JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
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Course Title : Human Resource Management
Course Code : MBA 642
Programme : Master of Business Administration
Credit Hours : 2
Delivery : Year 2 Semester 2
Instructor : Dr. Zerihun A. and Dr. Workineh Bayisa
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Course Outline

Course Description:
This course provides managers from different business functions with the
principles, knowledge, and techniques for managing employees. Incidents
and cases are used to diagnose human resource problems, and design and
implement solutions. Topics include Strategic role of HR, nature of human
resource management, human resource planning, performance evaluation,
recruiting, selection and assessment, training, managerial development,
compensation and incentives, Employee Welfare, collective bargaining and
labor relations. The course stresses the evaluation of human resource
programs, and the need for human resource practices to be compatible with
one another and to be supportive of the firm’s strategy.
Chapter I
The nature of Human Resources Management – Meaning and Definition –
Functions and Objectives – Evolution of HRM – – Strategic HRM – the link
between business and HR strategy – Strategic Role of HR Manager.
Chapter II
International Human Response: leading characteristics of international
human resource management, international recruitment, and diversity
management, international benefit administration
Chapter III
Industrial Relations - Nature – Importance – Parties to IR – Factors
influencing Industrial Relations - Trade Unions - Disputes and their
Resolution - Settlement of Disputes – Collective Bargaining - Workers’
Participation in Management.
Chapter IV
Human Resource Planning – Models used for HRP– Factors Affecting HRP –
analyzing the environment, forecasting future human resource needs,
forecasting future human resource supply - Job Analysis and Design –
Recruitment – Selection – Placement – Promotions – Transfers – Staff
Retention- Separations
Chapter V
Training and Development - Importance – Objectives - Training Process –
Methods of Training, evaluation of training effectiveness– Performance
Appraisal vs. Performance Management - Performance Measures, Key Results
Areas (KRA) and Key Performance Indicators (KPI)
Chapter VI
Compensation Strategy, Structure, Composition and Functions.
Compensation/Remuneration components - Theories of compensation -
Factors Influencing Employee Compensation/ Remuneration – Concepts of
variable Pay –Factors influencing variable pay
Chapter VII
Employee Welfare - Merits and Demerits of Welfare Measures – Types of
Welfare Activities – Safety and Health – Types of Incentive Schemes -
Principles of Fringes – Significant Benefit and Service Programmes.

SUGGESTED READINGS
1. Mathis, R. L. and Jackson, J. H. (2008). Human Resource Management. 9th
ed.
2. Decenzo & Robbins, Personnel / Human Resource Management, 3rd ed.,
John Wiley & Sons (Pvt.) Ltd.
3. Gary Dessler, Human Resource Management - (8th ed.,) Pearson
Education, Delhi
4. P. Subba Rao, Essentials of Human Resource Management & Industrial
Relations, Himalaya Publishers, Mumbai.
5. Anne-wil Harzing & Joris Van Ruvoss eveldt(eds.), International Human
Resource Management - Sage Publications, New Delhi.
6. Biswajeet Patanayak, Human Resource Management, PHI, New Delhi
7. Luis R. Gomez, Mejia, Balkin and Cardy, Managing Human Resources PHI,
New Delhi.
8. Rudrabasavaraj, Dynamics of Personnel Admn. Himalaya Publishing
House, Mumbai
9. Torrington, D. et al., (2008). Human Resource Management. 7th ed.
Prentice Hall, UK
10. Venkat Ratnam C.S. & Srivatsava, B.K. Personnel/Human Resource
Management, Tata McGraw Hill, New Delhi

***

Method of Evaluation

1. Article Review------------------------------------
2. Case Studies--------------------------------------
3. Term Paper----------------------------------------
4. Quizes(Optional)-----------------------------------
5. Final Exam-----------------------------------------
Total----------------------------------------------- 100%

CHAPTER ONE

NATURE AND SCOPE OF HUMAN RESOURCE MAMAGEMENT

Introduction
Organizations are made up of people and function through people.
With out people organization can not exist. The resource of money,
men, material and machineries are collected, coordinated and utilized
through people. These resources by them selves can not fulfill the
objectives of the organization. They need to be united in to a team. It
is through the combined effort of people that material and monetary
resources are effectively utilized for the attainment of common
objectives

With out united human efforts no organization can achieve its goals. All
the activities of an organization are initiated and completed by the
person who makes up the organization. Therefore, people are the most
significant resource of an organization. This resource is called human
resource and it is the most important factor of production.

From the above point one can understand that people are
determinants and initiators/starter/ beginner of all activities in a given
organization. Besides all tasks depend on how well the human
resource is managed. If the human resource is managed improperly,
the result would be ineffective so management of human resource is
central and critical task in any organization.

1.1MEANING AND DEFINITION

What is Human Resource Management?

Let us understand it by dividing the term in to its parts
 Human- People, us
 Resource- assets/Costs for an organization
 Management- Coordination and control of resources to achieve
set goals.
 Human Resources- refer to the knowledge, skills, creative
abilities, talents, and aptitudes obtained in the population (from
the national point of view)

Human resource management has been defined in various ways by

many scholars: The following are few definitions by different scholars:
Simply put, Human resource management (HRM) is a management
function that helps manager’s recruit, select, train and develops
members for an organization. Obviously, HRM is concerned with the
people‘s dimension in organization.

Human Resource Management is the planning, organizing, directing

and controlling of the procurement, development, compensation,
integration, maintenance, separation of human resources to the end
that individual, organizational and societal objectives are
accomplished.

Human Resource Management has been defined as the function or a

unit in an organization that facilitate the most effective utilization of
human resources to achieve the objectives of both the organization
and the employees.

Human Resource Management is concerned with the people dimension

in management. Since every organization is made-up of people,
acquiring their services, developing their skills, motivating them to
higher levels of performance and ensuring that they continue to
maintain their commitment to the organization are essential to the
achievement of organizational objectives.
Thus, it is true, regardless of the type of the organization –
government, business, education, health, recreation, or social action.

What are the Human Resource Activities?

 Human resource Planning
 Recruitment and Selection
 Placement and Orientation
 Performance appraisal
 Counseling
 Career Planning
 Training and Development
 Job Evaluation
 Transfer, Promotion and Demotion
 Job analysis
 Job design
 Communicating Polices
 Compensation
 Labor relations
 Safety and Health Management and the like.

1.2 CHARACTERISTICS (FEATURES) OF HUMAN RESOURCE

MANAGEMENT

 Comprehensive function
 Human Resource management is concerned with managing people
at work. It covers all type of people in the organization. It applies to
workers, supervisors, officers, managers and other type of personnel.

 People- oriented
Human Resource Management is concerned with employees as an
individual as well as groups. It is the task of dealing with human
relation ship with an organization. It is the process of achieving the
best fit between individuals, jobs, organizations and the environment.
It is the process of brining people and organizations together so that
the goal of each are met.

 Action oriented
Human Resource Management focuses on action rather than on record
keeping or procedures. It stresses the solution of personnel problems
to achieve both organizational objectives and employee’s personal
goal.

 Individual oriented
Under Human Resource Management, every employee is considered
as an individual so as to provide service and programs to facilitate
employee satisfaction and growth.

 Development oriented
Human Resource Management is concerned with developing potential
of employees so that they got maximum satisfaction from their best
effort to the organizations.
 Future oriented
Human resource management is concerned with helping organizations
to achieve its objectives in the future by providing competent and well
motivated employees.

 Challenging Function
Managing of Human Resource is a challenging job due to dynamic
nature of people. People have sentiments and emotions so they can
not be treated like machines. It is, therefore, necessary to handle them
tactfully. It is not simply managing people but administrating a social
system.

 Continuous Function
Management of Human Resource is an on going or never ending
exercise rather than a ‘one shot’ function.

 Pervasive function
Human Resource Management is inherent in all organizations and at all
levels. Each and every manager is involved with human resource
function.

 Science as well as an art

Human Resource Management is a science as it contains an organized
body of knowledge consisting of principles and techniques. It is also an
art because it involved application of theoretical knowledge to the
problems of human resource.

 Globally oriented
Human Resource Management is not only an American function or
activity; it is being practiced efficiently and continuously in Mexico,
Poland, Hong Kong and all over the world.

1.3. IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

The significance of HRM can be discussed in four dimensions:

corporate, professional, social and national.
 Significance for an organization

HRM can help an organization in achieving its goals more efficiently

and effectively in the following ways:

Attracting and retaining the required talents ---through effective

HRP, recruitment, selection, placement, orientation, compensation
and promotion polices.

 Developing the necessary skill and the right attitudes among

employees—through training, development, performance
appraisal etc.

 Securing willing cooperation of employees --- through motivation,

participation, grievance handling, etc.

 Utilizing effectively the available human resource.

 Ensuring that the enterprise will have in future a team of

competent and dedicated employees.

 Professional significance

Effective management of human resources helps to improve the

quality of work life. It permits team work among employees by
providing a healthy working environment. It contributes to professional
growth in the following ways:
  Provide maximum opportunities for personal development of each
employee
 Maintain healthy relation ship between individuals, and different
work groups
 Allocate work properly

 Social significance

Proper Human Resource Management has a great significance for the

society. It helps to enhance the dignity or self respect of labor in the
following ways:
 Provide suitable employment that provides social and psychological
satisfaction to people.
 Maintaining a balance between the jobs available and the jobseekers
in terms of numbers, qualifications, needs and aptitudes.
 Eliminating wastage of human resources through conservation of
physical and mental health.

4. National significance
Human resources and their management play a vital role in the
development of a nation.
The effective exploitation and utilization of a nation’s natural, physical
and financial resources require an efficient and committed man power.

There are wide differences in development between countries with

similar resources due to difference in the quality of their people.
Countries are underdeveloped because of their peoples are back ward.

The level of development in the country depends primarily on the

skills, attitudes and values of its human resources. Effective
management of human resources helps to speed up the process of
economic growth which intern leads to higher standard of living and
fuller employment.

1.4. OBJECTIVES OF HUMAN RESOURCE MANAGEMENT

The objectives of Human Resource Management is to provide with

efficient and effective work force that is to provide the right people
with the right talent , knowledge and experience that are able to
contribute towards the achievement of objectives. The objective
includes:

 Owners’ objectives
Owners objective of private and public organizations require that the
objective of which the organization has been established should be
 fulfilled through the contribution of HR .Owners of business require
their employees to contribute to the profitability of their organization
through the satisfaction of customers. Owners of non-business require
that the human resource attribute to the satisfaction of the client or
user through economic operation.

 Employee’s objective
Employees of organizations require the HRM to assist them in
achieving personnel goals such as
Adequate income
Security
Pleasant working condition
Room for growth and development , and
Better quality of work life

 Social objectives

The society provides challenges to HRM. They require the HRM to

contribute the product quality of a high value by promoting fair
Promotion and healthy environment, etc.

 Legal objectives (legal requirement)

Governments require HRM to comply with government laws and
regulations such as:
Avoid discrimination based on sex, age, disability etc.
Allow equal employment opportunities
Fair treatment
Minimum pay
Affirmative action
Fair working conditions ,
Avoid negligent hiring claim
Avoid Sexual harassment etc.

OBJECTIVES OF HRM FUNCTION (to an enterprise)

The contributions of HRM makes to organizational effectiveness include

the following

 Helping the organizations reach goals

 Efficiently employing the skills and abilities of the work force
 Providing the organization with well- trained and well – motivated
employees
 Developing and maintaining a quality of work life that makes
employment in the organization desirable.
Communicating HRM policies to all employees
  Helping to maintain ethical policies and socially behavior
 Managing Change to the mutual advantage of individuals, groups,
the enterprise, and the public. \
Evolution of Human Resource Management
HRM has evolved due to enlightened employers trying hard, over the
years, to improve the lot of their workers. Kautila has observed that
there existed a sound base for systematic management of human
resources in the fourth century B.C. Moses originated the principle of
division of labour in 400 B.C. the Babylonians had a code for incentive
wage plans in 1800 B.C. Thus human resource management in some
form or the other has been practiced in various parts of the world
since the dawn of civilization. With the onset of the Industrial
Revolution, the position underwent a radical change.
Industrial revolution is a word used to describe a number of changes
which took place in England between 1760 and 1850. It brought about
far reaching changes in the economic life of people. Numerous
inventions took place during that period which changed the entire
system of production involving large scale and complex division of
labour. The discovery of steam as an important source of power
helped to increase the production many times over. The use of
machines necessitated large amount of capital, which led to
concentration of economic power and growth of large enterprises.
It is against this background that we trace the origin of modern human
resource management.

1. Industrial Revolution Era

The industrial revolution consisted essentially of the development of
machinery. This brought about mass production of goods. Large-scale
production brought about increased output and the accumulation of
capital. Business and commerce were greatly accelerated and the owners
of businesses and entrepreneurs did well. But labour fared poorly and
was considered a commodity to be bought and sold.
But the consequence of grouping workers into shops and factories, and of
the specialization of labour, was a gradual emergence of more systematic
attention to the design of jobs, to the choice of workers for those jobs
(selection), to the provision of pay and benefits (compenstation), and to
welfare of employees both on and off the job. In the late 1800’s when
unions were battling for recognition and violent strikes become a
significant concern, these developments in management practices
accelerated. By the early 1900’s, many of the components of modern
human resource management were falling into place.
2. Scientific Management Era
The scientific management of the late 1800’s and early 1900’s
concentrated particularly on job design, selection, and compensation.
The name most closely associated with this movement is Fredrick W
Taylor who worked in the steel industry in the late 1870’s. Taylor
 believed in the same techniques used by scientist in the laboratory
experimentation, forming and testing hypotheses and proposing theories
based on research and testing- could be used by management to increase
efficiency in the work place.

The scientific management movement owes its origin to Frderick W Taylor

who is known as the father of scientific management. He was the first to
recognize and emphasize the need for adopting a scientific approach to
the task of managing an enterprise. He started his experiments in the
steel industry in the Midvale and Bethlehem plants. He tried to diagnose
the causes of low efficiency in industry and came to the conclusion that
much of the waste and inefficiency is due to the lack of order and system
in the methods of management. He therefore suggested that those
responsible for management should adopt a scientific approach in their
work, and make use of “scientific methods” for achieving higher
efficiency. Taylor advocated a thorough planning of the job by
management and emphasized the necessity of perfect understanding and
co-operation between the management and the workers both for the
enlargement of profits and the use of scientific investigation and
knowledge in industrial work. He summed up his approach in these
words:
 Science, not rule of thumb.
 Harmony not discord.
 Co-operation not individualism.
 Maximum ouput, in place of restricted output.
 The development of each man to his greatest efficiency and prosperity.
According to Taylor”planning should be the result of co-operation between
the management and workers and that a provision should exist for
compensating the personnel with financial incentives”. The ideas of
Taylor led to a separate discipline called:” Human engineering”.

Contribuitions of scientific Management: The chief contributions of

scientific management are:
I. Emphasis on rational thinking on the part of management.
II. Focus on the need for better methods of industrial work through
systematic study and research.
III. Emphasis on planning and control of production.
IV. Development of cost Accounting.
V. Development of incentive plans of wage payment based on systematic
study of work.
VI. Focus on the problem of fatigue and rest in industrial work.
VII. Focus on the need for a separate personnel department.

But after thirty years, this approach began to lose its popularity. Many
management thinkers were tempted to modify the views of Taylor. The most
important among them are Henry Gantt, Frank and Lilian Gilbreth. They
made scientific management more humanized and meaningful to followers of
Taylor. Henry Gantt Propounded the “Gantt Chart and The Task and Bonus
Wage system”. Frank Gilbreth formulated the “Laws of efficient Motion”. His
wife Lilian Gilbreth applied the principles of psychology to the principles of
scientific management.

3. Paternalistic Era
Robert Owen, a British industrialist is considered to be a great scholar of
management thought. He was manager of different cotton textile mills
between 1800 and 1828. He brought many social changes and was the first
person who gave due emphasis to labor welfare. Robert Owen, who is
considered to be the father of personnel management, worked for the
welfare of the workers and tried to develop a spirit of co-operation between
the workers and the management. He was of the view that the returns from
investment in human resources would be much higher than the investment
in machinery and equipment. He worked for the betterment of workers and
tried to improve their working conditions.

Robert Owen adopted a paternalistic attitude towards his employees. He

regarded the workers as children who must be cautiously guided, trained and
protected. He therefore improved the conditions of employees by removing
them from adverse environmental conditions and provided them with
satisfactory working and living conditions. He advised other manufacturers
to devote more attention to workers in order to increase productivity
because the workers according to Owen are the vital machines. The views of
Robert Owen were strongly supported by Charles Babbage. According to
Babbage, “the emphasis should be on multiplicity of interests between
employers and workers and on the division of labour, for such division of
labour would reduce the waste in raw materials, achieve savings through
more effective placement of workers, produce economies through a different
wage scale based on skill level, save time by not switching from task to task,
gain efficiencies stemming from familiarization with special tools and
stimulate workers inventions pertaining to tools and methods”.

4. Industrial Psychology Era

Applications of psychology to business and industry (Industrial Psychology)
began to emerge in 1890’s and 1900’s as psychologists studied selling
techniques and ways of testing candidates. The most notable industrial
psychologist was Hugo Munsteberg, whose major contributions were:
 The analysis of jobs in terms of their physical, mental and emotional
requirements and
 The development of testing devices for selecting workers.
In industrial psychology era, greater emphasis was given to individual and
group relations in the work place. The role of psychology and sociology in
the understanding of individual and group behavior in an organization was
emphasized. Hugo Munsterberg is regarded as the father of industrial
psychology. His contributions to industrial management were particularly
notable in the field of emotional requirements of workers. Top management
personnel began to realize that “human resources are the most valuable
assets that any organization possesses and that without these, other
resources are useless”.

5. Human Relations Era

What came to be called the human relations’ movement has been a major
influence on modern human resource management. This movement is
characterized by its focus on group behavior and workers’ feelings as they
relate to productivity and morale. Elton Mayo and others of the Harvard
Graduate School of Business Administration conducted experiments at the
Hawthorne plant of the Western Electric Company at Chicago. The important
features of the Hawthorne experiment are:
1. A business organization is basically a social system. It is not just a
techno-economic system.
2. The employee can be motivated by psychological and social wants
because his behavior is also influenced by feelings, emotions and
attitudes. Thus, economic incentives are not the only method to
motivate people.
3. Management must learn to develop co-operative attitudes and not rely
merely on command.
4. Participation becomes an important instrument in human relations’
movement. In order to achieve participation, effective two-way
communication network is essential.
5. Productivity is linked with employee satisfaction in business
organizations. Therefore management must take greater interest in
employee satisfaction.
6. Group psychology plays an important role in any business
organization. We must therefore rely more on informal group effort.
7. The industrial psychological era emphasizes that man is a living
machine and he is far more important than the inanimate machine.
Hence, the key to higher productivity lies in employee morale. High
morale results in higher output.
The findings of the Hawthorne experiment put emphasis on the
importance of understanding of the needs of both management and
workers of the special aspects of work performances. The basic
conclusion was that sociological and psychological phenomena often
exerted even greater influences on output than the physical conditions of
work. Therefore, management must be mainly concerned with the
informal, spontaneous behavior of work groups and the sentiments and
attitudes of employees.
6. The Behavioral Science Era
Further enquiry and experimentation led researchers to conclude that
productivity depended at least in part on the extent to which the
employees became a team and cooperated wholeheartedly and
spontaneously. Worker co-operation and enthusiasm seemed to be
related to the interest in the work group shown by the supervisor and
experimenters, the lack of coercion or force, and the extent to which
workers participated in making decisions and changes that would affect
them.

Human relationists made very significant contribution to management

thought by bringing in to limelight human and social factors in
organization. The behavioral science movement is an outgrowth of the
human relation studies. The method of research in the behavioral era
made use of data obtained from experiments, observations and surveys in
disciplines like sociology, anthropology, psychiatry, sociology, social
psychology and psychology. The various theories formulated in the
behavioral science era are:

1.5. ENVIRONMENT OF HUMAN RESOURCE MANAGEMENT

Environment may be understood as all those forces which have their

bearing on the functioning of the human resource department, this
environmental forces may affect the functions of HR department either
positively or negatively. The environmental forces are:
i. Government rules and regulations
ii. Economic conditions
iii. Labor union
iv. Diversity and composition of the labor force
v. Geographic location of the organization
vi. Technology explosion
vii. Strategy
viii. Nature of the task
ix. Work group
x. Leaders’ style and experience

The first six together forms the external environment and the last four
factors constitute the internal environment of the HR department.
Before examining these forces, it is useful to understand the utility of
analyzing the environment in which HR department has to work.

Analysis of the environment is useful for the HR manager and his or

her team in order to become proactive and not remain reactive to the
environment. Reactive strategy serves the purpose when the
environment is fairly stable and competition is less sever. Today’s
business environment is characterized by change and intense
competition. Proactive steps are vital for any organization if it has to
survive in such environment.

EXTERNAL ENVIRONMENT
Government law and regulations

It is a power full external influence which affects the organizations

directly. To make basic Human Resource decisions like hiring,
promotion, performance evaluation, downsizing and discipline, the HR
manager must weight the impact of government regulation.

Generally government rules and regulations prescribe the type of

practices that are either required or prohibited and possible
consequence of failing to abide by the requirement.

The major area of regulation includes:

 Equal employment opportunity and human rights legislation, which

directly affects recruiting, selection, performance appraisal, and
promotion.
 Employment of illegal aliens
 Discrimination based on sex, age, and disability.
 Compensation regulation, which affects pay, hours of work,
unemployment and similar conditions.
 Benefits regulation which affects pensions and retirement.
 Workers safety laws, which affect health and safety
 Labor relation laws and regulations, which affect the conduct of
collective bargaining.

Economic conditions

Economic and business conditions have a wide spread effect on HR

activities. The level of economic activity, and whether it is increasing
or decreasing, will influence the number and type of employees
demanded by an organization. Economic changes like inflation, and
increase or decrease in interest rate have major effects on the labor
market.

Generally in both private and public organizations, economic

conditions influence the financial “health” .In turn, this will have a
major bearing of HR polices and programs .Under favorable economic
conditions, expansion of existing programs and creation of new
programs that are designed to satisfy employee’s needs are very
likely. For example, a program may be designed to provide health care
for workers family, a scheduled salary increase, international vacation
benefits, paid holidays etc. In the opposite, with deteriorating
economic conditions, contraction or cancellation of some programs
may be necessary. For example an organization experiencing financial
loss is unlikely to implement so costly a new benefit, as a vacation plan
for employees rather such an organization may ask employees to take
actual pay and benefits cuts to lower labor costs.

Labor union

A union is an organization that represents the interest of employees on

different issues like working condition, wages and salary, grievance
process, working hours, fringe benefits etc. The presence of a union
directly affects most aspect of HRM functions such as recruitment,
selection, performance evaluation, promotion, compensation and
benefits.
Unionization means that many HR activities that involve organized
employees are jointly determined by management and union .The
activities that are carried by management are subjected to monitoring
by the union.

Diversity and composition of the labor force.

Mostly the work force of an organization is composed of people having

different religion, race and ethnic group. These phenomena is common
in multi nation organizations like OAU, NATO, Coca Cola Company, etc

The main challenge for HR manger here is that how to satisfy the
various needs and wants of diversified workforce and make them
motivated to accomplish the organization task. Understanding the
characteristics and composition of the labor force is important when
designing a HRM program.

Geographic location of the organization

The location of the organization influences the kind of people it hires

and the human resource management activity it conducts. A hospital,
plant, university located in a rural area confronts different conditions
that one located in an urban area. Recruitment and selection in a rural
area will be different in that there may be few applicants.

An urban location might be advantageous for recruiting and holding

professional workers. Urban locations provide a bigger labor force but
generally call for higher wages.

Geographic locations, therefore, influences the kinds of workers

available to staff the organization. The location or setting is extremely
significant for companies operating in other countries.
Technology Explosion

Science and technology (the former refers to pure knowledge and the
latter to application of knowledge for practical purpose), enables man
to over come distances, control birth rate, save lives; generate,
preserve and distribute energy, discover new materials and substitute
the existing ones; introduce machines to do the work of humans;
substitute mental work with computes; unravel the mysteries of the
seas and the space; and provide him self with a lot of leisure and
comfort in the process.

How does technology affect the HR function?

First, with the advent of technology, jobs tend to become more

intellectual or upgraded. A job hitherto (previously) handled by an
illiterate or unskilled worker now requires the service of an educated
and skilled worker.

Second, the introduction of new technology dislocates workers unless

they become well equipped to work on new machines. This makes it
obligatory on the part of HRM to train workers and to rehabilitate those
who are displaced or cannot be trained.

Third, for those employees who pick up and acquaint themselves with
new technology, the job will be challenging and rewarding. Working
class, in general, stands to gain through increased productivity, reduce
prices and increased real wages- all by –products of technological
advancement.
Fourth, along with upgrading jobs, technology has its impact on human
relations. Technology lays down the requirements for such of the
human interaction in organizations. The arrangement of production
set-up determines who will be near to whom. The work flow determines
who talk to whom. And since interaction and activity affects
sentiments, technology indirectly determines what individuals in large
groups will feel and think about their work situation.

Fifth, job holders will become highly professional and knowledgeable.

An organization which has adopted the latest technology is flush with
scientists, MBAs, engineers, college graduates and highly-skilled
workers. Such an organization can boast of a progressive and modern
out look of its personnel, the problems faced are serious, to say the
least. Motivating such employees, for instance, is a difficult job. Such
mundane (ordinary) incentives as attractive remuneration, job security
and just treatment hardly inspire the enlightened employees to work
more or harder. They are, instead, motivated by opportunities which
offer challenges, achievements and growth.

Further, retaining such employees for long is a difficult job. Being

cosmopolitan
(Broad-based) in their out look, these professionalized employees are
known for job hopping and organizational rootless ness.

The company has to make several allowances to discourage

rootlessness.The major ones are:

Regular attendance and punctuality have to be relaxed

Dual promotion ladders have to be established so that distinguished
technical people can rise in their ranks
Profit sharing to be provided to give creative persons a financial stake
in the idea they create.
Participation in professional get- together need to be sponsored
Writing of professional articles must be encouraged
Foreign jaunts (trips) needs to be allowed.
INTERNAL ENVIRONMENT

In addition to the external forces, these are factors internal to the

organization which influence HR activities. Unlike the external forces,
where HRM has no control, internal factors are within its influence.
Prominent internal forces are: Strategy of the organization, Nature of
the task, work group, Leader’s style and experience.

Strategy

A strategy indicates what an organization’s key executive hope to

accomplish (attain) in the long run. As a plan, a strategy takes the firm
in to the area of competition in the environment and into alignment
with the resource of the firm.

It is a company’s long term plan for how it will balance its internal
strength and weakness with its external opportunities and threat to
maintain a competitive advantage. Example – as strategy top level
manager of an organization might decide to enter new market or drop
a product line. Then the manager would more or less leave the
personnel implication of the plan for HRM to carry out.
Nature of the task
The task to be performed is one of the two most vital factors affecting
HRM. They describe HRM as the effective matching of the nature of
task (job) with the nature of employee performing the task.
The nature of the task obviously affect recruiting and selection, since
employees will probably be more satisfied and productive if their
preferences are met. But few jobs match all preferences exactly. With
jobs that are difficult, dirty, or in smoky or hot environment, the
manager must provide additional incentives (more pay, shorter
working hours, or priority in vacations) because few people prefer such
jobs. Or managers may try to find employees who can handle the
conditions better.

There are unlimited similarities and differences among jobs that attract
or repeal workers and influence the meaning of work for them .Some of
the most significant is the following:

 Degree of physical exertion required

E.g. Legal advisor Vs Ditch digger

 Degree of environmental unpleasantness

E.g. Accountant Vs coal minor

 Time dimension of the work

E.g. Lecturer Vs company manger

 Physical location of the work

 Degree of empowerment
Work group

Group plays a major role in the life of an individual. You probably

belong to a family, friendship, and student groups. Once a person joins
an organization, a work group largely influences his or her experience.

A work group consists of two or more people who consider themselves

a group, who are interdependent with one another for the
accomplishment of a purpose, and who communicate and interact with
one another on a more or less continuous basis.

Although the effective group supports management and the

organization’s goals, it can also work against them. This is usually the
case when the group perceives the organization’s goals as being in
conflict with its own. If the work groups are effective and work with the
management, the manager’s job is easier, and objectives are more
likely to be achieved. It the group is working against the manager, an
effort must be made to change the group’s norms and behavior by the
use of the manager’s leadership and the manager’s power to reward
and discipline and by the transfer of some group members.

Work groups are directly related to the success of HRM activities. If a

work group opposes HRM programs, it can ruin them. Examples of
programs that can be success or failure depending on the support or
resistance they receive from work groups include incentive
compensation, profit sharing, and safety and labor relations.
Leader’s style and experience
The experience and leader ship style of the operating manager or
leader directly affect human resource management activity because
many, if not most, programs must be implemented at the work unit
level. Thus, the operating manager or leader is a crucial link in the
HRM function.

Human Resource Management Out Comes (Effectiveness

Criteria)

 Attraction of employees

An important HRM goal is the attraction of the necessary number and

type of employees to the organization. There will be no issue with
greater urgency and far reaching consequence in the 21st century for
an organization than attracting and retaining talents. Attracting and
retaining HR is probably the biggest problem facing human resource
manager in to days work environments.

 High performance

High employee performance is clearly one of the important HRM goals,

both from the organization and the employees view point. Performance
refers not only the amount of work produced (e.g. number of sales
made or items of goods produced), but to other aspects as well. Fore
example, the quality of work is an important for many jobs .High
performing employees successfully meet their responsibilities and
there by making a contribution to the goal of the organization. As a
sort of reward promotion, transfer, salary increases and other
incentives are granted for high performing employees.

 Attendance and Retention

Organizations often confronted a serious problem of keeping their

labor forces working. This problem manifests itself in two ways. The
first occur when employees temporally stay away from the work,
referred to as “absenteeism”. The second occurs when employees
leave permanently, called “turnover”. Absenteeism and turnover are
the opposite of attendance and retention, respectively.

In order to retain qualified employees we have to know the root cause

of turn over and tackle them immediately. The following are the major
causes of turnover
-lower salaries and wages
-Bad working condition
-Lack of well organized training program
-Ineffective grievance procedure
-In adequate benefit
-Lack of opportunity for advancement.

Organizational polices about absenteeism and level of job satisfaction

determines absenteeism rate or attendance pattern. That is companies
that enforces high penalties for those who are absent have lower
absenteeism and satisfied employees are more likely to attend work.
There are certain factors that hinder employees from attending work.
These are illness, Family responsibilities (such as a sick chilled) and
transportation problem
The above factors are unintentional causes of absenteeism and in
those cases it is not necessary to enforce high penalties on employees.
But for intentional causes of absenteeism it is necessary to enforce
high penalties. In order to reduce absenteeism that is to increase
attendance, organizations resort to different approaches. To increase
workers motivation to attend work, some organizations have
introduced rewards, including participation in company lotteries, for
workers with excellent attendance records.

% Satisfied employees
Job satisfaction refers to how pleased an employee is with his or her
job and organizations .The nature of supervision, organizational polices
and practice, compensation and benefit packages and working
condition are the major factors that influence employees feeling about
their jobs and the organizations. Some experts believe that employee
satisfaction affects other HRM out comes such as attendance,
retention, performance, etc.

% Legal requirements
Meeting legal requirement is one of the most important HRM goal
(objectives). As you know every HRM decisions has legal implication.
Because supervisors and managers make many HRM decisions, it also
critical that they have the basic understanding of these laws. Violation
 of legal requirements can be costly to an organization. Asides from
lawyer’s fee and employee time and energy spent handling legal
complaints, an organization may be required to pay various fines and
implement special training program.

% Counter productivity

Counter productive behavior includes a wide range of possible

problems such as stealing on the job, engaging in fights and
sabotaging company equipment. The cost of counter productive
behavior to big business and organizations has been estimated in
billions of dollars annually. Certain industries, such as retail stores, are
particularly susceptible to employee theft. It is estimated that
employee stealing accounts for twice as much loss in retail sores as
shoplifting by customers.
From HRM perspectives, several things can be done to reduce counter
productive behavior, includes:
Careful selection of employees
Surveillance of work place
Thorough investigation of possible employee misconduct and taking
timely disciplinary action

% Cost containment (Keeping expenses down)

Now time cost containment is a critical HRM goal. Compensation and

benefit costs can be extremely high. This is particularly true in
organizations that are labor intensive such as educational institutions,
Consulting firms and service firms.

CHAPTER II
Emerging Trends In HRM

CONCEPT

 One of the important tasks facing the present-day managers in

integrating people with the strategic goals of the organization.

 Various HR activities including recruitment, training, development and

rewarding now need to be linked to the strategic goals of the
organization.
 Strategic management is a management task with the growth and future
of a business enterprise.

 It is the process of formulating and implementing strategies that will help

in aligning the organization and its environment to achieve organizational
objectives.

 Strategic management does not replace traditional management

functions such as planning, organizing, staffing, leading, controlling etc.
Rather, it integrates them into a broader context, taking into account the
external environment, internal organizational capabilities, and an
organization’s overall purpose and direction.

Understanding Strategy:

 The term ‘strategy’ is derived from the Greek word ‘strategies’, which
means generalship – the actual direction of military force. Therefore, the
word ‘strategy’ literally means the art of the general.

 The purpose of a ‘strategy’ is general two - fold;

 To protect existing territory

 To expand to new territory

 In business parlance, strategy is concerned with how organizations react

to their environment and adopt a course of action to deal with it.

 Thus, managing the environment has become the most critical function of
a business firm. Managing production, sales and inventories are no more
the critical issues.

 Instead, what to produce and where to market, how long to remain with
the chosen link, which new business to enter, which ones to quit and how
to get internally stronger and resourceful, are the issues at stake for the
firm.

 The future is no more a measured extension of the past not the present.
Instead of making extrapolated estimates about future sales.

 It is essential to undow the enterprise with certain ‘distinctive

competencies’ to take care of the eventualities resulting from unexpected
environmental changes.
 How to align the business of the firm with such an uncertain future is the
critical issue. It is this new compulsion that led to the evolution of
‘strategic management’

 .The maturing of this branch of knowledge has taken place through the
cumulative effort of business firms on the once hand and management
scholars on the others.

EVOLUTION OF STRATEGIC MANAGEMENT:

 Planning had all along been a part and parcel of the business activity. All
business enterprises, irrespective of size and nature, had been resorting
to some kind of planning.

 The objective is profit, the attainment of which necessitated some

planning.

 But over time, the planning task has become increasingly complex. A
variety of new factors entered the scene at various points of time, posing
new challenges in running the business. This in turn made new demands
on the planning front.

 Managing the Environment :

 For the business firm, the net result of all these changes was that
managing the environment became its most crucial function.

 Managing production, sales and inventories were no more the critical

issues.

 Instead, what to produce and where to market, how long to remain with
the chosen line of products, which new businesses to enter, which
business to quit and how to get internally stronger and resourceful, were
the issues at stake for the firm.

 Therefore, aligning the future of the firm with such an uncertain

environment was critical issue it was this new compulsion that led to the
evolution of strategic management as a critical management task.

 The business firm by now was required to develop a body of knowledge

by using.

 Management Schools, consultancy organizations and management

authors added their contributions to this body of knowledge.
 Cumulatively, these attempts gave rise to the body of knowledge that we
now call ‘strategic management’.

 The subject has acquired different names like business policy, corporate
strategy, strategic planning, strategic business planning etc.

PROCESS OF STRATEGIC MANAGEMENT

 Defining the mission statement

 Analyzing the Environment

 External environment – Political – Economic – Technological factors.

 Industry and competitive environment like market trends,

competitors etc.

 Organizational Self-assessment

 This involves identifying the strengths and weaknesses of the

organization and how to work on the strengths and overcome the
weaknesses.

 It also involves an analysis of physical, human, financial,

technological and capital resources.

 Understanding the various components of change like culture,

structure, power and decision-making process, past strategy and
work systems.

 Establishing goals and objectives :

 These goals and objectives should be specific, flexible and

measurable because of the changing business environment.
  Goals denote what an organization hopes to accomplish in a future
period of time.

 Objectives are the results that the organization wants to achieve.

 Formulating strategy :

 Environmental analysis and organizational self-appraisal lead to the

generation of strategic alternatives.

 The choice of strategies is wide and much would depend on how an

organization perceives its strengths and weaknesses vis-avis the
opportunities and threats the external environment presents.

 Strategies could be formulated at different levels. There would be

corporate-level strategy business-level strategy and functional-level
strategies.

 Implementing strategy :

 There are many aspects that need to be considered while

implementing the strategy.

 We have to adapt the organization structure to the requirements of

the strategy.

 We have to would the culture of the organization so that strategies

are implemented smoothly.

 We should know how strategy should shape the style of leadership

and in what manner the development of leadership should be done.

 In addition, understanding corporate politics and the use of power is

imperative for successful implementation of strategies.

 Evaluating and Controlling strategy :

 Strategic evaluation operates at two levels: Strategic and

operational.
  The purpose of strategic evaluation is to evaluate the effectiveness
of the strategy in achieving organizational objectives and taking
corrective action wherever required.

 Operational control is aimed at the allocation and use of

organizational resources through an evaluation of the performance
of organizational units.

 IMPORTANCE OF STRATEGY

 Serves as a road map for the organization.

 Lends support for systematic planning.
 Lays down growth objectives of the firm, and action plans needed
for achieving them.
 Ensures that the firm’s business, products and markets are chosen
wisely.
 Ensures best utilization of firm’s resources.
 Serves as a hedge against uncertainly.
 Helps build competitive advantages and core competencies.
 Draws from both intention and logic.

STRATEGIC ENVIRONMENT

 Swot Analysis :

 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).

 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.
 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.

SWOT Analysis Framework

Environmental Scan

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

SWOT Matrix

Strengths:

 Patents
 Strong brand names
 Good reputation among customers
 Cost advantages from proprietary know-how
 Exclusive access to high grade natural resources
 Favourable access to distribution networks.

Weaknesses:

 Lack of patent protection

 A week brand name
 Poor reputation among customers
 High cost structure
 Lack of access to the best natural resources
 Lack of access to key distribution channels.

Opportunities:

 An unfulfilled customer need

 Arrival of new technologies
 Loosening of regulations
 Removal of international trade barriers

Threats:

 Shifts in consumer tastes away from the firm’s products

 Emergence of substitute products
 New regulations
 Increased trade barriers

The SWOT Matrix:

 A firm should not necessarily pursue the more lucrative opportunities.

Rather, it may have a better chance at developing a competitive
advantage by identifying a fit between the firm’s strengths and upcoming
opportunities.

 In some cases, the firm can overcome a weakness in order to prepare

itself to pursue a compelling opportunity.

PEST Analysis:
 A scan of the external macro-environment in which the firm operates can
be expressed in terms of the following factors :

 Political
 Economic
 Social
 Technological

 A PEST analysis fits into an overall environmental scan as shown in the

following diagram.

Environmental Scan

External Analysis Internal Analysis

Macro Environment Micro Environment

PEST

 Political factor :

 Political factors include Government regulations & legal issues and define
both formal and informal rules under which the firm must operate. Some
examples include :

 Tax policy
 Employment laws
 Environmental regulations
 Trade restrictions tariffs
 Political stability.

 Economic Factor:

 Economic factors affect the purchasing power of potential customers and

the firm’s cost of capital. The following are examples of factors in the
Macro-economy.

 Economic growth
 Interest rates
 Exchange rates
 Inflation rate.
 Social Factor:

 Social factors include the demographic & cultural aspects of the external
Macro-environment. These factors affect customer needs and the size of
potential markets. Some social factors include.

 Health consciousness
 Population growth rate
 Age distribution
 Career attitudes
 Emphasis on safety.

 Technological Factors :

 Technological factors can lower barriers to entry, reduce minimum

efficient production levels and influence outsourcing decisions. Some
technological factors include :

 R & D activity
 Automation
 Technology incentives
 Rate of technological change.

 External opportunities and threats:

 The PEST factors combined with external Micro environmental factors can
be classified as opportunities and threat in a SWOT Analysis.

Chapter III

TRENDS IN UTILIZATION OF HUMAN RESOURCES

TELECOMMUTING:
 Telecommuting, or telecommunicating, dose not necessarily involves
geographic relocation but simply involves working at home at least part of
the time.

 The internet, e-mail, fax machines, cable modems, digital subscriber lines,
personal computers, other forms of telecommunications, and express mail
make up a set of forces that have allowed many workers to work off-site
by telecommunicating.

 In recent years, the number of workers who telecommute has increased

dramatically, with estimates of more than 10 million working at least 20 %
of the time at home.

 Telecommunicating is thought to bring several individual benefits,

including time savings from the avoidance of commuting as well as at-
home child care, ease of working for multiple employers, access to jobs
by disabled workers, and lifestyle advantages.

 Organizational benefits include recruiting advantages, lower costs in using

part-time workers, increased ability to use skilled professionals, on an ad
hoc basis, reduced likelihood of unionization, less need for office space,
productivity improvements, and employee retention.

 Nonetheless, there are potential problems with such arrangements,

including controlling difficulties, career limitations related to lack of
visibility, social isolation, less sense of belonging, and reduce royalties to
both employer and employee.

 There are also concerns about the security of confidential or competitive

information when it is transmitted over telephone lines from the
telecommuter.

RELOCATION OF WORK:

 Telecommunication advances have allowed information workers to

migrate from cities to rural areas and small towns.

 These workers have been attracted to the heartland because there is less
crime, a lower cost of living, and quality of life benefits.

 Workers who are making this relocation include owners of home-based

businesses, writers, artists, stock traders, composers, software
developers, and engineer.

 Companies also are relocating their operations.

 In information systems and data processing, companies are relocating
their facilities to areas where there are favorable costs.

 It is increasingly common for automobile rental companies and hotels to

locate their reservations operations in areas of the country where there
are wage advantages.

 Recently, manufacturing companies have been relocated out of California

because of the high costs of land and labor as well as regulative
environment.

GROWING USE OF TEMPORARY AND CONTINGENT WORKERS

 Another important human resource issue is the use of temporary or

contingent workers.

 The use of such workers is increasing, and there is likely to be additional

unbundling in the future.

 In contrast to core employees, contingent workers have short-term

affiliations with employers.

 The Second largest category is industrial help workers such as laborers,

equipment cleaners, helpers, and handlers.

 Because demand for such industrial help workers is cyclical and seasonal,
the advantages to the employer are obvious.

 Temporary workers are even being used in the health care industry as
registered nurses, practical nurses, and x-ray technicians.

 As indicated, the nature of temporary jobs is changing as there is a shift

towards the higher skill levels.

 Temporary workers now include accountants, computer specialists,

engineering personnel, financial executives, and technical writers.

Factors Prompting Use of Temporary or Contingent Employees:

 A number of factors encourage the use of temporary or contingent

employees.

 Because of economic uncertainty or turbulence, many employers are

reluctant to hire permanent employees and have increased their use of
contingent employees.
 Another factor is fluctuating workloads.

 Companies also can avoid paying overtime pay by using temporaries

during peak demand periods.

 Growing and declining companies have been found to use more

temporary employees.

 The use of temporaries who can be dismissed on short notice allows these
companies to protect the core of permanent employees.

 Other factors prompting the use of contingent workers include avoidance

of recruiting, hiring, and training expenses for workers who are to be used
only a short time and avoidance of severance costs.

 The perverse effects of legislation also may have prompted the use of
temporaries in some instances.

 Other advantages for employers in the use of such workers include

flexibility, potential savings in labour costs, and acquiring labour needed
during hiring freezes.

 In addition to benefits for employers, there are some benefits for

temporary or contingent workers.

 The benefits also include exposure in the job market, opportunities to

obtain work experience and work skills, and the opportunity to sample
employment situations.

Factors Limiting the Use of Temporary or Contingent Employees:

 Although there are several advantages for employers in using temporary

employees, there are also disadvantages.

 One disadvantage is the increased likelihood of missing affirmative action

goals.

 Another disadvantage is the need to train such workers. With temporary

executives, disadvantages may include inordinate emphasis on short-
term financial performance and absence of company loyalty.
 Disadvantages for temporary employees include lower opportunities to
receive health insurance and retirement benefits, lower pay, and fewer
training and educational opportunities.

Employee Leasing:

 Often, when an employer makes the decision to lease employees, his or

her employees then become employees of a leasing firm.

 The leasing firm then supplies these same employees to the original
employer.

 As with the use of temporaries, there are some advantages with

employee leasing.

 One primary reason for leasing is that small employers can obtain more
economical health insurance by virtue of the leasing company’s larger
numbers of employees and inclusion under pooled rates.

 Another motivating factor is that all payroll and administrative services

are performed by the leasing company, leaving the management of the
small company free to focus on other aspects of the business.

 The use of a leasing company also may not eliminate liability, as there
may be a shared employment relationship.

 Another disadvantage is that a number of leasing companies have failed,

leaving the employers using leased employees liable for workers’
compensation.

INTERNATIONAL DEVELOPMENTS

Global Competition:

 Companies competing on a global basis will need to use world-class

labour to obtain the quality needed for some product markets.

 Moving foreign nationals across international boundaries is another

approach for highly skilled individuals.

 However, the use of U.S. expatriate workers in overseas holding may be

declining.
 For example, during one year, Honeywell had 27,159 employees overseas
but only approximately 200 were U.S. Citizens.

Global Sourcing of Labour:

 Innovative uses of labour on a global basis are evident.

 The combination of a common language, an educated labour force, a

shortage of jobs, and relatively low wages make this an attractive option.

 An interesting benefit of this relationship is that, in addition to the low

cost of labour, there is a time differential advantage as work delivered
overnight can be worked on several hours prior to the normal starting
time of 8:00 A.M. on the East Coast.

 Several Asian countries such as Korea, Singapore, Taiwan, Malaysia, and

Indonesia are major U.S. trading and outsourcing partners.

 Nonetheless, the dramatic changes in Eastern Europe also have

implications for labour supplies.

MANAGEMENT TRENDS

 Several managerial trends are having an impact on human resources.

 Management of Diversity :

 Because of the increased heterogeneity of the workforce managers must

be prepared to deal with the challenges associated with such
demographic changes.

 Effective management of diversity can increase an organization’s

productivity through several avenues, one of which in increased problem-
solving ability.

 Recently, it has been demonstrated that ethnic heterogeneity in small

groups is associated with increased quality of ideas generated for solving
problems.

 Through such contributions, the management of diversity may enable

companies to gain competitive advantages.
 In addition to diversity-related creativity and problem-solving advantages
companies also may be able to tap gender and racially diverse markets
better with a more diverse workforce.

 Companies having good records in managing diversity may be able to

attract better employees.

 Thus managers need to be sensitive to diversity issues for all races and
nationalities as well as gender and other forms of workforce diversity.

 Work Teams :

 John R. Katzenback and Douglas K.Smith define work teams as “a small

number of people with complementary skills who are committed to a
common purpose, performance goals, and approach for which they hold
themselves mutually accountable”.

 A number of benefits have been attributed to the use of work teams as an

organizational form.

 Although work team effectiveness is a complex subject, effective work

teams have some common characteristics.

 Such characteristics include relatively small size, dedication to a common

purpose, commitment to common performance standards, willingness to
be collectively accountable, equitable and effective work and role
assignment procedures within the team, and complementary skills.

 Effective work teams also require compensation approaches that reward

teamwork, such as gain sharing or team bonuses.

 Virtual Teams :

 Virtual teams have members who work closely together even though they
are based at different locations, including different countries, and may
even be in different time zones.

 Advances in telecommunications, such as the Internet, e-mail, cell

phones, and videoconferencing, have made virtual teams a possibility.

 In turn, market factors such as shorter product life cycles, rapidly shifting
customer tastes, and international competitive pressures have provided
the driving force for the use of technology to develop virtual teams.
 Team members communicate frequently with each other using e-mail,
fax, and telephone, and the team leader also makes frequent trips
between the different locations.

 Human Resource Outsourcing :

 One of the most significant forces affecting human resource management

has been the outsourcing of human resource functions.

 The trend toward outsourcing has been caused by several strategic and
operational influences.

 Human resource executives have used outsourcing to relieve their

departments of some of the more mundane aspects of the function, such
as those involving routine, low-values-added transactions.

 Outsourcing also has been used to help reduce bureaucracy and to

encourage a more responsive and cost-sensitive culture by introducing
external market forces into the organization through the bidding process.

 Outsourcing has been pursued for several operational reasons as well,

such as for greater efficiency or better service in the performance of
functions.

 Outsourcing also has been seen as a vehicle for cutting costs.

 In addition, outsourcing has been used to obtain specialized expertise

that is not available in-house.

 Open-Book Management :

 The practice of sharing financial and performance information is often

referred to as open-book management.

 Essentially, the practice relies on the notion that empowered employees

can make informed decisions and take informed actions on behalf of the
firm.

 Because employees have the information and are empowered, they are
almost compelled to take action.

 Another positive feature of open-book management is that the sharing of

such information instills a sense of trust among employees.
 In firms that do not practice open-book management, financial and
performance information is often restricted to high-level executives.

 This restricted information flow conveys to other employees that they are
not to be trusted with such information.

 As a result of its positive features, open-book management has the

potential to enhance employee motivation.

 Open-book management is broader than many human resource practices

as it combines a number of practices such as profit sharing, use of
bonuses, score-boarding.

 Total Quality Management :

 While not new, another continuing trend of importance to management

strategists is total quality management (TQM).

 Many leading companies such as Motorola, Cadillac, and Xerox, whose

strategies require them to survive against the pressures of world-class
competition, have implemented TQM.

 TQM is probably most accurately categorized as a tactic for carrying out

strategies requiring high levels of product or service quality.

 Essentially, TQM pulls together a number of well-known managerial

principles into a coherent and systematic framework.

 TQM Principles Emphasize :

 Articulation of a strategic vision

 Objective and accurate measurements
 Benchmarking
 Widespread employee empowerment and team building
 Striving for continuous improvement
 Emphasis on a systems view of quality that conceptualizes quality-
related activities as being highly interdependent.
 Leadership committed to quality
 Great emphasis on customer satisfaction.

 Interestingly, TQM programs have the potential to increase the

importance of the human resource management function.

 Human resource management plays a major role in providing more

systematic training, facilitating changes that empower employees,
 instituting team-based reward systems, and communicating to workers
their role in quality.

 Integrated Manufacturing :

 Integrated manufacturing systems provide a new approach for

streamlined manufacturing.

 Such systems are commonly composed of advanced manufacturing

technology (AMT), TQM, and just-in-time (JIT) inventory control methods.

 When these technologies and managerial systems are combined,

integrated manufacturing systems have the potential to provide greater
dissemination of information, remove barriers associated with functional
specialization, promote collaboration to solve quality problems, and
develop congruence between goals of cost, quality and desired production
lead times.

 These systems require knowledge workers whose levels of technical and

problem-solving skills are advance beyond those needed for earlier forms
of manufacturing and have major implications for human resource
management.

 Reengineering :

 Reengineering, which is also called process innovation, core process

redesign, and business process reengineering.

 Essentially, reengineering is directed at achieving large cost savings by

eliminating unneeded activities and consolidating work.

 The type of service desired by customers is the key to the process.

 Often, reengineering requires cross-functional coordination and the

crossing of organizational boundaries.

 Because it may disrupt existing power relationships and eliminate

organizational jobs, it has high potential for conflict.

 Because the process often fails to obtain desired improvements and it has
high potential for destructive consequences, organizations should not
engage in reengineering unless they perceive a serious need.
 As a closing note on reengineering, it should be noted that some high-
level executives are not convinced of the ultimate value of reengineering.

 They have observed the elimination of jobs and such a massive increase
in the workload of remaining employees that they have serious concerns
about the long-range, detrimental human impact of such programs.
Because of such reactions, the use of reengineering may diminish
somewhat in the future.

 Management of Professionals :

 The difficulties are well known, and there has been a long-standing
controversy over whether such managers should be members of the
relevant profession themselves or laypersons.

 A human resource problem for the future will be to develop career paths
for professionals.

 Since they are often unprepared for management or administrative

careers, they may not find such work satisfying.

 As a result, dual career ladders are sometimes provided, one in

management and the other within the professional work.

 Large public accounting firms provide a remarkable example of turnover

problems among professionals.

 Managing in the Aftermath of Mergers and Acquisitions :

 Mergers and Acquisitions still are a permanent feature of the economy.

 Whether a merger or acquisition is successful depends on more than

financial considerations.

 Success often depends on how well the two organizations’ human

resources are integrated.

DEMOGRAPHIC TRENDS

 An Aging Workforce :

 Some of the implications of aging are that the workforce will be more
experienced, stable and reliable. As a result, it should be more productive.
 However, an older workforce may lead to less flexibility as older workers
may not adapt as quickly to a dynamic economy.

 Greater costs will also result from greater pension contributions that are
likely to be associated with an aging workforce.

 One implication of this trend is that as the workforce ages there should be
correspondingly greater health care costs.

 Companies’ age distributions have already begun to affect their

production costs and ability to compete.

 Interestingly, during the postwar period in which Japan’s remarkable

economic growth occurred, it had a relatively smaller proportion of retired
people to support than other industrial countries.

 Labour Shortages :

 At the beginning of the twenty-first century, firms faced the tightest U.S.
labour markets in 30 years.

 In some states, the unemployment rates for adults fell below three
percent.

 The combination of an exceptionally strong economy and demographic

trends produced the labour shortages that had been predicted solely from
demographic trends.

 Employers were expected to respond to the shortage by hiring retired

workers and creating more varied work schedules to accommodate their
needs.

 Barring an economic collapse, labour shortages also are predicted for the
future.

 The lure of jobs with dot-com or e-business companies and the prospects
for rapid accumulation of wealth has made the labour market even tighter
for highly skilled workers who are willing to take risks and live with
uncertainty.

 Older workers also have provided an excellent source of labour, although

many older workers are not interested in full-time work. They appear to
be interested in a part-time nature if the jobs provide flexibility and are
close to home.
 The Senior Employment Service in New York and Operation Able in
Chicago provide examples of successful employment of older workers.

 Greater Racial Diversity :

 The labour force will become much more diverse in the twenty-first
century. The category consisting of Asians and others (Pacific Islanders,
Native Americans, and Alaskan Natives) is projected to grow by over 40%
through 2008, the fastest of all racial groups.

 Hispanic participation is expected to increase by 36.8%, and Hispanics will

become the largest minority group in the labour force by 2008.

 The participation of black workers is expected to grow more slowly,

19.5%.

 Growth in labour force participation of white workers will be the slowest,

only 9.7%.

 As a result of these growth patterns, by the year 2008, over 29% of the
work-force will be composed of nonwhites.

 The discussion of the management of diversity, organizations will need to

plan to take advantage of diversity instead of forcing conformity.

 Changing Occupational Distributions for Women :

 Females have constituted a growing portion of the workforce for several

decades.

 However, this growth has slowed tremendously as women are predicted

to constitute 48% of the workforce by 2008.

 In the past 10 years, they also have made impressive inroads as

engineers, sales engineers, and as support staff for technical sales.

 In order to attract talented women, many employers have work

arrangements that better accommodate childbirth and, for women as well
as men, the care of young children.

 Dual-Career Couples :

 The number of couples having two wage earners has increased rapidly.
 In order to accommodate such families, many employers offer support
services such as “sick child” care programs and day care.

 Such services are believed to produce reductions in absenteeism, lower

turnover, recruiting advantages, and a positive impact on productivity.

 Other companies have set up child care facilities on company premises.

Campbell Soup Company has had success with such a program.
INTEGRATION OF STRATEGY AND HUMAN RESOURCE PLANNING

 The integration of business strategy and human resource strategy and

planning is particularly important for long-range planning efforts.
 Furthermore, with the recognition of the potential contributions of
human resource planning, line managers have taken on greater
responsibilities for these planning efforts.

Evolution of Strategy and Human Resource Planning Integration

 There are probably four stages in the evolution of linkages between

strategic business planning and human resource management.
 The first stage is called an administrative linkage, although there is no
real linkage. Senior executives operate as if qualifies personnel are
always available in the labor market, and the human resource unit is
relegated(down graded) to a paperwork-processing role.
 The second stage involves a one-way linkage in which the human
resource function becomes involved only in implementation.
 In the third stage, there is a two-way linkage. This involves a reciprocal
relationship in which the human resource function helps implement
strategic business plans and also provides input to strategy formulation.
 The final stage is called an integrative linkage. This stage goes beyond
the reciprocal relationship to an equal involvement with other functional
areas of business in the development of strategic business plans,
including issues outside of the human resource area.

Benefits of Integrating Human Resource Planning with Strategic

Planning

 Generates more diverse solutions to complex organizational problems

 Ensures consideration of human resources in organizational goal-setting
processes
 Ensures consideration of human resources in assessment of
organization’s abilities to accomplish goals and implement strategies
 Reciprocal integration prevents strategy formulation based on personnel
rigidities/preferences
 Facilities concurrent consideration of strategic plans and managerial
succession

Conditions Under Which Integration May Not Be Appropriate

 Strategic integration is appropriate only after the human resource

management function has progressed through earlier forms of
development.
 In fact, Baird and Meshoulam state that a partial determinant of the
effectiveness of an organization’s human resource management is the
degree to which it matches the organization’s developmental stage.
 For example, without managerial comprehension of such processes as
environmental scanning, strategy development, and managerial
succession, the resources devoted to strategic integration efforts will be
wasted
 Additionally, a sophisticated compensation program may fail because
the information and administrative system required for its
implementation may be undeveloped.
 It also follows that the stage of development in human resource
management should match the stage of development of the parent
organization.

EVALUATING STRATEGIC CONTRIBUTIONS IN EMERGING AREAS

There are a number of challenges from emerging areas related to

human resource management that have major consequences for most
companies.
Two of the most important of these are given below:

A) Equal Employment Opportunity and Management of Diversity:

The relevance of the management of diversity to the topic of

evaluating human resource effectiveness is that effective management
in this area enables organizations to tap the potential of their
workforces.
Thus, management of diversity can be related to the effectiveness with
which companies avoid labor shortages.
For example, African-American employees tend to have higher
turnover.
The company has made remarkable progress in-creasing the number
of African-American and female managers, both in total numbers and
in their representation in executive positions.
This accomplishment is all the more impressive when it is noted that
the company is located in a small town in upstate New York.
Some suggestions enabling organizations to be more effective in the
management of diversity are:
To deals with the advancement of minorities and females.
Advancement to upper-level positions requires information that is
obtained through informal networks from which minorities and females
are often excluded.

Roosevelt Thomas has explained this process as follows:

Another widespread assumption, probably absorbed from American

culture in general, is that “cream will rise to the top.” In most
companies, what passes for cream rising to the top is actually cream
being pulled or pushed to the top by an informal system of mentoring
and sponsorship.

Unfortunately, performance evaluation processes frequently do not

provide managers with the feedback that they need to advance to the
highest-level positions.

This weakness of performance evaluation systems in often offset by

informal feedback through personal mentoring or networks.

A second suggestion for improved effectiveness is that, where the

problems of minorities and females are unrelated to prejudice,
remedial efforts should facilitate the advancement of all groups of
people. In contrast, when remedial programs given special
consideration only to particular groups, they become enormously time
consuming and are inconsistent with the spirit of diversity.

A third suggestion is that, since the management of diversity is not an

exact science, mistakes will be making and setbacks will occur.
Accordingly, in the interests of fairness, managers should not be
penalized for their efforts.

A fourth suggestion is that the focus of the management of diversity

should be a broad one, extending even to education, personality,
background, and age. Such a broad orientation should facilitate the
development of a heterogeneous culture, instead of attempting to
assimilate those who differ into a dominant culture of white males.
 A fifth suggestion is to conduct training courses on diversity, which
may deal with communication style differences, increase self-
awareness, and reduce biases through skill-building exercises.
A sixth suggestion is to incorporate management of diversity into the
company’s performance evaluation and reward system so that those
managers doing a good job in this regard are rewarded. Companies
providing leadership in this area include Coca-Cola and Exxon-Mobil.

Chapter- VIII

INTERNATIONAL HUMAN RESOURCE MANAGEMENT

CONCEPT, SCOPE AND SIGNIFICANCE

Concept:

 IHRM is more a philosophy than a specific management practice. For that

reason it is difficult to give a precise definition of HRM.
 The emphasis on Human Resources is especially crucial for multinational
organizations at the international levels.
 Prasad & shetty states that “While MNC’s may have considerable resource in
terms of production & technology, these will be underutilized if they lack the
human resources to realize their potential”.
 Due to the changes taking place in economy and technology, the importance
of HRM to manage the industrial activities improved a lot.
 The field of IHRM has been characterized by three broad approaches. The
first emphasizes cross-cultural management. Examining human behaviour
within organizations from an international perspective.
 A second approach developed from the comparative industrial relations and
HRM literature and seeks to describe, compare and analyse HRM systems in
various countries.
 A third approach seeks to focus on aspects of HRM in multinational firms.
 Obviously, cross- cultural management issues are important when dealing
with the cultural aspects of foreign operations.
 Before we offer a definition of IHRM, we will first define a general field of
HRM.
 HRM refers to those activities undertaken by an organization to utilize its
Human Resources effectively such as:
HR planning,
Staffing,
Performance Management,
Training & Development,
Compensation & Benefits,
Labour Relations.
 An article by David Morgan on the development of IHRM presents a model
of International HRM that consists of 3 dimensions.
 The three board HR activities are:

Procurement
Allocation
Utilization

 The national or country categories involved in IHRM activities.

The host country where a subsidiary may be located.

The home country where a firm is headquartered.
And other countries that may be the source of labour & finance.

 The three types of employees of an international firm:

Host Country Nationals (HCN’s)
Parent Country Nationals (PCN’s)
Third Country Nationals (TCN’s)
 A Model of IHRM
 The scope of IHRM: The field of IHRM is characterized by 3 broad
approaches: such as

1. A cross-cultural management approach:

 This approach has examined human behaviour within organizations from an

international perspective.
2. Comparative Industrial Relations & HRM Literature:

 Seeks to describe, compare & analyse HRM systems in various countries

 3. HRM in Multinational Firms:

 A third approach seeks to focus on aspects of HRM in MNC’s.

 Morgan defines “IHRM as the interplay among these three dimensions, HR

activities, types of employees and countries of operation”.
 According to Acuff there are 5 basic points that, distinguish the activities of
an IHRM manager from those of his Domestic counterparts. Such as
1. More HR- activities- There are functions to perform in IHRM that do not
occur in domestic HRM. Functions like: Taxation, International relocation and
orientation.
2. More heterogeneous functions:
3. More involvement in employees personal lives:
4. Different emphasis:
5. More external influence:

An overview of HRM activities from an International Perspective:

After all, some of the most important tasks in IHRM involve-

Staffing
Assessment and Compensation
Training and Development
I.R/ employee participation. Which are also considered to be the main
activities in domestic HRM.
Issues in IHRM:

1. Managing International Assignments

2. Employee and Family Adjustment
3. Selection the Right Person for a Foreign Assignment
4. Culture Communication and Gauge
5. Language and Communication

Perlmutter’s Top Management Attitude towards Internationalization:

 Perlmutter’s (1996) offered an important- and historic-description of the

tortuous evolution of the multinational corporation.
  In his view, the attitude of top management at headquarters is particularly
important in the development of a multinational.
 As mentioned previously, perlmutter’s distinguishes three attitudes, namely
ethnocentric, polycentric and geocentric.
 These attitudes or orientations not only influence the organizational
structure and the lines of communication and information, but also the
approach to HRM activities in the fallowing way.

1. Ethnocentric:

 Personal management focuses to a great extent on recruiting and training

parent-country nationals for key positions, regardless of location.
 Their approach, working methods and culture are decisive for the
organizations of the subsidiary.
 Lines information and communications and advice issued by corporate
headquarters.
 Home-country attitudes dominate the concerns organizational culture,
whereas the foreign subsidiary plays an operational rather than a strategic
role.

2. Polycentric:

 Personal management is based largely on the view that values, norms and
customs differ from country to country and that local markets can therefore
best be reached by local mangers.
 The subsidiaries are allowed a relatively large measure of autonomy,
although financial controls ensure that headquarters can intervene
immediately if anything goes wrong.
 Career prospects for host country nationals are limited to top positions within
the subsidiary.
 They will not be considered for a position at corporate headquarters

3. Geocentric:

 A major theme in this approach is to utilize the best mangers throughout

the world, regardless of their nationality.
 The main concern is to implement a global approach, both at
headquarters and at the various subsidiaries, in which the exchange
between headquarters and subsidiaries of information, ideas, working
methods and personnel is a seen as a key activity.
 We can, of course, find combinations of these three approaches within
existing companies, but often there is one dominant attitude, which is
determined by the phase of internationalization in which the company
finds itself and by its history.
 This particular dominance is in reflected in the specific configuration of
the HRM activities.