MBA NOTES

1. NOTES ON SHRM
UNIT 1
Strategic human resource management is the process of linking the human resource function with
the strategic objectives of the organization to improve performance.
Strategic human resource management is the proactive management of people to the desired value
to them. It is designed to help companies better meet the needs of their employees while promoting
company goals.
Several commentators have argued that the concept of Strategic Human Resource Management
(SHRM) has evolved as a bridge between business strategy and the management of human
resources.
SHRM is a philosophy of people management based on the belief that human resources are
uniquely important to sustain business success.
SHRM aims to ensure that the culture, style, and structure of the organization and the quality,
commitment and motivation of its employees contribute fully to the achievement of business
objectives.
HR strategies combine all people management activities into an organized and integrated program
to meet the strategic objectives of an enterprise.
Strategic human resource management can be defined as the linking of human resources with
strategic goals and objectives in order to improve business performance and develop organizational
culture that foster innovation, flexibility and competitive advantage. In an organisation SHRM
means accepting and involving the HR function as a strategic partner in theformulation and
implementation of the company's strategies through HR activities such as recruiting, selecting,
training and rewarding personnel
DEFINITION
“Strategic human resource management means formulating and executing human resource
policies and practices that produce the employee competencies and behaviors that the company
needs to achieve its strategic aims.”- Gary Dessler
Strategic human resource management (SHRM) is defined as “the pattern of planned human
resource deployments and activities intended to enable an organization to achieve its goals”. –
Wright & McMahan
Strategic HRM, therefore, is concerned with the following:
1. Analyse the opportunities and threats existing in the external environment.
2. Formulate strategies that will match the organisation’s (internal) strengths and weaknesses with
environmental (external) threats and opportunities. In other words, make a SWOT analysis of
organisation.
3. Implement the strategies so formulated.
4. Evaluate and control activities to ensure that organisation’s objectives are duly achieved

2. Nature of SHRM:
1) Long-term Focus: As business strategies have a long-term orientation, therefore, focus of
SHRM is also long-term probably more than one year.
2) Associated with Goal-Setting: SHRM is highly related with setting of objectives, formulation
of policy and allocation of resources and it is carried out at all levels of top management.
3) Interrelated with Business Strategies: There is an interrelation between business strategies and
SHRM. E.g. it gives significant inputs when business strategy is formulated, and human resource
strategies (like recruitment, staffing, training and performance appraisal).
4) Fosters Corporate Excellence Skills: SHRM considers employees as the strategic potential of
the organization and on that basis makes effort to differentiate the organization from its competitors
present in the markets. It also promotes learning of modern skills
Aims of SHRM:
1) To develop Strategic Competencies: to make sure that the company has needed standards and
competent and highly motivated employees for achieving sustainable competitive advantage.
2) To give Sense of Direction: It guides the organization in the right direction so that the business
requirements of the organization and the individual as well as the cooperative requirements of its
employees are met by creation and attainment of consistent and reasonable HR policies and
programmes.
3) To achieve Integration: Target of SHRM is to give a united framework, so that the organized
HR system works synergistically in accordance with the organizational strategic objectives.
4) To formulate Business Strategy: by focusing on the measures through which the organization
can use the power of its human resources for the increasing benefits.
Benefits of SHRM:
1) Identifying and analysing external opportunities and threats that may be crucial to the company's
success.
2) Provides a clear business strategy and vision for the future.
3) To supply competitive intelligence that may be useful in the strategic planning process.
4) To recruit, retain and motivate people.
5) To develop and retain of highly competent people.
6) To ensure that people development issues are addressed systematically.
7) To supply information regarding the company's internal strengths and weaknesses.
8) To meet the expectations of the customers effectively.
9) To ensure high productivity.
10) To ensure business surplus thorough competency.

3. Importance of SHRM:
a) Helps firm in achieving cost-effective engagement of Labour
b) Enables firm to meet changing needs
c) Provides clear-cut goals, direction, and future focus
d) Helps Organization in Planning and Executing Organizational Changes
e) Ensures Optimum Utilization of Organizational Resources
f) Develops, Manages and Sustains Skills and Knowledge
Challenges of SHRM:
i. Absence of Long-term orientation
ii. Lack of Strategic Reasoning
iii. Lack of adequate support from top management
iv. Resistance from Labour Unions
v. Fear of Failure
vi. Rigidity of HR Practices
# Traditional HRM SHRM
Responsibility
for HR
programs
Staff personnel in the HR
department
Line managers; all managers responsible
for people are HR managers
Focus of
activities
Employee relations— ensuring
employee motivation and
productivity, compliance with laws
Partnerships with internal (employees) and
external (customers, stakeholders, public
interest groups) groups
Role of HR Reactive and transactional Proactive and transformational, change
leader
Initiative for
change
Slow, piecemeal, and fragmented,
not integrated with larger issues
Fast, flexible, and systemic, change
initiatives implemented in concert with
other HR systems
Time horizon Short-term Consider various time frames as necessary
(short, medium, or long-term)
Control Bureaucratic control through rules,
procedures, and policies
Organic control through flexibility, as few
restrictions on employee behavior as

4. possible
Job design Focus on scientific management
principles—the division of labor,
independence, and specialization
Broad job design, flexibility, teams and
groups, and cross-training
Important
investments
Capital, products, technology, and
finance
People and their knowledge, skills, and
abilities
Accountability Cost center. Investment center.
THEORETICAL PERSPECTIVES OF SHRM
Swiercz (2002) identified four perspectives on SHRM, namely, fit, functional, economic, and
typological perspectives. This classification is proposed to organize a range of related yet distinct
views on SHRM (Figure 1.8). A brief discussion of each of these perspectives follows.
The Fit Perspective
In a literal sense, the term fit means ‘congruity’. In HR literature, Dyer was the first to discuss the
idea of ‘fit’ in 1983. Baird and Meshoulam (1988), took it further and argued that HRM practices
should be integrated with the strategic planning process of the organization. They also
distinguished between the two types of fit—internal and external.
The primary proposition of Baird and Meshoulam (1988) was that an organization’s performance
can be enhanced if it adopts HRM practices that complement other HR practices (internal fit), as
well as the strategic objectives of the organization (external fit)
.
They have reported that HRM practices varied systematically with the type of manufacturing
system, firm environment, etc. Studies also indicate a significant relationship between the adoption
of high-performance HR practices and organization performance indicators. The fit perspective,
therefore, proposes HR as a critical success variable that must be integrated into all phases of
organizational planning. Moreover, even the best laid strategic plans cannot be implemented
without taking into account the HR practices.

5. Functional Perspective
Strategic human resource management literature classified as ‘functional’ has
two characteristics.
1. Human resource is seen as a staff function and, therefore, as advisory and subordinate to the core
line functions. This is in accordance with the classical organization design theory.
2. The sub-functional strategies, such as the compensation and recruitment strategies, are equated
with the overall HR strategy.
This perspective relies on the principle that an organization performs best when each departmental
unit maximizes its contributions, limited to its unique area of expertise. It further accepts that
organizations should be structured around differences in rank or grade, resulting in the creation of
staff functional specialists. General managers at the top have the responsibility of giving direction
to the firm, functional managers with independent expertise (HR functional staff specialists) are in
the middle, and subordinates who carry out supervisors’ directives are at the bottom.
The second characteristic of the functional perspective treats functional sub strategies as equivalent
with the overall concept of strategic HR. These sub strategies include recruitment, compensation,
human resource information systems, career development, training, job analysis, and international
HRM. According to this perspective, the difference between strategic staffing and conventional
staffing is that strategic staffing helps the organization to procure long-term human assets, while
conventional staffing fulfils the immediate operational objectives. Similarly, strategic
compensation aligns compensation practices with the critical contingencies facing the firm. Any
HR practice, therefore, becomes a strategy when it is carefully selected to complement the pressing
concerns faced by the management.
Economic Perspective
This perspective views human resources as a unique and distinguishable source of competitive
advantage. Barney’s resource-based VRIO framework, discussed earlier, takes an economic
perspective on SHRM. Wright and McMahan (1992) extended Barney’s view and argued that
human resources can be a source of sustained competitive advantage when four basic requirements
are met—human resources must add value to the firm’s production processes, skills sought by the
firm must be rare, human capital must not be easily imitable, and human resources must not be
subject to replacement by technological advances or other substitutes.

6. Typological Perspective
Typologies help in developing systematic comprehensive theories for the study of new innovations
in managerial thought. Dyer and Holder (1988) identified three ‘ideal’ HR strategic types based on
their observations of HR practices in several firms in the US. They intended their typology to
specify the content of HR strategic decisions and also to highlight the underlying philosophical
considerations that are the major determinants of strategy. The three distinct types of HR strategies
identified by them were as follows:
Inducement strategy: It is used by firms to support a business environment
that is highly competitive with respect to price and/or quantity. In this strategy, the decision making
power is highly centralized, with supervisors accepting only a moderate amount of employee
initiative, while discouraging innovation and spontaneity. Human resource strategies focus on cost,
expecting high performance in a minimally staffed organization. Loyalty and commitment are
rewarded by the organization to discourage high employee turnover.
Investment strategy :It is most likely to be found in firms where the business strategy is based on
differentiation, such as quality, features, or service, rather than price. The organization is
characterized by a tall structure, power is centralized, and the technology is modern and adaptable.
The HR strategy encourages creativity, initiative, and high performance standards. Formal rules
and procedures are minimal. The organization is comfortably staffed, jobs are broadly defined, and
continuous employee development is encouraged. Compensation is a balance of fixed and variable
components. The Compensation programmes encourage and reward creativity and initiative.
Involvement strategy: It is found in firms with a business strategy based on innovation and
flexibility when they are confronted with a market that is characterized by a highly competitive
price and/or quality. This strategy is also found in firms that use innovation to continuously provide
differentiated products or services, and also respond fast as there is a change in markets or when
their competitors catch up. Involvement firms are usually smaller, but if the size of these firms is
large, they employ decentralized units with flat structures. The HR strategy seeks to provide
autonomy and challenge to the employees to motivate them for high and meaningful performance.
The firm expects high levels of commitment from its employees. Decision-making is pushed down
to the lowest levels and performance is rewarded by compensation that links personal outcomes to
the organizational performance.
EVOLUTION OF SHRM
The HR function has evolved over time. The history of the function pre-dates Taylor’s theory of
scientific management and Fayol’s administrative theory. However, it was only during the 1930s
and 1940s that the function grew in significance, largely due to the war-time imperatives. At this
time, the HR functions matured and focused largely on labour relations and staffing. In India, the
Tata Iron and Steel Company (TISCO) was one of the first organizations to set up a personnel
department in the year 1947. Figure 1.5 presents the evolution of the HR function

7. From Personnel Management to HRM
The early 1970s witnessed the emergence of the term HRM as a replacement for personnel
management. The change in terminology also suggests a change in the objectives and boundaries of
the function. The main objective of HRM is to ensure the achievement of organizational goals
through people. The HRM function emphasizes the following two aspects:
 the importance of gaining the commitment of the people to the goals of the organization
 the need for a strategic fit between business strategy and HR strategy
Personnel management and HRM differ from each other on several counts. One major difference
being that while personnel management is part of the more mechanistic form of organization, HRM
is aligned with the organic design of the organization. Thus, personnel management is more
bureaucratic high levels of centralization and formalization and lower levels of flexibility. Human
resource management, on the other hand, is decentralized, flexible (with low levels of
formalization), and has cross-functional and crosshierarchical teams. Another difference between
personnel management and HRM that has been pointed out is the strategic nature of HRM.
Personnel management is not viewed as involved in the strategic areas of business. Despite these
differences, it is often believed that HRM is just a more modern term for personnel management.
Hence, HRM may be seen as an approach rather than as an alternative to the traditional personnel
management.
From HRM to SHRM: Shift in Focus
The dynamic and competitive business environment resulting from globalization has led
management to bring a new focus on how human resources should be organized and managed. The
HR function now has to develop a more strategic role. The early 1980s saw the emergence and
increase in the use of the term strategic HRM.
Strategic human resource management focuses on the relationship of HRM with the strategic
management of the organization, as defined earlier. It goes beyond the functional role of HRM and
emphasizes proactive HRM at the strategic level of the organization. Strategic human resource
management is concerned with organizational effectiveness and performance, changes in structure
and culture, matching resources to the present and future requirements of the organization,
capability development, employment relationship, and change management. Since corporate plans

8. are implemented through people and because human resources provide competitive advantage to
the organization, it is important to integrate HR considerations with the development of the
strategic corporate/business plans.
Hendry and Pettigrew (1986) put forward four meanings of SHRM:
1. the use of planning in human resource management
2. an integrated approach to the design and implementation of HR
systems
3. matching HRM policies and activities with the business strategy of the
organization
4. viewing people as a strategic resource for the achievement of competitive advantage
Fombrun, Tichy, and Devana were the first to formulate the concept of strategic HRM in 1984.
These researchers emphasized a strategic fit between HRM and corporate strategy.
HUMAN RESOURCE AS ASSET
Of all the resources available to an organization, human resources are considered the most
important for attaining the objectives of the organization. Hence, employees are now variously
referred to as human capital, human assets, or human resources.
HUMAN CAPITAL
The term capital refers to wealth, money, or property. Capital is used to generate more wealth for
an organization. When employees are referred to as human capital, it is implied that they are the
resources that generate more ‘wealth’.
Human capital refers to the collective skills and knowledge of the total workforce of an
organization that hold economic value for the organization. It enhances the productivity and

9. profitability of the organization. In order to ensure that human capital generates more wealth as
well as leads to value creation, it is important that human capital is utilized and managed efficiently
and effectively. When the value of people is enhanced, it enhances the value of the organization.
For example, when an organization provides opportunities for development and an environment
conducive to performance, it will result in higher levels of retention.
Today, it is possible for any organization to buy machinery and equipment comparable to that
available in leading global organizations. Therefore, machinery or finance, and access to these
resources, are no longer the factors that differentiate between organizational success or failure.
Rather, it is the ability to use these tangible resources (money, machinery, etc.) that serves as the
distinguishing factor. An organization that holds on to and builds on the skills, competencies, and
knowledge of its workforce can bounce back into business rather quickly, even if it loses all of its
equipment. However, an organization that loses its workforce but holds on to its tangible assets has
little hope of recovering.
Along with physical and capital resources, the human capital constitutes the decisive capability of
an organization since it prepares the organization to adapt in future. The use of new and improved
technology and lowering of overhead costs are the obvious methods of attaining competitive
advantage that can be used by an organization. The quality of human capital of an organization and
its efficient management can also contribute to higher levels of productivity and lower costs. In
fact, human capital helps the organization attain sustained competitive advantage in a manner that
is neither too obvious, nor accessible, to all organizations
An asset is something that is owned and has an exchange value. Today, human resources are
considered as assets of an organization. In the traditional sense, however, human resources
can ‘walk’ and are not owned by the organization, unlike physical assets. Human assets may
walk over to other organizations, taking with them their accumulated knowledge, skills, and
experience.
The value of people as human assets is the sum of an individual’s knowledge, experience, skills,
and competencies that are matched with the individual’s job. The value of people is dynamic, not
static. It grows with time as the individual gains experience, and as organizations invest in the
training and development of people. However, under certain conditions, the value of human assets
can also depreciate. Some of these conditions are as follows:
 placing an individual in a job that does not fit with the individual’s skills,
 competencies, etc.
 an individual performing below his/her potential owing to reduced motivation and
satisfaction
Thus, the manner in which human resources are managed determines their value as assets. Human
assets, unlike physical and capital assets, cannot be duplicated, and therefore, become the
competitive advantage of an organization. This quality of ‘non-duplication’ of human assets has
gained greater significance in the knowledge economy, where organizations rely more on
conceptual and knowledge-based skills rather than manual skills. The information technology (IT)
revolution has brought about a situation in which knowledge workers are replacing blue-collar
workers. In such a scenario, an organization needs to invest more in human assets in order to gain a
competitive advantage over other organizations. Figure 1.3 provides an overview of the main
features of human resource assets.

10. BARRIERS TO STRATEGIC HR
1. Short term mentality: Short-term mentality and focus on the current performance of SFIRM is the
first barrier. Every manager act, long-term focus, because the organization has been established
with long-terms objectives/focus.
2. Strategic inability: Very often SHRM does not think strategically and he cannot think it to due in
capability. This type of inability may arise for many reasons as lack of technical knowledge,
insufficient training and the like.
3. Lack of appreciation: Sometimes top managers do not recognize the activities of strategic human
resource management. So SHR manager does not get interested in doing any innovative venture. A
few appreciations may get them a substantial mental boost up.
4. Failure understands role: General managerial roles may not be fully understood by be managers.
This failure is due to lack of knowledge about the specialty of a degree of responsibility. This
failure may create distance between these managers.
5. Difficulty in quantifying outcomes: Many outcomes may not be quantified. But SHRM tries to
enjoy the contribution. This is not always possible. Participation, work etc. type function cannot be
quantified because of their intangibility.
6. Wong perception on human assets: Investment in human assets may be regarded as high risk
than that of technology and information. Though these technologies are run by the human
resources. This wrong perception may inhibit the progress.
7. Resistance: SHR Managers may be resisted because of the incentives for change that might arise.
The change implemented demand some incentives for efforts to execute the changed program. If
these incentives are not given reasonable, they may create barriers SHRM.
UNIT 2
STRATEGIC FIT: A CONCEPTUAL FRAMEWORK
Organizations are often confronted with a dilemma—should they adopt business strategies that fit
the available competencies and capabilities in the firm, or should they first decide their business
strategy, and then stretch and modify their competencies and capabilities to fit the business
strategy? The strategic fit proposes that if an organization seeks to maximize its competitive
advantage, it must match its internal resources and skills (organizational competencies) with the
opportunities available in the external environment. When an organization attempts to implement
new strategies with outmoded or inappro-priate HR strategies, it can face problems. Strategic
human resource management is largely about integration.
Guest (1989) emphasized that it is important to ensure that HRM is fully integrated into strategic
planning. In 1997, Guest identified the following five types of fit (Figure 1.6):
1. fit as strategic interaction (best fit approach)—HR practices linkagewith the external context
2. fit as contingency—HR approaches to ensure that internal practices ofthe organization respond
to external factors such as the nature of the market, skill availability, etc.
3. fit as an ideal set of practices (best practice approach)—there are ‘best practices’ which all firms
can adopt
4. fit as gestalt—emphasizes the importance of finding an appropriate combination of practices

11. 5. fit as ‘bundles’ (the configuration approach)—suggests a search for distinct configuration or
bundles of HR practices that complement each
other, in order to determine which ‘bundle’ is likely to be most effective
Three of the above five types of fit provide the following possible approachesto SHRM:
 the best fit approach
 the HR bundles or configuration approach
 the best practice approach
BEST FIT APPROACH (linking business strategy and hr strategy)
The focus of the best fit approach is on the linkage of HR strategies with business strategies. This
linkage is also referred to as external fit or vertical integration. Differences in business orientations
or strategies of organizations give rise to the need for different types of people as well as diverse
approaches towards investment in human capital.
.‘Best fit’ can be perceived in terms of vertical integration or alignment between the
organization’s business and HR strategies.
There is a choice of models, namely life cycle, competitive strategy, and strategic configuration.
Bases of Classification of HR Strategies:
There are various conceptualizations of the relationship between business strategy and HR strategy
in SHRM literature. Beaumont (1992) noted threebases of classification of HR strategies:
Different types of business strategies:
When an organization selects a strategy of becoming a ‘low-cost producer’, it adopts different HR
approaches to compensation as compared to an organization that adopts a ‘product innovation’
strategy. Taking a similar approach, earlier, Schuler and Jackson (1987) had proposed that the
different business strategies described by Porter (1985) will result in variations in HR practices.
Stages in the business or product cycle:
According to this classification, HR practices are related to variations in the life cycle stages of a
business—start-up, growth, maturity, and decline. Different dimensions of HR practices are
important at various stages of the business life cycle. For example, in the growth stage, an
organization recruits an adequate number and mix of qualified people. In the maturity stage, the
organization encourages sufficient turnover to minimize layoffs and facilitate reorganization. At the
decline stage, the organization plans and implements workforce reductions and reallocation. The
HR practices corresponding to the four stages of an organization’s life cycle are provided in Table
1.4
 The life cycle model
The life cycle model is based on the theory that the development of a firm takes place in four
stages: startup, growth, maturity and decline. This is in line with product life cycle theory.

12. Best fit and competitive strategies
Three strategies aimed at achieving competitive advantage have been identified by Porter (1985):
1. innovation – being the unique producer;
2. quality – delivering high-quality goods and services to customers;
3. cost leadership – the planned result of policies aimed at ‘managing away’expense.

13. Types and numbers of products: Fombrun et al. (1984) suggested that the strategy aimed at
achieving variations in product focus (the numbers and types of products), results in structural
modifications and influences HR strategy.
For example, an organization with a single product strategy having a functional structure is likely
to be subjective in its selection criteria and appraisals, and rewards are rather unsystematic and
allocated in a paternalistic manner. On the other hand, an organization that follows a strategy of
growth by acquisition (holding company) of unrelated businesses, with separate self-contained
businesses, has different criteria of selection that vary from business to business. Performance
appraisals and rewards are impersonal and are based on the return on investment and profitability.
Development is cross-functional but not cross-business.
HR Strategy Classification
Of these three bases of classification of HR strategy, the most popular approach is the type of
business strategy and the adoption of complementary HR strategies. Some approaches linking
business strategy with HR strategy are discussed. Porter emphasized the fit point of view by stating
that all the activities of an organization must be tailored to fit its business strategy. Schuler and
Jackson focused on Porter’s classification of the three generic business strategies, i.e., cost
leadership, differentiation, and focus. They argued that HR practices should be designed to
reinforce the behavioural implications of these generic strategies. Based on the role requirements,
each competitive strategy is defined in terms of a matching HRM strategy, as shown in Table 1.5.
Table 1.5: Linking Business Strategy and HR Strategy

14. Miles and Snow’s Classification of Business Strategy and HR Strategy
Miles and Snow (1984) suggested that HRM practices should be tailored to the demands of the
business strategy. They identified four types of organizational strategies on the basis of the
dominant culture of the organization. These are defenders, prospectors, analysers, and reactors.

15. Other Frameworks Linking Business Strategy with HR Strategy
Two other frameworks linking business strategy with HR strategy that have received a great deal of
attention in the literature on the subject are presented in Table 1.7

16. Strategic configuration (HR bundle approach)
Another approach to best fit is the proposition that organizations will be more effective if they
adopt a policy of strategic configuration by matching their strategy to one of the ideal types defined
by theories. This increased effectiveness is attributed to the internal consistency or fit between the
patterns of relevant contextual, structural and strategic factors.
Miles and Snow (1978) identified four types of organizations, classifying the first three types as
‘ideal’ organizations:
1. Prospectors: which operate in an environment characterized by rapid and unpredictable
changes. They react to this environment by focusing on the development of new products, markets
and technologies. They create change in their markets and are the forces to which competitors must
respond. Prospectors have low levels of formalization and specialization and high levels of
decentralization.
Defenders: , which operate in a more stable and predictable environment than prospectors and
engage in more long-term planning. Their emphasis is on defending their markets, and they do little
research and development. Defenders focus on efficiency by relying on routine technologies and
economies of scale. They have more mechanistic or bureaucratic structures than prospectors and
obtain coordination through formalization, centralization, specialization and vertical differentiation.
3. Analysers: which are a combination of the prospector and defender types. They operate in stable
environments like defenders and also in markets where new products are constantly required like
prospectors. They are usually not the initiators of change like prospectors but they follow the
changes more rapidly than defenders. Analysers seek effectiveness through both efficiency and new

17. products or markets. They are usually not the initiators of change, as are prospectors, but they
follow the changes more rapidly than defenders.
4. Reactors: which are unstable organizations existing in what they believe to be an unpredictable
environment. They lack consistent, well-articulated strategies and do not undertake long-range
planning
BEST PRACTICE APPROACH
This approach is based on the assumption that there is a set of best HRM practices and that
adopting them will inevitably lead to superior organizational performance. They are universal in
the sense that they are best in any situation.
Lists of best practices
A number of lists of ‘best practices’ have been produced, the best known of which was produced
by Pfeffer (1994), namely:
1. employment security;
2. selective hiring;
3. self-managed teams;
4. high compensation contingent on performance;
5. training to provide a skilled and motivated workforce;
6. reduction of status differentials;
20 7. sharing information.
The following list was drawn up by Guest (1999):
1. selection and the careful use of selection tests to identify those with potential to make a
contribution;
2. training, and in particular a recognition that training is an ongoing activity;
3. job design to ensure flexibility, commitment and motivation, including steps to ensure that
employees have the responsibility and autonomy fully to use their knowledge and skills;
4. communication to ensure that a two-way process keeps everyone fully informed;
5. employee share ownership programmes to increase employees’ awareness of the implications of
their actions on the financial performance of the firm.
Delery and Doty (1996) identified seven strategic HR practices, i.e. ones that are related to overall
organizational performance:
1. the use of internal career ladders,
2. formal training systems,
3. results-orientated appraisal,
4. performance based compensation,

18. 5. employment security,
6. employee voice and
7. broadly defined jobs.
Unit 4
HUMAN RESOURCE ENVIRONMENT
After developing investment prospective for making strategic decision about human resources
managers need to scan the environment before formulating strategy.
qualified employees to run the operations. During these days of rapid changes ,the process of
formulating strategies & planning and their implementation is more difficult but important.
for dealing with changing conditions , were successful comparative to those who ignored these
important factors.
The framework for scanning the environment is composed of the following categories:
.
organization.
TECHNOLOGY AND ORGANISATION STRUCTURE
 BROAD INFLUENCES TECHNOLOGY:
Technology particularly information technology is having a major impact or the structure of
organizations and the nature of managerial work. Major areas of business , manufacturing , sales,
finance, supply chain management and human resources have integrated through company’s
software systems.
The information technology has enabled companies to gain numerous benefits like efficiency gains,
quicker response time, better inventory management, enhanced coordination and improved decision
making.

19. Managers to be effective in such an environment requires special skills as the nature of managerial
assignment has changed. Lean and flat organizations, alternative job assignments and opportunities
are needed for development of effective managers for future needs.
The use of technology has changed the hierarchal structure of the organizations as physical
supervision need has been reduced.
Technology has also reduced work process cycle time. Changes in the work processes and design
warrants well planned training and development programs to ensure availability of employees with
updated skills.
 Influence of HRIS.
soft, HRIS. SAP, JD Edward, MRP, Oracle etc) for different operations including HR information
system, which provide facility of automatic human resources processes and immediate information
to decision makers
 Redeployment of HR Staff to operating Units.
to provide spontaneous HR support to operating units.
Because of organizational decentralization, HR staffs are redeployed (shifted) to individual
operating units. It provides better service because HR staffs are on-site, reporting to line
manager (operating unit in-charge) and also report to functional manager (head of human
resource department). HR staffs c

20. handle wide range of issues and ask for specialized services from the HR department
when such services are required. Some experts have questioned such redeployment
because of costs and redundancies associated with this process. However, it is better to
assign some HR staff at the operating unit as it adds value. HR staffs can understand and
improve organizational climate and environment.
 New organization structure.
become blurred. workers are becoming more responsible and accountable as job owners,
making decisions at their level;
e work arrangements, project teams have replaced normal
manager employee hierarchal relationship.
All structural changes on account of technological changes are focused to enhance
organizational ability to coupe up with the current & future challenges.
There are four new structural forms of interest:
 Unbundled corporations
They employ portfolio/conglomerate approach to their peripheral business units, which are
retained or divested according to profitability and risk criteria. Many traditional support
services of bureaucracies are outsourced to consultants/vendors. Functions such as trainings,
compensation and payroll are performed by vendors. This enables redeployment of
resources to more profitable alternatives
 Network Organizations
They are also called virtual corporations. These organizations are developed because of the
need to outsource activities that vendors/suppliers/consultants can perform better and
quickly. Virtual organizations describe organizations that rely heavily on outsourcing and
there is a need for speed. These organizations may include companies from all over the
world, and they also have permanent core member that performs a broker role.
 Cellular Organizations: These organizations are groups of small technology-oriented
companies that maintain affiliations over time. Employees of these organizations are
technical professionals.Subsets of the organization's companies join forces on various
projects when their skills and capabilities are required. One firm may take leadership
role, depending on a project. Individual companies may also join projects to learn
about new technologies. Managerial skills needed are technical knowledge, cross-
functional experience, collaborative leadership, self-management skills, and flexibility.
 Respondent Organizations: These are entrepreneurial organizations that provide
customized
services to unbundled organizations. In such corporations, decision-making is quick and
likely to be retained at the level of central entrepreneurial figure. These are risky ventures
having high failure rates. Potential advantages that these firms offer are exposure to new
technologies to acquire skills, financial gain, and develop as a generalist. One major
disadvantage is lack of participative decision- making in such organizations.

21. MANAGEMENT TRENDS
(A) Management of Diversity
Heterogeneity of the workforce is increasing. This increasing diversity has to be managed
effectively to increase productivity. One distinct benefit of managing diversity is increased
problem-solving ability. In fact, heterogeneity and creativity are considered to have strong
linkage. Ethnic heterogeneity can have two benefits: (1) increase in quality of ideas
generated for problem solving; and, (2) prevention of 'groupthink' phenomenon that occurs
in cohesive groups. However, quality idea generation depends on factors such as the amount
of diversity, communications, ease of discussing differences, cultural awareness training,
etc.
Management of diversity enables companies to gain competitive advantages. If work-force
is diverse, it may enable the firm to tap gender and racially diverse markets better. The
company can obtain quick and better market acceptance due to good public image based
on diversity. If the company can manage diversity better, it also attracts better employees.
Organizations that manage diversity better tend to be more open-minded, have less
standardized operating methods, and can manage resistance to change better. Despite of
these advantages, women and minorities do not have adequate representation in the work-
force.
It is important to note that: (1) there is a need to determine an optimal level of heterogeneity
because excessive diversity may lead to communication problems and unavoidable
conflicts.
Demographic Trends
Demographic trends for the future are relatively known. Massive changes in demography
have important implications for human resource management. These developments have
major implications for the career potential of individual workers.
(A) An Aging Workforce
As indications of aging trends, the median age for the labor force increases. Implications of
aging are:
(1) the workforce will be more experienced, stable, and reliable; and
(2) , (2) it should be more productive. However, an older workforce may lead to less
flexibility as older workers may not adapt as quickly to a dynamic economy. Greater
pension contributions increase costs. As the workforce ages, there will be greater
health care costs. Moreover, companies’ age distributions affect their production
costs and ability to compete.
(B) Labor Shortages
There is growing labor shortages. In such situation, employers address shortage by hiring
retired workers and creating more varied work schedules to accommodate their needs.
Employers also hire disabled workers such as the mentally challenged and retired workers

22. to fulfill shortages. Labor shortages also are predicted for the future. Traditional want ad
will be replaced with “situation wanted” ads and workers will place these ads on electronic
media and wait for companies to call them. Many of these workers will have two jobs.
The labor market for highly skilled workers will be tight because they are attracted to e-
business companies. Prospects for rapid accumulation of wealth in such companies have
made them willing to take risks and live with uncertainty. The most admired companies
have high ratios of applicants to jobs. The good employees are attracted to companies that
have good management even in tight labor markets.
The Internet has created many of the jobs for highly skilled workers and has helped the
labor market to be efficient by providing information about jobs and applicants and
facilitating match-ups. Internet recruiting has become important because Internet
recruiting reaches the global labor market, provides speed and economy, offers the
potential for tremendous volume, and there is specialization.
(C) Greater Racial Diversity
The labor force will become much more diverse racially. As a result, organizations will
need to plan to take advantage of diversity instead of forcing conformity. Organizations
will need to be proactive in helping to create a work environment in which the creativity
and innovativeness of diversity will flourish.
(D) Changing Occupational Distributions for Women
Females have constituted a growing portion of the workforce for several decades. While
the occupational distribution of women still differs from that of men, they have made great
strides in several job categories. Women have advanced most rapidly in cutting-edge
industries because the need for pure intellectual capability that overcomes discrimination
on the basis of gender; they have fared well as information workers and as computer
scientists. To attract talented women, many employers have work arrangements that better
accommodate childbirth and the care of young children. Such approaches include part-
time schedules, flextime, flexi-seheduling, and allowing employees to work at home.
(E) Dual-Career Couples
Because of increased female participation in the workforce, the number of dual-career
families has also increased. The number of couples having two wage earners has increased
rapidly. To accommodate such families, many employers offer support services such as
“sick child” care programs and day care. Such services reduce absenteeism, lower
turnover, recruiting advantages, and a positive impact on productivity. In order to help
such dual-career couples (and single parents), employers may provide several forms of
support: (1) referral services for child care; and (2) setting up child care facilities on
company premises.

23. INTERNATIONAL DEVELOPMENTS
(A) Global Competition
Companies competing on a global basis have to use world-class labor to obtain the quality
needed for some product markets. Moving foreign nationals across international
boundaries is another approach for highly skilled individuals. However, legal restrictions
involved in these actions may be critical. Some large organizations have human resource
management specialists who have developed expertise in working through the legalities
for such moves.
(B) Global Sourcing of Labor
Innovative uses of labor on a global basis are evident. The combination of a common
language, an educated labor force, a shortage of jobs, and relatively low wages make this
an attractive option. An interesting benefit of this relationship is that, in addition their
cross-border operations, such as equitable compensation systems and the ability to move
key employees into their operations in all three countries. They also will need to help
develop managers and key professionals who can work effectively in the cultures of the
other countries.
Trends in the Utilization of HumanResources
(A)Growing Use of Temporary and Contingent Workers
Contingent and temporary employees are often used to provide a buffer of protection for
the jobs of the core of permanent employees. The use of such workers is increasing. In
contrast to core employees, contingent workers have short-term affiliations with
employers. Companies also are using more 'leased' employees who are 'rented' from a
temporary help agency on a long-term basis. Unions typically resist the use of temporary
workers.
Although there is growing use of higher-skilled temporary employees, the largest
category of temporaries is still administrative support or clerical work. The second
largest category is industrial help workers such as laborers, equipment cleaners, helpers,
and handlers. Because demand for such industrial help workers is cyclical and seasonal,
the advantages to the employer are obvious. The nature of temporary jobs is changing
and there is a shift toward the higher skill levels. Temporary workers now include
accountants, computer specialists, engineering personnel, financial executives, and
technical writers. Temporary management personnel and executives are sometimes
early retirees from major computer companies or managers displaced as a result of
restructuring
(B) Factors Prompting Use of Temporary or Contingent Employees
A number of factors encourage the use of temporary or contingent employees. Because
of economic uncertainty or turbulence, many employers are reluctant to hire permanent
employees and have increased their use of contingent employees. Another factor is
fluctuating workloads. The organization may require employees for a relative short
period of time; hence, it uses temporaries. Companies also can avoid paying overtime
pay by using temporaries during peak demand periods. Growing and declining
companies have been found to use more temporary employees. The use of temporaries
who can be dismissed on short notice allows these companies to protect the core of
permanent employees.

24. Other factors prompting the use of contingent workers include avoidance of recruiting,
hiring, and training expenses for workers who are to be used only a short time and
avoidance of severance costs. Other advantages for employers in the use of such workers
include flexibility, potential savings in labor costs, and acquiring labor needed during
hiring freezes. There are some benefits for temporary workers such as flexibility to match
lifestyle and obligations with work and the ease of finding a job. For
women, the benefits are exposure in the job market, opportunities to obtain work experience
and work skills, and the opportunity to sample employment situations.
(c) Factors Limiting the Use of Temporary or Contingent Employees
There are several disadvantages for employers in using temporary employees: (1)
increased likelihood of missing affirmative action goals; (2) under-representation of
female and minority employees in their permanent workforce if they hire and rely
extensively on temporary workers; and, (3) need to train such workers. Temporary
executives may put emphasis on short-term financial performance and absence of loyalty.
Disadvantages for temporary employees include lower opportunities to receive health
insurance and retirement benefits, lower pay, and fewer training and educational
opportunities.
UNIT -3
REWARD STRATEGY
Reward Strategy defines the intention of organization how its reward policies and processes
should be developed to business requirements. All of the tools available to the employer
that may be used to attract, motivate and retain employees. Total rewards include
everything the employee perceives to be of value resulting from the employment
relationship.
Reward is one of the key levers available to an organization to influence the behavior,
motivation and the commitment of its staff. In fact the overall approach to reward sends
strong messages to all employees about what is important to the business. There is no one
“best practice” in terms of reward, only a best practice for the specific organization given
the variables impacting on it. Some of these variables are specific to the organization, others
relative to the industry while others are national and even international initiatives
(particularly if the company is a multinational).
Critical elements/variables to be considered before developing a reward strategy
 Understanding the organization, its position in its life cycle, strategy, critical success
factors and culture.
 Understanding the workforce and its demographics.
 Knowing the perceptions and values of stakeholders relative to remuneration.
 Understanding the market in which you compete for skills, the areas of shortage and
demand for scarce talent.
 Understanding the environment in which the company operates.

25. COMPONENTS OF REWARD STRATEGY
Paying for Performance
A remuneration strategy should ensure significant differentiation in reward between top
performing employees and others, and a remuneration mix that is customized in a way that
recognizes the preferences of different employee groups. The defensibility of pay is always
enhanced within the company and without, when linked to performance and as such should
be integral in any reward policy. Rewards perceived as an entitlement regardless of
performance are neither cost effective nor motivational. Differentials in pay levels,
increments and incentives favoring the good performers will drive positive behavior.
Guaranteed pay
Guaranteed pay should be driven by market competitiveness (scarcity), internal equity, and
individual performance. Whereas for example, competent performance could be linked to
median rates, upper quartile guaranteed package rates should be reserved for outstanding
performers rather than those with long service.
Short term incentives
Variable pay is an essential component of any reward strategy. Not only are they a
mechanism for recognizing work well done, they can ensure highly competitive earnings

26. relative to the market. Whereas fixed pay levels inflate payroll and cannot easily be
reduced, variable pay is more flexible and can be aligned to possible fluctuating individual
and company performance and budgetary constraints. The combination of reasonably
competitive guaranteed pay, (as opposed to highly competitive), and an aggressive incentive
scheme will motivate good performers and ensure optimum payroll spend.
Long term incentives
Executives and management should have a balance between short and long term reward as
they need to focus on both operational and strategic issues .The alignment of management’s
and the company’s medium to long term interests remains the underlying value proposition
for long term incentives. There has however been some fall-off in the practice of offering of
share options due to tax and cash flow implications arising from new legislation. This has
given rise to other options such as endowment policies, phantom shares, banked bonuses
etc.
Performance Management
Reward linked to performance remains an effective and defensible strategy, an important
consideration with the spotlight on executive pay and good governance. In this respect a key
success factor is to create a performance – focused culture and a defensible credible
performance measurement process. The challenge is to develop an environment where
people know and understand the purpose and value of their work.
“Performance management is one of the tools for creating a more efficient and profitable
business that has often historically been viewed as ineffective, highly political, and a time-
consuming chore”
PERFORMANCE MANAGEMENT
Performance management (PM) is a process of ensuring that set of activities and outputs
meets an organization's goals in an effective and efficient
manner. Performance management can focus on the performance of an organization,
a department, an employee, or the processes in place to manage particular tasks.[1]
Performance management standards are generally organized and disseminated by senior
leadership at an organization and by task owners, it can include specifying tasks and
outcomes of a job, providing timely feedback and coaching, comparing employee's actual
performance and behaviors with desired performance and behaviors, instituting rewards, etc
The term was first used by Beer and Ruh in the year 1976. Performance management is an
ongoing dynamic process that articulates organisational vision and objectives, installs
performance criteria in light of these objectives, and continuously reviews internal
procedures to integrate them with organizational philosophy and culture.
According to Michael Armstrong and Angela Baron – ‘Performance management is a
process which contributes to the effective management of individual and teams in order to
achieve high levels of organisational performance.’

27. The following are the characteristics of performance management:
Measures outputs of delivered performance :It is concerned with measuring outputs of
delivered performance compared with expectations expressed as objectives. Its complete
focus is on targets, standards and performance measures. It is based on the agreement of
role requirements, objectives and performance improvement and personal development
plans.
Concerned with inputs and values: Performance management is also concerned with
inputs and values. The inputs are the knowledge, skills and behaviors required to produce
the expected results from the individuals.
Continuous and flexible process :Performance management is a continuous and flexible
process that involves managers and those whom they manage acting as partners within a
framework that sets out how they can best work together to achieve the required results.
Based on the principle of management by contract and agreement: It is based on the
principle of management by contract and agreement rather than management by command.
It relies on consensus and cooperation rather than control or coercion.
Focuses on future performance planning and improvement :Performance management
also focuses on future performance planning and improvement rather than on retrospective
performance appraisal. It functions as a continuous and evolutionary process, in which
performance improves over the period of time; and provides the basis for regular and
frequent dialogues between managers and individuals about performance and development
needs.
The major objectives of performance management are discussed below:
 To enable the employees towards achievement of superior standards of work
performance.
 To help the employees in identifying the knowledge and skills required for
performing the job efficiently as this would drive their focus towards performing the
right task in the right way.
 Boosting the performance of the employees by encouraging employee
empowerment, motivation and implementation of an effective reward mechanism.
 Promoting a two way system of communication between the supervisors and the
employees for clarifying expectations about the roles and accountabilities,
communicating the functional and organizational goals, providing a regular and a
transparent feedback for improving employee performance and continuous
coaching.
 Identifying the barriers to effective performance and resolving those barriers through
constant monitoring, coaching and development interventions.
 Creating a basis for several administrative decisions strategic planning, succession
planning, promotions and performance based payment.
 Promoting personal growth and advancement in the career of the employees by
helping them in acquiring the desired knowledge and skills.

28. The Performance Management Cycle
The performance management process or cycle is a series of five key steps. These steps are
imperative, regardless of how often you review employee performance.
1. Planning
This stage entails setting employees' goals and communicating these goals with them. While
these goals should be disclosed in the job description to attract quality candidates, they
should be communicated once again when the candidate becomes a new hire. Depending on
the performance management process in your organization, you may want to assign a
percentage to each of these goals to be able to evaluate their achievement.
2. Monitoring
In this phase, managers are required to monitor the employees’ performance on the goal.
This is where continuous performance management comes into the picture. With the right
performance management software, you can track your team’s performance in real-time and
modify and correct course whenever required.
3. Developing
This phase includes using the data obtained during the monitoring phase to improve the
performance of employees. It may require suggesting refresher courses, providing an
assignment that helps them improve their knowledge and performance on the job, or
altering the course of employee development to enhance performance or sustain excellence.
4. Rating
Each employee’s performance must be rated periodically and then at the time of the
performance appraisal. Ratings are essential to identify the state of employee performance
and implement changes accordingly. Both peers and managers can provide these ratings for
360-degree feedback.
5. Rewarding
Recognizing and rewarding good performance is essential to the performance management
process, as well as an important part of employee engagement. You can do this with a
simple thank you, social recognition, or a full-scale employee rewards program that
regularly recognizes and rewards excellent performance in the organization.
Benefits of performance management
Direct financial gain
 Grow sales
 Reduce costs in the organization
 Stop project overruns
 Aligns the organization directly behind the CEO's goals
 Decreases the time it takes to create strategic or operational changes by communicating
the changes through a new set of goals

29. Motivated workforce
 Optimizes incentive plans to specific goals for over achievement, not just business as
usual
 Improves employee engagement because everyone understands how they are directly
contributing to the organizations high level goals
 Create transparency in achievement of goals
 High confidence in bonus payment process
 Professional development programs are better aligned directly to achieving business
level goals
Improved management control
 Flexible, responsive to management needs
 Displays data relationships
 Helps audit / comply with legislative requirement
 Simplifies communication of strategic goals scenario planning
 Provides well documented and communicated process documentation
STRATEGIES
Try These 6 Performance Management Strategies
1. Define and Communicate Company Goals and Performance Objectives
Your employees cannot meet your performance expectations or company goals if they are
not clearly outlined, making this our first step toward effective performance management.
Sometimes employers are not as clear as they could be when outlining their goals or
company objectives, and often, employees do not come forward to ask follow-up questions
2. Utilize Performance Management Software
If you are not already using a performance management software, it may be time to consider
trying it out. If you do already use one and it’s not saving you any time, your team
complains about it, or it has low employee engagement, it may be obsolete and in need of
an upgrade.
3. Offer Frequent Performance Feedback
While clearly communicating company and individual goals is an essential step for any
business, communication alone is not going to get you all that far. Your managers will also
need to check in with teams and employees periodically not only to gauge progress but also
to provide feedback.
4. Use Peer Reviews
Another great way to foster effective performance management is to utilize peer reviews,
also known as 360-degree reviews. Again, this is a feature that can be found on most
performance management software programs. Peer reviews are useful because they allow

30. coworkers to praise other coworkers and highlight positive aspects of their performance, as
well as point out where improvements can be made.
5. Preemptive Management and Recognition
One way to guarantee results in the workplace is to implement rewards and practice
preemptive management. This simply means that your employees always know what is
expected of them so there is never any guesswork or need for consequences in the
workplace.
6. Set Regular Meetings to Discuss Outcomes and Results
Also known as progress reports or progress meetings, setting aside time to meet with your
team and seeing how things are going with your set goals and objectives are important for
meeting those goals and objectives. TheseThese meetings can be held weekly, monthly, or
as often as you see fit. Ensure that your team knows that attendance is mandatory.
7.Define Expectations
Your managers can’t define their expectations if they don’t understand yours. A lack of
understanding of the organisation’s objectives leads to a loss of focus. Your managers don’t
know what to communicate to employees because they don’t know what areas to focus on.
8.Stress the Importance of Regular Reviews
Most managers believe that they should hold reviews yearly. This almost makes them seem
less important. They become an end-of-year inconvenience. But they should be a method of
tracking employee performance. Doing them yearly makes them a task to get through. Plus,
it means that managers miss important developments.
9.Move Away From the Lecture Format
Did you know that 46% of people leave meetings with no idea of what they’re supposed to
do next?
This often comes down to ineffective communication.
Your performance reviews are meetings that your managers hold with employees. If
managers don’t communicate well, employee performance doesn’t improve.
10.Define Rating Scales
Most performance reviews have rating scales attached. For example, you may ask managers
to rate employees on a scale of 1 to 5 on different aspects of their work.Rating scales
provide an at-a-glance means of analysing an employee’s performance. But they mean very
little if you don’t define the scale itself.
11.Emphasise a Focus on the Positives
There’s an old performance management technique known as the “feedback sandwich”.
It involves providing a piece of positive feedback, followed by negative. You then follow
this with another positive comment.
12.Review Your Reviewers
You’re responsible for reviewing the performance of your managers. How you work with
them influences how they review their team members. As a result, your performance
reviews set an example for how the system should work.

31. TRAINING AND DEVELOPMENT STRATEGIES
ANALYZE YOUR NEEDS:
Take the time to carefully analyze your needs when designing your training plan. This will
help you choose the right type of training for your requirements.
IDENTIFY SKILL GAPS
You can do this by looking at a written job description (make sure you have one!) and
comparing the skills the position requires with your employees’ current abilities.
Understanding where there may be gaps will help you identify the types of training you
need.
PRIORITIZE
Assign the training you’d like to provide into categories. Is it mandatory, or nice-to-have? If
it’s absolutely required, a training effort becomes imperative. If it reflects an ideal situation
that isn’t immediately feasible, you’ll know to plan for it in the longer term.
PLAN AND DELIVER THE TRAINING
Once you have assessed and prioritized the need for training, the next step is to secure what
type of training you will use and how you will offer it. There are several factors to consider:
COMPENSATION STRATEGIES
Pay:
๏ The key component for the right positioning of the company on the market
๏ Generally, the higher pay can attract skilled employees and reduce turnover if aligned
with right values
๏ The right pay depends on key values and behavior the company want to reward
๏ Most successful companies do not use the competitive pay as the advantage; they set
the proper mixture of the pay, benefits and career opportunities.
๏ Changes to pay are quick to implement, but they can become extremely costly to the
company
Benefits:
๏ The attractive benefits package can be a real competitive advantage - if benefits offered
are aligned with the corporate culture and values of the company and employees
๏ The company has to define its strategy for benefits. It is simple to lay one benefit over
another one. The company has to manage costs of providing benefits. It has to define its
core benefits, which will be used as a basis for building the competitive advantage
๏ Flexible benefits are usually seen as the best alternative, but the company loses the option
to put “its corporate extra” into the package
๏ Benefits do not increase the satisfaction of employees, but they are seen important when
the employee considers another job offer
๏ Benefits can be used as a great reward and recognition tool

32. Careers:
๏ Careers represent the future value to employees of staying with the company
๏ The opportunity to learn and grow is highly valued by many employees
๏ The proper career management is also a strong cost management tool for the company
๏ Careers are always connected with the strong performance management process and with
the succession planning processes
๏ Many companies do offer specialized career opportunities and they let employees leave
after a limited period of time (and they are valued for)
๏ The position and weight of the career management in the reward mix depends on the
industry and the mixture of employees
How to develop an effective Compensation Strategy?
1. Review the business environment: Understand the key factors outside the company.
2. Assess the business design: What are your key business drivers, goals?
3. Examine critical HR implications: Articulate the role of employees in executing the
business strategy.
4. Measure the internal reality: What do you reward? How? Why?
5. Identify gaps and priorities: What needs to be fixed or changed? When?
6. Develop the action plan. Measure it
RETRECHMENT STRATEGY
DOWNSIZING: it means reducing the no. of employees and the overall size of the firm.
There are many reasons why a company may need to reduce the number of people it
employs. The introduction of new technology may result in a reduced workload for
employees. External financial pressures or increased competition in the marketplace may
force a company to reduce its labor costs. Mergers and acquisitions may leave a company
with more employees than it requires.
When the management of an organization determines that their organization is not operating
at peak efficiency, they typically look for ways to make the organization more productive.
This is frequently accomplished via organizational downsizing, which is a reduction in
organizational size and operating costs implemented by management in order to improve
organizational efficiency, productivity and/or the competitiveness of the organization.
Organizational downsizing affects the work processes of an organization since the end
result of the downsizing is typically fewer people performing the same workload that
existed before the downsizing took place. The act of downsizing results in two categories of
people:

33. 1. Victims, the people who involuntarily lose their jobs due to organizational downsizing,
2. Survivors, the employees who remain after organizational downsizing takes place
REASON OF DOWNSIZING
Merger of two firms
Outsourcing
Strategy change
Economic crisis
Change in management
When company goes at loss
VOULANTARY RETIREMENT SCHEMES
retire earlier than their normal retirement age. The VRS package usually contains generous
retirement benefits for certain employees.
Purpose
changing business environment. VRS plans cut costs and reduce layoffs .
Targeted Employees:
employed with a company for at least 10 years are usually the first to be offered a VRS
package.
Considerations”
y not be right for every individual because the retiree will have to live on a fixed
income. Circumstances to consider are household dependent needs (e.g. college education
expenses) and mortgage payments and other household expenses. If the VRS package isn't
accepted, on the other hand, the employee might be laid off and receive few or no benefits.
Human Resource Outsourcing (HRO)?
to take responsibility (and risk) for HR functions and perform these tasks for the business.
Payroll outsourcing is commonly outsourced for two reasons: it’s a time-consuming
administrative task for employers, and there are many specialist companies with the
technology and knowledge to run it efficiently and compliantly.
are outsourced so as to focus on the organization`s core competencies. Often HR functions
are complex and time consuming that it will create difficulty in managing other important
thrust areas. By HR outsourcing, this problem can be avoided which will enhance

34. effectiveness by focusing on what the organization is best at. It will also improve the
flexibility of the organization to the rapidly changing business needs.
outsource time-consuming administrative tasks, which allow their internal resource to focus
on the strategic level.
The other two retrenchment strategy are
Early retirement plan
Project based employment
CAREER MANAGEMENT STRATEGY
Set and communicate clear goals
The most important part of getting what you want is actually knowing what you want. Once
you’ve decided on a clear path, identify and discuss goals with your manager and
mentors—this will provide meaningful dialogue during your reviews. As you work to
define these goals, use the following questions as your guide:
 What level of responsibility do you want to have?
 What projects would you like to lead?
 What type of company do you want to work for?
 What problem(s) do you care about solving?
 Is work/life balance important to you?
 What kind of people do you enjoy working with?
Create an open feedback loop
Timely, high-quality feedback, whether it’s positive or negative, will provide you with
better understanding of where your talents create the most value. The ability to listen to
honest feedback and adjust accordingly will go a long way towards increasing your value as
an employee. Furthermore, this feedback should help inform the career path you create for
yourself, even if that means refining your original goals.
Embrace new challenges
You should always be working to proactively identify projects that help to advance your
career. When a new opportunity arises and that opportunity fits your overall career plan,
raise your hand and go after it! To generate the most meaningful impact for you and your
company, be sure to understand the overall strategic vision of the organization and then
determine how your career objectives can help the company achieve that goal.
Create a portfolio of your accomplishments
Portfolios aren’t just for artists. Regardless of your industry, a work portfolio can be a great
asset to career advancement. As a collection of your best work, your portfolio will tell a
story beyond a resume or cover letter. It w also showcases your passion and commitment to
your profession. BrandYourself offers some very helpful tips on what you may want to
include in your own career portfolio.

35. Network
Networking is an essential part of professional development and a valuable skill that will
serve you throughout your entire career. A strong network enables you to discover new
jobs, different industries and helpful advice, all of which may open your eyes to new
possibilities for your career. Keep an open mind—opportunities to network are all around
you.
HUMAN ASPECTS OF STRATEGY IMPLEMENTATION
Behavioral issues in strategy implementation
• Matching culture with strategy
• Human side of M &A
• Leadership, power & politics
• Employee morale
• Personal values &business ethics
1. BEHAVIORAL ISSUES IN STRATEGY IMPLEMENTATION:
It is vital to bear in mind that organizational change is not an intellectual process
concerned with the design of ever-morecomplex 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 behavioural of the
employees affect the success of the organization. Strategic implementation requires
support, discipline, motivation and hard work from all manager and employees
 Influence Tactics: The organizational leaders have to successfully implement the
strategies and achieve the objectives. Therefore the leader has to change the behaviour
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. 
 Power: it is the potential ability to influence the behaviour 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) 
 Empowerment as a way of Influencing Behaviour: 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. 
 Leadership Style and Culture Change: Culture is the set of values, beliefs,
behaviours 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 behaviours that stem from them, and to adopt new ones.
 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. 
 Ethics and Strategy: Ethics are contemporary standards and a principle or conducts

36. that govern the action and behviour 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
 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? Whatmanagement style is to be used?
2. Matching culture with strategy
Organizational effectiveness results from the alignment of three main components:
o Culture: How we do things around here in order to succeed
o Leadership: Creating a vision and direction for the organization and mobilizing
people to accomplish them.
o Strategy: Establishing the fundamental focus for action that the organization
must take in order to provide significant added value to customers.
THE FOUR CORE CULTURE
1. Collaboration
 Diversity
• Involvement United We Stand, Divided We Fall Harmony
• People Interaction Complementary Pragmatism
2. Control
 Systematize
 Objectivity
 Order
 Stability Standardization
 Utility
 Realism Discipline
3. Cultivation
 Growth and Development
 Commitment
 Growth Commitment and Dedication
 Involvement Creativity Purpose
 Let Things Evolve
 Subjectivity
 Values are Paramount
 Meaningfulness Fulfillment
4. Competence
 Professionalism
 Pursuit of Excellence
 Continuous Improvement
 Competition for It.s Own Sake
 Efficiency

37.  Autonomy and Individual Freedom
THE FOUR CORE STRATEGIES
THE FOUR CORE LEADERSHIP
3. HUMAN SIDE OF MERGER AND ACQUISITION
Types of Business Combination
 Merger or Amalgamation:

38. – Merger or amalgamation may take two forms:
• Absorption is a combination of two or more companies into an existing
company.
• Consolidation is a combination of two or more companies into a new
company.
– In merger, there is complete amalgamation of the assets and liabilities as well
as shareholders’ interests and businesses of the merging companies.
Forms of Merger: –
Horizontal merger: it is a merger when two or more firms dealing in the
similar lines of activity combine together. –
Vertical merger: it is a merger that includes two or more stages of
production/distribution that are usually separate. A supplier and company. E.g.,
a leather supplier and a shoemaker.
Conglomerate merger :it is a merger in which the firms engaged of totally
different unrelated activities combine together.
Acquisition : Acquisition may be defined as an act of acquiring effective control
over assets or management of a company by another company without any
combination of businesses or companies.
Takeover – The term takeover is understood to connote hostility. When an
acquisition is a ‘forced’ or ‘unwilling’ acquisition, it is called a takeover.
Parties in the Acquisition –
a) Holding company – it is a company that holds more than half of the nominal
value of the equity capital of another company, or controls the composition of its
Board of Directors.
b) Subsidiary company- the company with the lesser number of share is called
subsidiary company. Both the companies maintain separate forms of accounts.
The Human Side of M&A Activity
Plenty of attention is paid to the legal, financial, and operational elements of
mergers and acquisitions. But executives who have been through the merger
process now recognize that in today’s economy, the management of the human
side of change is the real key to maximizing the value of a deal. The
management of the human side of M&A activity, however, based upon the
failure rates of M&As, appears to be a somewhat neglected focus of the top
management’s attention. People issues occur at several phases or stages of M&A
activity. More specifically, people issues in just the integration phase of mergers
and acquisitions include.
Role of HR in Mergers and Acquisition
1. Due diligence should be very clear
2. Employee’s dissatisfaction to be avoided

39. 3. Conduct common understanding programmes with the executive level
employees of the company which you are going to takeover.
4. Negotiate and make the Union Leaders understand about the entire issue and
their future positions after M&A.
5. Clear assessment of Manpower to be done
6. Understand the Org. Structure/Salary Structure and try to reduce the parity
between the two companies.
7. Understand all the legal cases pending with the acquiring company and take
full accreditation of the cases to take next steps
8. Information to sent to all the bodies as per statute.
9. Proper Audit with re to Fixed and Tangible asset to be done and accordingly
value to be determined.
10. Proper retrenchment policy to be implemented for excess staff
4. Personal values & business ethics
REASONS OF ETHICAL PROBLEMS
Personal Gain & Selfish interest
• Competitive Pressure on Profits
• Business Goals Vs Personal Values
• Cross-Cultural Contradictions
STRATEGY MANAGEMENT:
“Strategy is the determination of the basic long term goals and objectives of an enterprise
and the adoption of the course of action and the allocation of resources necessary for
carrying out these goals.”
Alfrred D. Chandler.
“A strategy is a unified, comprehensive, and integrated plan that relates the strategic
advantages of the firm to the challenges of the environment. It is designed to ensure that the
basic objectives of the enterprise are achieved through proper execution by the
organization.”
Lawrence R. Jauch & William F. Glueck
Strategy literal meaning is “In anticipation of opponents move, designing one’s own way of
action”. As it has different interpretations and really difficult to fathom what strategy
means. So we can conclude that it is the means to achieve organizational
goal.
In business parlance, there is no definite meaning of strategy and used for number of things
like mobilizing and deploying resources systematically and attain organizational goal or the
pattern of common thread related to the organization’s activities which are derived from the
policies and objectives and goals. It is related to pursuing those activities which move an
organization from its current position to desired future state. It also relates to resources
necessary for implementing a plan or following a course of action.
NATURE AND CHARACTERISTIC OF STRATEGY

40. Objective Oriented:
The business strategies are objectives oriented and are directed towards organizational goal.
To formulate strategies the business should know the objectives that are to be pursued. For
example if any business want to achieve growth then it has to set following objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.
Future Oriented:
Strategy is future oriented plan and formulated to attain future position of the organization.
Therefore strategy enables management to study the present position of organization and
decides to attain the future position of the organization. This is
possible because strategy answer question relating to the following aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different business.
Availability and Allocation of Resources:
To implement strategy properly there is need of adequate resources and proper allocation of
resources. If it is done then business can attain its objectives. There are three types of
resources required by business namely physical resources, i.e
plant and machinery, financial resources i.e capital, and human resources i.e manpower. If
these resources are properly audited/evaluated and find out its strength and weaknesses and
coordinate well then management can do better strategy implementation.
Influence of Environment:
The environmental factors affect the formulation and implementation of strategy. The
business unit by analyzing internal and external environment can find out its strength and
weaknesses as well as opportunities and threats and can formulate its strategy properly.
Universally Applicable:
Strategies are universally applicable and accepted irrespective of business nature and size.
Every business unit designs strategy for its survival and growth. The presence of strategy
keeps business moving in right direction.
Levels of strategy:
There are companies that are working in different business lines with regards to products
/services, markets or technologies and are managed by same top management. In this case
such companies need to frame different strategies. The strategies are executed at three
different levels such as –
a) Corporate level
b) Business level
c) Functional/operational level
Corporate level strategies are overarching plan of action covering the various functions that
are performed by different SBUs(strategic business unit, which involved in a signal line of
business) the plan deals with the objectives of the company, allocation of resource and co-
ordination of SBUs for best performance.

41. Business level strategy is comprehensive plan directed to attain SBUs objectives, allocation
of resources among functional areas and coordination between them for giving good
contribution for achieving corporate level objectives.
Functional level strategy is restricted to a specific function. It deals with allocation of
resources among different operations within that functional area and coordinating them for
better contribution to SBU and corporate level achievement.
Revision of strategy:
Strategies are to be reviewed periodically as in the process of its implementation certain
changes are going to take place. For example while implementing growth strategy there
could be shortage of resources because of limited sources or recession during the period so
retrenchment strategy should be considered.
CORPORATE LEVEL STRATEGY
Corporate level strategies are basically related to allocation of resources among the different
businesses of the firm, managing and nurturing portfolio of businesses etc. it helps to
exercise the choice of direction that an organization adopts. Corporate strategy typically fits
within three main categories- stability, growth, and retrenchment strategy. We will discuss
these three strategies in detail.
Corporate level strategies are principally about the decision related to dispersion of
resources among different businesses of an organization, transforming resources from one
set of business to others and managing and nurturing a portfolio of businesses such that the
overall corporate objectives are achieved.
1. Stability strategy:-
This strategy is adopted by the firm when it tries to hold on to their current position in the
market. It also attempts at incremental improvement of its performance by marginally
changing one or more of its businesses in terms of their respective customer group,
customer function and technologies either individually or collectively. it does not mean that
the firm don’t wants to have any growth. Its attempts are at the modest growth in the same
business line. For example any company offers a special service to a institutional buyers to
increase its sale by encouraging bulk buyer so it is companies strategy of stability by
improving market efficient.
2. Growth Strategy:-
This strategy is also known as expansion strategy. Here the attempts are made to have
substantial growth. This strategy will be pursued when firm increases its level of objectives
upward in a significant increment which is much higher as compared to its past
achievements.
To achieve higher target compared to past the firm may enter into new /introduces new
product lines, enter into additional market segment. it involves more risk and efforts as
compared to stability strategy. The growth strategy is divided into two parts namely
i) Internal growth strategy and
ii) External growth strategy.
Internal growth strategy mainly consists of diversification
strategies and
External growth strategy consists of merger, takeover, foreign collaboration and joint
venture.

42. The major objectives of adopting of growth strategies are –
i) Survival: - This is natural tendency of every business to grow. If it does not then new
entrants will be there in the market and its life will be in danger. Survival is also necessary
to face challenges of business environment.
ii) Innovation: - Innovation is important to business as it gives new product, new methods,
new schemes with which business can grow to a desirable extent. With this business gets
high performance, high results which are indication of growth.
iii) Motivation to employees: - growth strategy generates higher performance and it
enables the firm to motivate employees with monetary and non-monetary incentives.
iv) Customer satisfaction: - Growth strategy enables the firm to give more satisfaction by
providing good quality products at reasonable price.
v) Corporate image:- corporate image means creating good image of the organization in
the minds of the all stakeholders. This will be made possible only with growth strategies of
the firm as it gives quality goods to people, good return to investor, fair wages and salaries
to employees with its increased volume of output and enhance performance.
vi) Economies of scale: - Due to growth strategy there is increase demand to a products
which results in large scale production, which in turn brings economies of large scale. It
may be in saving labour cost or material cost.
vii) Efficiency:- Efficiency is the ratio of returns to costs. Due to growth strategy there is
innovation, up gradation of technology, training and development of employees and
research and development all these leads to improvement in output and reduction in cost
and increases profit.
vii) Optimum use of resources: - Due to growth strategy there is increased demand to a
product. This leads to large scale production and distribution. Therefore the firm can make
optimum use of resources.
viii) Expansion of business: - The growth strategy facilitates expansion to business unit.
Because the performance of business units improves in terms of sales, market share and
profit. Thereforethe business unit can move from its local level function to national or
international level.
ix) Minimize risk: - due to the expansion of business there is change in term of product
sales, market areas. In this case if business suffers a loss in one product or market then it
will be compensated in another market or product. Therefore the business will be minimize
the risk.
3. Intensification Strategy:
In intensification strategy, the business tries to grow within the existing businesses through
market penetration, market development and product development. Market penetration
means increasing current market’s sale by undertaking aggressive efforts like high
advertising, price cutting and sales promotion etc.

43. Market development means entering into new markets along with the current market. Here
business units undertakes market research, effective pricing policy, effective promotion mix
and distribution chain. And product development means introducing improved or
substitute’s product. It may be in the same market or
new market.
4. Diversification Strategy:
Diversification is one type of internal growth strategy. It is changing product or business
line. In this case business enters into in the new business service or product which is
extension of existing activity or there could be a substantial difference in skill technology
and knowledge. There are certain reasons because of
company go for diversification. The reasons are as under
a. Spreading of risk: - Diversification enables to spread the risk. In this the business
operates in a different markets where in one market business suffer a loss, that can be
compensated in other market and the levels of profit will be maintained.
b. Improves corporate image: - Corporate image is creating mental picture of the
company in the peoples mind. Through the diversification company as changes products
and knowledge gives better quality product and services with which it creates positive
impact on peoples mind.
c. Face competition effectively: - Due to the diversification company introduce wide range
of products and services. This enables company to maintain it’s a sale in the market.
d. Utilization of resources: - Diversification enables company to use the resources
optimally as it has excess capacity manufacturing. If facilities managerial man power and
other resources to production dept and other activities.
e. Economies of scale: - Diversification brings economies of scale especially in the area of
diversification. The company can combine the distribution old product as well as new
products with the help of same distribution chain.
f. Customer satisfaction: - When the company entered into new business it assured to give
qualitative product and good services. This leads to customer’s satisfaction.
g. Synergistic advantages: - Synergistic advantages are those which are gained by putting
little bit improvement in the same product or process which are related to old product and
gain new products. This will be easily attained in diversification
5. Turnaround Strategy:
Turnaround strategy means converting loss making unit into a profitable one. It is possible
when company restructure its business operations. it is broad in nature and including
divestment strategy (where business get out of certain activities or sell off certain units or
divisions) Its aim is to improve the declining sales, market share and profit because of high
cost of materials, lower price utilization for goods and services or increase competitions,
recession, managerial in efficiency.
The turnaround strategy is needed when the following situations arise in business. Namely:-
I) Liquidity problem

44. II) Fall in market share
III) Reduction in profit
IV) Under utilization of plant capacity
V) High inventory
6. Divestment Strategy:
Divestment is dropping out or sells off the products, or functions. It involves the sale or
liquidation of a portion of a business or major division or SUB. It is a part of rehabilitation
plan and his adopted when turnaround has been attempted but has
proven to be unsuccessful. There is certain reason for divestment
a. Withdrawal of obsolete products:- Those products which do not give adequate return to
the firm will be removed. And the products which are having good market share and
profitable will be continued.
b. Problem of Mismatch:- The business which is undertaken by the company is not
matching with the existing business line. Therefore the company may take initiative to gate
red of newly acquired business
c. Problem of competition:- Some times due to tough competition company may withdraw
some products from the market or sell the units producing such products.
d. Negative cash flows:- When business gets negative cash flows from a particular
business. The revenue collected from such a business is lower as the expenditure incurred
on it therefore it is to be divested
e. Technology Up-gradation:- Technology Up-gradation is important for survival of
business. But the cost of up-gradation is so high which is not affordable to business
therefore that business activity is to be divested
f. Concentration on Core Business:- When business undertake number of activities at a
time, then it may be difficult to the business to manage all activities satisfactorily. Due to
this business ignore its over activity which leads to loss in business therefore to concentrate
on core business divesting other
activities is essential.
g. Alternative for Investment: - Some time, by divesting certain activity company can
invest its blocked fund into some another investment alternative which will give good return
h. Returns to Shareholders: - Company, by divesting may increase shareholders return by
giving shareholder hefty dividend.
i. Attractive Offers from Other Firm: - Sometimes it happens company may get offer
from another company. To invest in a good return giving from company may divest current
activity.
7. Liquidation Strategy:
This is extreme case of divestment strategy and is undertaken in the situation when all the
efforts of reviving the company have come to an end. There is no possibility that the
business can made profit making unit again. In such situation business takes decision to sell

45. its entire business and the amount realized from it can be invested in another business.
When it is done it is known is liquidation. This is generally done by small businesses.
There are certain reasons because of the liquidation has taken place that reasons are –
i) When the business continuously suffered loss and all efforts have failed to make it
profitable again.
ii) When there is good offer from other businesses
iii) When business found that there are difficulties to deal with the present business
iv) When the business unit has taken over new business and the current business is not
coping with or matching and current business is not profitable
8. Modernization strategy:
Modernization is nothing but it is improvement/up-gradation of existing physical facilities
(plant, machinery, process etc) it is done to have improved quality of products and offer
customer value. It is also undertaken to face competition on proactive basis and take
competitive advantages. At present every firm is undertaking this on continuous basis to be
there in competitive business era and ensure its survival, growth and prosperity
It is to be noted that while doing modernization, it incurred a cost, so before introducing it
the firm must go through cost analysis and find out its impact in long term or short term
basis and then take decision.
However modernization has some advantages
i) Modernization can improve both product quality andand over all organizational
efficiency.
ii) There will be proper utilization of plant capacity, qualitative products will be produced
and there will be increase in sale.
iii) Modernization helps business to face competition in the market.
In fact, due to introduction of liberalization MNC, s and TNC,s are entering in market with
sophisticated technology and competing them is not a easy task to Indian business here
modernization helps.
iv) It also helps to build good corporate image in the market as good quality is the result of
modernization.
v) Modernization also leads to economy in production by reducing cost of production per
unit. This is because of reduction in wastages and increase in efficiency.
9. Merger Strategy:
Merger refers to combination of two or more companies where one company survives and
another company ceases to exist. The merger takes place for consideration. Here the
acquiring company pays it either in cash or its shares.
Advantages of Merger :
i) It enables the pooling of resources and streamlining of operations, thereby, resulting in
improved operational efficiencies.