LECTURE 12 – 15 : INVESTMENT PERSPECTIVE OF HR : WHY SHOULD

ORGANIZATIONS INVEST IN HR ?

The answer lies in the contribution of high performance work practices. Many studies have
shown the substantial economic benefits of adopting high-commitment or high-performance
work practices in contrast to conventional ‘scientific’ management typical of ‘modernist’
organizations. Often described as ‘Japanese” management practices, the case for implementing
such approaches is strong. The “assembly plants which had adopted flexible or lean
manufacturing methods and associated employment-relation practices far outperformed others
using mass production methods.

These high commitment work practices are characterized by

• Suggestion schemes, Quality Circles, Problem-solving groups or other forms of

employee participation in idea generation
• Employee participation in decision making
• Freedom of expression
• Extensive teamwork including self-managing teams
• Reformulation of work to make best use of upgraded skills.

Participation and involvement means that power shifts from middle managers to further down
the organizational hierarchy – those closest to the customer or the production process.
Companies operating such approaches include Levi Strauss, Motorola and Honeywell. What is
common about high performing companies in their agenda to create relationships with
employees which support their business objectives. Employee relations are therefore a priority
and ‘to push the execution of employee relations policies down to the lowest level possible,
compatible with t he organization’s overall values.’ Corporate values are most clearly visible in
reward policies which are sometimes used to instill specific values. Profit-related pay and share
ownership are obvious manifestations of value statements about the worth of the people to the
organization. Similarly, formal communication transmit values, through usually more is
understood by behavior of the people conveying the message then by the words used.
Despite the evidence from the organizations which practice Total Quality that these practices
work, diffusion seems to be slow. The main barrier appears to be that traditionally the focus of
management has been on the financial and strategic aspects of the business, rather than on
employee relations. Since high-commitment work practices require major up-front
investments, such as in training and higher rates of pay, a willingness to take risk that these
measures will pay off is required; and many management teams are risk averse. Political and
power barriers can get in the way of implementing high-commitment work practices.

How can HR help to implement high performance work practices?

I By creating a culture which is supportive of high performance

High performances does not occur in vacuum. The organization’s culture must be conductive to
productivity and the quality improvement.

II By influencing attitudes

HR professionals can be effective in bringing about change through their cross-organizational

influence, ability to design structures and processes which support the business strategy and
helping to create the culture changes through values and communication which supports new
ways of working. HR can help set up benchmarking visits to organizations which are achieving
outstanding results through people. Skillful use of data can stimulate the need for change
among

III By designing and implementing HR processes which support the business strategy

At a practical level to create the conditions for high performance, HR processes such as reward
systems need to be aligned to the new ways of working. The following HR processes are
typical of ‘vanguard’ companies described by O’toole:

 Highly selective recruitment

 Extensive training and skill development
 Contingent or performance-related pay , at high rates
 Employee share ownership
 Benefits tailored to individual needs
 Providing some degree of employment security
 Sharing information about a firm’ goals and results.

Performance management

Managing performances is perhaps the key responsibility of the line managers and an area
where a partnership between line and HR can be most beneficial. Hr can help managers to
understand how to define roles in the light of business drivers and how to identify the
capabilities required to do the job. The key performance indicators for each role should derive
from business drivers and are then built into role processes. This makes each job role
responsive to the changing business environment.

The four key elements of performance management are:

 A common understanding of the organizations goals
 Shared expectations of how individuals can contribute
 Employee with the skill and ability to meet expectations
 Individuals who are fully committed to the aims of the organization

In managing performances mangers should ensure that the employees are appropriately
focused into roles, developed and managed.

Job fit and job design – what role can HR play?

HR can develop assessment processes to ensure that the ‘right’ people are selected for roles.
HR can work with the line to develop self-assessment process. The pace of change is so fast
that job description, which create boundaries, are inappropriate. Important responsibilities fall
between the gaps and the most job descriptions are not current for more than few months. What
is needed is a broad role description, with some ‘fuzzy’ boundaries to allow for growth.
Dealing with poor performance

In some organizations, poor performance is handled by simply passing on the underperformer

to another department. HR needs to be able to support managers in understanding how they can
achieve high standards with slim resources. HR can provide valuable training and other
resources to ensure that managers have the skills to coach and develop other people, as well as
appraise performance.

Designing effective appraisal and development processes

Appraisal requires excellent interview and counseling skills if the process is to be motivating
for those involved. It relies on managers and employees having a relationship in which
discussing performance is not seen as a burden or a threat. Usually appraisal are taken only as
an administrative tool, thus there is no link between personal development and business
strategy. HR can help by designing processes which are user friendly and effective like, 360°
feedback.

Helping line managers to set appropriate measures

Success criteria should be such that makes a positive difference to the organization. While
measure undoubtedly send strong symbolic messages about what is valued, the question of
what is being measured and therefore considered important is increasingly be called into
question. Targets need to be set for the deliverables which are required but not at the expense
of how the deliverables are to be achieved. If measures are set around ‘soft’ targets such as
behavior, care must be taken that they are taken seriously and also understood well.

Reward Strategies

Since 1990’s the dynamic link between performance and reward has been a topic of debate.
The need of flexibility and cost effectiveness has lead to organizational restructuring of various
kinds; including flatter structures with their focus on teamwork, broader roles and non-
traditional work arrangements. Implementing a flatter structure is meaningless unless there is a
degree of consistency between what is expected of employees in terms of working practices
and systems, processes and the resources needed to do the job. All human resource systems
especially pay; need to reinforce the forms of skilled performance required of individuals.
However most of the companies believe in following the preferred model of paying market
rates alongside schemes that recognize individual short-term performance but not long term
development.

This is among the most challenging responsibility of human resource specialist, as there are
many factors to be taken into account before revising a compensation system to make it reflect
the diverse aspects of behavior, skills and experience which lead to the sort of performance
organization requires. Many organizations are experimenting with more flexible packages
which include elements of variable pay, linked to job performance, competence skill
development and desired team and leadership behavior.

The symbolic power of reward systems

Reward schemes are required to meet both the organizational need of managing its salary bill,
along side ensuring that it is getting good performance from its employees as well as the
employee is been appropriately recompensed for their efforts. Reward schemes carry enormous
symbolic significance for employees, as they are the powerful means of teaching employees
what is actually valued in the organization, as well as what is not. As such they have a greater
impact on employee attitudes and behavior than rhetoric or values statements which encourage,
team work.

In theory, reward schemes are designed to be motivating, offering appropriate incentives for,
and recognition of, desired performance. Whether schemes which focus exclusively on the
financial aspects of reward achieves this aim is open to debate.

The need to revise reward strategies

In an attempt to move towards the performance culture, many organizations have introduced
pay schemes which have intended to reflected performance in the job more than the job grade
itself. In these changing times, reward schemes quickly becomes sources of discontent. In
flatter structures in particular, there is often considerable pressure for reward system to be
revised. However, in traditional hierarchical structure, being promoted was the only way of
gaining status as well as earning more money or breaking through the ceiling for a grade. In
some organizations, eligibility for promotion was based on age and experience rather than
performance. In flatter structure where promotion is most unlikely, thus pay is obviously
performance based. There’s no perfect pay system, thus a good system should be customized
and tailored as per the need and the objective, rather than adopting any off-the shelf solution.

Performance-related pay

Incentive schemes and performance-related pay continues to provoke debate. However some
researches propagate the ineffectiveness of performance-based reward, recognition and
incentive systems on the following grounds:

There is no data to show long term benefits

They setup internal competition
Reward systems undermine teamwork and cooperation
They often reward those who are lucky and pass by those who are unlucky
They create cynic and losers

While devising such schemes care should be taken about their responsiveness to the business
drivers, the changing technology, the new skills needed and the fact in a new environment,
people need to perform on different parameters. In response to these business drivers some
basic questions need to be answered:

• What, for instance, are t he critical roles, task, skills, which should be rewarded?
• What are the new working practices that t he organization wishes to encourage?
• Will team working be more critical to achieving business goals than individual
performances?
• Is having one system the only way of thinking about the revised system?

Many organizations want people to be keen and willing to take on broader responsibilities,
learn new skills and develop wider competencies. In addition, technology is bringing about a
more fundamental change, switching the nature of the way work is carried out from directive
tasks to process-driven activities.

In some organizations only outputs are assessed for bonus purposes while in others inputs are
also taken into account. Typically, the new areas of providing incentives include ‘soft’ areas
such as making creative suggestions, receiving positive feedback from customers, team
working and demonstrating leadership. To support this approach there is usually an emphasis
on competencies and various feedback mechanisms are used.

Other trends……

I Competence-based pay (CBP)

Many organizations are experimenting with the competence-based pay (CBP), also known as
knowledge- or skill0based pay which takes the notion of performance-related pay in a
particular direction. CBP- works on the basis of rewarding the skills an individual possesses
and actually uses. The downside of such schemes of such schemes
That they tend to be very complex. The emphasis on individual competence can lead to a
failure to reflect sought after organizational business goals such as team working and quality.

II Team-based pay

It provides financial rewards to individual employees working within a formally established

team. Payments are linked to team performances or the achievement of agreed team objectives.
One of the drawback is that every scheme is unique, it’s not possible to adopt some broad
recommendations from other organizations, nor are such schemes easy to design or manage.
For effective success of such a scheme it necessary that team stands alone with the agreed
targets and standards, have autonomy, are composed of people whose work is interdependent,
are stable, are well established and make good use of complimentary skills. The three basic
elements of a team-based reward package (assuming that the basic pay is right) are:

1. The individual element, the basic salary but varied in relation to performance or
skills/competence.
2. A team element related to the achievement of team targets.
3. An organization element related to the business performance measured as a profit, or
added value.

According to Danny Chestennan, corporate development advisor at Kent County Council,

‘individuals should be rewarded for their contribution to teams, and the teams for the way they
develop individuals’.

III Flexible benefits

Given the way the work environment is changing, continuing to offer benefits that are based on
the ‘job-for-life’ assumption is unrealistic. The important thing is to find out how people
perceive their benefits and whether these are valued appropriate to both the company and the
employee needs. Items in this scheme include pensions, healthcare, childcare vouchers, annual
leave, life cover and dental insurance for employees and their partners. Further emphasize
should be there to ensure proper communication of these schemes by HR team.

How do people want to be rewarded?

The latest rewards techniques followed are as follows:

 Profit (gain) sharing

 Flexible benefit
 Bonuses payable
  Bonuses payable in terms of extra leaves rather than pay
 Bonuses payable towards prestigious qualification
 Long term incentives
 Deferred incentives
 Extending private health schemes to all employees and their families
 Longer holidays
 Sponsored holidays
 ‘Free” family holiday in company owned cottages
 Enhanced early retirement

Research suggests that intrinsic motivators such as the chance to do something worthwhile, to
have a development stretch, to increase job satisfaction are all as important as the financial
package and represent ‘psychological’ rewards.

IV Recognition

In many organizations the scope for modifying the reward system may appear limited.
Recognition schemes take on a special significance since they are a symbolic way of
reinforcing the ‘new’ behaviors and the performance needed in the organization.

LECTURE 16 –18 : INVESTMENT IN TRAINING AND DEVELOPMENT

Strategies for Training & Developing People

The workplace is being radically reshaped in a number of ways. People are now expected to
have a wide range of skills in areas such as customer relations, business awareness and
leadership. The impact of technology on people’s jobs is becoming ever more apparent, leading
to a growing importance attached to the soft skills as well as the ‘hard’. Peter Cochrane, head
of Research for BT and a well-known futurologist, suggests that ‘the future belongs to highly
skilled professionals working long hours on short contracts who won’t have time for the daily
life, which will create opportunities for others.’

In this period of rapid change, the need for employees to continuously update their skills, and
develop new ones, has never been greater. Paradoxically, the pace of change and the
demanding workloads of most employees act as a deterrent to conscious development.
Development strategies need to take into account the reality of most people’s working lives and
the fact that conventional training is only one way in which people can develop. Development
solutions can take many forms and strategies should ideally be as innovative as employees are
now required to be.

In creating a Development strategies, it is important as ever to start with where the business is
going and what that suggests in terms of the skills which will be needed. The Development
strategies should be guided by a vision and set of values. What is the philosophy which will
underpin development – do want people to be self sufficient or do u see development as a
partnership between the individual and th4e organization. Abroad philosophy can be
communicated to employees as it provides the rationale for the choice of elements in the
strategy

The question which Development strategies need to answer is how do we ensure that people
are developed to their full potential and maximum effectiveness?

Development needs to be focused on areas which are relevant to the individual and the
organization. One employee for instance might need a rapid injection of job related skills due
to a change in technology. Another may have reached the stage in his or her career when a
Development stretch, such as major new responsibility or an MBA programme might provide,
is required. While a Development strategy should be sufficiently flexible that it can adapt to
individual needs, organizational priorities may take precedence. This is where having a guiding
framework and criteria for decision making can be helpful.

In any Development strategy there are likely to be three areas of focus:

 • Organizational level – where corporate requirements such as induction, quality
improvements, leadership, customer care and culture change programmes are addressed
• Departmental business unit level – where job related training and development is likely
to take place
• Individual level – where people are usually motivated to close the gap between there
current and desired capabilities

It follows then that to ensure an optimum return on the time and other resources in
development that those activities are well targeted. Making a difference can be measured at a
number of levels. Donald Kirkpatrick’s evaluations framework suggests four levels –
1. Reactions - what do participants think about the activity at the time?
2. Learning how have skills, knowledge or attitudes improved as a result of the
activity?
3. Behavior – how does participants changed behaviors affect their constituents
example their work group?
4. Results – how do these improved behaviors, skills and knowledge translate into
bottom line impact?

NEED ANALYSIS
One way of finding out what is needed to carryout some form of development needs analysis
based on the existing work force there are many ways of doing this. Which includes surveys,
using existing data such as appraisal information, sampling of specific groups, bench marking
with “world class” organization to identify obvious gaps. The analysis should provide answers
to the questions:
• What is needed and why?
• Where is this needed?
• By whom?
• How will this best be provided?
• How m much will this cost?
• What will the expected return look like?
EVALUATION
Increasingly hard measures of the impact of development activities are required. Kirkpatrick
suggests the following guidelines to implementation when trying to assess the impact of the
training on business results:
• Use a control group
• Allow enough time for results to be achieved
• Measure both before and after training
• Repeat the ,measurement at appropriate time
• Consider the cost of evaluation versus the potential benefit
• Be satisfied with the evidence if absolute proof isn’t possible to attain

Marilyn Mc Dougall and Angela Mulvie carried out a study of how companies measure the
impact of HRM to bottom line. They found that many organizations make access to
management knowledge and skills available on a general basis to employees as a part of a
philosophy of continuous learning participants are therefore not expected to produce improved
bottom line results

PRIORITISING DEVELOPMENT NEEDS USING COMPETENCIES

The need to ensure that training and other forms of development are tailored to the business
requirements as well as to those of individuals evident in the wide spread use of competency
based development process. These should ensure that Development opportunities are targeted
to meet specific objectives for the relevant individuals. Some organizations are offering
managers 360 degree feedback based on a range of competencies.

Competencies can be used to develop self assessment questionnaires and other feedback
processes to ensure that individual needs are understood. Ensuring that development
opportunities are appropriately targeted may prove more difficult. It is useful to identify short
list of priority areas of management Development for the short, medium and long term. In the
medium term there may be significant merits in standardizing role description using
competencies to define the skilled component of each role. In the short term, management
Development effort may perhaps produce best effect when applied to specific business
objectives and particular groups or individuals according to relevant criteria such as:
Business needs
• The current short to medium term business strategy. If the current main business
priority is maintaining quality standard it may seem inappropriate to put effort into
change management and leadership.
• The biggest obstacle in terms of management skills or behavior to achieving the overall
business goals, i.e. does the lack of certain competencies prevent the organization from
maximizing opportunities or actually cause operating problems?
• The specific priorities of different business groups
• What managers would like to develop
• Cultural priorities
Building to strengths
Focusing Development on areas which people consider strengths may seem contradictory.
However there is reasonable amount of research evidence to suggest that people are
motivated to even higher levels of performance when they are working on areas in which
they feel they are effective.

Prioritizing resource allocation according to different development needs

How do the strengths and development needs of managers, high fliers and directors differ?
Roffey Park has carried out research into the effects of the changing workplace or
employees for a number of years. Two surveys carried out in 1998 highlight the needs
employees perceive with regard to the skills required to do their jobs. One survey, the
Management Agenda was completed by a cross-sector population of managers mainly
based in UK. The sample was a good mix of juniors, middle and senior managers as well as
people who were running their own companies. The other survey was a focused look at the
needs of high flyers in 400 organizations.
The survey asked both groups about their current skills and strengths. In both surveys, the
information supplied was a self assessment and may be viewed differently by people
reporting to the individuals surveyed. The top skills of the ‘Agenda’ group reflected the
broadly ‘people management’ aspects of their role and were as follows:
• Interpersonal
 • Communication
• Flexibility
• People management
• Organization/planning
• Analytical
• Motivational
• Leadership
• Coaching
The high flyers had a similar range of skills and strengths but there were some different
priorities in terms of job focus. For nearly half of this group, developing strategy is their key
priority with other responsibilities for managing a team, building and maintaining relationships
with clients and managing the financial side of the business. These priorities reflect the
business focus and direction setting so often associated with high flyers. Similarly, the
emphasis given to managing a team and managing relationships with clients suggests that
people related activities are important. However, the high flyer group as a whole placed little
priority on issues relating to customer satisfaction and quality management or training and
development.
Not surprisingly, the current skills and strengths of the high flyers reflected their priorities to a
large extent as follows:
• Communication
• Managing people
• Strategic thinking
• Interpersonal
• Business
• Financial
• Political
• Influencing
The survey asked both groups what they believed were the skills they needed to develop to
equip them for their current role (i.e. short term). The agenda group’s needs were as follows:
• Political/influencing skills
 • Strategic thinking skills
• IT skills
• Financial
• Entrepreneurial
• Leadership
• Business
• Change management
This group appears to be mainly in implementation roles, with an emphasis on raising or
maintaining quality. Ideally, these managers should have opportunities to improve processes
across their organization. Without making this overly complex, senior managers can improve
the efficiency of services while developing themselves at the same time. They may need help
in project management skills, including dealing with third parties s work is increasingly put out
to tender. The art of managing a flexible workforce is somewhat more challenging than
managing a directly managed staff.

Development needs of high flyers

The skills people felt would equip them for future success were diverse. The main areas were
as follows:
• Business
• Political/influencing
• Managing people
• Communication
• Leadership
• Interpersonal
Interestingly rather at odds with current management trends, this group does not see the ability
to coach and develop others as crucial to future success. This may reflect the pragmatic reality
that in many organizations promotion to senior positions has not depended on a manager being
an effective ‘people person’. However as many organizations are attempting to integrate
culture change objectives with succession planning, this may change. A number of the
organizations are now screening candidates for senior roles on the basis of how they
demonstrate leadership behaviors.
Supporting manager’s development
1. Creating a self-development culture
Development should be seen as primarily the individual’s responsibility but encouraged
and supported by the organization. A newsletter which regularly focuses on development
achievements will convey the message that development is taken seriously, especially when
directors contribute. Similarly, where people set themselves development targets they
should be encouraged to identify the organizational benefits (including bottom line) of what
they are planning to do. That way, people’s development can be more clearly understood
and celebrated in terms of its contribution to organizational effectiveness.
In the medium term, reward systems should be enhanced and reflect people development.
Managers should be rewarded on the achievement of people development targets and
individuals should ideally be offered a small bonus or a slightly higher salary if their
improved skills enhance their contribution. The appraisal scheme can be supplemented, if
this has not yet happened, with a development planning process. This again calls upon line
managers to be willing and able to hold development discussions with individuals.
2. Enabling development through competencies
People should be encouraged to move jobs around the organization, acquiring different forms
of experience. Competencies can be helpful in facilitating this process in that job requirements
can be defined in ways which enable people to undertake a realistic self-assessment. Job
profiles can be updated and specific technical competencies defined. This way, a data bank of
people requiring specific forms of development can be matched against available options.
There may also be opportunities for job swaps and secondments if resourcing is a problem. The
increased mobility of staff can also be supported by greater awareness of the roles of different
business groups. This can be encouraged by briefings hosted by different business groups at
their workplace.

Methods of learning on the job

1. On the job
It seems that most senior managers learn best by experience. On the job learning is
therefore likely to be the primary source of development. Given the importance of this form
of learning, it is essential that managers are able to support people with their development
as well as their current performance.
2. Training
Training can be helpful for both awareness raising and skills development. There are clear
benefits, for instance, in raising senior managers’ awareness of the strategic issues for their
organization through briefings and networks. The majority of managers, however, consider
that most of their development took place on the job, or outside work.
3. Mentoring and coaching
In many organizations, tools are now provided to encourage self development, including
the use of development centers and resource learning centers.
Many organizations such as British-American tobacco, have trained managers in coaching
skills and the trend towards the ‘line manager as developer’ is well established. In some
companies, managers’ ability to help others to develop is now taken into account when
bonuses are being allocated. Learning groups are increasingly being used in a number of
organizations such as ICL and the former Glaxo-Wellcome. These can enable individual
needs to be met in work context.
Some organizations are introducing peer mentoring to address both organizational needs
for teamwork and greater collaboration and individual needs for support. Peer mentoring
involves two, three or more individuals agreeing to have development relationship with one
another. This is primarily a development relationship with the clear purpose of supporting
individuals to achieve their job objectives. HR can help such relationships to be established
through creating a mechanism whereby peers can identify likely peer ‘resources’. Often
this is through the use of a database on which information is stored about people who have
specific expertise and are willing to act as peer mentors. These can be matched against
people who express specific needs.
4. Learning opportunities using computers
Many pundits predict a huge growth in on-line learning in next few years. This is driven by
shortage of time to attend training and the increasingly global spread of organizations
which make training solutions costly. Research by the Chartered Institute of Personnel and
Development (1999) found that only one quarter of organizations used the internet or
intranet for training and development, but forecast that there would be a 70 percent
increase in the early years of the millennium. Similarly, CD-ROM usage is expected to
grow by 60% as per the respondents in the CIPD survey.

Development
Development is a process of enhancing an individual’s present and future effectiveness. In
the present case, we are viewing effectiveness in the context of the employee’s career. And
by career we mean, the individually perceived sequence of attitudes and behaviors
associated with work-related experiences over the space of person’s life. Thus development
in the career entails changing both perceptions and behavior (or skills).
More specifically, the targets of development are the four outcomes that measure career
effectiveness: performance, attitudes, identity and adaptability. These outcomes can be
broken down by time-frame and locus of concern, as shown in the following figure:
Performance and attitudes focus on the short term: attainment of present work goals and
present feelings about the career, such as involvement commitment and conflict.
Adaptability is the extent to which the person is preparing to meet future career demands.
Identity is a measure of the congruence of integration of the person’s self-perceptions
overtime (i.e., a measure of how the person sees the parts of the career fitting together or
“making sense”). Any activity that enhances one or more of these four career outcomes
constitutes development. Training, coaching, increased effort and self-improvement to
increase job performance are development. Socialization, job experiences, counseling, peer
interactions and other activities that alter or clarify career attitudes are development. Job
assignments, education and other learning that broadens the person’s skills and abilities
enhances adaptability and thus also development. And finally self-examination, self-
assessment, feedback, counseling and other activities that clarify and focus self-identity are
also development. Too often, however, organizations define development as working only
on the top left-hand corner on short-term, task-related skills. Too seldom are attitudes,
adaptability and identity the focus of plans for development.
In addition to considering the four career outcomes as goals of developmental activities, we
can also examine various strategies for attaining these goals. In their review of
organizational training and development processes, Wexley and Latham propose certain
basic developmental strategies that organizations use. The first strategy is cognitive and is
conceived with altering thoughts and ideas. The second is behavioral, entailing the attempt
to change behavior directly. And the third is environmental and consists of interventions
aimed at immediate work environment of the individual.
If we combine the career goals and these three basic strategies, we obtain a matrix of
possible combinations of development strategies aimed at particular career outcomes, as
 shown in the table. (Since the performance category is so important, it has been subdivided
into technical, interpersonal and conceptual skills.) The specific activities listed are not
meant to be exhaustive and some cells may represent somewhat incompatible combinations
(e.g. cognitive approaches to developing interpersonal skills). Furthermore, several
activities are found in more than one cell, as a given activity can produce multiple
outcomes.
Conclusion
The need for employee at all levels to be involved in ongoing development – of new skills,
exposure to new experiences and learning to learn - is apparent. HR can work towards
creating a culture in which learning is valued and supported, and where the enhanced skills
of the individual are put to good use. In such a development culture the pressure to measure
a return on every development activity maybe less strong than in a culture which believes
that any offline activity is a cost. Individuals can take responsibility for managing their
development. After all, it is in their interest to do so, but the organization can help ‘kick-
start’ the process by providing people with the opportunity to understand what to develop
and how.
Ironically, pressure of work in some cases is so strong on the company ethos so ‘macho’
that people are always prepared to learn, especially through training. Various innovative
approaches such as ‘just-in-time’ training, using on-line resources, can help, but sometimes
the best form of development is when individual take themselves to a residential training
programme and make time to reflect. Senior managers in particular are important role
models in both leaning and valuing learning. They set the tone and need to be willing to
exercise some old fashioned command and control with regard to development.
Encouraging people to prioritize development, whose returns to the business may not be
immediate, over short-term business demands, at least occasionally, may well produce
larger returns in the long run.

LECTURE 19 – 22 : NON TRADITIONAL INVESTMENT APPROACHES :

INVESTMENT IN DISABLED EMPLOYEES
Before we move on to the core of the issue, we must define what disability or being disabled
means

“Someone who is disabled has an illness, injury or condition that tends to restrict the way they
live their life, especially by making it difficult for them to move about.”

Thus, the employee, who is working for the organization, will be termed disabled if he/she is
suffering from an injury or illness which affects or restricts them from performing their job
effectively. There can be two types of disabled employees

I. Disabled - while employed : i.e. the person was fit and sound during the start of
employment relationship, however, during the tenure of his/her service he turned
disable, which can be either:

a) On-the-job: This is during the work hours while working at premises.

b) Off-the-job: This is not at work premises, but surely after the start of
employment relationship.

II. Disabled - prior to employment: Here the employer is well aware of the disability yet
employ the person for the job.

I Disabled – while employed: There can be short- and long-term disability (STD and
LTD).While dealing with such a case the employer must follow the following procedure.

The Interactive Process, whereby through an informal open discussion with the disabled
employee, the precise job related limitation imposed by the employee's disability are being
realized and how those limitations could be overcome with a reasonable accommodation. Even
if the department's ability to accommodate the employee's disability seems doubtful, the
department must still conduct a good-faith interactive process.

There are four levels of possible accommodation:

 1. Job Accommodation: Modification of job duties, job environment and/or work
schedule.
2. Modified Work: Lateral transfer into an existing position for which employee is
qualified.
3. Transferable Skills: Transfer to "demoted" position or position of lesser
terms/conditions ("last resort accommodation.").
4. Alternate Work: However, consideration should be given to his present salary
and the distance of the new work place from his residence.

Consider the preference of the individual to be accommodated and select and implement the
accommodation that is most appropriate for both the employee and the employer. The
employer should not accommodate the employee in case:

1. The disabled employee cannot perform the essential functions of the job; and that no
reasonable accommodation exists.
2. The person would create an imminent and substantial danger to him/her self or to others
by performing the job; and there is no way to remove or reduce the danger.

In such a scenario employer may use medical separation and also appoint a rehabilitation
counselor for the disabled employee.

II Disabled prior to employment: There could be any form of disability namely

i) Mental health
ii) Physical Disability
iii) Learning Disability

which the employer is aware of prior to employment. But still considers their employment as a
part of social responsibility, alongside trusting their capability to perform the task fit for them.

The trend of employing disabled as well as keeping provisions for employees disabled after
employment is gaining momentum which can be due to:

i) Realization of social responsibility by employers.

ii) Government intervention
 iii) Trade benefit schemes, tax benefits etc.

Reasons for this change

Disability Confident employers will have access to a wider talent pool. Technological
developments and increasing use of flexible working mean that organisations are able to create
enabling environments where more disabled people can contribute to business success.

Engaging with potential employees (disabled)

• Attracting talented disabled candidates can be problematic. Experience of leading

employers suggests that multiple (project based) recruitment tends to attract more
disabled candidates than single-post advertising.
• Employer needs to build a brand which symbolize welcome and fair treatment.
• Consider offering work experience and internship opportunities to disabled people.
• Sector based initiatives can help to change people's views of working in a particular
industry.

Take for example, in ITES sector companies like Hero Ites, a part of Munjal group, openly
mentions the special invitation to disabled in it’s employment advertisement.

Similarly there’s a lot of potential to hire these people in the sunrise sectors like banking,
software,etc though companies like Satyam, Infosys… have taken initiative yet lot has to be
done. Considering high staff turnover and an acute shortage of skilled workforce, qualified
technical people who are disabled can be good alternative. Unfortunately when it comes to
recruitment, employers tend to look the other way if the job candidate is a person with
disability. Top of the charts in the IT job market include vacancies for software developers,
programmers, web designers, database and system administrators, graphic artists and system
analysts.

But still the percentage of disabled employees is very low. Most employers are reluctant to
employ the disabled because of concerns regarding safety regulations, the need to modify
premises such as installing ramps, disabled-friendly toilets and extra medical costs.
Even if they are employed, the system that is being followed in the organization does not work
in their favour. There is, however, concern that some management practices, even those
imposed without prejudice on all employees, might have a disparate effect on the health and
performance of some disabled employees.

With the advancement in technology, the potential of these employees can be enhanced to a
higher level. For example, speech device can be used as a tool to support the person who is
verbally impaired. Similarly, visually disabled can convey through special computers. Thus we
need such things along with training for the disabled employees as well as the normal
employees to help them adjust to the changes, and their differently-abled employees. Though,
this may seem as an investment but the benefits are far reached and rewarding. Return on
investment is far greater considering people with disabilities tend to be appreciative and loyal
employees, because they have difficulties finding jobs. Their commitment to work has to do
with their self-esteem. This notion of work, as a prideful activity, is something they definitely
feel.

Cost to keep disabled employee (employed)

Employers experience multiple direct and indirect benefits such as retaining qualified
employees, considering

i) the cost of training the new employee

ii) productivity of retained employee is higher
iii) cost of accommodation is lower than inducting new employee
iv) Employers want to retain valued and qualified employees.

There are lot many industries which have a scope of employing disabled employee. its just the
initiative which is required, considering Titan, Tata group which is one of the world's largest
timepiece manufacturers started introducing disabled employees to it’s facility since 80’s .
"Titan was clear that these people are an intrinsic part of our society and need understanding,
support and opportunities, not charity or misplaced compassion," says Mamatha Bhat. Thus,
the capable candidates of 18 -24 yrs were adopted and proper measures were taken to get them
into main stream, like

i) ergonomically designed workspaces

ii) training to enhance technical competence
iii) non-discriminating policies, effective grievance handling, counseling etc.

With time, Titan has realized that the disabled members of its family are more loyal and far
more focused on the job. Despite the physical shortcomings of these employees, productivity
and quality had never been an issue. Titan's children of a lesser god
are no longer classified as disabled, merely 'differently-abled'.

Thus, such an investment is worth not only for it’s return in terms of loyalty earned. But,
employers should consider their responsibility towards the society and help in making these
people self dependent and getting them into the main stream.

EMPLOYEE ASSISTANCE PROGRAMMES (EAPs)

EAPS are used to make professional help available to the employees. Typical EAPS offer
assistance to employees in such areas as alcoholism, drug abuse, emotional stress, family
problems and financial indebtedness.

Although research findings tend to vary, it is believed that EAPs are valuable contributors to
both employees and employers.

First of all, giving employee assistance is simply the right thing to do from the standpoint of
humanity, and there are some cost-benefit arguments in favor of EAPS. Certainly, the
resolution of personal problems tends to make the employee a more effective contributor to
employer objectives. That is, money spent on abating alcoholism among the workforce is
perceived to be cheaper than money spent on ineffective performance, lost time, illness and
death on the part of employees suffering from the disease of alcoholism.
Characteristics of an effective EAP

 The EAP should be staffed with competent professionals who respond to employee
problems with empathy and who know what services are available in the local community.

 The EAP should be accessible to all employees 24-hours a day, seven days a week.

 The EAP should be advertised to all employees so that all are aware of the program.

 The EAP should be available to all employees and their dependents.

 The EAP must guarantee complete confidentiality.

 The EAP staff members should be willing to meet at any location where the employee or
dependent feels comfortable.

LECTURE 23 – 24 : IMPORTANCE OF HUMAN RESOURCES TO

STRATEGY
The field of Human Resource Management (HRM) has recently seen the human resources that
it selects, trains, and retains move from a supportive to a strategic role in organizations. This
occurred because in Strategic Management sources of competitive advantage were no longer
sought in the external, but in the internal environment of a firm, namely in its resources,
particularly its human ones. Accordingly the field of HRM reconsidered its own role, resulting
in the emergence of a new distinct discipline termed Strategic Human Resource Management
(SHRM). It intended to link HRM with the strategic management process of the organization

A shift in thinking in Strategic Management about the location of sources of competitive

advantage has put the spot light on human resources as the strategic resource in a firm.
Initially, sources of competitive advantage were sought outside of the firm, i.e. in a superior
positioning of a firm in attractive markets and keeping contenders out. In this view, the role of
the human resources was one of implementation and support. More recently a new school of
thought, called the resource-based view of the firm argued instead that the source of
competitive advantage lies within the firm, in unique resources that cannot be imitated by
competitors. Because these resources, capabilities, and competencies are dependent on people
and in the case of capabilities and competencies located in the minds of people human
resources are deemed valuable if not the "the key strategic resource". This shift in Strategic
Management has elevated the role of human resources from a supportive to a strategic one

In light of this elevated status for human resources in the Strategic Management field, many
have reasoned that the HRM function had acquired a new strategic role as well. Bartlett and
Ghoshal (2002) explain that rather than being supportive - by focusing on recruiting, training,
and taking care of benefits - HRM's role became strategic: building and using human capital to
ensure competitive advantage. The notion of the HRM function being strategic is embodied in
the distinct field (Dyer, 1985; Dyer and Holder, 1988; Fisher, 1989; Schuler and Jackson,
1987) of Strategic Human Resource Management (SHRM). Rather than being supportive it
consists of (1) "linking [HRM] with the strategic management process of the organization," and
(2) "emphasizes the coordination or congruence among the various human resource
management practices (Wright and McMahan, 298)." In other words, rather than executing
strategy formulated by others, it attempts to be involved in the formulation of the strategy.
These attempts consist amongst others of (1) use of the label 'strategic,' (2) linking role
behaviors to strategy types, (3) linking competency profiles to core competencies, (4) using HR
measures to justify performance contribution, (5) adapting strategy tools to encompass the
HRM function.

Human capital has long been held to be a critical resource in most firms. Human resource
management (HRM) is one of the principal mechanisms by which managers integrate the
actions of individuals to keep their behavior congruent with the interests of the firm. Business
leaders now recognize that the human resource (HR) function has a direct impact on bottom
line results and must be aligned with corporate goals. Both academics and practitioners agree
that as the dynamics of competition accelerate, people are perhaps the only truly sustainable
source of competitive advantage. Therefore, effective management of human capital may be
the ultimate determinant of organizational performance.
Rather than focusing on particular HR practices that are used in isolation, strategic human
resource management (SHRM) researchers look more broadly at bundles of HR practices that
are implemented in combination. SHRM researchers have established a broader perspective
that is oriented toward managing the workforce as a whole since the era of SHRM was ushered
decades ago. Since that time, behavioral perspective has emerged as the predominate paradigm
for the research (Fisher, 1989; Schuler, 1989; Snell, 1992). According to behavioral
perspective, different strategies require different behaviors and different HRM practices to
elicit and reinforce those behaviors. This view of the link between strategy and HRM provides
a clear explanation for why such management should be linked to strategy. To date, a growing
body of empirical evidence supports this perspective.

HRM has evolved over the years from a disjointed collection of employment practices. If we
are to develop a more parsimonious depiction of the field as a whole, an overarching construct
is needed to describe how particular patterns of practice fit together. Control is an important - if
sometimes neglected - facet of organizational design. In the past, the construct of control has
been used as a lens for combining HRM practices. A control perspective is consistent with the
behavioral perspective in many ways; for instance, control systems mold the emergent
behavior. Accordingly, this study used the concept of control to integrate HRM practices and
place them in the strategic context of firms.

Strategies are only a means toward an end. According to contingency theory, a close link exists
between business strategy and HRM methods. This theory holds that HRM methods are
determined by the type of business strategy a firm follows. It moreover assumes that the
companies that closely coordinate their business strategy and HRM practices achieve better
performance than the companies that do not. To date, there is an extensive research exploring
the links between competitive strategy and HRM strategy. However, one of the areas that is
conspicuous by its absence is, based on control perspective, the links between HRM control
and business strategy, and their effects on performance. Further effort is needed to direct
toward closing the gap.

The focus in this study is on the performance effects of HRM control and interaction of
business strategy with HRM control. As such, this research contributes to knowledge about the
effects of HRM control on firm performance and, importantly, illuminates how HRM control
moderates the relationship between business strategy and firm performance.

LECTURE 25 – 27 : BUSINESS STRATEGY : THEORETICAL OVERVIEW

Business strategy determines the direction in which the enterprise is going within its
environment in order to achieve sustainable competitive advantage. Strategy is a declaration of
intent, which is concerned, with the long-term allocation of significant company resources. It is
a means of addressing critical issues or success factors at level of the business as a whole or an
aspect of it.
Thus, strategic decisions aim to make a major and long-term impact on the behavior of the
organization.

Business objectives, plans, financial projections, target for shareholder value or key result areas
(KRAs) are the outcomes or expressions of strategy.

LEVELS OF BUSINESS STRATEGY

♦ Corporate level
Strategy is likely to be concerned in general with the composition and performance of the
portfolio of businesses that make up a company.

In particular, corporate strategy is concerned with: -

 The company’s mission
 The cohesiveness of that portfolio
 Mergers, acquisitions and divestment
 The ethos of how to manage and control the business.
♦ Business unit strategy
Strategy is concerned mainly with answering the question ‘where and how are we going to
compete in order to earn sustained high returns?’
This means making decisions on the business can develop superior effectiveness, a superior
cost position and superior quality, coupled with the ability to meet customer’s real needs.

It puts corporate strategy into effect at the competitive level and refers to definition of the
business, growth and profitability objectives, product/market scope, marketing approach and
competitive position.

DEVELOPMENT OF BUSINESS STRATEGY

It is generally assumed that strategy formulation is an analytical, systematic and rigorous

process. But this is not necessarily so.

According to Mintzberg, strategy formulation is not necessarily a rational and continuous

process. He believes that, rather than being consciously and systematically developed, strategy
reorientation happen in brief quantum leaps. Strategies are not always deliberate. In theory,
strategy is a systematic process. ‘First we think, then we act. We formulate then we implement’

In practice, ‘a realized strategy can emerge in response to an evolving situation.

Analysis of the concept of business strategy as a basis for HR strategy has to take into account
not only the different levels and styles of strategy but also of the diversity of ways in which
strategy is formed.

ARTICULATING BUSINESS STRATEGIES

Business strategies are not necessarily expressed in writing, although there are advantages in
doing so from the point of view of having a defined point of view of having a defined point of
reference for planning and control purposes.

Strategic management and control companies are more likely to prepare formal, long- term
strategic plans.
Financial control companies will rely on one-year budgets with interim reforecast as required.

A business unit may have a formal strategy but it is more likely (especially in the case of a
financial control company) to have an unwritten strategic orientation which is based on an
assessment of future market opportunities.

STRATEGIC MANAGEMENT

It involves following considerations:-

 Mission and strategy
 Formal structure
 Human resource system (HRS)

Organizations exist to accomplish some mission or set of objectives. Change in the mission or
objectives are more of incremental in nature as the organization adapts to changing customer
tastes or competitive threats. To accomplish its mission or objectives, the firm must decide
what optimal structure is needed to carry out its objectives. Once the nature of the structure is
decided upon, it must attract and retain sufficient number of people to carry out the tasks
needed to see that its objectives or strategies are effectively implemented.

DEVELOPING HR STRATEGY, STRATEGY DRIVEN ROLE BEHAVIOURS AND

PRACTICES
HR strategy can be used as an integrating force, linking various strands together into an overall
strategic thrust which complements and is consistent with the overall business strategy. In
some circumstances this may be highly desirable; for example, when Book club Associates, a
leading mail order book club, embarked on a programme of sustained growth and
diversification, it developed an integrated HR strategy aimed at achieving significant cultural
change in four main areas: communications, involvement, performance management, and
reward management. The links between each aspect of this strategy were emphasized and new
communication channels were developed and used to ensure that everyone knew and could
discuss the implications of the business strategy.

The key requirements of HR strategy are that it should be:

 Justified from the business strategy, i.e. in alignment with the business strategy
 Imaginative and innovative
 Clear and actionable
 Selective, focusing on priorities
 Flexible

Strategic HR thinking may indeed concentrate on one area such as resourcing or performance
management, although it would be important to ensure that the implications of change in one
direction are considered for other aspects of human resource management. For example, the
development of a performance management system raises questions about career development,
training and performance related pay.

KEY ISSUES

Of all the requirements of HR strategy referred to above, perhaps the most critical is that HR
strategy should be justified by business strategy. Without this, top management and line
managers as of little relevance to the real priorities of the business will see HR strategies, and
the credibility of the HR function will be in doubt. It is therefore; instructive to consider the
views of senior executives on how they rank HR issues among the key business issues that
their organizations face.
Organizing and managing HR strategy development

Effective integration of HR strategy is best achieved if the personnel director is closely

involved at top management level with the formulation of business strategy. One would expect
the head of the personnel function to be a member of an executive and management committee,
or at least to have access to the CEO, in order to obtain information about the direction
business strategy is taking and make contributions at an early stage on any HR Implications.
HR strategies should be based on information concerning:

 The business strategy and plan

 The external environment, with particular reference to the supply of people (demographics)
and the availability of skills
 The internal environment, including the implications of product development and new
technology, the requirement for increased flexibility and the need for new skills and multi-
skilling
 HR issues related to productivity, motivation, communications, commitment, involvement,
employee relations etc.

HR strategy areas

There are specific aspects of HR strategy, which, collectively, will form the building blocks of
overall HR strategy development. No two organizations will face quite the same issues, and
each will address in its own way those issues that it does face

First however, a human resource management strategy should provide answers to three
fundamental questions, which relate to all the specific aspects discussed below:
1. How are we going to acquire and retain the number and quality of people required to
meet the forecast needs of the organization?
2. How are we going to ensure that we have a well-motivated and fully committed
workforce?
3. What actions will be needed to train, develop, and fit people for greater responsibility
and responsiveness to change and the resulting demands for different skills and
abilities?

ACQUISITION AND RETENTION STRATEGIES

A starting point in the development of a human resource strategy is often the identification
of the long-term human resource requirements of the organization. These provide the basis
for more detailed human resource planning processes. The aim of these strategies should be
to ensure, On the one hand, that the achievement of corporate objectives will not be
inhibited by human resource shortages or inefficiencies and, or other, that impending
surpluses can be dealt with in good time with the minimum individual hardship and
disruption to employee relations.
At this stage broad questions need to be answered concerning:

Human resource requirements:

- How many employees are needed? – Over what period? – What kind of abilities and skills
will be required?

Availability:
- What is available now inside the company?
- What would be made available from inside and outside the company?

Retention
- What is the company’s experience in retaining staff?
- What are the problems and how can they be overcome?

Human resource utilization:

- How well are human resources used in the company?
- What is the scope for increasing productivity?
MOTIVATION STRATEGY

Motivation strategy should aim to increase the effective contribution of members of the
organization in achieving its objectives. Motivation strategy will refer to the performance
management and reward systems, and in particular to the type and scale of financial
incentives which are to be provided. But it will also be considered with other processes
which should yield favorable attitudes, including job design, participation, joint objective
setting, career development, and nay other processes relating to the individual’s need to
achieve and maintain a sense of personal worth and importance. Motivation is also affected
by the quality of leadership in an organization: therefore the selection, training, and
development of effective leaders should be part of the strategy.

HUMAN RESOURCE DEVELOPMENT AND TRAINING STRATEGIES

A human resource development strategy is concerned with the longer-term programmes

needed by an organization to improve operational performance at all levels, in accordance
with the additional demands which the business strategy will place on people in future. The
strategy will provide continuous development processes linked closely with the
programmes designed for the organization as a whole to implement its product, technology
and market development strategies.

The associated training strategy will be concerned particularly with the development of
new or existing competencies and with multi-skilling. For example, it will take account of
the introduction of new technology and of increased demands for `knowledge workers’ and
for `systems technicians` on production lines. The training strategy may be linked to the
reward strategy by the development of skills or competency- based payment systems.

ORGANIZATION DEVELOPMENT STRATEGY

The aim of on organization should be to ensure that an effective organization is maintained

which will respond appropriately to changes in its internal and external environment and
 make the best use of the individual and collective capacities of its members. The main
strategic areas in which organization development takes place are:

• The implications of change and the actions required to ensure that the organization
will continue to function effectively when subjected to pressures resulting from
change
• Changes in organization structure as well as values and culture development
programmes, and changes in organization climate and management style
• The proper integration of increasingly diversified activities which are likely to
result from change
• Team development
• The management of conflict
• Work on planning and objective-setting processes for individuals and teams

How can HR strategies be fully aligned?

In setting business strategies, line managers need to be fully in tune with what their customers
say they want from the organization. The same is true of HR strategies, except that such
strategies may have to be attuned to the needs of each organizational unit. HR and line
managers need to think through the kind of culture needed in each unit if the people in that unit
are able to deliver the business strategy.

What makes a difference to the delivery of business strategy is people’s behaviors. So, for
instance, all the ‘customer focus’ training in the world is of no use if clients perceive that the
company’s representative is rude to them over the phone. HR needs to think through the
behavioral character desired of employees. This: includes both behaviors, which the company
wants to encourage, and dysfunctional behaviors, which the company wishes to stop. HR also
needs to think through the HR processes, which are aligned to that behavior. This will include
issues such as recruitment, training, resources, location, working environment etc.
Working through these issues with line managers in a systematic way helps line managers to se
the link between managing the cultural aspects of the organization and achieving business
goals.
Major action plans can establish what the HR team needs to do next to make the change
happen. These plans need to be developed with the management team and can be both short
and long term. Changing the structure, for instance, can be a short-term measure while
changing the culture can take several years and may need to be phased.

LECTURE 28 – 29 : ALIGNING HR AND BUSINESS STRATEGIES THROUGH HR

PLANNING

Strategic planning is a key tool for HR. Tony Grundy defines HR strategy as ‘the plans,
programmes and intentions to develop the human capability of an organization to meet the
future needs of its external and internal environment’. HR strategy may be planned, emergent
or some combination of these. Research by Tyson and Witcher as well as Grundy suggests that
emergent HR strategy may be damaging by organizational effectiveness. Other research
projects also suggest that the more planned and timely the implementation of HR strategies, the
more value is perceived to be added to the business.

There are many reasons why many HR teams do not take a planned approach. Some HR teams
may prefer working in an emergent way and would rather wait until there is a clear business
strategy on which to model the HR strategy. This may be a long wait and opportunities for
adding value may be missed. Some teams fear criticism of being seen to create their own
policy in the absence of business strategy, on the one hand, or being seen to drive business
strategy, on the other. The sheer complexity of the links which need to be managed between
HR strategy and organizational effectiveness amy mean that the overall focus of the delivery is
diffuse and therefore not appreciated. Similarly, periods of ongoing change and active
organizational politics can cause the links to be undermined. This may be a question of
ownership of the HR’s strategy and where it sits in the organization structure.
However, Lam and Schaubroeck’s research suggests that leaders in firms with relatively highly
formalized HR planning are more likely to perceive its usefulness compared with those firms
where the Hr strategic objectives are less clear. In strategic HRM, planning needs to go beyond
being focused on operations and control.whether a formal or informal approach is used, the
important thing is to keep the plan simple. As Hr teams move towards a strategic HRM
approach, the need for integration among the different HR practices increases. These clear
objectives are than likely to be useful in strategic planning activities, helping the organization,
to enhance organizational performance, rather than simply being a means of making the case
for more resources.

HR planning is critical to the effective development of strategy since it should identify gaps
and surpluses in capabilities as well as issues of utilization of talent. Indeed so central is this
identification of organizational capability considered by some researchers that they argue for
an enhanced role for HR planning in overall strategic palnning. Various researchers have
suggested that the most effective links are made when HR strategy as such disappears and is
more fully integrated into other resource strategies supporting the operational management
process.

This would mean that the role of Hr would be to facilitate the development of an organizational
strategy, which is owned and developed by line managers. This would probably be issue based
and directly linked to the business strategy. Indeed, Grundy argues that the key role of a
strategic HRM function is to facilitate Organization and people strategy, together through joint
coordination with line management of strategic programmes such as management development
and succession planning.

The effectiveness of HR planning very much depends on the organizational context. HR

planning objectives are likely to be contingent upon different competitive strategies and
different organizations will therefore be unlikely to use identical approaches to similar issues.
However, unless the objectives are clear, building commitment to the strategy among line
managers and employees is difficult. Lam and Schaubroek suggest three different kinds of Hr
objectives:

 Operational: which seek to identify current capabilities and with short term
requirements in mind.

 Traditional: which attempt to incorporate forecasts about the numbers of employees

and their skill types to meet longer-term demands. This type of planning needs to take
account of career development, succession planning, external recruitment and appraisal
 data. It can establish whether it is possible for the organization to achieve its strategic
objectives.

 Strategic: which is where HR planning provides valuable data and is carried out as an
integral part of the overall strategic planning process. This involves line managers in
developing and evaluating HR practices since this approach recognizes that those who
are most knowledgeable about the workforce should be involved in building
commitment of the strategy across the organization. Often the main thrust of strategic
HR planning is finding ways to establish and maintain core competencies.

Typical objectives associated with different areas of HR responsibility includes:

Maximum strategic impact

 Align HR practices with business objectives

 Conduct development programmes to support strategic changes
 Carry out job analysis for long-term objectives
 Improve HR adaptability on changing environment
 Enhance workforce capability and innovation

Coordinate

 Improve coordination between various HR functions

 Improve team effectiveness
 Improve HR project management
 Develop compensation and benefit programmes
 Coordinate any potential HR problems
 Integrate diverse HR functions and operations

Communicate
  Communicate HR policies inside the organization
 Improve management acceptance of current HR policies, improve employee
involvement and understanding of HR
 Conduct job analysis for long-term objectives
 Communicate HR policies outside the company

Control

 Clarify budget and resources availability

 Manage personnel-related costs
 Improve HR budget control
 Improve HR resource procedures and control
 Review Hr operations procedures

Alignment through organization development

Corporate strategy usually involves reviewing the business the organization is in, or wants to
be in and its relative competitive positioning in the market place. This allows a strategic intent
to be developed. A review is then carried out of the human capabilities through which
competitive advantage can be achieved, enabling the organization to compete in a distinctive
and sustainable way.

The decentralized structure has led to a wide range of management practices in different
business units and little sharing of good practice across the organization. An organization
development team at the center of the organization has the challenge of helping to bring about
change as well as creating greater coherence across the organization while not diminishing the
autonomy of the business units. This delicate balancing act is achieved by ensuring that the
heads of the different business units are fully involved in developing the OD strategy and can
perceive the potential value added by the unit to their own operations.

The OD team is aiming to focus its delivery on a few key areas. These include strategy and
planning, orgainsation and management culture and values, people and performance. Learning
and change will be at the heart of al OD activities and provide inner coherence to the OD
strategy. The team consists of experienced OD practitioners who have both internal
consultancy and business experience. The OD strategy is as follows:

Our focus is on:

 Change in organizations and culture
 Organizations and team effectiveness
 Leadership and management processes
 Organization learning and corporate knowledge

Our outputs will be:

 Involvement in major change initiatives
 Supporting business management and major functions- developing change skills in the
company;
 Evaluating organization effectiveness

Our methods include:

Consultancy and facilitation
Project management
Education and training

Backed up with
 New management tools and processes
 Diagnostic audits and surveys
 Seminars, case studies and information networks
 Best practice action research

Clear lines of communication exist between the OD team and those responsible for providing
training, management and leadership development and succession planning. While at any point
in time, the specific focus of the team’s activity within this general remit will be tailored to the
needs of a particular business unit, the core thrusts remain the same and have a corporate
perspective. The team can then pursue major corporate projects while working within different
business units to help them achieve their local OD objectives, such as managing a specific
change process.
The clarity of outputs means that the team will be able to measure their achievement and gain
client feedback which can feed further into the ongoing development of strategy. It could be
argued that a coordinated organizational strategy such as this could be the joint staring pint for
developing corporate strategy.

Aligning the structure of HR with the organizational strategy

In recent years, many central HR teams in large organizations have decreased in size. There has
been a noticeable shift to consultancy-type roles with many HR responsibilities devolved to the
line. Operational HAR roles have been the most endangered with parts of the operation, such
as pay and even recruitment outsourced. Many; organizations have experienced problems with
quality and the current trend appears to be too take back into the centre the areas of operations
which leave HR most exposed if they go wrong. This includes areas such as executive
compensation and bonus arrangements. To some extent, these consultancy-type relationships
have left HR with less direct power, but where the influence of HR is strong, the function is
seen as central. The converse is also true. The most common HR structures appear to
concentrate the strategic roles in the corporate centre, leaving operational support to the line
being provided through divisional support units. Where such developed support units exist,
they sometimes report back to the head of HR, and are therefore clearly marinating a strong
professional link, while other units report to the divisional director, maintaining only a dotted-
line relationship with the head of HR. In some cases, call centers and help desks have been
established to ensure that operational HR support of some kind is available to line managers
who may not have a regular HR contact. Unisys has established an international on-line service
centre which provides solutions to HR issues in a way which meets ‘local’ as well as corporate
requirements.

As units devolve, there can be tension which the HR function attempts to resolve in different
ways. The centre can come to be seen as increasingly peripheral as most strategic decision
making takes place in the business units. This can be particularly challenging when HR
attempts to take a corporate perspective on the development of high potential talent, for
instance, since business heads can be reluctant to share information with the centre which
might cause them to lose a ‘star’ employee to another region.

Empowerment
Empowerment has become a cliché and a discredited one at that in some quarters. The main
reason according to Barbara Ettore is the myths surrounding it. If empowerment is supposed to
be defined as an employee’s ability to solve problems, take decisions based on those decisions,
management has encouraged the tint two but has failed to allow the third. Often the real
dilemma for executives is whether to trust employees. The management assumption is that
workers cannot fully understand the impact of their actions on the organization’s bottom line.
This assumption is based on the relative lack of information received by workers which would
give them a clear insight into how their actions affect the whole operation, stretching from the
business strategy and work processes to customers, shareholders, suppliers, etc.

This is where empowerment without alignment with strategy and information is likely to
backfire. Yet the benefits of empowerment can outweigh the risks. Empowered orgainsation are
more likely than others to respond quickly to ideas and suggestions, enable managers to make
their own decisions without having to rely on headquarters and put customers’ needs first.
Empowerment needs to be aligned to the strategic aims of the organization so that employees
can direct their solutions to real business issues. Typically, employees need to be clear about
what the customer wants, the part their own role plays and what shareholders are looking for.
Characteristically, in empowered organizations, good ideas are rewarded effectively and
authority is appropriately delegated as far down the organization as possible. Systems are a
supportive framework rather than a set of constraints and employees work to broad principles
rather than rules. Companies like Levi-Strauss, Hewlett-Packard and Nordstorm are among
high-performing orgainsation which practice aligned and informed empowerment. But, as
Ettore points out, ‘as with all initiatives, if management is not committed and if HR is not a
strategic function, it will fail’.

Aligning training and development to business strategy

Benchmarking is often used to identify organizations considered to be best in class on
particular aspects of their strategy or implementation. Training and development benchmarks
often focus in the amount of money invested in T & D activity. These figures vary widely
among employees but US surveys during the last decade suggest that a disproportionate
expenditure, i.e. those who spend more than 1.5% of their payroll on T & D, is made by just
0.5% of all US employers. These few organizations recognize that having a workforce with
high skill levels is a primary source of competitive advantage. In these exemplary
organizations, T & D is strongly aligned to the strategic leadership and planning processed of
the business. The primary focus of such training is on creating readiness and flexibility through
training supervisors, managers and executives since it is these individuals who set the tone for
the rest of the orgainsation.

Typical of the ‘best practice’ benchmark organization is that they:

 Create a systematic link between business strategy and the T & D system. T & D
targets, are reviewed at least annually to ensure that they are still on track with
changing business requirements.
 T & D executives take a full part in the strategic planning process, ensuring that
strategic goals take into account the availability of the talent needed to carry out the
goals.
 Information support systems are also integrated into the strategic planning process.

Links between training and development activity and the business strategy depend very much
on whither training is integral part of the HR strategy and whether this is itself fully aligned to
business needs. Depending on the type of competitive strategy in use, different analytical links
can exist. Strategies geared to the life cycle of the organization need employees and especially
management styles to be adopted to changing conditions. Those which focus on competitive
positioning through differentiation are likely to place a greater emphasis on process innovation
and specialization of distinctive skills. Similarly, strategies focusing on realizing strategic
intent are likely to competency definitions which help ht orgainsation to compete effectively.
Research carried out in the UK (Poole and Jenkins, 1996) suggest that core elements in the
development of competitive advantage in respondents’ organizations were:

• Management development
• Career development
• The development of high-potential employees
• Support for continuous training and retraining

Clearly, human resource development as well as management is an essential plan for building
sustainable competitive advantage. Training can help in the creation of a more productive,
skilled and adaptable workforce.

Strategic alignment through competencies

Ensuring alignment relies on excellent performance management so that people are clear what
their roles are, what is expected of them and how that might change. A competency framework
is a useful way of aligning HR processes to the business strategy. In this section we look at
some processes for defining and using competencies.

Competencies area often defined as ‘a particular attribute that people have that collectively
helps to develop the capability of the individual and the organization’. If you adjust
competencies so that they are continually aligned to the business strategy, the likelihood of
people’s behavior being in line with what the business needs at any point in time is high. If
these are reflected in the performance standards the organization is seeking to achieve, the link
between skilled behavior and outputs is evident.

They are a means of describing the kinds of behaviors and approaches which should enable the
organization to achieve its business objectives and should draw employees’ attention to things
which need to be commonly applied. So, for instance, as organizations require people to work
across boundaries, there is a need to clarity on what effectively cross-boundary team working
looks like. Defining the competency can b\help those involved become aware of the
applications for the way they work. By definition, competencies are temporary and need a
review process built in to check that they are still linked with current business strategies.
General competencies are a means of ensuring consistency across the orgainsation through the
creation of a common language to describe performance. In addition, professional functionally
specific technical competencies to make up the typical competence framework.

Performance management of the 1990s has focused on activity management. Competencies

should be a means of defining where the 20% of effort needs to be put in order to achieve an
80% return. However, if competencies are used mechanistically, or are not ‘owned’ by the
people for whom they have been defined, it is unlikely that they will produce the benefits of
clarity since they will not be used. There is an increasing awareness that people’s needs must
be taken into account if they are to be motivated to carry out activities to a high standard. A
competency framework needs to be a means of addressing both organizational requirements for
performance and individual needs for development, achievement and recognition.

The skills for future success

Dave Ulrich suggests that organizational skills springs from capabilities such as speed,
responsiveness, agility, learning capacity and employee competence.

The kinds of skills which individuals are likely to find useful in changing times seem fairly
common to organizations of all sectors. Research has found a remarkable similarity among
respondents in recent surveys who recognize the need to develop high-level political
influencing skills. This is the ability to make things happen by understanding the informal
system, and bringing about change without formal authority. Strategic thinking is needed at all
levels, so that people can understand the implications of change and work in partnership with
the organization to deliver strategic solutions. IT skills, financial and broader business
awareness should enable staff to understand the mechanics of what the organization needs to
do as well as take shrewd risks based on informed judgment. Leadership and change
management should be core skills for any manager, especially those in senior positions.
Entrepreneurial skills and creative thinking should enable people to find innovative solutions
and make things happen.
Training may be a part of the answer, but in many cases need to be developed on the job
through effective use of mentors, peer coaching, challenging assignments and learning review
processes. Competency-based approaches to development may make it possible for people to
have learning opportunities in different parts of the organization from areas to which they had
access in the past. Helping people to develop skills and employability calls for a strategic
approach, with a longer term perspective but firmly rooted in the here and now. Trials of
different approaches, well evaluated to assess what works, can deliver results in the short term
and avoid the danger of paralysis while officials wit for the way ahead to become clear.

Delivering best value and through employees

So if change under Best Value is to be managed skillfully, a partnership approach between

management and HR is called for. The business strategy for delivering Best Value needs to be
clear and the HR strategies which support this must be directly linked to the business intention.
Key targets for strategic activity with regard to employees include:
• Improve communications
• Clarity career tracks
• Develop people
• Provide feedback and recognition
• Ensure balance
• Involve people

Most importantly, developing an open, problem-solving climate can not only equip people for
learning what is appropriate in the short term but can also provide the basis for ongoing change
in the longer term. This involves understanding your current culture, breaking established
patterns which are counterproductive, setting new standards and giving people the chance to
exercise new skills. In addition, some sacred cows may need to be challenged. New ways of
working which are positive and moving in the ‘right’ direction should be stabilized and
achievements celebrated. People’s roles should be linked to the business imperative so that
everyone knows where they fit in, and what role they have to play in ensuring successful
service delivery which really represents best value. As Davin Ulrich says:
The successful organization will be those that are able to quickly turn strategy into action: to
manage processes intelligently and efficiently: to maximize employee contribution and
commitment; and to create the conditions for seamless change.

LECTURE 30 – 32 : INTEGRATING BUSINESS AND HR STRATEGY

Strategic Integration

Strategic integration is the process of linking human resource management policies and
activities to explicit business strategies. This integrating process will aim to match available
human resources to the ever changing requirements if the organization. It will also establish the
competencies required at all levels in the organization to ensure that business strategies are
implemented and will then take the human resource development initiatives required to provide
those competencies. Finally, it will provide the levers required to manage strategic change.

A coherent approach

The history of personnel management, in fact management generally, over the last two decades
is littered with techniques and nostrums such as management by objectives, job enrichment,
OD (organization development), systematic training, career planning, job evaluation, merit
rating, assessment centres, psychometric tests, performance related pay, performance
management, quality circles and competency analysis. These have usually been introduced
piecemeal and have too often failed to make any real impact on performance. Each of these
techniques can play a part in improving organizational effectiveness but not if used in isolation
and without the full backing of top management as something they recognize as being
important in helping them to get things done.

A coherent approach means linking and, as necessary, coordinating the various techniques
available to ensure that added value is obtained from their combined impact. For example, a
performance management system will generate data on development needs, indicate where
competency-related training is required, provide the basis for performance related pay, help
managers to lead their teams more effectively, clarify the results expected of individuals and
teams and assist with career and management succession planning. A coherent approach to
human resource management, is however, only possible where the whole top team works
together in developing and managing the process. In this situation, the human resource
professional acts as an enabler and facilitator, providing ideas, drawing the threads together,
and helping his or her colleagues to put the ideas into practice.

Change management

Human resource strategies should help the organization to move forward in the direction set by
business strategies. They do this first, by providing various levers for change through the
introduction of integrated resourcing, human resource development, performance and reward
management systems and secondly by seeing that change is managed properly.

Change management programmes should be managed by the top but their implementation
requires the support and involvement of people at every level in the organization. They are
sometimes related to abstractions such as participation or culture and are based on the belief
that the place to begin is with the knowledge and attitude of individuals. In fact, at Beer,
Eisenstat and Spector point out : ‘Individual behaviour is powerfully shaped by the
organizational roles that people play. The most effective way to change behaviour, therefore, is
to put people into a new organizational context which imposes new roles, responsibilities and
relationships on them’. They suggest a six step approach to effective change:

1. Develop commitment to change through joint analysis of business problems.

2. Develop a shared vision of how to organize and manage for competitiveness.
3. Foster consensus for the new vision, competence to enact it, and cohesion to move it
along.
4. Spread revitalization all departments without pushing it from the fop, i.e. don’t force
the issue, allow departments to find their own way to the new organization.
5. Institutionalize revitalization through formal policies, systems and structures.
6. Monitor and adjust strategies in response to problems in the revitalization process.

Flexibility
 In each area of human resource management it is necessary to develop flexible structures,
climates, systems and organizations which enable the organization to respond readily to
change. Organizations need to embrace the motto ‘constancy towards ends but flexibility
about means’. Greater operational flexibility must, of course, be achieved within a
strategic framework which maintains a strong sense of direction, but there is usually plenty
of scope within that framework to develop organization structures which are adaptive and
receptive to innovation. The thrust towards functional flexibility which can be achieved by
one and more of the following approaches:

• Work-based-job related flexibilities concerned with multi-skilling and the removal

of demarcation boundaries
• Contract-based-employee contracts which specify flexibility as a key aspect of
terms and conditions and job descriptions which specify outputs but do not attempt
to hamper employees by over-rigid descriptions of how they are expected to achieve
results
• Team-based-the use of project teams, task forces and autonomous work groups
• Organization-based-the use of contract workers and part-timers
• Time-based-the use of flexible hours : daily, weekly and annual.

Values

Peters and Waterman wrote that if they were asked for one all-purpose bit of advice for
management, one truth they could distil from all their research on what makes company
excellent, it would be: ’Figure out your value system. Decide what the company stands for’.
And Selznick emphasized the key role of values in an organization when he wrote: ‘The
formation of an institute is marked by the making of value commitments, that is, choices which
fix the assumptions of policy makers as to the nature of the enterprise, its distinctive aims,
methods and roles.

Successful companies are value driven, whether those values direct the beliefs and actions of
the chief executive officer or whether, preferably, they permeate the whole organization. Each
aspect of human resource management discussed in this book can be enhanced if it is
underpinned by a set of values which may refer to such areas as care and consideration for
people, care for customers, competitiveness, enterprise, excellence, financial flexibility,
growth, innovation, market/customer orientation, performance orientation, productivity,
quality, social responsibility and team work.

Commitment

The effectiveness of any aspect of human resource management depends largely upon the
extent to which it will increase commitment, motivation and, ultimately, performance. A
strategy for commitment is therefore necessary to support each aspect of the overall human
resource strategy. The aims of a commitment strategy will be:

• Identification – Increasing the identification of every member of the organization with

the mission, goals and core values of that organization.
• Mutuality – developing unity of purpose and a shared belief that what is good for the
individual is good for the organization and vice versa. Mutuality therefore involves
integrating the needs of these who work in the organization with the needs of the
organization.
• Individual creativity and energy – Unleashing the latent creativity and energy of
individuals throughout the organization. Note the emphasis on individuals. While
good teamwork is vital, and a commitment strategy will aim to enhance it, what must
not be inferred from the development and application of such a strategy is that the
organization wants to create a colony of clones who will slavishly conform to norms
and standards imposed on them by the company. As John Harvey-Jones 4 says, it is
‘the individual’s unique and personal contribution that matters’.
• Ownership of change – Managing change by getting people to ‘own’ it. This means
trying to ensure that those affected by change feel the project is their and not one
imposed upon them by outsiders which will conflict with their values or be detrimental
in any way.
The reality is that organizations are faced with an increasingly unpredictable world. Change is
not susceptible to a one-off programme that will lead to calmer times. Yet to survive and
thrive, businesses cannot afford simply to be buffeted by uncontrollable forces, in the hope that
luck will be on their side. Success will not happen by change but through continuous strategic
processes that will ride these choppy waters. (It has been said that the Japanese in top
management see themselves as White water rafters) Some characteristics of these processes
include:

• A recognition that short term decisions have long term consequences

• The processes are value driven. Strategic decisions have a sense of direction,
related to a vision of what could be
• This ‘what could be’ has to be based on the distinctive capabilities of the firm
It is not just a ‘wish list
• Strategic decisions have implications for resources – not least the human
resource.

Levels of Managerial Activity

Let us now look at the human resource system as they affect the strategic activities of the
organization. To define our focus it is necessary to add one more degree of complexity to the
frameworks already presented. To do this we use Robert Anthony’s definition of the three
levels of managerial work:

1. Strategic level – deals with policy formulation and overall goal setting, its objective
is to position the organization the best possible way to deal effectively with the
environment.
2. Managerial level – focuses on the processes by which the organization obtains and
allocates the resources needed to carry out its strategy and objectives.
3. Operational level – the day-to-day management of the organization is carried out at
this level.
Professional execution of the operational and managerial level activities is a necessary
condition, but, not sufficient basis for an effective human resource organization. The strategic
level activities, however, begin to separate the truly well managed companies from
competition.

Strategic selection

The selection process includes all activities related to the internal movement of the people
across positions as well as to hiring. The process matches available human resources to jobs in
the organization. Three strategic concerns are particularly important.

1. design of a selection system that supports the organization strategy eg if a company

plans to diversify in the next vie years, a careful analysis should be made of the
types of people who will be needed to staff the new business
2. monitoring the internal flow of personnel to match emerging business strategies
3. matching key executives to business strategies

Strategic appraisal

The performance appraisal process is the key to an effective human resource system.
Companies must develop a performance appraisal system that is supportive of their business
strategy because there is a link between such a system and total performance for the firm.
Excellent managers and companies simply recognize that an integral part of management is the
process of evaluating performance.

Strategic rewards

Among the rewards that are deemed to be important are the following:

Pay in its many forms such as salary, bonuses, stock options, benefits and perquisites
Promotion
Career opportunities, a long term chance for growth and development
Positive feedback from clients
Responsibility

Strategic Development

Activities designed to ensure that individuals are properly equipped with skills and knowledge
to carry out their jobs fall into the management-development category. Development that
occurs in organizations takes the form of on-the-job training, job rotation mentoring, formal
training etc.

Strategic integration is necessary in order to provide congruence between business and human
resource strategy so that the latter supports the accomplishment of the former and, indeed,
helps to define it. The aim to provide strategic fit and consistency between the policy goals of
human resource management and the business.

Problems of integration

However, integrating the two is easier said than done for the following reasons:

1. Diversity of strategic processes, levels and styles – as described above, the different
levels at which strategy is formulated and the different styles adopted by
organizations may make it difficult to develop a coherent view of what sort of HR
strategies will fit the overall business strategies and what type of HR contributions
are required during the process of business strategy formulation. In other words, it
may be difficult to focus HR strategies.

2. The evolutionary nature of business strategy – which may make it difficult to pin
down the relevant HR strategies.
 3. The absence of written business strategies – which adds to the problems of
clarifying the strategic business issues which human resource strategies should
address.

4. The qualitative nature of HR issues – business strategies tend, or at least aim to be

expressed in the common currency of figures and hard data on portfolio structure,
growth, competitive positioning, market share, profitability etc.

HR strategies may deal with quantifiable issues such as resourcing and skills acquisition but
are equally likely to refer to qualitative factors such as commitment, motivation, good
employee relations and high employment standards. And as John Purcell has written: If it were
possible to demonstrate that ‘enlightened’ or progressive approaches to the management of
people were invariably associated with higher productivity, lower until costs and improved
profit, life would be easier for the human resource planner. As it is, little can be proved
because for the complexity of the variable and the impossibility of monitoring and measuring
all the relevant dynamics and relationships.

Approaches to dealing with these problems

These are serious problems and it may be difficult for the HR strategist to overcome them
completely. But the attempt should be made and the following approaches are available.

1. Understand how business strategy is forms

The HR strategist should take pains to understand the levels at which business
strategy is formed and the style adopted by the company in creating strategy and
monitoring its implementation. It will then be easier to focus on those corporate or
business unit issues which are likely to have HR implications.

2. Understand the key business issues

The key business issues which may impact on HR strategies include:

 • Intentions concerning growth or retrenchment, acquisitions, mergers,
investments, divestments, diversification, product/market development
• Proposals on increasing competitive advantage through productivity, improved
quality/customer service, cost reduction
• The perceived need to develop a more positive, performance-oriented culture
• Other culture management imperatives associated with changes in the
philosophies of all organization in such areas as moving from ‘control’ to
commitment’, mutuality, communications, involvement empowerment,
devolution and team working.

Business strategies in these areas should not be over-influenced by HR factors; HR strategies

are, after all, primarily about making business strategies work. But the business strategy must
take into account key HR opportunities and constraints.

Business strategy, therefore, sets the agenda for HR strategy in the following areas:

• Resourcing
• Skills acquisition and development
• Culture, values and attitudes
• Commitment
• Productivity
• Performance management
• Rewards
• Employee relations

While these may all arise at business unit level, there are a number of strategic issues which
exist at the corporate level and are likely to have a decisive influence on HR strategy. These
are:

• Corporate mission
 • Corporate values, culture and style
• Organizational philosophy and approach to the management of people
• Top management as a corporate resource

Some organizations such as IBM, Hewlett-Packard and Marks & Spencer will have clearly
articulated strategies in these areas. Others will not, until events force a re-evaluation of the
mission, values, philosophies and structure of the organization, as has happened in such
companies as British Airways, BP, Thom EMI and ICL. These changes have often taken place
following the appointment of a CEO with a new vision of where the organization should be
going and how it is going to get there.

3. Establish methods of linking business and HR strategy

Business and HR issues influence each other, and in turn influence corporate and
business unit strategy,. It must be remembered, however, that in establishing those
links account must be taken of the fact that strategies for change have also to be
integrated with the changes in the external and internal environments. This is
illustrated in a model developed by Professor Andrew Pettigrew and his team at the
centre for Corporate Strategy and Change, Warwick University

This model shows in general the relationship between HR and business strategy and the
environment, but how can specific links be achieved? To achieve a link in rigorous terms
would require a means of quantifying the resources allocated to human resource development,
both overall and at the level of each element of HR strategy, and then measuring and
comparing the marginal return (in terms of higher profit) on investing in each element. But, to
echo Purcell’s point, such an approach is unlikely to be practicable. The link must therefore be
judgmental, but it can still be rigorous. Conceptually, the approach would be develop a matrix,
for each of the key elements of business strategy, identifies the associated key elements of HR
strategy.

While it may seldom, if ever, be possible to devise a complete expression of these relationship
in matrix form, at least this approach will ensure that the implications and interrelationship of
business and HR strategy are analyzed systematically. The following is a disguised example of
a real life statement of business strategy which has been distilled into an HR strategy
statement, which in turn has been expanded into an expression of its key elements.

Implementing Strategic Human Resource Management

One a manager has used these frameworks to identify the scope of the human resource
function in a particular organization the task becomes one of implementation. The following
steps should prove helpful as guidelines for task.

1. The task that the organization needs to support its strategic objectives should be
identified at the strategic, managerial, and operational level.
2. Gaps in the delivery of service to clients at the present time should be identified. Just
as it is not possible to reward managers solely for how well they meet long-term goals,
so a human resource system must have its operational house in order before it can
afford the luxury of concentrating on the formulation and implementation of a human
resource strategy.
3. If the organization has no process by which it emerges in strategic planning at the
corporate or business level, it will not be possible for the human resource function to
develop a strategic thrust since the human resource strategy flows from the corporate or
business strategy.
4. In terms of staffing the function, the organization will need to provide for people
trained as business generalists so they can better respond to line management concerns.
5. The reward and control systems should be altered to support the strategic human
resource function. Just as managers need to be rewarded for both performance of
operational and managerial short-term objective as well as for progress against strategic
goals, there should be a similar system to drive the human resources function.
6. Systematic links should be designed between the human resource function and the line
organization. Although the debate rages on over where strategies for managing change
are playing an increasingly important parts in human resource management.

The Internal Environment

 Competitive pressures have accentuated the need for managements to concentrate on
innovation, quality enhancement, customer service and cost reduction. This has influenced the
way which organizations have been structured and managed. The need to be more responsive
to external events has resulted in a greater emphasis on operational flexibility, and the need to
make managers more accountable for results has resulted in more decentralization and
devolution of authority.

The impact of new technology, especially information technology, has enabled

organizations to eliminate layers of management and supervision in the interests of a quicker
and more flexible response to new demands, increased accountability and, of course, cost
reduction. Cellular manufacturing systems, for example, have encouraged the creation of
autonomous work groups, which reduces the need for supervisory and quality control staff as
well as enhancing team accountability and, importantly, cohesiveness.

The new ‘flexible fir is one in which teamwork is more important but it also means the
setting of core groups of employees consisting of managers, technicians, knowledge workers
and multi-skilled craft workers. These groups are supported as and when required be
contracted staff and part-timers. The creation, development and control of teams of core
workers operating in a state of constant change places even greater demands on all managers
and it is these demands which have accentuated the need to adopt a human resource
management approach.

What makes strategic HRM ‘more strategic’ that HRM?

Strategic HRM has become topical in recent years but definitions as to what is meant by the
term very widely. Shaun Tyson defines FR strategy as the intentions of the corporation, both
explicit and convert, toward the management of its employees, expressed through philosophies,
policies and practices’/ Typically, strategic HRM bridges business strategy and HRM and
focuses on the integration of HR with the business and its environment. Researchers
distinguish between ‘hard’, traditional HRM and ‘soft’. ‘Hard’ HRM reflects a contingency
approach based on the assessment of the best way to manage people in order to achieve
business goats in the light of contextual factors. ‘Soft’ HRM focuses on a high-commitment-
high-performance approach to the management of people. One of the key elements of soft’
HRM is the internal approach to the management of people. One of the key elements of ‘soft’
HRM is the internal integration of HR policy goals with each other. In the UK, David Guest
incorporated the HR policy goats of strategic integration, commitment, quality and flexibility
into a model. He suggests that these HRM policy goals are a package which Purcell considers
to have six common elements:

Careful recruitment and selection.

Extensive use of systems of communication.
Team working with flexible job design.
Emphasis on training and learning.
Involvement in decision making.
Performance appraisal with tight links to contingent pay.

The main rationale for strategic HRM thinking is that by integrating HRM with the business
strategy, rather than HR strategies being a separate set of priorities, employees will be managed
more effectively, organizational performance will improve and therefore business success will
follow. This is itself may not be enough. Tony Grundy suggest: Human Resources Strategy in
itself may not be effective. Integrating Corporate Strategy and HR matters into an
‘Organization and People Strategy’ may prove more successful. Some researchers have argued
that technical HRM focuses on building company’s performance, while strategic HRM creates
competitive advantage by building HR systems which cannot be imitated.

Strategic HRM therefore has a clear focus on implementing strategic change and growing the
skill base of the organization to ensure that the organization can compete effectively in the
future. Indeed, strategic HR departments are future-oriented and operate in a manner consistent
with the overall business plan in their organizations. Such departments assess the knowledge,
skills and abilities needed for the future and institute staffing, appraisal and evaluation,
incentives and compensation, training and development to meet those needs. This also suggests
that facilitating organizational learning, both for implementing change and in helping to
develop strategy, is a key element to strategic HR.
According to this approach, people are a key resources and a critical element in a firm’s
performances since they build organizational effectiveness. Tony Grundy defines
organizational effectiveness as : ‘The capacity of the organization to adapt rapidly to its
external environment and to meet market and other external demands and with good resulting
business performance.’ What remains unclear is how organizations can achieve consistently
superior performance via HR strategy necessarily so. As Johnson comments: ‘Strategic
decisions are characterized by the political hurly-burly of organizational life with a high
incidence of bargaining and a trading off of costs and benefits of one group against another; all
within a notable lack of clarity in terms of environmental interests and objectives.

Goold and Campbell also emphasise the variety and ambiguity of influences which shape
strategy: Informal understandings work alongside more formal processes and analyses. The
headquarters agenda becomes entwined with the business unit agenda, and both are interpreted
in the light of personal interests. The sequence of events from decision to action reversed, so
that ‘decisions’ get made retrospectively to justify actions that have already taken place.

Strategy formulation is not necessarily rational and continuous process, as was pointed out by
Mintzberg. He believes that, rather than being consciously and systematically developed
strategy reorientations happen in brief quantum leaps. Strategies, according to Mintzberg, are
not always deliberate. In theory, he says, strategy is a systematic process. “First we think, then
we act. WE formulate, then we implement’ in practice, ‘ a realized strategy can emerge in
response to an evolving situation’ and the strategist is often ‘a pattern organizer, a learner if
you like, who manages a process in which strategies, and visions, can emerge as well as be
deliberately conceived.

Articulating business strategies

Business strategies are not necessarily expressed in writing, although there are advantages in
doing so from the point of view of having a defined of references for planning and control
purposes. Strategic management and strategic control companies are more likely to prepare
formal, long-term strategic plans, but financial control companies will rely on one year budgets
with interim reforecasts as required.

A business unit or independent company may have a formal strategy but it is more likely,
especially in the case of financial control company, to have an unwritten strategic orientation
which is based on an assessment of future market opportunities. In Mintzberg’s phrase, these
organizations ‘craft’ their strategies, being responsive situations as they emerge while still
taking a view on the general direction in which they are going.
LECTURE 33 – 35 : STRATEGIC PERFORMANCE MANAGEMENT AND
COMPENSATION SYSTEMS

Traditionally, performance appraisal has been used as the guide for employee performance.
Performance appraisal also known as ‘performance evaluation’, ‘merit rating’, and
‘performance assessment’ is a process of recording assessment of employees’ performance,
potential and development needs. According to Wayne F Cascio (1995) performance appraisal
is defined as “the systematic description of job related strengths and weaknesses of an
individual or a group”. Performance appraisal is a system of review and evaluation of an
individual’s (or team’s) performance. Lately it has been supplanted in more and more
companies with performance management (PM), a more comprehensive human resource
management process.

Within the recent past there has been a shift from traditional annual performance appraisal to
continuous performance management . The obvious reasons behind this have been the
inadequacy of Performance appraisal in serving as a performance enhancement tool.
Performance appraisal is known to be a contentious and unpopular activity of Human Resource
Management. It is contentious because employees do not readily accept their manager’s
assessment about their performance, and managers feel uncomfortable when they have to
defend their judgment. It is unpopular because managers do not want to play the role of a
judge; besides they have feelings of guilt if their evaluation is critical of their employees’
performance.

There could be other reasons for performance appraisal being unpopular:

• Many a times appraisal is based on hunches, opinions and reflects what appraiser can
readily recall since real performance measurement takes time and follow up.
• Employees are often less certain about where they stand after the appraisal than before
it.
• Employees don’t know what constitutes performance or what precisely is expected out
of them.
• Many a times employees don’t take appraisals seriously because they feel it is an
annual or six monthly ritual undertaken by the organization.
With these problems with the conventional performance appraisal, there was a transition in the
approach, organizations started moving towards developmental performance appraisal. This led
to additions in the definition of performance appraisal also. Fletcher has defined performance
appraisal more broadly as activities through which organizations seek to assess employees and
develop their competence, enhance performance and distribute rewards. Fletcher holds that as a
set of practices (and as a part of performance management), performance appraisal has now
become part of a more strategic approach to integrating HR activities and business policies.
Later on, a new field of study has emerged in the form of performance management, which is a
holistic approach towards management of employee and organizational performance.

Performance management is a means of getting better results from the organization, teams and
individuals by understanding and managing performance within an agreed framework of
planned goals, standards and competence requirements. It is a process for establishing shared
understanding about what is to be achieved and an approach to managing and developing
people in a way that increases the probability that it will be achieved in the short and longer
term (Armstrong, 1998).
Performance Management becomes essential because most of the contemporary organizations
possess some or the other of the following features:
• A diversity of locations, units, programs, projects and specialized disciplines.
• Complex cultural interactions and varied tasks and problems.
• Interdependence and dynamism – what one segment of the organization does, affects
the total organization.
• Decentralization and empowerment.
Some of the benefits of an effective Performance Management system are as follows:

• It creates a culture of excellence in the organization that inspires every employee;

• aligns organizational objectives to individual aspirations;
• equips people with the skills and the infrastructure necessary to perform their duties and
imbibes teamwork;
• clears growth paths for specially talented individuals;
• provides new challenges to rejuvenate plateauing careers;
Performance management systems are widely recognized as a key business strategy for driving
strong business results. Through goal setting, performance appraisal and feedback, continuous
training and development efforts, and performance related pay, Performance Management can
help companies incorporate strategy into individual employee efforts and turn their potential
into desired results.

Performance Management can assist in motivating employees for good performance and can
strengthen their commitment to the organization. Furthermore, it can assist in organizational
processes that are important to organization’s long term success such as organizational
learning, knowledge management, change management and succession management.
Performance management is necessary to develop a ‘performance consciousness’ and it can be
used as a powerful employee development tool. Effective performance management makes
people aware of where they stand and also helps in retention of star performers. The thrust of
an effective Performance Management System (PMS) has been identified as the ability to
understand and reinforce the desired work behavior by all employees.

The performance management process links individual job performance to the attainment of
organization’s vision, mission and goals. Performance management is a continuous process that
involves supervisors and employees in the identification and evaluation of key job performance
objectives and competencies that contribute to the achievement of organizational goals.
Employees who understand what they are trying to accomplish and how their work fits into the
work of the organization as a whole are more likely to perform at a higher level. With this in
mind, the performance management process is designed to:
• Provide supervisors and employees with a method to identify individual job performance
objectives and discuss their alignment with organization objectives;
• Provide supervisors and employees with a forum for ongoing communication and feedback
on the attainment of individual objectives and performance in core competency areas;
• Facilitate the identification of areas for improvement needed by employees to perform more
effectively on the job;
• Provide employees with the opportunity to collaborate with their supervisor to develop a
personal job performance development plan.
The goal of performance management is to help employees improve their performance and
their effectiveness. Performance is the results accomplished by an employee in meeting
specific objectives or the development of competencies necessary for effectively doing a job.
Performance management is a continuous process of supervisors and employees working
together to:
• Set performance expectations linked to organizational objectives;
• Establish criteria against which individual and unit performance can be measured;
• Identify areas for competency improvement;
• Provide performance feedback;
• Continually enhance performance.

STRATEGY ORIENTED COMPENSATION SYSTEMS

Workforce alignment, the concept of aligning the contributions of individual employees with
corporate goals, is one of today’s hottest business topics, on the mind of every business
manager from the CEO to the HR director. Yet for all of the urgency associated with workforce
alignment, many organizations are stymied in their attempts to achieve it.

Pay for performance plays an essential role in achieving workforce alignment. Many leading
companies practice this compensation management discipline with varying degrees of success.
Typically they rate their managers on a bell curve annually, assigning an overall performance
rating from “Exceeds objectives” to “Does not meet objectives.” At many companies, the
“Does not meet objectives” generally have to go, while others are awarded bonuses, raises and
stock-option grants commensurate with their rating.

Unfortunately, although most organizations profess to subscribe to pay-for-performance

philosophies, many simply cannot execute. There is a broken link between senior executives’
desire to differentiate pay based on performance and line managers’ ability to do so. Relating
compensation to individual performance for tens or hundreds of thousands of employees across
large global companies is nearly an impossible task today. Complexity in compensation
processes creates apathy among managers who do not see themselves as compensation experts
and instead take the path of least resistance.
Hence, the companies use the “peanut butter” approach to compensation distribution, spreading
merit increases, bonuses and stock options equally across the employee population. Top
performers are not given rewards commensurate with their contributions, and under-performers
are over-compensated.

Shockingly, the peanut-butter approach is used in company after company, where employee-
related compensation spending consumes up to 80 percent of each operating expense dollar,
according to industry research. This reality practically screams for a pay-for-performance
solution that keeps compensation expenditures in line with the allocated budget — a system
that makes managers compensation experts and, above all, makes them believe in the pay-for-
performance process and take ownership of it.

Challenges

Today’s business environment provides a stark backdrop for the ongoing disconnect between
corporate performance and individual compensation. Unfortunately, in all too many companies,
workforce misalignment is the norm. Despite strong commitment from senior executives to
differentiate pay based on performance, managers throughout the organization have a difficult
time doing so.

Meanwhile, economic pressures conspire to force organizations to do more with less. As

compensation funds shrink, how are limited resources best used? Every day newspapers are
filled with the latest news on lower-than-expected earnings, mergers, acquisitions and
corporate restructurings, all of which beg the question: Which employees will be chosen to
stay, which will go, and how shall the remaining ones be motivated?

Without a connection to compensation, performance management lacks the element of

execution. How can companies ensure that employees will actually be financially rewarded for
meeting performance objectives? Adding compensation to the equation brings the required
element of execution to performance management, ensuring that it is a true pay-for-
performance strategy that can deliver tangible business results.

Clearly, there are no companywide common denominators for compensation practices, let
alone guidelines or systems for implementing them. Faced with this constant state of flux,
many managers quickly give up on attempts to become compensation experts, and instead
muddle their way through the compensation planning process as quickly as possible to “get it
over with.”

What’s Needed

“Getting it over with” does not constitute the proper respect due to employee-related
compensation. What’s needed is a system for implementing pay-for-performance that balances
compensation expenditures with available financial resources.

Compensation management technology applications play a critical role in supporting pay-for-

performance initiatives that ultimately lead to workforce alignment. These systems provide the
structure, processes and knowledge required to make pay-for-performance initiatives
successful at all levels of the organization. Among the benefits of on-demand compensation
management applications include:

Employee differentiation, which puts an end to the peanut-butter style of compensation

disbursement.
True manager self-reliance, in which managers can leverage drill-down analytics and
situation-specific advice and guidance to help them become self-sufficient and confident in
administering their group’s compensation. In turn, this boosts their ownership of the pay-for-
performance corporate mandate.
Situation-specific advice and guidance: Far more sophisticated and personalized than
previous-generation knowledge management technologies, today’s most advanced systems
provide the infrastructure to harness and share knowledge within the enterprise, delivering it on
an individualized basis.
Strong, direct return on investment: Because compensation consumes such a large
portion of corporate budgets, administering it can significantly improve process efficiency.
This, in turn, can result in increased profitability and productivity, saving dramatic amounts of
time and effort.

The goals and objectives for automated compensation analyses and delivery systems are the
same as those for any other mission-critical application: to bring the needed information to
those who must make pay decisions and do so quickly, accurately and in the form in which
they can best use the information. Web-based compensation management applications do all of
this better than any other previous system.

Allen P. Jackson, principle at Towers Perrin, describes the following capabilities and features
of Web-based compensation management applications used to implement and administer pay-
for-performance programs. These include:

Determine the manager’s population: Before a manager can administer the compensation
plan, the population must be determined. Because it is role-based, the Web-based application
must know who is a manager and to whom the manager directly reports.
Rating employees: The manager now accesses the rating that was generated during the
performance management process or, if that process was not Web-enabled or the data are not in
machine-readable form, enters the appropriate performance rating into the application for each
employee. The system then automatically generates graphics that depict the distribution of the
ratings, both the actual distribution for the manager’s employee population and the desired
distribution.
Compensation planning: Performance versus position-in-range matrix: This useful tool
contains a list of performance categories and increase percentages, and highlights one
employee. The guidelines in the range quartiles show the suggested percentage increases that
could be given by a manager to an employee depending on the employee’s position in the
range. A wide variety of variables, including market rates, traditional evaluation methods, and
newer competency-based approaches, as well as minimum and maximum guidelines, ensure
that managers are properly prepared to plan actual compensation changes.
Planning new base salaries: When the performance rating versus position-in-range matrix
is finalized, the manager can proceed with compensation planning, entering either the
percentage increase provided by the matrix or the actual dollar amount.
Planning new variable compensation: In a fashion identical to that used for base salaries,
each employee who is eligible for variable compensation is now reviewed and a suggested
amount of compensation is calculated.
Planning stock compensation awards: The manager can then decide on the award of any
stock (typically stock options) that is part of the total compensation package. When this step is
completed, managers can generate statistics for their own work group and, under certain
conditions, determine where they stand in relation to other groups. In addition, reports are
available showing roll-ups and grouped departmental or line-of-business statistics.
Approving compensation plans: After a manager submits a compensation plan, it is
accessible to the approving manager for review and approval. The manager can then roll up for
an aggregate view of pay-for-performance and drill down to examine any one individual’s pay
plan. Group-level analytics provide visibility at each level in the management hierarchy before
compensation actions are taken.

In delivering these capabilities, the compensation management application must support

corporate requirements for a predictable total cost of ownership and for likely high levels of
ROI. Changes in objectives must therefore be easily incorporated into the pay-for-performance
system to keep up with frequent modifications to corporate objectives and compensation plans.
The application must provide flexibility for constant tuning and substantial change, or it will
need to be essentially re-deployed on a frequent basis—at a significant cost of both time and
money. System deployment needs to be reviewed carefully to monitor and measure expected
ROI.

To support a broad user base, the compensation management system also must have an
outstanding capability to deliver situation-specific advice and guidance to line and senior
managers. The advice and guidance management system should offer tailored support,
instructions and learning for each company based on corporate-defined compensation
objectives, employee compensation records and compensation market survey data. Just-in-
time, situation-specific advice and guidance should be delivered to each line manager when
they need it and must be relevant to the situation under review by the manager, helping to
shape manager behavior and affect more appropriate and consistent pay decisions.

Finally, an online compensation management application that supports managers with a

situation-specific, knowledge-based administration approach helps them become experts in the
art of compensation and fosters manager ownership of the resulting decisions. Although these
managers are focused on their particular fields of expertise — whether it is sales, engineering,
manufacturing, distribution or finance — they are looked to as compensation experts during
the annual corporate compensation planning process. As a result, it is critically important that
the company striving to realize a pay-for-performance culture provide a best-in-class
compensation management application that supports managers each step of the way. The
system must provide information for both decision-making and employee explanations, thereby
giving managers competence, confidence and ownership in their abilities and knowledge to
administer effective compensation plans.

Compensation management plays a critical role in forging a link between corporate goals and
individual performance. These solutions help organizations achieve workforce alignment by
supporting pay-for-performance initiatives with the structure, processes and knowledge
required to make them a success at all levels of the organization. As companies implement pay-
for-performance, which often starts with incremental efforts, compensation management
applications can be the catalyst for their deployment, acceptance and ultimate success.

LECTURE 36 – 39 : ROLE OF STRATEGIC HR LEADERS, FUTURE ROLES AND

LEADERSHIP COMPETENCIES

Businesses can recapture the innovative spirit that initially launched their success. It has been
done in companies old and new, big and small, and in just about every industry you can
imagine. Each case is different, but there are three common threads. First, corporate leaders
recognized the intellectual capital and potential that resided within their own employees.
Second, they turned to the Human Resources Department to find the key to unlocking that
potential and putting that capital to work. Third, the company reaped tremendous rewards in
terms of productivity and profitability as a result. What is common to each strand of this
process is the importance of HR departments to the process of strategic innovation.

Ideas are the lifeblood of business success. Most of today's corporate giants began with little
more than a great idea and an entrepreneurial gleam in their eye. They leveraged their
intellectual capital to build financial strength. Yet, along the way, many corporations lose the
ability to innovate and take risks. Entrepreneurship gives way to entropy, and new ideas are
relegated to the suggestion box in the employee cafeteria.

It does not have to be that way.

Businesses can recapture the innovative spirit that initially launched their success. It has been
done in companies old and new, big and small, and in just about every industry you can
imagine. Each case is different, but there are three common threads.

* First, corporate leaders recognized the intellectual capital and potential that resided within
their own employees.

* Second, they turned to the Human Resources Department to find the key to unlocking that
potential and putting that capital to work.

* Third, the company reaped tremendous rewards in terms of productivity and profitability as a
result.

What is common to each strand of this process is the importance of HR departments to the
process of strategic innovation.

Rarely are the terms "strategic innovation" and "human resources" uttered in the same breath.
HR departments in many corporations have come to be little more than service providers-
offering basic training and rewarding performance based on formulas created out of a cookie-
cutter process. Ask yourself: How often does an HR department see its role as building
corporate-wide capabilities, as opposed to increasing the general competence of the workforce?
Look at where the innovation movements usually take their lead: In most companies, the push
to make quality a priority starts with manufacturing. Customer service efforts got their start in
marketing. How much has HR contributed?

The real question should be: How much more can HR contribute? Look closely, and it becomes
clear that the HR function has a distinctive ability to create wealth. After all, HR departments
have at their disposal the means and the tools to have a more strategic impact. Their product is
people, and it is people who are indispensable to the innovation process. Moreover, it is people
who can carry the innovation message and the innovation approach to all corners of an
organization. When HR professionals put their focus on developing employee innovation and
pushing it deep within the organization, they can drive change and growth company-wide.

HR AS INNOVATION INCUBATOR
There are many ways an HR Department can drive the innovation function. It can do it as the
incubator of new ideas, as the crossfertilizer of concepts and teams, or even just by focusing on
the teaching/learning dimensions of its traditional training mandate.

First, look at an example of HR "going for the gold," as an incubator of ideas by harnessing the
passion of a workforce. An example of this dynamic in action can be found at Whirlpool, the
appliance-making giant. Looking for ways to enhance customer loyalty and get beyond the
seas of "white boxes" that confront consumers when they begin shopping for a new range or
refrigerator, Whirlpool turned to its employees for new ideas. They tapped their creativity
through a new process that gave every employee accessible tools and an environment that
propelled innovation. Among the tools they established were a Knowledge Management
intranet site and an innovation database to help employees share insights and spark ideas. The
intranet site paired those who had good ideas-but perhaps lacked the business skills to put them
in action-with "innovation coaches," in-house experts skilled at working with employees to
bring their ideas to fruition.

Their efforts have paid off: Whirlpool employees have helped develop and introduce path-
breaking new products, including Polara, the first refrigerated range; the Gladiator line of
garage appliances, and the first in-sink dishwasher. Today, innovation is so deeply embedded in
the corporate culture that every employee is encouraged to participate. One senior manager
summed up the results this way: "We don't have teams to make people feel good; we have
teams to run the business here, and we feel that engages people in the business." The results
speak for themselves: Whirlpool's stock is up significantly since its employee innovation
program began, and 40 percent above that of one of its closest competitors, Maytag. (No
wonder their repair people are so lonely!)

Whirlpool's model engaged many employees in the innovation process-nearly 10,000 of them
in one manner or another. This example illustrates the important role employee-driven
innovation can play in a company's success. However, innovation for innovation's sake does
not work. A few top people sitting around an "Innovation Department" trying to think of new
ideas amounts to an ineffective echo chamber, yet having a thousand bright employees going
off in different directions, all pursuing their personal ideas about how to build a better
mousetrap, is a recipe for a different sort of disaster. What is needed is a corporate function
designed to drive innovation in support of a company's overall goals and objectives. That is a
role HR departments are well suited to fill. When they do it right, the results benefit
employees, shareholders, and consumers alike.

HR AS CONCEPT CROSS-FERTILIZER

Part of the HR supportive role, as mentioned earlier, can be as a cross-fertilizer of concepts and
teams. A good example of that occurred "down under" at the National Australia Bank.

It started with an idea in the head of the Executive General Manager responsible for People and
Culture, NAB's rather elegant moniker for its HR department. She began with a values-based
concept: People like to save. Considering the age of baby boomers, there is increasing worry
about retirement, but people also like to shop, which can undercut the urge to save. What the
NAB executive saw were two values in contradiction. The goal was to combine them and allow
them to work together rather than at cross-purposes.

The idea that emerged from this values-based analysis was the notion of a credit card which
automatically sent a percentage of the cost of any purchase made on the card to the customer's
savings account. What NAB did was reconcile two apparently conflicting values and come up
with a unique notion: Spend to save! What one sees here is an inherent strength of HR being
integrated into the bank's marketing/product strategy: HR's fundamental understanding of
people. In the great save versus shop conflict, the pull of an immediate object of desire meets
the intangible distance of a faraway goal such as retirement, and the immediate object usually
wins. Recognizing this conflict, NAB's "spend to save" program connected the two, so that
savings were also buttressed when the customer shopped.

Perhaps even more unique than the idea itself was the way it was developed and shepherded
through the corporate development process. The Executive GM for People and Culture pushed
this program through as part of a people project within the broad purview of HR. In fact, it
started as part of a corporate values project which involved a broad cross-section of employees
to define values that motivated them such as "humanizing values." NAB pushed the underlying
long/short-term values inherent in the "shop to save" concept from the drawing board into the
marketplace by pulling together a core, cross-functional team that originated with and was
coordinated by the HR department. The exercise demonstrated the intimate link between
classic HR values and innovation. Corporate innovation exercises that do not make this link
with underlying values remain just that-exercises. In fact, the National Australia Bank example
demonstrates that innovation is the expression of values, a means of bringing them to life.

Another example of HR as the pivot of cross-functional development took place at Cemex, the
large Mexican-based multinational cement company. In this instance, the Cemex HR
department started with a value that is central to any organization-the strength of the promises
people make to their corporate colleagues. In a sense, one can see business as a network of
promises people make to each other, either implicitly or explicitly. Take internal meetings.
When people say they will attend a meeting at a certain time and then show up late, they are
breaking a promise, a low-priority promise, but a promise nonetheless. It undermines the
degree of trust that exists within the organization and reduces the company's ability to operate
effectively. Sometimes this can even be the result of a conflict in values (some alphatypes seem
to think that, in the corporate jungle, showing up late for a meeting demonstrates their
importance, rather than their inability to manage their own time).

Yet this conflict in values can have significant, negative implications for a company. Supply
chains are complicated these days: Immediate delivery depends upon every link in the chain
connecting seamlessly. A broken promise in one place can lead to gridlock in a great number of
places.

Cemex decided the value of its people keeping their time commitments to one another was too
important to leave to personal whim or chance. It demanded a company-wide effort. The
company's HR department addressed the problem head-on. The first thing they did was seek
out a consulting company with experience in improving the quality of promises made within
companies. Perhaps it serves as proof of the growing importance of this function that Cemex
found a firm that does indeed specialize in that. How do you get people to keep their promises?
It comes down to getting people to work together to jointly find the flaws in their working
relationship and address them collectively. For example, they will bring together departments
to map the ways they are supposed to work together and diagnose the recurrent breakdowns in
execution. They improve the process by redesigning the coordination mechanisms and improve
skills levels by training people to make contracts, ones that are more precise, realistic, and
ultimately more achievable.
As a result of this effort and technological innovations to improve scheduling of truck routes,
Cemex was able to guarantee delivery of cement to construction sites within a 20-minute
window. Twenty minutes: That is the length of time we associate more with delivering hot
pizza than wet cement. It is even more impressive considering the industry average delivery
window is three hours!

HR AS INNOVATION ACADEMY

These are examples of ways that HR serves as the cross-fertilizer of concepts and teams, or, in
the case of Whirlpool, the incubator of ideas. However, not all HR departments are in a
position to do those things. Whether they have the opportunity to do that may depend upon the
organizational structure of the company and its culture. What about the HR department that
does not have the mandate, the independence or the corporate flexibility to do that? How can
HR departments advance corporate strategy or competitive values without producing or
developing the "big idea?" Is it possible for HR departments to generate companywide
innovation by focusing on the teaching/learning dimensions of its traditional mandate?

The answer is: Some companies do it, so it obviously can be done.

General Motors, a firm for which I worked, was involved in a project that did not involve
corporate transformation, but focused instead on traditional HR functions. All large companies
have high-potential younger executives whose attitudes and cultural outlooks are still being
formed. How can their thinking be influenced? A common way is to bring them together to
listen to a few well-known gurus for a few days. Part of the core team that learned our methods
and became familiar with our tools helped set up a Discovery Center-a sort of innovation
academy-in North America.

The Discovery Center sought to further the development of talented individuals with leadership
potential within the company. Every week, high-potential GM employees would do tours of
duty at the Discovery Center, learning our tools and methods to address key strategic issues as
defined by GM's Strategy Board.

For example, the board wanted to explore emerging characteristics and requirements specific to
emerging cities in developing countries, an especially important strategic area given GM's
massive investments in productive capacity across Asia. The team developed an original point
of view on the subject, not only through on-site study missions to factories or interviews with
luminaries, but also by directly experiencing and understanding how consumers live and what
their needs are.

The benefits of this revolutionary approach will become more and more apparent as the high-
potential young managers learning this approach reach higher levels of responsibility. GM
insiders themselves refer to their company as the big oil tanker. The purpose of this project is to
help turn the big oil tanker around. That takes a lot of people sharing a customer-focused and
values-based attitude. HR departments are in a good position to help shape and sharpen that
attitude.

HR AS AN INNOVATION ENGINE

Clearly, there are a great many things that HR leaders can do to help a company change
direction. They can take big dramatic steps, as they did at Whirlpool. They can bring together
teams from across the firm to address customers' needs, as they did at National Bank of
Australia. Or they can slowly change the way of thinking by influencing the next generation of
corporate leaders, as they are trying to do at General Motors.

Perhaps the question is not, "What can HR do?" The question might more properly be, "Why
don't more HR departments take a leading-edge role in corporate transformation and renewal?"
It is indicative of the state of things that in writing this article, it was difficult to find many
examples of companies where HR departments had taken a broad leadership role in fostering
innovation. HR executives should be asking two questions, "Why aren't there more? And why
isn't my company one of them?"

Perhaps part of the reason is the division within the discipline. HR is the Gemini of the
corporate galaxy-its twins are the innovation side and the enforcement side. The enforcement
side ensures the organization follows the relevant laws and regulations, but a police force is not
likely to lead a revolution. If revolution is to come, if it is to come at all, it will be from the
organizational effectiveness/development side of HR. That means, in the beginning, perhaps
only half of the discipline is a potential source of innovation. Of that half, how many have the
freedom and the opportunity to pursue innovation? How many are permitted to reach out,
examine values, and turn them into projects that can expand a company's growth potential and
add value? How many HR executives have heard "no" so many times, they would not
recognize the sound of "yes?"

LECTURE 40 – 42 :WORKFORCE DIVERSITY AND ITS

IMPLICATIONS & CULTURAL ISSUES OF EXPATRIATES

DIVERSITY
Any attribute that humans are likely to use to tell themselves ‘that person is different from me’
and thus includes such factors as race, sex, age, values and cultural norms, etc.

WORKFORCE DIVERSITY
Narrow definitions tend to reflect Equal Employment Opportunity (EEO) law and define
diversity in terms of race, gender, ethnicity, age, national origin, religion, and disability.

Broad definitions may include all the different characteristics that make one individual
different from another. It includes sexual orientation, values, personality characteristics,
ethnicity, religion, education, language, physical appearance, martial status, lifestyle, beliefs,
ideologies and background characteristics such as geographic origin, tenure with the
organization, and economic status and the list could go on.

FACTORS INFLUENCING DIVERSITY IN THE WORKPLACE

(1) Demographic changes

(2) Global marketplace

(3) Economics

(4) Comfort with being different

(5) A diverse customer base

(6) Equal Employment Opportunity and Affirmative Action programs.

MANAGING WORKFORCE DIVERSITY

How administrators manage diversity greatly depends on the needs of the organization. For
example, some companies may want a diversified work force in order to make them more
competitive in the global market. Diversity helps them to better understand international
markets. While other organizations consider diversity as a means to bring about greater
harmony in the workplace and an opportunity to prepare employees and volunteers to deal with
the nation's changing demographics. Regardless of the reasons, managing diversity is here to
stay. So, it's no longer an issue whether to implement diversity training, but how diversity
training will be implemented.

"Managing for Diversity" pertains to a philosophy that is purely motivated by business

purpose and market advantage. It is seen as a strategy for improving organizational
competitiveness and efficiency. It is distinctly different from policies grounded in social
purposes such as equal employment opportunity or affirmative action. It focuses on managing
the mix of individuals assigned to a task, involved in the subordinate-supervisor relationship,
or employed in the organization. It may address decisions about composition of work groups,
choice of supervisor, and training and other support for diverse groups.

ATTEMPTS TO BETTER MANAGE DIVERSITY THROUGH:-

VOULNTARY AFFIRMATIVE ACTION PROGRAMS

Through voluntary affirmative action programs, the employer makes an extra effort to hire and
promote those in the protected (female or minority) groups. Affirmative action refers to legally
mandated written plans and statistical goals for the recruitment, training and promotion of
specific under-utilized groups. This quantitative, compliance-driven approach is remedial in
that it attempts to set right past wrongs.

There are 2 basic strategies used under affirmative action are as follows:-

1. GOOD FAITH EFFORT STRATEGY: It emphasizes on identifying and eliminating

the obstacles to hiring and promoting women and minorities on the assumption that
eliminating these obstacles will result in increased utilization of women and minorities.
 2. QUOTA STRATEGY: It mandates bottom-line results by instituting hiring and
promotion restrictions.

TYPES OF DIVERSITY
 GENDER DIVERSITY
Women have been moving steadily into occupations, professions and managerial jobs
previously reserved for men. Their access to education and training continues to improve,
providing many with the necessary qualifications to aspire to jobs in senior management.

PROCTOR & GAMBLE

Motto: gender diversity is not a problem to be fixed but a strength to be leveraged.
There’s actually a very strong business case for P&G to take it up:-
P&G is into business like cosmetics, sanitary napkins, baby diapers, etc, since the
ultimate consumers or decision makers for several of our businesses are women
themselves, they are able to relate to the consumer needs a lot better than male managers.

SHOPPER’S STOP
2 years ago, shoppers stop took a call: it planned to correct the disproportionately low
percentage of women working for it. There were 2 reasons why they close to act on it.

First, they felt that women inherently possess skills like empathy, intuition and nurturing
instincts, which make them more amenable to handling functions such as customer care
and human resource.
Second, gender diversity helped them in creating a positive culture, where the behaviour
and conduct of employees tended to be more acceptable.

 AGE DIVERSITY
Mature workers are competent, dependable, strong work ethics, punctual, committed to
quality, lower absenteeism, less likely to change jobs, proven ability to take of business.
Fresher/ young people are enthusiastic, innovative and have the zeal to prove them.
An organization should try to maintain a balance between mature and young employees
because it provides the organization a competitive benefit.
  CULTURAL DIVERSITY
The biggest driver for a higher level diversity strategy is the need to tap the creative,
cultural and communicative skills of a variety of employees and to use those skills to
improve company policies, products and customer experiences.
One company just did that:-
The Latino employee network at FRITO-LAY, the snack food division of PEPSICO,
proved invaluable during the development of DORITOS GUACAMOLE FLAVOURED
TORTILLA CHIPS. Members of the network, called Adelante, provided feedback on the
taste and packaging to help ensure that the product would be regarded as authentic in the
Latino community. The Adelante member’s insights helped make the guacamole flavored
Doritos one of the most successful new product launches in the company’s history.

REASONS FOR VALUING DIVERSITY

Companies today are increasingly striving for racial, ethnic and sexual work force balance
“Not because of legal imperatives, but as a matter of enlightened economic self interest”.

(1) Diversity among the workforce introduces new ideas or ways of thinking that improve
the quality of decisions and organizational outputs.

(2) To respond to competition, labor shortages, changing demographics and changing

workforce values.

(3) To show that the organization is strategically driven, well managed and quality
focused.

(4) To form better work relationships among employees

(5) To enhance social responsibility

(6) To address legal concerns.

(7) It has become necessary to recruit, train and promote diverse new groups because this
will adapt best to externally changing sociological realities and to changing market
preferences.

Ford Motor Company

The world's second largest automaker, selling vehicles in 200 markets and with approximately
345,000 employees on six continents. Ford has a well-defined diversity policy aimed at
creating an inclusive corporate culture. . For Ford, diversity is an essential ingredient in the
mix to transform the company to a team-based workplace and to help understand our customer
needs. Its diversity philosophy is based on the premise that the diversity of its workforce,
dealer network and supplier community can help it to access and serve world markets better. .
Periodic interactions among employees help in surfacing diversity-related issues of the
employees, and to promote diversity vision and values. Moreover, it has specific programs
aimed at reducing gender imbalance, respecting individual employee needs such as holidays to
celebrate.

THE FUTURE TRENDS RELATED TO WORKFORCE

DIVERSITY

• Society will become more diverse and, therefore, the workforce and the marketplace
will become more diverse.
• There will be more globalization of corporations, which will lead to a more global
workforce, marketplace, and economy
• Diverse work teams will be a reality in organizations
• Diversity will become more of a business concern than a social concern and be more
closely linked to competitive strategies
• Diverse populations will make more money and spend more money and this increase in
wealth will empower diversity
• Senior managers will become more involved in diversity issues because they will
realize that the diverse workforce needs to be better utilized in order to remain
competitive
 • More managers will face the challenge of dealing with backlash and diversity training
will be integrated more with other types of training.

CULTURAL ISSUES OF EXPATRIATES

The trend of globalization is providing opportunities for Indian firms to

reach foreign markets. The business model of many upcoming industries
like the information technology sector is dependent heavily on the foreign
markets. This increases the need of professionals working in foreign cultural
settings. The merger and acquisition activity especially the cross-border
acquisitions have reached much higher levels. The trend of acquisitions is
not only restricted to the new sectors like Information Technology, Telecom
and Business Process Outsourcing, but core sector companies like
Manufacturing (For Example: Bharat Forge acquiring Carl Dan Peddinghaus
in Germany) and Mining (For Example: Sterlite group acquiring mines in
Australia) have observed spurt in such activities too. The sheer size of
certain deals in the range of 200- 300 Million dollars (acquisition of Tetley,
UK, Flag Telecom in Bermuda) indicates global aspirations of the Indian
firms. The Pharmaceutical companies have widened their reach in world
market with examples like Ranbaxy and DRL having presence in many
countries. The globalization dreams present a new challenge for the Indian
firms; the challenge to develop competent managers who would be able to
work in new environments efficiently and will act as a bridge between the
parent company and its subsidiaries.

The globalization will also bring new employees to the Indian firms, the
ones with different origin, language and national culture adding
complexities to the culture of Indian organizations. The firms thus need to
develop systems and processes not only to train managers for expatriate
assignments but also to handle cultural diversity. This task can be achieved
by well designed cross-cultural training programs which will help employees
in coping up with the stress and cultural shock while dealing with a new
culture. The need for cross-cultural training will be for both: Indian
expatriates and employees dealing with expatriates of other origins. The
cross-cultural training will also be required for the Indian companies getting
into Business Process Outsourcing as the
clients belong to culturally different environments. Working effectively in
cross-cultural context is becoming vital competence for aspiring managers.
The present article attempts to define the possible sources of cross-cultural
differences, its impact on business practices, competencies required for the
expatriates, evolution of cross-cultural training, issues to be considered
while developing cross-cultural training and different ways of training the
employees.

Determinants of cultural differences:

There have been many attempts to define cultures and what differentiates
them. The study by Hofstede defined and differentiated between cultures
on various dimensions – viz. collectivism vs. individualism, power distance,
uncertainty avoidance, masculinity vs. feminism and long vs. short term
orientation. The author classified a number of countries on these
parameters. These parameters can be defined as:

1. Power distance: degree of inequality in power between a less powerful

individual and a more powerful one in which they belong to same social
system.
2. Masculinity vs. feminism: refers to the distribution of emotional roles
between the genders. It opposes a tough masculine to tender feminine
society.
3. Uncertainty avoidance: is the extent to which a culture programs its
members to feel either comfortable or uncomfortable in unstructured
situations.
4. Individualism vs. collectivism: is the degree to which individuals are
supposed to look after themselves or remain integrated into groups usually
around the family
5. Long term vs. short-term orientation: refers to the extent to which a
culture programs its members to accept delayed gratification of their
material, social and emotional needs.

The differences in cultural values were shown by the study of Hofstede

(2001), which involves 60, plus countries where each one of them was
classified on these parameters.These cultural differences may effect
motivational factors, collectivism at work place, organizational structure
design etc.Various studies have tried to study these differences. The
difference in cultures has been associated with perceptions and paradoxes.
The study by Osland and Bird (2000) lists down the paradoxes and the
reasons for them. The paradoxes arise because of perceptual schemas
(cultural myopia and lack of experience), theoretical limitations emic and
etic studies which present one sided views of the cultures (From inside and
outside the culture while ignoring the other ones.). The other reasons for
misunderstandings are tendency for observers to confuse individual and
group values, unresolved cultural issues, role differences and real vs.
espoused values. The cultural differences and varying approaches lead to
significant difference in business practices which must be recognized by
the trainers and employees receiving expatriate assignment.

How do people and practices differ across cultures :

The differences in cultures lead to significant differences in the way people
react to a stimulus. The motivational needs of the managers and executives
vary across the cultures. The motivational factors that work in India may
not be relevant in China, hence the expatriates will need to understand the
basic differences in the employee behavior. The production facilities of
firms may be similar across all the subsidiaries but the employee behavior
in these facilities may not remain the same.

Impact of dealing with a different culture

The cultural change leads to cultural shock, which is a mental state of
stress caused by acute changes in the culture. The expatriates tend to feel
lonely because all of a sudden every thing changes including the work
environment, peers, processes and to an extent organizational culture and
value system. The employees react by comparing the new culture to their
own values and beliefs and at times are unable to accept the vast
difference between the two. The process of encountering and accepting the
new changes or in other words process of acculturation can be classified in
four stages.
Initial stage of elation and optimism
Period of frustration, depression and confusion
Gradual improvement of mood leading to optimism and
satisfaction
Mastery stage

Oberg described four stages of adjustment: Stage I, the initial, or

honeymoon stage; Stage II, the disillusionment, or culture shock stage;
Stage III, the adjustment, or adaptation stage; and Stage IV, the mastery
stage. The honeymoon stage is a period lasting less than two months. Here
the employee is thrilled with the new experience. The culture shock stage
occurs as the individual copes seriously with living in the new culture on a
daily basis, as a lack of understanding of the culture inhibits awareness of
what is appropriate, or inappropriate, behavior in the new cultural
environment, resulting in confusion, frustration, tension and depression.
The frustration occurs as the person begins to realize that past behaviors
are inappropriate in the host culture but has not yet learned what behaviors
to substitute. The adjustment stage is characterized by increased ability to
adapt in the new culture; and, in the mastery stage, adjustment is about
as complete as possible, and anxiety is largely gone. Rhinesmith (1970),
classified reactions to a different culture in three categories that are flight,
fight and adaptation. The flight here characterizes reactions like rejecting
new culture and people and withdrawing from any opportunity of
interacting with new people or situations that cause discomfort. The Fight is
approaching new culture with hostility and term adaptation is used for
people who undertake the process of understanding the difference and
adjusting to the new culture.

Defining Expatriate Competencies:

The expatriates need to perform the same set of functions but in a

completely different environment which can cause lot of stress to the
person. The cultural stress will have significant impact on various aspects
of the job related behavior. Most of the expatriate failures are related lack
of adjustment in new culture. Hence while defining the competencies for
the expatriates human resource professionals also need to assess the soft
skills of employees which will be handy in the new environment like
tolerance of cultural difference, ability to adapt new culture and
interpersonal relationships. The cross-cultural skills required for successful
expatriate assignment can be listed broadly as (Hofstede, 2001):
• The capacity to communicate respect
• The capacity to be non judgmental
• The capacity to understand relativity of one’s own knowledge and
perception
• The capacity to display empathy
• The capacity to be flexible
• Tolerance for ambiguity

The focus is clearly on the soft skills and emotional maturity. The people
undertaking foreign assignments must be mature and stable enough to
accept the existence of cultural differences. They should also be able to
understand the context of various situations and happening, which calls for
objective evaluation of a situation without bringing in one’s own biases and
perceptions. The cross-cultural competencies have can be viewed as
combination of three different dimensions (Black and Mendenhall, 1990)
that are self maintenance dimension (mental health, psychological well-
being, stress reduction and self confidence), relationship dimension (ability
to foster relationship with the people of host nations and perceptual
dimension (perceptions of host nation’s culture and its social systems. Thus
perceptions have been given an important role in defining competencies.
Most often employees tend to make perceptions based little information
they receive through the media or stories. This leads to general
stereotyping causing formation of wrong notions about the host culture.
The employee should instead form opinions and beliefs related to the host
nation only after spending considerable amount of time over there.

The events which are used to form these perceptions should be seen in
depth using the back ground information like social value system, political
system and cultural values. Only then a clear picture of host nation culture
will emerge. The employees on expatriate assignments must be able to
decode various verbal and non-verbal ways of communication used in the
new culture and work in unstructured and ambiguous situations (Demers,
2002). The expatriate employees should have capabilities to deal with
alienation and isolation, willingness to communicate and empathy for
people of other cultures (Mendenhall and Odou, 1986). The competencies
required for expatriate assignments have been classified under categories
of stable and dynamic competencies in the paper by Sullivan (1999). The
author has broken the dimensions proposed by Black and Mendenhall
(1990) in stable and dynamic components. The components are listed in
the following table:
Hence the employees should have the ability to question the perceptions
and resolve conflicts arising out of the cultural differences. The stress
management skills have been given importance because the cultural
differences and lack of proper socialization along with cultural shock causes
stress on the expatriates. The stress might also arise from living at a
distance from the family.