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HUMANRESOURCEMANAGEMENT
Environmental Context
By Geetha RaviShankar
Lecturer RJSIMS
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N E W E C O N O M I C P O L I C Y ( N E P ) A N D C H A N G I N G
B U S I N E S S
Objectives of NEP-
To pull the country out of economic crisis.
To accelerate the rate of growth
Salient Features of NEP
Liberalization
Privatization
Globalization
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Reasons for NEP
Fall in prices
Fall in foreign exchange reserves
Poor performance of PSUs
First Gulf war caused spike in oil prices which caused a major
BoP crisis in India in India
India asked for $1.8 billion to bailout loan but IMF in turn
demanded reforms. As a result NEP was inaugurated by PM P.V.Narasimha Rao under
guidance of FM Manmohan Singh in 1991
Reasons for NEP
Fiscal deficit was 5.4% of GDP which rose up to 8.4 in 1990-91.
In 1991 interest liabilities rose up to 36.4% of the government
expenditure.
Country was moving towards debt trap
There was-mounting adverse Balance of Payment situation
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LIBERALIZATION
Liberalisation is a neweconomic policy by whichseveral restraints on the
Indian Economy likelicensing, price control,
financial control,etc.that ledto corruption, undue delay
and inefficiency werereduced.
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ECONOMICREFORMSUNDERLIBERALISATION
Tax reforms
Efforts to ensureVAT reforms inall states
Foreignexchangereforms
Foreign tradepolicy reforms
Role of RBI shifted froma regulator to a facilitator
FIIs were allowed toinvest in India
Domestic andinternational banksemerged
Abolition of licensing
De-reservation ofproduction areas
Expansion ofproduction quantity
Freedom of importingcapital goods
Industrial
sectorreforms
Financial
sectorreforms
Fiscal
reforms
External
sectorreforms
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PRIVITISATION
Privitisation is a process of involving the private
sector in the ownership or operations of a state
owned enterprise
The ownership of PSUs is being sold-off gradually
to private entrepreneurs.
PrivitisationOutright sale of Government
Enterprises
Withdrawal of GovernmentOwnership and Management
from Mixed enterprises
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GAINSFROMPRIVITISATION
100%
Commitment
and efficiency
Competition
Up gradation &
Modernisation
Self Interestsupersedessocialinterest
Promotes
ConsumerSovereignty &
Diversificationof
Production
Weakersectionsuffers
Evil effects of
Privitisation
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GLOBALISATION The increasing internationalization of trade, particularly financial product
transactions. The integration of economic and capital markets throughoutthe world.
Bringing the world closer through better world-wide communication,transport and trade links. The creation of a "Global Village", where
members of the same industry from around the world interact on a largescale.
Unrestricted flow of goods and services, technology and expertise amongdifferent countries of the world
Process associated with increasing openess,growing economicinterdependence deepening economic integration in the world economy
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IMPACTOFGLOBALISATIONONHR
i. Democratization and pressures for more labour rights incountries where such rights have been restricted.
ii. More liberalization and deregulation .
iii. Competition for investment
iv. Increased economic interdependence of nations.v. Capital, information and technology flows are on the
increase .
vi. Internationalization of enterprises and creation of mergersand alliances .
vii. Customer-driven (and not product-driven) global and localmarkets, but at the same time segmented markets .
viii. Competitiveness increasingly based (not on low wages ornatural resources) on knowledge/innovation, skills andproductivity.
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POSITIVEIMPACTOFNEP
Economic activities have picked up and GDP has shown
a significant increase.
It has stimulated industrial production
Increase in Government revenues and decrease in fiscal
deficits
Substantial increase in forex reserves
It has checked inflation and flow of goods and services
has increased
Consumer sovereignty has widened.
India has been recognized and emerging super power.
Monopoly replaced by competition.
Flow of foreign investment has increased.
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NEGATIVEIMPACTOFNEP
Agriculture has been totally neglected
Growth process concentrated to urban areas
Consumerism has increased
Lopsided growth process Might result in economic colonialism
Cultural erosion
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BUSINESSENVIRONMENT
Business environment includes al l those
internal and external factors wh ich d irect ly o r
indirect ly inf luence business.
Internal EnvironmentProduction
Finance
MarketingHuman Resource
R&D
OrganizationalStructure
Management
&
LeadershipStyles
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EXTERNALENVIRONMENTOFBUSINESS
ExternalMicro Environment
(All Stakeholders)
Shareholders
Creditors
CompetitorsSuppliers
Customers
Marketing Intermediaries,etc.
Macro Environment
(STEPIN)
Socio-Cultural factors
Technological factors
Economic Factors
Political Factors
International factors
Natural Factors
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SOCIO-CULTURALENVIRONMENT
Attitude of the people towards-
work
Wealth
Family Marriage
Religion
Education
Ethics
Human Relations
Social responsibilities
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CULTURALENVIRONMENT
Culture is-
Prescriptive
SociallyShared
Learned
Subjective
Cumulative
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TECHNOLOGICALENVIRONMENT
Technology-
Reduces the cost of production
Reduces the size of inventories.
Reduces delivery time Reduces incidents of lock-outs and lost sales
Reduces rush orders
Responds to market changes quickly
Cuts down over production
Reduces unnecessary movement of forwarding and back-tracking Reduces paper work and wasteful process
Facilitates planning production level accurately
Avoids physical movement of employees, suppliers and customers
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TECHNOLOGICALENVIRONMENT
Availability and developments in technology can
have a powerful influence on global business
strategy:
e.g.
Access to bandwidth
PC ownership
Technology and salesprocessing payments and sales
Compatibility of technologies in Business Management
accounting systems, language differences, etc.
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ECONOMICENVIRONMENT
All these factors need to be considered in any
global business venture:
Tax System
Economic Systems-(Capitalistic, Mixed or Communistic)
Investment Considerations and Allowances Sophistication of Financial Marketsease with which capital can be
moved and raised
Economic Growth & Economic Transition
Inflation
Monetary and Fiscal Policiesinterest rates, tax regimes,
government aid
Balance of Payments
Exchange Rates
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ECONOMICTRANSITIONCANBEACHIEVEDBY-
Liberalisation of economic activities.
Optimum utilization of resources
Dispensing with licensing system and regulated
markets Macro economic stabilization through market-
oriented instruments
Privitisation
Establishment of legal frame-work to secureproperty rights and transparent market regulations
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Economic Union
Free trade area
Free tradeamong members
Common External Trade
Policy
Customs
Union
Factor
Mobility
Common
Market
Harmonization of Economic
Policies
Economic
Union
Regional Economic Trading Blocs
Free Trade Area (FTA)
Customs Union (CU)
Common Markets
Economic Union
Political Union
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POLITICALENVIRONMENT
The form of
Government(Democracy,Totalitarian,etc.)
Political rights and Civil liberties of Citizens
(free & fair elections, minority rights,equality,libertyand justice)
Political stability
Political risks-
Confiscation-nationalization of property withoutcompensation.
Expropriation-nationalization of property with
compensation.
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POLITICALENVIRONMENT(CONTD.)
Nationalization- It refers to the shifting of ownership
of private property to the government.
Domestication- foreign business firms relinquish
control and ownership in favour of domestic
investors.
General Instability risks -These are risks due to
social, political religious unrest in the host country.
Operation risk - These are due to the imposition of
controls on foreign business operation by the host
Government.
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INDICATORSOFPOLITICALINSTABILITY
Corruption
Social Unrest
(Communal conflicts, ethnic conflicts,etc.)
The Negative Attitudes of Nationals( Exploitation,colonialism,repatriation,
to foreigners,etc.)
Policies of the Host Government
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LEGALENVIRONMENT
Kind s of Legal Systems
Common Law-
(Traditions ,customs,culture,precedent andassuage)
Civil Law-Detailed set of laws
( It includes contracts and agreements)
Theocratic Law-based on religious precepts likeHindu law,muslim law,etc.
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PROPERTYRIGHTS
Property right refers to usage of others resources for
a price.
Methods of violation of property rights- Private Action-(theft, blackmailing and piracy)
Public Action-Collecting income from individuals
by the Government or by politicians
Labour Legislations- They are mostly enactedbased on the resolutions of IMF.
(Minimum wages Act,stipulations regarding work
conditions)
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IMPLICATIONSOFSTRUCTURALREFORMSON
HRM ININDIA
1.Impact on Job Design& Analysis
Introduction of BPRE(Business Process Re-Engineering)
(team work,multi-skills,flexible work,work-sharing)
Team-design is taking precedence over job-designing
Transformation through computerization and automation
Broad-banding replaced narrow jobs
Retrenchment strategies
Training & redeployment
Industry free from unionism
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Impact on Human Resource Planning
Outsourcing certain operations
Shifts in organization Structure(flat structures wereadopted)
Team-designing replaced job-designing
Internal skill mobility planning
Government stopped insisting on choosingemployees from disadvantaged community afterglobalization in order to attract FDIs
Trade union insistence on internal candidaturedisappeared post-globalization.
Eliminated interference of Trade Unions andGovernment on Human Resource Planning
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Impact on Employment Practices
Reduction in the gap b/w national business environment andinternational business environment
Mobility of labour between countries
Development of modern HR recruitment techniques likeemployee-referrals,outsourcing,e-recruitment,walk-in,consult-
in,etc. For achievement of competitive strategies by emphasizing on
soft skills of employees like aptitude,attitude,emotional testing,etc.
Elimination of trade union/Government/political interference
for recruitment Reduction in supervision and enhancement in productivity
Selecting candidates with multi-skills rather than withexpertise in a single area.
Empowerment of employees
Reduction in cost due to on-lineinterviews and selection
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Impact on Performance Appraisal(PA)
PA ratings used for employee development(through identification of employee weaknesses)rather than for their punishment
Evolution of modern PA techniques like- the 360
degree PA system where all-round feed back istaken.
Developing performance measures to assess thevalue addition of HR
Alignment of PA systems with strategies
Creation of internal performance consultants
Shift in PA systems has eliminated the need forunionism in organizations
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Impact on HRD(Human Resource
Development)
Downsizing of organisation structure
Building Organization structure based on the characteristics
of organization structure
Job enrichment at all levels
Creating autonomous jobs Performance planning and development
Employee empowerment
Encouraging team-work
Culture building and competence building Motivation ,confidence and commitment building
Structuring business groups
Providing training and retraining
Developing reward system leading to HRD
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IMPACTONHRDCONTD.
Introducing innovative techniques for organizational
development
Developing the skill of adoptability
Encouraging proactive learning
Developing value system centered around
competition
To develop programmes to satisfy the social needs
of employees
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Impact on Salaries and Benefits
Higher Salaries and Benefits for employees
Salaries based on employee performance levels.
Individual bargaining taking precedence over
collective bargaining.
Salaries fixed on the basis of skill,talent and
commitment of the workers.
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Managing Workforce Diversity
Coping with ethnic diversities
Diversity due to age,religion,etc.
Diversity due to physical capabilities
Cultural diversity Geographical diversity
Cross national diversity
International diversity
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Response of management to structural
adjustments
Change in Organization Structure
Globalization has replaced
functional,geographical,matrix organization
structures
by
flat,teambased,strategic,empowered,flexible,decent
ralized structures.
Employee participation encouraged in management
activities
Companies aim at acquiring competitive advantage.
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Response of management to structural
adjustments(Contd.)
Employee empowerment.
Performance based payment and compensation.
Few rules.
Humanistic principles replaced mechanisticprinciples.
Individual bargaining is replaced by collective
bargaining.
More fringe benefits given to employees Employee motivation is assuming significance.
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Response of workers to structural changes
Employees started preferring individual negotiations
to Collective Bargaining
Employees prefer to participate in management
activities and decision making
Individual grievance redressal assumed
significance over industrial disputes
Attrition rate is increasing since employees shift
jobs for higher compensation and better benefits
Productive efficiency of workforce is increasing
Workers are becoming more versatile and multi-
skilled
They have become more adaptive and flexible to
changes
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Response of Trade Unions to structural
changes
Trade Unions are decaying slowly
Insistence on internal candidature is not there
Individual Bargaining is Replacing Collective
Bargaining
Individual grievance redressal is replacing Industrial
Conflicts
Trade Union Membership is declining
Unions size is also declining after globalization.
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