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Human Resource Development

Human Resource Development (HRD) as a function has evolved in India indigenously

from the year 1975 when Larsen & Toubro (L&T) conceptualized HRD as an integrated
system and decided to separate it from the personnel function. Since then, most
organizations have started new HR departments or redesignated their personnel and other
departments as HRD departments. Today, there are high expectations from HRD. Good
HRD requires well-structured function, appropriately identified HRD systems, and
competent staff to implement and facilitate the change process.

Frameworks Of HRD:

Global Models
A- The Strategic HR Framework Approach.
This framework, formulated by Ulrich and Lake (1990) aims to leverage and / or align
HR practices to build critical organizational capabilities that enable an organization to
achieve its goals.
This framework offers specific tools and paths to identify how a firm can leverage its HR
In this approach Business strategy, organizational capabilities and HR practices are the
three important elements.
In his approach Dave Ulrich presented a frame work for HR professionals in terms of the
following four key roles:
1. Management of strategic human resource.
Here, the activities for managing strategic human resources include:
 Aligning HR and Business strategy.
 ‘Organizational diagnoses, reengineering organization processes.
 „Shared services‟, listening and responding to employees.
 ‘Providing resources to employees‟, managing transformation and change;
 Ensuring capacity for change.
2. Management of firm infrastructure:
The activities for Management of Firm Infrastructure, includes constant examination
to provide the HR processes, HR professionals to act as administrative experts
ferreting unnecessary costs, improving efficiency and constantly finding new ways to
do things better, being effective as administrative experts.
They also need to undertake activities leading to continual reengineering of the work
processes they administer.
It requires HR professionals’ design to deliver efficient HR processes for staffing,
training, appraising and rewarding, promoting and otherwise managing the flow of
employees through the organization.

3. Shared services (Management of employee contribution):

The activities for managing employee contribution includes: listening, responding,
and finding ways to provide employees with resources that meet their changing

4. Management of transformation and change: The activities for managing

transformation and change includes: identifying and framing problems, building
relationships of trust, solving problems, creating and fulfilling action plans.

B- The Integrative Framework.

The integrative framework offered by Yeung and Berman (1997) identifies three paths
through which HR practices can contribute to business performance. They are:

1. By building organizational capabilities.

2. By improving employee satisfactions; and
3. By shaping customer and share holder satisfaction

It is the argument of Yeung and Berman for dynamic changes in HR measures to refocus
on priorities and resources of the HR function. In this regard they argued that HR
measures should be:
 Business driven rather than HR driven;
 Impact driven rather than activity driven;
 Forward looking and innovative rather than backward looking; and
 Instead of focusing on individual HR Practices the measures should focus
on the entire HR system, taking into account synergies existing among all
HR practices

C- Human Capital Appraisal Approach.

This approach outlined by Friedman (1998) of Arthur Anderson Consulting

Company is based on the belief that:
a) There are five areas of human capital management:
1. Recruitment, Retention and retirement;
2. Rewards and Performance Management;
3. Career Development;
4. Succession Planning and training;
5. Organizational structure and human capital enablers.
b) There are five stages in the management of human capital. They are:
1. Clarification stage.
2. Assessment stage.
3. Design stage.
4. Implementation stage, and
5. Monitoring stage.
A 5 x 5 matrix using these five stages and five areas could be used to evaluate and
manage the human capital well.
Recruitment, Rewards and Career Succession Organizational
Retention Performance Development; Planning structure and
and Management and human capital
retirement training enablers.



Design stage.
Design stage.



For example, in the clarification stage, the managers examine their human capital
programs to fit into their strategy and overall culture. They may also examine each of the
areas to fit into the strategy, etc.,
D- HRD Score Card Approach.
It is a recent approach formulated by T.V. Rao (1999). It envisages that HR interventions
in order to make the right business impact should be mature in terms of HRD systems,
competencies, culture (including styles) and business linkages.

The maturity level and the appropriateness of each of the sub-systems of HR, the
appropriateness of the HR structures and the level of competences of HR staff, line
managers, top management, etc., the HRD culture ( defined in terms of openness,
collaboration, trust, autonomy, pro-action, authenticity, confrontation and
experimentation) and the congruence of the top management, HR staff styles with HRD
culture, and the extent to which all the systems and practices result in employee
satisfaction and customer satisfaction etc., are to be assessed through a well- formulated
HRD audit.

E) P-CMM Approach.

Curtis and team (1995) developed this approach for software organizations. The People
Capability Maturity Model (P-CMM) aims at providing guidance on how to improve the
ability of (software) organizations to attract, develop, motivate, organize and retain the
talent needed to steadily improve their software development capability.

The strategic objectives of P-CMM are:

 Improving the capability of (software) organizations by increasing the capability

of the workforce;
 Ensuring that the (software development) capability is an attribute of an
organization rather than that of a few individuals;
 Aligning the motivation of individuals with that of the organization;
 Retaining human assets, i.e., people with critical knowledge and skills within the
A fundamental premise of the maturity framework is that a practice cannot be improved
if it cannot be repeated. In an organization’s least mature state, systematic and repeated
performance of practices are sporadic.The P-CMM describes an evolutionary
improvement path from an adhoc one.

It is intended to help (software) organizations to:

a) Characterize the maturity of their work force practices;
b) Guide a program of continuous workforce development;
c) Set priorities for immediate actions;
d) Integrate work force development with process improvement; and
e) Establish a culture of software engineering excellence.
The P-CMM includes practices such as work environment, communication, staffing,
managing performance, training, compensation, competency development, career
development, team building and culture development.

The P-CMM is based on the assumptions that organizations establish and improve their
people management, practice progress through the following 5 stages of maturity:
1. Initial,
2. Repeatable,
3. Defined,
4. Managed, and
5. Optimizing.

Each of the maturity levels comprises of several Key Process Areas ( KPA’s) that
identify clusters of related workforce practices. When performed collectively, the
practices of a key process area achieve a set of goals considered important in order to
enhance work force capability.

In maturing from the initial to the relatable level, the organization installs the discipline
of performing basic practices for managing its workforce. In maturing to the defined
level, these practices are tailored to enhance the particular knowledge, skills and work
methods that best support organization’s business. The core competencies of the
organization are identified; the work force activities are aligned to the development of
these competencies. In maturing to the managed level, the organization uses data to
evaluate how effective its work force practices are and to reduce variation in their
execution. The organization quantitatively manages organizational growth in work force
capabilities, and when appropriate, establishes competency-based teams. In maturing to
the optimizing level, the organization looks continuously for innovative ways to improve
its overall talent. The organization is actively involved in applying and continuously
improving methods for developing individual and organizational competence.

All these approaches share a lot in common. All of them have the following
characteristics with relatively varying degrees of emphasis:

1. All of them are systems driven and emphasize HRD systems or sub-system or
2. All of them attempt to link HR practices with business goals.
3. All of them recognize the importance of HR professionals.
4. All of them recognize the importance of HRD.

Indian Experiment(S).

Integrated Systems Approach by Pareek and Rao.

In 1975, Larsen and Toubro, a prominent engineering company in India had appointed
two consultants form the Indian Institute of Management, Ahmedabad to study the
performance appraisal system and make recommendations in order to improve it.

The two consultants Pareek and Rao studied the system through interviews etc., and
suggested a new system. Pareek and Rao recommended that „……. Performance
Appraisal, Potential Appraisal, Feedback and Counseling, Career Development and
Career Planning and Training and Development get distinct attention as unique parts of
an integrated system which we call the Human Resource Development System.” This
system was proposed as a separate system with strong linkages to personnel (human
resources system).

Pareek and Rao , in the year 1977, in their second report on the human resources system
in L & T recommended that the personnel function be viewed as Human Resources
Function (HRF) and suggested a trifurcated function: Personnel administration, HRD and
worker Affairs. Adding organization development also to the HRD function, the
consultants recommended that…. “Since OD is being added now, it is necessary to
strengthen that part of HRD. We therefore recommend that the company may appoint a
Manager OD with two officers to do a lot of research work which will soon start.”

The consultant differentiated HRD function from other components of HRF; integrating
them structurally and system-wise. Structurally, HRF is to be a sub-system of HRD and
its integration with the other two sub-systems (personnel administration and worker
affairs) to be done by a person at Director level (for example Vice-President, Personnel
and HRD), through task forces and sub-system linkages. Inter-system linkages were
outlined between various HRD sub- systems to have an Integrated System.

They outlined 14 principles to be kept in mind while designing the HRD system. These
principles to be kept in mind while designing the HRD systems and the process of their
implementation. Some of these Principles include:

1. HRD systems should help the company increase enabling capabilities. The
capabilities include: development of human resources in all aspects,
organizational health, improvements in problem-solving capabilities, diagnostic
skills, capabilities to support all the other systems in the company etc.,
2. HRD systems should help individuals recognize their potential and help them
contribute their best towards the various organizational roles they are expected to
3. HRD systems should help maximize individual autonomy through increased
4. HRD systems should facilitate decentralization through delegation and shared
5. HRD systems should facilitate participative decision making.
6. HRD systems should attempt to balance the current organizational culture with
changing culture.
7. There should be a balance between differentiation and integration.
8. There should be a balance between specialization of function with its diffusion
into others.
9. The HRD system should ensure responsibility for the function.
10. The HRD systems should build upon feedback and reinforcement mechanisms.
11. The HRD system should maintain a balance quantification and qualitative
12. There should be a balance between external and internal help.
13. The HRD system should plan the evolution of the function.
14. There should be continuous review and renewal of the function.

In sum, the Integrated HRD systems Approach of Pareek and Rao has the following

1. A separate and differentiated HR department with full-time HRD staff.

2. Six HRD sub-systems including OD.
3. Inter-linkages between the various sub-systems.
4. Designed with 14 principles in mind.
5. Linked to other sub-systems of Human Resource Function.

From the foregoing discussions, thus it can be understood that the Integrated Systems
Approach of Pereek and Rao envisaged the following:

1. A separate HRD for effective designing and implementation of HRD systems.

2. Strategy as a starting point;
3. Focus on all the HR systems to achieve business goals and employee satisfaction.
4. It aimed at synergy, proposed the phased evolution of HRD function (like P-
CMM approach) and included most of the elements of Human Capital Approach.

After L & T accepted and implemented these recommendations in full and started
implementing them, the State Bank of India, the single largest Indian Bank and its
associates decided to use the Integrated HRD Systems Approach and to create a new HR
department. By the mid-80’s, therefore, a large number of organizations in India have
established HR departments.

The Integrative Framework in detail

What is exceptional about the HR function, however, is that it is less prepared than many
other functions (such as finance or management information systems) to quantify its
impact on business performance. Measurement of HR effectiveness and impact was
ranked as the number one topic that HR executives are most interested in exploring in
today’s scenario. As business competition escalates and corporate resources shrink, all
staff functions (e.g., management information systems, finance, human resources, and
research and development) are being pressured to demonstrate their value added and to
refocus their resources for higher business leverage.

Possible outcomes of refocusing staff functions are outsourcing, automation, elimination,

and/or downsizing in order to conserve scarce organizational resources. The HR function
is no exception to this challenge. What is exceptional about the HR function, however, is
that it is less prepared than many other functions (such as finance or management
information systems) to quantify its impact on business performance. Conceptual
linkages between HR and business performance are not well developed, and existing HR
measures are not properly formulated to capture the impact of HR on business
performance. As such, efforts to refocus HR may not be well positioned to optimize
business performance. To stimulate discussion and thinking on this timely and vital topic,
this article addresses three issues central to the HR–business performance relationship:
1. Do HR practices make a difference in business results?
2. In what ways can HR practices add value to business performance?
3. What are the most appropriate HR measures that drive business performance?

Building upon a balanced scorecard framework further offers a framework highlighting

the paths through which HR practices can impact business performance. In general, it can
be said that HR practices play three major roles:
(1) building critical organizational capabilities;
(2) enhancing employee satisfaction; and
(3) improving customer and shareholder satisfaction.
Based on the framework, three clusters of HR measures—internal operational measures,
internal strategic measures, and external strategic measures—are suggested to help the
HR function demonstrate and drive its business contribution. Examples from Eastman
Kodak, Sears, and Motorola are used to exemplify some innovative measures in each
cluster. Finally, implications for the HR function are discussed.

Does HR Make a Difference in Business Results?

Without the conviction that HR does make a difference, HR professionals will not, and
cannot, be motivated to develop HR measures that drive business performance.
Fortunately, in the last few years, several research studies have reported some important
findings regarding the relationships between HR and business performance (Arthur,
1994; Huselid, 1995; MacDuffie & Krafcik, 1992; Ostroff, 1995; Pfeffer, 1994; U.S.
Department of Labor, 1993).

Several consistent themes emerge from these exemplary studies of the HR–business
performance relationship. First, HR practices definitely make a difference in business
results, especially the use of HR practices that build employee commitment. Second, all
of these studies examine the HR system as a whole rather than individual HR practices.
The synergy and congruence among HR practices have an important impact on business
performance. Third, these studies are quite robust as they examine sample firms within an
industry [e.g., the auto industry (MacDuffie & Krafcik, 1992), the steel minimill industry
(Arthur, 1994)] and across multiple industries (Pfeffer, 1994), both within a region
(Huselid, 1995) and across the nation (Ostroff, 1995). Building upon the premise that HR
practices make a difference in business results, our next challenging task is to offer a
conceptual framework that outlines specific ways in which HR practices can exert an
impact upon business performance.

How Can HR Practices Impact Business Performance?

To develop meaningful HR measures, a framework is needed to outline how HR can

impact business performance. Based on the experience of Eastman Kodak, this article
proposes an integrative framework that builds upon a balanced scorecard framework
(Kaplan & Norton, 1992, 1993) and a strategic HR framework (Ulrich & Lake, 1990).
While the balanced scorecard framework defines what a business should focus on, the
strategic HR framework offers specific tools and paths to identify how a firm can
leverage its HR practices in order to succeed. In this section, we will first briefly review
the balanced scorecard framework, then the strategic HR framework, and finally the
integrative framework. Balanced Scorecard.

The balanced scorecard framework defines what it takes for a company to succeed.
Popularized by Robert Kaplan, a Harvard professor, and his associate, David Norton
(Kaplan & Norton, 1992, 1993), it has increasingly been adopted by major companies
such as Sears, AT&T, Eastman Kodak, American Express, and Taco Bell. Simply put,
two key premises underlie the concept. First, for businesses to succeed in the long run,
the expectations of three stakeholders—shareholders, customers, and employees—need
to be satisfied. While a business may still succeed in the short run if it ignores the
expectations of one of the stakeholders, in the long run, its business performance will
suffer. Second, as depicted in Figure 1, all three stakeholders are interrelated. Employee
attitudes and behaviors impact the level of customer satisfaction and retention. In turn,
customer attitudes and behaviors influence shareholder satisfaction and retention. Finally,
shareholder satisfaction affects employee satisfaction through bonuses, stock options, or
further investment in employee growth and development. If even one of the components
breaks down, the system cannot work.

Sears Measures in Operationalizing Balanced Scorecard

I. Compelling Place to Work

Attitudes about the job
1. I like the kind of work I do.
2. My work gives me a sense of accomplishment.
3. I am proud to say I work at Sears.
4. How does the amount of work you are expected to do influence your overall attitude
toward the job?
5. How do your physical working conditions influence your overall attitude toward your
6. How does the way you are treated by those who supervise you influence your overall
attitude about
the job?

Attitudes about the company

7. I feel good about the future of the company.
8. Sears is making the changes necessary to compete effectively.
9. I understand our business strategy.
10. Do you see a connection between the work you do and the company’s strategic

II. Compelling Place to Shop

1. Customer service.
2. Customer recommend products.
3. Customer loyalty.
III. Compelling Place to Invest
1. Revenue growth.
2. Profit contribution margin.
3. Sales per square feet.
4. Inventory turnover.

The strength of the balanced scorecard framework is that it provides a simple conceptual
and diagnostic tool to ensure that companies utilize the right processes and people to
drive customer and business performance. AT&T, and American Express make use of the
balanced scorecard principle but with different terms.
Integrative Framework
By integrating the strategic HR framework with the business framework, the interrelationships among
the six components can be identified in two linkage chains. In the first chain, HR practice can be
conceptualized as key drivers in building organizational capabilities, enhancing employee satisfaction,
and more innovatively, shaping customer satisfaction. In turn, both organizational capabilities and
employee satisfaction can impact customer satisfaction. In the second chain, organizational
capabilities become key drivers which implement business strategy, impact customer satisfaction, and,
eventually, contribute to shareholder satisfaction. In addition, both business strategy and customer
satisfaction, if properly managed, should increase shareholder satisfaction. The Kodak framework lays
out three unique ways in which HR can contribute to business success: building organizational
capabilities, enhancing employee satisfaction, and shaping customer satisfaction. While previous
research and case studies have suggested the strategic relevance of HR in each of these three areas,
very few researchers have systematically addressed all three contributions:

a. HR–organizational capability linkage: -The thesis that HR practices should be aligned to build
organizational capability was suggested by Schuler & Jackson (1987) and Ulrich & Lake (1990). The
argument for this linkage is simple: if companies intend to compete based on specific organizational
capabilities (e.g., customer service for Nordstrom, innovativeness for 3M, quality for Motorola), they
require a coherent set of HR practices to influence the mindset and behaviors of their leaders and
workforce at all levels.

b. HR–employee satisfaction linkage:-The impact of HR practices on employee satisfaction has

also been widely publicized through a well-known example of New United Motor Manufacturing Inc.
In 1982, the GM Fremont facility was closed due to severe employee problems. When approached by
Toyota for a joint venture, GM agreed to reopen the facility in 1984 under a new entity called New
United Motor Manufacturing Inc. (NUMMI). Without moving to a new facility, investing heavily in
new technology, or hiring a new group of employees (85% of NUMMI employees were rehired from
the GM Fremont facility with the same UAW hierarchy), NUMMI was able to substantially improve
employee satisfaction through radical changes in human resource philosophy and practices. The
effects of these HR philosophy and practice changes were dramatic. Between 1982 and 1986,
employee absenteeism was reduced from 20% to 2%; grievances decreased from 2000 per year to two
per year; and strikes went from two–four times per year to zero times per year. As a result,
productivity was increased by 100%; cost was reduced by 30%; and both quality and consumer
satisfaction were enhanced substantially.
c. HR–customer satisfaction linkage: -Some pioneering companies are leveraging HR practices to
drive customer satisfaction. For instance, Baxter Healthcare has offered free consulting and training
sessions for its key customers. This has led to two outcomes: (1) key customers become more
successful; and (2) stronger relationships with key customers are established. Another positive
example of using HR to drive customer satisfaction is Southwest Airline. To ensure that its crew
members are customer-focused,the airline has been involving external customers in selecting the crew
force. As a result, Southwest’s crew members tend to possess attributes that are desired by customers.
The integrative model in unique in two ways. First, it tightly aligns the HR planning process with the
business planning process. For example, while the business framework (i.e., the balanced scorecard)
highlights what Eastman Kodak needs to focus on in order to succeed, the strategic HR framework
provides specific tools and paths to identify how Eastman Kodak can leverage its HR practices and
organizational capabilities to succeed. Thus, the integrative model provides a simple but
comprehensive roadmap for a company to think through its strategic focus. Second, the model helps
senior line and HR executives rethink the strategic roles within corporations which can be played by
HR practices. As human resources clearly have become an important source of sustainable
competitive advantage (Pfeffer, 1994; Huselid, 1995), the model explicitly identifies the high value-
added contribution of HR practices within corporations.