mmzc 441 lecture 2

MMZC 441/ MMVA ZC441 Human Resource Management

BITS PilaniPilani Campus

Session 2 Date 10/08/2015 By : Jayashree Mahesh

BITS Pilani

Pilani Campus

Chapter 2: Context of Human Resource Management

Chapter 3 : Integrating HR Strategy with Business Strategy

Text Book : Aswathappa K., Human Resource Management- Text and Cases, Tata McGraw Hill, 7th Edition, 2013.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Ch 2 Context of HRM - Learning Outcome

External and internal environment impacting HR functions Describe each Factor and its Impact on HRM

3


Environment

• Environment may be understood as all those forces which have their bearing on the functioning of HR department

4


Political - Legal

• Legislature – Executive – Judiciary • Article 14: equality before law• Article 15: no discrimination • • Article 23: no forced labour • Prohibition of child labour, equal wage act, factory act, maternity leave ,

workmen compensation, provident fund, gratuity act etc…• Influences recruitment, placement, training, Employee- relations

5


Economic Environment

• Economic forces – Economic growth, industrial production, agriculture, population, national and per capita income, money and capital markets, suppliers, competitor, customers, and industrial laws etc..

• All these influences quality of labor which in turn impacts productivity….

6


Specific Environment

• Suppliers – For HR dept, suppliers are those who provide human Resources to an organization. Ex: Consulting firms, training institutes.

• Competitors – Competition plays significant role in HR function and Activities. Organization need to groom its employees through well managed HR planning programmes to withstand competition

• Customers – Customers have their own influence on companies personal Functions. So everybody in the organization must endeavour to offer products which gives satisfaction for the money customers pay.

7


Globalization & Implications of Global Economy

• Tendency of firms to extend their sales , ownership and manufacturing to newer markets abroad

• Worldwide company culture• Worldwide recruiting• Global alliance needs highly trained and devoted staff• Deal with virtual workforce• Outsourcing

8


Technology

• Technology plays a vital role in HR functions, in order to make people more intellectual and efficient.

• Managing well knowledgeable people - incentives, wlb, flexi time, profit sharing

• HRIS: managing a virtual workforce • Managing employee alienation • Training & retraining employees to manage obsolescence• Providing work life balance

9


Strategic HR issues• Impact on productivity• Necessary expansion/

contraction of workforce• Training needed to utilise new

technology• Costs for hiring, severance,

training• Effective management of

change• Impact on work group dynamics

Strategic Issues• Impact on productivity• Impact of quality of output• Impact on training/delivery of

output• Cost of equipment/technology• Adequacy of current facilities• New market opportunities

afforded

Consideration of adopting a new technology

HR and Technology

10


Socio- Cultural – Influence

• Culture refers to the complex whole which includes knowledge, belief, morals, laws, customs and other capabilities and habits acquired by an Individual as a member of society.

• Ex: Tata’s culture – “Hire the right people and let them free” • L & T’s culture – “ They are known for their professional approach • Culture indicates attitude of workers towards work • Time dimensions which influence HRM (past, present, future)• Achievement oriented, effort-reward • Individualistic or collectivism

11


Internal Forces

Unions • A firm’s personal activities will be influenced by it’s own union’s as well

as the union’s of other plants. • A trade union may be understood as association of workers or

management formed to protect their own individual interest. • All HR activities like recruitment, selection, training, compensation are

carried out in consultation with union leaders. • Eg : The Bokaro steel plant has 68 trade unions. Calcutta Corporation has

about 100 trade unions.

12


Internal Forces

Strategy, Task and Leadership • Strategy and HR, Task and Motivation, Leadership and followers. Organizational Culture and Conflict• Conflict arises as: Goals, Ethics, Authority vs Autonomy, Leadership vs

followership, Change vs stability etc.

13


Scanning the Environment

• Involves surveillance of the environment to determine trends and projections that would affect the fortunes of the organization.

• Focuses on the specific environment • Provides relevant information for planning and decision making• The relevant areas for HRM to be scanned are labor market, legal

environment, constitutional provisions and technology

14


Summary of Chapter

• The HRM environment comprises of both external and internal forces. • The external environment consists of political-legal, economic,

technological and cultural factors (PEST). • The internal environment consists of unions, suppliers, customers ,

competitors and professional bodies. • The study of environment enables HR experts to become proactive in

their approach to personnel aspects.

15


Ch 3 Integrating HR Strategy With Business Strategy- Learning Outcome

Understanding the Nature of Strategic HRM Describe the Strategic Management Process Integrate HR Functions with Strategic Management Process

16


Strategic Management

• Strategy: the companies long term plan for how it will balance its internal strengths and weakness with its external opportunities and threats to maintain a competitive advantage.

• Strategic management: refers to the process of crafting strategies , their implementation and evaluation of their effectiveness.

• Strategies bridge where the company is now , with where it wants to be tomorrow

17


Traditional HRM vs. Strategic HRM

18


Strategic HR Model

Institutional/ Political forces

HRM Practices

Firm-level Outcomes (performance, satisfaction,

absenteeism, etc.)

Firm strategy

HR BehavioursHR Capital Pool (skills, abilities)

Resource dependence institutionalResource-

based view of the firm

Behavioural Approach

Cybernetic Agency/Transaction Costs

19


Strategic Management Process

I. Environmental Scanning II. Identifying sources of competitive advantage III. HR Strategy formulationIV. HR Strategy Implementation V. Strategy Evaluation and Monitoring

20


I: Environmental Scanning

• Consists of External and Internal environment…• External environment : PEST analysis • Internal environment: SWOT analysis, organizational culture,

organizational structure, employee morale, industrial relations, unionization etc..

21


Worksheet for Environmental Scanning

22


• A scan of the internal and external environment is an important part of the strategic planning

process.

• Environmental factors internal to the firm usually can be classified

as strengths (S) or weaknesses (W), and those external to the firm

can be classified as opportunities (O) or threats (T).

• Such an analysis of the strategic environment is referred to as a SWOT analysis.

What is a SWOT Analysis?

23


The SWOT analysis provides information that is helpful in matching

the firm's resources and capabilities to the competitive environment in

which it operates As such, it is instrumental in strategy formulation and selection.

The following diagram shows how a SWOT analysis fits into

an environmental scan:

SWOT Analysis

24


The SWOT Framework

25


A firm's strengths are its resources and capabilities that can be used for

developing a competitive advantage. Examples of such strengths include:

• Patents

• Strong brand names

• Good reputation among customers

• Cost advantages from proprietary know-how

• Exclusive access to natural resources

• Good access to distribution networks

Strengths

27


The absence of certain strengths are a weakness. For example, the following may be considered weaknesses:

• Lack of patent protection

• A weak brand name

• Poor reputation among customers

• High cost structure

• Lack of access to best natural resources

• Lack of access to key distribution channels

Weaknesses

28


In some cases, a weakness may be the flip side of a strength.

• For example, a firm has a large amount of manufacturing capacity.

• While this capacity may be considered a strength that competitors do not

share, it also may be a considered a weakness if the large investment in

manufacturing capacity prevents the firm from reacting quickly to changes

in the strategic environment.

Weaknesses - Continued

29


• The external environmental analysis may reveal certain new opportunities for profit and growth.

• Some examples of such opportunities include:

An unfulfilled customer need

Arrival of new technologies

Loosening of regulations

Removal of international trade barriers

Opportunities

30


Changes in the external environmental also may present threats to the firm.

Some examples of such threats include:

shifts in consumer tastes away from the firm's products

emergence of substitute products

new regulations

increased trade barriers

Threats

31


Launched in 1954. Oldest detergent used in more then 20 countries Very strong brand communication Available in wide variety and product size. (surf excel blue, matic, quick wash, comfort in 5 kg, 2kg,

250grm) Solid base company of Unilever (HUL) , employee 2lks, operated in 100 countries, $868 m in R&D; Strong competitors, (tide, nirma, ariel, oxyclean, sundry) Substitute products (liquid detergent, bars) Lack of control in supply chain management No famous brand ambassador High price of product Changing life style Applying tactics and surprise Explore new geographical market Political effects, economical effect, legislative effect; environmental effect Chances of price war

Example: Surf excel SWOT Analysis

32


Strength:• Strong brand

portfolio• Brand name• Solid base of

company• Innovative aspects• Success of slogan:

stain is good

Analysis:

• High price of the products• No famous brand ambassador

Opportunities:

• Changing life style of thepeople

• New market vertical, horizontal

• Increasing the volume of the production

• Seasonal weather and fashioninfluences

• Technology innovation and development

Threats:• Political effect• Legislative effect• Environmental effect• Introduction of local

product• Change in life style• Chances of price

war• Economic crisis

33

Weakness:


“For the first six months we did not have internet connection. We would go to Anil Lall’s house with two floppies and he would upload the site.....” remembers

Sanjeev Bikchandani the founder of www.naukri.com. But then was the internet boom. Uploading content on web became a lot easier for us. There was growing

number of internet users. We knew that the idea would click. But there were other constraints. “With little finance in hand and limited technical resources, running

the business was difficult. But we were all committed and wanted to make this business successful. So we started posting jobs from different magazines and

newspapers on our

website. The recruiters came to know about us from the applications received by them- stating with reference to your advertisement in naukri.com. The

recruiters started discussing, “Hey, what is this naukri.com” Within 6 months of the launch, a direct mail letter was sent to HR managers and recruiters. For Rs.

350/- you could list a job on the site. For Rs. 6,000/- you could get annual subscription which gave you unlimited listings through the year. And thus naukri.com

began to get business. Low business, maybe Rs. 2-2.5 lakhs, but in a year two, more direct mails were sent out. “Revenues increased between 8-9 times in one

year. The job market was growing and the MNC’s were entering Indian market.

The year was 1999. Investment bankers were throwing off their ties and setting up .com businesses. Sanjeev Bikhchandani too started getting feelers, “we would

like to invest in your company”, they said. His initial reaction was: “I don’t need your money. We are breaking even now. Next year, we will continue to grow, bring

in Rs. 50-60 lakhs and make profits. And I will be Happy.”

The truth was happy as a small company, operating from home. After years of struggle, the company could finally see the word profit in its horizon. “I didn’t want

to sign complex agreements, have somebody breathing down my neck and be under pressure for growth. I was comfortable, leading an uncomplicated life.” Around

that time, he came across international magazines talking about dotcoms, like Yahoo! And it’s listing on stock market. “I figured out that something was happening in

here. But I said I don’t want money anyway: neither from Stock markets IPO nor from investment bankers, no matter what the valuation.

But then, funded competition launched. The advertising budget of jobsahead.com (just the launch) was twice as large as naukri’s annual turnover. They had

deep pockets. When that happened Sanjeev realized that the game has changed. And something has to be done to keep the market share intact.

SWOT :Naukri.com

34

http://www.naukri.com/









Strengths: Committed promoters, economical pricing,

Weakness: Little finances and technological resources, complacency and contentment with limited growth

Opportunity:Internet boom, rising number of internet users, recruiters awareness about Naukri through applicants, growing job market, MNC’s entering Indian market, investment bankers willing to invest into .com business

Threat: Competition from funded companies, heavy advertising expenditure by funded companies

Solution

35


Sources are quality, price, brand positioning, timely delivery and customer service.

Competitive Advantage Core capabilities Intellectual Capital

II. Identify Sources of Competitive Advantage

36


III. Identify HRM Strategies

Indirect Interventions

Direct Interventions

Human Capital Social Capital

Devolved Informal learning Developing awareness of learning opportunities

Empowered informal learningCreating a learning environment (i,.e. a context conducive to social capital)

Learning as socialization Delivering formal training, learning and development interventions

EngineeringCreating and controlling communities-of-practice and social networks

37


• Implementation through HR plans, policies and practices.

• Monitoring as establishing targets,measuring performance, analyzing the deviation and executing the modifications.

IV. Implementing HR Strategies,& V. Monitoring and Evaluation

38


• Allows identification, prioritisation and exploitation of opportunities.

• Provides an objective view of management problems.

• Represents a framework for improved co-ordination and control of activities.

• Minimises the effects of adverse conditions and changes.

• Allows major decisions to better support established objectives.

• Allows more effective allocation of time and resources to identified opportunities.

• Allows fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions.

• Creates a framework for internal communication among personnel.

Benefits of Strategic Management

39


Benefits of Strategic Management

• Helps to integrate the behaviours of individuals into a total effort.

• Provides a basis for the clarification of individual responsibilities.

• Gives encouragement to forward thinking.

• Provides a co-operative, integrated and enthusiastic approach to tackling problems and opportunities.

• Encourages a favourable attitude towards change.

• Gives a degree of discipline and formality to the management of a business.

40


In strategy formulation

HR manager supplies competitive intelligence that is useful

In strategy implementation

Encouraging proactive behaviour

Explicit communication goals

Stimulate critical thinking Productivity

Quality and Service

Proficient strategic management

HR Role in Strategic Management

41


Strategy management

SWOT

Role of HRM in aligning with Business strategy

Summary

42

mmzc 441 lecture 2

Documents

ugc act

factory act

hr functions

hr strategy

hr dept

strategic hr issues

equal wage act

hrm3bits pilani