EEB

Emerging
HORIZONS IN
HRM
FALL WINTER 2010-2012
SECTION-FP5

PROJECT ON EMERGING HORIZONS IN HRM

Serial
Names
number
1.
Jasmeen Kaur

Roll number

2.

Jaya Sachwani

11

3.

Karavi Sonowal

14

4.

Arpita Das

05

10

ACKNOWLEDGEMENT

We would like to express our immense gratitude to Prof. Pankaj

Upadhyay for providing support and guidance for our learnings as well
as projects and for directing our thoughts, goals and objectives towards
the attitude that drives to achieve and other aspects that one as novice
needs to be acquainted with. We are privilege to work under his dynamic
supervision
We are glad to acknowledge him for incorporating right attitude in me
towards learning and for helping and supporting whenever required.

Prof. Pankaj Upadhay

(EEB)

Prof. J.D. Gupta

(DEAN)

TABLE OF CONTENTS
CHAPT
ER
1.
2.
3.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9

TOPIC

PAGE NO.

Executive Summary
Human Resource Management(HRM)
HistoryAntecedents
Birth and evolution
HRM In Nature
HRM In Scope
HRM In Beliefs
HRM In Objectives
HRM In Functions
Major Influencing Factors
HRM Management Futuristic Vision

4.
5.
6.
6.1
6.2
6.3
7.
7.1
7.2
7.3
7.4
8.

Emerging Horizons In HRM

New Trends In International in HRM
HRM In IT Industry
Hiring Talent
Developing Talent
Retaining Talent
Business process Re-engineering (BPR)
BPR Process
Objectives Of BPR
Causes Of Failure In BPR
Conditions For Success In BPR
Downsizing

7,8
9
10
10
10
11
11
12
12
13
14
14
16
18
20
20
20
21
22
27
27
30
30
32

8.1
8.2
8.3
9.
10.
11.
11.1
11.2
11.3
11.4
11.5

Rationale Downsizing
Downsizing-The Long term Effect
Role Of HR in Downsizing
Voluntary Retirement Scheme(VRS)
Changing Role Of HRM
Case Studies
BSNL
SBI
LAYOFFS IN CITIBANK
YAHOO
JET AIRWAYS

12.

HRM Review Of Emerging Trends In HR

ASIA
Conclusion
News Round Up
Bibliography

13.
14.
15.

33
34
40
41
42
54
54
58
61
63
66
69
71
73
74

1. Executive Summary
Emerging Trends in Human Resource Management
Human resource management, if we see it from definition perspective it is a process of bringing
people and organizations together so that the goals of each others are met.
If we see in practical situation the above definition its just one side of a coin which has limited
HRM involvement but HRM today is a different story, it have changed the way we work, and
also it helps an organization to survive in recessionary period. Managing and attracting the
human resource in todays time is very difficult task. The role of HR manager has changed a lot
(Dancing differently on changing tunes of life) from being protector and screener to the role of
Savior who acts as planner and change agent affecting bottom of the pyramid where it is blue
collar workers & at the Top & Middle level executives.
The trends in human resource industry are dynamic in nature which contributes towards to
achievement of organization goals. Over the years, highly skilled and knowledge based jobs have
increased while low skilled jobs are decreasing. This calls for skill mapping through proper HR
initiatives.
Change is inevitable as said and thats what Indian organizations are witnessing in management
cultures, systems and working style. Alignment with global companies has forced Indian
organization accept and incorporate change in everyday life which makes role of HRM all the
more important.
Some of the recent changes are as follows:

The policies of many companies have become people centric, traditionally the policies
mainly focused on achievement of organizational goals showing negligence towards the

human resource.
Attracting and retaining of human resource has become difficult as loyalty factor is losing
its shine, today HR personnel have to motivate and design healthy career road map to
make them stay in the company.

Human Resource Outsourcing is the new name in the industry to replace the redundant
traditional HR department. Many HR outsourcing companies in India are already
established and some are coming up to support increasing demand of corporate India.
With the increase of global job mobility, recruiting competent people is also increasingly
becoming difficult, especially in India. Therefore organizations are also required to work
out

retention

strategy

for

the

existing

skilled

manpower.

HR managers today are focusing on policies (trust, openness & equality), Motivation,
Relations. Due to new trends in HR the manager should treat people as resources, reward
them equitably and integrate their goals with that of the organizational goals through
suitable HR Policies.

2. Human Resource Management

Human Resource Management is the management of an organization workforce, or human
resources. It is responsible for the attraction, selection, training, assessment, and rewarding of

employees, while also overseeing organizational leadership and culture, and ensuring compliance
with employment and labor laws. In circumstances where employees desire and are legally
authorized to hold a collective bargaining agreement, HR will typically also serve as the
company's primary liaison with the employees' representatives (usually a labor union).HR is a
product of the human relations movement of the early 20th century, when researchers began
documenting ways of creating business value through the strategic management of the
workforce.

The

function

was

as payroll and benefits administration,

initially
but

dominated

due

by

transactional

to globalization,

company

work

such

consolidation,

technological advancement, and further research, HR now focuses on strategic initiatives

like mergers and acquisitions, talent management, succession planning, industrial and labor
relations, and diversity and inclusion.

In startup companies, HR's duties may be performed by a handful of trained professionals or

even by non-HR personnel. In larger companies, an entire functional group is typically dedicated
to the discipline, with staff specializing in various HR tasks and functional leadership engaging
in strategic decision making across the business. To train practitioners for the profession,
institutions of higher education, professional associations, and companies themselves have
created programs of study dedicated explicitly to the duties of the function. Academic and
practitioner organizations likewise seek to engage and further the field of HR, as evidenced by
several field-specific publications.

3. History
3.1 Antecedent Theoretical Developments

10

HR spawned from the human relations movement, which began in the early 20th century due to
work by Frederick Taylor in lean manufacturing. Taylor explored what he termed "scientific
management (later referred to by others as "Taylorism"), striving to improve economic
efficiency in manufacturing jobs. He eventually keyed in on one of the principal inputs into the
manufacturing processlaborsparking inquiry into workforce productiviThe movement was
formalized following the research of Elton Mayo, whose Hawthorne studies serendipitously
documented how stimuli unrelated to financial compensation and working conditionsattention
and engagementyielded more productive workers. Contemporaneous work by Abraham
Maslow, Kurt Lewin, Max Weber, Frederick Herzberg, and David McClelland formed the basis
for studies in organizational behavior and organizational theory, giving room for an applied
discipline.

3.2 Birth and Evolution of the Discipline

By the time enough theoretical evidence existed to make a business case for strategic workforce
management, changes in the business landscape had transformed the employer-employee
relationship, and the discipline was formalized as "industrial and labor relations". In 1913, one of
the oldest known professional HR associationsthe Chartered Institute of Personnel and
Developmentwas founded in England as the Welfare Workers' Association, then changed its
name a decade later to the Institute of Industrial Welfare Workers, and again the next decade
to Institute of Lab our Management before settling upon its current name. Likewise in the United
States, the world's first institution of higher education dedicated to workplace studies
the School of Industrial and Labor Relationswas formed at Cornell University in 1945.
During the latter half of the 20th century, union membership declined significantly, while
workforce management continued to expand its influence within organizations. "Industrial and
labor relations" began being used to refer specifically to issues concerning collective
representation, and many companies began referring to the profession as "personnel
administration". In 1948, what would later become the largest professional HR association
the Society for Human Resource Management (SHRM)was founded as the American Society
for Personnel Administration (ASPA)
Nearing the 21st century, advances in transportation and communications greatly facilitated
workforce mobility and collaboration. Corporations began viewing employees as assets rather
than as cogs in machine. "Human resources management", consequently, became the dominant
term for the functionthe ASPA even changing its name to SHRM in 1998."Human capital
management" is sometimes used synonymously with HR, although human capital typically refers
to a more narrow view of human resources; i.e., the knowledge the individuals embody and can
contribute to an organization. Likewise, other terms sometimes used to describe the field include
"organizational management", "manpower management", "talent management", "personnel
management", and simply "people management".

3.3 Human Resource Management: Nature

11

Human Resource Management is a process of bringing people and organizations together so that
the goals of each are met. The various features of HRM include:

It is pervasive in nature as it is present in all enterprises.

Its focus is on results rather than on rules.
It tries to help employees develop their potential fully.
It encourages employees to give their best to the organization.
It is all about people at work, both as individuals and groups.
It tries to put people on assigned jobs in order to produce good results.
It helps an organization meet its goals in the future by providing for competent and wellmotivated employees.
It tries to build and maintain cordial relations between people working at various levels in the
organization.
It is a multidisciplinary activity, utilizing knowledge and inputs drawn from psychology,
economics, etc.

3.4 Human Resource Management: Scope

The scope of HRM is very wide:
1. Personnel aspect-This is concerned with manpower planning, recruitment, selection,lacement,
transfer, promotion, training and development, layoff and retrenchment, remuneration,
incentives, productivity etc.
2. Welfare aspect-It deals with working conditions and amenities such as canteens, crches, rest
and lunch rooms, housing, transport, medical assistance, education, health and safety, recreation
facilities, etc.
3. Industrial relations aspect-This covers union-management relations, joint consultation,
collective bargaining, grievance and disciplinary procedures, settlement of disputes, etc.

3.5 Human Resource Management: Beliefs

The Human Resource Management philosophy is based on the following beliefs:

12

Human resource is the most important asset in the organization and can be developed and
increased to an unlimited extent.
A healthy climate with values of openness, enthusiasm, trust, mutuality and collaboration is
essential for developing human resource.
HRM can be planned and monitored in ways that are beneficial both to the individuals and the
organization.
Employees feel committed to their work and the organization, if the organization perpetuates a
feeling of belongingness.
Employees feel highly motivated if the organization provides for satisfaction of their basic and
higher level needs.
Employee commitment is increased with the opportunity to discover and use one's capabilities
and potential in one's work.
It is every manager's responsibility to ensure the development and utilization of the capabilities
of subordinates.

3.6 Human Resource Management: Objectives

To help the organization reach its goals.

To ensure effective utilization and maximum development of human resources.
To ensure respect for human beings. To identify and satisfy the needs of individuals.
To ensure reconciliation of individual goals with those of the organization.
To achieve and maintain high morale among employees.
To provide the organization with well-trained and well-motivated employees.
To increase to the fullest the employee's job satisfaction and self-actualization.
To develop and maintain a quality of work life.
To be ethically and socially responsive to the needs of society.
To develop overall personality of each employee in its multidimensional aspect.
To enhance employee's capabilities to perform the present job.
To equip the employees with precision and clarity in transaction of business.
To inculcate the sense of team spirit, team work and inter-team collaboration.

13

3.7 Human Resource Management: Functions

In order to achieve the above objectives, Human Resource Management undertakes the
following activities:

1. Human resource or manpower planning.

2. Recruitment, selection and placement of personnel.
3. Training and development of employees.
4. Appraisal of performance of employees.
5. Taking corrective steps such as transfer from one job to another.
6. Remuneration of employees.
7. Social security and welfare of employees.
8. Setting general and specific management policy for organizational relationship.
9. Collective bargaining, contract negotiation and grievance handling.
10. Staffing the organization.
11. Aiding in the self-development of employees at all levels.
12. Developing and maintaining motivation for workers by providing incentives.
13. Reviewing and auditing manpower management in the organization
14. Potential Appraisal. Feedback Counseling.
15. Role Analysis for job occupants.
16. Job Rotation.
17. Quality Circle, Organization development and Quality of Working Life.

3.8 Human Resource Management: Major Influencing Factors

In the 21st century HRM will be influenced by following factors, which will work as various
issues affecting its strategy:

14

Size of the workforce.

Rising employees' expectations
Drastic changes in the technology as well as Life-style changes.
Composition of workforce. New skills required.
Environmental challenges.
Lean and mean organizations.
Impact of new economic policy. Political ideology of the Government.
Downsizing and rightsizing of the organizations.
Culture prevailing in the organization etc.

3.9 Human Resource Management: Futuristic Vision

On the basis of the various issues and challenges the following suggestions will be of much help
to the philosophy of HRM with regard to its futuristic vision:
1. There should be a properly defined recruitment policy in the organization that should give its
focus on professional aspect and merit based selection.
2. In every decision-making process there should be given proper weight age to the aspect that
employees are involved wherever possible. It will ultimately lead to sense of team spirit, teamwork and inter-team collaboration.
3. Opportunity and comprehensive framework should be provided for full expression of
employees' talents and manifest potentialities.
4. Networking skills of the organizations should be developed internally and externally as well as
horizontally and vertically.
5. For performance appraisal of the employees emphasis should be given to 360 degree
feedback which is based on the review by superiors, peers, subordinates as well as self-review.
6. 360 degree feedback will further lead to increased focus on customer services, creating of
highly involved workforce, decreased hierarchies, avoiding discrimination and biases and
identifying performance threshold.
7. More emphasis should be given to Total Quality Management. TQM will cover all employees
at all levels; it will conform to customer's needs and expectations; it will ensure effective

15

utilization of resources and will lead towards continuous improvement in all spheres and
activities of the organization.
8. There should be focus on job rotation so that vision and knowledge of the employees are
broadened as well as potentialities of the employees are increased for future job prospects.
9. For proper utilization of manpower in the organization the concept of six sigma of improving
productivity should be intermingled in the HRM strategy.
10. The capacities of the employees should be assessed through potential appraisal for
performing new roles and responsibilities. It should not be confined to organizational aspects
only but the environmental changes of political, economic and social considerations should also
be taken into account.
11. The career of the employees should be planned in such a way that individualizing process and
socializing process come together for fusion process and career planning should constitute the
part of human resource planning.
To conclude Human Resource Management should be linked with strategic goals and objectives
in order to improve business performance and develop organizational cultures that foster
innovation and flexibility. All the above futuristic visions coupled with strategic goals and
objectives should be based on 3 H's of Heart, Head and Hand i.e., we should feel by Heart, think
by Head and implement by Hand.

4. Emerging Horizons In HRM

ABSTRACT:
The management has to recognize the important role of Human Resource Department in order to
successfully steer organizations towards profitability. It is necessary for the management to

16

invest considerable time and amount, to learn the changing scenario of the HR department in the
21st century. In order to survive the competition and be in the race, HR department should
consciously update itself with the transformation in HR and be aware of the HR issues cropping
up. With high attrition rates, poaching strategies of competitors, there is a huge shortage of
skilled employees and hence, a company's HR activities play a vital role in combating this crisis.
Suitable HR policies that would lead to the achievement of the Organization as well as the
individual's goals should be formulated. HR managers have to manage all the challenges that
they would face from recruiting employees, to training them, and then developing strategies for
retaining them and building up an effective career management system for them. Just taking care
of employees would not be enough; new HR initiatives should also focus on the quality needs,
customer-orientation, productivity and stress, team work and leadership building. This book is
divided into two sections that throw light on the emerging HR trends and discusses HR issues in
various industries like financial services, IT, Power, Healthcare, to name a few. This book should
be valuable for practicing HR managers of every organization and also for those who have a
significant interest in the area of Human Resource Management, to realize the growing
importance of human resources and understand the need to build up effective HR strategies to
combat HR issues arising in the 21st century.
Economic Liberalization and Globalization in India since 1991 is having a major impact on
human resource management. In their efforts to integrate themselves into the global economy,
companies in India are using human resources as a strategic tool for competitive advantage. A
large pool of qualified manpower is making India an outsourcing hub for the developed nations.
One survey of opportunities and challenges facing human resource management under
liberalization reported the following:
I.

Virtually all companies are putting emphasis on the up gradation of managerial and
professional skills.

II.

Organizational restructuring has emerged as an important strategy. Companies are

adopting flatter structures and empowering employees to facilitate independent decision
making and flexibility. This is leading to improved involvement and motivation of
employees.

17

III.

Middle level managers are becoming more participative and result oriented. Decision
making is being increasingly handled at the group level.

IV.

There is increasing emphasis on training and retaining talent. Companies have started
paying greater attention to career planning and career growth for employees.

V.

Employee compensation is being linked with performance through benchmarking,

business process reengineering etc.

VI.

There is an emphasis on transparency and multi skilling.

VII.

Companies are downsizing to shed redundant staff.

VIII.

Networking of various functions and divisions is being adopted with a view to create a
responsive, global oriented and competitive organization.
Introduction
Human Resource Management has evolved considerably over the past century, and
experienced a major transformation in form and function primarily within the past two
decades. Driven by a number of significant internal and external environmental forces,
HRM has progressed from a largely maintenance function, with little if any bottom line
impact, to what many scholars and practitioners today regard as the source of sustained
competitive advantage for organizations operating in a global economy.

5. NEW TRENDS IN INTERNATIONAL HRM

International HRM places greater emphasis on a number of responsibilities and functions such as
relocation, orientation and translation services to help employees adapt to a new and different
environment outside their own country.

Selection of employees requires careful evaluation of the personal characteristics of the

candidate and his/her spouse.

Training and development extends beyond information and orientation training to include
sensitivity training and field experiences that will enable the manager to understand
cultural differences better. Managers need to be protected from career development risks,
re-entry problems and culture shock.

18

To balance the pros and cons of home country and host country evaluations, performance
evaluations should combine the two sources of appraisal information.

Compensation systems should support the overall strategic intent of the organization but
should be customized for local conditions.

In many European countries - Germany for one, law establishes representation.

Organizations typically negotiate the agreement with the unions at a national level. In
Europe it is more likely for salaried employees and managers to be unionized.

HR Managers should do the following things to ensure success

Use workforce skills and abilities in order to exploit environmental opportunities and
neutralize threats.

Employ innovative reward plans that recognize employee contributions and grant
enhancements.

Indulge in continuous quality improvement through TQM and HR contributions like

training, development, counseling, etc.

Utilize people with distinctive capabilities to create unsurpassed competence in an area,

e.g. Xerox in photocopiers, 3M in adhesives, Telco in trucks etc.

Decentralize operations and rely on self-managed teams to deliver goods in difficult

times e.g. Motorola is famous for short product development cycles. It has quickly
commercialized ideas from its research labs.

Lay off workers in a smooth way explaining facts to unions, workers and other affected
groups e.g. IBM, Kodak, Xerox, etc.

HR Managers today are focusing attention on the followinga) Policies- HR policies based on trust, openness, equity and consensus.
b) Motivation- Create conditions in which people are willing to work with zeal, initiative and
enthusiasm; make people feel like winners.

19

c) Relations- Fair treatment of people and prompt redress of grievances would pave the way for
healthy work-place relations.
d) Change agent- Prepare workers to accept technological changes by clarifying doubts.
e) Quality Consciousness- Commitment to quality in all aspects of personnel administration will
ensure success.
Due to the new trends in HR, in a nutshell the HR Manager, should treat people as resources,
reward them equitably, and integrate their aspirations with corporate goals through suitable HR
policies.

6. HUMAN RESOURCE MANGEMENT IN IT INDUSTRY

Changes in technology have altered employment and occupational patterns. In India,
there has been considerable shift in employment from agriculture to industry and to
service sector. Technological advancements have boosted productivity and replaced many
blue colored jobs with highly skilled jobs. Telecommunications are making it relatively
easy for many to work at home. Office automation (personal computers, word processing,
management information systems etc) continue to change the nature of office work.
Computer aided manufacturing and office processes require better trained and more
competent employees.
Technological changes have several implications for human resource management. Jobs
and organizational structures will have to be redesigned. New compensation and
incentive schemes need to be created. Changes will also be necessary in selection,
training and evaluation practices. Technology is also forcing firms to be more

20

competitive. Information technology requires flatter organizations. Human resource

management plays a significant role in such changes. For example, employees cannot be
empowered to make decisions unless they are selected trained and rewarded to do so.
Contemporary business environment is characterized by information technology which
has become a significant toll for enhancing productivity. The structure and functioning of
IT industry differs significantly from the traditional manufacturing industries. IT industry
requires high quality staff. As technology and skills become obsolete very fast, there is
need for continuous updating of knowledge and skills. Hiring, developing and retaining
human resources are more crucial in IT industry.

6.1 HIRING TALENT

IT companies need people with diverse skills who have the willingness to learn and
accept change. Shortage of qualified people having necessary skills and relevant
experience makes hiring all the more difficult. IT firms generally prefer the
graduates/post graduates from premier institutions such as IITS. Regional Engineering
Colleges, IIMS and people having masters degree in computer applications (MCAS)

6.2 DEVELOPING TALENT

There is a major focus on developing competency and empowerment skills in IT industry.
Most IT companies undertake skill up gradation programmers periodically. Major IT
companies undertake skill up gradation programmers periodically. Major IT companies
such as Infosys, Wipro, Satyam and TCS have set up their own training institutes. Both
technical training and behavioral training (team-building, interpersonal skills, sensitivity
training etc) are undertaken. I n house programmers, e-learning and outsourcing are used
for this purpose. As the companies operate in a knowledge based industry, considerable
investment is necessary in training and building talent.

6.3 RETAININING TALENT

Due to the high attribution rates, retaining talent has always been a great challenge for
companies. Therefore IT industries have revolutionized performance and compensation
management practices. Several IT companies in India are using 360 degree appraisal and
employee stock option plans (ESOP). Entrepreneurship is another technique used to
retain talent. Under this technique, employees are induced to develop business plans and
sell them to management.Business incubator units are created for this purpose. For
example two US based units Mantra and On scan-have emerged from the incubator in
Infosys. Knowledge employees seek satisfaction or physiological needs. Therefore,
building a sense of pride in the organization, emotional bonding, job sculpting and such
other non-financial rewards can also be quite helpful in retaining talent in IT industry.
Industry is also expected to map a fast track career growth for employees communicating

21

effectively with its people and providing the right opportunities to the right people is
another challenge before IT industry.

7. BUSINESSS PROCESS RE-ENGINEERING (BPR)

Michael Hammer and James Campy introduced the technique of BPR in mid 1980s in their
book reengineering the corporation. Since then the companies all over the world has
redesigned their core business processes to gain radical improvements in performance. Hammer
and Campy has defined BPR as the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in critical, contemporary measures of performance,
such as cost, quality, service and speed. Business process re-engineering is the analysis and
design of workflows and processes within an organization. According to Davenport (1990) a
business process is a set of logically related tasks performed to achieve a defined business
outcome. Re-engineering is the basis for many recent developments in management. The crossfunctional team, for example, it has become popular because of the desire to re-engineer separate
functional tasks into complete cross-functional processes. Also, many recent management
information systems developments aim to integrate a wide number of business
functions. Enterprise resource planning, Supply chain management, Knowledge
management systems, Groupware and collaborative systems, Human Resource Management
Systems and Customer relationship management.

22

Business process re-engineering is also known as business process redesign, business

transformation, or business process change management.

Business process re-engineering (BPR) began as a private sector technique to

help organizations fundamentally rethink how they do their work in order to dramatically
improve customer services, cut operational costs, and become world-class competitors. A key
stimulus for re-engineering has been the continuing development and deployment of
sophisticated information systems and networks. Leading organizations are becoming bolder in
using this technology to support innovative business processes, rather than refining current ways
of doing work.

23

Reengineering guidance and relationship of Mission and Work Processes to Information

Technology.
Business Process Re-engineering (BPR) is basically the fundamental re-thinking and radical redesign, made to an organization's existing resources. It is more than just business improvising.
It is an approach for redesigning the way work is done to better support the
organization's mission and reduce costs. Reengineering starts with a high-level assessment of the
organization's mission, strategic goals, and customer needs. Basic questions are asked, such as
"Does our mission need to be redefined? Are our strategic goals aligned with our mission? Who
are our customers?" An organization may find that it is operating on questionable assumptions,
particularly in terms of the wants and needs of its customers. Only after the organization rethinks
what it should be doing, does it go on to decide how best to do it.
Within the framework of this basic assessment of mission and goals, re-engineering focuses on
the organization's business processesthe steps and procedures that govern how resources are
used to create products and services that meet the needs of particular customers or markets .As a
structured ordering of work steps across time and place, a business process can be decomposed
into specific activities, measured, modeled, and improved. It can also be completely redesigned
or eliminated altogether. Re-engineering identifies, analyzes, and re-designs an organization's

24

core business processes with the aim of achieving dramatic improvements in critical performance
measures, such as cost, quality, service, and speed.
Re-engineering recognizes that an organization's business processes are usually fragmented into
sub processes and tasks that are carried out by several specialized functional areas within the
organization. Often, no one is responsible for the overall performance of the entire process. Reengineering maintains that optimizing the performance of sub processes can result in some
benefits, but cannot yield dramatic improvements if the process itself is fundamentally inefficient
and outmoded. For that reason, re-engineering focuses on re-designing the process as a whole in
order to achieve the greatest possible benefits to the organization and their customers. This drive
for realizing dramatic improvements by fundamentally re-thinking how the organization's work
should be done distinguishes re-engineering from process improvement efforts that focus on
functional or incremental improvement.

The main features of BPR are as follows:

I.

FUNDAMENTAL RETHINKING:
In BPR, an organization must ask the most basic question about its business and
how does it operate. Why does it do what it does and why does it do the way it
does? These questions force people to look at the tactic rules and assumptions that
underlie the way business is audited. Re-engineering first determines what
company must do, then how to do it. It takes nothing for granted. It ignores what
is and concentrates on what should be. At the heart of BPR lies the notion of
discontinuous thinking identifying and abandoning the outdated rules and
fundamental assumptions that underlie the current business operations.

II.

RADICAL REDESIGN:
It means getting to the roots of the things. It involves disregarding all existing
structures and procedures and inventing completely new ways of accomplishing
work. Re-engineering is about business re invention not business improvement,
modification or enhancement. This means that companies and their employees
must unlearn the principles and techniques that brought them success for so long.

25

More innovative, flexible and customer focused organization structures will be

required.
III.

DRAMATIC IMPROVEMENTS:
The main purpose of BPR is to secure quantum leap in performance rather than
marginal improvements. The old ways of doing business need to be replaced by
new ways due to more demanding customers, growing competition and changing
environment. Three types of companies undertake re-engineering. First are the
companies that are in deep trouble and must re-engineer to survive. Second are
companies which forces trouble ahead. Third are companies are in peak condition
and are ambitious and aggressive.

IV.

KEY PROCESSES:
Under division of work principle, managers focus on individual tasks (eg,
receiving the order forms, picking up the goods from the warehouse etc) and lose
sight from the other objective (e.g., to get goods in the hands of the customer).a
business process is a collection of activities that takes one or more inputs and
creates an output valuable to the customer.

Re-engineering is different from both automation and restructuring or downsizing. Downsizing is

doing less whereas BPR is doing more.re-engineering focuses on business processes whereas
reorganizing concentrates on organization structure.re-engineering differs from total quality
management.BPR and TQM are complimentary to the extent that they share a focus on
customers and processes. Quality programmers work within the framework of existing processes
or through continuous improvement called kaizen. The aim is to do what is already being done a
little better.re-engineering involves breakthroughs by discarding the existing processes.

7.1 THE BPR PROCESS

Develop goals and a strategy for reengineering effort

26

Emphasize top managements commitment to

the re-engineering effort

Create a sense of urgency among members of

the organization

Start with a clean slate; in effect, recreate the

organization

Optimize top-down and bottom-up perspectives

7.2 OBJECTIVES OF BPR:

BPR aims at:
i.
ii.
iii.
iv.
v.
vi.

Re-designing the key business processes to improve quality and reduce cost
Flattening the organization and encouraging teamwork.
Applying a holistic approach to principles and processes of business.
Training and developing human resource.
Improving information technology.
Identifying core competencies and managing environmental changes to develop
competitive strength with a clear focus on the goals to be achieved.
Leading Indian companies like TELCO, TISCO, L&T, RANBAXY, ASHOK
LEYLAND, CROMPTRON GREAVES, ETC are adopting BPR to face the
challenges of liberalization and globalization.
Business processes mean the way the work gets done. Processes determine jobs
and structure. The way in which work is performed determines true nature of jobs
and how people who perform these jobs are grouped. The fragmented processes
found in traditional firms lead to narrow specialization and functional

27

departments. On the other hand integrated processes give rise to multidimensional jobs organized into process teams.
People who perform multidimensional jobs and who are organized into teams
must be recruited, evaluated and compensated by means of appropriate
management systems. Management systems in turn shape the values and beliefs
of a company, the regaining values and beliefs in an organization must support the
performance of its process design. For example, an order fulfillment process
designed to operate quickly and accurately can work only when the people
performing it believe in speed and accuracy.

Business Processes

Values and Beliefs

Jobs and Structures

Management and
Measurement
Systems

28

The Business System Diamond

The Four Elements of the business systems Diamond are interrelated. Therefore, BPR practically
changes everything.
When a company re-engineers its business processes, the following types of changing take
place:i.

Work units change from functional departments, to process teams. Key processes are

ii.

simplified and integrated.

Jobs change from specialized tasks to multidimensional work. Process teams are
collectively responsible for process reports. Jobs become more challenging and

iii.
iv.
v.
vi.
vii.
viii.
ix.

satisfying.
People are empowered and not merely controlled.
Education to improve understanding of task and training to increase skills. Constant
learning is encouraged.
Focus of appraisal and compensation shifts from activity to results.
Values change from protective to productive.
Managers act as coaches and mentors rather than superiors.
Organization structures changes from hierarchical to flat.
Checks and balances are reduced.

7.3 Causes of Failure in BPR

1.
2.
3.
4.
5.
6.
7.

Trying to fix a process instead of changing it.

Lacking focus on business process.
Ignoring everything except process redesign.
Settling for results.
Settling for minor results.
Quitting too early.
Placing prior constraints on the definition of the problems and the scope of the re-

engineering effort.
8. Allowing existing corporate cultures and management attitudes to prevent re-engineering
from getting started.
9. Trying to make re-engineering from the bottom-up.
10. Assigning someone who does not understand re-engineering to lead the effort.
11. Skimping on the resources devoted to re-engineering.
12. Bringing re-engineering in the middle of corporate agenda.
13. Dissipating energy across too many re-engineering efforts.
14. Attempt to re-engineer when the chief executive is two years from retirement.

29

15. Failure to distinguish re-engineering from other business improvement programmers.

16. Concentrating exclusively on design.
17. Trying to make re-engineering happen without making anybody happy.
18. Pulling back when people resist making re-engineering changes.
19. Dragging the effort out.

7.4 Conditions for success in BPR

i.

Clarity of Purpose:-First of all, the strategic purpose should be clearly defined. It means
understanding what business you want to be in and how you want me going to gain
competitive advantage in it.

ii.

Top Management Support:-BPR must begin from the top. The leader must develop a
core team competent people from different departments and divisions to plan and
implement the re-engineering programmed.

iii.

Choice of right processes:-Appropriate business processes should be chosen for reengineering. Process should be chosen on three criteria:
a. Dysfunctional or most troublesome processes.
b. Process having the maximum impact on customers.
c. Processes most susceptible to successful redesign.

iv.

Customers Angle:-See things through the customers eyes. Discard preconceived

notions and create a vision of the re-engineering corporation. Staff can be convinced of
the need for re-engineering by explaining the impact on customer satisfaction.

v.

Sense of urgency:-A time frame should be developed for achieving results through reengineering.

vi.

Proper Climate:-Environment conducive to change must be created. Involvement and

participation of people are helpful in overcoming resistance to change.

30

8. DOWNSIZING
Downsizing means reducing the size of the organization. It is a restructuring process in which the
organization disposes off its non- core activities. In the context of human resource management,
downsizing involves elimination of certain jobs with a view to improve work efficiency. The
organization reduces staff which is excess of its needs. As a result some of the employees get
separated from the organization.

Downsizing is a commonly used euphemism which refers to reducing the overall size
and operating costs of a company, most directly through a reduction in the total
number of employees. When the market is tight, downsizing is extremely common, as
companies fight to survive in a hostile climate while competing with other companies
in the same sector. For employees, downsizing can be very unnerving and upsetting.
There are several reasons to engage in downsizing. The primary reason is to make the
daily operations of a business more efficient. For example, a company may be able to
replace assembly line employees with machines which will be quicker and less prone

31

to error. In addition, downsizing increases profits by reducing the overall overhead of

a business. In other instances, a company may decide to shut down an entire division;
a car company, for example, might decide to stop making sedans altogether, thus
cutting an entire department.
In some cases, it becomes apparent that a business has too many employees. This may
be because there has been a decline in demand for the company's services, or because
a company is running more smoothly and efficiently than it once was. Many offices
are heavily bloated with support staff and redundant departments, and these
businesses may refer to downsizing as trimming the fat.
Numerous terms accompany downsizing. Employees may be terminated, fired, laid
off, made redundant, or released. A business may be optimized, right sized, or
experiencing a reduction in workforce. Some of these terms have different legal
meanings depending on where one is in the world; a layoff, for example, may refer to
a mass temporary release of employees who will brought back in once business picks
up, while a redundant employee is one who is asked to leave permanently.
Numerous consulting firms offer assistance with downsizing, often with the use of
specialists who visit a business to evaluate it. Since profit is an important bottom line
for companies, downsizing measures should be expected by employees, especially
when they observe a troubled market or they are working for a struggling company.
For employees, the process can be stressful, because they may feel uncertain about
whether or not they will continue to employ. Sometimes, downsizing is very abrupt,
with a huge batch of employees being released from employment on the same day,
while in other cases
it may be a more drawn out and nerve-wracking process in which employees are
slowly let go. Employers should remember that downsizing is very upsetting and
stressful, and they should take steps to make it run smoothly while assuring valued
employees that their jobs are secure.
8.1 Rationale

32

Downsizing may become necessary due to the following reasons:1. An organization might suffer from over staffing due to faulty human resource
planning. At the same time, steel authority of India (SAIL) had 1, 70,000
employees as against its actual requirement of 1, 00,000 employees.
2. A change in man-machine ratio may occur due to technological advances.
3. An organization may start outsourcing some of its business functions. As
result people employed in these functions become surplus.
Downsizing may, however, lead to following adverse consequences:
1. Downsizing may create a feeling of insecurity causing low morale and high stress
among employees. Employees may feel that they are paying the price for
mismanagement.
2. When competent employees leave the organization, downsizing may erode the skill
base.
3. Implementation of performance improvement practices become difficult due to a
feeling of job insecurity created by downsizing.

8.2 Downsizing -- The Long Term Effects

Few government departments or branches have escaped the necessity of downsizing.
The last three or four years have brought almost constant cuts in staffing, and some
departments have been "hit" several times. For many downsizing has become an
annual process.
When managers are faced with downsizing, they tend to focus on the immediate and
practical needs that emerge at the time when staff are being let go. After all,
employees need to be selected and notified, one of the most difficult tasks for any
manager. Jobs responsibilities need to be shuffled, and generally the period where
downsizing is occurring is very busy and emotionally taxing.
Unfortunately, there is a tendency for managers to focus on those that are leaving

33

rather than those that remain. This also holds true for central training and consulting
agencies who are asked to support the laid off employees with career development
help, counseling, and other supports. There is no question that lay off employees
deserve and need these kinds of supports and services. Unfortunately, there is a
tendency to forget that after the laid-off workers are gone, the "survivors" must soldier
on, and the manager must deal with the long-term effects on the remaining
organization.
We are now seeing the effects of downsizing on those that remain. One of the most
telling comments is often put forth by employees a year or two after downsizing, and
it goes like this: "Sometimes I think that the ones who were laid off are the lucky
ones". They usually go on to describe a workplace where employees feel:
. A lack of executive commitment to their functions
. Confusion about the priorities of their organization
. Increased workloads
. Confusion about their mandate
. A sense of being betrayed by executives and managers
. A profound sense of distrust
. A sense of futility with respect to long-term planning
. Undervalued and unappreciated
In operational terms, this translates into a number of problems.
. The organization moves towards less risk-taking and innovation
. Destructive conflict tends to increase
.Internal competition for resources increases
.Individual staff members devote less effort to working together and more attention to
doing things that will protect themselves.
. General listlessness and lethargy
. Decreases service levels and increased public hostility

34

Dealing with downsizing: The right way to manage your workforce during a recession
Theres no doubt about itits a tough time to be in business. Whether you
own your company, hold a position in senior management or work in human
resources, there is a lot of pressure on you to ensure that your organization makes it
through the recession with the fewest battle scars possible.
One of the key factors to your success will be how you handle the people who work
for youespecially if you are considering laying off staff.
Holding on to the employees you need
Its tempting to assume that your employees are grateful just to have a job and would
never dream of leaving during a recession, but that would be a costly mistake. A 2008
study published by the University of WisconsinMadison found that downsizing can
actually lead to a higher rate of turnover, which can leave organizations without the
critical people they need to keep operating through the tough times. Although they
may not be actively looking, unhappy employees are usually open to new
opportunities if they present themselves.
So how do you keep your employees from wanting to leave? Make a concerted effort
to keep morale up; low morale leads to job dissatisfaction and poor productivity. It
can be challenging in a recession, but it is possible. Heres how.
1. Increase Communication. One of the worst things you can do during a recession
is to leave your employees in the dark. People tend to know when layoffs are coming
they smell it on the wind. But leaving your employees to guess at whats a coming
only lead to rumors and low morale. Be open and honest with your employeesshare
both what you know and what you dont know about how the economy is affecting
your business. Whatever you do, dont rely on email for communicating difficult
news. It lacks tonality and can seem very cold and uncaring. Have regular staff
meetings so employees have an opportunity to ask questions. And if you dont know
the answer to a question, its okay to say so.

35

2. Invest in Training. Investing in anything during a recession may seem counterintuitive, but now is an excellent time to invest a little time and money in your
employees. Continuing to plan for the future and showing your employees they are an
important part of the company go a long way toward maintaining morale. It doesnt
have to be expensive. Take advantage of e-learning opportunities, plan a Lunch &
Learn session, encourage employees to join trade associations that offer inexpensive
training sessions, organize a mentoring program or arrange for employees who
participate in off-site training to share what theyve learned when they return to the
office.
3. Involve Your Employees in Decision-Making. As much as possible, involve your
employees in major decisions like layoffs or salary cuts. Since they work in the
trenches, they may have ideas that will surprise you, such as innovative ways to cut
costs or get rid of inefficient processes. You may also find out how far employees are
willing to go to avoid job losses. If you are facing dire circumstances, your employees
might suggest alternatives to layoffs such as a pay cut, closing at noon on Fridays or
other cost-saving measures. Most importantly, you will increase the amount of
employee buy-in if they feel they are part of the decision-making process and not
simply at the mercy of unseen faces working behind closed doors.
4. Stay positive. A good attitude is infectious. Try to maintain a positive outlook and
remember to share good news widely.
5. Try to keep the little things. When budgets get tight, the first impulse is to cut
everything that seems non-essential. If you can, try to keep the small perks that dont
cost very much but that really boost morale.
Avoiding layoffs altogether

Programs like the federal governments Work-Sharing program may help you avoid
permanent layoffs. Work-Sharing is an Employment Insurance (EI) program that

36

enables companies whose business activities have been reduced due to circumstances
beyond their control to cut back staff hours anywhere from one to three days a week.
This helps companies reduce salary costs without resorting to layoffs.
With Work-Sharing, workers whose employers are participating in the program can
draw EI benefits to help compensate for the loss of income. The program helps both
the worker and the employer: employers retain the experienced staff they will need
once the economy starts to improve and employees protect their income and maintain
their skills.
The last resort: handling layoffs
Laying people off is easily one of the hardest roles that a manager faces, but it is
almost inevitable that at some point in your career you will need to do it.
Although it may sound odd, laying people off and retaining people actually go hand in
hand. How you conduct layoffsand how you deal with those who remainwill
directly impact your bottom line. Mishandle either of those two things and you will be
facing productivity and morale problems.
Why is it so important to carry out layoffs properly? For one thing, we now live in the
age of social media and greater personal disclosure, which means there is a good
chance some of your former employees will share their experiences (good, bad or
ugly) on YouTube, Twitter, Facebook or a blog. If the comments are negative, they
can seriously harm your companys reputation and your ability to attract new clients
or employees.
Be aware the employees who remain will be watching your actions very closely. Treat
laid-off workers with respect and dignity and you will retain the respect of your
employees. Show a lack of compassion or march a popular and well-respected
employee to the door like a criminal and you will quickly find yourself facing a crisis
in employee morale and a reduction in company loyalty.

37

Another reason why layoffs need to be handled with care is that the business world is
becoming increasingly interconnected. Social media have moved into the business
world with networks like LinkedIn, where there is rarely more than a few degrees of
separation between you and a previous employee. And never forget that todays
former employee may be tomorrows client.
So, how do you make sure that you conduct layoffs in a manner that reflects well on
you and your company? It comes down to four basic principles.
1. Plan layoffs carefully. If you find yourself in a position where you need to let
people go, dont act indiscriminately. Take the time to ensure your layoff plan and
your business plans are in sync. Look at your current projectsparticularly those that
are critical to the businessand dont forget to plan for the future. Make sure you
have a clear idea of the projects that will get underway once the crisis is over. The last
thing you want is to suddenly realize that a mission-critical project is in jeopardy
because you let the wrong people go and now dont have the talent and resources to
proceed.
2. Be prepared. You will make things easier both for yourself and the people you are
laying off if you are well prepared. If you need to, write a script and practice it in
front of a mirror until you can do it without sounding forced. Make a list of questions
that might be asked and have answers ready. Be confident and get to the pointdont
make small talk. Keep in mind that much of what is said in a layoff meeting will not
be retained, so have resources available for affected employees, such as information
on benefits, separation terms, important contacts and other written information. Also,
make sure you have fully planned the necessary post-layoff logistics. Will employees
be allowed to say goodbye to colleagues? Will they be permitted some time to gather
their belongings? Will you offer to pack up their things and have the boxes delivered
to their home address?
3. Know the law. One thing you really dont needin a recession or at any timeis
a costly court battle, so make sure you know your responsibilities as an employer. The

38

law stipulates that employees must get either some notice prior to dismissal or be
compensated instead, although the particulars vary depending on the province or
territory. There are also certain rules that apply when laying off groups of individuals,
but again, the laws are different depending on the province. Speak to a lawyer or
contact your provincial labor board to make sure that you are meeting your
obligations in accordance with the law.
4. Treat people with dignity and respect. It is human nature to shy away from
uncomfortable situations, but as a manager you dont have that luxury. Distancing
yourself because you feel bad wont make anyone feel better. Remember, this is not
your fault, and avoiding people will not minimize feelings of guilt or hurt. In fact, it
will make them worse. Be kind and compassionate. Losing your job can be a
humiliating experience, so give people the respect they need.
Remember, the recession will end eventually, but what you do between now and then
could have a direct impact on whether your business thrivesor nosedives. When the
recession is finally over and business starts to return to normal, make sure that you
and your employees are ready.

8.3 Role of HR in Downsizing

Human resource personnel have to perform the following functions for successful
implementation of downsizing:
HR personnel must ensure proper communications to minimize the negative effects of
rumors and ensure that individuals are kept informed with factual data.
1. In order to sell the idea of downsizing to the employees, HR professionals have to
convince trade unions and win their support for downsizing.
2. Hr managers must also deal with the actual layoff. They must have programmers to assist
the laid off employees, when informed about layoff, employees face many uncertainty
about service pay, retirement benefits, search for alternatives job, transition assistance,
etc. These uncertainties need to be anticipated and taken care of.

39

9. Voluntary Retirement Scheme (VRS)

In India downsizing its generally implemented through voluntary retirement scheme. Under this
scheme the organization and its employees enter into mutual agreement. Under this agreement
employees agree to voluntarily retire on payment of agreed compensation by the employer. In the
present globalized scenario, right sizing of the manpower employed in an organization has
become an important management strategy in order to meet the increased competition. The
voluntary retirement scheme (VRS) is the most humane technique to provide overall reduction in
the existing strength of the employees. It is a technique used by companies for trimming the
workforce employed in the industrial unit. It is now a commonly method used to dispense off the
excess manpower and thus improve the performance of the organization. It is a generous, taxfree severance payment to persuade the employees to voluntarily retire from the company. It is
also known as 'Golden Handshake' as it is the golden route to retrenchment.
In India, the Industrial Disputes Act, 1947 puts restrictions on employers in the matter of
reducing excess staff by retrenchment, by closures of establishment and the retrenchment process
involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction

40

of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was
introduced as an alternative legal solution to solve this problem. It allowed employers including
those in the government undertakings, to offer voluntary retirement schemes to off-load the
surplus manpower and no pressure is put on any employee to exit. The voluntary retirement
schemes were also not subjected to not vehement opposition by the Unions, because the very
nature of its being voluntary and not using any compulsion. It was introduced in both the public
and private sectors. Public sector undertakings, however, have to obtain prior approval of the
government before offering and implementing the VRS. India is a large country with large
population. She is facing many problems at the same time. One of its biggest problems, which
India is facing, is that of Unemployment. It demands an immediate solution because it threatens
the peace, prosperity and stability of free India.
VRS or voluntary retirement schemes are being implanted across almost all sectors in India to
prevent the situation of Unemployment. The employees in banks and public sector undertakings
have been given the option to retire with handsome benefits. It is also known as "Golden
handshake". The Nationalized banks took the lead and the bank officers grabbed the opportunity.
They got 12 to 20 lakhs cash to start life afresh. A tough estimate of the number of VRS
separations in the year 2001 is in excess of the two lakh. The scheme enabled to over-staffed
units to get rid of surplus hands and thus to make long-term gains. It was designed to improve
their competitiveness and efficiency.
As the scheme is implemented to prevent the unemployment but in fact VRS has actually
increased the problem of unemployment. After getting the voluntary retirement they could not sit
idle for long period. After all it is difficult for anybody to sit idle. A large number of skilled
workers from VRS separation have created a new set of problems. The workers who have retired
at an early age are still good enough to work. They accept jobs in private sector not for monetary
gain so much as for keeping themselves busy. As a result, they have snatched the employment
opportunities of the fresh job seekers. Secondly, the old hands agree to work for a smaller pay
packet, which suits the employer.
Unemployment means forced idleness, it a young man or woman willing to work for his living is
denied a job, he is unemployed. In the capitalist system there is very little scope for the working
class. They kept them at starvation level. Now with the wide use of computers, they have been

41

able to cut down the workforce by nearly 80 percent. What is the future of millions of jobless
young men and women in such a situation? The unemployed have come to realize that only thing
worse' than being exploited is the state of being idle and penniless.
Employment opportunities in India today are almost nil. Even the Government, which used to be
the largest employer, has stopped all recruitments, Industrial growth also has been negative over
the last several years. As a result the unemployment rate is increased to 7.3 percent of the
working population is the highest of the last decade.
A major cause of growing unemployment is global recession or the economic slowdown all over
the world. Information Technology sector no more offers a bright career. There is general slump.
The invasion of cheap Chinese goods in Indian market is another deathblow to Indian industries.
One of our richest resources is human being, which is means as-well-as end of the production.
Therefore this manpower should be utilized in proper way so that it becomes productive. It is a
well-known fact that the very institution of democracy becomes weak if the number of
unemployed people abnormally increases in a country. Apart from it if the manpower in our
country is not utilized there are no chances of developing the economy of India. Unemployment
cannot be more disastrous to any other country than to ours.
What is therefore required is a growth strategy that seeks to get the bulk of additional agricultural
output from the states, which have yet to benefit from Green Revolution. They account 80% of
the poor and 70% of the unemployed. Furthermore, if employment is to become the primary
objective of developmental planning, a major part of additional output is the nineties and
thereafter will have to be derived from the village and smalls scale industry sector which account
80% of industrial employment. A shift in the pattern of investment, the sources of employment
generation and the development strategy all over will be required to avoid the payment of dole.
So the way to tackle the problem of unemployment is to curb the causes behind it.

42

A business firm may opt for a voluntary retirement scheme under the following
circumstances:

Due to recession in the business.

Due to intense competition, the establishment becomes unviable unless downsizing is

resorted to.

Due to joint-ventures with foreign collaborations.

Due to takeovers and mergers.

Due to obsolescence of Product/Technology.

Though the eligibility criteria for VRS varies from company to company, but usually, employees
who have attained 40 years of age or completed 10 years of service are eligible for voluntary
retirement. The scheme applies to all employees including workers and executives, except the
directors of a company. The employee who opts for voluntary retirement is entitled to get forty
five days emoluments for each completed year of service or monthly emoluments at the time of
retirement multiplied by the remaining months of service before the normal date of service,
whichever is less. Along with these benefits, the employees also get their provident fund and
gratuity dues. Compensation received at the time of voluntary retirement is exempt from tax
under section 10 (10C) of the Income Tax Act, 1961 up to the prescribed amount upon fulfilling

43

certain stipulated conditions. However, the retiring employee should not be employed in another
company or concern belonging to the same management.
The companies can frame different schemes of voluntary retirement for different classes of their
employees. However, these schemes have to conform to the guidelines prescribed in rule 2BA of
the Income-tax Rules. The guidelines for the purposes of section 10( 10C ) of the Income-tax Act
have been laid down in the rule 2BA of the Income-tax Rules. The guidelines provide that the
scheme of voluntary retirement framed by a company should be in accordance with the following
requirements, namely:

It applies to an employee of the company who has completed ten years of service or
completed 40 years of age

It applies to all employees (by whatever name called), including workers and executives
of the company excepting Directors of the company

The scheme of voluntary retirement has been drawn to result in overall reduction in the
existing strength of the employees of the company

The vacancy caused by voluntary retirement is not to be filled up, nor the retiring
employee is to be employed in another company or concern belonging to the same
management

The amount receivable on account of voluntary retirement of the employees does not
exceed the amount equivalent to one and one-half months salary for each completed year
of service or monthly emoluments at the time of retirement multiplied by the balance
months of service left before the date of his retirement on superannuation. In any case,
the amount should not exceed rupees five lakhs in case of each employee, and

44

The employee has not availed in the past the benefit of any other voluntary retirement
scheme.

Some companies offers very attractive package of benefits to the employees who opt for VRS.
For example, the VRS scheme may also include providing counseling to employees about their
future; managing of funds received under the scheme; offering rehabilitation facilities to them,
etc.
A company may make the following announcements while implementing a voluntary
retirement scheme:

The reasons behind downsizing the organization.

The eligibility criteria for voluntary retirement scheme.

The age limit and the minimum service period of employees who can apply for the
scheme.

The benefits that are offered to the employees who offer to retire voluntarily.

The rights of the employer to accept or reject any application for voluntary retirement.

The date up to which the scheme is open.

The income tax benefits and income tax incidence related to the scheme.

It should also indicate that the employees who opt for voluntary retirement and accept the
benefits under such scheme shall not be eligible in future for employment in the
organization.

45

Voluntary Retirement Schemes have been legally found to be giving no problem to employers,
employees and their unions. But, the retrenchment plans of an organization must be compatible
to its strategic plans. Its procedure and reasons for introduction must be discussed with all
management staff including top management. One need to identify departments or employees to
whom VRS is applicable and thereby formulate its terms and conditions and also state the
benefits that would be available to those who took VRS. Such information should be made
available to every employee of the organization, mentioning the period during which the scheme
will be open. Also, existing employees might face insecurity because of fear of losing their job
too. One of the possible drawbacks of the VRS is that the efficient employees would leave the
company while the inefficient may stay back. Thus it is the /responsibility of the employer to
motivate them and remove their apprehensions and fears. During 1991 India adopted of
economic liberalization, globalization and privatization. Since then several organization in both
public sector and private sector have downsized in order to reduce the surplus staff.VRS has
been used to reduce the wage bill by offering one time compensation. VRS has come to known
as GOLDEN HAND SHAKE in view of its benefits for both employees and employers.
In initial stage VRS appeared attractive and many organizations successfully implemented it,
but in many cases VRS attempts have failed. Various issues involved in VRS need to be tackled
effectively in order to make the scheme successful. The main issue in VRS is as follows:

1. Identifying the need of VRS.

First of all the organization must check whether VRS is really necessary. In case there is
surplus manpower which cannot be utilized in future.VRS may be required. The type of
employees to be covered in the scheme and those who opt for it also need to be identified.

2. Cost benefits Analysis.

Before deciding to launch a VRS .its implications for the organization should be carefully
considered. VRS is double edged weapon and not a panacea for all ills of humans
resource management. When targeted employees do not opt for VRS, the morale of
employees may go down. It is also possible that employees who are unemployable
elsewhere do not opt for the scheme. In such a case the organization may lose talent and
may be left with poor quality staff. If this happen the very purpose of VRS will be
defeated.

46

3. Designing the Scheme.

The main issues involved in designing VRS are:a) The employees to be covered in the scheme. Logic lies in covering those employees
to be covered in the scheme. Who are least required in future? SAIL prescribed the
minimum age limit for different categories of employees.
b) The compensation package to be offered. In public sector three months salary for
each completed year of service subject to a maximum of monthly salary multiplied by
the number of months left for retirement is the norm. In public sector banks 45 days
of salary for every year of service or salary for balance period of service whichever is
less offered.

4. Convincing Trade Unions

Unless trade union agrees VRS is likely to fail. Therefore, management must convince
the union by explaining various pros and cons and suggesting alternatives which
employees can adopt after opting for VRS.

5. Rehabilitating Employees.
A firm or an association of firms may design a rehabilitation package for the concerned
employees. Such a package includes redeployment through further training. When
employees know that they have alternative means of earning livelihood. They will opt for
VRS. Government of India has set up five employees assistance centers at Mumbai,
Kolkata, Ahmadabad and Indore to provide training to displaced workers.

In the present globalised scenario, right sizing of the manpower employed in an organization has
become an important management strategy in order to meet the increased competition. The
voluntary retirement scheme (VRS) is the most humane technique to provide overall reduction in
the existing strength of the employees. It is a technique used by companies for trimming the
workforce employed in the industrial unit. It is now a commonly method used to dispense off the
excess manpower and thus improve the performance of the organization. It is a generous, taxfree severance payment to persuade the employees to voluntarily retire from the company. It is
also known as 'Golden Handshake' as it is the golden route to retrenchment.
In India, the Industrial Disputes Act,1947 puts restrictions on employers in the matter of
reducing excess staff by retrenchment, by closures of establishment and the retrenchment process

47

involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction
of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was
introduced as an alternative legal solution to solve this problem. It allowed employers including
those in the government undertakings, to offer voluntary retirement schemes to off-load the
surplus manpower and no pressure is put on any employee to exit. The voluntary retirement
schemes were also not subjected to not vehement opposition by the Unions, because the very
nature of its being voluntary and not using any compulsion. It was introduced in both the public
and private sectors. Public sector undertakings, however, have to obtain prior approval of the
government before offering and implementing the VRS.
A business firm may opt for a voluntary retirement scheme under the following
circumstances:

Due to recession in the business.

Due to intense competition, the establishment becomes unviable unless downsizing is

resorted to.

Due to joint-ventures with foreign collaborations.

Due to takeovers and mergers.

Due to obsolescences of Product/Technology.

Though the eligibility criteria for VRS varies from company to company, but usually, employees
who have attained 40 years of age or completed 10 years of service are eligible for voluntary
retirement. The scheme applies to all employees including workers and executives, except the
directors of a company. The employee who opts for voluntary retirement is entitled to get forty
five days emoluments for each completed year of service or monthly emoluments at the time of
retirement multiplied by the remaining months of service before the normal date of service,
whichever is less. Along with these benefits, the employees also get their provident fund and
gratuity dues. Compensation received at the time of voluntary retirement is exempt from tax
under section 10 (10C) of the Income Tax Act, 1961 up to the prescribed amount upon fulfilling
certain stipulated conditions. However, the retiring employee should not be employed in another
company or concern belonging to the same management.

48

The companies can frame different schemes of voluntary retirement for different classes of their
employees. However, these schemes have to conform to the guidelines prescribed in rule 2BA of
the Income-tax Rules. The guidelines for the purposes of section 10( 10C ) of the Income-tax Act
have been laid down in the rule 2BA of the Income-tax Rules. The guidelines provide that the
scheme of voluntary retirement framed by a company should be in accordance with the following
requirements, namely:

It applies to an employee of the company who has completed ten years of service or
completed 40 years of age

It applies to all employees (by whatever name called), including workers and executives
of the company excepting Directors of the company

The scheme of voluntary retirement has been drawn to result in overall reduction in the
existing strength of the employees of the company

The vacancy caused by voluntary retirement is not to be filled up, nor the retiring
employee is to be employed in another company or concern belonging to the same
management

The amount receivable on account of voluntary retirement of the employees does not
exceed the amount equivalent to one and one-half months salary for each completed year
of service or monthly emoluments at the time of retirement multiplied by the balance
months of service left before the date of his retirement on superannuation. In any case,
the amount should not exceed rupees five lakhs in case of each employee, and

The employee has not availed in the past the benefit of any other voluntary retirement
scheme.

Some companies offers very attractive package of benefits to the employees who opt for VRS.
For example, the VRS scheme may also include providing counseling to employees about their
future; managing of funds received under the scheme; offering rehabilitation facilities to them,
etc.
A company may make the following announcements while implementing a voluntary
retirement scheme:-

49

The reasons behind downsizing the organization.

The eligibility criteria for voluntary retirement scheme.

The age limit and the minimum service period of employees who can apply for the
scheme.

The benefits that are offered to the employees who offer to retire voluntarily.

The rights of the employer to accept or reject any application for voluntary retirement.

The date up to which the scheme is open.

The income tax benefits and income tax incidence related to the scheme.

It should also indicate that the employees who opt for voluntary retirement and accept the
benefits under such scheme shall not be eligible in future for employment in the
organization.

Voluntary Retirement Schemes have been legally found to be giving no problem to employers,
employees and their unions. But, the retrenchment plans of an organization must be compatible
to its strategic plans. Its procedure and reasons for introduction must be discussed with all
management staff including top management. One need to identify departments or employees to
whom VRS is applicable and thereby formulate its terms and conditions and also state the
benefits that would be available to those who took VRS. Such information should be made
available to every employee of the organization, mentioning the period during which the scheme
will be open. Also, existing employees might face insecurity because of fear of losing their job
too. One of the possible drawbacks of the VRS is that the efficient employees would leave the
company while the inefficient may stay back. Thus it is the /responsibility of the employer to
motivate them and remove their apprehensions and fears

10. Changing Role of Human Resource Management

50

Along with the environment of human resource management, the role of HRM is also changing.
In todays Flattened, downsized and responsive organizations highly trained and committed
workforce rather than machinery is the best competitive edge.
Some examples of the new role of Human Resource Management are given below:

1. Productivity Improvement.
In the globally competitive environment boosting productivity is of crucial importance.
Human resource management plays a vital role in boosting productivity and reducing
labor costs. Screening tests used to select high potential employees, training programmers
for increasing labor productivity etc. are designed by the HR department. In downsizing
programmers, human resource experts help employees learn to prioritize tasks and
reduce job stress.

2. Employee commitment.
Only involved and committed employees can make a difference. Building employee
commitment through two way communications, grievance handling, fair treatment,
opportunities for full use of skills, career oriented performance appraisal , open job
postings, etc. it is necessary to convince employees that the company and all its managers
care about them.

3. Responsiveness.
Organizations need to be more responsive to technological change and product
innovations. Downsizing, employee empowerment, flattened structure, and team work
are all designed to enable the organization to respond quickly to customers needs to
competitors challenges. Human resource management plays a crucial role in team
building through group incentives and flexible work hours. HR will have proactive rather
reactive.

4. Service sector.
Success in service organizations such as banks, airlines, hotels and other depends largely
on employee behavior. Human resource management can improve attitudes, motivation
and behavior of staff. Progressive practices such as career advancement, orientation and
socialization, employee counseling help improve employee behavior towards customers.
Human resources practices build employee commitment and morale which in turn
improve customer service and generate profits.

5. Corporate Strategy.

51

Human resource management is playing an increasing role in developing and

implementing corporate strategy. In fast changing and globally competitive environment,
human resources provide a competitive advantage. Therefore, strategy has become
increasingly dependent on employee competence, motivation and commitment. HR is
going to play an increasingly significant role in corporate strategic management.

11. CASE STUDIES

CASE STUDY: 11.1

52

BSNL submits VRS proposal to Telecom Ministry/BSNL seeks 12000 cr for VRS

Abstract
Kapil Sibal asks BSNL to submit plans to become profitable. In order to run profitable, BSNL
has prepared several plans which also include a VRS plan to employees
Issues
BSNL Staff VRS : BSNL staff to go on one-day strike against proposed VRS
State-run BSNL has submitted the details of the proposed voluntary retirement scheme
(VRS) to the Telecom Ministry for employees who have completed the age of 45 years and have
served on a regular basis for 15 years, Parliament was informed today.
The employees, who will avail the VRS, would get an ex-gratia amount of 60 days salary (basic
+ dearness allowance) for each completed year of service, or salary for the number of months left
in the service, whichever is less.
However, the compensation would be subject to the maximum of 60 months salary, Minister of
State for Communications and IT Milind Dora said in Lok Sabha.
Further, he said the ex-gratia amount will be in addition to the normal retirement benefits.
The likely expenditure on ex-gratia for approximately 1 lakh employees is estimated to be about
Rs 11,276 crore. In addition there will be expenditure on normal retirement benefits, including
gratuity, pension, leave encashment and transfer grant.

53

BSNL had consultations with its executive association and staff union in this regard. BSNL has
reported that the majority of associations have opposed the scheme or expressed their
reservations, he added.
"The proposal is under examination in the Department of Telecom," Deora said.
BSNL had registered a net loss of Rs 1,823 crore during 2009-10. BSNL had reported the highest
net profit of over Rs 10,000 crore in 2005-06, but since then its profits have been falling and in
2009-10 it reported net losses.
The VRS has been under discussion since 2009 when a panel headed by Sam Pitroda, advisor to
the Prime Minister on Public Information Infrastructure and Innovations, advocated that BSNL
take the VRS route to prune its nearly 2.77 lakh strong workforce by a third.
Besides, BSNL has Rs 5,475.73 crore as the outstanding dues from the customers at the end of
three years and for the current year as on September 30, 2011 in respect of wired and wireless
mobile services and circuits, Deora said.
State-owned telecom service operator Bharat Sanchar Nigam Limited (BSNL) is seeking Rs
12,000 crore from the central government towards one-time compensation package to the
employees opting for its voluntary retirement scheme (VRS), according to RK Upadhyay,
chairman and managing director.
The total cost of the VRS, designed to revive the loss-making company, works out to Rs 16,000
crore if 100,000 employees opt for it. I think approximately Rs 12,000 crore is required to be
given by the government and the remaining Rs 4,000-odd crore will be borne by the company

Employee costs account for 48 per cent of the public sector undertaking (PSU). The VRS will
not only help in saving 15-16 per cent of the companys revenues but will also give the flexibility
of recruiting young workforce who can adopt to new technologies or outsource some of its
services, he said.
Upadhyay said the company had charted out plans to wipe out its losses in the next two to three
years. This year, we hope to keep our losses at least at the same level as last year's if not less,
he added.
BSNLs losses have more than tripled to about Rs 6,000 crore during 2010-11, primarily on
account of hefty outgo for employees salaries and expenses borne by the PSU for procuring 3G
and BWA spectrum. The company had registered a net loss of Rs 1,823 crore during 2009-10.
He said the zero-debt company paid in excess of Rs 19,000 crore to the government by way of
spectrum charges and it was expecting around Rs 6,000 crore from the government in return to
the spectrum surrender.

54

BSNL, which for the last three years had received Rs 2,000 crore per year from the government
under the Universal Service Obligation Fund towards its commercially non-viable operations, is
also looking at requesting the Centre to continue the same.
The Rs 2,000-crore government contribution ended in July 2011. We have taken up the case and
the government is considering. We do expect that pretty soon ... and it is not a bailout package,
Upadhyay said while ruling out any possibility of seeking a bailout scheme from the
government.
To achieve a turnaround, Upadhyay said, BSNL was looking at new revenue streams, which
include commercializing its idle lands across the country in a public-private-partnership mode.
We have enormous land bank, which came under the BSNL fold through a memorandum of
understanding with the Centre in 2001. Now, the government is evaluating options on how to
formally hand over this land to us. This land has been given to us for a specific purpose of
offering telecom and IT services. So, we will go in for giving the land or buildings that are idle to
KPOs, BPOs and call centers, he said.
On the litigations surrounding the orders for GSM lines, Upadhyay said the tender for 14.7
million GSM lines had already been opened through an e-tendering process and that both
technical and financial bids had been submitted to the government.
Technical bids have been opened and we hope to complete the technical evaluation in about 710 days from now. Then, we will be in a position to go for the financial bids, which probably will
come to a conclusion within the next three-four weeks. We estimate the cost of the singlequantity tender to be around Rs 5,000 crore, funds for which will be raised from banks, he
added.
Issues
Bangalore: A union of state-run telecom major BSNL Tuesday said its workers, executives and
non-executives plan to go on a one-day strike on December 15 against the "proposed
retrenchment of workers" through Voluntary Retirement Scheme (VRS) and withdrawal of
existing benefits.
"Over 92 million mobile users and about 29 million fixed line users could expect disrupted
telecom services (on Dec 15)," BSNL Joint Action Committee (JAC, Karnataka) Conveyor C K
Gundanna told reporters here.
Parliament was informed on Nov 30 that state-run BSNL had submitted the details of the
proposed VRS to the Telecom Ministry for employees who had completed the age of 45 years
and had served on a regular basis for 15 years.
"It is only due to the pro-private and anti-PSU policies of the government and mismanagement
that the financial viability of the company has been adversely affected," he alleged.

55

BSNL had registered a net loss of Rs 1,823 crore during 2009-10. BSNL had reported the highest
net profit of over Rs 10,000 crore in 2005-06, but since then its profits have been falling and in
2009-10 it reported net losses.

CASE STUDY:11. 2
THE STATE BANK OF INDIA:VRS

56

ABSTRACT
The case 'The State Bank of India VRS' is intended to provide a detailed insight into the
developments after leading Indian public sector bank SBI decided to implement a VRS. The case
examines in detail the reasons for SBI's employees protesting against the VRS and the post-VRS
scenario.

Issues:
How poor manpower planning led to problems with the banks VRS
Contents:
VRS troubles
Background note
The protests
The post VRS days

57

In February 2001, India's largest public sector bank (PSB), the State Bank of India (SBI) faced
severe opposition from its employees over a Voluntary Retirement Scheme (VRS). The VRS,
which was approved by SBI board in December 2000, was in response to Federation of Indian
Chambers of Commerce and Industry's (FICCI) report on the banking industry. The report stated
that the Indian banking industry was overstaffed by 35%. In order to trim the workforce and
reduce staff cost, the Government announced that it would be reducing its manpower.
Following this, the Indian Banks Association (IBA)2 formulated a VRS package for the PSBs,
which was approved by the Finance ministry.
Though SBI promoted the VRS as a 'Golden Handshake,' its employee unions perceived it to be
a retrenchment scheme. They said that the VRS was completely unnecessary, and that the real
problem, which plagued the bank were NPAs3. The unions argued that the VRS might force the
closure of rural branches due to acute manpower shortage. This was expected to affect SBI's aim
to improve economic conditions by providing necessary financial assistance to rural areas. The
unions also alleged that the VRS decision was taken without proper manpower planning. In
February 2001, the SBI issued a directive altering the eligibility criteria for VRS for the officers
by stating that only those officers who had crossed the age of 55 would be granted VRS.
Consequently, applications of around 12,000 officers were rejected. The officers who were
denied the chance to opt for the VRS formed an association - SBIVRS opted Officers'
Association to oppose this SBI directive. The association claimed that the management was
adopting discriminatory policies in granting the VRS...

Background note
The SBI was formed through an Act of Parliament in 1955 by taking over the Imperial Bank. The
SBI group consisted of seven associate banks:
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
State Bank of Bikaner & Jaipur.
The SBI was the largest bank in India in terms of network of branches, revenues and workforce.
It offered a wide range of services for both personal and corporate banking. The personal
banking services included credit cards, housing loans, consumer loans, and insurance. For
corporate banking, SBI offered infrastructure finance, cash management and loan syndication...

58

The protest
The SBI was shocked to see the unprecedented outcry against the VRS from its employees. The
unions claimed that the move would lead to acute shortage of manpower in the bank and that the
bank's decision was taken in haste with no proper manpower planning undertaken.
They added that the VRS would not be feasible as there was an acute shortage of officers
(estimated at about 10000) in the rural and semi-urban areas where the branches were not yet
computerized. Moreover, the unions alleged that the management was compelling employees to
opt for the VRS. They said that the threat of bringing down the retirement age from 60 years to
58 years was putting a lot of pressure on senior bank officials to opt for the scheme.

The post VRS days

According to reports, SBI's total staff strength was expected to come down to around 2,00,000 by
March 2001 from the pre-VRS level of 2,33,000 (Refer Table III). With an average of 5000
employees retiring each year, analysts regarded VRS as an unwise move. By June 2001, SBI had
relieved over 21,000 employees through the VRS. It was reported that another 8,000 employees
were to be relieved after they attained the retirement age by the end of 2001. Analysts felt that
this would lead to a tremendous increase in the workload on the existing workforce..

CASE STUDY: 11.3

Layoffs in Citibank India:

59

Abstract
Global banking giant Citibank is likely to lay off more employees in India in the next few weeks,
while several senior managers have already been shown the door, company sources say
Issues
Cutting down employees
US banking giant Citigroup, led by Indian-American Chief Executive Vikram Pandit, is
set to lay off about 4,500 employees over the next few months to cut costs amid tough economic
times.
Some of the job cuts, representing 1.7 percent of the group's total global headcount of 267000 as
at the end of September, would be from the firm's proprietary-trading operations as regulators
seek to restrict banks from betting shareholder cash, Pandit said Tuesday.
As a result, Citi will book a charge of approximately $400 million in the fourth quarter of this
year due to severance payments and other expenses associated with the layoffs, he said speaking
at the Goldman Sachs Financial Services Conference in New York.
"Financial services faces an extremely challenging operating environment with an unprecedented
combination of market uncertainty, sustained economic weakness in the developed economies
and the most substantial regulatory changes we have seen in our lifetimes," Pandit said.
"These trends will likely significantly affect the competitive landscape in the coming years."
Citigroup posted a 74 percent increase in third-quarter profit, aided by a $1.9 billion accounting
gain that softened the impact of lower trading and investment-banking revenue. Excluding the
accounting figure, the bank's revenue for the period fell 8 percent to $18.9 billion.
Most of that accounting gain stemmed from a credit- valuation adjustment, or CVA. This
required Citigroup to write down the value of its debts amid a widening of the bank's credit
spreads, the extra yield investors demand to own a corporate bond rather than US Treasuries.
The spreads have tightened this quarter, Pandit said. If the fourth quarter ended yesterday, the

60

bank would post a $200 million negative CVA, compared with a $1.9 billion gain in the previous
quarter.
Citigroup's lending business in its securities and banking operation also would record a loss of
about $300 million tied to hedges if the quarter ended yesterday, Pandit said.

CASE STUDY : 11.4

61

Yahoo Asks Three percent of India staff to leave

Yahoo! Is sacking about 40-60 or three percent of its India staff as its per its global downsizing
plans due to the ongoing economic slowdown. This amounts to three percent of its total Indian
workforce of 2,000. However, the officials at Yahoo! Maintain that a significant number of
employees were affected due to poor performance and only a few of them due to slowdown.
Globally, about 1,500 Yahoo! Employeesabout 10% of its work force are likely to retrench.
Yahoo layoffs underway as investor calls for Microsoft deal.
SAN FRANCISCO (AFP) - Yahoo on Wednesday began dropping the axe on employees,
following through on a promise to cut its workforce by at least 10 percent in an effort to right its
financially listing ship.
As Yahoo began its second round of layoffs this year, an investment firm, Ivory Investment
Management, which owns a 1.5 percent stake in Yahoo, urged the firm's board to sell its Internet
search business to software giant Microsoft.

Yahoo announced plans to dump some 1,400 employees after reporting in October that the weak
economy had cut deeply into the California Internet pioneer's third-quarter profits.
Layoffs of most US Yahoo workers were happening Wednesday and were already underway in
other parts of the world, Yahoo's beleaguered co-founder and outgoing chief executive Jerry
Yang wrote in an email to employees.
"This is a tough time for all of us," Yang wrote. "The reductions we're making are very hard, but
they are also very necessary as we focus on the long-term health of our business."
Yahoo has been losing ground on the Internet to companies such as Google, MySpace and Face
book and the economic slowdown has hurt the firm particularly hard as advertisers cut back on

62

spending.
"My impression is that this will be the first of several layoffs Yahoo will have to do," said analyst
Rob Ederle of Ederle Group in Silicon Valley.
Yang announced last month he is stepping down as chief executive, and Yahoo is currently
seeking a successor to turn the company around.
Among the supposed contenders is Arun Sarin, recently retired head of British mobile telephone
powerhouse Vodafone Group PLC.
"Clearly, Yahoo is hunting for a turn-around guy," Enderle said. "And those guys trim the
company to its core to get it growing again or package it for sale."
Turn-around executives are notoriously merciless when it comes to getting rid of employees or
divisions not considered key to a company's success.
"Right now, Yahoo is simply too bloated and unable to move," Enderle said. "They lack agility
and a turn-around manager would be the one to get it agile."
Ivory Investment Management maintained that Yahoo could get 15 billion dollars up front for its
search business from Microsoft, which is eager to better compete against Google in the lucrative
arena.
Such a deal would let Microsoft bear the cost of operating online search at Yahoo websites while
Yahoo gets a share of advertising revenues that could bolster its annual cash flow by as much as
500 million dollars, Ivory argued.
"This deal would offer Microsoft the unique opportunity to immediately gain critical mass to
better level the playing field with Google," Ivory managing partner Curtis Macnguyen wrote in a
letter to Yahoo's board of directors.
"It would simultaneously allow Yahoo to both receive a sizable upfront cash payment and
increase its prospective cash flow."
Microsoft chief executive Steve Ballmer said last week that the software giant remains interested
in acquiring Yahoo's search business.
Yang and Yahoo's board earlier this year rejected a 47.5-billion-dollar bid by Microsoft for the
company, earning the disapproval of many shareholders.
"Getting rid of search might be a wise thing for Yahoo," Enderle said. "They can't afford a battle
with Google right now."
Yahoo would be better off leveraging its hundreds of millions of users worldwide into a colossal
social-networking community, according to the analyst.

63

"Yahoo is much better funded and bigger than Facebook or MySpace. That is more of a battle
that Yahoo could probably win."

Case study: 11.5

64

HR Problems at Jet Airways: Coping with Turbulent Times in the Indian

Aviation Industry

HR Problems at Jet Airways: Coping with Turbulent Times in the Indian Aviation Industry
Introduction
In October 2008, Jet Airways (India) Limited (Jet), one of India's leading domestic airlines,
decided to lay off more than 1,000 employees to streamline its operations. The retrenchment was
the second phase of its trimming operations.
The first phase, which took place a day earlier, saw the airline showing the door to 850 cabin
crew members6. The second phase of retrenchment included employees from all operations cabin crew, pilots, ground staff, airport services staff, and employees from management
departments. The sudden decision not only took the employees by surprise but also caused alarm
in the Indian aviation sector. Amidst great furor and opposition by various organizations and
political parties, Naresh Goyal (Goyal), chairman of Jet, reinstated the employees a day later
amidst great emotional drama. He was quoted as saying he had been appalled by the
retrenchments of his employees, which he claimed, he had come to know only through media
reports.
He added that he would "not be able to live as long as he lives" with the tough decision his
management had taken and clarified that he was taking back the employees as they were "family

65

to him and as head of the family he would take care of them. A month later - in November 2008,
Jet announced that it would consider serious salary cuts for its staff to handle the aviation crisis.
While many industry analysts were surprised by the turn of events that had led to the
reinstatement of the sacked employees, they opined that Jet had been forced to take drastic
decisions such as laying off employees or initiating pay cuts because of the turbulent phase
through
which
the
aviation
industry
was
passing.
In September 2008, the International Air Transport Association 8 (IATA) had predicted that world
over the aviation industry would lose about US$5.2 billion based on an average jet fuel price of
US$ 140 . The rise in fuel prices had pushed the fuel bills of the aviation industry to US$186
billion by the end of the year 2008.
Excerpts
Background Note
Jet, with its headquarters in Mumbai, India, began as an air taxi operator in April 1992 and started its
commercial operations a year later, in 1993. It operated with just 24 flights across 12 destinations initially,
but showed exceptional growth with more than 357 daily flights to about 62 domestic and international
destinations in 2008. It was first listed in the National Stock Exchange (NSE) in the year 2005. As of June
2008, it operated over 370 daily flights to about 68 destinations both in India and abroad including San
Francisco, New York, Toronto, Singapore, Brussels, London (Heathrow), Hong Kong, Shanghai, Kuala
Lumpur, Colombo, Bangkok, Kathmandu, Dhaka, Kuwait, Bahrain, Muscat, Abu Dhabi, Dubai, etc..
HR Issues, Management and Decision Making at Jet
According to the company, Jet paid the utmost importance to the composition of its senior management and
its human resources with emphasis on teamwork as a key success factor. Being in the service-based industry,
Jet gave priority to high quality, professional service to its customers...
The retrenchment drama unfolded on October 16, 2008, when Jet announced that it would lay off nearly
1,100 of its staff a day after it had already laid off around 800 of its cabin crew members.
The second phase of 1,100 employees included those from departments like management, flight
attendants, and the cockpit crew.
The company decided to lay off these employees with no prior notice but offered them a month's
remuneration... Excerpts Contd...
Reasons for Retrenchment

66

The growing challenges in the Indian aviation industry were the main reason for the lay offs at Jet,
according to the company and other industry analysts.
Turbulent Times for the Indian Aviation Industry
The Indian aviation industry was one of the fastest growing aviation industries in the world. The Air
Corporations (Transfer of Undertakings and Repeal) Act 1994 opened the Indian skies up to private
operators. Apart from government-owned airlines, the aviation industry was flooded with private operators
and low cost carriers...
The retrenchment drama unfolded on October 16, 2008, when Jet announced that it would lay off nearly
1,100 of its staff a day after it had already laid off around 800 of its cabin crew members.
The second phase of 1,100 employees included those from departments like management, flight
attendants, and the cockpit crew.
The company decided to lay off these employees with no prior notice but offered them a month's
remuneration...
Reasons for Retrenchment
The growing challenges in the Indian aviation industry were the main reason for the lay offs at
Jet, according to the company and other industry analysts.
Turbulent Times for the Indian Aviation Industry
The Indian aviation industry was one of the fastest growing aviation industries in the world. The
Air Corporations (Transfer of Undertakings and Repeal) Act 1994 opened the Indian skies up to
private operators. Apart from government-owned airlines, the aviation industry was flooded
with private operators and low cost carriers...
Jet received criticism from several quarters for retrenching its employees. Many of its
employees protested against the decision to oust them without prior notice. Most of them had
paid substantial amounts to receive training at major Aviation Training institutes...
Massive Salary Cuts Follow
In the last week of November 2008, Jet decided on a 20% cut in the salaries of its pilots,
engineers, and some other staff. The company planned a 5 percent to 10 percent cut in the salary
of top officials who drew a salary above Rs. 75,000...

67

12. A Review

Of Emerging trends In HR Across Asia

A review of emerging trends in HR across Asia

HRM 28 Feb 2012

Asia showed signs of growth despite uncertainty looming in the United States coupled with the
Euro zone crisis. Companies continued seeking HR professionals across varying job functions
and were keen to groom their employees and keep them engaged in this turbulent economic
climate.
Conservative appetite for financial services
Singapore and Hong Kong serve as the financial hubs of Asia and consequently the financial
services sector was impacted by global market volatility. In Singapore, financial services
organisations sought HR professionals with specific investment banking experience, preferring
candidates with prior front office banking experience.
In Hong Kong, we observed new hiring trends for banks in Hong Kong, with these banks keen to
hire junior generalists with 3-5 years experience to strengthen their middle management. Banks
previously sought generalists at the AVP level with 5-7 years' experience.
Growth within commerce and industrial sectors
The commerce and industrial sectors remained strong with constant demand for HR talents in
Singapore, Hong Kong, China, Malaysia and Thailand across a spectrum of job functions such as
HR generalists, business partners as well as compensation and benefit professionals.
Within Singapore, the healthcare, IT & telecommunications, shipping and logistics, chemicals,
manufacturing, automation and aerospace sectors saw strong demand for HR professionals. HR
professionals with specialist experience in compensation and benefits as well as learning and
development were highly sought-after.

68

With more companies seeking to reduce the administrative aspect of HR business partners, many
embarked on HR transformation projects such as moving transactional activities to shared
services. Hence, candidates with specific HR shared services experience were highly soughtafter.
The FMCG and retail sectors also hired actively in Malaysia, seeking talent and development
and compensation and benefits specialists, as well as HR business partners. Malaysia has been
positioning itself as the shared services hub for HR activities. Therefore professionals
specialising in HR shared services were in demand.
The growth for commercial businesses in Hong Kong saw steady demand for HR generalists at
the senior management level. Business partners and compensation and benefits professionals
were in demand throughout the year.
What lies ahead for 2012
We anticipate hiring levels for HR professionals to be softer within the financial services sector
compared to the commerce and Industry sectors. We however foresee Asian financial institutions
with strong balance sheets to take opportunity to keep their eye out for strong HR talents to upskill their existing HR capabilities. We expect junior candidates with shared services experience
to remain in demand as turnover in this area is usually higher than other functions.
While HR business partners and compensation and benefits specialists will continue to remain in
demand in 2012, candidates with regional experience have to be realistic and anticipate that their
regional portfolio may shrink from Asia Pacific to Southeast Asia as companies will be keen on
greater organizational efficiency. We anticipate the demand for HR contractors across all sectors
to increase as companies may struggle to secure permanent headcounts.

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13. Conclusion:
Trends in Human resource management have changed the way we work, as organizations are
more depended on HRM to increase the success ratio in todays competitive global environment.
Human resource management is a process of bringing people and organizations together so that
the goals of each other are met. The role of HR manager is shifting from that of a protector and
screener to the role of a planner and change agent. Personnel directors are the new corporate
heroes. The name of the game today in business is personnel . Nowadays it is not possible to
show a good financial or operating report unless your personnel relations are in order.
Over the years, highly skilled and knowledge based jobs are increasing while low skilled jobs are
decreasing. This calls for future skill mapping through proper HRM initiatives.
Indian organizations are also witnessing a change in systems, management cultures and
philosophy due to the global alignment of Indian organizations. There is a need for multi skill
development. Role of HRM is becoming all the more important.
Some of the recent trends that are being observed are as follows:

The recent quality management standards ISO 9001 and ISO 9004 of 2000 focus more
on people centric organizations. Organizations now need to prepare themselves in order
to address people centered issues with commitment from the top management, with
renewed thrust on HR issues, more particularly on training.

Charles Handy also advocated future organizational models like

Shamrock, Federal and Triple I. Such organizational models also refocus on people
centric issues and call for redefining the future role of HR professionals.

To leapfrog ahead of competition in this world of uncertainty, organizations have

introduced six- sigma practices. Six- sigma uses rigorous analytical tools with leadership
from the top and develops a method for sustainable improvement. These practices

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improve organizational values and helps in creating defect free product or services at
minimum cost.

Human resource outsourcing is a new accession that makes a traditional HR department

redundant in an organization. Exult, the international pioneer in HR BPO already roped in
Bank of America, international players BP Amoco & over the years plan to spread their
business to most of the Fortune 500 companies.

With the increase of global job mobility, recruiting competent people is also increasingly
becoming difficult, especially in India. Therefore by creating an enabling culture,
organizations are also required to work out a retention strategy for the existing
skilled manpower

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14. News Round Up

AMD Trims its staff, lays off 500 people in US.

Advanced Micro Devices, one of the worlds two makers of microprocessors for personal
computers, laid off 500 people effective November 5, 2008. It announced that this reduction is
unfortunate but necessary part. This process helps align their people with the focused programs
to achieve organizations objectives, for eliminating duplication of efforts and it allows operating
more effectively.

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15. Bibliography
ICMR
HR Journal
Google.com
C.B Gupta (Essentials of HRM)