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Himanshu Kapadia's The Employment Relationship: Crucial Challenges for HR


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Himanshu Kapadia's The Employment Relationship: Crucial Challenges for HR

  1. 1. “The Employment Relationship: Crucial Challenges for HR”Dynamic Business Environment:Today, we are living in the age of change and dynamism. The world as we know it is increasinglychanging at a faster pace defined by global competition, faster flow of information , easiercommunication & increasing complexity of business environment.With these rapid changes, new paradigms of business are constantly getting created, while the statusquo is continually challenged by forces of technological breakthroughs, economic growth, marketevolution, societal changes, shifts in consumer tastes and political events.Changing Employment Relationship:The pace and nature of changes in the environment in which businesses of today operate, the nature ofemployment relationship is undergoing fundamental changes. Reengineering, shifting marketdownsizing, and make other factors have contributed to rapid changes in existing jobs and creation ofnew ones. There are no rigid job definitions. Functional flexibility is the new rule of the game. Therole and composition of teams has expanded. Organisations are increasingly using temporary staffingand contractual labour as a means to mitigate the cyclical changes as well as manage costs andefficiencies.These changes have the following implications on Human Resource Management for bothorganizations and employees: 1. Companies no longer assure lifelong employment to their employees 2. Employees do not profess complete and lifelong loyalty to the employer. 3. A talented and committed human resource base is emerging as a source of great competitive advantage. 4. Increasing focus on HR practices & policies to retain and motivate the workforceThe companies need to invest in their human capital fully well knowing it could be their riskiestinvestment. Hence there are risk – mitigation / hedging methods in HR which are observed in recenttimes like the ‘Employment Bonds’ that are being used by the organisations as tools to minimise thepotential loss of a bad people investment.In this quest to win the ‘War for Talent’, employers often make promises that are likely to be met onlyif the pace of growth in the business continues steadily. However, the business realities of thedownturn in the recent past have shown us that growth may not be uninterrupted or steady all the
  2. 2. while and managing human resources may have to re-adjust to satisfy other stakeholders, particularlyshareholders, by cutting down on promises made earlier, as a consequence, the relationship betweenemployee & employer is impacted.Organizational Psychology is a subject which applies the principles of psychology to one of the mostimportant areas of people’s life – work. Specifically, with the human aspects of the workplace andaim at improving people’s efficiency, and hence organizational effectiveness, through the knowledgeof human behaviour.Employment Relationship in Future Organizations addresses the issues of change within employeerelationships resulting from the impact of factors such as:  International competitive pressures  technological change  Changing individual expectations and behavioursThe new employment contract is analysed from inside and outside organizations and the issues areaddressed from both a human resource management and work psychology perspective.Emerging Challenges for HR – Employment Relationship:  TrustValuing the employment relationship implies that both the parties viz. The employers & theemployees should value trust in the relationship. Employers should pay attention to buildingemployee’s trust in the organisation through transparency and management credibility. This meansclarifying what is on offer, meeting commitments, or when necessary, explaining what has gonewrong and monitoring employee attitudes from time to time. Non-fulfilment of perceived obligationsmay lead to disconnect. Congruence between what has been promised & what the employees receivefrom the organisation strengthens trust in the employment relationship.  Psychological ContractPsychological Contract between the employer and the employee involves the beliefs about theobligations that are predicted on the unstated perception that a promise has been made between thetwo stakeholders. Psychological contract is dynamic. It implies the inferences of the ‘Employee valueProposition’ as promoted by the organisation. It refers to the way the employment relationship isinterpreted. It helps build the people dimension into thinking about organisational strategy. Now, thepurpose of business strategies becomes how to get the best return from their employee’s energies,knowledge and creativity. Managing the favourable balance of this ever changing PsychologicalContract is going to be one of the biggest challenges for the HR practitioners going forward.
  3. 3.  Well BeingThe workforce today has matured beyond wanting only compensation at par. They demand more fromthe job – well being. The organisations today have also recognised that an employee’s emotional andphysical well being is essential for overall efficiency and maximum productivity of the employee.Hence a slew of measures will be required to be initiated by the HR Managers of tomorrow.  InformationOne of the cornerstones of any relationship is the openness of communication and the amount ofinformation sharing that is done in good faith. Employment relationship is no different. Organisationsgoing forward will have to design policies which enable them to seamlessly share relevantinformation on a continuous basis with their employees and engage them in the state of affairs fromtime to time as important stakeholders driving in a transparent and accessible environment.  FairnessAdopting fair practices and ensuring that there are no inherent bias that creeps into any of the HRrelated processes whether it is the recruitment, performance evaluation, compensation parity or evenfor that matter, facilitating the exit of an employee, there should be no room for any prejudice,preconceived mindsets and meritocracy should be the norm. This is a very difficult target to achieve,especially given that some of these processes rely on a great degree of an individualistic assessment ofthe situation. When fairness in process is religiously followed, it significantly reduces the employee –employer litigation matters. Any lapse in maintaining a stringent check on the fair and unbiasedtreatment can lead to the severing of an employment relationship.  InvolvementNumerous empirical studies over the years have shown that a positively engaged workforce is morelikely to be closer to their optimum performance. Intellectual stimulus and creating a challenging ancompelling environment for every employee’s involvement is going to be a great challenge for the HRManagers going forward. To keep up the morale of the workforce and to ensure that there are enoughopportunities create to differentiate the quality of internal talent pool, creating platforms for employeeinvolvement will be vital for maintaining a healthy employment relationship. In the absence of suchavailable platforms, boredom, monotony, lethargy and atrophy can easily creep in dislodging thebalance & harmony of the employment relationship
  4. 4. Consequences of Mismanagement of Employment Relationship:The problem occurs when the employee perceives that the organisation has failed to meet itsobligations towards the employees and vice versa. This is a cognitive experience when either of theparties forms judgements regarding the level of breach of the unstated psychological contractualrelationship.This perception not only leads to negative feelings about the unmet expectations associated withspecific promises, but also to more general feelings of organisational belongingness in term of notbeing mutually valued and respected. Such alienation in the minds of the employees would lead to thefollowing behavioural reactions:  Lack of commitment  Increased Absenteeism & tardiness  Frustration  Job Insecurity  DisengagementUltimately resulting in Voluntary Turnover / Attrition which eventually results in elevating peoplecosts to the organisation and lower productivity.Conclusion:This is a turbulent time for the HR managers. With increasing number of legal cases involvingemployees and the employer, mostly revolving around employments bonds, HR managers have astrategic role to play. From acquiring the right talent and designing perfect employment agreements tohelping the employees sustain or have a peaceful exit, HR managers have quite a lot on their plates.Organisations trying to improve the quality or efficiency of employee’s work can gain a great dealwhile taking into consideration the holistic view of the Employment Relationship from the point ofview of the employee and vice versa. Empathy from both sides is the key in this symbioticassociation.A strong organisational culture aligned with the vision and the strategy of the company can elicit thehighest performance and retention of the top talent thereby enabling the organisation to truly emergeas a great place to work in. Submitted by Himanshu Kapadia Welingkar Institute of Management Development & Research, Mumbai PGDM 2010 - 2012 | Batch 3 M: +91 - 98202 52331 | E-Mail:
  5. 5. References:  ‘Employment Relationship’ – by Archana Tyagi & Rakesh Kumar Agarwal – Indian Journal of Industrial Relations – Vol. 45, No. 3, January, 2010  Anderson, N & Schalk R (1998), “The Psychological Contract in Retrospect and Prospect” – Journal of Organisational Behaviour, 19:637-47  Blau, P.M. (1964), Exchange and Power in Social Life, New York, Wiley.  Mayer, R.C. Davis, JH & Schoorman F.D. (1995), “An Integrative Model of Organisational Trust”, Academy of Management Review, 20: 709-34  Organ, D.W. (1988), Organisational Citizenship Behaviour: The Good Soldier Syndrome, DC Heath & Company, Lexington, MA  “The War For Talent” - Steven Hankin of McKinsey & Company in 1997, by Ed Michaels, Helen Handfield-Jones, and Beth Axelrod, Harvard Business Press, 2001 ISBN 1578514592, ISBN 9781578514595.