NAME OF THE BOOK: STRATEGIC HRM

AUTHOR: JEFFREY A. MELLO

LESSON 1

AN INVESTMENT PERSPECTIVE OF HRM

Introduction:

In business, we should have a competitive advantage over its competitors

More & more organizations are realizing that critical source of competitive
advantage comes from having: & managing its people.
If people provide competitive advantage, then people should be considered
as an asset.
In assets we invest in terms of development
Competitive advantage means that which cannot be copied or duplicated.
people’s creativity / innovation cannot be duplicated

Sources of employee contribution:

Knowledge
Attitude

Valuation of Assets:
Any organization has five kinds of assets that it can leverage to aid in
performance & add value to the operations. They are:
Financial: Examples: Equity / Securities & Investments / Accounts
receivable
Physical: Examples: Plant / Land / Equipment / Raw material
Market: Examples: Goodwill / Branding / Patents / Trademarks / Copyrights
Operational: Examples: Management Practices / Structure of Work /
Technology
Human: Examples: Competencies / Commitment / Attitude

The Hidden leverage of Human Capital

The following are the broad critical areas of operation:
Strengthening key relationships with both internal / external
customers
Leveraging downtime by improving productivity
Refocusing staff on core activities that provide competitive
advantage
Building returns on compensation, by linking performance to pay

Factors influencing investment orientation

Management values:
Attitude towards risk
Nature of employee skills
Utilitarianism
Availability of outsourcing

ASSIGNMENT: 1
Obtain the annual report for a fortune 500 company of your choice. Review
the material presented & the language used in the text. Write a one page
memo that assesses how investment oriented the organization appears to
be towards its human assets?
ASSIGNMENT: 2
Compare & contrast the similarities & differences among organizations you
investigated. Can you isolate any factors that appear to influence how an
organization perceives the values of its employees?
ASSIGNMENT: 3
Why can some organization that fails to invest heavily in human assets still
be financially successful? Why can some organization that does invest
heavily in human assets still be financially unsuccessful?
ASSIGNMENT: 4
What challenges exist relative to valuation of human assets & measuring
human capital?
ASSIGNMENT: 5
Visit an industry. Try to isolate any factor that appears to influence how an
Organization perceives the value of its employees?

LESSON 2

TRENDS AFFECTING HRM

Introduction:
The employment relationship is undergoing a change on account of
Technology
Demographics & Diversity
Globalisation

Impact of Technology:
Technology includes tools, machinery, equipment, work procedures,
employee knowledge & skills
Challenges that technology presents for human resources management:
Requires changes in skills & work habits of employees
Elimination of some lower level positions & layers of management
Telecommuting options
Opportunities presented by Internet
Electronic monitoring & employee privacy
e-HR
Ethical Behaviour

Workforce Demographic Changes

Composition of workforce is undergoing a change
One of the notable consequences of these new workplace dynamics is that
there is now increased emphasis on the management of professionals.
We need new strategies for managing & retaining employees. The use of
project teams helps to address this issue
Employees with higher levels of training, education & skills are demanding
more meaningful work & more involvement in organizational decisions that
affect them.
Employees are becoming more proactive & taking their career management
into their own hands rather than leaving the responsibility to with the
employer
Personal & family life dynamics continue to evolve & create challenges for
organization
An increasing number of employees are opting for non-traditional work
relationships often in the form of part-time work, independent consulting,
or contingent or temporary employment.

Diversity:
Managing diversity is the biggest challenge to the management &
especially to HR professional
The individual diversity has two sources:
Personal : Race / Age / Religion / Gender / Sexual orientation
Work related: Motivation / Job responsibilities / Employment status
While most diversity initiatives cover some combinations of personal
dimensions, managers must remain cognizant of the work related
dimensions of diversity in ensuring that employees are managed & given
job assignments that allow both maximum satisfaction & productivity
An Organization needs to strategize its approach in dealing with diversity
by
determining its important for the Organization?
Articulate how diversity relates to the mission & strategic objectives of the
Organization?
Define diversity & determine how inclusive its effect will be?
Determine specific types of diversity initiatives that will be undertaken

Globalisation: We will see in International HRM

ASSIGNMENT: 1
Why might an organization resist establishing a telecommuting program
for its employees? Under what conditions will telecommute programs be
most effective?
ASSIGNMENT: 2
Identify & discuss the significant trends related to technology that impact
your college. What challenges do these trends present? What initiatives
have been established thus far to meet these challenges?
ASSIGNMENTS 3:
Ask a HR manager as to what are the challenges posed by those born in
70s? How did / does he handle the same?
ASSIGNMENT 4:
Ask a HR manager as to what are the challenges posed by those born in
80s? How did / does he handle the same?
ASSIGNMENT 5:
Ask a HR manager as to what are the challenges posed by generation Y?
How did / does he handle the same?
ASSIGNMENT 6:
Ask a HR manager as to what are the challenges posed by diversity? How
does their organization handle the same

LESSON 3

STRATEGIC PLANNING

Strategic Management
Process of determining how the organization’s long-term objectives are to
be met. It is formulated by CEO & his team

Models of strategy:
SWOT analysis
The process of strategic management consists of:
Vision statement
Mission statement
Analysis of External environment which includes Identify key players /
Aware of Opportunities & Threats / Government regulations / Technology /
Market trends / Economic trends
Internal environment which includes Resources & Management Systems
Goals
Strategy

Types of Strategies:
Corporate: Types: Growth / Stability / Turnaround
Business Unit Strategies: Types: Cost Leadership / Differentiation / Focus
Linking People with the strategic needs of the business:
The 5 P Model
The five HR Ps are:
Philosophy
Policies
Programs
Practices
Processes

The Strategic business needs of an Organization are:

Survival / Growth / Adaptability / Profitability

Business needs should be translated into specific actionable statements,

which are called strategic business objectives

HR Philosophy states:
How does Organization regards its people
Also includes Organization’s Culture
HR Policies:
People-related business issues are those that affect the immediate &
future success of the business
HR Programs
HR efforts specifically intended to initiate, disseminate, & sustain
strategic Organizational change efforts necessitated by the strategic
business needs
HR Practices
The roles the individual assumes in an
HR Processes:
Defines how HR activities are carried out

ASSIGNMENT: 1
Select a particular industry & identify at least three major competitors in
that industry. Visit their websites & identify key strategic issues within the
industry as well as key strategic issues for the individual firms
ASSIGNMENT: 2
What are the keys factors in the environment that impacts the Institute’s
performance? What are the key resources & how can they best deployed?
ASSIGNMENT:3
In recession a SBU adopts which type of strategy? Your answer should be
industry based.
ASSIGNMENT 4:
In recession, besides turnover strategy, what are the other types of
strategy Corporate can adopt. Your answer should be industry based.
LESSON 4

THE EVOLVING / STRATEGIC ROLE OF HR:

Introduction:

SHRM involves making the function of managing people most important

priority in the Organization & integrating all HR programs & policies within
the framework of an Organization’s strategy. SHRM realizes that people
make or break an Organization

SHRM involves the development of a consistent aligned collection of

practices, programs, & policies to facilitate the achievement of the
Organization’s strategic objectives.

It translates Organization’s objectives into specific people management

systems

Why HR matters now more than ever:

Regardless of their industry, size, or location Organizations are today are
facing five critical business challenges.
Globalisation:
Today market is becoming global.
Profitability through growth
To increase revenue be in touch with fast changing needs of the
customers.
Technology
It has made the world smaller.The challenge for managers is to make
sense & good use of what technology offers
Intellectual capital
Attract, develop, & retain individuals who can drive a global
Organization
Change, Change, & more Change:
Learn rapidly & continuously innovate, & take on new strategic
imperatives faster & more comfortably For this the organization
must create a healthy discomfort with status quo,
The four different roles a HR function can assume:

Becoming a Partner in Strategy Execution

Ensure people related policies are in alignment with strategic
objectives
Becoming an Administrative Expert
Improve the efficiency of both their function & the entire O
Becoming an Employee Champion
Ensuring that employees are engaged, committed & contribute fully
to the Organization Be employees voice in management’s
discussions
Becoming a Change Agent
Replace resistance with resolve, planning with results, & fear of
change with excitement about its possibilities

Critical HR Competencies:
Strategic contribution
Business knowledge
Personal credibility
HR delivery
HR technology
Employment model:

The characteristics of human capital are:

Strategic value
The extent of human being’s potential to improve efficiency /
effectiveness, exploit market opportunities & or neutralize potential
threats.
Uniqueness
The degree to which it is specialized & not widely available. The
more unique an organizational human capital, the greater potential
source of competitive advantage it would provide

The above two dimensions produce the following four types of employment
model
Knowledge based employment
It is commitment based HR configuration
Job based employment
It is Productivity based HR configuration
Contractual work arrangements
Compliance based HR configuration
Alliances or partnership arrangement
Collaborative based HR configuration
Much of the work is outsourced to outside vendors
Outcomes of Strategic HRM
Increased Performance / Customer & Employee Satisfaction / Enhanced
Shareholder’s Value THROUGH
Effective management of staffing / retention / turnover through selection of
employees that fit with both strategy & culture
Cost-effective utilization of employees through investment in identified
human capital with potential for high retention
Integrated HR programs & policies that clearly follow from corporate
strategy
Facilitation of change & adaptation through flexible, more dynamic
organization
Sharper focus on customer needs / key & emerging markets / quality

What does HR Strategy contain?

HR Planning & Design of Jobs & Work System
A model of HR-Shareholder Value Relationship consists of
Business & Strategic Initiatives
Design of HRM System
Employee Skill / Employee Motivation / Job Design & Work Structure
Productivity / Creativity / Discretionary Effort
Improved Operating Performance
Profits & Growth
Market Value

Barriers to Strategic HR

Focus on current performance

Many HR professionals lack business knowledge,
Line’s manager’s perception of HR is that it is inflexible & rules oriented
Few functional managers see themselves as HR managers
Difficult to quantify many of the outcomes & benefits of HR programs.
Incentive for change is very high.
Because people have a habit & enjoy maintaining status quo, resist change

Most of these barriers are rooted in the culture of an O. O’s history, values,
& management practices can act as disincentives for any change initiative

ASSIGNMENT 1:
Select a local Organization & investigate whether the role of HR is strategic
or traditional by interviewing selected key decision makers?

ASSIGNMENT 2
Visit a local manufacturing / service / IT / BPO industry, & check the type
of employment which exists?

ASSIGNMENT 3
To be a true strategic partner, does HR need to take on a more generalized
or specialized approach to its work? Why?

ASSIGNMENT 4
Visit an industry. Interview the HR Head. Ask him as to what are the
barriers he is encountering in taking up the strategic role?

ASSIGNMENT 5:
Interview the CEO of a company. Ask him the reasons for:
Increased performance
Customer & employee satisfaction
Enhanced shareholder’s value

LESSON 5
HR PLANNING
Introduction:
Once the corporate & business units strategies have been established,
then human resource strategy can begin to developed
The HR strategy involves taking the O’s strategic goals & objectives &
translating them into a consistent, integrated, complimentary set of
programs & policies for managing employees

The first component of HRM strategy is human resource planning. The

second component is the design of work system
All other functional HR activities such as staffing, training, performance
management, compensation, labour relations, & employee separations are
derived & should flow from the HRM planning process
HR planning involves making assumptions about future, particularly the
status of the economy, competition, technology, regulation, & internal
operations, & resources.
Objectives of HR planning:

Prevent overstaffing & understaffing

Ensure the O has the right employees with the right skills in the right
places at right times
Ensure the O is responsive to change in its environment
Provide direction & coherence to all HR activities & systems
Unite the perspectives of line & staff managers

Types of planning
Two types: Aggregate & Succession

Aggregate
Forecasting the demand for employees The single greatest indicator of the
demand for employees is demand for the Organization’s product or
service.
It can be bottom up or top down planning or both

Succession
Identifying key management positions that the O cannot afford to have
vacant
Serves the following two purposes:
· Facilitates transition when an employee leaves
Identifies developmental needs of high potential employees & assist
with their career planning

Strategies for managing shortages

Recruit new permanent employees

Offer incentives to postpone retirement
Rehire retirees part time
Attempt to reduce turnover
Work current staff overtime
Subcontract workout
Hire temporary employees
Redesign job processes so that fewer employees are needed

Shortages for managing surpluses

Hiring freezes
Do not replace those who leave
Offer early retirement incentives
Reduce work hours
Voluntary severance,
Across the board pay cut
Layoffs
Reduce outsourced work
Employee training
Switch to variable pay plan
Expand operations
New Succession Planning Paradigm:

There are five design shifts that are important:

Design Shift 1: Core Capabilities / Competencies
Design Shift 2: Candidate Choice:
Design Shift 3: Competency-Focussed Development
Design Shift 4: More Communication Openness
Design Shift 5: Continuous Review

Design Shift 1: Core Capabilities / Competencies

Identify core capabilities of the business

From this a leadership competency model is defined. It can used to
evaluate positions requiring core strategic competencies.
Create position pools, which requires these core competencies
Form candidate pool to match single or multiple positions

Design Shift 2: Candidate Choice:

Designing the process, so candidates can express an interest in pursuing

leadership track positions. This makes more opportunities available for
diversity candidates
The new process must also accommodate the individual candidate as a
team member & not just an individual contributor

Design 3: Competency-Focussed Development

Design the development process to make it more focussed on learning of
competencies necessary for business success,
The pace of change & competition requires that executives begin to think
differently about where & how the organization’s future leadership is
developed.
The design needs to accommodate the reality that people will change
employers & possibly careers several times during their working lives. This
requires change in assumptions about what characterises success. It also
requires more structured & managed development tracks that can provide
the broad based exposure & skills in a shorter period of time

Design 4: More Communication Openness

Design the entire process to be more open & less exclusive & secretive.
The new process needs to foster more open dialogue, help candidates
understand the expectations of the new leadership competency model

Design 5: Continuous Review

Design the process to be more ongoing, more fluid, & more of a continuous
review system rather than a ritualised annual planning event

Design Issues to be addressed:

The system must make sense for & be usable by different business units,
each having some unique needs
The system must have a process to focus & guide the development of
executives to meet strategic purpose
The system must align with other human resource process that are also
undergoing transition
The system must assure that a cadre or pool of potential leaders is being
prepared for executive positions
The system must be owned by the senior management team
The system must deal with diversity issues & changing demographics
The system must add value & contribute to business success in some
measurable way

ASSIGNMENT 1:
What role might HR planning play in each of the following Organizations:
· A small, rapidly growing technology company
· A medium-sized non-profits O
· A state government agency social service agency
· A professional sports franchise
· A company planning on acquiring or merging with a key competitor
ASSIGNMENT 2
Discuss the pros & cons of informing employees that they have been
targeted as part of the organization’s succession planning process. What
particular business conditions & / or strategy might make telling or not
telling the more advantageous option?

ASSIGNMENT 3
How does HR add value by being more strategically proactive than
reactive? Can / should HR be both strategically proactive & reactive?

ASSIGNMENT 4
Visit an industry, & explain how senior managers do succession planning
for their position?

LESSON 6

DESIGN & REDESIGN OF WORK SYSTEMS

Design of work systems:

The following three factors have to be considered in designing jobs:
What employees do?
What employees needs?
Interface with other jobs in the Organization

What employees do?

List down the duties, which the employee has to perform to achieve the
Organizational goals?
Assess the knowledge, skills & capabilities needed to perform the duties
Duties change whenever the goal changes. Goal changes whenever there
is a change in the environment. If duties change, competencies also
undergoes change
Ensure employees are engaged.
What employees need?

In designing work system, it is essential to consider the needs / wants of

workers.
Employers must consider the following universal needs / wants which will
motivate the workers & make them productive & satisfied
No biases should exist in any people related policies / programs
Work / life balance
Want to be heard
Workplace safety
Involvement

How jobs interface with other jobs

There are three types of interdependencies:
Pooled
Individuals work independently, but within a framework of the
Organization’s rules & regulations
Sequential
Output of one becomes input of other
Reciprocal
Workflow is not linear but random

Redesign of work system:

In competitive environment, jobs are designed not solely around technical

measures for efficiency but around strategic choices made by
management. The greater volatility in the environment, the greater the need
for more flexible adaptive work system

In reengineering, unnecessary activities that add no value are eliminated,

tasks are outsourced work is consolidated. All done to increase efficiency
& enhance performance. Reengineering has to be done by taking people
into confidence, otherwise it will backfire

With flattening of OS the work has to be done in teams & projects.

Strategic Work Redesign:

Outsourcing
Offshoring
Mergers & Acquisitions

Guidelines for HR Outsourcing

Making the Outsourcing Decision

Selecting & negotiating with outsourcing vendors
Managing internal resistance
Managing vendor relationship
Monitoring & evaluating vendor performance

Understanding Change:

Despite the need for & pressure to change, any change initiatives in O are
often met with resistance. There are several reasons for such resistance
like:
Perceived costs of change
Disrupts status quo
Uncertainty
Commitment of resources which could be deployed otherwise
Risk involved
 Employees fail to perceive any benefit for themselves

If employee fail to see any real need to change the design of work system
they are less likely to support the change in their job or work environment..
Poor coordination & communication often undermine change initiatives

Managing Change:

The challenge before management is as to how to overcome resistance to

change
Following actions are proposed:
Plan to promote & implement change
Invite participation
Have two way communication

The Job Characteristics Model:

Model developed to design enriched jobs

The model illustrates relationship between redesigned jobs & ultimate
performance
The model suggests that any job has five core characteristics which
impacts certain psychological states of the employee that in turn has an
impact on work related outcomes

The five core characteristics are:

Skill variety
Task identity
Task significance
Autonomy
Feedback

The work outcomes of the above model are as follows:

High internal work motivation
High quality work performance
High satisfaction with work
Low absenteeism & turnover
ASSIGNMENT 1:
Apply the job characteristics model to the following positions:
An order taker at McDonald’s
An usher in E-Square
A receptionist in an Office
A manager of an auto rental company
An insurance salesperson

ASSIGNMENT 2
How Offshoring affects the economy of the country. Do you feel that it will
cause domestic organizations to become more competitive in the global
market place through increased efficiency & reduced costs, or it will
simply result in higher unemployment & an erosion of the consumer
segment of our economy?

ASSIGNMENT 3:
Comment: Lot of jobs are getting outsourced to India, for the simple reason
, our exchange rate: $1= Rs. 40/-. The day the Indian rupee becomes
stronger that is $1= Rs.10. then India will loose its charm as destination for
offshore / outsourced jobs.

ASSIGNMENT 4:
Visit an industry that has outsourced some HR activities. Enquire from the
HR Head about its performance?

PART 2:

IMPLEMENTATION OF SHRM

STAFFING

Introduction:
Staffing, the process of recruiting applicants & selecting prospective
employees, remains a key strategic area for HRM. For the performance of
the firm depends upon the individual it employs. Decisions made as a part
of staffing process has a significant impact on an firm’s bottom line
The activities performed as a part of recruiting & selection offer an firm
numerous choices for finding & screening new employees. These options
have a significant impact on an firm’s efficiency. It involves time & financial
costs.
Trends such as broader job scope & responsibilities, leaner staffing &
operating with fewer full time permanent employees, smaller autonomous
units, pay for performance & flatter O S affect the types of individuals &
skills that firm seek & influence how firms find & screen applicants.
Staffing takes on even greater importance in the service sector
The most important part in staffing is ensuring that employees fit with the
culture of the firm
Hence staffing process must be strategically focussed..

Recruitment:
Temporary versus Permanent:
Internal versus External Recruitment:

When & How to extensively recruit:

Recruitment process is time consuming process. Speed is an essential

ingredient in today’s business.
An firm must determine when to begin its recruitment efforts to ensure that
trained employees will be ready when the firm needs them

Methods of Recruitment:
The most important factors in this process is balancing between cost
& effectiveness of any methods

Selection:

Selection decisions can & do have significant economic & strategic

consequences for O; & these decisions need to made with great care
Before deciding any selecting tools, or criteria determine whether they are
Reliable
Valid

Interviewing:
Decisions made in selection making process are most critical. Take
different perspectives.
It is subjective process. Avoid the following mistakes:
Similarity errors
Contrast error:
First impression error:
Halo error:
Horn effect:

Testing:

It is objective in nature
It is matching the profile of the candidate with that of the Organization
Preferable if done before the interviewing process

References:

Do it before calling the candidate for interview

Do reference checking mainly on the value system for which the
Organization stands

International Assignment:

Focus on more interpersonal & acculturation abilities

Check the following abilities of the candidates:
Adaptability
Open-mindedness
Ability to tolerate uncertainty & ambiguity
 Independence
Also interview the family members

Medical Check Up
Done to avoid compensation claim

Conclusions:

Staffing is the core component that forms the backbone of an integrated

strategic system of human resources management by ensuring that there
is optimal fit between employees & the strategic needs of the Organization
If Organization ‘s staffing is deficient, the effectiveness of its HR programs
& policies will be impaired.
Good training will not fix bad selection

ASSIGNMENT 1
What are the elements one has to take into consideration while determining
recruitment costs? :
Visit an industry. Take any position, which ha been recently filled. Enquire
recruitment cost for that position? Which factors were taken into
consideration for determining the recruitment cost? Also check what was
the CTC of the employee who left, & what was the CTC offered to the new
incumbent? Also enquire how long it took to fill the position [starting point
the date of resignation to the date of issue of offer letter to the new
incumbent?

ASSIGNMENT 2
What are the various cost effective methods of recruitment?

ASSIGNMENT 3
What are the methods followed by a firm to ensure cultural fit?

TRAINING & DEVELOPMENT:

Introduction

The outcome of any Training / Development program should have an

impact on bottom line of the firm

Planning & Strategizing Training

Consists of four steps:

Need assessment
Establishing objectives & measures
Delivery of training
 Evaluation of training

Need assessment:
Done at
Organizational
Task
Individual

Process of Training & Development

Objectives
Design & Delivery:
Consider the following two critical issues:
Interference
Transfer
Have strategy to overcome the above two issues
Evaluation
Reaction
Learning
Behaviour
Results

Integrating training with Performance Appraisal & Compensation

Through Performance appraisal we assess performance

If performance as per standards
Reward / recognize the performance

If gap in performance
Provide Training
Again assess performance
If performance improved reward or recognize the employee

Conclusions:

It is a means to determine the extent to which human assets are viable

investment

ASSIGNMENT 1:
Visit an industry. Enquire as to which was the recent in-house training
program conducted in last month.
Calculate the ROI in term of rupees of the said training program.

ASSIGNMENT 2:
What are the competencies needed for global leaders in government? What
similarities & differences exist from those needed in private industry? To
what can these similarities & differences be attributed?

ASSIGNMENT 3:
What key factors influence the success of the training programs?

ASSIGNMENT 4:
Develop a tool to evaluate the learning / training taking place in the course
in which you are enrolled?

ASSIGNMENT 5
Visit an industry & find out how do they identify training needs based on
performance appraisal?

ASSIGNMENT 6
Visit an industry, & find out how do they identify developmental needs of
potential employees?

PERFORMANCE MANAGEMENT & FEEDBACK

Introduction:

An firm faces five strategic decisions in establishing its performance

management system, which are as follows:
Purpose of the system
Who evaluates
What to evaluate
How to evaluate
Methods of evaluation

Besides the above five strategic design decisions, following critical factors
must be considered when developing an effective performance
management system
Ensure the link between the performance management system & training &
development & compensation
Have criteria for strategic initiatives that involve long range planning &
growth
Flexible job assignments & responsibilities
Group performance

Degree of standardization or flexibility of the performance management

systems. The firm should strike a balance between the two

Performance management system is not measuring the performance but

also providing feedback to the employees on the process. The following
are the critical guidelines with respect to feedback process::
 Should be specific
Should be based on facts
Provided as soon as possible
Performance measures should be based on clear measurable goals
The process should involve a dialogue between the employee & the
senior

There is probably no ideal model for a performance management system.

An effective performance management system is strategic, designed with
the needs of many constituents & purposes balanced with firm’ s strategy.
The system are as varied as the firm in which they are located, but all
display innovation & insight toward creativity supporting the firm ‘s
strategies

Strategies for improving the performance management system:

Involve managers in the design of the system

Hold managers accountable for the performance & development of their
subordinates
Set clear expectations for performance
Set specific objectives for the system
Tie performance measure to rewards
Gain commitment from senior management

ASSIGNMENT 1
In competing environment, should pa be used for development of
employees or for assessing employee’s performance? Justify your answer
with logic.

ASSIGNMENT 2
Visit a manufacturing industry & find out how do they conduct performance
appraisal?

ASSIGNMENT 3
Visit an IT industry & find out how do they assess their employee’s
performance?

ASSIGNMENT 4
Visit a service industry, & find how do they assess their employee’s
performance?

COMPENSATION

Introduction:

It impacts an employer’s ability to attract applicants, retain employees, &

ensure optimal levels of performance
It is a key economic issue. For it forms a chunk of operating expenses
A critical balancing act must occur to ensure that compensation attracts,
motivates, & retains employees, at the same time, compensation should
allow the firm to maintain a cost structure that enables it to compete
effectively & efficiently in its markets
It consists of three components:
Fixed
Variable
Benefits

Equity
While designing the overall compensation system, an O needs to be
concerned with perceived equity or fairness of the system for employees
When individuals perceive that they are being treated inequitably relative to
their peers, they usually try to establish equity by demanding additional
compensation; or decrease their inputs
Three types of equity Internal / External / Individual

Employee assessments of equity are in fact perceptions These

perceptions of equity directly impact motivation, commitment, &
performance on the job
Although compensation is not the only work-related outcome employees
receive, it often is the basis by which employees conclude that they are
being treated appropriately

Internal equity:

It is perceived fairness of pay differentials among different jobs within an

O.
Employers can establish internal equity by job evaluation. There are four
techniques to evaluate job:
Job Ranking / Job Classification / Point System / Factor Comparison

Regardless of the method chosen, employees must understand & accept

the system to ensure optimal motivation, commitment & performance
External Equity:

It refers to employee’s perception of the fairness of their compensation

relative to those outside the firm
Done by doing salary survey
After the survey the firm has to determine its pay strategy relative to the
market. There are three strategies from which the employer can choose
Lead / Lag / Market Rate

Individual Equity:
It considers employee perceptions of pay differentials among individuals
who hold identical jobs in the same firm
The pay differentials exists on account of:Seniority / Skill-based pay / Merit
pay.
Conclusions:
The individual senses inequity when perceiving that the below given ratios
are not equal.
Outcomes / Rewards [self] divided by Inputs / Contributions [self] is equal
Outcomes / Rewards [others] divided inputs / Contributions [others]
Firms wishing to be more innovative may need to alter their compensation
system to promote more intrapreneurial behaviour that encourages
employees to act as risk taking entrepreneurs
Firms taking a strategic approach to compensation realize the need for
creativity to meet strategic objectives
Also within a given firm different compensation programs may be needed
for different divisions, departments, or group of employees
Compensation systems must grow & evolve in the same manner as the firm
to ensure that what is actually being rewarded is consistent with firm’s
strategic objectives
The link between strategy & compensation is essential for ensuring optimal
performance

ASSIGNMENT 1
Visit any new industry, which has been established for the first time last
year in Pune. Find out how did they fix the basic wages for the various
positions in the organization? How did they establish equity in
compensation?

ASSIGNMENT 2
Is performance based pay effective? Why or why not? How can
performance based pay systems be better deigned to ensure optimal
results.

ASSIGNMENT 3:
What are the critical factors in designing a team based compensation
system?

ASSIGNMENT 4:
What factors should influence executive compensation?

LABOUR RELATIONS:

Introduction:
The nature of relationship between the employer & the employee can have
a significant impact on morale, motivation, & productivity
If the employees feel that the terms & conditions of their employment are
less advantageous will not be committed to perform & to remain with the
employer
Consequently how O manage the day to day aspects of the employment
relationship can be a key variable affecting their ability to achieve strategic
objectives
When workers get unionised, it creates special challenges for HR
management. The payroll expenses & the work processes may contribute
to or retard efficiency in operations

Why employees unionise:

Perceived benefits. These benefits could be economic, social & or political

Power in unity

Collective bargaining

Management & Union come together to negotiate through collective

bargaining an agreement covering terms & conditions of employment
Negotiation should take place in good faith
The outcome of negotiation should be win-win
When negotiation fails, the management can declare a lock out, & the union
can declare a strike. That is why the process of negotiation should not be
allowed to come to a stalemate
Negotiation should be based on give & take principles
Unions Today:
Develop partnership with employers & seek win-win outcomes
Collective bargaining should strengthen both the union’s position &
employee’s right & enhance the performance of the firm
Realize that the jobs of today & those of future are quite different from the
jobs of past.
Partner with employers in creating beneficial change, rather than inhibiting
change
Union leaders will have to rethink their roles & learn management skills in
understanding the business, strategic issues, & the environment in which
the business is done
Cannot guarantee job security but can guarantee employability by training
employees to be multiskilled

As unions decline in number & stature, workers become less powerful. The
workers interest can be enhanced through legislation or management
initiatives
New strategies for Union:
Goals:
Employment security / Higher wages / Make unions stronger

Past strategies:
Job classification / Grievance handling / Collective bargaining

Future strategies:
Participate in developing
New work system
Technology
New product development
Seek to upgrade worker skills through T & D
Mobilize & engage the workforce for greater control over production
decisions
Leverage the use of capital investment & pension funds

ASSIGNMENT 1:
Visit any manufacturing industry, which recently signed a settlement with
their union. How much rise did the management give in terms of money &
benefits? Did the management submit its charter of demands to the union?
If so how much demands of the management was settled

ASSIGNMENT 2
What are the possible outcomes of failure to reach consensus on collective
bargaining agreement?

ASSIGNMENT 3:
With unionisation on the downturn, why should an organization be
concerned about labour relations?

ASSIGNMENT 4
Visit a manufacturing industry & interview a union leader to find out
whether they have adopted the new role

ASSIGNMENT 5
Visit a service sector & interview a union leader to find out whether they
have adopted the new role
EMPLOYEE SEPARATION

Introduction:
The pressure to remain competitive & efficient, coupled with the fact that
employees are less committed to individual employers than in past makes
the process of employee separation a key strategic issue for firm
HR strategy involves managing the process by which employees leave the
firm, regardless of departure
Firm can manage this separation process to ensure that transitions are
smooth for both employer & employees, the operations are not disrupted,
& that professional relationship is not disturbed

Separation can be :Forced / Voluntary / Retirement

Forced reduction done for:

Inefficiency / Lack of adaptability / Weakened competition position within
the industry / Payroll expense is one of the largest expenses

Efficiency is sought by reducing labour force, & by redesigning the work

process

Voluntary:
Employee on own calling it a day for better prospects

Retirement:
on reaching the age of superannuation
Performance-Replaceability strategy is the best tool to manage voluntary
separation

Replaceability: Difficulty: Performance High:

Strategy: Retain / Invest
Replaceability Easy: Performance High:
Strategy: Retain / Invest
Replaceability Difficulty: Performance Average:
Strategy: Retain / Provide performance incentive
Replaceability Easy: Performance: Average
Strategy: Retain / Provide performance incentives
Replaceability Difficulty: Performance Low:
Strategy: Improve performance / Terminate
Replaceability Easy: Performance Poor
Strategy :Improve performance / Terminate

Have back up for all key positions

Conclusion:
Strategically managing employee separation entails determining the value
of human assets from investment perspective & considering the costs of
discarding the assets

ASSIGNMENT 1
Visit an organization. Find out which key individual submitted his
resignation. How did the management retain him?

ASSIGNMENT 2:
Discuss the ways an organization might attempt to retain its most valued
employees?

ASSIGNMENT 3
Because workers live & stay healthy longer, the workforce is aging? How
might this impact an organization’s competitive position?

ASSIGNMENT 4
Visit an industry, & find out how they retain the employee who has put in
his papers
INTERNATIONAL HRM

Introduction:

Tremendous opportunities exist to market goods / services globally

Increasing number of organizations are developing strategies to expand
internationally
These strategic opportunities are resulting in employers’ sending an
increasing number of employees abroad to start up, manage, & develop
their international operations
Workforce are becoming more culturally diverse
HRM is critical to the success of any international endeavour

How international HRM differs from domestic HRM

Addresses broader range of functional areas like:

Compensation plans
More involvement in the employees personal life like: housing / schooling /
recreational facilities
Deal with more complex external constituencies like terrorism / safety /
health·

Setting different HRM system for different geographic locations

Assessing the culture

Besides economic / market / social / political factors; cultural factor plays a

very important role in any decision to go abroad

HOFSTEADE Model
Cultural differences are explained along the following four dimensions:
Individualism / collectivism
Power distance
Uncertainty avoidance
Masculine / feminine tendencies
·
HALL’s Model:
It describes culture in terms of five silent languages:
Time
Space
Material goods
Friendship
Agreement

Strategic HR Issues in International Assignments:

Following are the steps:
Establish the purpose of assignment.
Select the appropriate person for the assignment. The individual should
have technical abilities, tolerance of ambiguity, communication skills,
patience, & openness to differences in others, & willingness to learn
Assess the adaptability to host culture of both employee & his family
members.
Prior to departure the employee & family should be receive cross-cultural
training in the norms & values of the host country, workplace & business
practices, language training, health & safety issues & realistic expectations
of the day to day life in the host country Sensitivity training should also be
given to the employees of the host country, especially so as to understand
as to how local decisions are made, & being empathetic
Training on performance management. If the expatriate is going to work in
Operations then training in labour relations is essential.

Firm also needs to make a strategic decision as to the level of

standardization it desires across locations. For this there are four
approaches:
Ethnocentric
· It involves exporting the firm’s home country practices & policies to
foreign locations
Polycentric
· Allows each location to develop its own practices & policies that are
consistent with local culture & workforce characteristics
Regiocentric
Developing standardized practices & policies by geographic region
to give autonomy to the regional subsidiary within a geographic
region
Geocentric
Involves developing one set of global practices & policies that are
applied to all geographic region

Repatriation:
It is returning of the employee
Firm need to establish a strategy that allows them to take the valuable
experience abroad & Integrate it with what is happening at home
Allow co-workers to learn from the experiences of repatriate & enhance
their own performance

Address
Career anxiety issue.
Personal issues like logistics / schooling / housing

Conclusions:

A key issue that impacts an organization’s success in the international

arena is an awareness of cultural differences & the development of both a
business strategy & corresponding HR strategy that is consistent with the
culture of the host country

ASSIGNMENT 1:
Visit a MNC. Interview a foreigner. Find out what are the work related
cultural, issues, which they are facing in India? What sort of training was
given to them?

ASSIGNMENT 2:
Visit a MNC. Interview a foreigner. How did the parent organization address
their career issues in case of repatriation?

ASSIGNMENT 3:
Interview an Indian, who went on a long-term assignment to China / Japan.
How did he & his family prepare themselves to meet the challenges in that
country with respect to the following factors: Language / Food / Schooling?

THE END.

THANK YOU