These innovations are likely to enter other organizations due to high mobility of labour.

(10) The practice of one-time lump-sum pay increases that do not increase base pay has been accelerating at an incredible rate in some industries.

(11) There is a move by many organisations to follow two-tier pay in labour contracts. It involves paying new workers much less than the old workers. Though labour unions and employees do not approve this system; the companies that have implemented such programmes justify them as being necessary to remain in business.

Armstrong et al conclude that these trends indicate that compensation programmes are no longer market driven. The key issue is affordability. The whole compensation and benefit scene is a collage of changing, innovative thought and programming. They further suggest that as a result of payments related to profit, performance or skill acquisition, an individual's contribution to organisational success can be rewarded.

Strategic Elements of Compensation

T. Flannery et at (1996) write, “An effective reward strategy can be critical in effectively harnessing the forces of change and moving the organisation forward.”

John Stredwich (2000) has tabulated a number of areas where major changes have taken place as shown in Exhibit 11.2 “Changing Nature of Pay and Rewards.”

According to Stredwick, the reward strategies can be so designed which facilitate the organisation to incorporate such changes as shown in Exhibit 11.2. The following measures can be taken:

1. Achieving Competitive Advantage

(a) Reward structure can be set at the top of the market range to encourage the best people to join. Although pay becomes a major expense, this is out-weighed by the benefits

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obtained from employing the best talents available. Employee retention under such a strategy generally remains high, saving on recruitment costs.

(b) The strategy of paying high performance premiums to the staff for on-time project completion, leading to customer satisfaction and repeat business.

(c) Schemes covering groups or teams of employees such as gain-sharing increase their commitment and involvement and help the teams to work together for the benefit of the organisation, its customers and all the employees.

Due to globalisation and the resultant increased competition, the proportion of contingent pay (pay for performance) has risen in comparison to base pay. In many organisations, the guaranteed annual increase (increment) has been replaced by an increase based on individual performance.

2. Emphasise Performance

The costs and revenues of a firm can be influenced by a few HR practices. For example, Continental Airlines, as part of its turnaround strategy, introduced an incentive system known as on-time bonus, where each employee would get a bonus of $65 every month for ensuring on-time flight operations. This bonus has a strong influence on financial performance of the firm in terms of decreased costs and increased revenues and at the same time placed the company first in the industry in on-time performance. Though the company paid $51 mn in the form of bonuses, it saved $75 mn by saving on accommodation costs associated with missed connections. On-time bonus enhanced the morale of the employees and motivated them to provide better service to the customers. The company was also able to increase its market share because of on-time operations of its flights.

3. Encourage Flexibility in Working Practices

The increased movement towards a greater use of flexibility has led to the introduction of rewards for those employees who increase their skills and competences, which allow them to carry out a wider range of jobs.

4. Support Key Competences

Rewards can be used to encourage specific competences, as for example, innovation and creativity.

5. Encourage Local Decision-making

Pay decisions used to be made at headquarters, but the need to respond to local conditions has led to decisions on pay being delegated to localized units.

Strategic Compensation Alternatives (Choices)

While designing a compensation strategy, several options may be explored by the management. The major options are discussed below:

Fixed vs. Variable Pay

Traditionally, fixed pay plans have been quite popular in most of the organisations, but now variable pay programmes are widely followed by many organisations and for all levels of employees. Widespread use of various incentives plans, team bonuses, profit sharing plans have been

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implemented with a view to link growth in compensation to results. Of course, while using variable pay systems, management must look into two issues carefully:

Should performance be measured and rewarded based on individual, group or organisational performance?

Should the length of time for measuring performance be short-term or long-term?

Internal and External Pay Equity

Most of the compensation systems aim at achieving internal and external pay equity. It may be noted that pay equity is achieved when the compensation received by an employee is equal to the value of the work done. Compensation policies are internally equitable when employees believe that the wage rates for their jobs approximate the job's worth to the organisation. Perceptions of external equity exist when the firm pays wages that are relatively equal to what other firms are paying for similar work.

Job vs. Individual Pay

Many organisations decide the minimum and maximum values of each job, independent of individual workers (who are placed in between these two extremes), ignoring their abilities, potential and the ability to take up multiple jobs. Such job-based pay systems may, in the end, compel capable employees to leave the company in frustration. To avoid such unfortunate situations, knowledge-based pay systems (or skill-based ones) have been followed increasingly in many modern organisations. In this case, employees are paid on the basis of the jobs they can handle or the talents they have that can be successfully exploited in various jobs and situations.

Below Market vs. Above Market Compensation

Small firms having no unions of employees may follow below market compensation. But they will have to face higher rate of labour turnover. Many large dynamic companies like Infosys, Wipro, TCS, etc., pay above market compensation to employees of certain groups in order to attract (and retain) 'the cream of the crop'. To grow rapidly and to get ahead of others in the race, especially in knowledge-based industries, leading companies prefer to pay above market salaries. Above market pay policy is also followed in well-established manufacturing units operating in a highly competitive environment.

Competency Base Pay vs. Broadbanding

A company following a skill-based or competency based pay system may use broadbanding to structure its compensation payments to employees. Broadbanding simply compresses many traditional salary grades (say 15 to 20 grades) into a few wide salary bands (three or four grades). By having relatively few job grades, this approach tries to play down the value of promotions. Depending on changing market conditions and organizational needs, employees move from one position to another without raising objectionable questions, (such as when the new grade would be available, what pay adjustments are made when duties change, etc.). As a result, movement of employees between departments, divisions and locations becomes smooth. Employees with greater flexibility and broader set of capabilities can always go in search of jobs in other departments or locations that allow them to use their potential fully. Broadbanding further helps reduce the emphasis on hierarchy and status. However, broadbanding can be a little unsettling to a new recruit when he is made to roll on various jobs. Most employees still believe that the existence of many grades helps them grab promotional opportunities over a period of time. An organisation having fewer grades may be viewed negatively,

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as having fewer upward promotion opportunities. Moreover, some of the employees may not want to move across the organisation into different areas.

Factors Affecting Formulation of Compensation Strategy

Reward strategy addresses the organisation's need to obtain, retain, and motivate committed, competent, experienced and loyal employees. The organisation's freedom to formulate reward strategy and set salary and wage rates is constrained by internal and external influences and obligations. Out of all such factors, it is the organisation's ability to pay and sustain high pay levels. Some other factors are:

(i) trade union pressures and bargaining position,

(ii) productivity,

(iii) government policies,

(iv) changes in technology, economy, labour market,

(v) cost of living increases, and

(vi) levels of skill and competence required.

Edward E. Lawler III lists nine strategic issues to be considered by organisations while making strategic choices about their total compensation. These issues are discussed below:

(1) Development of a Compensation Philosophy

An important strategic decision is whether to develop a compensation philosophy, and if yes, what to include in it. A well-developed philosophy can provide an important stability to the compensation practices of an organisation, which in turn increases the effectiveness of the system by giving it the necessary integrity and credibility. For example, salaries do not typically keep up with inflation because organisations usually tie the amount of pay increases to changes in the compensation market rather than to inflation. This approach is always difficult for organisations to explain and justify, but it is easier when they have a consistent well-articulated policy of meeting the market rather than meeting inflation. Generally, the following major issues form part of an organisation's compensation philosophy statement:

(i) Goals of compensation system

(ii) Communication policy

(iii) Decision making approach to the compensation issue

(iv) Desired market position

(v) Centralisation and Decentralisation in compensation policy formulation and administration

(vi) Desired mix between benefits and cash

(vii) Role of performance-based pay

(viii) Performance appraisal

(ix) Fit of compensation system with overall management philosophy of an organisation

(x) Approach to change in compensation policy and practice.

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(2) Process vs. Mechanics

It involves deciding relative weight to be put on the process issues and 'the mechanistic issues involved. Too often, the major weight seems to go into the development of the correct mechanics for administering pay. The problem with this approach is that there are no objectively right answers to what an individual should be paid, as people's reactions to their pay and its fairness are subjective. Therefore, process issues like communication policy and participation in the design and administration system can have an important impact on people's perceptions of their pay and their behavioural reactions to the pay system.

(3) Paying the Job vs. Paying the Person

Almost all job evaluation systems are keyed to determining the total compensation levels for jobs. In many cases, it is a reasonable approach, but it can be dysfunctional in many cases, such as:

(i) it can decrease people's motivation to acquire new skills and abilities,

(ii) it can encourage people to try to acquire more subordinates and more resources, even if they do not need them, just because job evaluation systems are often based on the size of people's budgets and the number of people who report to them.

Therefore, total compensation levels should be decided in the light of skills and abilities a person has.

(4) Means–End Relationship

Very often, compensation system becomes an end in itself, rather than a means to achieve organisational objectives. There is no magic formula for preventing the pay system from becoming an end, rather than a means. However, there is a strategic approach that can help. It involves the flexibility of the compensation system and its permanency. A measured displacement is likely to occur when a compensation system has been in place or a long period of time, and individuals have a particularly strong interest in seeing that it is maintained. This suggests at a strategic level that fairly frequent changes, adaptations, and updating of the compensation system are needed, and it should always be treated as a system that is open to change. It should go on to point out that the pay system will be evaluated regularly to ensure it produces desired outcomes – which are attraction, retention, and effective performance – rather than such pay a system which assures internal equity and well developed policies and procedures. Finally, it should stress that it needs to fit the environment in which the organisation operates.

(5) Internal vs. External Equity

Employees of an organisation compare their pay with people both inside and outside the organisation. The organisation has to decide what weightage is to be given to external equity and how much weightage to internal equity, as striving for both internal and external equity can result in individuals being overpaid further, leading to increase in total cost. Strategically, unless there is some particular need for internal equity to be exceptionally high, it would seem advisable for organisations to emphasize external pay comparisons. Though, both internal and external inequity have serious consequences for the organisation, the consequences of external in equity (e.g. turnover and absenteeism) are more severe compared to those of internal inequity (requests for internal transfers to better paying jobs, complaints, etc.) However, in practice, internal equity often gets more than its fair share of attention because of its immediacy in the organisation.

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(6) Surveying the Right Markets Establishing external equity demands good market data. The key is to gather market data on those jobs that the individuals, whose jobs are being evaluated, might move to. This is no simple task because people tend to make very different comparisons and have very different mobility opportunities. Depending on the individuals and their level in the organisation, it might be one of a very small number of jobs in a local community, or it might be a large number of jobs located all over the country, or even the world. Typically, instead of one survey, a set of surveys is needed covering the range of jobs which exist.

As a strategy, therefore, organisations should use a wide range of surveys and should be open to individuals bringing in surveying data that are relevant to their particular technical speciality. The survey data may also be made public within the organisation so that such data can be understood, and comments and suggestions may be received from people to whom such data is going to be applied. In other words, salary survey process should be demystified and made open to participation.

The participatory survey can reduce the negative consequences of surveying the wrong markets, i.e. either over-compensating or under-compensating. It may also help to disabuse some individuals of the view that "all these other companies are paying a lot more".

(7) Centralisation vs. Decentralisation The compensation system, like most other aspects of large organisations, can be designed and implemented either on centralised or decentralised basis. The choice between these two approaches is an important one for organisations. Each one has its unique advantages and disadvantages. The effectiveness of different approaches is determined by the environment in which the organisation operates and by the business strategy of the organisation. For example, the decentralised approach seems to be advisable in large organisations that are in multiple businesses and that operate in multiple locations. A centralised approach is usually quite appropriate in small organisations, and in large ones that are in a single business and in a single centralised location.

(8) Role of Performance in Determining Total Compensation Whether performance has a key impact on total compensation is a very important strategic issue. Normally, performance does not play a role in determining an individual's total compensation.

In many organisations, performance plays a very minor role. It is because either performance is not used to determine pay changes, or because the only thing that is determined by performance is pay raise and the variance between the best and the worst performer is too small to be significant. Instead of performance, seniority is more important in determining compensation.

Not relating pay to performance eliminates its role as a motivator. A high performer will try to leave the organisation, a low performer will continue to perform poorly, and a good candidate from outside would not like to join such organisation.

(9) Compensation Mix Employees are concerned not only with total compensation, but its break-up (as discussed in Chapter 2) as well. Even if total compensation remains the same, the behaviour of employees gets affected by its break-up. Therefore, organisations vary widely in the percentage of their total compensation costs that are allocated to cash and fringe benefits because there are large individual differences in people's preference for benefits and cash. One approach to solving this problem is cafeteria approach, as it gives wide choice to people in how they receive their compensation.

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Summary

The compensation system of any organisation is composed of many strategic decisions. The above discussion points out that there is no simple approach that works for all organisations. Each organisation needs to design its own compensation system to fit its own situation.

Questions

1. Explain the meaning of Strategic Compensation Management.

2. Define compensation strategy. What are its aims?

3. Explain the features of reward strategy.

4. Discuss the structure of reward strategy.

5. Explain the meaning and contents of reward strategy.

6. How is a reward strategy developed? Explain.

7. Discuss the factors affecting strategy formulation.

8. Examine the alternatives in formulating compensation strategy.

9. Write short notes on the following:

(a) Fixed vs. Variable Pay.

(b) Competency Pay vs. Broadbanding.

(c) Below Market vs. Above Market Compensation.

References

1. Armstrong, Michael and Murlis Helen (2005), Reward Management, Kogan Page India, New Delhi, p.30-47.

2. Borwn D (2001), Reward Strategies: From Intent to Impact, CI PD, London, p. 327-28.

3. Cook, Mary F. (2001), The Complete Do-It-Yourself – Human Resource Department, Prentice- Hall, New Jersey.

4. Curie Donald (1997), Personnel in Practice, Blackwell, U.K., p. 257.

5. Flannery T, Hofrichler, D. and Platten, P. (1996), People, Performance and Pay, The Free Press, p 20-21.

6. Lawler, Edward E. "Determining total Compensation: Strategic Issues" in Foulkes Fred K (ed.) (1986), Strategic Human Resource Management, Prentice- Hall, New Jersey, p. 216-227.

7. Mintzberg, H. QuinnJ.B. andJames, R.M. (1988), The Strategy Process, Concepts, Contexts and Cases, Printice- Hall, Englewood, Cliffs, Nj.

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8. Stredwick, John (2000), An Introduction to Human Resource Management, Butterworth Heinemann, Oxford, p. 274-278.

9. Rothwell, Williamj. and Kazanas H.C. (2003), Planning and Managing Human Resources, HRD Press Inc., Massachusetts, P. 455.

10. Wheelen, Thomas L., and Hunger, J. David (2002), Strategic Management and Business Policy, Pearson Education Asia, Singapore.

11. www.hrsource.org.

12. www.altavista.com.

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Lesson-4

Corporate Strategy; Career Development; Organization Development Industrial Relations; Workforce Diversity

Corporate Strategy A corporate strategy entails a clearly defined, long-term vision that organizations set, seeking to create corporate value and motivate the workforce to implement the proper actions to achieve customer satisfaction. In addition, corporate strategy is a continuous process that requires a constant effort to engage investors in trusting the company with their money, thereby increasing the company’s equity. Organizations that manage to deliver customer value unfailingly are those that revisit their corporate strategy regularly to improve areas that may not have delivered the aimed results. Corporate strategies may pertain to different aspects of a firm, yet the strategies that most organizations use are cost leadership and product differentiation.

Cost leadership is a strategy that organizations implement by providing their products and services as low as consumers are willing to pay, thereby being competitive and realizing a volume of sales that allows them to be the leaders in the industry. Typical examples of cost leaders are Walmart in the retail industry, McDonald’s in the restaurant industry, and Ikea, the furniture retailer that offers low-priced, yet good quality home equipment by sourcing its products in emerging markets, thereby having a high-profit margin.

Product differentiation refers to the effort of organizations to offer a unique value proposition to consumers. Typically, companies that manage to differentiate their products from the competition are gaining a competitive edge, thereby realizing higher profits. Often, competitors employ cost leadership to directly compete with these companies; yet, customer satisfaction and customer loyalty are the factors that eventually make or break a strategy.

Other examples of corporate strategies include the horizontal integration, vertical integration, and the global product strategy, i.e. when multinational companies sell a homogenous product around the globe.

Corporate strategies are always growth-oriented, seeking to retain a company’s existing customer base while attracting new customers.

In brief, corporate strategy means a company’s vision and tactics to outperform its competition.

Career Development Career development is indispensable for implementing career plans. It consists of activities undertaken by the individual employees and the organization to meet career aspirations and job requirements. The most important requirement of career development is that every employee must accept his/her responsibility for development.

Steps in Career Development:

1. Challenging Initial Jobs: Generally, employees who receive challenging job assignments early in their careers do better on latter jobs. Apparently, initial challenges, particularly if they are successfully met, stimulate a person to perform well in subsequent years.

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2. Dissemination of Career Option Information: As managers identify career paths that successful employees should follow within the organization, they should make this information available. If, for example, the organization prefers candidates for middle management position to have some job exposure in the manufacturing side of the business, this information should be disseminated throughout the organization.

3. Job Postings: To provide information to all employees about job openings, management can use job postings. The posting lists the abilities, experience and seniority requirements to qualify for particular vacancies. Job posting provides a channel by which the organization lets employees know what jobs are available and, for future reference, what requirements they will have to fulfil to achieve the promotions to which they may aspire.

4. Assessment Centres: By putting people through assessment centres, managers can obtain observable evidence of their ability to do certain jobs. In this role of an assessor, individuals learn how to observe behaviour carefully, to make inference from observations, and to give feedback to the assessees. It shows the importance of performance appraisal. It makes assessors more aware of what is involved in the process of development and this awareness can provide valuable insights into their own career development.

5. Continuing Education and Training: The education and training in an effective career development programme could include on-the-job training, educational or skill course offered within the organization or outside courses provided by colleges, universities or specialized institutes.

6. Career Development Workshops: By bringing together groups of employees with their supervisors and managers, problems and misconceptions can be identified and resolved. Discussion can focus on those areas where mismatches are identified. These workshops frequently include self-diagnostic activities for employees, diagnosis of the organization, etc.

7. Periodic Job Changes: Job changes can take the form of vertical promotion, lateral transfer or assignments. Varied experiences present new tests to the individual, which, if successfully surmounted, build confidence and provide positive feedback that can encourage accepting new challenges and greater responsibilities.

8. Sabbaticals (Leave granted at intervals): An extended leave can allow time for attending executive development conferences, uninterrupted reading, accepting a visiting lectureship at a university, or other such activities that may enhance one’s career development. A period of time away from the organization may allow such individuals to develop new, non-work related interest, to come to terms with the levelling of their career, and to put their work into a life perspective.

For employees at lower levels in the organization, the idea of sabbaticals lies in continuing education and training to facilitate the learning of new skills that will make career advancement feasible.

Organization Development While career development talks about individual employees, organization development (OD) is the study of successful organizational change and performance. OD emerged from human relations studies in the 1930s, during which psychologists realized that organizational structures and processes influence worker behaviour and motivation. More recently, work on OD has expanded to focus on aligning organizations with their rapidly changing and complex environments through organizational

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learning, knowledge management and transformation of organizational norms and values. Key concepts of OD theory include: organizational climate (the mood or unique “personality” of an organization, which includes attitudes and beliefs that influence members’ collective behaviour), organizational culture (the deeply-seated norms, values and behaviours that members share) and organizational strategies (how an organization identifies problems, plans action, negotiates change and evaluates progress).

Industrial Relations Strategy An IR Strategy is an expression of an enterprise’s capacity to develop and implement a sound industrial relations management plan which ensures that industrial relations issues and risks are identified, assessed and managed. The IR Strategy should demonstrate the integration of industrial relations requirements with the normal procedures, practices and performance standards of the enterprise.

It involves an enterprise:

developing a policy statement on industrial relations management that has the total support of management.

defining responsibilities for industrial relations management within the enterprise.

identifying resources and procedures for implementing required industrial relations management measures.

having planning processes and procedures in place that enable identification of potential industrial relations issues, and facilitate the development of measures to minimize impacts.

outlining methods used to assess the capacity of subcontractors to understand and comply with their industrial relations responsibilities, and

establishing procedures to review and monitor the implementation of measures which support the IR Strategy and to initiate corrective action when required.

Factors Affecting Employee Relations Strategy Two sets of factors, internal as well as external, influence an IR strategy.

The internal factors are:

1. The attitudes of management towards employees and unions.

2. The attitudes of employees towards management.

3. The attitudes of employees towards unions.

4. The inevitability of the differences of opinion between management and unions.

5. The extent to which the management can or wants to exercise absolute authority to enforce decisions affecting the interests of employees.

6. The present and likely future strength of the unions.

7. The extent to which there is one dominating union or the existence of multiple unions leading to inter-union rivalry.

8. The extent to which effective and agreed procedures for discussing and resolving grievances or handling disputes exist within the company.

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9. The effectiveness of managers and supervisors in dealing with problems and disputes related to IR.

10. The prosperity of the company, the degree to which it is expanding, stagnating or running down and the extent to which technological changes are likely to affect employment conditions and opportunities.

The external factors affecting IR strategy are:

1. The militancy of the unions, nationally or locally.

2. The effectiveness of the union and its officials, and the extent to which the officials can and do control the activities of supervisors within the company.

3. The authority and effectiveness of the employer’s association.

4. The extent to which bargaining is carried out at national, local or plant level.

5. The effectiveness of any national or local procedure agreements that may exist.

6. The employment and pay situation, nationally and locally.

7. The legal framework within which IR exists.

Main Stakeholders in Industrial Relations IR is a complex system comprising inter-relation among workers (Employees), Managers (Employers) and Government.

1. Employees: Employees with their various characteristics (Skills, knowledge, commitment, attitude, etc.) affect and are affected by the system or IR. They perceive IR as a means to improve their conditions of employment, sort out their grievances and exchange their ideas with the management, thus, participate in organizational decision making.

2. Employees: Employees with their various characteristics (skills, knowledge, commitment, attitude, etc.) affect and are affected by the system of IR. They perceive IR as a means to improve their conditions of employment, sort out their grievances and exchange their ideas with the management, thus, participate in organizational decision making.

3. Employers: IR helps developing machinery to avoid disputes, creating and sustaining employee motivation, ensuring employees’ commitment, achieving higher efficiency, negotiating terms and conditions of employment, sharing decision making with employees.

4. Government: Role of the government changes with the change in industrial environment and management perspectives. Till 19th century, the government had adopted the policy of laissez faire, but towards the end of 19th century, the government started intervening in the matters of IR. Today, the government has a regulatory role and uses machinery of labour courts, industrial tribunals, enquiry committees, etc.

Considering all these three parties to formulate IR strategy is called TRIPARTITE APPROACH.

STRATEGIES for Improving IR

1. Impact of Trade Unionism

Unions have a crucial role to play in IR. Unions have broad objectives, which are:

a. To redress the bargaining advantage of the individual worker vis-a-vis the individual employer, by substituting joint or collective action for individual action,

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b. To secure improved terms and conditions of employment for their members and the maximum degree of security to enjoy these terms and conditions,

c. To obtain improved status for the worker in his or her work, and

d. To increase the extent to which unions can exercise democratic control over decisions that affect their interests by power sharing at the national, corporate and plant levels.

The union power is exerted primarily at two levels – at the industry level, to establish joint regulation on basic wages and hours with an employer's association or its equivalent; and at the plant level, where the shop stewards' organizations exercise joint control over some aspects of the organization of the work and localized terms and conditions of employment. Unions are a party to national, local and plant level agreements which govern their actions to a greater or lesser extent, depending on their power, and on local circumstances.

Employers are also directly involved in any dispute between them and the employees. Employers are endowed with certain inalienable rights vis-a-vis labour. The management has the right to hire and fire any worker, notwithstanding union restrictions. It is not just firing a worker here or there, but the management's ability to control the economic destiny of the workers that matters. The management has the right to relocate, close, merge, take over or sell a particular plant. These actions affect workers' interests. The management has another powerful weapon – introducing or threatening to use technological change. Technological change can displace labour or annihilate skills.

Armed with these rights, the management resorts to several tactics to break a strike, some of them even unethical. The management is known to adopt dubious means to forego a strike, call off a strike, or tone down union demands. The management often breaks a powerful union, sets one faction against another, and favours the more satisfied and the less militant workers. Loyal workers from sister concerns are brought in on the pretext of a factory visit, and are induced into the plant and advised to break the strike.

2. Grievance Procedure: A step by step management

Grievance procedure is a formal communication between an employee and the management designed for the settlement of a grievance. These grievance procedures differ from organization to organization.

The 15th session of Indian Labour Conference held in 1957 emphasized the need of an established grievance procedure for the country which would be acceptable to unions as well as management. In the 16th session of Indian Labour Conference, a model for grievance procedure was drawn up. This model helps in creation of grievance machinery. According to it, workers’ representatives are to be elected for a department or their union is to nominate them. Management has to specify the persons in each department who are to be approached first and the departmental heads who are supposed to be approached in the second step. The draft Model Grievance Procedure was accepted by the labour conference in 1958. It specifies the details of all the steps that are to be followed while redressing grievances. These steps are:

a. An aggrieved employee shall first present his grievance verbally in person to the officer designated by the management for this purpose. The response shall be given by the officer within 48 hours of the presentation of the complaint. If the worker is not satisfied with the decision of the officer or fails to receive the answer within 48 hours, he will, either in person

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or accompanied by his departmental head, present his grievance to the head of the department.

b. The head of the department shall give his answer within 3 days, or if action cannot be taken within this period, the reason for delay should be recorded. If the worker is dissatisfied with the decision of the departmental head, he may request that his grievance be forwarded to the Grievance Committee. The Grievance Committee shall make its recommendation to the manager within 7 days of the workers’ request. If a decision cannot be given within this period, the reason should be recorded. Unanimous decision of the committee shall be implemented by the management. If there is a difference of opinion among the members of the committee, the matter shall be referred to the manager, along with the views of the members and the relevant papers for final decision.

c. In either case, the final decision of the manger shall be communicated to the employee within three days from the receipt of the Grievance Committee's recommendations.

d. If the worker is not satisfied even with the final decision of the manager, he may have the right to appeal to the manager for revision. In making this appeal, he may take a union official with him to facilitate discussion with the management. The management will communicate the decision within 7 days of workman's revision petition.

e. If worker is still not satisfied, the mater may be referred to voluntary arbitration. f. Where a worker has taken a grievance for re-address under the grievance procedure, the

formal conciliation machinery shall not interview till all steps in the procedure have exhausted. A grievance shall be presumed to assume the form of a dispute only when the final decision of top management is turned down by the worker.

The Grievance Committee shall consist of 4 to 6 members.

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3. Disciplinary Procedure

Maintenance of harmonious human relations in an organization depends upon the promotion and maintenance of discipline. No organization can prosper without discipline. Discipline has been a matter of utmost concern for all organizations. Maintenance of effective discipline in an organization ensures the most economical and optimum utilization of various resources, including human resources. Thus, the objective of discipline in an organization is to increase and maintain business efficiency. Effective discipline is a sign of sound human and industrial relations and organizational health.

Approaches to Discipline

1. Human relations approach: The employee is treated as a human being and his acts of indiscipline will be dealt from the viewpoint of values, aspirations, problems, needs, goals behaviour, etc. Under human relations approach, the employee is helped to correct his deviations.

2. Human resources approach: The employee is treated as a resource and the acts of indiscipline are dealt by considering the failure in the areas of development, maintenance and utilization of human resources group discipline approach.

3. The leadership approach: The group as a whole sets the standards of discipline and punishments for the deviations. The individual employees are awarded punishment for their violation under the group discipline approach. Every superior administers the rules of discipline and guides, trains and controls the subordinates regarding disciplinary rules.

4. Judicial approach: In this approach, in-disciplinary cases are dealt on the basis of legislation and court decisions. The Industrial Employment (Standing Orders) Act, 1946, to a certain extent, prescribed the correct procedure that should be followed before awarding punishment to an employee in India. No other enactment prescribed any procedure for dealing with disciplinary problems. But over a period of time, a number of principles regarding the basic formalities to be observed in disciplinary procedures emerged, gradually resulting from the awards of several Industrial Tribunals, High Courts and the Supreme Court, and the Principles of Natural Justice.

Managerial Perspectives’ Impact on IR Strategies

1. Unitary systems approach: The organization is perceived as an integrated and harmonious system, viewed as one happy family. A core assumption of unitary approach is that management and staff, and all members of the organization, share the same objectives, interests and purposes; thus working together, hand-in-hand, towards the shared mutual goals. Furthermore, unitary has a paternalistic approach, where it demands loyalty of all employees. Trade unions are deemed as unnecessary and conflict is perceived as disruptive.

2. Pluralistic approach: The organization is perceived as being made up of powerful and divergent sub-groups – management and trade unions. This approach sees conflicts of interest and disagreements between managers and workers over the distribution of profits as normal and inescapable. Consequently, the role of management would lean less towards enforcing and controlling and more toward persuasion and co-ordination. Trade unions are deemed as legitimate representatives of employees. Conflict is dealt by collective bargaining and is

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viewed not necessarily as a bad thing, and if managed, could in fact be channelled towards evolution and positive change. Realistic managers should accept conflict to occur. There is a greater propensity for conflict rather than harmony.

3. Marxist approach: This perspective focuses on the fundamental division of interest between capital and labour, and sees workplace relations against this background. It assumes that conflicts are a by-product of a Capitalist system. It is concerned with the structure and nature of society and assumes that the conflict in employment relationship is reflective of the structure of the society. Conflict is therefore seen as inevitable and trade unions are a natural response of workers to their exploitation by capital.

4. Psychological approach: Psychologists are of the view that problems of industrial relations are deeply rooted in the perception of attitude of focal participants. Management and labours perceive each other differently and consider the other as less dependable and more deficient in thinking about the emotional characteristic and inter-personal relations. Conflict emerges as a result of negative perception of behaviour of the actors (management and workers). Interpersonal and intergroup relations breed disharmony in the system.

5. Sociological approach: Differences in personal factors like education, attitude, culture, behaviour, emotions, etc., create conflicts and competition among members of the industrial society. Industrial relations are shaped by society, as there are many factors inside and outside industry that affect Industrial Relations. Moreover, the process of change makes IR more complex, which would further complicate with time.

6. Socio-ethical approach: Good IR can be maintained only when both, labour and management realize their moral responsibility in contributing to the said task through mutual cooperation and greatest understanding of each other’s problem. Both goals of labour-management relations may be stated as maximum productivity, adequate understanding among parties to IR regarding the roles that other parties play, and willingness among parties to co-operate as partners in IR.

7. Human relations approach: When resources are not managed properly, problem of Industrial Relations surfaces, which can only be managed by understanding and managing the dynamics of human behaviour at individual, group and organizational level. A common denominator in all conflicts is the dissatisfied needs of individual. The approach also stresses that human needs keep on changing, right from basic needs to self-actualization, and attention needs to be drawn to them. At the same time, suitable motivational strategies should be used for optimum employee satisfaction.

8. HRD approach: It recognizes employees as the greatest assets in an organization, and believes that they can be developed to unlimited extent with proper incentives, atmosphere and treatment. The methodology used in HRD approach includes diagnosis of the problem and designing interventions to bring about necessary changes.

9. Gandhian approach: It is based on the fundamental principles of truth, non- violence and non-possession. If employers follow the principle of trusteeship, there is no scope for conflict. Workers should seek redressal through collective action. Workers can resort to ‘Satyagraha’ to have their grievances redressed. Gandhiji accepted that workers can go on strike, but this should be exercised in a peaceful and non-violent manner, and this should be the last resort.

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Workforce Diversity

Workforce diversity is a workforce consisting of broad mix of workers from different racial and ethnic background of different ages and genders and of different domestic and national cultures. It refers to policies and practices that seek to include people within a workforce who are considered to be, in some way, different from the dominant group in the organization.

Dimensions of Workforce Diversity

1. Primary Dimension: it mainly includes inborn differences like age, race, ethnicity, gender, physical ability, and sexual orientation.

2. Secondary Dimension: it mainly includes education, religion, beliefs, marital status, family background, work culture, citizenship status, military/civilian service, and mental and physical conditions, as well as other distinct differences between people.

Goals of Workforce Diversity

1. To identify, attract and retain the best people of each group, 2. To create a workplace where talent can perform at its best to maximise shareholders’ value, 3. To assess and understand the diversity of the market place.

Factors that Motivate Organizations to Diversify Workforces/Benefits of Diversity, both to Employees and Employers

1. Fulfillment of Social Responsibility: As many of the beneficiaries of good diversity practices are from disadvantaged groups of society.

2. As an imperative resource: Available talent is now overwhelmingly represented by people from a vast array of backgrounds and experiences. Competitive organizations cannot allow discriminatory preferences and practices to impede them from attracting the best available talent within that pool. So, workforce diversity helps in attracting and retaining highly talented people.

3. As an Economic payback: Many groups of people who have been excluded from workplaces are consequently reliant on government funded (i.e. tax funded) social service programmes. Diversifying the workforce through initiatives like affirmative actions (in USA) and reservations (in India) in public sector organizations, can effectively turn tax users into tax payers.

4. As a Legal Requirement: Many private sector organizations are now under legislative mandates to be non-discriminatory in their employment practices. Non-compliance with Equal Employment Opportunities or Affirmative Action (USA) and reservations to certain categories in India, can result in and/or loss of contracts with Government agencies. In the context of such legislations, it makes sense to utilize a diversified workforce.

5. As a Marketing Strategy: In today’s global economy, buying power is represented by people from all walks of life (ethnicities, races, ages, abilities, genders, etc.). In this varied customer environment, it becomes imperative for organizations to hire people from all walks of life for their specialized insights and knowledge to ensure that their products and services are designed to appeal to diverse customer base. Thus, diversity enables more successful marketing to different types of customers.

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6. As a Communication Strategy: All organizations are seeing a growing diversity in the workforce around them, their vendors, partners and customers. Organizations that choose to keep homogeneous workforces will likely find themselves increasingly ineffective in their external interactions and communications. So, diversified workforce is able to communicate effectively with different stakeholders of the organization.

7. As a Capacity-building Strategy: In the present business climate, company’s property depends on the capacity to effectively solve problems, rapidly adapting to new situations, readily identifying new opportunities and quality capitalizing on them. The capacity can be measured by the range of talent, experience, knowledge, insight and imagination available in the workforces, which is more if the workforces are diversified.

8. Highly Motivated and Committed Workforce: The act of recognizing diversity also allows for those employees with these talents to feel needed and have a sense of belonging, which in turn increases their commitment to the company and allows each of them to contribute in a unique way.

9. Helps organizations in Globalizing: Diversity provides organizations with the ability to compete in global markets. Simply recognizing diversity in a corporation helps link the variety of talents within the organization.

10. It strengthens cultural values within the organization.

11. It enhances corporate reputation.

12. It enhances service levels and customer satisfaction.

Challenges

Workforce diversity also brings with it a number of challenges.

1. People who spend significant amounts of energy coping with an alien environment have less energy left to do their jobs. It also decreases the productivity of organizations.

2. Managing diversity is more than simply acknowledging differences in people. A major challenge is miscommunication within an organization. There are competencies, however, which help to develop effective communication in diverse organizational environments. These skills include self-monitoring, empathy, and strategic decision-making.

(a) Self-monitoring refers to a communicator’s awareness of how his/her behaviour affects another person along with his/her willingness to modify this behaviour based on knowledge of its impact.

(b) Empathy enables the receiver to go beyond the literal meaning of a message and consider the communicator’s feelings, values, assumptions, and needs.

(c) In diversified cultures, a message meaning can never be completely shared because no two individuals experience events in exactly the same way. Each interprets messages and discerns meanings based on their unique standpoint.

3. Maintaining a culture which supports the idea of employee voice especially for marginalized group members. When the organizational environment is not supportive of dissenting viewpoints, employees may choose to remain silent for fear of repercussions, or they may

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seek alternative safe avenues to express their concerns and frustrations such as on-line forums and affinity group meetings.

Disadvantages of Workforce Diversity It may be difficult to bring together employees of different cultures due to:

• communication barriers,

• resistance to change, and

• negative attitudes towards diversity.

Meetings and discussions are to be arranged while dealing with what should be a simple issue, i.e. communication.

Strategies to Manage Diversity Managing diversity in the workplace presents a set of unique challenges for HR professionals. These challenges can be mitigated if an organization makes a concerted effort to encourage a more heterogeneous environment through promoting a culture of tolerance, open communication and creating conflict management strategies to address issues that may arise. All the approaches to managing diversity can be divided into two categories: Individual Approaches which can be learning and Empathy; and Organizational Approaches in the form of testing, training, and mentoring. Tips for managing diversity in the workplace are:

• Prioritize communication: To manage a diverse workplace, organizations need to ensure that they effectively communicate with employees. Policies, procedures, safety rules and other important information should be designed to overcome language and cultural barriers by translating materials and using pictures and symbols whenever applicable.

• Treat each employee as an individual: Avoid making assumptions about employees from different backgrounds. Instead, look at each employee as an individual and judge successes and failures on the individual’s merit rather than attributing actions to their background.

• Encourage employees to work in diverse groups: Diverse work teams let employees get to know and value one another on an individual basis and can help break down preconceived notions and cultural misunderstandings.

• Base standards on objective criteria: Set one standard of rules for all groups of employees, regardless of background. Ensure that all employment actions, including discipline, follow this standardized criteria to make sure each employee is treated the same.

• Be open-minded: Recognize, and encourage employees to recognize, that one’s own experience, background, and culture are not the only things with value to the organization. Look for ways to incorporate a diverse range of perspectives and talents into efforts to achieve organizational goals.

• Although the standpoint of the dominant group will often carry more weight, a transformational leader will encourage conflicting standpoints to coexist within an organization, which will create a forum for sanctioned conflict to ensue. No organization can prosper without discipline.

Summary

A corporate strategy entails a clearly defined, long-term vision that organizations set, seeking to create corporate value and motivate the workforce to implement proper actions to achieve customer

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satisfaction. Corporate strategies may pertain to different aspects of a firm, yet the strategies that most organizations use are cost leadership and product differentiation. Career development is indispensable for implementing career plans. Organization Development (OD) is the study of successful organizational change and performance. Grievance procedure is a formal communication between an employee and the management designed for the settlement of a grievance.

References

1. Parvathy (April 2013), Industrial Relations. Accessed at www.slideshare.net/Parv32/industrial-relations in October 2018.

2. Tutorial on IR Strategy in Industrial Relations Management. Accessed at www.wisdomjobs.com in October 2018.

3. Patwardhan, Vivek S (March 2017), “Strategic Industrial Relations for Competitive Advantage”, The SHRM SouthAsia Blog. Accessed at http://blog.shrm.org in October 2018.

4. Rastogi, Savita, Management of Human Resource, New Delhi: Classical Publishers.

5. Kumudu (2011), Workforce Diverssity, accessed at www.slideshare.net/kumudu737sjp/ workforce-diversity in October 2018.

6. Dyson, Eric (2017), Getting Right Understanding Managing Diversity in Workplace. Accessed at www.peoplescout.com in October 2018.

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Lesson-5

Employee Separation, Retrenchment and Retention

Definition

Employee separation has been defined as negative recruitment. It may be in the form of resignation, dismissal or discharge, suspension, retrenchment or lay-off. Employee separation constitutes the final stage in the staffing process of an organization.

Types of Separation

Separation is classified basically into three types.

Compulsory Separation: The employee is separated due to the expiration of an employment contract.

Employment-at-will doctrine: In the absence of a specific contract, either an employer or employee could sever the employment relationship at any time. These can be of two types:

Voluntary separation refers to the separation of employees on their own request. This is the most common form of employee separation, particularly during boom periods.

Involuntary separation means the separation of employees for organizational reasons which are beyond the control of the employees. In recessionary times, involuntary separation or the act of asking the employee to leave by management is quite common.

The difference in voluntary and involuntary forms of separation is that for voluntary exits, the employee stands to get most of the benefits and perks due to him or her, whereas when an employee is asked to leave, he or she might get a separation package or in instances where disciplinary or performance related exits take place, the employee might not get anything at all.

Reasons for Separation

Voluntary Separation

Voluntary separations are initiated by employee (often those the company would prefer to keep). Voluntary separation, which normally begins after a request is placed in this regard by the employee, can be of two types – avoidable and unavoidable. Further, they can be professional reason and personal reasons.

Professional reasons: Employees may seek separation when they decide to seek better positions, responsibilities and status outside the present organization. Efficient employees would seek to expand their realm of knowledge and skills continuously by working in different capacities/ positions in various organizations. In their quest for greater responsibility, power and status, they may seek separation from the organization.

Personal unavoidable reasons: The important personal reasons for voluntary separation are relocation for family reasons, like marriage and health crisis of family members, maternity and child-rearing. For instance, when working women get married, they often prefer to settle in the partner’s

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place of occupation. Similarly, an employee may seek voluntary separation to look after the child or parent.

Personal Avoidable Reasons: Lack of growth, internal pay equity, management, workload, etc.

Some of the common reasons for employees to leave organizations can include the following:

A poor match between the job and the skills of the employee. This issue is directly related to the recruitment process. When a poor match occurs, it can cause frustration for the employee and for the manager. Ensuring the recruitment phase is viable and sound is a first step to making sure the right match between job and skills occurs.

Lack of growth. Some employees feel “stuck” in their job and don’t see a way to have upward mobility in the organization. Implementing a training plan and developing a clearly defined path to job growth is a way to combat this reason for leaving.

Internal pay equity. Some employees, while they may not feel dissatisfied with their own pay initially, may feel dissatisfaction when comparing their pay with others.

Management. Many employees cite management as their reason for leaving. This can be attributed to over-managing (micromanaging) people, managers not being fair or playing favourites, lack of or poor communication by managers, and unrealistic expectations of managers.

Workload. Some employees feel their workloads are too heavy, resulting in employees being spread thin and lacking satisfaction from their jobs, and possibly, lack of work-life balance as a result.

INVOLUNTARY SEPARATION initiated by the organization (often among those who would prefer to stay). An involuntary separation is caused by factors which remain beyond the purview of the employees. However, these factors may be classified broadly into health problems, behavioural problems and organizational problems.

Health problems. Major health problems crippling the employees may make them invalid or unfit to continue in the profession. For instance, accidents causing permanent disabilities and illness of the employees like brain stroke and other terminal illnesses can lead to their involuntary separation. Death of employees is another factor which results in their involuntary separation.

Behavioural problems. An employee's objectionable and unruly behaviour within the organization may also lead to his involuntary separation from the organization. When the employee’s behaviour is unethical or violates the code of conduct in force, the organization may initiate disciplinary actions, which may eventually result in his termination. This may constitute an act of involuntary separation. Consistent failure to reach performance goals by an employee can also result in his involuntary separation.

Organizational problems. Organizational problems are another important factor that contributes to the involuntary separation of employees. The poor financial performance of an organization may cause it to terminate the services of some of its employees as part of cost control measure. Such terminations are also classified as involuntary separation. Similarly, automation, organizational restructuring and rationalization can also result in employee termination, discharge or lay-off, broadly called involuntary separation.

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Components of the Employee Voluntary Separation Process

The employee separation process starts from the time the employee gives notice to his or her employer about the intention to quit. This is usually called “putting in one’s papers”, because in earlier times, an employee was required to submit a formal resignation letter, though in recent times, this is being done by email. Once the employee gives notice, all the financial transactions and records of the employee are “frozen” by the HR department and the employee’s manager is tasked with the process of ensuring proper handover and closure of work tasks allotted to the employee. Usually, the notice period ranges from a month to two to three months, depending on the level at which the employee is working. Further, there has to be a well-defined handover plan drawn up by the employee’s manager that covers all aspects of closing out on the work that the employee is performing.

Participants in the Employee Voluntary Separation Process

Typically, the employee separation process proceeds along two parallel tracks. One involves the employee and the manager and is concerned with the handover of work and other tasks. The other track is by the separations team and deals with the employee benefits accruing as a result of separation as well as other benefits like PF (Provident Fund), Gratuity (if applicable), etc. The HR manager is needed at all steps of this process and in the final exit interview that is conducted to assess the reasons for the employee leaving the company and taking the employee’s views on work and the company in general as well as any “de-motivating” factors that might have caused the employee to resign.

Managing Separations

Employee separation is a sensitive issue for any organization. To compete, organizations must ensure that good performers are motivated to stay and chronically low performers are allowed, encouraged, or if necessary, forced to leave. The permanent separation of employees from an organization requires discretion, empathy and a great deal of planning. Each organization must have comprehensive separation policies and procedures to treat the departing employees equitably and ensure a smooth transition for them.

Attrition is economically damaging to the organizations as replacement employees have to be hired and trained at a cost. Further, losing employees who are well versed with the organizational culture can mean a loss of valuable resources that lead to a situation where the organization stands to miss the potential value adding activities of the employees. It is for this reason that HR managers and organizations take attrition seriously and consider ways and means to curb the same. Employee retention is a set of actions designed to keep good employees once they have been hired as that is beneficial for the organization.

In HR, we can separate the costs associated with turnover into indirect costs and direct costs. Direct turnover costs include the cost of leaving, replacement costs, and transition costs, while indirect turnover costs include the loss of production and reduced performance. The following are some examples of turnover costs (see table):

Recruitment of replacements

Administrative hiring costs

Lost productivity associated with the time between the loss of the employee and hiring of the replacement

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Lost productivity due to a new employee learning the job

Lost productivity associated with co-workers helping the new employee

Costs of training

Costs associated with the employee’s lack of motivation prior to leaving

Sometimes, the costs of trade secrets and proprietary information shared by the employee who leaves

Public relations costs

To avoid these costs, development of retention plans is an important function of the HR strategic plan. Retention plans outline the strategies the organization will use to reduce turnover and address employee motivation.

Direct Indirect

Recruitment costs Lost knowledge

Advertising costs for new position Loss of productivity while new employee is brought up to speed

Orientation and training of new employee Cost associated with lack of motivation prior to leaving

Severance costs

Cost associated with loss of trade secrets Testing costs

Time to interview new replacements

Time to recruit and train new hires

Table: Turnover Costs

Managing Compulsory Separations: As compulsory/ auto separation is occurring due to expiry of employment contract, either the time period is over or the work for which hiring was done, is either completed or has become impossible to implement, nothing much is required to be done to manage such termination. Still, exit interviews can be taken of such leaving employees and employee assistance programmes (mentioned later) can also be offered.

Managing Involuntary Separations (Retrenchment): Retrenchment is something akin to downsizing. When a company goes through retrenchment, it reduces expenditures in an attempt to become more financially solvent. Corporate downsizing is the process of reorganizing a company’s structure in a manner that brings about lay-offs of a portion of the company’s workforce. It may be due to economic downturns or business loss. A severance agreement is a contract, or legal agreement, between an employer and an employee that specifies the terms of an employment termination, such as a layoff. Sometimes this agreement is called a "separation" or "termination" agreement or "separation agreement general release and covenant not to sue." Like any contract, a severance agreement must be supported by "consideration". Consideration is something of value to which a person is not already entitled that is given in exchange for an agreement to do, or refrain from doing, something. Violence

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in the workplace caused by involuntary turnover has become a major organizational problem in recent years. A standardized, systematic approach to discipline and discharge is necessary.

In such situations, Employee Assistance Programmes should be developed. These programmes can be in the form of outplacement counselling which helps displaced employees manage the transition from one job to another, provides services such as job search support, résumé critiques, job interviewing training and networking opportunities may be provided in-house or through an outside source, aims at helping people realize that other opportunities exist.

Managing Voluntary Separations (Retention)

Plans should be developed to address employee turnover, resulting in a more effective organization. Organizations should never harass the employees, especially in the case of voluntary separation, just because they are quitting the organization. In fact, a quitting employee of the organization must be seen as a potential candidate of the future for the organization and also the brand ambassador of its HR policies and practices. However, many organizations are still treating their employees as “expendable resources” and discharging them in an unplanned manner whenever they choose to do so. Some steps required to be taken are:

The Red Lists and Risk Management

In many organizations, managers are asked to identify potential cases of attrition before the employee actually puts in his or her papers. For instance, many multinationals have the practice of asking their managers to prepare lists of potential employees who are likely to quit. This “red list” is then sent to the managers’ supervisor and the HR manager so that when the employee actually quits or even does not quit, the organization is prepared for the quitting event or counselling the employee against quitting. The latter scenario happens when the employee is deemed valuable to the organization and the manager identifies such attrition as being a loss to the company. Further, attrition is also managed by the HR department organizing periodic one on one sessions with the middle management and the managers having the same one on one session with their employees. The rationale for such sessions is that the employees would vent their frustrations or lack of comfort with the manager or with the organization and hence, ways and means can be found to address the employees’ concerns.

Grievance Redressal

Any employee retention strategy would necessarily include a plan for redressing employee grievances and ways and means to address employee issues. This would mean that the employees would be enabled to take their issues regarding pay, their work, their role, etc., to the HR manager for each division and expect to get a fair hearing in the process. There should be a plan where the HR manager in conjunction with the manager of the employee who has raised the issue works towards resolving the issue.

Conducting employee satisfaction surveys

Any type of survey can provide information on the employee’s satisfaction with their manager, workload, and other satisfaction and motivational issues. However, a few things should be considered when developing an employee satisfaction survey are:

Communicate the purpose and goal of the survey.

Once the survey is complete, communicate what changes have been made as a result of the survey.

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Assure employees their responses will be anonymous and private.

Involve management and leadership in the survey development.

Ask clear, concise questions that get at the root of morale issues.

If, in any case, employee decides to leave, exit interviews of employees who are leaving the organization should be conducted. They can provide important retention information. An exit interview is an interview performed by HR or a manager that seeks information as to what the employee liked at the organization and what they see should be improved. Exit interviews can be a valuable way to gather information about employee satisfaction and can serve as a starting point for determining any retention issues that may exist in the organization. However, the exit survey data should be reviewed over longer periods of time with several employees, so we can be sure we are not making retention plans based on the feedback of only a few people.

Sample Exit Interview Questions

What is your primary reason for leaving?

What did you like most about your job?

What did you like least about your job?

Did you feel there was room for growth in your job?

What incentives did you utilize while at our company?

Which incentives would you change and why?

Did you have enough training to do your job effectively?

A retention plan is to be developed based on exit interview analysis, survey results, any current plans and strengths and weaknesses of those plans, the goal of the retention plan, and finally, the specific strategies to be implemented. There can be different retention strategies.

An effective retention strategy would focus on preventing as well as addressing grievances. Though it is not the contention that all grievances can be prevented, they can be “pre-empted” by actively listening to the employees from time to time. This strategy of “listening” to the employees would revolve around a concept of “one-one” meetings between the employees and the manager and employees and the HR representative for the unit or division. The idea of the regular “one-one” meetings would be to identify potential causes of friction among the employees and any issues they may have vis-à-vis their job and benefits. These issues need to be brought out into the open before they become contentious resulting in the employee feeling frustrated and quitting the job. Hence, all efforts must be made to identify sources of employee dissatisfaction and “hygiene factors” that must be taken care of for proper functioning of the employees.

Some ways to improve motivation are:

A) Job rotation: Job rotation is the practice of moving the employees around divisions and within divisions with a clear emphasis on making sure that they operate in domains other than the ones assigned to them initially. This would mean that the employees get trained on competencies beyond that of their assigned role and this would lead to greater motivation to pick up additional skills and motivate them to perform better.

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B) Job dissatisfaction should be reduced: Job satisfaction is a pleasurable feeling that results from the perception that one's job fulfils one's important job values.

A High Performance Work System (HPWS) is a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization. The overall company strategy should impact the HPWS the HR develops in regard to retention. Management theorists often emphasise the fact that one of the reasons for low employee morale in organizations is the fact that the employees often feel alienated and cut off from the larger purpose. The contention is that the employees feel themselves to be part of an impersonal setup and perceive themselves to be unable to make a difference to the whole unit. Hence, there is a need to involve the employees in the larger picture and provide them with perspective on the bigger picture. Dissatisfied individuals enact a set of behaviours in succession to avoid their work situation which are: behaviour change, physical job withdrawal; and psychological job withdrawal. There are many motivational theories developed by management thinkers.

A synthesis of employee motivation theories 1. Need Theories of Motivation: Need theories attempt to pinpoint internal factors that energize

behaviour. Needs as defined previously are physiological or psychological deficiencies that arouse behaviour. These needs can be strong or weak and are influenced by environmental factors.

2. Equity Theory: Equity theory recognizes that individuals are concerned not only with the absolute amount of rewards they receive for their efforts, but also with the relationship of this amount to what others receive. Based on one’s inputs, such as effort, experience, education, and competence, one can compare outcomes such as salary levels, increases, recognition and other factors. When people perceive an imbalance in their outcome-input ratio relative to others, tension is created. This tension provides the basis for motivation, as people strive for what they perceive as equity and fairness (Robbins, 1993). One of the prominent theories with respect to equity theory was developed through the work of J.S. Adams. Adams’ theory is perhaps the most rigorously developed statement of how individuals evaluate social exchange relationships (Steers, 1983). The major components of exchange relationships in this theory are inputs and outcomes.

Some Principles of Justice

Outcome fairness: the judgement that people make regarding outcomes received relative to outcomes received by others with whom they identify.

Procedural justice: focuses on methods used to determine the outcomes received.

Interactional justice: refers to the interpersonal nature of how the outcomes were implemented.

3. Expectancy Theory: “Expectancy theory holds that people are motivated to behave in ways that produce desired combinations of expected outcomes”. Essentially, the expectancy theory argues that the strength of a tendency to act in a certain way depends on the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual (Robbins, 1993). Expectancy theory states that motivation is a combined function of the individual’s perception that effort will lead to performance and of the perceived desirability of outcomes that may result from the performance.

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4. Job Design: This theoretical approach is based on the idea that the task itself is a key to employee motivation. Specifically, a boring and monotonous job stifles motivation to perform well, whereas a challenging job enhances motivation. Variety, autonomy, and decision authority are three ways of adding challenge to a job. Job enrichment and job rotation are the two ways of adding variety and challenge.

The critical factors among the respective motivation theories and the implications for developing and implementing employee retention practices

Needs of the employee: Employees have multiple needs based on their individual, family, and cultural values. In addition, these needs depend on the current and desired economic, political, and social status; career aspiration; the need to balance career, family, education, community, religion, and other factors; and a general feeling of one’s satisfaction with the current and desired state of being.

Work environment: Employees want to work in an environment that is productive, respectful, provides a feeling of inclusiveness, and offers friendly setting.

Responsibilities: Given that one feels competent to perform in a more challenging capacity and has previously demonstrated such competencies, an employee may feel a need to seek additional responsibilities and be rewarded in a fair and equitable manner.

Supervision: Managers and other leaders, more frequently than others, feel a need to teach, coach, and develop others. In addition, these individuals would seek to influence the organization’s goals, objectives and the strategies designed to achieve the mission of the organization.

Fairness and equity: Employees want to be treated and rewarded in a fair and equitable manner, regardless of age, gender, ethnicity, disability, sexual orientation, geographic location, or other similarly defined categories. With increased effort and higher performances, employees also expect to be rewarded more significantly than counterparts who provide output at or below the norm. The employee’s effort and performance at a particular level is influenced by her/ his individual goals and objectives and which would vary with each individual. An outcome or reward that is perceived to be highly significant and important can result in a higher level of effort and performance by the individual employee.

Effort: Even though employees may exert higher levels of effort into a position based on a perceived significant reward, this could be a short-term success if the task itself does not challenge or provide satisfaction to the employee.

Employees’ development: Employees prefer to function in environments that provide a challenge, offers new learning opportunities, significantly contributes to the organization’s success, offers opportunities for advancement and personal development based on success and demonstrated interest in a particular area.

Feedback: Individuals prefer to have timely and open feedback from their supervisors. This feedback should be an ongoing process during the year and not limited to formal performance reviews once or twice per year. In addition, the feedback should be from both the employee and the supervisor.

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Conclusion

Given the emphasis within organizations on retaining its critical employees, the author has summarized some of the most widely used employee retention practices as cited in the respective literature sources and the causes for employee turnover. Nevertheless, in most cases, these practices are developed and implemented without understanding the theory that explains the practice and why it may be effective.

Retrenchment: The legal aspect The above is a very informal definition of retrenchment. Retrenchment has more to it than just termination of employment by an employer. There are a host of legal provisions which govern the practice of retrenchment. Section 2 (oo) of the Industrial Disputes Act, 1947 defines Retrenchment as–

“The termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include –

voluntary retirement of the workman, or

retirement of the workman on reaching the age of superannuating if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

termination of the service of the workman as a result of the non-removal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or

termination of the service of a workman on the ground of continued ill-health.

Some real world case studies Attrition has become a challenge for companies like the Indian IT major Infosys that has seen unprecedented attrition among its employees in recent months. The situation has deteriorated to the extent that the company is having to address investor and analyst queries about this issue and has had to come up with a plan to tackle the same. The point here is that attrition in well-known companies affects their brand value and their brand image, and considering the fact that companies like Microsoft and Unilever as well as P&G are respected globally for their HR practices, attrition in these companies dents the carefully crafted image of being people friendly. This is the reason why blue chip companies take attrition seriously and to the point where Steve Balmer (the former head of Microsoft) is reported to have gone through all the exit interview forms of the employees.

Summary

In recent years, with the high levels of attrition in the service sector, it has become imperative for firms to have a structured separation plan for orderly exits of employees. Of course, the concept of “pink slips” or involuntary exits are another matter altogether and involve some bitterness that results because of the employee losing his or her job. In conclusion, it is our view that employee separations must be handled in a professional and mature manner, and though attrition is a fact that concerns everyone in the industry, once an employee decides to leave, the separation must be as smooth as possible. Separation is classified basically into three types:

Compulsory separation: The employee is separated due to the expiration of an employment contract.

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Voluntary separation refers to the separation of employees on their own request. This is the most common form of employee separation, particularly during boom periods.

Involuntary separation means the separation of employees for organizational reasons which are beyond the control of the employees. In recessionary times, involuntary separation or the act of asking the employee to leave by management is quite common.

While nothing can be done to control compulsory separations, voluntary and involuntary separations need to be managed while keeping them at a minimum. Employees Assistance Programmes (EAPs) attempt to ameliorate problems encountered by workers who are drug dependent, alcoholic, or psychologically troubled. EAPs are usually identified in official documents published by the employer. There are several issues in controversy regarding EAPs.

References

Tutorial on Severance Pay. Accessed at www.whatishumanresource.com in October 2018.

Tutorial on Employee Separation. Accessed at www.whatishumanresource.com in October 2018.

Ricio, Daniel Edward (2011), Employee Separation and Retention. Accessed at www.slideshare.net in October 2018.

Aly (2017), Employees Retention and Separation. Accessed at www.slideshare.net in October 2018.

Juneja, Prachi, Employee Separation Process. Management Study Guide. Accessed at www.managementstudyguide.com in October 2018.

Juneja, Prachi, Employee Retention Strategies. Management Study Guide. Accessed at www.managementstudyguide.com in October 2018.

Business Dictionary. Definition of Retrenchment Strategy accessed at www.businessdictionary.com in October 2081.

Business Jargons. Definition of Retrenchment Strategy, accessed at www.businessjargons.com in October 2018.

Chapter 7: Retention and Motivation, in Human Resource Management. Accessed at www.saylordotorg.github.io in October 2018.

Ramlall, Sunil (2014), “A Review of Employee Motivation Theories and their Implication for Employee Retention within Organizations”, in Journal of American Academy of Business. Accessed at www.issuu.com in October 2018.

Maertz, Carl P Jr. and M. A. Campion (1998), “25 Years of Voluntary Turnover Research: A Review and Critique,” in International Review of Industrial and Organizational Psychology, vol. 13, ed. Cary L. Cooper and Ivan T. Robertson, London: John Wiley, 49-86 pp.

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Unit-III Lesson-1

Identifying Strategic Positions Dr. Savita Rastogi

1.1 Meaning

The strategic position of an organization forms an integral part of the strategic management process. It informs the strategic choices that need to be made and subsequently implemented. Strategic choices can be of two kinds – 1) with respect to the external environment; 2) with respect to the internal environment. In this chapter, discussion will concentrate on strategic choices within an organization. With respect to Strategic Human Resource Management, it refers to identifying strategic positions by workforce differentiation to maximize profitability. Many companies spend too much time and money on low performers with the aim of improving their performance. On the other hand, high performers do not get necessary resources, development opportunities, or rewards. So, it is necessary that workforce differentiation takes place.

1.2 Steps Needed For Effective Workforce Differentiation 1. CLARIFYING firm’s strategy and the strategic capabilities needed to execute it, is a crucial

first step in the process of developing a differentiated workforce.

2. The next step in the process is to identify the strategic positions essential for delivering the firm’s strategic capabilities, as well as the specific employee competencies and behaviors needed in these roles.

The process of identifying “A” positions begins with the development of a clear statement of the firm’s strategic choice (how will we compete?) as well as the firm’s strategic capabilities (what must we do exceptionally well to win?). Once these two factors are clarified, one can identify “A” positions. Then, the process of improving the performance of employees in the firm’s most critical roles can begin. The key elements of this process are outlined in figure 3-1.

Strategic positions have a significant impact on one or more of the firm’s strategic capabilities. And, perhaps surprisingly for many man- agers, they might exist at almost any level in the organization. So, strategic positions may be R&D scientists focused on new product development, or the distribution and logistics specialists that make the firm’s vaunted processes work effectively & so on.

In addition to their direct impact on the firm’s strategic capabilities, strategic positions are characterized by a significant amount of variability in the performance of the employees holding those jobs. Performance variability means that the difference between high and low levels of performance in a given job is substantial. For example, many managers are familiar with the wide variations in the performance of salespeople; a top salesperson might easily sell ten or twenty times more products than an average salesperson might. But such variations in performance can appear almost anywhere in an organization, and when they do, they have the potential to be an important driver of strategic success.

Strategic or “A” jobs provide the context for significant performance improvement, while variability in the incumbents’ performance gives the specific opportunity for improvements in

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business performance. If everyone in a job were performing at a very high level, there would be little chance for significant performance gains. But in reality, this situation is the exception and not the rule, especially in strategic positions.

In a single-product firm or division with few products, identifying strategic positions is usually straight forward. The few strategic jobs are usually apparent to managers (once they begin to look). When a job (strategic or otherwise) affects multiple capabilities, matters get more complicated.

Figure 1-1

Creating a differentiated workforce

Determine

Identify

Identify

Assess

Plan actions for all players in

strategic strategic strategic players in strategic

choice capabilities positions positions positions

• Operational • List possible • List positions • Develop “A,” • Remove “C”

excellence strategic within each “B,” “C” positions

• Product capabilities strategic criteria • Remove “C” players

leadership • Review strategic capability • Apply “A,” “B,” from “A” positions

• Customer capability criteria • Assess each “C” criteria to • Put “A” players in

intimacy • Assess each for position on all positions “A” positions

present and present and • List all positions • Develop “B” players

future wealth- future wealth- by “A,” in “A” positions into

creation impact creation “B,” “C” “As”

• Determine potential designation

3–5 strategic • Identify strategic • Assess all

capabilities positions’ employees

performance in positions

variability • Determine

• Finalize percentage of

strategic “A,” “B,” and

positions “C” players

• Review other in all positions

positions (not in strategic capability for wealth-creation potential)

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Exec

team

Line managers

HR

function

It is recommended that managers spend time thoroughly understanding the strategic capabilities and the jobs most critical to ensure their firm’s strategic success. They might be pressured to jump ahead in the process and name a certain group of jobs as key or strategic because they are obvious. But in the long run, this approach is shortsighted, as managers often misdiagnose the truly strategic positions. Managers might place too much emphasis on senior positions and not enough on the entry-level, customer-facing positions. It is suggested that managers follow process as mentioned in 3-1 to ensure that they identify the truly strategic roles in their businesses, not just obvious ones.

Once the critical jobs are identified, the next step is to specify, in clear behavioral terms, the employee actions and deliverables that constitute “A” performance in these positions. Performance differentials between “A” and “C” players can be on the order of twenty to one or more. So focusing intervention and improvement efforts first and foremost on the “A” positions is important, because it is where both the need and the payoffs are the greatest.

The approach to identifying strategic jobs and the staffing and development processes for ensuring that “A” players are placed in “A” positions, suggested here, is quite different from the processes most organizations use. In the next section, contrast between the traditional process and this approach is discussed.

1.3 Approaches to Identifying “A” Positions

Traditional Approaches 1. People traditionally have determined the relative value of jobs in an organization in one of two

ways. Human resource professionals typically focus on the level of skill, effort, and responsibility a job entails, together with working conditions. For example, the Hay System for job evaluation, prices jobs based on the relative value of skill, effort, responsibility, and working conditions of a particular job. The typical job-evaluation process allocates points to benchmark jobs; then the remaining jobs are placed in the hierarchy. This process drives a number of organizational decisions, most notably, compensation. From this point of view, the most important positions are those held by the most highly skilled, hardest-working employees, exercising the most responsibility and operating in the most challenging environments. But recently, job responsibilities have broadened considerably, and the pace at which jobs change, has also increased dramatically. So, much like conventional accounting systems that are primarily focused on tangible instead of intangible assets, conventional job-evaluation systems are now much less useful than they used to be while the conventional approach might be effective in a world of stable companies, jobs, and (local) labor markets, in the current competitive environment, a new and much more strategic approach to the design of work and

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the valuation of jobs is needed based on future value creation and strategic job worth.

2. Economists, by contrast, generally believe that people’s wages reflect the value they create for the company and the relative scarcity of their skills in the labor market. Thus, the most important jobs are those held by the most highly paid employees.

Problems with Traditional Approaches Both of the above approaches merely identify which jobs the company is currently treating as most important. They do not identify which are actually more important. To do that, one must start forward from strategy rather than working backwards from organisation charts.

Consider what some senior HR executives have to say about the importance of identifying strategic positions in the box, that follow, “Differentiating Strategic Positions.” The quotes in the box point to the potential problems associated with conventional approaches to job valuation, which we believe to be too slow, inflexible, and primarily focused on internal equity at the expense of strategic capabilities, value creation, and market competitiveness.

Differentiating Strategic Positions “We must evolve new guidelines about how to manage our workforce to assure our future

competitiveness, both within the U.S. and Europe.”—Dan Phelan, senior HR vice president, Glaxo Smith Kline

“In Telecom Italia Group, we are focused on ensuring that a good proportion of ‘A’ people fill the positions, particularly the ‘A’ positions. Our ‘Management Review’ process is designed to do that.”—Carlo Bertelegni, vice president of HR, Telecom Italia Group

“Merely identifying strategic positions is not enough. You must assure a disproportionate representation of top talent in these strategic positions through recruitment, selection, development and rewards, as well as let them know how much we value them so we can retain them.”—Ray Carson, senior HR vice president, Wyeth Healthcare

Because the impact of history and inertia on job composition is substantial—job responsibilities, once set, are notoriously intractable in many organizations—it is important to re-examine periodically how jobs and work are designed. But most firms don’t do this. The problem is exacerbated when strategy and the external environment are changing much more quickly than companies are adapting on the inside. Most need to be more adaptive in how they design and structure work. The question is how?

Contemporary Approaches Firms should move from conventional approaches toward a model in which job value is

determined by the specific strategic capabilities needed to execute strategy. Then they need to invest disproportionately in the most strategic positions, ensuring that “A” players are in “A” positions for “A” customers. They must also manage “B” and “C” positions effectively. They must quickly remove “C” players from “A” positions (replacing them with “A” players). It must also be ensured that “B” players in “A” positions improve their performance. Similarly, “A” players in “B” positions might move into roles (“A” positions) that capitalize on their unique skills and abilities.

The workforce is the most expensive yet poorly managed asset in most organizations. In an era of global competition, both for talent and share of customer wealth, companies need a new way to

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manage talent. We believe that an inevitable trend toward increasing levels of differentiation in organizations is growing, and we are observing a movement from equality norms to equity (the quality of being fair and impartial) norms.

Over time, organizations lose their focus on the importance of a job or position, and bureaucracy takes over. Over time, they tend to standardize and routinize HR processes and systems and iron variance out of the system. Firms focus on process improvement at the expense of strategic value. Six sigma* processes contribute to this trend. The consequences are that workforce strategy becomes more homogenous and disconnected from business strategy.

*Six Sigma is a measurement-based strategy for process improvement. It’s a methodology, which aims at improving process and increasing customer satisfaction (Both internal & external). The concept behind this approach is to reduce the variation in processes. This reduction leads to consistent and desired outcomes from processes. Hence, Continuous process improvement with low defects is the goal of this method.

How can this process be interrupted? As can be seen in the table 3-1, firms that are successful in workforce differentiation have a clear, widely shared view of the importance of identifying “A” positions and an action plan. For this, one needs to know the key characteristics of “A,” “B,” and “C” positions.

Table 1-1

Successful workforce differentiation management

Firm View of “A” positions Firm’s action Comment

American Century Investments

Explicit workforce and position differentiation

Strategic position identification

Rigorous performance evaluation of strategic talent

Action plans to resolve gaps

Rigorous performance and rewards systems concentrate on investment positions and assuring "top talent" in these positions.

Biogen-Idec Not every position contributes to strategic capabilities

Succession planning emphasized for strategic positions

Development and succession of those with potential in strategic positions are emphasized and carefully tracked

Differential investment and rewards are related to position value.

Cisco Historically reviewed "C" players and removed them

Focus of evaluation of managers and executives in customer success/wealth-creating positions

Focus leadership on strategic customer-facing positions and redesigned incentive system to elicit wealth-creating customer behaviors

"All executives must meet customer goals or incentives will not be paid" – CEO John Chambers. Explicit recognition in a "techie" industry that customer solutions, not technical solutions, are the real wealth-creating positions.

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Colgate Clear identification of strategic capabilities and strategic positions

Explicit career development models for strategic positions within strategic capabilities

Rigorous assessment of career progress

Line managers know strategic positions

Investment in career development models appears to have significant pay off in assuring strategic talent in strategic positions (e.g., consumer insight).

Diageo Explicit focus on strategic positions

Refocused role of HR generalists to focus primarily on strategic positions

Strategic positions, largely in marketing, consumer insight, and supply chain, have been identified. LOB HR managers are responsible for delivering disproportionate capability in these positions and are evaluated on how well they deliver strategic talent in these positions.

General

Electric

Originator of "A", "B", "C" players concept ("organizational vitality")

Begin to focus on strategic positions

Use explicit "A", "B", "C" players evaluation

Corporate owns strategic positions (e.g., leadership M & A, etc.)

"We can't afford 'A' players in all positions." Therefore GE is moving, in one of five groups, to focus on "A" positions and realigning workforce strategy around these positions.

Table 1-1 (Continued)

Firm Issue Firm’s Action Comment

Glaxo Smit Kline

Workforce philosophy makes strategic positions explicit

Have identified–

– Corporate strategic positions

– LOB strategic positions

Line managers have explicit workforce accountabilities

To determine and leverage workforce investments in talent, a sequential assessment of strategic capabilities, strategic positions, and strategic players is used.

Honeywell Brought the GE models to Honeywell

Rigorous assessment of "A" positions with GE criteria resulted in retention of "A" players–not the "new broom sweeps clean"

Differentiation is the mother's milk of a high performance culture"– CEO Larry Bossidy. Assessing the value of the position as well as the player are decisions.

IBM Strategic talent flexibility well beyond "lifetime

Explicit recognition of change in strategic talent requirements

Building workforce agility around strategic and support positions, IBM clearly

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employment" Recognition that strategic talent is available extemally

acknowledges that the nature of strategic work changes over time and workforce flexibility is essential to have the strategic talent instantly and continuously available without building expensive, embedded workforce platforms,

1.4 Characteristics of “A”, “B,” and “C” Positions

To execute strategy with a differentiated workforce, organizations must clearly understand which positions are strategic and which are not. Understanding each position’s level of impact on business success is the first step. While a number of factors contribute to a position’s relative strategic impact, the most important are its strategic impact and level of performance variability (see table 3-2).

Primary Characteristics of Strategic (“A”) Positions Two elements are critical to the identification of a strategic or “A” position:

First, the work must have strategic impact and directly affect one of the firm’s primary strategic capabilities.

Second, there must be a high level of performance variability among incumbents in those positions.

Strategic Impact: Jobs are strategic when they have a disproportionate impact on a firm’s ability to execute business strategy through its strategic capabilities. For example, in a pharmaceutical firm focused on new products, a strategic capability at the firm level is likely to be R&D acumen, and the associated key jobs are likely to be research scientists. However, not all R&D scientists are likely to hold “A” jobs, just those associated with new product development in a particular domain (e.g., heart disease). Similarly, in a software firm, programmers associated with the development of the firm’s core products are likely to have a greater impact on the firm’s strategic capabilities than will programmers elsewhere in the firm (i.e., the firm’s own internal IT operations).

As we mentioned in the first chapter, all a firm’s jobs are important, but not all jobs are strategic; this distinction is critical for the design and implementation of effective workforce management systems. Strategic jobs are the very few (typically less than 15 percent) that directly enhance a firm’s strategic capabilities. Strategic positions can appear at any level throughout the organization and affect one or more strategic capabilities. Jobs that affect more than one capability are

Table 1-2

Which jobs make the most difference?

An “A” position can be defined primarily in terms of its impact on strategy and by the range in the performance level of the people in the position. From these two characteristics flow a number of other attributes that distinguish “A” positions

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Defining characteristics

"A" Position Strategic "B" Position Support "C" Position Surplus

Scope of authority Has direct strategic impact and exhibits high-performance variability among those in the position, representing upside potential.

Autonomous decision making.

Has an indirect strategic impact by supporting strategic positions and minimizes downside risk by providing a foundation for strategic efforts, or has a potential strategic impact, but exhibits little performance variability among those in the position.

Specific processes or procedures typically must be followed.

May be required for the firm to function but has little strategic impact.

Little discretion in work

Primary determinant of compensation

Performance Job level Market price

Effect on value creation

Creates value by substantially enhancing revenue or reducing costs.

Supports value-creating positions.

Has positive economic impact.

Consequences of mistakes

May be very costly, but missed revenue opportunities are a greater loss to the firm.

May be very costly and can destroy value.

Not necessarily costly.

Consequences of hiring wrong person

Significant expense in terms of lost training investment and revenue opportunities.

Fairly easily remedied through hiring of replacement.

Easily remedied through hiring of replacement.

Source: Adapted from Mark A. Huselid, Brian E. Becker, and Richard W. Beatty, “‘A Players’ or ‘A Positions’? The Strategic Logic of Workforce Management,” Harvard Business Review, December 2005.

Especially important, as they have the potential to have a leveraged or synergistic impact on the firm’s performance.

Performance Variability: The second key driver of position importance is performance variability, which means that the gap between low and high performers in this role is substantial. While strategic impact provides the context, performance variability provides the opportunity for improvement. If all employees perform at a very high level within a given role, then there is little opportunity for real strategic impact through more effective workforce strategy and management. But if a job has a direct impact on strategic capabilities and there are dramatic differences in the performance of job holders, managers can have a significant impact on firm performance through more effective workforce management. As Nathan Myhrvold, former chief scientist at Microsoft,

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commented, “The top software developers are more productive than average software developers not by a factor of 10X or 100X, or even 1,000X, but 10,000X.”1

Few jobs exhibit the enormous variation on performance cited by Myhrvold. But differences in performance of twenty to fifty to one are common, especially in knowledge intensive roles, or in jobs with a substantial span of control or sphere of influence (i.e., where an employee’s performance affects the performance of either subordinates or peers else- where in the value chain). Capturing the potential gains associated with this level of variation means that first we need to identify the key positions and then manage them differentially. But differentiation based on what? We focus on employee performance because there are often large differences from the lowest to the highest employee in any given role, and there are often large differences from the average to the top employees.

The impact of variability in workforce performance on firm-level outcomes is not just limited to highly complex jobs such as computer programmers or R&D scientists. Figure 3-2 gives an example from Gallup that describes the importance of developing a clear understanding of the processes through which variance in workforce performance creates value.

An important conclusion from the data is that firms would be better off paying the bottom 10 percent of the workforce to stay home! At an estimated $35,000 per employee per year in total compensation, the bottom 10 percent of the workforce (458 employees) generates cost to the business of over $16 million per year. Better yet, as the study’s author noted, they destroy so much value, you should consider paying them to go to work for your competitors!2

Figure 1-2

Performance variability is critical for a position to be strategic Impact on customer attitude scores This company, highly regarded for its customer service, surveyed about 45,000 customers to gauge the impact of its 4,583 service reps. It discovered that the top 10% had a positive effect on customer attitudes with 71% of the customers they talked to; the top seven reps created a positive effect with every customer. In sharp contrast, the bottom 10% had a net negative impact of 14% on customer attitude scores, while the bottom three employees alienated every customer they spoke with.

Total 7 reps Top 1% Top 5% Top 10%

Top quartile +61%

2nd quartile +40%

3rd quartile +27%

Lowest quartile −2% –14% Bottom 10%

Bottom 5%

Bottom 1%

Bottom 3 reps

Source: Glen Phelps, “The Fundamentals of Performance Management,” Gallup Management Journal, February 10, 2005:1–4.

–100% –63%

–31%

+71% +77%

+88% +100%

The w

orst

The

best

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Based on our experience with thousands of practicing managers and a careful reading of the academic literature, we believe that there is more variability in employee performance than many managers realize. More- over, given the significant role of talent in the strategic success of most firms, we believe this gap is destined to increase. Just as the impact of the workforce on the firm’s strategic success is increasing, so too is the variability in employee performance. As employee discretionary effort and knowledge continue to play a larger part in the creation of wealth within firms, the importance of managing these assets strategically increases as well. This means that managers will increasingly need to focus on managing the variability in employee performance.

To further complicate matters, not only are the average levels of variability increasing and the amount of variability differing substantially across roles, but the impact of workforce performance variability on firm performance can in many cases be asymmetrical; that is, the impact of an increase in workforce performance on firm performance can be either much larger or much smaller than the impact of a decrease in workforce performance. So, as the relative value of the workforce has increased, so too has the relative importance of high and low levels of employee performance. The very best employees (especially in strategic roles) are much more valuable, while the worst employees are more costly than ever in terms of lost profits.

Secondary Characteristics of Strategic (“A”) Positions

Strategic or wealth-creating positions meet the criteria that we have outlined—they impact one or more of the firm’s strategic capabilities, and the employees in those roles exhibit wide swings in performance. The strategic position identification process is partly empirical and partly clinical. Some key points to remember about strategic positions include:

• Strategic positions are those in which top talent significantly enhances the probability of achieving the business strategy.

• Employees are hard to get; top talent is difficult to attract and retain.

• Positions create wealth (by substantially enhancing revenue or reducing costs).

• Mistakes may be very costly, but missed revenue opportunities are a greater potential loss to the firm.

• Selection of the wrong person is expensive in terms of lost training investment and especially lost revenue opportunities.

• Poor performance is immediately detected.

• Strategic positions have major revenue-enhancing or cost- reducing impact on the firm.

• Strategic positions have strategic impact on the firm’s customers.

• Substantial performance variability is possible, depending on the incumbent.

• These positions usually comprise less than 15 percent of the firm’s positions.

• Strategic positions are not determined by placement in the firm’s hierarchy.

Primary Characteristics of Support (“B”) Positions In contrast to high-impact strategic roles, “B” positions generally support or enable performance

in “A” or strategic roles. World-class performance in these roles has only a neutral or modestly

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positive effect on firm performance. In addition, some positions are defined not so much by the wealth that they create but by the wealth that they can destroy. It can be said that although a business cannot win with “B” positions, but can certainly lose with them, if they not manned properly.

For example, imagine the case of a quality inspector in a pharmaceutical manufacturing plant. This is certainly an important role; an impurity or other manufacturing defect in a medicine that causes a product recall could cost the firm billions of dollars. Assuming that the job is structured correctly, however, an increase in the performance of quality inspectors, say from the seventieth to the ninety-fifth percentile, is unlikely to have much effect on the likelihood of a product recall (because the base rate is already so low). However, allowing job performance to fall below proficiency could be extremely costly.

Secondary Characteristics of Support (“B”) Positions

In addition to the primary characteristics noted earlier, “B” positions can exhibit a number of secondary characteristics. No position is likely to have all these attributes, but the pattern of results is consistent with the following elements.

• “B” positions support wealth-creating positions.

• Mistakes may be very costly in that they can destroy wealth.

• Selection of wrong person is fairly easily remedied.

• Poor performance may be detected.

• Specific processes or procedures must be followed.

• Job level is the best predictor of compensation.

• Performance beyond a point has little potential for wealth creation or even diminishing returns to the firm.

• Performance variability may be substantial, but performance beyond “standard” has little strategic value.

• Usually most of the firm’s positions are “B.”

Primary Characteristics of Surplus (“C”) Positions Organizational success depends on both strategic success and operational excellence. Many “C”

jobs, while having a small influence on strategic success, can be critical to operational excellence. A company might not even want to label them as “C” jobs or they may divide them into two categories: the jobs that contribute to strategic success and the jobs that primarily influence operational excellence. In any case, “C” jobs have the following characteristics:

• The work may be required in order for the firm to function, but it has little strategic impact.

• There is low performance variability in these positions.

Secondary Characteristics of Surplus (“C”) Positions “C” or surplus positions exhibit the following secondary characteristics:

• “C” positions have little economic impact.

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• Employee mistakes and errors are not costly.

• Selection of the wrong person is easily remedied.

• Poor performance is often tolerated.

• There is little discretion in work, and procedures may be dictated by regulation.

• Market price is the best predictor of compensation.

Conclusion

While conventional wisdom does suggest that the firms with the most talent win, but given the financial and managerial resources needed to attract, select, develop, and retain high performers, companies simply cannot afford to have A players in all the positions. Rather, more practical belief is that the firms with the right talent win. Businesses need to adopt a portfolio approach to workforce management, placing the very best employees in strategic positions, good performers in support positions, and eliminating nonperforming employees and jobs that don’t add value. One thing to keep in mind is “Effective management of A positions requires intelligent management of B and C positions, as well.” It has been argued that strategic impact provides the context and performance variability provides the opportunity for creating shareholder wealth. The quickest route to increasing shareholder wealth is to increase employee performance in strategic positions.

Summary An organization’s talent should be taken as an investment to be managed like a portfolio if

strategy execution is to take place effectively. Many companies fall into the trap of spending too much time and money on low performers, while high performers do not get the necessary resources, development opportunities, or rewards. Management thinkers recommend that workforce should be managed like a portfolio - with disproportionate investments in the jobs that create the most wealth. For this, management has to rise above talent management’s "best practice". The emphasis of management will be to create a differentiated workforce that cannot be easily copied by competitors. For creating differentiated workforce, a manager should

i) Differentiate those capabilities in the company that are truly strategic

ii) Identify wealth-creating "A" positions

iii) Create a new relationship between HR and line managers,

iv) Articulate the role each plays in a differentiated workforce strategy.

v) Develop the right measures for his organization.

The Differentiated Workforce gives an organization the tools to translate talent into strategic impact.

Exercise Review Questions A. True/False 1. Strategic or “A” jobs provide the context for significant performance improvement. Correct Answer—true as by improving A jobs, significant improvement takes place. 2. Performance variability means that the difference between high and low levels of performance in a given

job is substantial. Correct Answer—true

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3. The need to increase levels of differentiation in organizations is increasing.

Correct Answer—True

3. The two elements critical to the identification of “A” positions are Strategic Impact and high performance.

Correct Answer—True

4. “B” positions generally support/enable performance in “A” positions.

Correct Answer—true B. Fill in the Blanks

1. Steps needed for effective workforce differentiation are --------. Options: Two, Three.

Correct Option—two. First of the two steps is clarifying firm’s strategy and strategic capabilities and the second is identifying strategic capabilities and specific employee competencies.

2. Strategic positions have a significant impact on enterprise’s -------------capabilities.

Options—strategic, administrative

Correct Option—strategic (i.e. what must be done exceptionally well to win.

3. Economists believe that most important jobs are held by the most ---------paid employees.

Options—lowly, highly

Correct Option—highly (because people’s wages reflect the value they create for the company).

4. Two main characteristics of “C” positions are -------strategic impact and -------- performance variability.

Answer—little, low

Short Questions 1. Discuss the two steps needed for effective workforce differentiation. 2. Discuss traditional approaches to identify “A” position. 3. Explain the problems associated with traditional approaches to identify “A” position. 4. Differentiate equality from equity with respect to wage payments. 5. Explain primary characteristics of “A” positions. 6. Describe the secondary characteristics of “A” positions 7. Explain primary characteristics of “B” positions. 8. Describe the secondary characteristics of “B” positions 9. Explain primary characteristics of “C” positions. 10. Describe the secondary characteristics of “C” positions

Long Questions 1. How is an ‘A’ Position identified?

2. How is a ‘B’ Position identified?

3. How is a ‘C’ Position identified?

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References https://www.sciencedirect.com/science/article/abs/pii/S1053482209000461

http://www.thedifferentiatedworkforce.com/pdfs/TDW-Chapter3.pdf

Mark A. Huselid Richard W. Beatty Brian E. Becker “A Players” or “A Positions”?: The Strategic Logic of Workforce Management, HBR, vol December 2005 as retrieved from https://hbr.org/2005/12/a-players-or-a-positions-the-strategic-logic-of-workforce-management on 20/10/2018

Mark A Huselid, Differentiated workforce as retrieved from https://www.amazon.in/Differentiated-Workforce-Transforming-Talent-Strategic/dp/142210446X on 18.10 18.

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Lesson-2

HR Analytics This chapter includes

1. Meaning of HR analytics,

2. Importance/Benefits of Hr Analytics;

3. Ways to Increase Business Value of Talent Analytics;

4. Process of Hr Analytics;

5. The 8 Hr Analytics Every Manager Should Know About;

6. Ten Major Trends in the Field of Hr Analytics for the Near Future;

7. Analytics Tools Used by Indian Companies to Spot Talent and Troubles:

2.1 Meaning Employees are the greatest asset of a company, but if the company’s hiring decisions go wrong,

employees could also be the company’s greatest expense. Therefore, recruiting the right people and retaining and promoting the best, while identifying and addressing under-achievers, is critical. Many organizations spend a lot of time and efforts on human resources’ matters but do not have sufficiently detailed data to help them fully understand their employees. They also lack information regarding challenges that can affect workforce planning, development and productivity.

HR analytics can help to address these challenges. Also called talent analytics, HR analytics, is the application of considerable data mining and business analytics techniques to human resources data. It is an area in the field of analytics that refers to applying analytic processes to the human resource department of an organization. It is hoped that it would result in improving employee performance and therefore getting a better return on investment. HR analytics does not only deal with gathering data on employee efficiency. Instead, it aims to provide insight into each process by gathering data and then using it to make relevant decisions about how to improve these processes, operational performance and organizational performance through high quality talent related decisions.

In sum, HR analytics refers to the analysis and application of a company's people data to formulate HR strategies. It correlates business data and people data, which can help establish important connections later on. The goal of human resources analytics is to provide an organization with insights for effectively managing employees so that business goals can be reached quickly and efficiently.

key aspects of HR analytics Providing data on the impact, the HR department has on the organization as a whole.

Establishing a relationship between HR and the business outcomes and

Creating strategies based on the above information.

Even if HR analytics is not used, businesses spend a significant amount of money on HR functions. But the use of HR analytics helps in predictive analysis to make and execute the decisions in a rational way.

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2.2 Importance/Benefits of HR Analytics Analytics is always an important topic and trend in every part of business and HR is also not far

behind. Today many organizations are looking for metrics or analytics in HR which are not just related to people but also on processes such as recruitment, retention, compensation, succession planning, benefits, training & development, performance and appraisal and many others. In short Talent analytics is becoming more popular these days as companies are doing lot of efforts to cultivate and align Human capital management (HCM) with core business objectives in order to achieve a competitive fringe.

Some typical benefits and uses of HR analytics are as follows:

Improvement in organizational performance through high quality talent related decisions

Improvement in the accuracy of forecast workforce requirements and utilization.

Optimization of talents’ management through development and planning.

Identification of the primary reasons for attrition.

Provide the source of competitive platform for the organizations

Manages applicants in better way by matching job requirements for specific positions.

Recognizing the factors which turn the employee satisfaction into productivity.

Determining individual’s KPIs (Key performance Indicators) on the business.

Enabling HR to demonstrate its contribution to achieving corporate goals.

Above points explain the reasons for increased use of HR Analytics by HR departments. Supporters also argue that big data* analytics can help to provide evidence to de-bunk commonly held assumptions about employees that are wrong and based on biases. *Big data is the collection of data sets so large and complex that it becomes difficult to process using traditional data-processing applications (Big data has been explained in detail later in this chapter).

2.3 Ways to Increase Business Value of Talent Analytics Leading HR executives make four types of investments to increase the business value of talent

analytics:

a. First, they invest in strategy to align the vision of talent analytics with internal clients' needs.

b. They invest in execution by sourcing and practicing the use of analytics to solve critical business challenges.

c. They invest in analytics application skills and HR's technological capacity. And

d. Finally, they invest in infrastructure by building effective relationships with HR partners, business leaders and vendors.

2.4 Process of HR Analytics

1. Research Relevant Data

Only that data is to be researched which is relevant to the goals of the business. It can be done by looking at the direction that manager wants the business to head towards and the key performance

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indicators that fit alongside those. Whatever data is to be analyzed, needs to be of strategic value to the organization or it will be a waste of time and energy. The ability to find the right answer for a business question increases when manager’s maturity, in statistics, data mining, machine learning tools, survey management and strategic workforce management, is high.

2. Experiment with Different Analytical Tools With more and more tools becoming available on the market that enable users to merge

successful data mining techniques, data transformation techniques and data visuals with a user friendly self-service interface, it is now easier than ever to explore data quickly and get an action plan together to proceed forward. So the historical issues related to HR analytics of lack of adequate investment in HR/Talent Analytical Systems and inaccurate, inconsistent or hard to access data which required too much manual manipulation, can be easily addressed with the right analytical system and support.

3. Create an Action Plan By having access to analytics and teaming that data with prior experience and intuition, the

manager will have the key ingredients to create a strong action plan. Human Resource leaders are urged to apply big data and predictive analytics to talent, leadership, and organizational capabilities. People generally need to see evidence of why something is happening or needs to change so to have an action plan in place can really benefit by helping people to understand the reasons.

4. Ensure Analytical Data Gathered is Legally Compliant The data that is planned to be gathered and analyzed is approved by a legal team or

representative and confirmed to be compliant with the law ahead of starting any analytical HR project. It would also be wise to have the finished result approved before it is used in business to avoid any damaging risks to the organization.

Anonymity and data protection carry strict laws and as such, a sound business reason is to be provided for collating and analyzing such data. Therefore, make it a priority to check legal compliance throughout the whole process from start to finish.

5. Streamline the Process Analytics can range from simple data collation to complex projects depending on what outcome

is desired. Some decisions are required to be made initially to agree on the intended model and strategy before one can proceed and mine the data. Then the quality of the data is to be checked and clean everything up so it is in a readable and understandable format. The people analytics revolution is gaining speed.

Apparently these steps can take up approximately 75% of the time required for the whole project, so it may take some time to eventually be in the position to streamline a clear process that is user friendly.

Patrick Coolen suggests a 4 step approach that includes Intake and Design, Data Cleaning, Data Analysis, and Sharing Insights. It may not be an exact fit to the strategy in every organization, but it is a tried and tested model that would be a good place to start.

6. Have the Right Skill-Set Certain set of capabilities is required for HR analytics to be conducted correctly and some of the

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main skills that should be mandatory are: An understanding of business objectives and timeframes; Knowledge of HR/Organizational processes; and IT skills

Alongside the above, people with very curious and inquisitive mind are required who are not afraid to ask the right questions and chase the factual answers.

Further, people who are able to translate the analytical HR data into an understandable format to the rest of the organization play a key role in how effective the outcome of applying analytics to HR processes will be.

7. Focus on the Facts Having a fact based HR organization is a concept in which one is able to prove the effectiveness

of organization’s HR policies and procedures in supporting the overall goals of the business. This not only makes organization’s HR function more credible when delivering data and forecasting results, but also effective when changes need to be made, so one should push HR to be more reliant on the facts and figures rather than simply measuring Key Performance Indicators (KPI’s) or Return on Investments (ROI’s).

8. Create your HR Business Strategy After obtaining data, knowing how to understand and translate the information in a clear way, the

next step is to create HR business strategy. Many experts believe that HR has a holistic perspective on talent alignment to the business strategy

9. Use HR Tech to Support the Process With analytics set to play a large role in the HR function going forward, technology is a vital

component to support the management of the analytical data and reduce accuracy errors.

With the right HR technology in place, having real-time data and data management accessible from anywhere with a wi-fi signal, applying analytics into organization’s HR processes will get a whole lot easier.

To sum up, hopefully with these steps one will be able to implement analytics into HR processes and be on the way towards a culture of a more fact based HR organization.

Just to recap, the top 9 steps on how to apply analytics into HR processes are:

1. Research relevant data

2. Create an action plan

3. Experiment with different analytical tools

4. Ensure analytical data gathered is legally compliant

5. Streamline the process

6. Have the right skillset

7. Focus on the facts

8. Create your HR Business Strategy

9. Use HR technology to support the process

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2.5 The 8 HR Analytics Every Manager Should Know About

Capability analytics Capability analytics is a talent management process that: (i) identifies the required and desired

capabilities or core competencies in a business; (ii) compares them with the capabilities that a business has at present; and (iii) Identify the gaps, if any. Capabilities are not just about qualifications and skills; they can also include capabilities that may not be formally recognized, such as interpersonal skills (i.e., the ability to develop and maintain relationships).

Competency acquisition analytics Competency acquisition analytics involves: (i) identifying the core competencies that a business

requires now and in the future; (ii) assessing the current levels of these competencies within the business and identify any gaps; (iii) monitoring how effectively these competencies are developed in-house or recruiting candidates with those competencies. Effective competency acquisition analytics requires focusing on a small set of core competencies.

Capacity analytics Capacity analytics tries to establish how operationally efficient people are in a business. For

example, to study “are people spending too much time on administrative work and not enough on more profitable work”? It also allows businesses to establish of how much capacity they have to grow as capacity leads to profits? The important part, here, is establishing a system to track capacity without creating huge administrative burdens and without alienating employees with a ‘big-brother’ approach. Big data and sensor system can be very effective here.

Employee churn analytics Employee churn analytics is the process of assessing staff turnover rates in an attempt to predict

the future HR requirements and reduce employee churn. Employee churn can be identified through tools such as the employee satisfaction index, employee engagement level, surveys and exit interviews.

All employee churn is not bad. It is important to identify a healthy level of churn and the ‘regrettable’ churn.

Corporate culture analytics Corporate culture analytics is the process of assessing and understanding more about corporate

culture or the different cultures that exists across an organization. Corporate culture is essentially the collective (often unspoken) rules, systems and patterns of behaviour that embodies a business. One way to assess culture is through the analysis of customer service conversations, which can provide a rich data to assess corporate culture.

Through such analytics, HR manager can identify required changes in culture, understand how the culture is changing, create early warning systems to detect toxic cultures and ensure management is recruiting people who would be able to blend their culture with the corporate culture.

Recruitment channel analytics It is the process of finding out where the best employees come from and which recruitment

channels are the most effective. Recruitment channel analytics will involve some historical

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assessment of employee value using KPIS (Key Performance indicators) such as human capital value added and return per employee. Surveys and entry interviews are also useful sources of data.

Aggregator sites like glassdoor.com operate like Trip Advisor for recruitment and can provide companies with independent reviews of their recruitment process.

Leadership analytics Leadership analytics discloses various dimensions of leadership performance through data to

identify the good, the bad and the ugly. Data about leadership performance can be obtained through the use of surveys, focus groups (a group of people assembled to provide feedback), employee interviews or ethnography.

As few employees would feel confident or safe talking about their leader or manager if they knew that person could or may have access to their opinion, it is advisable to make the data collection anonymous.

Employee performance analytics Employee performance analytics seeks to assess individual employee performance. The resulting

insights can identify who is performing well and who may need some additional training or support in order to raise their game. Today, there are many innovative ways of collecting and analyzing performance, from crowd sourced performance assessments to big data analytics.

Companies should move away from the classic and outdated performance reviews. With modern data capture techniques, it is possible to analyze performance more holistically and less focused on specific parts of a job that might cause employees to skew their behaviour.

2.6 Ten Major Trends in The Field of HR Analytics for the near Future Workforce analytics is developing and maturing. According to Tom Haak, the following are the

10 major trends for the near future.

A. From One time Exercise to Regular Exercise Many workforce analytics efforts start as a consultancy project through one question “How do our employees experience their journey?” Many people are interviewed, data is gathered, and with the help of the external consultants a nice report is written and many follow up projects to redesign the employee journey are defined.

Though one time exercise is nice, but it might be more beneficial to develop ways to gather regular feedback from the candidates, employees and other relevant groups. Approaches used are:

The detailed annual or bi-annual employee survey,

Weekly, monthly or quarterly surveys to gather more frequent feedback. A few questions, often varying the questions per cycle.

Some more advanced pulse survey solutions are adaptive. They ask more questions to people when they sense there are issues otherwise not. For example, the question is “How was your week?” If the answer is “Very Good”, the survey is finished, if the answer is, “Not so good”, there are some follow-up questions. Pulse surveys can

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also be easily connected to the important “moments that matter” for the employee experience.

Continuous real-time mood measurement. Innovative solutions in this area are still scarce, especially if one wants to measure in a passive non-obtrusive way.

B. From People Analytics to Workforce Analytics

Currently, the general opinion seems to be that people analytics is a better term than HR analytics. However, increasingly the workforce is consisting of more than just people. Robots and chatbots are entering the workforce. If an organisation analyses robots, the more appropriate term would be workforce analytics.

C. More Transparency This overview of workforce analytics trends cannot be complete without a reference to GDPR.

Privacy is fad now a days. Many project works are jeopardized by ethics and privacy concerns. This number will only increase if companies do not comply with the new European privacy regulation, the General Data Protection Regulation (GDPR) which is enforceable from 25 May 2018 onward.

GDPR is fuelling a lot of positive developments, one of them being a lot more transparency. About what kind of data is collected, how it is used, and how algorithms are used to make decisions about people.

The issue of data ownership is related. It is expected that employees will no longer accept that they cannot own their own personal data. Employees need to have the possibility to show their data to their potential next employer as evidence for their productivity and engagement.

D. More Focus on Productivity Another approach is, to focus more on increasing the productivity of the existing employees,

instead of hiring additional staff, and on improving the selection criteria.

Using workforce analytics, one can try to find the characteristics of top performing people and teams, and the conditions that facilitate top performance.

These findings can be used to increase productivity and to select candidates that have the characteristics of top performers. When productivity increases, an organisation needs less people to deliver the improved results.

E. What is in it for me? If the focus of workforce analytics efforts is primarily on efficiency and control, employees will

doubt if there are any benefits for them.

Though overall there is a shift to more employee-centric organizations, still sometimes one can doubt seriousness of the efforts to improve the employee experience.

Asking the question: “How will the employees benefit from this effort?” is a good starting point for most workforce analytics projects.

F. From individuals to teams to networks Workforce analytics can help to improve the way teams and networks function in and across

organizations. The rise of Organizational Network Analysis is one of the promising signs. Still, many

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workforce analytics projects today are focused on individuals like “What are the characteristics of our top performers? How can we measure the individual employee experience? How can we decrease absenteeism?” etc.

G. Cracks in the top-down approach The tendency to implement changes top-down, is still common to adhere to uniformity and

standardization. However, in line with the trend called “the consumerization of HR”, employees are expected to take more initiative. For example, if an employee wants feedback, he can easily organize it himself using Slack plug-in Captain Feedback. A simple survey to measure the mood of the team is quickly built with Polly (view: “How to measure the mood in your team with Slack and Polly“). Many employees are already tracking their own fitness with trackers like Fitbit and the Apple Watch.

Many teams are primarily using WhatsApp and Slack as communication tools to avoid the officially approved communication channels. HR should also go with the flow instead of trying to promote standardized channels.

Workforce analytics can benefit from the data gathered by their employee’s own devices if the benefits of such sharing is clear to employees.

H. Ignoring the learning curve Workforce analytics can be of two kinds - descriptive and predictive. The third kind is also said

to be continuous analytics. Generally, the highest level is predictive analytics.

As predictive analytics seems to be the holy grail, many HR teams want to jump immediately to this level skipping operational reporting, advanced reporting and strategic analytics. However, ignoring the learning curve does not seem to be a sensible strategy.

I. Give us back our time! This fad is concerned with performance management. In an organization, it was calculated that

all the work around the performance management process for one employee costed manager and employee around 10 hours (preparation, two formal meetings per year, completing the online forms, meeting with HR to review the results etc.).

By simplifying the process (no mandatory meetings, no forms, no review meetings, just one annual rating to be submitted per employee by the manager), HR could give back many hours to the organization – to the relief of both managers and employees.

Workforce analytics can help a lot in the “give-us-time-back” projects, for example by some simple measurement of the time, a sample of managers, employees, and HR professionals spend on different activities, and estimate the value these activities contribute towards optimization of the core activities of the organization (e.g. serving clients and bringing in new clients).

J. Too high expectations The expectations from workforce analytics are often too high, but two elements must be

considered. In the first place, human behaviour is not so easy to predict, even if one has access to loads of people data and good performance is very well defined, as for example in football, it is very difficult to predict the future success of young players.

Secondly, the question is to what extent managers, employees and HR professionals behave in a rational way as human behaviour is subject to cognitive biases.

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A more general thought is replacing ‘Workforce analytics’ with ‘Science’? But again the problem is that there are many scientific findings that have been available for a long time but that are hardly used in organizations. Example: it has been proven repeatedly, that the (unstructured) interview is a very poor selection instrument. But still, most organizations still rely heavily on this instrument (as people tend to overestimate their own capabilities). So, why would organizations rely on the outcomes of workforce analytics, when they hardly use scientific findings in the people domain?

2.7 Indian Companies Use Analytics Tools to Spot Talent and Troubles. (Namrata Singh/TNN/Oct 11, 2016, 9:39 IST)

Several companies in India have begun using Predictive Index (PI) which creates a behavioural profile and is believed to provide an accurate depiction or pattern of people’s core drives and work preferences.

According to Vinay Bansal, Co-founder, Predictive Strategy Group, “Predictive Index is like a blood test—getting to know about a disease even before the symptoms have become visible to all. It involves a quick and simple psychometric test to assess the natural behaviour of an employee. The results are reviewed and assessed by trained analysts and the report gives a summary of the strong behaviour a person is likely to display along with a elaboration of the management and influencing style. Since it is data driven, predictive HR analytics makes the process objective.”

Amway, the Direct Selling Company, relied on PI to make more informed decisions. During internal job postings, they were able to zero in on a candidate even two levels below than the desired position because PI indicated behavioural indices of the person fitted well with the desired profile.

HCL technologies was also found using HR analytics tools. Start ups were found to be using HR analytics in a big way.

In India, the concept is still catching up. In the west, it has been in use for the past 30 years. Even China is much more open to adopting technology in the area of hiring as compared to corporates in India.

2.8 HR Analytics India Summits The new report on the Global Workforce Analytics Market from Grand View Research (GVR)

predicts that the market will grow at a 16% CAGR from $430.9 million in 2015 to touch $1.87 billion by 2025. The report also reveals that workforce analytics will be more widely adopted to help optimize workforce, develop workforce performance metrics, reduce operational costs, and stimulate market growth. HR analytics, a discipline that started as a small technical group that analysed engagement and retention, has now gone mainstream. Predictive analytics tools from many HR technology vendors have arrived, making it possible to analyse data regarding recruitment, performance, employee mobility, and other factors.

While widespread adoption might be limited, HR analytics has grown from a technical specialist group to a serious business function that must meet the needs of many stakeholders throughout the company.

India had been holding Summit on HR Analytics from 2017 onwards, the 4th was organised in November, 2019 which brought together stirring sessions, prudent panel discussion and forward looking keynotes to help managers strategize workforce planning.

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HR Analytics Courses in India There are a number of institutes and educational institution which are offering formal educative

courses in HR analytics like BITS Pilani, XLRI and IIMs. Such courses are also available online.

2.9 Challenges in HR Analytics The challenge of human resources analytics is to identify what data should be captured and how

to use the data so that the organization gets an optimal return on investment on its human capital. Over the last 30 years the volume of data and metrics available for HR to report on has increased exponentially. However most companies are not realizing the value from their analytics investments. Human resources departments have been slow to get on board with big data, and it is not just a lack of forward thinking. They face big challenges when implementing hr data analytics, both of logistics and mindset. Some such challenges are:

1. Bringing Together Data From Many Different Places A big data initiative requires HR to acquire data from all the different departments within the

business. They have to acquire, sanitize, unify, and analyze data from multiple departments as well as from multiple business functions, including payroll and finance. The problem gets even bigger for HR departments venturing outside their companies into the world of unstructured data and predictive analytics. They need people who have the skills to gather and prepare data for analysis in addition to performing analysis.

2. Lack of Data Analytics Skills within HR Only one out of three HR managers describes their big data proficiency as either “good” or

“excellent.” For many managers, the problem goes all the way to back to graduate school where some are taught HR Management specifically while others did not. Also, most companies start by hiring quantitative analysts for departments directly related to money, finance, and forecasting. Big data for HR has been an afterthought, not just for HR managers but also for the C-suite (.C-Suite gets its name from the titles of top senior executives which tend to start with the letter C, for chief, as in chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO). Also called C level executives.

3. Insufficient IT Resources for HR Data Analytics Data analysis is resource-intensive for IT, and many smaller companies simply don’t have the

infrastructure for analytics programs. Public cloud resources can be a great help for SMBs* that want to analyze their own data, but an SaaS solution—from a company that’s already done unstructured data analysis—can be even better for companies that lack time, infrastructure, and in-house expertise.

*(Stands for "Server Message Block. is a network protocol used by Windows-based computers that allows systems within the same network to share files). Software as a service (SaaS) is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet. SaaS is one of three main categories of cloud computing. The other two being “Infrastructure as a service (IaaS) and platform as a service (PaaS)”.

4. Worries About Privacy and Compliance When HR collects data on a candidate, particularly data from outside the company, the

department has to consider privacy. Collecting sensitive information, such as personal health

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information or information about sexual orientation, can put HR in murky territory related to protected characteristics.

Laws related to the Fair Credit Reporting Act in the U.S. also come into play. Also, privacy laws in other countries, particularly EU countries, can become a minefield for HR data. Unlike the European Union, India does not currently have a separate data protection law for individuals. ... Recently, in a landmark case, in 2017 however, the constitution bench of the Indian Supreme Court has held Right to Privacy as a fundamental right, subject to certain reasonable restrictions.!

5. Taking the “Human” out of Human Resources @To many HR managers, the idea of implementing people analytics equals letting computers

decide whom to hire. Although the desire to be ethical by sidelining computers is commendable, it is to be kept in mind that using all available tools to hire the right people for the right jobs in the right companies is the ultimate ethical achievement for HR. It’s best for employees, shareholders, society—everyone.

Big data and predictive analytics support hiring, and they help us understand what makes candidates truly successful. But human beings still make the final decision. Thanks to data, they make better decisions.@

Summary The main role of HR analytics is to provide data on the impact of the HR department on the

organization as a whole. HR analytics establishes a relationship between the role of HR department and the business outcomes– and then creates strategies based on that information. Some typical benefits of HR analytics are: Improved organizational performance through high quality talent related decisions; Increased accuracy in forecast of workforce requirements and utilization for improved business performance; Optimization of talents through development and planning; Identify the primary reasons for attrition and identify high-value employees for leaving; Provide the source of competitive platform for the organizations; Manages applicants in better way on basis of qualification for a specific position; Recognize the factors which turn the employee satisfaction into productivity; To determine the individuals Key Performance Indicator (KPIs) on the business; and Enabling HR to demonstrate its benefaction to achieving corporate goals. The 8 HR Analytics Every Manager Should Know About are: Capability analytics; Competency acquisition analytics; Capacity analytics; Employee churn analytics; Corporate culture analytics; Recruitment channel analytics; Leadership analytics; and Employee performance analytics. some major trends for the near future in the field of HR analytics are: From one time effort to real-time effort, From people analytics to workforce analytics, More transparency, More focus on productivity, employees ask “What is in it for me?”, From individuals to teams to networks, Cracks in the top-down approach, Ignoring the learning curve, and Too high expectations.

Though, Indian companies use analytics tools to spot talent and troubles, the concept is still catching up. Challenges in HR Analytics are Bringing Together Data From Many Different Places, Lack of Data Analytics Skills Within HR, Insufficient IT Resources for HR Data Analytics, Worries About Privacy and Compliance, and Taking the “Human” out of Human Resources.

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Exercise

Objective Type Questions

True/False

1. Psychological knowledge is essential to success with people analytics.

Answer-- True

2. All humans are prone to cognitive biases.

Answer—True.

Fill in the Blanks

1. HR analytics refers to the analysis and application of a Company’s ----------data to formulate HR strategies.

Answer: people

2. HR analytics helps in ------------analysis to make and execute the decisions in a rational way.

Answer--- predictive

3. Companies face challenges of ----------- and ------------- while implementing HR data analytics.

Short Questions

1. Define the term “HR analytics”

2. Explain the key aspects of HR analytics.

3. Explain the benefits of HR analytics.

4. “Human behavior is not easy to predict” Comment.

5. What is predictive index?

Long Questions

1. What is HR analytics? Discuss its importance. How can the business value of talent analytics can be increased?

2. State the process of HR analytics.

3. Explain different types of analytics which, if conducted, can increase the effectiveness of HR analytics.

4. Discuss major trends in the field of HR analytics that can occur in the near future.

Describe the challenges before HR manager in the field of HR analytics.

References 1. https://www.techopedia.com/definition/28334/human-resources-analytics-hr-analytics

2. https://www.google.co.in/search?q=hr+analytics&rlz=1C1CHZL_enIN723IN724&oq=hr+ANA&aqs=chrome.0.0j69i60j69i57j0l2j69i60.12964j0j4&sourceid=chrome&ie=UTF-8

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3. Bernard Marr as retrieved frm https://www.forbes.com/sites/bernardmarr/2016/03/01/the-8-hr-analytics-every-manager-should-know-about/#5b07d7ac788f on 24. 10. 18

4. Tom Haak retrieved from https://www.analyticsinhr.com/blog/10-trends-in-workforce-analytics/ as on 20.11.2018

5. Arnold Birkhoff, 9 Ways the GDPR will Impact HR Data & Analytics

As retrieved from https://www.analyticsinhr.com/blog/general-data-protection-regulation-gdpr-impact-hr-analytics/ as on 20.11.2018

6. https://www.linkedin.com/pulse/why-psychological-knowledge-essential-success-people-andersen/?irgwc=1

6. Ananya Bhattacharya, “Complying with Europe’s GDPR will be a “matter of survival” for Indian IT firms” posted on May 24, 2018 retrieved from https://qz.com/india/1286271/complying-with-europes-gdpr-is-a-struggle-for-indian-it-firms/ on 20.11.2018.

7.http://timesofindia.indiatimes.com/articleshow/54790024.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst retrieved as on 20.11.2018

8. https://www.financialexpress.com/industry/hr-analytics-rise-of-the-machines-in-hr/149687/ retrieved as on 20.11.2018

9. http://www.hranalyticsindia.com/

https://www.sociallyawareblog.com/2015/04/03/big-data-and-human-resources-letting-the-computer-decide/

10. Posted on October 28, 2015 by Alersandra swerdlow https://startups.sap.com/how-analytics-are-becoming-important-for-hr/retrieved on 16.12.2018

11. (https://www.sociallyawareblog.com/2015/04/03/big-data-and-human-resources-letting-the-computer-decide/) as on 22.11.2018

12. https://www.roedl.com/insights/india-eu-gdpr-data-privacy-law as on 22.11.2018

13. Lee Jacqueline, “Predictive Analytics, employer Branding, Recruitment Strategy” posted on June 8, 2015 and retrieved on 20.11.2018 from https://www.hirevue.com/blog/5-reasons-hr-struggles-with-using-big-data/

14.ROBYN South “Analytics in HR: 9 Steps on How to Apply Analytics into Your HR Processes” posted on August 17,2017 https://blog.cake.hr/analytics-hr-8-steps-apply-analytics-hr-processes/retrieved on 16.12.2018.

15. Patrick Coolen accessed on 16.12.2018 at https://www.linkedin.com/pulse/10-golden-rules-hr-analytics-crowd-version-patrick-coolen?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_post_details%3Bm%2BcsY4o0SSqWZC5rlCDnHQ%3D%3D

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Lesson-3

What is Employee Engagement?

3.1 Meaning of Employee Engagement

Employee engagement is the extent to which employees feel intense about their jobs, are committed to the organization, and put voluntary effort into their work. Employee engagement is much more than involving employees in activities, games, and events.

3.2 Employee Engagement is not the Same as Employee Satisfaction Employee Satisfaction only indicates how happy or contented employees are. It does not address

their level of motivation, involvement, or emotional commitment. For some employees, being satisfied means collecting salary while doing as less work as possible.

When organizations focus on improving employee satisfaction, changes will not necessarily lead to increased performance. Oftentimes, the conditions that make employees “satisfied” with their jobs are the same conditions that frustrate high performing employees. Top performers embrace change, search out ways to improve, and challenge the status quo. They expect all employees to be held accountable for delivering results, whereas low performers avoid accountability, cling to the status quo, and resist change.

3.3 Importance of Employee Engagement a. Employee engagement drives their performance.

b. Organizations with an engaged workforce outperform their competition. They have higher earnings per share (EPS) and recover more quickly after recessions and financial setbacks.

c. Engaged employees look at the whole of the company and understand their purpose, where, and how they fit in. This leads to better decision-making.

d. Engagement is a key differentiator when it comes to growth and innovation.

e. A company that has an effective employee engagement strategy and a highly engaged workforce is more likely to retain top performers as well as attract new talent. Expectations of employees have changed. Mobile professional careers are much more common than “job for lifers”.

f. It is a huge opportunity to gain long-term commitment and discretionary effort from team. That effort will ultimately lead to higher sales and fewer mistakes.

g. Improving employee engagement can significantly improve company performance across a number of key areas, such as; profitability, productivity, customer satisfaction, innovation, health and safety, sickness and absence, turnover and wellbeing.

But, in order to achieve above benefits, engagement efforts have to be aligned with overall business strategy. Implementing unplanned ideas and activities that manager think might help, without monitoring or measuring their impact, is a waste of time and resources.

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3.4 How is Employee Engagement Measured? (Measure what matters) Engagement can be accurately measured with short surveys that contain just a few questions. But

such short surveys can only provide an indication of whether employees are engaged. They do not explain why employees are engaged or disengaged because details are lacking. Due to insufficient information, an organization cannot develop meaningful activities, training programs, strategies, and initiatives to raise levels of engagement.

In order to get an exhaustive picture of employee engagement, a survey should include about 50 to 80 questions that cover a complete range of relevant topics. There should also be open ended questions for deeper diagnosis of potential engagement problems in a company.

3.5 When Should Employee Engagement be Measured? There is no one best time to conduct an employee engagement survey. It can be done anytime.

Though the timing of an engagement survey will have an effect on survey results, but it is always a good practice to have a better understanding of how engaged your employees are. Steps to be taken are:

a. Create a readiness assessment: A readiness assessment identifies the potential challenges that might arise when implementing new procedures, structures, and processes within a current organizational context.

b. Communicate the reasons for doing the engagement survey to employees;

c. Communicate results, and

d. Take action on survey results. These actions give meaning to the survey. Otherwise, a survey ends up being more of a waste of time and de-motivator.

3.6 Components of Employee Engagement There are two primary factors that drive employee engagement. These factors are based on

statistical analysis. They are also widely supported by industry research.

Engagement with the Organization measures how engaged employees are with the organization as a whole, and also when extended, how they feel about senior management. This factor assess employees’confidence in organizational leadership as well as trust, fairness, values, and respect - i.e. how people like to be treated by others, both at work and outside of work.

Engagement with "My Manager" is a more specific assessment tool of how employees relate to their direct supervisors. Assessment aspects include feeling valued, being treated fairly, receiving feedback and direction, and generally, having a strong working relationship between employee and manager based on mutual respect.

3.7 Beyond the two Core Engagement Factors Besides the above two factors, high performance organizations and highly engaged employees,

also stand out in the following areas:

Strategic Alignment: Strategic Alignment ensures that employees have clarity of purpose and direction, and that their efforts are focused in the right direction. If those efforts are not focused in the right direction, they get wasted.

Managing Execution: The most effective managers excel at managing people through inter

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personal skills, but they are also good at execution. They execute well by providing clear expectations, holding people accountable, and staying focused on achieving results.

Leader and Manager Competency are measured as part of the employee survey using upward feedback. For a more complete assessment of manager competency, 360 Degree Feedback Survey is recommended.

3.8 Who should be Involved in Employee Engagement Initiatives? HR can lead the charge to create an effective employee engagement strategy, but it needs to be

adopted by the entire organization.

The optimism of upper management always differs from what middle managers experience with their teams.

To understand the overall organization picture, it is essential to have an effective, multi-directional communication strategy in the organization. Effective communication is one of the most important factors that is most likely to bring success to the organization. Organizations that succeed are able to comprehend and communicate what success looks like – as individual employees, teams and departments, and the company as a whole. This results in increasing engagement organization-wide.

3.9 Employee Engagement Dynamics (Drivers of Engagement –What Matters Most?)

After assessing whether employees are engaged or disengaged, managers also need to be able to take action on the results. They need to understand what drives engagement and disengagement. They need to be strategic so as to be able to plan activities or initiatives that will have the greatest impact on increasing engagement.

The elements that drive engagement are usually similar across most organizations, but the specific concerns and level of importance are unique and specific in every organization and even in different demographic subgroups within an organization.

The following two techniques can be employed by a manager to identify the key drivers of engagement in an organization. These techniques also help him to understand what to focus on and how to improve in those key areas.

1. Priority Level -A study of the statistical patterns across all groups in the organization can help in determining which items are impacting overall engagement within each demographic group. Items that are strongly linked to engagement, but have low scores are the areas where a manager will want to focus his change initiatives and engagement strategy.

2. Virtual Focus Groups - Employees are asked specific follow-up questions at the end of the survey to provide specific problems as well as suggestions for improvement. Once such areas which need improvement are identified, manager can take up the comments where he will often find detailed information that provides the specific what, why, and how any specific action can be taken.

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Pockets of Discontent - Identify “at-risk” demographic groups within the company

Even organizations with high overall levels of engagement will have areas with low levels of such engagement. These localised problem areas can have a big effect on any organization’s overall performance due to high levels of localized employee turnover and apathy.

Understanding what is happening in these different demographic groups within the organization is as important as the overall level of engagement. When an area or group where engagement is low is identified, one can quickly disaggregate and look at the specific issues and dynamics within that group.

3.10 Problems of Disengagement Disengagement is not just a problem of having a few unhappy employees. It can lead to serious

problems within an organization. Some such problems are:

1. Spread of negativity: Disengaged employees impact both co-workers and customers as disengagement often causes friction.

2. Lower Performance: Disengaged employees do not perform at the same level as engaged employees do. This reduced individual performance can lower production and company performance as a whole.

3. Higher Turnover Rate: The turnover rate is higher among disengaged employees and therefore, a loss to the organization as the costs and time have to be spent on recruiting and training new employees.

4. Reduced Commitment: Another problem of losing young talent is that new employees do not connect with the organization so easily.

5. Poor Employee health: Poor workforce engagement can be detrimental to organizations because it results in decrease in employee well-being and productivity.

6. Higher Employee Dissatisfaction: High engagement group employees demonstrate higher psychological well-being and personal accomplishment, whereas low engagement group employees exhibit higher emotional exhaustion and depersonalization.

3.11 Employee Engagement Activities that Organizations can Undertake

1. Involve employees in business planning process Every 6 months, or even quarterly, the most important issues in the organization and the actions

taken to address those issues, should be presented to the employees. Team members should be involved in planning ahead, assessing opportunities and coming up with improvement ideas for the business strategy. By promoting transparency and offering employees a strategic insight into how the organization is being managed, loyalty will be fostered and leadership abilities will be developed.

2. Create a knowledge creation system High employee turnover rate results in the loss of essential information. A knowledge sharing

system helps the organization avoid such cost, to some extent, and it can also be a great engagement driver for newcomers. It can be done through a mentorship program by pairing experienced employees with newly hired ones. Create a learning program guide that they should follow, giving

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them enough space to test their own learning methods. Give them a timeframe, a set of objectives and the engagement will unfold on its own.

3. Encourage knowledge sharing in a creative way Teams are often so isolated within their own project and their own workspace, that they have no

idea what the rest of the organization is doing. So, an open sharing space should be created once every 2 months or so, where every team can present updates on their project and key learning points. Teams will develop much more rapidly, using the knowledge shared and the different experiences on every project.

To minimize the risk of this turning into a boring, mandatory two hour meeting, make it fun and creative. One can have a theme for each sharing session. One should also try the Happiness at Work Card Game for teams! The game consists of over 50 common workplace scenarios and over 100 science-based solutions. Each scenario identifies and provides context for a common workplace situation, followed by a concise scientific justification for why it is a problem at work. Each solution falls within one of four categories: Practice Positivity, Subdue Stress, Flow to Goals, and Revitalize Relationships. The cards provide many unique practice opportunities that meet the needs and working styles of diverse teams. Card game is designed as a tool for team performance and employee engagement,

4. Show financial statements to the employees A quick presentation of the financial state of the organization should be presented to the

employees every quarter or at the end of the year. Show them how everyone’s efforts are linked together, set bold objectives for the next months and get everyone involved in meeting those objectives. Employees should be encouraged to take responsibility for the success of the company so that they put in their voluntary effort.

5. Encourage and provide learning opportunities An organization can create its own Academy, where employees can access the knowledge and

development opportunities that they need. Lack of learning prospects is one of the top reasons why employees quit organizations. Assess their needs and their preferences, create a curriculum and set-up 1-2 classes per week. Get them involved in deciding how those learning initiatives should be scheduled (during or after working hours). Make it engaging and rewarding with a ceremony, caps and flowers and even a fun night out.

6. Healthy mind in a healthy body A Manager can have his own Office Olympics where everyone can get involved and have fun. It

promotes wellbeing and the benefits of a healthy lifestyle in a funny, yet competitive environment.

Employee Get to know each other in a different environment and connect with people with the same interests. It’s a great chance to get some of those chair-numbed-muscles going and bond in a friendly competition. Prizes and embarrassing photos are a must.

7. Have a hack night (informal social event backed by technology) Break monotony with an ambitious working night. Set a clear objective, create your own set of

rules (breaks, music, snacks, etc.) and try to be as productive as possible in just one night. Get

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everyone together and test your creative and operational limits. It is fun. However, sometimes it is linked with hacking and hence, illegality.

8. Create excitement about upcoming opportunities Communicate upcoming opportunities on a regular basis. This will make employees excited and striving for the next always. It should be done in the internal newsletter, face-to-face or during a general update meeting. It has to be Kept in mind that a career processes should be driven by individual potential as well as current opportunities.

9. Let them create their own on boarding experience Create a self-guided on boarding experience. People are much more likely to remember and assimilate information that they get on their own. Set the ground rules; give them basic instructions, a list of objectives and a timeframe. For example a 60 days plan, with some basic milestones.

Let them swim on their own. Oftentimes, onboarding processes fail to provide actual value and initiate a dialogue. Let new employees create their own onboarding experience and figure out their work preferences.

10. Make orientation day a fun The term used is “a scavenger hunt on boarding”. Turn information that is usually considered

boring or useless into company trivia and learning how to use tools and systems, such as the internal communication system. Include other people in the game. For example, have some of the older employees provide answers and get to know the new hires.

11. Create your own internal magazine Create internal employee-focused magazine with fun columns, news, featured stories and

opportunities. It can have such features like the cover of the magazine being photo and name of the employee with title “Employee of the Month”. It can be an online magazine or a printed one. It can also be both, a monthly online issue and a quarterly printed one.

12. TEDx [Insert Company Name Here] Sounds good right?

A manager should have own company’s TEDx-like Talks where he gets to share ideas, boost creativity and encourage innovation. Make workplace less about work and more about the people there-- their ideas, experiences and aspirations. Give them a chance to be the source of their own inspiration, boosting morale and creativity for everyone in the company. It can be made an event of its own or be included in another event that is being already planned in the organization.

13. Create a League of Extraordinary Managers Managers are a key business component and an equally important engagement driver. Create a

coaching program for managers and teach them to really care. Coach them towards maximum contribution and satisfaction, align them with the organization’s strategy, mission and values and show them how to recognize attitude, effort and results.

14. Encourage employees with the slogan “I am my own hero” Encourage individuals to design and own their career paths, instead of relying on the company or

on their manager. Employees need to take initiative and set a career goal for themselves. Ask

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employees to write their goal on a piece of paper. Put it in an envelope and close it. Then, after 6 months or a year, the sealed envelopes should be given back to them to see if they have realized that goal. For this activity, managers have a guiding role. They can understand and help align employees’ aspirations with the organization’s career development point of view.

15. Create the feeling of “Give back” Employees are to be involved in social and charity initiatives. Giving back creates a positive

mentality. It also fosters pride and loyalty. Get the team together, have everyone pitch a cause and pick the one he wants to support. It is important that such a cause is made personal. One can donate either time and involvement, or money, or both.Usually, giving time is more rewarding than giving money, especially for gen Y employees, who are highly oriented towards social involvement.

3.12 Commitment to Taking Action, not just Measurement Most companies that measure employee engagement do little beyond that measurement. In order

to obtain all of the benefits of employee engagement, management have to commit to taking action. Taking action means ensuring that all employees understand the company vision and its strategic direction, as well as their individual role in achieving the same. It also means engaging managers by developing their leadership skills, and living the company values on a day-to-day basis.

Employee engagement is an organizational effort that requires a long-term vision in a business strategy context, if it is to improve productivity and retention rates. HR manager has to identify what does the company need? And then develop the right strategy. Only then focus should be brought on how to measure employee engagement and what activities to implement.

3.13 Employee Engagement Practices in Indian Organizations 1. Gen-Y Meets Gen-Z Under Gen-X’s Watch

Some organizations have not yet found answers for engaging their Gen-Y workforce, and now here comes Gen-Z. Some of Gen-Y employees will be in managerial positions, trying to steer the careers of Gen-Z. Just like any generation, Millennials will negatively stereotype Gen Z’s as being laid back. This is bound to lead to friction at the workplace. On the positive side, engaging and involving multiple generations of employees, will require a transformation in policies, workplace, rewards, and more focus on personal aspirations of individuals.

2. Employee Engagement in the World of Agile and Devops Agile and DevOps (DevOps is a set of practices that automates the processes between software

development and IT teams, in order that they can build, test, and release software faster and more reliably). It will be a way of life in the workplace. Agile means relating to or denoting a method of project management, used especially for software development. It is characterized by the division of tasks into short phases of work and frequent reassessment and adaptation of plans. For e.g., “agile methods replace high-level design with frequent redesign.”

DevOps is the combination of cultural philosophies, practices, and tools that increases an organization's ability to deliver applications and services at high pace. It results in evolving and improving products at a faster pace than organizations using traditional software development and infrastructure management processes.

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But now, these words are applicable not only in software industry but in all kinds of organizations. This indicates a massive shift in the way employees think and behave. Experiential learning and internal communication programs will have to be created to help employees embrace the new agile world and ensure that mind-shift happens rapidly.

3. More Women at the Workplace This is perhaps, the best of all the developments that is happening and will increase. Due to the

culture shift and organizational policies, more women are expected to join the workforce. It will also pose new challenges – pushing organisations for better workplace practices that are diversity friendly and inclusive. Managing a healthy and engaging workplace will be the key.

4. Whose Culture is it Anyway With organisations spreading globally, and creating workplaces that have locally relevant

policies, the old notion of organizational culture, is in danger of ceasing to exist. The years ahead will see several cultures mushrooming in each organization, and would evolve or devolve into being relevant at a team level, rather than an organization wide being. A kind of tribal culture of individual groups will come into being. The team manager will be influential in creating the culture and driving it. Organisations may define an outline, but it is these tribal cultures that set the future of the workplace. Internal Communications and Employee Engagement functions will need to be more dynamic to address concerns and issues at these levels.

5. Employee Experience and Personalization In future, there would be a great shift in the way employers invest in personalizing their

employee communication. Several digital companies will emerge with the typical big data and collaboration pitch, but still, the employer will not know what employees really want. More expert knowledge will be required to manage this aspect.

6. Automation Resources Vs. Human Resources Automation will take over in a big way in future. Automation in already lean, and barely staffed

companies, will certainly lead to concern and confusion among employees. No organization can stay away from automation, but at the same time will have to ensure that the existing and new generation employees are either re-skilled or moved to other roles. It is vital for HR, Internal Communication, and Employee Engagement to enable this transition in a win-win way so that the organization does not lose important talent.

7. Flexibility is the Enemy Global, connected, flexible, collaborative are all the buzz words used in defining the corporate

workplace today. All these employee friendly strategies (which employees don’t think so) will work against the organization from a team productivity perspective – and hence organizational performance and success. Teams who do not meet each other regularly, who do not work under the same roof (even for a few days in a week), who do not enjoy and celebrate together, and who do not share the same vision, cannot work as one unit. Seeing all the team members together, at least once a week is a rarity today. Team building is too far away.

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8. Compete with your Own Talent Start up culture is taking big leap across India. Organizations have started to realize that the

“entrepreneurial bug” has been biting far too many employees. “Empowerment” and “entrepreneurial spirit” has been promoted among employees, and not wrongly, so much that everyone is looking forward to the opportunity of starting an enterprise of their own. Organizations are rapidly losing their most valuable talent. Not only this, the people who are going out, are poaching other employees too. Organizations, in a nutshell, will start competing with their own talent. This is not a new phenomenon, just that the number of entrepreneurs quitting well paying jobs, have grown at least 10X in the last few years. This is a nightmare that any Employee Engagement and Human Resources would want to avoid.

9. Trumped If most of the H1B and other employees in international locations return and if the reverse brain

drain happens – it will be a challenging time for HR and Employee Engagement teams. All people who are returning, though Indians, will carry a different culture and mindset. Adjusting to the realities of a Indian workplace and local company policies, not to mention a change in lifestyle, will be like a shock. Managing such situations and helping them gel well with local employees needs to start from the ground-up.

Summary Employee engagement is the extent to which employees feel passionate about their jobs, are

committed to the organization, and put discretionary effort into their work. Employee engagement is not the same as employee satisfaction as the latter only indicates how happy or content your employees are. It does not address their level of motivation, involvement, or emotional commitment. A company that has an effective employee engagement strategy and a highly engaged workforce is more likely to retain top performers as well as attract new talent. Successful organizations are value-driven with employee-centric cultures. The best way to find strategies to improve employee engagement is by conducting a survey that has been developed specifically for this purpose.

There are two primary factors that drive employee engagement-- Engagement with The Organization, and Engagement with "My Manager". High performance organizations, and highly engaged employees, also excel in the areas of strategic Alignment and managing execution.

HR can lead the charge to create an effective employee engagement strategy, but it needs to be embraced by the entire organization. Disengagement is not just a problem of having a few unhappy employees. It has a real effect on organizations and, if not addressed head on, can lead to serious problems within a company. Some such problems are spread of negativity, reduction in productivity and increase in labour turnover. Therefore, the aspect of employee engagement should be addressed as soon as possible.

Exercise Review Questions A. True/False 1. Employee engagement is same as employee satisfaction. Answer: False

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2. The best time to conduct an employee engagement survey is any time. Answer true 3. Strategic alignment ensures that employees have clarity of purpose and direction. Answer: True. 3. Even companies with high overall levels of engagement will have struggling areas. Answer: True 4. Disengaged employees have no real effect on business’s bottom line. Answer: False 5. Employee engagement can be increased even without involving employees at planning stage. Answer: False. 6. Employee engagement can only be increased through money offers.

B. Fill in the Blanks 1. Organizations with an engaged workforce ----------------their competition.

Answer: outperform

2. Engagement is a key ------------- when it comes to growth and innovation.

Answer: differentiator

3. Employee engagement surveys must be -------------against other organizations for providing fruitful results.

Answer: Benchmarked

4. ----------can lead the charge to create an effective employee engagement strategy.

Answer: HR

5. All efforts of employee engagement need to be -------------in nature to have greater impact.

Answer: Strategic

6. Most companies that measure employee engagement do -------------beyond that measurement.

Answer: little

7. Employee engagement is an ---------------- effort that requires a long term vision.

Answer: organisational

Short Questions 1. Define employee engagement. Differentiate it from employee satisfaction.

2. Discuss the importance of employee engagement.

3. How is employee engagement measured?

4. When should an organization measure engagement of its employees?

5. Explain primary components of employee engagement.

6. Who should be involved in employee engagement initiatives

7. Explain the dynamics of employee engagement.

8. Explain “Happiness at work” Card Game for teams.

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Long Questions 1. Explain all the components/factors of employee engagement

2. Discuss the high cost of employee disengagement.

3. Discuss different employee engagement activities that an organization can undertake.

4. Discuss some recent trends in employee engagement practices.

References https://www.custominsight.com/employee-engagement-survey/what-is-employee-engagement.asp

https://www.custominsight.com/employee-engagement-survey/what-is-employee-satisfaction.asp

https://www.custominsight.com/employee-engagement-survey/benchmark-data.asp https://www.custominsight.com/blog/measuring-employee-engagement.asp https://www.custominsight.com/360-degree-feedback/ https://www.custominsight.com/employee-engagement-survey/employee-survey-sample-compare.asp

https://www.custominsight.com/blog/employee-engagement-disengagement-elephant-in-the-boardroom.asp https://perspectives.eiu.com/ retrieved as on 21.11.2018

https://journals.sagepub.com/doi/abs/10.1177/1548051813494240retrieved as on 25.12.2018

https://gethppy.com/employee-engagement/15-employee-engagement-activities-can-start-now/ retrieved as on 1.1.2019

(https://blog.hubspot.com/blog/tabid/6307/bid/33369/How-to-Create-200-Hours-Worth-of-Marketing-Content-in-One-Night.aspx) retrieved as on 1.01 2019

(Dr Martin Reddington DBA, Academic Fellow CIPD, Sourced from https://home.kpmg.com/uk/en/home/insights.html on 21.11.2018)

https://www.dfrens.com/employee-engagement-trends-in-india-2017/

https://www.google.com/imgres?imgurl=https://www.dfrens.com/wp-content/uploads/2016/12/Employee-Engagement-Trends-2017-Dfrens.jpg&imgrefurl=https://www.dfrens.com/employee-engagement-trends-in-india-2017/&h=940&w=1280&tbnid=5_A1I0IGwMRREM:&q=employee+engagement+activities+in+indian+companies&tbnh=160&tbnw=218&usg=AI4_-kQby2OMZ2itxe4SWKEPuvrEMYj0mw&vet=12ahUKEwjf-f7N3uXeAhVOAHIKHQmuDtsQ9QEwAHoECAYQBg..i&docid=-7NvutQuKeZowM&sa=X&ved=2ahUKEwjf-f7N3uXeAhVOAHIKHQmuDtsQ9QEwAHoECAYQBg TOP 9 EMPLOYEE ENGAGEMENT AND TEAM BUILDING TRENDS FOR 2017 IN INDIA (posted by Sachid tharayil, Dec 21, 2016) retrieved on 20.11.2018

https://www.google.co.in/search?q=devops&rlz=1C1CHZL_enIN723IN724&oq=DevOps&aqs=chrome.0.0l6.7793j0j8&sourceid=chrome&ie=UTF-8

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Lesson-4

Matching Culture with Strategy This topic has been discussed under the following main headings:

1. What is Organizational Culture?

2. What is Strategy?

3. Why Alignment Between Strategy and Culture is Required?

4. What are the Benefits of Such Matching?

5. What are the Problems Caused Due to Misalignment?

6. How to Make Such Alignment More Effective?

4.1 Meaning of Organizational Culture Corporate culture means different things to different people. It is emotional, ever-changing,

and complex. Culture is human, vulnerable, and as moody as the people who define it. One of the most important building blocks for a highly successful organization and an extraordinary workplace is “organizational culture”. The most important thing about culture is that it’s the only sustainable point of difference for any organization. Anyone can copy a company’s strategy, but nobody can copy their culture. Culture is driven by leadership. How leaders behave, what they say, and what they value, drives culture. But what is organizational culture?

Characteristics of Culture Culture is how organizations do things;

It defines the values and behaviors that contribute to the unique social and psychological environment of an organization;

Organizational culture defines a jointly shared description of an organization from within;

Organizational culture is the sum of values and rituals which serve as “glue” to integrate the members of the organization;

Organizational culture is a system of shared assumptions, values, and beliefs, which governs how people behave in organizations;

Organizational culture is civilization in the workplace;

Organizational culture refers to the philosophies, attitudes, beliefs, behaviors and practices that define an organization;

Culture is the organization’s immune system; and

A big organization will not only have culture but subculture too.

4.2. What is Strategy Strategy, at its core, is rational and logical, clear and simple. It should be easy to

comprehend and to talk about. Without a clear strategy, a company is lost. Strategy is a high-level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited. Strategy generally involves setting

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goals, determining actions to achieve the goals, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources). Strategy can be intended or can emerge as a pattern of activity as the organization adapts to its environment or competes. It involves activities such as strategic planning and strategic thinking.

4.3 Organizations Must Change and Adapt Repeatedly

Perhaps the greatest challenge business leaders, face today is how to stay competitive amid constant turbulence and disruption. The time has come to rethink strategy in terms of:

Will our strategy work in this environment?

What must we change, and what must we not change?

Do we need a new business model?

What is our core? How is today’s unprecedented environment changing our customers and their behavior? Is our industry being deeply restructured, and if so, how will it affect us?

Companies most likely to be successful in making change work to their advantage are the ones that no longer view change as a discrete event to be managed, but as a constant opportunity to evolve the business. Three things are necessary:

Change awareness – A company’s ability to redefine itself as necessary

Change agility – A company’s ability to engage people in pending changes

Change reaction – A company’s ability to appropriately analyze problems, assess risks, and manage the reactions of employees

4.4 Agile Organizations (Both in Terms of Culture & Strategy) Agility does more than allow companies to adapt. It makes them adaptable and proactively

nimble as part of their culture. Agile organizations are optimistic in the face of challenge, never rest on their success, and regularly seek to improve even when they are successful. Agile companies focus on the ability and capacity to implement changes, both incremental and discontinuously, as well as the ability to verify the contribution of execution to performance. In today’s business environment, organizational agility is no longer a luxury, but a necessity.

Common Traits of Agile Organizations They never rest on their success and regularly seek to improve even when they are

successful.

There is clarity and alignment around the mission, vision and values.

They embrace failure as a learning opportunity; have a strong purpose, a vitality and a learning mindset.

Rapid decision-making happens every day and not just during a crisis.

Agile organizations has strong ability to execute, high levels of accountability, customer-centric thinking and strong cross-organizational synergy

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Competitive advantage requires the ability to move quickly, efficiently, and decisively. It also requires quickness in sensing, responding and exploiting change in the business environment. Organizational agility is needed as it is the capacity to be infinitely adaptable without having to change. Agile organizations strive to develop a built-in capacity to shift, flex, and adjust, either alone or with alliance partners, as circumstances change, and to do so as a matter of course.

Being infinitely adaptable is crucial here. There is really only one way to do that. Create the culture that has the built-in capacity for agility. The leaders of the future will be those who can out-change both the competition and external forces.

4.5 Difficulties in Changing Organizational Culture

Culture determines how everything else in the organization unfolds. The culture of an organization is practically its DNA.

The organization and its culture are interdependent and reciprocal. The organizational overall culture affects the organization, its design and strategies and vice versa.

The culture of an organization reflects its deepest values and beliefs. Trying to change it can result in changing everything the organization holds dear, often without that conscious intention.

The organizational culture is deeply embedded in the entire organizational system. Each little change affects every layer of that system.

The culture of an organization evolves over time. The culture is the identity of an organization as it is deeply linked to its history and development.

Any effort to change the organizational culture can be compared with changing the course of a large ship. The ship takes time to manoeuvre and whilst the engines are pushing one way the tides and winds are pushing another. Concisely, the culture of an organization creates its unique, complex face and character. As such, it is as difficult to change in its entirety as the whole personality of a human being or that of a nation. Organizational culture is like an iceberg with most of its weight and bulk below the surface. Changing a culture is a large-scale undertaking, and eventually all of the organizational tools for changing minds will need to be put in play.

4.6 Steps in Organizational Culture Change

Although changing can be compared with rolling rocks uphill, it will likely result in increased growth and revenue. Organizational cultures are formed over years of interaction among participants in the organization. It usually takes a significant event for people to consider culture change.

Three major steps are involved in changing an organization's culture.

1. Understand current culture: Ways to Understand culture are

a). Recognition of the existence of such culture Every organization has company culture, whether intentionally cultivated or not. In short, it refers to the combination of values, goals, ethics, and expectations that govern and influence employee behaviours.

b). Analysis of organization’s Priorities

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To understand organizational culture, organization’s priorities should be looked into. These goals and initiatives reveal what the organization values and what it does not (both explicitly and implicitly). Is it one with a workforce that’s engaged, empowered, and encouraged to innovate and improve? Or a culture where the bottom line is often prioritized? Culture transformation should be tried if the organization’s priorities require pausing and rethinking.

c). Inquire About Company Culture

An organization’s culture is made up of behaviours, those that are encouraged, permitted, and hindered. To understand what kind makes up an organization, it is best to go directly to the source that is the employees. Feedback should be taken regarding behaviours that currently serve the company well and which need to be discouraged or changed to elevate the organization. Gather feedback from all levels of employees, from executives to front-line managers. Surveys, company-wide assessments, and focus groups can all help create a clearer picture of the behaviours that define current organization’s culture. Again, the key is to engage every employee as you ask for feedback because the sum total of all employee contributions and behaviours are what make up your culture.

d). Identify Leaders

While every employee contributes to organization’s culture, leaders have more impact and influence. Leadership sets the tone for what’s permissible and encouraged in the organization and what is not.

2. Plan the Desired Organizational Culture

Develop a picture of organization's desired future. Examine the mission, vision, and values for both the strategic and the value-based components of the organization. Questions to be answered are:

a. What are the five most important values management would like to be represented in organization’s culture?

b. Are these values compatible with the current organizational culture? Do they exist now? If not, why not? If they are so important, why aren't those values being attained?

c. Are the mission, vision, and values clearly articulated and disseminated so that employees have a clear understanding of the organization's direction and where they fit within it?

d. What cultural elements support the success of the organization, and what elements of the current organizational culture need to change?

3. Change the Organizational Culture

The two most important elements for creating organizational cultural change are executive support and training.

Executive Support

Executives must support the cultural change in ways beyond verbal assent. They must show the support for the cultural change by changing their own behaviours.

Provide Training

Culture change depends on behavior and belief change. Members of the organization must clearly understand what is expected of them and how to actually do the new behaviours. Use

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training to communicate expectations and new behaviors. Mentoring will also help employees learn and change.

Additional Ways to Change the Organizational Culture

Communication, employee involvement, and a willingness to learn and adapt are main instruments to keep organizational change on track.

Create value and belief statements

Ask employees’ focus groups to put the company's mission, vision, and values into words that state the impact on each employee's job. For example, for one job, the employee stated, "I live the value of quality patient care by listening attentively whenever a patient speaks." This exercise gives all employees a common understanding of the desired culture.

Practice effective communication

Keep all employees informed about the organizational culture change process to ensure commitment and success.

Review organizational structure

The physical structure of the company may have to be changed to align with the desired organizational culture. For example, a small company with four distinct business units competing for a product, customers, and internal support resources may not support an effective organizational culture and the overall success of the business.

Consider moving employees and teams

The sense of cohesion and camaraderie among groups that must work together must be created to serve customers. So, people who must work closely together must be moved into the same space.

Redesign organization’s approach to rewards and recognition

The reward system must be changed to encourage behaviors vital to the desired organizational culture. For example, if employees are to be encouraged to work as cohesive teams, they must be rewarded for their success as team players.

Review all work systems

Systems such as employee promotions, pay practices, performance management, and employee selection should align with the desired culture. It is more difficult to change the culture of an existing organization than to create a culture in a brand-new organization or team. When an organizational culture is already established, people must unlearn the old values, assumptions, and behaviors before they can learn the new ones. But with time, commitment, planning, and proper execution, can change organizational culture to

support the accomplishment of key business goals and needed outcomes.

4.7 The Relationship between Culture and Strategy(7)

Too often a company’s strategy, imposed from above, is at odds with the ingrained practices and attitudes of its culture. Leaders may underestimate how much a strategy’s effectiveness

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depends on its cultural alignment.(8) But the fact is that organizational culture shapes and sustains both employee productivity and business results. The relationship between culture and strategy can be stated as under:

Strategy drives focus and direction while culture is the emotional, organic habitat in which a company’s strategy lives or dies

Strategy is just the headline on the company’s story – culture needs a clearly understood common language to embrace and tell the story that includes mission, vision, values(9), and clear expectations

Strategy is about intent and ingenuity and culture determines and measures desire, engagement, and execution

Strategy lays down the rules for playing the game, and culture fuels the spirit for how the game will be played

Strategy is imperative for differentiation, but a vibrant culture delivers the strategic advantage

Culture is built or eroded every day. How you climb the hill and whether it’s painful, fun, positive, or negative defines the journey

When culture embraces strategy, execution is scalable, repeatable and sustainable

Culture is a clear competitive advantage

Culture must be monitored to understand the health and engagement of an organization

4.8 What is More Important: Strategy or Organizational Culture Corporate culture is an incredibly powerful factor in a company’s long-term success. No

matter how good a strategy is, people always make the difference. Culture can be intimidating and frustrating, often leaving leaders dodging it, neglecting it, or discounting it. Because so many companies are run by people whose expertise is heavily skewed to the rational, financial, and legal side of the equation, culture is often subordinated, misunderstood, or unappropriated. While many studies show there is a direct correlation between a healthy, productive culture and a company’s bottom line, the majority of companies spend little time thinking, let alone doing anything about, this topic – even when they’re spending lots of time thinking about their business strategy. But the fact is Organizational culture is eating what it kills(10) – such as strategy, change management, innovation, operational efficiency, lean process and even including vision and mission. Culture trumps strategy every time.

4.9 Need/Benefits of Strategy, Capabilities and Culture Alignment There is a powerful triumvirate in corporate transformations – Strategy, capabilities and

culture. All three need to be designed together, aligned and enabling of each other to create true organizational transformation. The most critical element in any strategy is its translation into reality. The only true measure of success is in its execution. And one of the key determinants of successful strategy implementation is organizational alignment. Organizational alignment is the absolute compatibility between the strategic and cultural paths. For e.g., successful rowing eights operate as a unit. Ever watched a “rowing eights” event? To achieve success, the rowers must

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stroke at the same pace with the blades of every oar pulling at the same depth in the water. They all know the overall game plan for success and they are ready to respond to the orders of the coxswain (who’s job it is to quarterback the execution of the race strategy and communicate the adjustments that keep the boat on course in changing wind and water conditions) as individuals and as a cohesive unit. Each member of the team knows what their job is during the race and that they can rely on their coaching, training, boat, and equipment, and the skills, technique, and commitment of their teammates while the race is on. When team alignment and cohesion is off, the boat strays off course, essentially wasting time, energy, and the resources that were invested in trying to achieve the goal of winning the race.

It’s very much the same for an organization. Without alignment, the best strategic plan will never be fully achieved because organizational alignment is the glue that makes strategy execution excellence happen. An aligned organization gets things done faster, with less effort, and with better results, and is more agile and responsive to changing business conditions.(11) Ultimately, a high level of organizational alignment is essential for achieving increasingly better business performance results now and in the future! That’s why organizational alignment is so important for achieving better performance results.

4.10 Business Impact Of A Weak Or Misaligned Organizational Culture(12)/ Consequences of Culture-Strategy Misalignment

Optimal performance will be impossible to sustain when corporate culture does not align with the strategic goals of the company. Just as a garden must be carefully tended to keep weeds from taking it over, culture must be consciously maintained to prevent it from turning into something unintended.(13)

Allowing culture and strategy to fall out of alignment can bring leaders face-to-face with far-reaching consequences. These include:

Lost sense of mission. When strategy and a strong culture are aligned, employees get a sense of clarity and a mission that guides their actions and decisions. In situations of misalignment or non alignment, many employees turn to self-serving behaviors and the motive of mission is lost.

Disoriented employees. When employees get mixed signals from leaders preaching one set of values but rewarding a different set of behaviors, it can leave them feeling confused and out of touch with the organization’s goals. For example, an organization may emphasize on individual performance reviews but rewards teamwork.

Damaged public image. When culture and strategy are aligned, day-to-day operations tend to fall into sync with a company’s brand and image. But in situations of non alignment or misalignment, organization can appear deceitful to those observing it—especially to customers.

Increased turnover. A culture well-aligned with strategy inspires loyalty in all levels, from company leadership to entry-level hires. When that alignment fails, the sense of loyalty can be nearly impossible to maintain—and employees will tend to seek it elsewhere.

4.11 Symptoms of Misalignment It is extremely important to identify strategic misalignment as early as possible. Uncorrected

problems compound quickly and lead to serious damages within the organization. Precisely what

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damage will occur and where, is difficult to predict because of two reasons: i) business organizations behave much like living organisms which are difficult to predict; ii) they are made up of inter-dependent systems that cause reactions to differ from case to case. Some symptoms of strategic misalignment, which can help an early diagnosis, are as under (14):

a) Missed Financial Projections:

While projections can be missed due to many reasons, often the root cause is strategic misalignment. This is because different areas of the organization are reacting to different stimuli differently.

b) Stalled Growth:

When organizations begin to fail due to misalignment, initiatives required to support and sustain profitable growth get into trouble. It is because, despite their best intentions, they cannot sufficiently coordinate efforts on their own to correct the course.

c) Reactive Spending and Duplication of Initiatives:

Reactive spending and duplicity of initiatives, due to inter-dependent initiatives, might occur as a result of low quarterly or annual results. It poses a pressure on limited resources.

d) Cultural Erosion and Morale Problems:

Misalignment leads to organizational chaos which is not liked by both leaders and workers alike. Human nature is such that we thrive on stability, predictability and feelings of accomplishment and success. Pressure mounts with the increased workload and stress of failure. Morale among workers is infectious. When it is good, the good feelings spread to others. Unfortunately, the reverse is true as well. This makes the morale symptom damaging to the organization’s culture and overall performance.

e) Decreased Revenue / Profitability:

Revenue decreases can occur for a variety of reasons, most of which can be traced back to misalignment. When new services or products are delayed in roll-out because the initiatives to bring them to market are unsuccessful, revenue takes a hit and overall competitive positioning can be eroded. Profitability suffers as a result of any of the symptoms discussed thus far.

4.12 Causes of Misalignment There are many ways that strategy misalignment can creep into an organization. Some of them are listed hereunder:

a) The Planning Process:

A big cause of strategy misalignment is the lack of developed strategic planning process. An underdeveloped process does not adequately define plan goals to make them concise and measurable. Underdeveloped planning processes also neglect detailed planning at the operations level and overlook communications and change management.

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b) Governance:

Strategy misalignment is likely to creep in when plan governance is missing. Strong governance instils leadership and worker accountability to planned goals. Governance helps avoid strategy misalignment not only by defining accountability, but by empowering employees.

Strategy governance helps create employee empowerment. It does so by directly defining

Who can do what?

Under what circumstances?

What are the metrics for evaluation?

To practice “strategy misalignment avoidance”, governance can and should be broad enough in scope to orchestrate many programs that support planned goals. Orchestration involves:

Managing and tracking the budget allocations related to the strategic goals.

It involves coordinating planning at the operational levels.

It also involves managing the overall strategic plan and the operations plans below that.

Proper governance will guide the organization firmly away from strategic misalignment and towards plan goal achievement.

c) Miscommunication:

Strategic plans must be communicated very effectively. Common communication issues related to strategy misalignment include failure to determine:

Who needs to know about plan information?

What do they need to know about the plan?

When do they need to know it?

What should the information mean to them?

What is it that the organization expects them to do with the information?

How will they be communicated with?

This means that during planning, above topics and many others must be addressed initially during strategic plan development and throughout operational planning. During plan refresh cycles, the communication strategy should always be reviewed and updated as necessary.

4.13 Steps to Realign Corporate Culture Examine the hiring process. Take an in depth look at the employees while hiring and

promoting. Are they a good fit with the organization’s strategy and purpose? For example, persons who like to work alone are not good for an organization that relies strongly on teamwork.

Examine systems. Organization’s systems should be examined to find out whether they support or conflict with the cultural values? For instance, if trust is one of primary values of an organization, it should be checked whether the system permits most of the senior executives to approve large expenditures.

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Examine communication systems. In terms of:

What words are the organizational leaders using to communicate with the people?

What principles are they talking about?

What milestones and events are they choosing to commemorate?

Are these communication choices supporting a culture that reinforces organizational strategy?

By examining all aspects, an organization can conquer cultural problems to achieve high performance.

Initial Steps to Correct Misalignment: Though it does take time to address strategy misalignment, the following interim actions and planning philosophies can be taken:

A. Plan Bi-directionally

Strategy misalignment begins to occur when there is a lack of connect between the strategy-making body of the organization and the business operational managers who are responsible for tactical execution and making day-to-day decisions within the business. Misalignment between strategy and execution is more likely to take place when organizations focus primarily on strategy but fail to plan operationally. A bi-directional planning process better assures that hard links exist between goals and tactics. One directional ( top-down approach emphasising planning) process only creates an “us against them” mentality. Instead top-down / bottom-up (bi-directional) planning approach involves operational leaders in the planning process. Bi-directional planning leads to more realistic and measurable goals because a healthy amount of disagreement enters into the strategy process, due to the mix of perspectives offered from the managers now providing input.

Summary This chapter discusses the meaning of culture, meaning of strategy and the need of alignment

between the two. Organizational culture is defined as the underlying beliefs, assumptions, values and ways of interacting that contribute to the unique social and psychological environment of an organization. Strategy is a high-level plan to achieve one or more goals under conditions of uncertainty. Strategy culture misalignment can be a serious problem, and likely exists to some extent in almost every organization. Getting control of the problem will allow organization’s a chance to accomplish their goals and function at a higher level.

Exercise Review Questions

Objective Type Questions

A. True/False

1. Strategy is a high level plan to achieve goals under conditions of certainty.

Answer: False.

2. Change is to be viewed as a constant opportunity to evolve the business and not as a discrete event to be managed.

Answer: True

3. Agile organizations are pessimistic in the face of challenge.

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Answer: False

4. Agile organizations rest on their successes.

Answer: False

5. An organization’s identity is not based on its culture.

Answer: false

6. Executives need not support the cultural change in ways beyond verbal assesnt.

Answer: False

7. Organizational culture does not deliver strategic advantage.

Answer: False

B. Fill in the Blanks

1. Culture is the only sustainable point of -------------for any organization.

Answer: difference

2. A strategy defines how the --------- will be attained by the ------------------.

Answer: goals, resources

3. The greatest challenge being faced by organizations is how to stay ---------------- amid constant turbulences.

Answer: Competitive

4. Agile organizations strive to develop a built in ------------ to shift.

Answer: capacity

5. Peter Drucker said: “Culture eats strategy for------------.

Answer: Breakfast

6. The organization and its culture are ---------------and interdependent.

Answer: reciprocal

7. The culture of an organization is embedded in the entire -------------------system.

Answer: organizational

8. Organizational culture is like an --------------- with most of its weight and bulk below the surface.

Answer: iceberg

9. Organizations must create plans to ensure that the desired organizational culture becomes a ---------------------.

Answer: reality

10. Strategy drives focus and direction while culture is ---------------.

Answer: emotional

11. Strategy lays down the ---------------for playing the game while culture ------------ the spirit.

Answer: rules, fuels

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Short Questions

1. Define culture. Explain its characteristics.

2. Define strategy.

3. Why should organizations change and adapt repeatedly to environment?

4. Define agile organizations. What are their common traits?

5. Discuss the relationship between strategy and organizational culture.

6. Explain the benefits of strategy and culture alignment.

7. Discuss the consequences of misalignment between organizational culture and strategy.

8. Explain the symptoms of misalignment between organizational culture and strategy.

9. What are the causes of misalignment?

Long Questions

1. How can organizational culture be changed.

2. Discuss the procedure of realigning corporate culture with organizational strategy.

References 1. https://www.torbenrick.eu/blog/culture/organizational-culture/retrieved on 24.11.2018

2. https://www.torbenrick.eu/blog/culture/broken-organizational-culture/ POSTED BY TORBEN RICK | MARCH 18, 2016 | CORPORATE CULTURE, RETRIEVED ON 24.11.2018.

3. https://www.torbenrick.eu/blog/category/strategy/retrieved on 25.11.2018

4. Torben Rick, “Why Focus on an agile organization”, posted on February 26, 2018at https://www.torbenrick.eu/blog/culture/agile-organizational-culture/ retrieved on 29.11.2018

5. https://www.torbenrick.eu/blog/culture/why-is-organizational-culture-change-difficult/ retrieved as on29.11.2018

6. susan M Heathfield, “You Can Consciously Change Your Corporate Culture—Your culture should—and can—reflect your company’s needs” updated on October 3, 2018 retrieved on 29.11.2018 from https://www.thebalancecareers.com/how-to-change-your-culture-1918810.

7. “what is the relationship between corporate culture and strategy” posted by Torben rick, June 7 2013at https://www.torbenrick.eu/blog/strategy/relationship-between-culture-and-strategy/retrieved on 21.11.18

8. https://www.torbenrick.eu/blog/performance-management/organizational-alignment-is-the-glue/posted on October 10, 2014 retrieved on 30.11.2018.

9. https://www.torbenrick.eu/blog/culture/value-statements-can-be-real-business-drivers/ as on 24.11.2018

10. (https://www.torbenrick.eu/blog/culture/organisational-culture-eats-strategy-for-breakfast-lunch-and-dinner/)

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11. https://www.torbenrick.eu/blog/culture/corporate-culture-will-need-to-be-both-resilient-and-agile/posted on October 3, 2016 retrieved on 30.11.2018.

12. https://www.torbenrick.eu/blog/culture/business-impact-of-a-weak-or-misaligned-organizational-culture/ retrieved as on 25.11.2018

13. Reed Deshler, “The Dangers of a Misalignment Between Culture and Strategy”

Posted on November 7, 2017 retrieved from https://playbook.amanet.org/training-articles-misalignment-culture-strategy/ on 29.11.2018.

14. Hatim Abukhames, “Strategy Misalignment: The Symptoms, Dangers and Treatment” Published on April 19, 2015 at https://www.linkedin.com/pulse/strategy-misalignment-symptoms-dangers-treatment-hatim-abukhames/ retrieved on 29.11.2018.

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Lesson-5

Behavioural Issues in Strategy Implementation

This Chapter Includes:

1. What is Strategic Implemetation;

2. Key Elements of Strategy Implementation;

3. Components of Strategy Implementation;

4. Importance of Strategic Implementation;

5. Basic Features;

6. Five Stages of Strategic Management Process; 7. Common Mistakes in Implementation;

8. How to Make it Effective;

9. Behavioural Issues in Strategy Implementation

5.1 Introduction Business Strategy can be described as the plan which guides organizations in the selection and

application of resources that will help them obtain a competitive advantage. It is more concerned with how a business competes in a particular market. It consists of strategic decisions about the choice of products, meeting the needs of customers, exploiting/creating opportunities, etc. In simple terms, it can be defined as a plan that says where a business/organization wants to go and how it envisages getting there.

Often the difference between the market leaders and other players in the industry is the reflection of the difference between the ability to execute strategy. Much of strategy implementation involves managing change. So the behavioural issues involved, must not be overlooked.

5.2 What Is Strategic Implementation Strategic implementation is a term used to describe the various activities within an organization

to manage the execution of a strategic plan. It is a process that puts plans and strategies into action to reach desired goals. It is a written document that details the steps and processes needed to reach plan goals. It includes feedback and progress reports to ensure that the plan is on track.

5.3 Key Elements of Strategy Implementation Absence of required elements at the implementation stage often results in failure of promising

strategies because their implementation does not include all the required elements. Such elements are:

Organization One has to adjust the strategy to match the organizational structure of the business. A strategy

that requires quick action at the working level and decisions by working-level employees needs an organizational structure that delegates authority. On the other hand, a strategy that relies on tight control from the upper management levels works best in a hierarchical structure with centralized authority.

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Planning Implementing strategy requires a series of activities (plan), through which an organization is able

to meet its targets and achieve overall goals. Managers should identify the individual tasks that make up each activity, place them in the correct sequence and arrange them in a schedule. This plan forms the basis for implementation and for further monitoring and control.

Resources After completing implementation plan process, manager can start assigning employees to the

individual tasks. Some tasks require additional resources, like computer software, promotional materials and money to cover special expenses. Manager should ensure necessary number of people on the team to carry out all the tasks and enough other resources for a successful and complete strategy implementation.

Communication The details of the strategy and its implementation plans have to be communicated to the selected

team. It can be done through written descriptions, procedures, images and drawings. Online collaboration tools such as those found in office productivity software can help foster a cooperative working relationship among team members.

Monitoring Managers’ focus should shift from initiating implementation to monitoring once the team starts

working. It is to be made sure that work is on track and on schedule according to the planning documentation. When tasks are late or assigned resources are found insufficient, corrective steps are required to be taken

5.4 Components of Strategy Implementation The important elements of strategy can also be discussed in the form of components of strategy

implementation which are Organizational Structure, Control, and Culture.

a. The first component of strategy implementation is organizational structure, which assigns employees to specific tasks and specifies how those tasks link together to realize a competitive advantage. The purpose of organizational structure is to coordinate and integrate the efforts of all employees at the corporate, business, and functional levels, and across functions and business units, so that they work together to help the firm achieve its strategies successfully.

b. Another component of implementation is a strategic control system, which provides the incentives that motivate employees to help the firm achieve its strategies. Control systems also provide performance feedback to managers so that corrective action can be taken if needed.

c. Organizational culture is another important component of strategy implementation, and it consists of the values, norms, beliefs, and attitudes that are shared by people in an organization. Culture guides the way that employees interact with each other and with stakeholders outside the organization, and thus will have an important impact on the implementation of an organization’s strategies.

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5.5 Importance of Strategic Implementation Strategic implementation is critical to a company’s success, addressing who, where, when, and

how of reaching the desired goals and objectives. It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and identifying strategic issues and goals. Implementation assigns individuals to tasks with timelines so that an organization reaches its goals. Through a series of action-based phases and tasks, the implementation process is a fundamental step in turning a company’s vision of a project into reality.

Importance as a Function Without strategic implementation, a project would not be able to get off the ground, since strategic implementation functions as a project’s blueprint. The implementation process identifies what tasks need to be completed, and when. Strategic implementation is action-based and uses a variety of tools to keep the project team on track:

a. Provides a Work Breakdown Structure A work breakdown structure is an asset to any project team because it illustrates the order of operations for project implementation. Work breakdown structures identify all the steps that need to be taken to get from one implementation phase to the next. Work breakdown structures are designed in a hierarchal structure, and break a project down into smaller, and more manageable, components.

b. Develops Implementation Schedule Another valuable application that strategic implementation is responsible for is developing an implementation schedule. Implementation schedules are similar to time lines in that they dictate start and end dates for when project tasks and phases should be completed. Project implementation schedules are often broken down into charts that map out the duration of how long a task should be performed before it’s on to the next phase.

c. Does Cost Allocation Strategic implementation is important because it evaluates project costs and determines cost allocation to fund the project from start to finish. By planning ahead, and conducting financial studies and projections, the strategic implementation process can save projects money in the end, because unforeseen costs can be reduced or eliminated.

d. Determines Evaluation Methodology The strategic implementation process will determine the evaluation methodology for a project. Evaluations are done to study how close a project is to being completed, and if the project team has met important milestones. Evaluations consist of measuring a project’s progress, and comparing that against what the targeted goal is. This will tell the project team whether or not they are on track with the projected time frames and projected funding.

e. Effective strategy implementation allows the company to be more successful in pursuing a cost leader or differentiation strategy.

i. Strategy implementation aids firms in pursuing a cost leader strategy, because it can help them reduce expenses in all functions through improved coordination and control.

a. Managers must choose the combination of structure, control, and culture that will lead to the lowest costs.

b. Managers must continuously monitor their structure, control, and culture to ensure that costs are continuously driven down.

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ii. Strategy implementation aids firms that are pursuing a differentiation strategy, because it helps the company to add value and uniqueness to its products.

a. A differentiation strategy requires a broad product line, leading to high bureaucratic costs. Thus an effective coordination mechanism is especially important.

b. To successfully pursue a differentiation strategy, a company’s functions must work cooperatively together. Behavior controls and culture are more effective than output controls in a cooperative situation, because it’s hard to measure the relative contribution of different groups when they are cooperating.

c. Thus, differentiators tend to have a very different culture than cost leaders. Differentiators tend to have a collegial or professional culture, based on expertise and cooperation.

5.6 Basic Features A successful implementation plan will require:

a very active leader who remains visible, such as the CEO, as he communicates the vision, excitement and behaviours necessary for achievement.

Everyone in the organization should be engaged in the plan.

Performance measurement tools are helpful to provide motivation and allow for follow up.

Implementation often includes a strategic map. It identifies and maps the key ingredients that will direct performance. Such ingredients include finances, market, work environment, operations, people and partners

5.7 The Strategic five Stages of the Management Process The strategic management process is more than just a set of rules to follow. It is a philosophical

approach to business. Upper management must think strategically first, then apply that thought to a process. The strategic management process is best implemented when everyone within the business understands the strategy. The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.

A. Clarify the Vision

The purpose of goal-setting is to clarify the vision for business. This stage consists of:

a. Identifying detailed and realistic short- and long-term objectives in the light of vision

b. Identifying the process of how to accomplish them,

c. Customizing the process for the staff,

d. Give each person a task with which he can succeed, and

e. Write a mission statement that succinctly communicates business goals to shareholders as well as employees.

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B. Gather and Analyze Information

Gather and analyse information to identify the strengths and weaknesses of the organization as well as any threats and opportunities that may arise along the path.

C. Formulate a Strategy

Formulation of strategy requires:

a. Reviewing the information gathered from the analysis;

b. Determine what resources the business currently has that can help reach the defined goals and objectives;

c. Identify any areas for which the business must seek external resources;

d. The issues facing the company should be prioritized by their importance to success;

e. Formulate alternative strategies

f. Choose strategy

D. Implement Strategy

Successful strategy implementation is critical to the success of the business venture. Everyone within the organization must be made clear of their responsibilities and duties, and how that fits in with the overall goal. Additionally, any resources or funding for the venture must be secured at this point. Once the funding is in place and the employees are ready, plan should be executed.

E. Evaluate and Control

This step includes performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Strategic evaluation is an important tool to reflect on achievements and shortcomings, and for re-examining the goals themselves which may have been set at a different time, under different circumstances.

Any successful evaluation of the strategy requires:

Defining the parameters to be measured in such a way that they reflect goals set in stage 1;

Determine progress by measuring the actual results versus the plan;

Monitoring internal and external issues will also enable the manager to react to any substantial change in the business environment.

If it is determined that the strategy is not moving the company towards its goal, take corrective actions.

If those actions are not successful, then the strategic management process should be repeated. Because internal and external issues are constantly evolving, any data gained in this stage should be retained to help with any future strategies.

5.8 Common Mistakes in Implementation

Here are some common issues with plan implementations:

a. Lack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a

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frustrated few. Employees not given sufficient authority and other means to implement the plan

b. Lack of communication: The plan doesn’t get communicated to employees, and they don’t understand how they contribute.

c. Getting mired in the day-to-day: Owners and managers, consumed by daily operating problems, lose sight of long-term goals.

d. Out of the ordinary: The plan is treated as something separate and removed from the management process.

e. An overwhelming plan: The goals and actions generated in the strategic planning session are too numerous because the team failed to make tough choices to eliminate non-critical actions. Employees don’t know where to begin. Plans that are overwhelming and need to be pruned to be made achievable

f. A meaningless plan: The vision, mission, and value statements are viewed as fluff and not supported by actions or don’t have employee buy-in.

g. Annual strategy: Strategy is only discussed at yearly weekend retreats. Strategic plans are treated as separate from daily operations

h. Not considering implementation: Implementation isn’t discussed in the strategic planning process. The planning document is seen as an end in itself.

i. No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. No one feels any forward momentum. Insufficient progress reports: Achievement of benchmarks always needs to be noted.

j. No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner.

k. Lack of empowerment: Although accountability may provide strong motivation for improving performance, employees must also have the authority, responsibility, and tools necessary to impact relevant measures. Otherwise, they may resist involvement and ownership. It is easier to avoid pitfalls when they are clearly identified.

5.9 How to Make It Effective To successfully implement strategy, several items must be in place:

a. Paying the Costs Nearly all strategic plans come with a cost. Yet, most strategic plans are rolled out without any direct connection to budgeting. An unfunded strategic plan is only a wishlist. Implementation requires an understanding of plan costs and institutional commitment to its funding. Plans need to come with funding in place.

b. Relation to External Conditions strategic plan is responsive to external conditions, directly or indirectly. Changes in external conditions – the economy, supply costs, labor or other issues – can make the plan's implementation unnecessary, no longer strategic or impossible to achieve. Acknowledgment of these parameters should be built into the plan's rollout so that everyone knows that the plan includes responses to external conditions.

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c. Establishing Benchmarks Every plan has objectives, but not all plans contain enough information about achieving them. Two common deficiencies are: Establishment of benchmarks and Establishment of oversight practices. The two are closely related. Oversight confirms that benchmarks are being achieved according to schedule. The presence of monitoring activities also sends employees a message that the plan is still in place and remains important.

d. Building in Updates and Revisions One way of insuring that a strategic plan continues to be relevant is to build periodic reviews of all the plan's essential features into the implementation of the plan: goals, benchmarks and monitoring. A plan shouldn't be evergreen; it needs to be viewed as a contemporary document. Strategic plans work best when they are time-limited, with a major review, often with a new rollout, at least once a year.

e. Unlearn the past: Often past strategies stand in the way. So unlearning is important. f. Increase commitment at lower levels: People at lower levels in an organization are often

skeptical about the practical utility of a strategic plan. Without taking the lower level employees along, strategy implementation is difficult.

g. Avoid over ambitious strategies: Functional managers are used to a way of working. They may not be able to adjust suddenly to a new strategy.

h. Identify responsibilities and milestones: The list of specific tasks each function must perform, specific milestones and the names of the individuals who accept responsibility for each major functional program, must be identified.

i. Communicating downward is as important as communicating upward: It is the functional and lower level operating managers who hold the key to the successful implementation of a strategy. Half hearted commitment from functional managers can thwart the goals set for the business

j. Using one of the strategic plan conception and implementation templates available on the internet removes a lot of uncertainty and makes it easier to benchmark and monitor plan progress. Some are free in exchange for your contact information; others have either a one-time fee or a monthly charge.

k. Sample Strategic Assessment Plans Numerous sites and reference works offer sample strategic plan documents. For example, “The My Strategic Plan website”, offers a step-by-step plan for implementation that includes assessing necessary personnel, aligning the budget and producing various versions of the plan for individual groups. Several of these sample strategic plans’ documents allow for tracking the plan and managing the system with rewards. Typically, the plan is presented to the entire organization and includes a schedule of meetings, annual review dates for reporting progress and a means of modifying current assignments or adding new assessments.

As companies try to both increase product differentiation and reduce costs simultaneously, strategy implementation becomes much more complex. This leads to new forms of structure and control systems:

To cope with the complexity of producing many products for many market segments, companies can adopt a product structure.

To implement a product structure, a company must first group its products into categories targeted at specific groups of customers and managed by one set of managers.

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Support activities from the value chain are centralized to keep costs low. However, sub-groups within each function specialize in meeting the needs of a particular product group.

The organization then develops a control system that examines each product group separately. This creates ability to rapidly spot problem areas, and also a way to give rewards for high performance.

However, rewards still are closely tied to organizational, and not group, performance, to ensure that managers work together across units as needed.

5.10 Behavioural Issues in Strategy Implementation Behavioural implementation deals with those aspects of strategy implementation that

have impact on behaviour of people in the organization. Since human resources form an integral part of the organization, their activities and behaviour need to be directed in a certain way. Any departure may lead to the failure of strategy.

The key to execution is shaping the attitudes and behaviour of people. A culture of trust and commitment motivates people to execute the agreed strategy. People’s minds and hearts must align with the new strategy so that they embrace it willingly, going beyond compulsory execution to voluntary cooperation.

To build people’s trust and commitment, Chan Kim and Renee Mauborgne emphasize the importance of getting people’s buy-in, building trust and creating a perception that a level playing field exists. Only then will people cooperate voluntarily in implementing strategic decisions. This approach called Fair process has three main components: engagement, explanation and expectation clarity%%

Strategic implementation requires support, discipline, motivation and hard work from all managers and employees. It is vital to bear in mind that organizational change is not an intellectual process concerned with the design of ever-more-complex and elegant organization structures. It is to do with the human side of enterprise and is essentially about changing people’s attitudes, feelings and– above all else– their behaviour. The behaviour of the employees affects the success of the organization. Ways in which such support can be obtained are:

a. Influence Tactics: The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behavior of superiors, peers or subordinates. For this they must develop and communicate the vision of the future and motivate organizational members to move into that direction.

b. Power: it is the potential ability to influence the behavior of others. Leaders often use their power to influence others and implement strategy. Formal authority that comes through leaders position in the organization (He cannot use the power to influence customers and government officials) the leaders have to exercise something more than that of the formal authority (Expertise, charisma, reward power, information power, legitimate power, coercive power).

c. Empowerment as a way of Influencing Behavior: The top executives have to empower lower level employees. Training, self managed work groups eliminating whole levels of management in organization and aggressive use of automation are some of the ways to empower people at various places.

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d. Political Implications of Power: Organization politics is defined as those set of activities engaged in by people in order to acquire, enhance and employ power and other resources to achieve preferred outcomes in organizational setting characterized by uncertainties. Organization must try to manage political behavior while implementing strategies. They should;

Define job duties clearly. Design job properly. Demonstrate proper behaviors. Promote understanding. Allocate resources judiciously.

e. Leadership Style and Culture Change: Culture is the set of values, beliefs, behaviors that help its members understand what the organization stands for, how it does things and what it considers important. Firms’ culture must be appropriate and support their firm. The culture should have some value in it . To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviors that stem from them, and to adopt new ones. The first difficulty that arises in practice is to identify the principal characteristics of the existing culture. The process of understanding and gaining insight into the existing culture can be aided by using one of the standard and properly validated inventories or questionnaires that a number of consultants have developed to measure characteristics of corporate culture. These offer the advantage of being able to benchmark the culture against those of other, comparable firms that have used the same instruments. The weakness of this approach is that the information thus obtained tends to be more superficial and less rich than material from other sources such as interviews and group discussions and from study of the company’s history. In carrying out this diagnostic exercise, such instruments can be supplemented by surveys of employee opinions and attitudes and complementary information from surveys of customers and suppliers or the public at large.

f. Values and Culture: Value is something that has worth and importance to an individual. People should have shared values. This value keeps the every one from the top management down to factory persons on the factory floor pulling in the same direction.

g. Ethics and Strategy: Ethics are contemporary standards and a principle or conducts that govern the action and behavior of individuals within the organization. In order that the business system function successfully the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations.

h. Managing Resistance to Change: To change is almost always unavoidable, but its strength can be minimized by careful advance. Top management tends to see change in its strategic context. Rank-and-file employees are most likely to be aware of its impact on important aspects of their working lives. Some resistance planning, which involves thinking about such issues as: Who will be affected by the proposed changes, both directly and indirectly? From their point of view, what aspects of their working lives will be affected? Who should communicate information about change, when and by what means? What management style is to be used?

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i. Managing Conflict: Conflict is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of the others goals or the furthering of his interests. The organization has to resolve the conflicts.

Summary Business Strategy can be described as the plan which guides organizations in the selection and

application of resources that will help them obtain a competitive advantage. Often the difference between the market leaders and other players in the industry is the ability to execute strategy. Strategic implementation is a term used to describe the various activities within an organization to manage the execution of a strategic plan. key elements of implementing a business strategy are planning, organizing, collecting resources, communicating and monitoring. Elements, expressed in terms of components are organizational structure, strategic control systems and organizational culture. Strategic implementation is important as it functions as a project’s blueprint, Provides a Work Breakdown Structure, Develops Implementation Schedule, Does Cost Allocation, Determines Evaluation Methodology, and Effective strategy implementation allows the company to be more successful in pursuing a cost leader or differentiation strategy. Basic features of a successful implementation strategy are a very visible leader, such as the CEO, employees feel engaged, Performance measurement tools are helpful to provide motivation, and Implementation often includes a strategic map, which identifies and maps the key ingredients that will direct performance. Such ingredients include finances, market, work environment, operations, people and partners. The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring. Some common mistakes in implementation are Lack of ownership, Getting mired in the day-to-day operation, plan too overwhelming and meaningless etc. Strategy implementation can be done more effectively by adopting measures like Commitment and Consensus, Plans need to come with funding in place, Benchmarks to be established, plan should be reviewed from time to time, past should be Unlearnt.

Behavioural implementation deals with those aspects of strategy implementation that have impact on behavior of people in the organization. Since human resources form an integral part of the organization, their activities and behavior need to be directed in a certain way. Any departure may lead to the failure of strategy.

Exercise Review Questions I Objective Type A. True/False 1. Strategic implementation process does not map out the life cycle of a project.

Answer False

2. Strategic implementation schedule does not specify start and end dates for different tasks of the project.

Answer: False

3. Strategic implementation process does not result in reduced costs.

Answer; false

4. Strategic plan is not affected by external conditions.

Answer: False

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5. strategic plans need major review at least once a year.

Answer: true

6. Strategy implementation is difficult without involving the high level employees.

Answer: True

7. Organizational change is an intellectual process only.

Answer: False

B. Fill in the Blanks 1. Strategic -----------------is a process that puts plans and strategies into action to reach desired goals.

Answer; implementation

2. Effective strategic implementation requires its matching with the ----------------structure of the business.

Answer: organizational

3. Main three components of strategy implementation are Organizational structure, control and ---------.

Answer : culture

4. Strategic implementation often includes a strategic --------which identifies key ingredients.

Answer: Map

5. There are ---------stages in the strategic management process.

Answer: five

6. Organizations need to have resources, both-----------and --------------- , to successfully implement the strategy.

Answer: time, money

7. Numerous sites and reference works offer --------------- strategic plan documents.

Answer: sample

8. Strategic plan implementation becomes much more complex when product differentiation is to ------------ and cost is to -------------.

Answer: increase, decrease

9. The key to strategy execution is shaping the -------------and behaviour of people.

Answer: attitudes

Short Questions

1. Define business strategy.

2. Define strategic implementation.

3. Discuss the key elements of strategy implementation.

4. Explain the components of strategy implementation.

5. How does strategy implementation help in reducing the project costs?

6. How does strategy implementation help firms in pursuing differentiation strategy?

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7. Discuss the basic features of a successful strategic implementation plan.

8. How is a strategy formulated?

9. Explain the stage of strategy evaluation and control in the strategic management process.

10. Explain the Fair Process Approach To strategy implementation.

Long Questions

1. Describe the importance of strategic implementation.

2. Discuss different stages in the strategic management process.

3. Discuss the common mistakes that can occur in the strategy management process.

4. How can strategic implementation be made more effective?

5. Discuss the behavioural issues in strategy implementation.

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