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Chapter 1

THE STRATEGIC ROLE

OF
HUMAN RESOURCES
MANAGEMENT
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ANNOTATED OUTLINE

Introduction
Organisations have to provide a healthy work climate in order to get
the best out of people. To utilise the capabilities of people fully, you
need competent leadership willing to recognise, reward and nurture
talent at all levels. This is where human resource managers play a
critical role by bridging gaps between employee expectations and
organisational requirements by adopting appropriate human resource
strategies and practices. HRM, in short, is the art of procuring,
developing and maintaining competent workforce to achieve the
goals of an organisation in an effective and efficient manner.

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Human Resource Management:
Features
Pervasive force
Action oriented
Individually oriented
People oriented
Future oriented
Development oriented
Integrating mechanism
Comprehensive function
Auxiliary service
Inter-disciplinary function
Continuous function

The Strategic Role Of Human Resources Management

1-4 Important terms

Clearing the Fog

Human resource: Knowledge, skill sets, expertise of employees, the
adaptability, commitment and loyalty of employees.
Skills: The individual abilities of human beings to perform a piece of work.
Resource: The stock of assets and skills that belong to a firm at a point of time.
Capability: The ability of a bundle of resources to perform an activity; a way of
combining assets, people and processes to transform inputs into outputs.
Core competencies: Activities that the firm performs especially well when
compared to its competitors and through which the firm adds value to its goods
and services over a long period of time.
Competitive advantage: It comes from a firm's ability to perform activities more
distinctively and more effectively than rivals. To attain competitive advantage, firms
need to add value to customers and offer a product or service that cannot be
easily imitated or copied by rivals (Uniqueness).
Value: Sum total of benefits received and costs paid by the customer in a given
situation.

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Scope of HRM

HRM mainly covers three broad areas

Personnel aspect
Welfare aspect
Industrial relations aspect

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Objectives of HRM
HRM aims at achieving organisational goals, meet the expectations
of employees; develop the knowledge, skills and abilities of
employees; improve the quality of working life and manage human
resources in an ethical and socially responsible manner.

Importance of HRM
From an organisational standpoint, good HR practices help in
attracting and retaining talent, train people for challenging roles,
develop their skills and competencies, increase productivity and
profits and enhance standard of living

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Importance of HRM

attract and retain talent

train people for challenging roles
develop skills and competencies
promote team spirit
Good HR Practices help
develop loyalty and commitment
increase productivity and profits
improve job satisfaction
enhance standard of living
generate employment opportunities

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HRM as a central subsystem in an

organisation

Product
Subsystem

HR Subsystem
Procurement
Finance Training Marketing
Subsystem Compensation Subsystem
Appraisal
Rewards

Technical
Subsystem

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Functions of HRM

HRM

Managerial Operative Functions

functions:
Procurement Development: Motivation and Maintenance: Emerging
Planning Integration:
Compensation: Issues:
Job Analysis Training Grievances
Job design Health Personnel
HR planning Executive records
Work scheduling Discipline
Organising Recruitment development
Safety Personnel
Motivation Teams and
Selection Career teamwork audit
planning Job evaluation Personnel
Placement Welfare Collective
Succession Performance and research
Directing bargaining
Induction potential HR
appraisal Social security Participation accounting
Internal planning
mobility Compensation Empowerment HRIS
Controlling Human administration
resources Trade unions Job stress
development Incentives
benefits and Employers Mentoring
strategies
services associations International
Industrial HRM
relations

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Strategic Human Resource Management

Competitive advantage through people?

Competitive advantage allows a firm to gain an edge over its rivals
when competing. It comes from a firms unique ability to perform
activities more distinctively and more effectively than rivals. HR can be
a source of competitive advantage when the talents of people working
in the firm are valuable, rare; difficult to imitate and well organised to
deliver efficient and effective results.

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The evolving strategic role of Human

Resource Management
Strategic focus

Strategic partner Change agent

System People

Administrative expert Employee champion

Operational focus

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Strategic Human Resource Management

Realising the growing importance of HR, a new line of thinking
emerged elevating the status of HR to that of a strategic partner both
in the formulation of a firms strategic as well as in the implementation
of business activities. SHRM, simply stated, is the linkage of HRM
with strategic goals and objectives with a view to improve business
performance and develop organisational cultures that foster
innovation and flexibility. Strategic HR differs radically from traditional
HR in a number of ways:

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Traditional HR vs. Strategic HR

Point of distinction Traditional HR Strategic HR

Focus Employee Relations Partnerships with internal and
external customers
Role of HR Transactional change Transformational change leader
follower and respondent and initiator
Initiatives Slow, reactive, fragmented Fast, proactive and integrated
Time horizon Short-term Short, medium and long (as
required)
Control Bureaucratic-roles, policies, Organic-flexible, whatever is
procedures necessary to succeed
Job design Tight division of labour; Broad, flexible, cross-training
independence, teams
specialisation
Key investments Capital, products People, knowledge

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EVOLUTION OF HRM

The field of HRM evolved both in India and elsewhere over

a number of years to present level of sophistication and
use of proactive methods

The industrial revolution

Scientific management
Trade unionism
Human relations movement
Human resources approach

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Evolution of the Personnel Function

Concept What is it all about?

The Commodity Labour was regarded as a commodity to be bought and sold.

concept Wages were based on demand and supply. Government did
very little to protect workers.

The Factor of Labour is like any other factor of production, viz, money,
Production concept materials, land, etc. Workers are like machine tools.

The Goodwill concept Welfare measures like safety, first aid, lunch room, rest room will
have a positive impact on workers productivity

The Paternalistic Management must assume a fatherly and protective attitude

concept/ Paternalism towards employees. Paternalism does not mean merely
providing benefits but it means satisfying various needs of the
employees as parents meet the requirements of the children.

Cont

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Evolution of the Personnel Function

The Humanitarian To improve productivity, physical, social and psychological

concept needs of workers must be met. As Mayo and others stated,
money is less a factor in determining output, than group
standards, group incentives and security. The organisation is a
social system that has both economic and social dimensions.

The Human Resource Employees are the most valuable assets of an organisation.
concept There should be a conscious effort to realise organisational goals
by satisfying needs and aspirations of employees.

The Emerging concept Employees should be accepted as partners in the progress of a

company. They should have a feeling that the organisation is
their own. To this end, managers must offer better quality of
working life and offer opportunities to people to exploit their
potential fully. The focus should be on Human Resource
Development.

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Growth in India

Legal phase
Welfare phase
Development phase

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Personnel Function in India;

Changing Scenario
Period Emphasis Status Roles
1920 30 Welfare management Clerical Welfare
Paternalistic practices administrator

1940 60 Expanding the role to cover Administrative Appraiser

Labour, Welfare, Industrial Advisor
Relations and Personnel Mediator
Administration Legal advisor
Fire fighting

1970 80 Efficiency, effectiveness Developmental Change agent

dimensions added Integrator
Emphasis on human Trainer
values, aspirations, Educator

1990s Incremental productivity Proactive, Developer

onwards gains through human growth-oriented Counsellor
assets Coach
Mentor
Problem solver

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Shifts in HR management in India

Traditional HR practice Emerging HR practice

Administrative role Strategic role

Reactive Proactive

Separate, isolated from Key part of organisational

company mission mission

Production focus Service focus

Functional organisation Process-based organisation

Individuals encouraged, Cross-functional eams,

singled out for praise, teamwork most important

rewards

People as expenses People as key

investments/assets

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HRM in the new millennium

Current thinking in HRM strongly supports the view that when

opportunities for growth and enhancement of skills are available in an
organisation, people will be stimulated to give their best, leading to
greater job satisfaction and organisational effectiveness. To this end,
therefore, HR managers in the new millennium are expected to
successfully evolve an appropriate corporate culture, take a strategic
approach to the acquisition, motivation and development of human
resources and introduce programmes that reflect and support the core
values of the organisation and its people.

Size of work force

Demands for better pay, benefits, working conditions

Cont

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HRM in the new millennium

Composition of workforce
Equal pay for equal work
Breaking down of glass ceiling
Constitutional protection to minority groups
Importance to factors such as age, sex, religion, region, caste especially while
dealing with multifarious, heterogeneous, culturally diverse work groups

Employee expectations
Better educated, more knowledgeable, emotionally strong and demanding
workforce
Demand for educated, trained, experienced and knowledgeable workers growing
Understand individual differences and develop appropriate policies to meet their
growing expectations.

Cont

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HRM in the new millennium

Changes in technology
Modernisation, computerisation, sophistication increasing by the day
Knowledge and skills need to be refined constantly
Training, retraining and mid-career counselling important
Equip employees so as to cope with dramatic challenges brought forward by rapid
advances in science and technology
Life style changes
Environmental challenges
Personnel function in future
Job redesign
Career opportunities
Productivity
Recruitment and selection
Training and development
Rewards
Safety and welfare Cont

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HRM in the new millennium

Changes in 21st century affecting HRM

HR as a springboard for success
Talent hunting, developing and retraining
Lean and mean organisations
Labour relations
Health and benefit programmes

The Strategic Role Of Human Resources Management