Management Consulting/Human Resource Management
Dear Mr Lingham could you please help me with the following question?
1. How does effective performance management adds to an organization’s competitive edge.
2. What are the various methods available to an organization to measure performance
3. What are the two main strategies available to improve performance.
HERE IS SOME SOME USEFUL MATERIAL.
SOME ANSWERS HELD BACK DUE TO SPACE CONSTRAINT.
PLEASE FORWARD THESE BALANCE QUESTIONS TO MY EMAIL ID
I will send the balance asap.
1. How does effective performance management adds to an organization’s competitive edge.
SUSTAINABLE COMPETITIVE EDGE AND HR ROLE.
Sustainable competitive edge means the organization has
-overall cost leadership
1. To achieve the overall cost leadership, the organizational
-tight cost control
-frequent , detailed control reports
-structured organization and responsibilities
-incentives based on meeting strict quantitative targets.
1. To achieve the overall cost leadership, the required
-sustained capital investment
-process engineering skills
-intense supervision of labor
-products designed for ease of manufacture
-low cast distribution
2. To achieve the differentiation, the organizational requirements
-strong coordination among functions within in R & D,
product development, and marketing.
-measurement of quality
-system to bring in excellent talent.
-strong market share
-better known brands
-growing customer base
2. To achieve the differentiation, the required skills/resources
-strong capability in basic research
-strong partnership with distribution channels
-creative entreprenurial approach
1. To achieve the focus, the organizational requirements
-combination of the above mentioned policies directed at the
particular strategic target.
1. To achieve the focus , the required skills / resources
-combination of the above mentioned policies directed at the
particular strategic target.
TO ACHIEVE THE COMPETITIVE CAPABILITIES,
YOU NEED HUMAN RESOURCE COMPETENCE
-sustained capital investment [ finance experts]
-process engineering skills [ enginners]
-intense supervision of labor [ supervisors/ managers]
-products designed for ease of manufacture [ research /designers]
-low cast distribution [ distributors personnel]
-competitive capabilities [ human capital]
-strong abilities [ HR skills]
-product engineering [ product engineers]
-creative flair [ designers / artists ]
-strong capability in basic research [ research/development engineers]
-quality leadership [ leaders/ managers ]
-technology leadership [ senior engineers/ technocrats]
-strong partnership with distribution channels [ people collaboration]
-creative entreprenurial approach [ business minded managers]
-innovation capability [ creative people ]
Now you can see how human resources plays a critical part
in maintaining competitive edge.
Question: Discuss how the practices of human resource management can give an organization the competitive advantage, particularly in the area of recruitment, training and diversity management. Discuss the HRM theories, components of HRM, practices of HRM and which practices that gives an organization the "competitive advantage".
STRATEGIC HRM DEFINED
Strategic HRM is an approach to making decisions on the intentions and plans of the organization concerning the employment relationship and its recruitment, training, development, performance management, reward and employee relations strategies, policies and practices. The key characteristic of strategic HRM is that it is integrated.
HRM strategies are generally integrated vertically with the business strategy and horizontally with one another. The HRM strategies developed by a strategic HRM approach are essential components of the organization's business strategy.
Concerns of strategic HRM
Strategic HRM is concerned with the relationship between human resource management and strategic management in the firm. Strategic HRM refers to the overall direction the organization wishes to pursue in order to achieve its goals through people. It is argued that, because intellectual capital is a major source of competitive advantage, and in the last analysis it is people who implement the strategic plan, top managernent must take these key considerations fully into account in developing its corporate strategies. Strategic HRM is an integral part of those strategies.
Strategic HRM addresses broad organizational issues relating to organizational effectiveness and performance, changes in structure and culture, matching resources to future requirements, the development of distinctive capabilities, knowledge management and the management of change. It is concerned with both meeting human capital requirements and the development of process capabilities, that is, the ability to get things done effectively. Overall, it will consider any major people issues that affect or are affected by the strategic plan of the organization. 'The critical concerns of HRM such as choice of executive leadership and formation of positive patterns of labour relations, are strategic in any firm.'
The focus of strategic HRM
Strategic HRM focuses on actions that differentiate the firm from its competitors. It develops declarations of intent which define means to achieve ends, and it is concerned with the long term allocation of significant company resources, and with matching those resources and capabilities to the external environment. Strategy is a perspective on the way in which critical issues or success factors can be addressed, and strategic decisions aim to make a major and long term impact on the behaviour and success of the organization.
The meaning of strategic HRM
Strategic HRM has four meanings:
• the use of planning;
• a coherent approach to the design and management of personnel systems, based on an employment policy and manpower strategy, and often underpinned by a 'philosophy';
• matching HRM activities and policies to some explicit business strategy;
• seeing the people of the organization as a 'strategic resource' for the achievement of 'competitive advantage'.
AIMS OF STRATEGIC HRM
The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage. Its objective is to provide a sense of direction in an often turbulent environment, so that the business needs of the organization, and the individual and collective needs of its employees, can be met by the development and implementation of coherent and practical HR policies and programmes. Strategic HRM should provide unifying frameworks which are at once broad, contingency based
STRATEGIC HRM MODELS
There are three models: high performance management (high performance working), high commitment management and high involvement management. Within the framework of the concept of strategic HRM, these describe various approaches to its development and implementation.
High performance management
High performance working involves the development of a number of interrelated processes that together make an impact on the performance of the firm through its people in such areas as productivity, quality, levels of customer service, growth, profits, and ultimately the delivery of increased shareholder value. This is achieved by 'enhancing the skills and engaging the enthusiasm of employees' the starting point is leadership, vision and benchmarking to create a sense of momentum and direction. Progress must be measured constantly.
That the main drivers, support systems and culture are:
*decentralized, devolved decision making made by those closest to the customer so as constantly to renew and improve the offer to customers;
*development of people capacities through learning at all levels, with particular emphasis on self-management and team capabilities - to enable and support performance improvement and organizational potential;
*performance, operational and people management processes aligned to organizational objectives - to build trust, enthusiasm and commitment to the direction taken by the organization;
* fair treatment for those who leave the organization as it changes, and engagement with the needs of the community outside the organization - this is an important component of trust and commitment-based relationships both within and outside the organization.
High-performance management practices include rigorous recruitment and selection procedures, extensive and relevant training and management development activities, incentive pay systems and performance management processes.
The strategy may be expressed as a drive to develop a performance culture in an organization, and the following is an example of the performance strategy formulated recently by a large local authority:
The fundamental business need the strategy should meet is to develop and maintain a high performance culture. The characteristics of such a culture are:
*a clear line of sight exists between the strategic aims of the authority and those of its departments and its staff at all levels
*management defines what it requires in the shape of performance improvements, sets goals for success and monitors performance to ensure that the goals are achieved
*leadership from the top which engenders a shared belief in the importance of continuing improvement
*focus on promoting positive attitudes that result in a committed and motivated workforce
*performance management processes aligned to the authority's objectives to ensure that people are engaged in achieving agreed goals and standards
*capacities of people developed through learning at all levels to support performance improvement
*people provided with opportunities to make full use of their skills and abilities
*people valued and rewarded according to their contribution.
High commitment management
One of the defining characteristics of HRM is its emphasis on the importance of enhancing mutual commitment . High commitment management has been described as 'A form of management which is aimed at eliciting a commitment so that behaviour is primarily self-regulated rather than controlled by sanctions and pressures external to the individual, and relations within the organization are based on high levels of trust.'
The approaches to creating a high commitment organization are:
• the development of career ladders and emphasis on trainability and commitment as highly valued characteristics of employees at all levels in the organization;
• a high level of functional flexibility with the abandonment of potentially rigid job descriptions;
• the reduction of hierarchies and the ending of status differentials;
• a heavy reliance on team structure for disseminating information (team briefing), structuring work (team working) and problem solving (quality circles).
job design as something management consciously does in order to provide jobs that have a considerable level of intrinsic satisfaction;
• a policy of no compulsory lay-offs or redundancies and permanent employment guarantees, with the possible use of temporary workers to cushion fluctuations in the demand for labour;
• new forms of assessment and payment systems and, more specifically, merit pay and profit sharing;
• a high involvement of employees in the management of quality.
High involvement management
This approach involves treating employees as partners in the enterprise whose interests are respected and who have a voice on matters that concern them. It is concerned with communication and involvement. The aim is to create a climate in which there is a continuing dialogue between managers and the members of their teams in order to define expectations and share information on the organization's mission, values and objectives. This establishes mutual understanding of what is to be achieved and a framework for managing and developing people to ensure that it will be achieved.
Five high-involvement work practices have been identified:
• 'on-line' work teams;
• 'off-line' employee involvement activities and problem solving groups;
• job rotation;
• suggestion programmes;
• decentralization of quality efforts.
IMPLEMENTING HR STRATEGIES
Because strategies tend to be expressed as abstractions, they must be translated into
programmes with clearly stated objectives and deliverables. But getting strategies
into action is not easy. The term 'strategic HRM' has been devalued in some quarters;
sometimes it means no more than a few generalized ideas about HR policies, at other
times it describes a short term plan, for example to increase the retention rate of
graduates. It must be emphasized that HR strategies are not just programmes, policies, or plans concerning HR issues that the HR department happens to feel are important. Piecemeal initiatives do not constitute strategy.
The problem with strategic HRM is that too often, strategic intentions are not achieved in practice. As seen : 'One principal strand that has run through this entire notes is the disjunction between rhetoric and reality in the area of human resource management, between HRM theory and FIRM practice, between what the HR function says it is doing and how that practice is perceived by employees, and between what senior management believes to be the role of the HR function, and the role it actually plays.' The factors they identify that contribute to creating this gap include:
There is a tendency for employees in diverse organizations only to accept initiatives they perceive to be relevant to their own areas.
There is a tendency for long serving employees to cling to the status quo.
Complex or ambiguous initiatives may not be understood by employees or will be perceived differently by them, especially in large, diverse organizations.
It is more difficult to gain acceptance of non-routine initiatives.
Employees will be hostile to initiatives if they are believed to be in conflict with the organization's identity, as with downsizing in a culture of 'job for life'.
* The initiative is seen as a threat.
There are inconsistencies between corporate strategies and values.
The extent to which senior management is trusted.
The perceived fairness of the initiative.
The extent to which existing processes could help to embed the initiative.
A bureaucratic culture that leads to inertia.
Barriers to the implementation of HR strategies
The barriers that can be met by HR strategists when attempting to implement strategic initiatives often result from a failure to understand the strategic needs of the business, with the result that HR strategic initiatives are seen as irrelevant, even counter-productive. This problem is compounded if there has not been an adequate assessment of the environmental and cultural factors that affect the content of the strategies. III conceived and irrelevant initiatives, possibly because they are current fads or because there has been a badly digested analysis of best practice that does not fit the organization's requirements, will not help. Implementation will also be difficult if one initiative is taken in isolation without considering its implications on other areas of HR practice or trying to ensure that a coherent, holistic approach is adopted.
It will be very hard to implement anything if the practical problems of getting the initiative accepted by all concerned, including, importantly, top management have not been dealt with. Inability to achieve ownership among line managers, or to develop the skills they require to play their part in implementation, will be major obstacles. (The key role of line managers in making HR initiatives work is often underestimated.) It is also necessary to ensure that supporting processes for the initiative (such as performance management to support performance pay) and the financial and people resources required are available.
Overcoming the barriers
To overcome these barriers it is necessary to:
1. Conduct a rigorous initial analysis
. The initial analysis should cover business needs, corporate culture, and internal and external environmental factors. The framework could be a SWOT analysis of strengths, weaknesses, opportunities and threats facing the organization, or a PESTLE analysis (the political, economic, social, technological, legal and environmental contexts within which the organization operates).
2. Formulate strategy
. The formulation should set out the rationale for the strategy and spell out its aims, cost and benefits.
3. Gain support
. Particular care needs to be taken to obtain the support of top managers (for whom a business case must be prepared), line managers, employees generally and trade unions. This means communication of intentions and their rationale, and the involvement of interested parties in the formulation of strategic plans.
4. Assess barriers
. An assessment is required of potential barriers to implementation, especially those relating to indifference, hostility (resistance to change) and lack of supporting processes or resources. Unless and until a confident declaration can be made that the initiative will receive a reasonable degree of support (it could be too much to expect universal acclamation) and that the resources will be available, it is better not to plunge too quickly into implementation.
5. Manage change
. Change management processes should be used to gain acceptance for any new initiatives contained in the strategy. The important role of the HR function in managing change cannot be overestimated.
6. Prepare action plans
. These should spell out what is to be done, who does it and when it should be completed. A project plan is desirable which indicates the
stages of the implementation programme, the resources required at each stage, and the stage and final completion dates. The action plan should indicate the consultation, involvement, communication and training programmes that will be required. It should also state how progress will be monitored, and the criteria for measuring success against objectives.
7. Project manage implementation
. This should be conducted by reference to the action or project plan, and would involve monitoring progress and dealing with problems as they arise.
8. Follow up and evaluate
. Nothing can be taken for granted. It is essential to follow up and evaluate the results of the initiative. Follow-up can take place through interviews, focus groups, and desirably, attitude surveys. The evaluation should point the way to action in the form of amendments to the original proposals, the provision of supporting processes, additional support to line managers, intensified communication and training, or getting more resources.
Setting out the strategy
The following is an example of the headings under which a strategy and the plans for implementing it could be set out.
business needs in terms of the key elements of the business strategy;
- environmental factors and analysis (SWOT/PESTLE);
strengths, weaknesses, opportunities, threats.
- cultural factors - possible helps or hindrances to implementation.
• Content - details
of the proposed HR strategy.
• Rationale - the
business case for the strategy against the background of business needs and environmental/ cultural factors.
• Implementation plan:
- responsibility for each stage; - resources required;
- proposed arrangements for communication, consultation, involvement, training and change management;
- project management arrangements.
• Costs and benefits analysis - an
assessment of the resource implications of the plan (costs, people and facilities) and the benefits that will accrue, for the organization as a whole, for line managers and for individual employees. As far as possible these benefits should be quantified in terms of value added.
HRM AND HRD are outcomes of STRATEGIC HRM.
HRM includes [ you must be aware of it already ]
-recruitment / selection
-training / development
-compensation / benefits
-employee relations/ labor relations
-safety / health
HR DEVELOPMENT includes
-career planning /development.
CORPORATE HR STRATEGIC PLANNING.
In most companies, HRM is part of senior management.
HRM makes contribution to the development of
-corporate mission statement
Normally the senior management team or TOP management would
-ceo or managing director
-corporate planning manager
-supply chain manager
TOP management would
-evaluate the current [ last 12 months] performance against the
objectives / target set previously, which includes return on investment,
profitability , etc and also the performance of various departments
like marketing, sales, HR, manufacturing, etc etc.
STEP 1 [b]
TOP management will also evaluate the current mission,objectives,
strategies and policies.
STEP 2[a ]
CEO or MD will take the summary of the evaluation of the current
performance to the board for review.
STEP 2 [ b ]
Based on the review plus the external environmental factors,
the board will make decisions on
-new mission statement
-new corporate objectives
-new corporate governance
STEP 3 [ a ]
TOP management will scan and assess the company's
external environment --political/ economic/social/ technology.
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3 [ b ]
TOP management will scan and assess the company's
internal environment --structure/ culture/resources etc
to determine the strategic factors that pose as
OPPORTUNITIES / THREATS.
STEP 3[ c ]
TOP MANAGEMENT will analyze the the strengths / weaknesses
of the organization and pinpoint the problems areas that needs
attention and the strengths that could be exploited.
Based on the above analyses, TOP management will generate,
evaluate, and select the best strategic factors.
TOP management will review and revise [ if necessary ] the
mission statement and corporate objectives.
TOP management will generate and evaluate strategy alternatives
This final corporate mission statement, objectives and strategies
becomes the foundation information for the various departments
to work out their departmental objectives/strategies/plans.
After working out their respective objectives/strategies/plans
and the budgets , the departmental managers send their
respective information to the TOP management for
On receiving the approved package from the TOP management,
the departmental managers develop the implementation plan.
NOW you have mission/objectives/strategies/plans/budget/schedules.
IN case of HR, which is a department by itself,
This final corporate mission statement, objectives and strategies
becomes the foundation information for the HR department
to work out your departmental objectives/strategies/plans.
Discuss with the various other departments like sales/ production/
distribution/accounting/ IT etc about their requirements
Once you get their departmental requirements, HRM develops
-recruitment /selection plans / programs/ procedures/ priorities
-training plans / programs/ procedures/ priorities
-rewards plans / programs/ procedures/ priorities
-development plans / programs/ procedures/ priorities
-payroll plans / programs/ procedures/ priorities
- performance management plans / programs/ procedures/ priorities
-staff/organization communication plans / programs/ procedures/ priorities
BUSINESS PARTNER MODEL
PRIORITY AND FOCUS: Becoming more strategic and building strategic relationships.
DESCRIPTION: The model defines the basic role of HR into four areas (service delivery, employee commitment, change management and strategic actions); the business partner model is the next step in HR evolution after the traditional "personnel" or generalist’s model; the strategy is interpreted by many to emphasise strategic initiatives and to de-emphasise transactions; when it is effective, HR becomes more important and earns a seat at the executive table.
LIKELY STRATEGIC IMPACT: Moderate because the strong strategic relationships might not be enough to directly impact employee productivity or profit.
APPROPRIATE FOR: Medium and large businesses that need to move away from the "personnel" model.
ADVANTAGES/ BENEFITS: Strong interpersonal relationships and high visibility with executive management; fast response time to major corporate problems; smaller sized HR with lower headcount
DISADVANTAGES/RISKS: De-emphasis on transactions minimizes customer interactions; many HR professionals evolving from the personnel model may not be capable of becoming strategic; the emphasis on outsourcing may mean reduced HR headcount; the emphasis on corporate strategic issues can make the cadre of generalists feel "isolated" from corporate; the highly centralised corporate unit can become averse to taking risks and may evolve into a "meeting culture"; the minimal use of metrics makes it difficult to prove economic value during budget reductions; there is no emphasis on rewarding great people management
STRUCTURE AND ORGANISATION: The strategic elements of HR are centralised and while there are a moderate number of generalists, their responsibilities are generally non-strategic; this model generally has a top-heavy senior HR management staff.
LARGEST BUDGET/TIME ALLOCATION: Strategic consultants, high-level corporate HR staff, outsourcing, legal compliance.
LOWEST BUDGET/TIME ALLOCATION: Payroll, transactions, workforce planning, metrics.
LINE MANAGEMENT PARTICIPATION: Medium
USE OF TECHNOLOGY: Medium, mostly reliant upon standard enterprise suites.
BEFORE YOU GO INTO DEVELOPING HR STRATEGIES,
YOU SHOULD REVIEW ,
-company vision statement.
-company mission statement.
THEN YOU SHOULD ALIGN THE HR STRATEGIES
WITH THE COMPANY OBJECTIVES/ STRATEGIES.
WHILE DEVELOPING FUTURE HRM STRATEGIES, CONSIDER
1.Goals A firm’s goals should reflect its strategy and highlight the few unique circumstances that will affect its future most deeply.
2.Competitive Differentiation .In a competitive marketplace, winning requires that a business serve some set of customer needs better than its competitors. Differentiation is what gives a firm its competitive edge.
3.Customer Strategy . the adage that no two customers are exactly alike is especially apt. A firm’s competitive differentiation depends on its ability to fully meet the specific business and individual needs of certain customers. This makes the question “Who are our target clients?” both critical and complex.
4.Geographic Strategy .The strategic decisions surrounding a firm’s target clients are bound up in issues of geographic strategy as well as customer differentiation
5.Client Value Proposition .The true value proposition to the co's client is all-inclusive, encompassing both the comprehensive service they provide and the process with which they provide it. In addition, because it is the entire experience of working with a finance co. that matters to the client, the finance co. firm’s value proposition has a personal element as well. This personal value element is critical to the person using the financial service.
6. Business Line Strategy . One aspect of value proposition is identifying the lines of business in which the company engages .
7.Service Strategy .When clients purchase a service , it includes a certain level of attention as well as a particular kind of capability from the firm.
8.Pricing Strategy .How the firms price their services is a critical strategic issue for two reasons: it helps define the client value proposition (value at a price), and it drives the firm’s economics.
IF THE COMPANY OBJECTIVES WERE THEN,
• "EXPAND our customer base and enhance the franchise by pursuing multimedia opportunities.
• DELIVER an award-winning level of journalistic excellence, building public interest, trust and pride.
• PROVIDE vigorous community leadership and support.
• INSTILL an environment of internal and external excellence in customer service.
• EMPOWER and recognize each employee's unique contribution.
• ACHIEVE the highest standards of quality.
• IMPROVE financial strength and profitability."
HUMAN RESOURCES OBJECTIVES / STRATEGY
A Recruitment and Retention
HR Strategic objective: To recruit and retain staff of quality and
high quality support staff
-to develop a competency based recruitment / selection system.
DEVELOP AN ACTION PLAN.
B Reward and Recognition
HR STRATEGIC OBJECTIVE: To reward staff appropriately and selectively to aid
recruitment and retention
-to develop a system to pay market oriented/ pay for performance system.
DEVELOP AN ACTION PLAN.
C Training, Learning and Development
HR STRATEGIC OBJECTIVE: To enable all staff to reach full potential for the benefit
of the COMPANY and their own development
-to provide all employees a minimum of 4 days training annually.
DEVELOP AN ACTION PLAN.
D Equality, Diversity and Culture
HR Strategic objective: To value and recognise the diversity of the company staff; and to
attract a more diverse intake wherever possible
-to install a program to educate the employees the benefits
of diversity to the organization and to the employees.
DEVELOP AN ACTION PLAN.
E Action to tackle poor performance
HR STRATEGIC OBJECTIVE: TO ESTABLISH A SYSTEM TO MANAGE
THE POOR PERFORMANCE STAFF.
-to develop and implement the performance management system,
which will include 1] annual appraisal system 2] individual development plan.
DEVELOP AN ACTION PLAN.
F Staffing needs
HR STRATEGIC OBJECTIVE: TO ESTABLISH A SYSTEM TO
IDENTIFY THE STAFFING NEEDS FOR THE SHORT/LONG TERM NEEDS.
-to conduct an HR audit.
-to develop an HR PLANNING/ MANPOWER PLANNING.
DEVELOP AN ACTION PLAN.
HUMAN RESOURCE MANAGEMENT PRACTICES:
Human Resource is the most important asset for any organization and it is the source of achieving competitive advantage.
Managing human resources is very challenging as compared to
managing technology or capital and for its effective management,
organization requires effective HRM system. HRM system should be backed up by sound HRM practices.
HRM practices refer to organizational activities directed at managing the pool of
human resources and ensuring that the resources are employed towards the fulfillment of organizational goals.
HRM practices get affected by
external and internal factors and directly or indirectly affect other variables such as employee’s attitude, employee employer
relations, financial performance, employee productivity etc. and ultimately contribute to overall corporate performance
Human Resource Management Practices:
Human resources are the source of achieving
competitive advantage because of its capability to convert the other resources (money, machine, methods and material) in to output (product/service). The competitor can imitate other resources like technology and capital but the human resource are
It is important factors providing flexibility and adaptability to organizations. one needs to bear in mind that people (managers), not the firm, are the adaptive mechanism in determining how the firm will respond to the
that managing people is more difficult than managing technology or capital.
However those firms that have learnt
how to manage their human resources well would have an edge over others for a long time to come because acquiring and
deploying human resources effectively is cumbersome and takes much longer
The effective management of human resources requires sound Human Resource Management systems. defines HRM as a distinctive approach to employment
management which seeks to obtain competitive advantage developed showing how HRM practices leads to overall
A Comprehensive Review
through the deployment of a highly committed and skilled workforce, using an array of techniques.
HRM can help firms improve organizational behavior in such areas as staff commitment, competency and flexibility, which
in turn leads to improved staff performance .
In order to develop a sound HRM system , the organization should have effective Human Resource Management practices.HRM practices refer to organizational activities directed at managing the pool of human resources and ensuring that the resources are employed towards the fulfillment
of organizational goals .
HRM practices may differ from one organization to another and from one country to another.
The relationship between HRM practices and other important organizational variables is then presented including the HR best
practices of Indian companies.
Types of HRM Practices
Theories on best practices
or high commitment theories suggest that universally, certain HRM practices, either separately or in combination are associated
with improved organizational performance.
Researchers have also found that those well-paid, well motivated workers, working in an
atmosphere of mutuality and trust, generate higher productivity gains and lower unit costs
Several attempts have been made from time to time by different researchers to identify the type of HRM practices in different sectors.
the following seven practices:
1. Employment security
2. Selective hiring
3. Self-managed teams/team working
4. High compensation contingent on organizational performance
5. Extensive training
6. Reduction in status difference
7. Sharing information
identify an ‘HRM bundle’ of key practices which support service
organizations quality strategies, these being:
1. Careful recruitment and selection, for example, ‘total quality recruitment’, ‘zero defects recruitment’, ‘right
first time recruitment’.
2. Extensive remuneration systems, for example, bonuses
available for staff willing to be multi-skilled.
3. Team working and flexible job design, for example, encouraging a sense of cohesiveness and designing
4. Training and learning, for example, front line staff having enhanced interpersonal and social skills.
5. Employee involvement, for example, keeping employees
informed of key changes in the organization.
6. Performance appraisals with links to contingent reward systems, for example, gathering customer feedback to
recognize the work by employees over and above their
expected duties, which in turn is likely to lead to a bonus for staff.
They developed the 3cTER
Framework of HRM practices and identified Training and Development, Employer-Employee Relations, Recognition
through Rewards, Culture building, Career Development, Compensation and Benefits as important HRM Practices.
external and internal factors affecting HR practices differs significantly across countries.Some of the major potential
influences are as follows:
external factors affecting HR practices are those pressures on firms that cannot
be controlled and changed in a favorable way in the short run.
These factors include the following:
Economic Changes: found that as
a result of development of the global economy, the international
dimension of HR practices has become more and more significant
.The focus of HR practices has shifted from traditional topics such as internal selection and rewards to concepts such as
globalization and international competition.
Technological Changes: Technology affects HRM to a greater extent because of high degree of interaction between
technology and HR. Technology changes the way we work, the roles we undertake and the interactions through which work gets
technology facilitates the growth of a multinational enterprise but generates simultaneous problem of “unpluggedness” among a geographically dispersed workforce.
that technology lies at the heart of manufacturing industry. It provides a series of business advantages.
Technological developments alter the context of HR practices and the way they are implemented.
culture has crucial importance in organizations preferences in developing appropriate structure and methods for
HR practices affectivity.
Industry/Sector Characteristics: Organizations can be classified into manufacturing and service organizations for the purpose of analyzing the HRM practices. The idea behind this classification is the fact that different production processes
necessitates different HR practices.
Legislations /Regulations: Legislations and regulations
are frequently cited as having a direct impact on HR practices. Every country has developed a set of regulations for the management of human resources, so, the HRM practices have to be designed or modified according to
Actions of Competitors: There are many ways in which companies can gain a competitive edge or a lasting and sustained
advantage over their competitors, among them being the development of comprehensive human resource practices
Action of Unions:
The presence or absence of unions in organizations is a salient variable known to be associated with some HR.
Globalization : As a result of globalization, the whole world has become a single market, the companies have crossed the boundaries of their country of origin and opened their
operations in other countries. This has created a challenge for the organization in terms of management of human resources,
some companies have tried to transfer the HRM practices from one country to another but it has been found that some practices
can be transferred across nations almost without any change but some must be modified to become workable in another setting and some are more deeply culture-specific and may not always be transferable.
support the argument that multinational companies’ HRM practices are more prone to local cultural influences than are their
overall policies and strategies. Moreover, some of the practices which the company had imported from abroad had to be modified
to make them workable, given its local cultural and non-cultural contexts.
The Internal environment of organizations strongly affect their HR practices.
. The important internal
factors are as follows:
Organisations Size: evidence suggests that there is a large number of small firms that
do not institute formal HR practices in large organizations , fo each functional level there may a need for a different HR department
Organisational Structure: A firm’s strategy and structure are important in determining HR practices flexibility and
integration. There are important structural differences among firms
that affect the way in which HR practices are designed and implemented.
Business Strategy: To gain competitive advantage, firms use different competitive strategies .These strategies are more
productive when they are systematically liked with human resource management practices Companies can improve their environment
by making efficient choices about human resource practices that
consistently support their chosen strategy
Human Resource Strategy: HR strategy is an important determinant of both intensity and diversity of HR practices
. As a rule HR practices are shaped in
accordance with HR strategy.
History, Tradition and past practices: A number of closely related factors, such as history, traditions and past
practices tend to generate resistance to change in most organizations
Top Management: The influence of top management on HR practices is acknowledged by most writers, even if only
to the extent of advising that top managements support should
be present in designing and implementing HR policies.
Line Management: Line Management participation in designing and implementing HR activities is the key to organizational success. Since line managers are responsible for creating value, they should integrate HR practices in their work found
that organizational power and politics as exercised by various
constituencies are crucial determinants of HR practices.
Academic and Professional influence on HR Practices:
HR staffs are often involved in the decision making process about HR policies and practices. Their knowledge about
alternative HR practices may represent important variables in their own right .
Various models of HRM have been developed from time to time by different teams of the researchers. All these models
have helped the HR practitioner to effectively manage the human resources. Some of the important models have been discussed as
The Harvard model works as a strategic
map to guide all managers in their relations with employees and concentrates on the human or soft aspect of HRM. It strives at
employee commitment not control. It also works on the premise
that employees needed to be congruent, competent and cost effective.
The Michigan model focuses on
hard HRM. It holds that people should be managed like any other
resources and so obtained cheaply, used sparingly, developed and exploited fully. It also emphasised the interrelatedness of
HRM activities. According to this model, selection, appraisal, development and rewards were geared towards organizational
Guest comparative model works on the
premise that a set of integrated HRM practices will result to
superior individual and organisational performance. It advocates
a significant difference of HRM from PM. It holds that HRM strategies like differentiation, innovation, the focus on Quality
and cost reduction will lead to practices like better training appraisal, selection, rewards, job designs, involvement, and
security leading to more quality outcomes; commitment and flexibility. It will then affect performance in that productivity will
increase; innovation will be achieved as well as limited absences, labour turnover, conflict or customer complaints.
This model was developed by Hendry and Pettigrew at centre for strategy and change, Warwick University in
early 1990s. It emphasizes on analytical approach to HRM. It also recognizes the impact of the role of the personnel functions
on the human resource strategy content. The researcher focused
their research on mapping the context, identifying the inner
(organizational) and external (environmental) context.
HRM Practices and other Variables
HRM practice directly or indirectly affects several other variables in the organization. The following relationships have
been identified .
HRM Practices & Competitive Advantage
HRM practices help the organizations to achieve competitive advantage. According to the resource based view
of the firm (competitive advantage
can be developed and sustained by creating value in a way that is rare and difficult for competitors to imitate and the quality the
human resource within is difficult to imitate.
HRM Practices & Employee-Employer Relationship
Employee-employer relations can be made improved if the organization implements effective HRM practices.
The result of the study indicated a positive and significant influence of
empowerment, organizational communication and procedural justice as determinants of employees trust in their managers. The
result also indicated that procedural justice mediates the impact of employee development on their trust in their managers. The HRM practices help the organization to increase mutual understanding between the employees and the employer.
HRM Practices and Trust
employee trust in the whole organization is connected to perceptions of the fairness and functioning of HRM practices.
Such practices can therefore be used in order to build the impersonal dimension of Organizational trust
HRM Practices & Effective utilization of employees
Employees often perform below their potential. HRM practices may
have an influence on employee skills and motivation. HRM practices influence employee skills through the acquisition and
development of a firms human capital. Recruiting procedures and
selection regimes will have an influence over the quality and type of skills new employees possess.
HRM Practices & Service Quality
Researches provide evidence to show that HRM practices help the organization to improve the quality of services
There is the relationship among
human resource management practices, service behavior and service quality in the tourist hotels. The results indicated that
HRM practices had partially a direct effect on customer perceptions of service quality and an indirect effect through
employees’ service behavior. This means that service behavior only partially mediates the relationship between human resource
management practices and service quality.
HRM Practices and Employee Commitment
The implementation of HRM practices in the organization leads to enhanced employee commitment.
suggests that the district health officials do not share a strong emotional bond with their department. The state needs to reform
its Human Resource Management practices to effectively strengthen the functioning of the health system. The study also
suggests that investing in development of multiple strategies for the growth and career development of health professionals
in required. that in the separatist faculty decentralization, compensation,
training/development, positional tenure and career mobility have
significant effects. Age, organizational tenure, level of autonomy, working hours, social involvement and personal importance
significantly affect the employees’ organizational commitment in the hegemonist faculty. Participation, social interactions and
job level are factors that are important in both faculties.
The study also aimed at assessing how much of commitment in the two industries can be attributed to HRM
practices. HRM practices were found significantly different in two organizations and mean scores on various HRM practices
were found more in the fashion organization. Regression results showed that various HRM practices were significantly predicting
organizational commitment in both organizations and also when
they were combined. Performance appraisal and ‘attitudes towards HRM department’ were the significant predictors of organizational
commitment in both the organizations.In an another study,
impact of HR practices on permanent
employee’s organizational commitment and their intention to stay and found that organizational commitment was positively affected by person-organization fit, remuneration, recognition, and an
opportunity to undertake challenging employment assignments.
Intention to stay was significantly related to person-organization
fit, remuneration recognition, training and career development.
HRM Practices and Organizational Performance
HRM practices enhances organizational performance.
the relationship between
HRM practices, workplace climate and perceptions of organizational performance, in a large sample of Canadian nursing
homes and found that nursing homes, which had implemented
more ‘progressive’ HRM practices and which reported a workplace
climate that strongly valued employee participation, empowerment
and accountability tended to be perceived to generally perform
better on a number of valued organizational outcomes.
HRM systems affect organizational performance
.They found that hotel performance is positively associated with
hotel category and type of hotel and hotel performance is positively related to the HRM systems of recruitment and
selection, manpower planning ,job design ,training and development ,quality circle, and pay system.
it has been found that HRM practices contributes to the enhanced
banks performance. Further, the result indicated that HRM
practices like training, employee participation in decision making was found significantly related with banks performance. Further,
HR practices in a company does indeed have a major impact
towards a firm’s performance. The findings also show that HR
practices have an impact of nearly 50 percent on firm performance.
HRM Practices & Financial Performance
evaluate the link between systems of High Performance work practices and firm
performance and found that these practices have a statistically
significant impact on intermediate employee outcomes (turnover
and productivity) and short and long term measures of corporate
financial performance. examined the impact of HRM practices on firm profitability. They found that little support
for a positive relationship between HRM practices and firm profitability.
HRM practices can substantially help a firm perform better.
Further, different HRM practices for managerial and nonmanagerial
employees are found to be significantly related with firm performance.
examined SHRM (Strategic
Human Resource Management) practices in China to assess the
impact of these practices on firm performance and employee
relation climate and found that SHRM practices have direct and
positive effects on financial performance, operational
performance, and the employee relations climate.
HRM Practices and Employees Productivity
working in teams, greater discretion and autonomy in the
workplace and various employee involvement and pay schemes,
do motivate workers and generate higher labor productivity Employees’ involvement in
terms of delegation of responsibility and systems of collecting
proposals from employees may have a positive impact on
productivity . Cross functional teams,
job rotation, quality circles and integration of functions may all
contribute positively to labor productivity.
HRM activities providing informal and formal training as well as
recruitment and selection have also shown to have an impact on
productivity and market value
HRM practices (training, selection, career
planning, employee participation, job definition, compensation,
performance appraisal) were correlated positively with the
Human Resource Management Practices: A Comprehensive Review
employee performance. Further respondents gave highest
importance to performance appraisal and then to compensation
among individual HRM practices.
HRM Practices and Effective Management of Employees
the IT companies sampled, institute such HRM practices that
are complex in nature and a majority of the IT companies do
follow such HRM practices which can be termed as adaptive in
nature. They suggested that offering job plus education referral
recruitment, online and open house tests (in case of recruitment
& selection), flexible training choice, skills & project centric
training (in case of training & development) and lastly,
transparent appraisal systems, above average salary, more nonsalary
benefits, flexi timing and opportunity for growth are some
of the selective practices which, if followed with rigor, would
help managing enhance human resources of an IT company.
HRM Practices and Growth and Innovations
HRM has a more significant influence on growth / innovation
indices as opposed to financial performance.
examined the relationship between HRM, technology innovation
and performance in China and found that employee training,
immaterial motivation and process control have positive effects
on technological innovation, while material motivation and
outcome control have a negative influence on technological
innovation. It is also found that technological innovation is
positively related with performance.
HRM Practices & HRD Climate
It has been found that the HRM practices help the
organization to develop better HRD climate in the organization.
employee’s perception of HRD
practices, to explore whether ISO certification leads to any
improvement in HRD climate and examined the role of HRD
practices on employee’s developmental climate and quality
orientation in the organization. They found that ISO certified
companies obtained higher means on some HRD variables as
compared to others. Organizations with better learning, training
and development systems, reward and recognition, and
information systems promoted a favorable HRD climate. Quality
orientation was predicted by career planning, performance
guidance and development, role efficacy and reward and
HRM Practices and Technology
HRM practices and Technology affects each other. On
one side HRM practices affects implementation of the technology
because the success of information technology (IT) projects is
highly dependent upon the end-users’ behaviour. Whether endusers
are able and willing to work with newly introduced software
applications is fundamental. Hence, a key issue is supporting
targeted employees of newly introduced software applications in
their proper utilisation.HRM practices have the potential to
provide such support .
On the other side argued
that with the growth of information technology, much of the
administrative aspects of human resource management can be
accomplished through technology solutions hosted by the
company or outsourced. As technology frees up HR from some
of its routine tasks, there is a greater opportunity for HR
professionals to become a strategic partner
HRM Practices and Job Satisfaction
HRM practices also affect the level of job satisfaction
of the employees the
relationship between HRM practices and workers overall job
satisfaction and their satisfaction with pay. The result indicated
that several HRM practices raise workers overall job satisfaction
and their satisfaction with pay.
HRM Practices and Employees Intention to Leave
Employee turnover is a major challenge for the
organization but the companies implementing effective HRM
practices can reduce the rate of the employee turnover.
empirically evaluated six HR practices
(realistic job information, job analysis, work family balance, career
development, compensation and supervisor support) and their
likely impact on marketing executives intention to leave (MEIL)
The framework indicates how external and internal factors affect HRM practices and how these HRM practices
generate into certain benefits for the organization and ultimately
lead to overall corporate performance.
The review of various studies conducted on HRM practices shows that there are several factors in side and outside
the organization that affect HRM practices and the HR mangers should carefully analyze these factors while designing the HRM
practices. The following things should in particular be kept in
mind according to the findings of our literature survey.
1. Due consideration should be given to link the HRM
practices with the long term objectives and the strategies of the
2. The HRM practices should be evaluated from time to
time by conducting a survey among the employees and the
provisions should be made to incorporate changes from time to
3. The traditions of the organization and the past practices
should be kept in mind while designing and implementing HRM
4. The top management should provide fullest possible
support (financial as well as moral) to the HR department in
designing and implementing the HRM practices.
5. The HR managers should keep themselves up to date
with state of art HRM practices.
6. The HRM practices differ from one country to another
and from one organization to another, so due consideration
should be given to the organization and the country’s specific
7. The line managers should be involved in the process of
the design of the HRM practices because line managers are the
people who deal with the employees in their department and
they can provide valuable insights.
8. There is a need to critically examine the actions of the
competitors because it directly or indirectly affects the
9. The power centre and the politics that is prevailing in
the organization should be properly studied.
10. If trade unions exist in the organization, then the proper
opportunity of representation should be given to them.