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CHARACTERISTICS OF SHRM

1. SHRM is a comprehensive approach to people management 2. SHRM is a generalist approach to people management 3. SHRM is an integrative approach to people management 4. SHRM has a long-term focus 5. SHRM focuses on customers- internal and external 6. SHRM has a market & environmental focus 7. SHRM is a combination of hard and soft models 8. SHRM elevates the status of HR 9. SHRM talks of levels of HRM 10. SHRM considers employees as most important 11. SHRM focuses on measurement 12. SHRM is a coordinating function

SHRM is concerned with establishing vertical and horizontal fit: Vertical Fit: Ensuring integration of HRM with the strategic management process

• Conscious effort to align business with HR issues • HRM activities designed keeping in mind organizational vision and strategy • Inputs about HR are considered integral part of organizational strategy • Top management take special interest in HR issues • Information sharing mechanism between HR and senior managers • Top-level strategic teams include HR head/executive • HR executives are provided training in general managerial skills

Horizontal Fit: This involves two types of fit Internal Fit: Ensuring integration between HRM sub-functions or sub-systems e.g. staffing, compensation, training, etc.

• Presence of a long term HR vision and HR strategy • Consistent HR policies in each other • Presence of coordinating mechanism between HR sub-functions • Information sharing mechanism between HR sub-areas

External Fit: Ensuring integration between HRM and other functional areas e.g. marketing • Consistency of HR activities with other functional activities • HR issues part of every manager’s responsibility • HR decisions taken jointly with other managers • Functional area managers actively involved in HR activities

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EMERGING HR SCENARIO

Dave Ulrich’s 4 Roles of HR Departments

Responsibilities/Capabilities of HR Professionals

Strategic

Tactical

Operational

Ensure vertical integration

Lay down HR vision Create strategies Chalk out future plans Drive change Scan environment

Ensure horizontal integration

Create HR strategies Show HR deliverables Market the HR function Utilize people as assets

Implement strategies Hire & fire Dispense with rewards Train & develop Maintain and retain

staff

Other Roles Facilitator, Linking Pin, Communicator, Resource Allocator, Organizer, Leader & Consultant

Change Agent

Employee Champion

Adm. Expert

Strategic Partner

Strategic

People

Operation

Process

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New Age HR Departments

Change of name (Corp. HR Dept., Strategic HR Dept.) Upward movement in hierarchy (Dir-HR, VP-HR, GM-HR etc.) Representation at board level Flat structure of HR departments Team based organizational design Outsourcing of administrative HR activities Automation and e-HR

Non-linear Moves and Changing Face of HR Departments An increasing number of HR executives are occupying top positions and are today CEOs:

• Mr. K Ramachandran, CEO Philips India • Mr. Mahendra Swarup, CEO Indiatimes.com • Mr. Raman Madhok, CEO JISCO • Dr. Anil Khandelwal, CEO Bank of Baroda • Mr. Sujit Baksi, CEO HCL E Serve

The heads of HR of several companies like Infosys, TCS, Satyam Marico, Crompton Greaves, Cadbury and Nerolac are not career HR professionals. T. V. Mohandas Pai is Member of the Board and Director-Human Resources. He served as the Chief Financial Officer at Infosys. During his tenure as CFO, Mohan put in place the country’s first publicly articulated financial policy for the company. The Infosys Annual Report, under his supervision, has won the Best Presented Annual Accounts Award for ten years in succession. Mohan was an integral part of the Infosys team that enabled the first listing of an India-registered company on NASDAQ. He was voted ‘CFO of the Year’ in 2001 and 2002, and “Best Chief Financial Officer in India” in the AsiaMoney Best Managed Companies Poll 2004. Ajoyendra Mukherjee is head, global human resources Tata Consultancy Services (TCS). A key member of the corporate leadership team, Mukherjee was earlier the vice president and head of operations, eastern region. Mr. S.V. Krishnan is head Human Resources at Satyam Computer Services. Mr Krishnan led large business teams and was heading the GE business relationship for Satyam. Mr. Hari T (HR head eralier) is leading Global Marketing and Communications at Satyam. Mr Hari T helped the company grow multi-fold over the last 9 years as HR Head. Pari Sadasivan made a non-linear move taking over as V-P, HR, at IBM India after 20 years of long career in operations. Rajiv Dube, CEO, Rallis India, moved to Mahindra & Mahindra as head of HR. Shrikant Gupte, ex-CEO, Modi Lotteries, and ex-head of personal care in Marico, joined as group head of HR at Nicholas Piramal. G Krishnamurthy was a business development executive in L&T before joining as EVP, HR, in the same company. Ramesh Samtani was operations director before heading HR. Rakesh Pandey, Marico’s previous head of HR, too came from operations background.

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V. Chandramouli is Director (HR & Strategy) at Cadbury India. HR was earlier an independent function. Now it is integrated with corporate strategy. Today, HR head in a company need not be a specialist. Instead, he could be a talent from line function, such as finance or marketing. Having a perspective on the clients and the business units helps in reorienting the HR needs within the organization and aligning them with the market needs. The reverse is also happening. HR executives are taking up other assignments. Many companies differentiate between operational and strategic HR. While the operational aspect of HR is being handled by traditional HR executives, the strategic part is being given a business dimension by introduction of people from non-HR streams. In some companies, traditional HR activities are outsourced and strategic activities are performed by HR executives.

Old Myths about HR 1. People go into HR because they like people. 2. Anyone can do HR. 3. HR deals with the soft side of a business and is therefore not accountable. 4. HR focuses on costs, which must be controlled. 5. HR's job is to be policy police and the health-and-happiness patrol. 6. HR is full of fads. 7. HR is staffed by nice people. 8. HR is HR's job.

New Realities about HR

1. HR departments are not designed to provide corporate social therapy. 2. HR professionals must master both theory and practice. 3. The impact of HR practices on business results can and must be measured. 4. HR professionals help not just reduce cost but add value. 5. HR professionals must create the practices that make employees more competitive, not just

more comfortable. 6. HR professionals must see their current work as part of an evolutionary chain 7. At times, HR practices should force vigorous debates. HR professionals should be confrontative and challenging as well as supportive. 8. HR professionals should join other managers in championing HR issues. The HR function traditionally has spent more time professing than being professional. It is time to talk less and do more; time to add value, not write value statements; time to build competitive, not comfortable, organizations; time to be proactive, not reactive. It is time to perform, not preach.

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EVOLUTION OF SHRM

Exhibit 1: Paradigm Shift in People Management

Period Era Workforce Status Activity End Result

1900-20 Industrialization Bonded PA Hiring & Firing Birth of Products

1920-40 Trade Unionism Blue Collar PM Compensation &

Training

Mass Production

1940-60 Corporatization White Collar I & HR Labour-Mgmt.

Issues

Mass Marketing

1960-80 Rise of MNCs Professional HRM Human values Customization

1980-2K IT Revolution Knowledge

Worker

HRD Competency-

building

Mass

Customization

2K

onwards

Borderless World Intellectual

Asset

SHRM Integration Customerization

Compiled for Class Discussion: FTA

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Exhibit 2:Traditional Vs. Strategic HRM

Traditional HRM Strategic HRM

Beliefs Conformity Can-do outlook

Guidelines Contracts & rules Vision/Mission

Objectives Organizational interest Organization & Individual interest

Scope Personnel Department General Managers

Methodology Technical, specialist Professional, managerial

Approach Segregated, staff function Systems approach

Functions Traditional, administrative Modern, developmental

Nature Short-term, constrained Evolving strategic role

Thrust Monitoring Nurturing

Status Implementer, reactive Formulator, proactive

Role Attain goals Design goals

Compiled for Class Discussion: FTA

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Exhibit 3: Influence of Different Movements on SHRM

Movement Period Proponents Philosophy Contribution to PM/HRM

Social Reformer 1790s Robert Owen People’s behaviour is a function of their treatment

Better working conditions, safety

Scientific Management

1870s Frederick Taylor

Need for scientific selection & development of workers

Incentive system, manpower planning

Industrial Psychology

1900s Hugo Munsterberg

Analysis of jobs in terms of their mental and emotional requirements

Job analysis, selection techniques, statistical validity of tests

Human Relations

1920s Elton Mayo Productivity was a function to the extent of which people worked as a team.

Workers participation, Industrial Democracy

Behavioural Science

1940s Rensis Likert Understanding human behaviour is central to all management problems

Job satisfaction, motivation, QWL

Organization Development

1960s Warren Bennis

Man has complex and shifting needs which require a humanistic organization

Change management, team building

Corporate Culture

1980s Tom Peters & Waterman

Excellent companies are people oriented and emphasize mutuality

Shared values, corporate image, mission/vision

Core Competence

1990s Prahlad & Hamel

Winning will spring from human capabilities and competencies

Strategic HR, vertical and horizontal fit

Compiled for Class Discussion: FTA

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Models of SHRM

The Michigan Model

Michigan model of HRM has originated from the writings of C. Fombrun, Noel Tichy and M.A. Devanna, who

discussed it in a detailed fashion in their book titled Strategic Human Resource Management, published in 1984.

The model of Fomburn et.al. is also called as the ‘Matching Model’ because it depicts the relation between HRM

and organizational strategy. The model shows how activities within HRM can be unified and designed in order to

support the organization's strategy. It is divided into two parts: first which shows HR-strategy integration and

second which depicts the HR cycle. The assumption that HRM is derived from corporate and business level

strategy leads to the matching model, according to which organizational effectiveness is achieved by ensuring a

tight fit between corporate / business strategy and HRM strategy.

The model provides a simple framework to depict how HRM policies are derived from mission and strategy of the

organization, which is in turn influenced by external factors. The second part of the model to show how HR

functions like selection, appraisal, development and reward can be mutually geared to produce the required type

of employee performance. It basically talks of the concept of the one-way fit between HRM and business strategy

by prescribing design of HRM policies in light of strategy.

The Michigan model has a harder, less humanistic touch, holding that employees are resources in the same way as

any other business resource. They must be obtained (i) as cheaply as possible, (ii) used sparingly and (iii)

developed and exploited as much as possible. From this point of view, for example, the object of formal human

resource planning can be just that-largely a factor of production, along with land and capital.The hard model of

HRM emphasizes the quantitative, calculative and business strategic aspects of managing the headcount resource

in a rational way as for any other economic factor.

This model stresses upon the crucial importance of the close integration of HR policies, systems and activities

with business strategy. The Michigan theorists highlighted the following as being the most important HR issues to

achieve such a match:

• Selection of the most suitable people to meet business needs.

• Performance in the pursuit of business objectives.

• Appraisal, monitoring performance and providing feedback to the employees.

• Rewards for appropriate performance.

• Development of skills and knowledge required to meet business objectives.

Managerial Implications

The model:

is focused on individual and organizational performance.

based on strategic control, organizational structure, systems for managing people

concentrates on managing human assets to achieve strategic goals.

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contributes to human resource performance.

has components such as organization structure, mission and strategy, human resource selection,

performance appraisal, rewards and development.

requires that personnel policies, practices and systems are not only consistent with the business objectives

of the firm but should also have coherence among various sub-systems of HRM.

The Harvard Model

The Harvard Model propounded by Michael Beer, Richard Walton, quinn Mills, P. Lawrence ans Bert Spector in

1984 is another significant model of SHRM. The model recognizes the different stakeholder interests which

impact HRM policy choices, and also lays emphasis on situational or environmental factors, which help shape

human resource strategic choices. According to Beer et al., “Human resource management involves all

management decisions and actions that affect the nature of the relationship between the organization and its

employees -- its human resources. General management make important decisions daily that affect this

relationship”.

The type of HRM policies and practices an organization prefers should be dependent upon its organizational

vision, mission, strategy, goals, and objectives. In quite a few cases, such HR practices shall also be devised and

adopted in tune with external environment of organizations. In other words, HR policies and practices are subject

to be influenced by internal and external environment of organizations. The Model, argues that human resources

policies are to be influenced by two significant considerations:

1. Situational factors. The internal and external environment factors of organizations that include (i) labour

market conditions, (ii) societal values, (iii) business strategies, (iv) technologies, (v) management

philosophies, and (vi) market conditions will constrain the formation of HRM policies.

2. Stakeholders’ interests. The stakeholders influence the short-term HRM policies. They include (i)

management employees, (ii) unions, and (iii) government agencies.

Further, the model classifies HRM policies and practices into four themes as follows:

• HR flows. Recruitment, selection, placement, promotion, appraisal and assessment, promotion,

termination and the like.

• Reward systems. Pay systems, non-monetary recognition schemes and so on.

• Employee influence. Clarification of responsibility, authority, hierarchy and delegation of powers.

• Work systems. Definition of work and alignment of people.

The above HR practices are centered on four C's as described in the following:

Competence of employees: Competence creates a positive attitude towards learning and development and,

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thereby, gives employees the versatility in skills and the perspective to take on new roles and jobs as

needed. HRM policies and practices will exist in such a way that they attract, develop and retain

employees with valuable skills and knowledge.

Commitment of employees: Commitment means that employees will be motivated to ‘hear, understand,

and respond’ to management’s communications relating to the organization of work. HRM policies must

contribute for infusing employee commitment to organization. The commitment will yield two benefits.

Firstly, it will enhance the employee performance and loyalty to his/her work. Secondly, it will enhance

the individual self-respect and worth.

Congruence between the goals of employees and the organization: Higher congruence is a reflection of

policies which bring about a higher coincidence of interest among management, shareholders and

workers, in turn, reducing adversarial relations. There must be congruence between and among various

HRM policies as well as practices in operation

Cost effectiveness of HRM practices: Cost effectiveness means that ‘the organization’s human resource

costs - wages, benefits, and indirect costs such as strikes, turnover, and grievances - have been kept equal

to or less than competitors. HRM policies must be evaluated in terms of wages, benefits, turnover,

absenteeism, strikes, benefits etc

Managerial Implications

The model helps HR managers in charting HR strategy for their organizations. This model offers three significant

insights for practice. Firstly, HRM policies should be defined keeping in view the environmental factors and

stakeholders' concerns. In other words, there must be a good fit between organizational environment and HR

policies. Secondly, such HRM policies and practices must have a goal to achieve employee commitment,

competence development, coherence among themselves and embrace cost effective methods. Thirdly, HRM that

stems from environmental factors and is drawn based on four C's will result in employee and organizational

effectiveness. This is a soft model as it is based on stakeholders' concerns and their commitment to organizational

goals.

The model is different from the Michigan model because it takes into account different sets of interests,

philosophies and assumptions (e.g. employee and union interest) that may be operating and thereby likely to

influence HRM decisions directly. It talks of HRM policy choices leading to favourable HR outcomes thereby

impacting long-term organizational consequences. It talks of the concept of the two-way fit between HRM and

business strategy as it takes into consideration employee interests

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THE MICHIGAN MODEL

HRM-Strategy integration

The HR Cycle

Political Forces

Economic Forces Cultural Forces

Strategy

Structure HRM

Selection Performance Appraisal

Development

Rewards

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THE HARVARD MODEL

Stakeholders

Shareholders Management Government Employees Suppliers Society

Situational factors

Strategy Philosophy Values Law Market Technology Economy Workforce Profile

HRM Policy Influence

HR Flow Rewards

Work System

HR Outcomes Commitment Competence Congruence Cost saving

Goals

Individual Organizational

Societal

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Schools of Thought

Two divergent approaches to SHRM can be identified based on the Michigan and Harvard models. Both these

schools/approaches talk about fit between strategy and HRM. They are also called as contingency schools because

they assume that HRM is contingent on organizational strategy. These two approaches are:

Instrumental approaches to SHRM: This approach draws upon the ‘rational-outcome’ model of strategic

management to view HRM as something that is driven by and driven directly from corporate, divisional or

business level strategy, and geared almost exclusively to enhancing competitive advantage. Instrumental

approaches place the emphasis firmly on human ‘resource’ management. They basically talk of the concept of the

one-way fit between HRM and business strategy by prescribing design of HRM policies in light of strategy. The

Michigan model of HRM is an example of this approach. This is referred to as the ‘hard’ version of HRM.

Thus, taken from this perspective, HRM is concerned with the integration of human resource issues into business

planning. All decisions about the acquisition, processing and management of human resources must, like any

other organizational input, be tailored to increase or restore competitive advantage. The key question must be:

'What HRM strategy will maximize competitive advantage, optimize control, and minimize unit and labor

replacement costs'. According to this approach, all issues associated with the management of human resources

should be derived issues.

Question marks have been raised over the model due to its simplistic response to organizational strategy. The

question what if it is not possible to produce a human resource response that enables the required employee

behavior and performance is not addressed. This model has also been criticized because of its dependence on a

rational strategy formulation approach and because of the nature of the one-way relationship with organizational

strategy. There is the charge that it tends to be overly rationalistic, that strategy is assumed to be formulated in

advance of action and then unproblematically implemented. It fails to perceive the potential for a reciprocal

relationship between HR strategy and business strategy. The theory seems to ask too little of HRM. Surely, any

chief executive with long-term vision would want to use HRM not just to woodenly implement a preconceived

business strategy, but to create a climate in which valuable strategizing occurs.

It encourages a narrowness of focus. It concentrated on four 'generic' functions: selection, reward, appraisal and

development. While these undeniably have a central role, a strong case can also be made for the inclusion of other

dimensions such as welfare, equal opportunities, employee involvement and industrial relations.

Finally, there is the claim of excessive ‘unitarism’. The so-called ‘unitary frame of reference’ describes an

approach towards the management of people which regards the work organization as a harmonious unit

characterized by a common purpose within which managerial authority is taken to be legitimate. Any challenge to

this authority (such as trade unionism) is viewed as fundamentally destructive. From this perspective, interests

and concerns of employees are frequently ‘written-out’ of the equation, it being taken for granted that what top

management considers best for the organization will automatically or ultimately be best for the workforce.

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Thus, from this viewpoint: HRM appears as something that is ‘done to’ passive human resources rather than

something that is ‘done with’ active human beings. In many respects, Humanistic variants off HRM can be seen

as responses to these potential difficulties.

Humanistic approaches to SHRM: This approach utilizes the 'process' theory to emphasize the reciprocal nature

of the relationship between strategic management and HRM and the latter's role in ensuring that competitive

advantage is achieved through people, but not necessarily at their expense. These approaches are closely

associated with what has become known as the ‘Harvard School’ of HRM. As the humanistic label implies, the

emphasis is on the ‘soft’ aspects of HRM associated with organizational culture and employee commitment and,

as such, its orientation is broader and less rigidly ‘functional’. The emphasis is on ‘human’ resource management.

The Harvard Model recognizes the different stakeholder interests which impact on employee behavior and

performance, and also gives greater emphasis to factors in the environment, which will help to shape human

resource strategic choices identified in the ‘situational factors’ box. The model has potential for international or

other comparative analysis, as it takes into account different sets of philosophies and assumptions that may be

operating. Humanistic approaches draw explicitly on a process model of strategic decision-making which

emphasizes the emergent, political and frequently non-rational nature of this process. This leads to a less

prescriptive and more people-centered approach than that found in Instrumental orientations and a more

realistically pluralist view of employment relations.

INSTRUMENTAL APPROACH HUMANISTIC APPROACH Michigan Model Drawn from Harvard Model

Hard version                  Soft version 

Emphasis on Human ‘resource’ Emphasis on ‘Human’ resource Rational- outcome model Process model

Organizational goals Organizational & individual goals HRM to be driven by SM HRM to drive and be driven by SM

One-way link Two-way link Reactive Proactive

Quantitative and calculative Qualitative and intuitive HRM is things ‘done to’ HR HRM is things ‘done with’ HR

Unitarist Pluralist HR as implementer HR as formulator & implementer

While the above two schools fall under the Best Fit schools of thought, or contingency schools of thought

(because here HR is contingent on strategy) there is another broad school of thought viz. Best Practice school.

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The Best Practice School The Best Practice school is also called as the Universalistic perspective. It is the simplest SHRM model. It posits

that some HR practices are universally better and result in improved organizational performance. Research

evidence is there suggesting that certain HR practices have a positive effect on performance. The best practices

approach advocates universal HR practices, i.e. they have an effect on business performance regardless of the

context in which they are applied.

The most influential best practice set is associated with the 7 practices identified by Pfeffer (1994) viz.

employment security, selective hiring, self-managed team, pay contingent on company performance, extensive

training, reduction of status differences and sharing information. Osterman (1994) included practices such as

teams, job rotation, quality circles. This perspective emphasizes employee empowerment, recognition,

information-sharing, team-building, socialization, human values, communication, partnership, collaboration,

innovation and these are found to be positively linked with firm performance. Best practices were found to be

highly correlated to customers’ ratings of service quality. Likewise, employee empowerment and communication

practices enhanced employee trust.

Criticisms: The universal perspective is not without its critics. Organizations that do not adopt best HR practices

can also generate greater returns. The universal school does not address the role of strategy as a contingency.

Findings suggest that the strategy-HR interaction accounts for more variation in firm performance than the main

effect of HR. Another controversy involving this issue is whether there exists a set of ‘best practices’ that are

universally effective across contexts and industries. Several best practices have failed in a number of cultures.

There has been little evidence that provides a definitive prescription as to which HRM practices should be

included in a best practices system. Whether the best practices are applied to all the employees uniformly is not

clear.