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  • 1. CHARACTERISTICS OF SHRM 1. SHRM is a comprehensive approach to people management 2. SHRM is a generalist approach to people management 3. SHRM is an integrative approach to people management 4. SHRM has a long-term focus 5. SHRM focuses on customers- internal and external 6. SHRM has a market & environmental focus 7. SHRM is a combination of hard and soft models 8. SHRM elevates the status of HR 9. SHRM talks of levels of HRM 10. SHRM considers employees as most important 11. SHRM focuses on measurement 12. SHRM is a coordinating functionSHRM is concerned with establishing vertical and horizontal fit:Vertical Fit: Ensuring integration of HRM with the strategic management process • Conscious effort to align business with HR issues • HRM activities designed keeping in mind organizational vision and strategy • Inputs about HR are considered integral part of organizational strategy • Top management take special interest in HR issues • Information sharing mechanism between HR and senior managers • Top-level strategic teams include HR head/executive • HR executives are provided training in general managerial skillsHorizontal Fit: This involves two types of fitInternal Fit: Ensuring integration between HRM sub-functions or sub-systems e.g. staffing,compensation, training, etc. • Presence of a long term HR vision and HR strategy • Consistent HR policies in each other • Presence of coordinating mechanism between HR sub-functions • Information sharing mechanism between HR sub-areasExternal Fit: Ensuring integration between HRM and other functional areas e.g. marketing • Consistency of HR activities with other functional activities • HR issues part of every manager’s responsibility • HR decisions taken jointly with other managers • Functional area managers actively involved in HR activities 1
  • 2. EMERGING HR SCENARIO Dave Ulrich’s 4 Roles of HR Departments Strategic Strategic Change Partner Agent Process People Adm. Employee Expert Champion Operation Responsibilities/Capabilities of HR Professionals Strategic Tactical Operational Ensure vertical Ensure horizontal Implement strategies integration integration Hire & fire Lay down HR vision Create HR strategies Dispense with rewards Create strategies Show HR deliverables Train & develop Chalk out future plans Market the HR function Maintain and retain Drive change Utilize people as assets staff Scan environmentOther RolesFacilitator, Linking Pin, Communicator, Resource Allocator, Organizer, Leader & Consultant 2
  • 3. New Age HR Departments Change of name (Corp. HR Dept., Strategic HR Dept.) Upward movement in hierarchy (Dir-HR, VP-HR, GM-HR etc.) Representation at board level Flat structure of HR departments Team based organizational design Outsourcing of administrative HR activities Automation and e-HRNon-linear Moves and Changing Face of HR DepartmentsAn increasing number of HR executives are occupying top positions and are today CEOs: • Mr. K Ramachandran, CEO Philips India • Mr. Mahendra Swarup, CEO Indiatimes.com • Mr. Raman Madhok, CEO JISCO • Dr. Anil Khandelwal, CEO Bank of Baroda • Mr. Sujit Baksi, CEO HCL E ServeThe heads of HR of several companies like Infosys, TCS, Satyam Marico, Crompton Greaves,Cadbury and Nerolac are not career HR professionals.T. V. Mohandas Pai is Member of the Board and Director-Human Resources. He served as theChief Financial Officer at Infosys. During his tenure as CFO, Mohan put in place the country’sfirst publicly articulated financial policy for the company. The Infosys Annual Report, under hissupervision, has won the Best Presented Annual Accounts Award for ten years in succession.Mohan was an integral part of the Infosys team that enabled the first listing of an India-registered company on NASDAQ. He was voted ‘CFO of the Year’ in 2001 and 2002, and “BestChief Financial Officer in India” in the AsiaMoney Best Managed Companies Poll 2004.Ajoyendra Mukherjee is head, global human resources Tata Consultancy Services (TCS). Akey member of the corporate leadership team, Mukherjee was earlier the vice president and headof operations, eastern region.Mr. S.V. Krishnan is head Human Resources at Satyam Computer Services. Mr Krishnan ledlarge business teams and was heading the GE business relationship for Satyam.Mr. Hari T (HR head eralier) is leading Global Marketing and Communications at Satyam. MrHari T helped the company grow multi-fold over the last 9 years as HR Head.Pari Sadasivan made a non-linear move taking over as V-P, HR, at IBM India after 20 years oflong career in operations.Rajiv Dube, CEO, Rallis India, moved to Mahindra & Mahindra as head of HR.Shrikant Gupte, ex-CEO, Modi Lotteries, and ex-head of personal care in Marico, joined asgroup head of HR at Nicholas Piramal.G Krishnamurthy was a business development executive in L&T before joining as EVP, HR,in the same company.Ramesh Samtani was operations director before heading HR.Rakesh Pandey, Marico’s previous head of HR, too came from operations background. 3
  • 4. V. Chandramouli is Director (HR & Strategy) at Cadbury India. HR was earlier anindependent function. Now it is integrated with corporate strategy.Today, HR head in a company need not be a specialist. Instead, he could be a talent from linefunction, such as finance or marketing. Having a perspective on the clients and the businessunits helps in reorienting the HR needs within the organization and aligning them with themarket needs. The reverse is also happening. HR executives are taking up other assignments.Many companies differentiate between operational and strategic HR. While the operationalaspect of HR is being handled by traditional HR executives, the strategic part is being given abusiness dimension by introduction of people from non-HR streams. In some companies,traditional HR activities are outsourced and strategic activities are performed by HR executives. Old Myths about HR1. People go into HR because they like people.2. Anyone can do HR.3. HR deals with the soft side of a business and is therefore not accountable.4. HR focuses on costs, which must be controlled.5. HRs job is to be policy police and the health-and-happiness patrol.6. HR is full of fads.7. HR is staffed by nice people.8. HR is HRs job. New Realities about HR1. HR departments are not designed to provide corporate social therapy.2. HR professionals must master both theory and practice.3. The impact of HR practices on business results can and must be measured.4. HR professionals help not just reduce cost but add value.5. HR professionals must create the practices that make employees more competitive, not just more comfortable.6. HR professionals must see their current work as part of an evolutionary chain7. At times, HR practices should force vigorous debates. HR professionals should beconfrontative and challenging as well as supportive.8. HR professionals should join other managers in championing HR issues.The HR function traditionally has spent more time professing than being professional. It istime to talk less and do more; time to add value, not write value statements; time to buildcompetitive, not comfortable, organizations; time to be proactive, not reactive. It is time toperform, not preach. 4
  • 5. EVOLUTION OF SHRM Exhibit 1: Paradigm Shift in People Management Period Era Workforce Status Activity End Result1900-20 Industrialization Bonded PA Hiring & Firing Birth of Products1920-40 Trade Unionism Blue Collar PM Compensation & Mass Production Training1940-60 Corporatization White Collar I & HR Labour-Mgmt. Mass Marketing Issues1960-80 Rise of MNCs Professional HRM Human values Customization1980-2K IT Revolution Knowledge HRD Competency- Mass Worker building Customization2K Borderless World Intellectual SHRM Integration Customerizationonwards AssetCompiled for Class Discussion: FTA 5
  • 6. Exhibit 2:Traditional Vs. Strategic HRM Traditional HRM Strategic HRM Beliefs Conformity Can-do outlook Guidelines Contracts & rules Vision/Mission Objectives Organizational interest Organization & Individual interest Scope Personnel Department General ManagersMethodology Technical, specialist Professional, managerial Approach Segregated, staff function Systems approach Functions Traditional, administrative Modern, developmental Nature Short-term, constrained Evolving strategic role Thrust Monitoring Nurturing Status Implementer, reactive Formulator, proactive Role Attain goals Design goalsCompiled for Class Discussion: FTA 6
  • 7. Exhibit 3: Influence of Different Movements on SHRM Movement Period Proponents Philosophy Contribution to PM/HRMSocial Reformer 1790s Robert Owen People’s behaviour is a Better working function of their treatment conditions, safetyScientific 1870s Frederick Need for scientific Incentive system,Management Taylor selection & development manpower planning of workersIndustrial 1900s Hugo Analysis of jobs in terms Job analysis, selectionPsychology Munsterberg of their mental and techniques, statistical emotional requirements validity of testsHuman 1920s Elton Mayo Productivity was a Workers participation,Relations function to the extent of Industrial Democracy which people worked as a team.Behavioural 1940s Rensis Likert Understanding human Job satisfaction,Science behaviour is central to all motivation, QWL management problemsOrganization 1960s Warren Man has complex and Change management,Development Bennis shifting needs which team building require a humanistic organizationCorporate 1980s Tom Peters & Excellent companies are Shared values, corporateCulture Waterman people oriented and image, mission/vision emphasize mutualityCore 1990s Prahlad & Winning will spring from Strategic HR, verticalCompetence Hamel human capabilities and and horizontal fit competencies Compiled for Class Discussion: FTA 7
  • 8. Models of SHRMThe Michigan ModelMichigan model of HRM has originated from the writings of C. Fombrun, Noel Tichy and M.A. Devanna, whodiscussed it in a detailed fashion in their book titled Strategic Human Resource Management, published in 1984.The model of Fomburn et.al. is also called as the ‘Matching Model’ because it depicts the relation between HRMand organizational strategy. The model shows how activities within HRM can be unified and designed in order tosupport the organizations strategy. It is divided into two parts: first which shows HR-strategy integration andsecond which depicts the HR cycle. The assumption that HRM is derived from corporate and business levelstrategy leads to the matching model, according to which organizational effectiveness is achieved by ensuring atight fit between corporate / business strategy and HRM strategy.The model provides a simple framework to depict how HRM policies are derived from mission and strategy of theorganization, which is in turn influenced by external factors. The second part of the model to show how HRfunctions like selection, appraisal, development and reward can be mutually geared to produce the required typeof employee performance. It basically talks of the concept of the one-way fit between HRM and business strategyby prescribing design of HRM policies in light of strategy.The Michigan model has a harder, less humanistic touch, holding that employees are resources in the same way asany other business resource. They must be obtained (i) as cheaply as possible, (ii) used sparingly and (iii)developed and exploited as much as possible. From this point of view, for example, the object of formal humanresource planning can be just that-largely a factor of production, along with land and capital.The hard model ofHRM emphasizes the quantitative, calculative and business strategic aspects of managing the headcount resourcein a rational way as for any other economic factor.This model stresses upon the crucial importance of the close integration of HR policies, systems and activitieswith business strategy. The Michigan theorists highlighted the following as being the most important HR issues toachieve such a match: • Selection of the most suitable people to meet business needs. • Performance in the pursuit of business objectives. • Appraisal, monitoring performance and providing feedback to the employees. • Rewards for appropriate performance. • Development of skills and knowledge required to meet business objectives.Managerial ImplicationsThe model: is focused on individual and organizational performance. based on strategic control, organizational structure, systems for managing people concentrates on managing human assets to achieve strategic goals. 8
  • 9. contributes to human resource performance. has components such as organization structure, mission and strategy, human resource selection, performance appraisal, rewards and development. requires that personnel policies, practices and systems are not only consistent with the business objectives of the firm but should also have coherence among various sub-systems of HRM.The Harvard ModelThe Harvard Model propounded by Michael Beer, Richard Walton, quinn Mills, P. Lawrence ans Bert Spector in1984 is another significant model of SHRM. The model recognizes the different stakeholder interests whichimpact HRM policy choices, and also lays emphasis on situational or environmental factors, which help shapehuman resource strategic choices. According to Beer et al., “Human resource management involves allmanagement decisions and actions that affect the nature of the relationship between the organization and itsemployees -- its human resources. General management make important decisions daily that affect thisrelationship”.The type of HRM policies and practices an organization prefers should be dependent upon its organizationalvision, mission, strategy, goals, and objectives. In quite a few cases, such HR practices shall also be devised andadopted in tune with external environment of organizations. In other words, HR policies and practices are subjectto be influenced by internal and external environment of organizations. The Model, argues that human resourcespolicies are to be influenced by two significant considerations: 1. Situational factors. The internal and external environment factors of organizations that include (i) labour market conditions, (ii) societal values, (iii) business strategies, (iv) technologies, (v) management philosophies, and (vi) market conditions will constrain the formation of HRM policies. 2. Stakeholders’ interests. The stakeholders influence the short-term HRM policies. They include (i) management employees, (ii) unions, and (iii) government agencies.Further, the model classifies HRM policies and practices into four themes as follows: • HR flows. Recruitment, selection, placement, promotion, appraisal and assessment, promotion, termination and the like. • Reward systems. Pay systems, non-monetary recognition schemes and so on. • Employee influence. Clarification of responsibility, authority, hierarchy and delegation of powers. • Work systems. Definition of work and alignment of people.The above HR practices are centered on four Cs as described in the following: Competence of employees: Competence creates a positive attitude towards learning and development and, 9
  • 10. thereby, gives employees the versatility in skills and the perspective to take on new roles and jobs as needed. HRM policies and practices will exist in such a way that they attract, develop and retain employees with valuable skills and knowledge. Commitment of employees: Commitment means that employees will be motivated to ‘hear, understand, and respond’ to management’s communications relating to the organization of work. HRM policies must contribute for infusing employee commitment to organization. The commitment will yield two benefits. Firstly, it will enhance the employee performance and loyalty to his/her work. Secondly, it will enhance the individual self-respect and worth. Congruence between the goals of employees and the organization: Higher congruence is a reflection of policies which bring about a higher coincidence of interest among management, shareholders and workers, in turn, reducing adversarial relations. There must be congruence between and among various HRM policies as well as practices in operation Cost effectiveness of HRM practices: Cost effectiveness means that ‘the organization’s human resource costs - wages, benefits, and indirect costs such as strikes, turnover, and grievances - have been kept equal to or less than competitors. HRM policies must be evaluated in terms of wages, benefits, turnover, absenteeism, strikes, benefits etcManagerial ImplicationsThe model helps HR managers in charting HR strategy for their organizations. This model offers three significantinsights for practice. Firstly, HRM policies should be defined keeping in view the environmental factors andstakeholders concerns. In other words, there must be a good fit between organizational environment and HRpolicies. Secondly, such HRM policies and practices must have a goal to achieve employee commitment,competence development, coherence among themselves and embrace cost effective methods. Thirdly, HRM thatstems from environmental factors and is drawn based on four Cs will result in employee and organizationaleffectiveness. This is a soft model as it is based on stakeholders concerns and their commitment to organizationalgoals.The model is different from the Michigan model because it takes into account different sets of interests,philosophies and assumptions (e.g. employee and union interest) that may be operating and thereby likely toinfluence HRM decisions directly. It talks of HRM policy choices leading to favourable HR outcomes therebyimpacting long-term organizational consequences. It talks of the concept of the two-way fit between HRM andbusiness strategy as it takes into consideration employee interests 10
  • 11. THE MICHIGAN MODEL Political Forces Economic Forces Cultural Forces Strategy Structure HRM HRM-Strategy integration RewardsSelection Performance Appraisal Development The HR Cycle 11
  • 12.     THE HARVARD MODEL Stakeholders Shareholders Management Government Employees Suppliers Society HRM Policy HR Outcomes Goals Influence Commitment HR Flow Competence Individual Rewards Congruence Organizational Work System Cost saving Societal Situational factors Strategy Philosophy Values Law Market Technology Economy Workforce Profile 12
  • 13. Schools of ThoughtTwo divergent approaches to SHRM can be identified based on the Michigan and Harvard models. Both theseschools/approaches talk about fit between strategy and HRM. They are also called as contingency schools becausethey assume that HRM is contingent on organizational strategy. These two approaches are:Instrumental approaches to SHRM: This approach draws upon the ‘rational-outcome’ model of strategicmanagement to view HRM as something that is driven by and driven directly from corporate, divisional orbusiness level strategy, and geared almost exclusively to enhancing competitive advantage. Instrumentalapproaches place the emphasis firmly on human ‘resource’ management. They basically talk of the concept of theone-way fit between HRM and business strategy by prescribing design of HRM policies in light of strategy. TheMichigan model of HRM is an example of this approach. This is referred to as the ‘hard’ version of HRM.Thus, taken from this perspective, HRM is concerned with the integration of human resource issues into businessplanning. All decisions about the acquisition, processing and management of human resources must, like anyother organizational input, be tailored to increase or restore competitive advantage. The key question must be:What HRM strategy will maximize competitive advantage, optimize control, and minimize unit and laborreplacement costs. According to this approach, all issues associated with the management of human resourcesshould be derived issues.Question marks have been raised over the model due to its simplistic response to organizational strategy. Thequestion what if it is not possible to produce a human resource response that enables the required employeebehavior and performance is not addressed. This model has also been criticized because of its dependence on arational strategy formulation approach and because of the nature of the one-way relationship with organizationalstrategy. There is the charge that it tends to be overly rationalistic, that strategy is assumed to be formulated inadvance of action and then unproblematically implemented. It fails to perceive the potential for a reciprocalrelationship between HR strategy and business strategy. The theory seems to ask too little of HRM. Surely, anychief executive with long-term vision would want to use HRM not just to woodenly implement a preconceivedbusiness strategy, but to create a climate in which valuable strategizing occurs.It encourages a narrowness of focus. It concentrated on four generic functions: selection, reward, appraisal anddevelopment. While these undeniably have a central role, a strong case can also be made for the inclusion of otherdimensions such as welfare, equal opportunities, employee involvement and industrial relations.Finally, there is the claim of excessive ‘unitarism’. The so-called ‘unitary frame of reference’ describes anapproach towards the management of people which regards the work organization as a harmonious unitcharacterized by a common purpose within which managerial authority is taken to be legitimate. Any challenge tothis authority (such as trade unionism) is viewed as fundamentally destructive. From this perspective, interestsand concerns of employees are frequently ‘written-out’ of the equation, it being taken for granted that what topmanagement considers best for the organization will automatically or ultimately be best for the workforce. 13
  • 14. Thus, from this viewpoint: HRM appears as something that is ‘done to’ passive human resources rather thansomething that is ‘done with’ active human beings. In many respects, Humanistic variants off HRM can be seenas responses to these potential difficulties.Humanistic approaches to SHRM: This approach utilizes the process theory to emphasize the reciprocal natureof the relationship between strategic management and HRM and the latters role in ensuring that competitiveadvantage is achieved through people, but not necessarily at their expense. These approaches are closelyassociated with what has become known as the ‘Harvard School’ of HRM. As the humanistic label implies, theemphasis is on the ‘soft’ aspects of HRM associated with organizational culture and employee commitment and,as such, its orientation is broader and less rigidly ‘functional’. The emphasis is on ‘human’ resource management.The Harvard Model recognizes the different stakeholder interests which impact on employee behavior andperformance, and also gives greater emphasis to factors in the environment, which will help to shape humanresource strategic choices identified in the ‘situational factors’ box. The model has potential for international orother comparative analysis, as it takes into account different sets of philosophies and assumptions that may beoperating. Humanistic approaches draw explicitly on a process model of strategic decision-making whichemphasizes the emergent, political and frequently non-rational nature of this process. This leads to a lessprescriptive and more people-centered approach than that found in Instrumental orientations and a morerealistically pluralist view of employment relations. INSTRUMENTAL APPROACH HUMANISTIC APPROACH Michigan Model Drawn from Harvard Model Hard version                  Soft version  Emphasis on Human ‘resource’ Emphasis on ‘Human’ resource Rational- outcome model Process model Organizational goals Organizational & individual goals HRM to be driven by SM HRM to drive and be driven by SM One-way link Two-way link Reactive Proactive Quantitative and calculative Qualitative and intuitive HRM is things ‘done to’ HR HRM is things ‘done with’ HR Unitarist Pluralist HR as implementer HR as formulator & implementerWhile the above two schools fall under the Best Fit schools of thought, or contingency schools of thought(because here HR is contingent on strategy) there is another broad school of thought viz. Best Practice school. 14
  • 15. The Best Practice SchoolThe Best Practice school is also called as the Universalistic perspective. It is the simplest SHRM model. It positsthat some HR practices are universally better and result in improved organizational performance. Researchevidence is there suggesting that certain HR practices have a positive effect on performance. The best practicesapproach advocates universal HR practices, i.e. they have an effect on business performance regardless of thecontext in which they are applied.The most influential best practice set is associated with the 7 practices identified by Pfeffer (1994) viz.employment security, selective hiring, self-managed team, pay contingent on company performance, extensivetraining, reduction of status differences and sharing information. Osterman (1994) included practices such asteams, job rotation, quality circles. This perspective emphasizes employee empowerment, recognition,information-sharing, team-building, socialization, human values, communication, partnership, collaboration,innovation and these are found to be positively linked with firm performance. Best practices were found to behighly correlated to customers’ ratings of service quality. Likewise, employee empowerment and communicationpractices enhanced employee trust.Criticisms: The universal perspective is not without its critics. Organizations that do not adopt best HR practicescan also generate greater returns. The universal school does not address the role of strategy as a contingency.Findings suggest that the strategy-HR interaction accounts for more variation in firm performance than the maineffect of HR. Another controversy involving this issue is whether there exists a set of ‘best practices’ that areuniversally effective across contexts and industries. Several best practices have failed in a number of cultures.There has been little evidence that provides a definitive prescription as to which HRM practices should beincluded in a best practices system. Whether the best practices are applied to all the employees uniformly is notclear. 15