STUDY MATERIAL. M.B.A. PROGRAMME (Code No. 411) (Effective from ) II SEMESTER 209MBT24 HUMAN RESOURCE MANAGEMENT

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1 St. PETER S UNIVERSITY St. Peter s Institute of Higher Education and Research (Declared Under Section 3 of the UGC Act, 1956) AVADI, CHENNAI TAMIL NADU STUDY MATERIAL M.B.A. PROGRAMME (Code No. 411) (Effective from ) II SEMESTER 209MBT24 HUMAN RESOURCE MANAGEMENT St. PETER S INSTITUTE OF DISTANCE EDUCATION Recognized by Distance Education Council and Joint Committee of UGC AICTE - DEC, New Delhi. (Ref. F.No.DEC/SPU/CHN/TN/Recog/09/14 dated & Ref. F.No.DEC/Recog/2009/3169 dated )

2 Author: VSP Rao Copyright 2011, VSP Rao No Part of this publication which is material protected by this copyright notice may be reproduced or transmitted or utilized or stored in any form or by any means now known or hereinafter invented, electronic, digital or mechanical, including photocopying, scanning, recording or by any information storage or retrieval system, without prior written permission from the publisher. Information contained in this book has been published by Excel Books Private Limited and has been obtained by its authors from sources believed to be reliable and are correct to the best of their knowledge. The University has edited the study material to suit the curriculum and distance education mode. However, the publisher/university and its author shall in no event be liable for any errors, omissions or damages arising out of use of this information and specifically disclaim any implied warranties or merchantability or fitness for any particular use. Produced and printed by: Excel Books Private Ltd, A-45, Naraina, Phase-I, New Delhi

3 PREFACE St. Peter s University has been recognized by the Distance Education Council, and Joint Committee of UGC- AICTE-DEC, for offering various programmes including B.Tech., D.Tech., MBA, MCA and other programmes in Humanities and Sciences through Distance Education mode. The Methodology of Distance Education includes self-instructional study materials in print form, face-to-face counseling, practical classes, virtual classes in phased manner and end assessment. The basic support for distance education students lies on the self instructional study materials. Keeping this in mind, the study materials under distance mode are prepared. The main features of the study materials are (1) learning objectives (2) self explanatory study materials unitwise (3) self tests (4) list of references for further studies. The material is prepared in simple English and graded in terms of technical content. It is built upon the pre-requisite knowledge. Students are advised to study the materials several times and get benefited. The face-to-face session in the counseling centre will help them to clear their doubts and difficult concepts which they would have faced during the learning process. Students should remember that self study and sustained motivation are the two important requirements for a successful learning under the distance education mode. We wish the students to put forth their best efforts to become successful in their chosen field of learning. Registrar St. Peter s University

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5 CONTENTS Page No. Scheme of Examinations Syllabus of Human Resource Management Model Question Paper vi x xi UNIT I: PERCEPTIVE IN HUMAN RESOURCE MANAGEMENT Lesson 1 An Introduction to Human Resource Management 3 Lesson 2 Roles and Policies of HRM 15 UNIT II: THE CONCEPT OF BEST FIT EMPLOYEE Lesson 3 Human Resource Planning 29 Lesson 4 Selection Process 40 Lesson 5 Recruitment 50 UNIT III: TRAINING AND EXECUTIVE DEVELOPMENT Lesson 6 Training and Development Programs 63 Lesson 7 Executive Development and Knowledge Management 77 UNIT IV: SUSTAINING EMPLOYEE INTEREST Lesson 8 Compensation 95 Lesson 9 Theories of Motivation 113 Lesson 10 Career Management 124 UNIT V: PERFORMANCE EVALUATION AND CONTROL PROCESS Lesson 11 Performance Evaluation 139 Lesson 12 Implication of Job Change 165 Lesson 13 Industry Practices 174 Lesson 14 Control Process 182 Lesson 15 Employee Grievances 187

6 Scheme of Examinations I Semester Code No. Course Title Credit Marks Theory EA Total 109MBT11 Management Principles & Organisational Behaviour MBT12 Economic Analysis for Business Decisions MBT13 Statistics for Management MBT14 Applied Operation Research for Management MBT15 Financial and Management Accounting MBT16 Legal Environment of Business MBT17 Executive Communication Total II Semester Code No. Course Title Credit Marks Theory EA Total 209MBT21 Production & Operation Management MBT22 Financial Management Decisions MBT23 Marketing for Managers MBT24 Human Resource Management MBT25 Computer Applications and Management Information System MBT26 Total Quality Management MBT27 Applied Research Methods in Management MBP01 Computer Lab for Business Administration Record Total

7 III Semester Code No. Course Title Credit Marks Theory EA Total 309MBT01 International Business Management MBT02 Strategic Management E1*** Electives I E2*** Electives II E3*** Electives III E4*** Elective IV E5*** Elective V E6*** Elective VI Total *** Any one group of electives from Marketing, Finance, Human Resource Management and System is to be chosen. IV Semester Code No. Course Title Credit Marks Theory EA Total 409MBT01 Marketing Research and Consumer Behaviour MBT02 Entrepreneurship Development MBP01 Project and Vivavoce * Total * In lieu of Project and Vivavoce, 409MBT03 - E-Commerce Technology and Management (6 Credits) is offered for Distance Education Students.

8 LIST OF ELECTIVES MARKETING ELECTIVES Code No. Course Title Credit Marks Theory EA Total 309MBT03 Retail Management MBT04 Services Marketing MBT05 Advertising and Sales Promotion MBT06 International Marketing MBT07 Brand Management MBT08 Rural and Social Marketing Total FINANCE ELECTIVES Code No. Course Title Credit Marks Theory EA Total 309MBT09 Security Analysis and Portfolio Management MBT10 Merchant Banking and Financial Services MBT11 International Trade Finance MBT12 Strategic Financial Management MBT13 Corporate Finance MBT14 Derivatives Management Total

9 HUMAN RESOURCE MANAGEMENT ELECTIVES Code No. Course Title Credit Marks Theory EA Total 309MBT15 Managerial Behaviour and Effectiveness MBT16 Organisational Change & Intervention Strategy MBT17 Industrial Relations and Labour Welfare MBT18 Labour Legislations MBT19 Strategic Human Management and Development MBT20 Corporate Governance & Corporate Social Responsibility Total SYSTEM ELECTIVES Code No. Course Title Credit Marks Theory EA Total 309MBT21 Software Development MBT22 Database Management Systems MBT23 Enterprise Resource Planning for Management MBT24 Software Project and Quality Management MBT25 Decision Support System MBT26 Information Technology for Management Total

10 209MBT24 HUMAN RESOURCE MANAGEMENT Syllabus UNIT I: PERCEPTIVE IN HUMAN RESOURCE MANAGEMENT Evolution of human resource management - The importance of the human factor - Objectives of human resource management - Role of human resource manager - Human resource policies - Computer applications in human resource management. UNIT II: THE CONCEPT OF BEST FIT EMPLOYEE Importance of human resource planning - Forecasting human resource requirement Internal and external sources. Selection process screening - Tests - Validation - Interview - Medical examination - Recruitment introduction - Importance - Practices - Socialization benefits. UNIT III: TRAINING AND EXECUTIVE DEVELOPMENT Types of training methods purpose benefits resistance - Executive development programmes - Common practices - Benefits - Self development - Knowledge management. UNIT IV: SUSTAINING EMPLOYEE INTEREST Compensation plan - Reward - Motivation - Theories of motivation - Career management - Development mentor - Protégé relationships. UNIT V: PERFORMANCE EVALUATION AND CONTROL PROCESS Method performance evaluation - Feedback - Industry practices - Promotion, demotion, transfer and separation - Implication of job change. The control process - Importance - Methods - Requirement of effective control systems grievances - Causes - Implications - Redressal methods. TEXT BOOKS: 1. Decenzo and Robbins, Human Resource Management, Wilsey, 6 th edition, Biswajeet Pattanayak, Human Resource Management, Prentice Hall of India, R. Krishnaveni, Human Resource Development, Excel Books, New Delhi, 1 st edition. 4. VSP Rao, Human Resource Management, Excel Books, New Delhi, 2 nd edition. REFERENCES: 1. Human Resource Management, Eugene McKenna and Nic Beach, Pearson Education Limited, Dessler Human Resource Management, Pearson Education Limited, Mamoria C.B. and Mamoria S., Personnel Management, Himalaya Publishing Company, Wayne Cascio, Managing Human Resource, McGraw Hill, Ivancevich, Human Resource Management, McGraw Hill 2002.

11 MODEL QUESTION PAPER M.B.A. DEGREE EXAMINATIONS Second Semester 209MBT24 - HUMAN RESOURCE MANAGEMENT (Regulations 2009) Time: 3 Hours Maximum: 100 marks Answer ALL the questions PART A (10 2 = 20 Marks) 1. Enumerate the Strategic, Administrative and Specialized roles of HRP Professionals. 2. Distinguish between Performance Appraisal and Potential Appraisal. 3. Explain Horn effect and Stereotyping in Performance Appraisal. 4. Briefly explain Vroom s Expectancy Theory. 5. Briefly state what is Knowledge Management? 6. Distinguish between Job Specification and Job Evaluation. 7. What is Acceptance Error and Rejection Error in Selection and Performance. 8. Briefly explain MBO. 9. Briefly explain the concepts of Minimum wage, Fair wage and Living wage. 10. State at least four objectives of Workers Participation in Management. PART B (5 16 = 80 Marks) 11. (a) Discuss the Operative Functions of HR Managers. or (b) Briefly Explain Computer Applications in Management. 12. (a) Discuss the Merits, Demerits and Steps involved in Job Classification or Grading Method. or (b) Discuss the Merits, Demerits and Steps involved in Points Ranking System of Job Evaluation. 13. (a) Discuss the Merits and Demerits of Internal and External Sources of Recruitment. or (b) Briefly explain Career Planning, Carrier Stages, need and process of Career Planning.

12 14. (a) Briefly explain the following terms and their merits and demerits. (i) Vestibule Training and (ii) Job Rotation Method of Development or (b) Discuss Sensitivity, Laboratory or T-group Training, its objectives, usefulness and demerits. 15. (a) Briefly explain the following: (i) Assessment Center and (ii) 360 Performance Appraisal or (b) Briefly explain the following: (i) Elements of a Good Wage Plan (ii) Types of Wages and their merits and demerits

13 1 An Introduction to Human Resource Management UNIT I Perceptive in Human Resource Management

14 2 Human Resource Management

15 LESSON 1 AN INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 3 An Introduction to Human Resource Management STRUCTURE 1.0 Objectives 1.1 Introduction 1.2 Meaning and Nature of HRM 1.3 Scope of HRM 1.4 Objectives of HRM 1.5 Importance of HRM 1.6 Systems Approach to HRM 1.7 HRM and Competitive Advantage 1.8 Strategic Human Resource Management 1.9 Traditional HR versus Strategic HR 1.10 Evolution of the Concept of HRM 1.11 Let us Sum up 1.12 Glossary 1.13 Suggested Readings 1.14 Questions 1.0 OBJECTIVES After studying this lesson, you should be able to: Explain the evolution of human resource management Discuss the objectives of human resource management Explain the scope and importance of HRM 1.1 INTRODUCTION To extract the best out of people, the organisation must provide a healthy work climate where they can exploit their talents fully while realizing goals assigned to them. They must have requisite skills to handle their jobs in a competent way. Above all, to get the best out of people, they must be managed well and this requires leadership. This is where human resource managers play a critical role in bridging gaps between employee expectations and organisational needs by adopting appropriate human resource strategies and practices.

16 4 Human Resource Management 1.2 MEANING AND NATURE OF HRM Human Resource Management is a process of bringing people and organisations together so that the goals of each are met. It tries to secure the best from people by winning their wholehearted cooperation. In short, it may be defined as the art of procuring, developing and maintaining competent workforce to achieve the goals of an organisation in an effective and efficient manner. Features of HRM It has the following features: Pervasive force: HRM is pervasive in nature. It is present in all enterprises. It permeates all levels of management in an organisation. Action oriented: HRM focuses attention on action, rather than on record keeping, written procedures or rules. The problems of employees at work are solved through rational policies. Individually oriented: It tries to help employees develop their potential fully. It encourages them to give their best to the organisation. It motivates employees through a systematic process of recruitment, selection, training and development coupled with fair wage policies. People oriented: HRM is all about people at work, both as individuals and groups. It tries to put people on assigned jobs in order to produce good results. The resultant gains are used to reward people and motivate them toward further improvements in productivity. Future oriented: Effective HRM helps an organisation meet its goals in the future by providing for competent and well-motivated employees. Development oriented: HRM intends to develop the full potential of employees. The reward structure is tuned to the needs of employees. Training is offered to sharpen and improve their skills. Employees are rotated on various jobs so that they gain experience and exposure. Every attempt is made to use their talents fully in the service of organisational goals. Integrating mechanism: HRM tries to build and maintain cordial relations between people working at various levels in the organisation. In short, it tries to integrate human assets in the best possible manner in the service of an organisation. Comprehensive function: HRM is, to some extent, concerned with any organisational decision which has an impact on the workforce or the potential workforce. The term workforce signifies people working at various levels, including workers, supervisors, middle and top managers. It is concerned with managing people at work. It covers all types of personnel. Personnel work may take different shapes and forms at each level in the organisational hierarchy but the basic objective of achieving organisational effectiveness through effective and efficient utilisation of human resources, remains the same. It is basically a method of developing potentialities of employees so that they get maximum satisfaction out of their work and give their best efforts to the organisation. (Pigors and Myers) Auxiliary service: HR departments exist to assist and advise the line or operating managers to do their personnel work more effectively. HR manager is a specialist advisor. It is a staff function.

17 Inter-disciplinary function: HRM is a multi-disciplinary activity, utilising knowledge and inputs drawn from psychology, sociology, anthropology, economics, etc. To unravel the mystery surrounding the human brain, managers, need to understand and appreciate the contributions of all such soft disciplines. Continuous function: According to Terry, HRM is not a one shot deal. It cannot be practised only one hour each day or one day a week. It requires a constant alertness and awareness of human relations and their importance in every day operations. 5 An Introduction to Human Resource Management 1.3 SCOPE OF HRM The scope of HRM is very wide. Research in behavioural sciences, new trends in managing knowledge workers and advances in the field of training have expanded the scope of HR function in recent years. The Indian Institute of Personnel Management has specified the scope of HRM thus: Personnel aspect: This is concerned with manpower planning, recruitment, selection, placement, transfer, promotion, training and development, lay off and retrenchment, remuneration, incentives, productivity, etc. Welfare aspect: It deals with working conditions and amenities such as canteens, creches, rest and lunch rooms, housing, transport, medical assistance, education, health and safety, recreation facilities, etc. Industrial relations aspect: This covers union-management relations, joint consultation, collective bargaining, grievance and disciplinary procedures, settlement of disputes, etc. 1.4 OBJECTIVES OF HRM The principal objectives of HRM may be listed thus: To help the organisation reach its goals: HR department, like other departments in an organisation, exists to achieve the goals of the organisation first and if it does not meet this purpose, HR department (or for that matter any other unit) will wither and die. To employ the skills and abilities of the workforce efficiently: The primary purpose of HRM is to make people s strengths productive and to benefit customers, stockholders and employees. To provide the organisation with well-trained and well-motivated employees: HRM requires that employees be motivated to exert their maximum efforts, that their performance be evaluated properly for results and that they be remunerated on the basis of their contributions to the organisation. To increase to the fullest the employee s job satisfaction and self-actualisation: It tries to prompt and stimulate every employee to realise his potential. To this end suitable programmes have to be designed aimed at improving the Quality of Work Life (QWL). To develop and maintain a quality of work life: It makes employment in the organisation a desirable, personal and social, situation. Without improvement in the quality of work life, it is difficult to improve organisational performance. To communicate HR policies to all employees: It is the responsibility of HRM to communicate in the fullest possible sense; tapping ideas, opinions and feelings of customers, non-customers, regulators and other external public as well as understanding the views of internal human resources.

18 6 Human Resource Management To be ethically and socially responsive to the needs of society: HRM must ensure that organisations manage human resource in an ethical and socially responsible manner through ensuring compliance with legal and ethical standards. Check Your Progress 1 Fill in the blanks: 1. is a process of bringing people and organisations together so that the goals of each are met. 2. Training is offered to sharpen and their skills. 3. is concerned with manpower planning, recruitment, selection, placement, transfer, promotion, training and development, lay off and retrenchment, remuneration, incentives, productivity. 4. The primary purpose of HRM is to make people s strengths productive and to benefit and 1.5 IMPORTANCE OF HRM People have always been central to organisations, but their strategic importance is growing in today's knowledge-based industries. An organisation s success increasingly depends on the Knowledge, Skills and Abilities (KSAs) of employees, particularly as they help establish a set of core competencies that distinguish an organisation from its competitors. With appropriate HR policies and practices an organisation can hire, develop and utilise best brains in the marketplace, realise its professed goals and deliver results better than others. Human Resource Management helps an organisation and its people to realise their respective goals thus: At the enterprise level: Good human resource practices can help in attracting and retaining the best people in the organisation. Planning alerts the company to the types of people. it will need in the short, medium and long run. It helps in training people for challenging roles, developing right attitudes towards the job and the company, promoting team spirit among employees and developing loyalty and commitment through appropriate reward schemes. At the individual level: Effective management of human resources helps employees thus: It promotes team work and team spirit among employees. It offers excellent growth opportunities to people who have the potential to rise. It allows people to work with diligence and commitment. At the society level: Society, as a whole, is the major beneficiary of good human resource practices. Employment opportunities multiply. Scarce talents are put to best use. Companies that pay and treat people well always race ahead of others and deliver excellent results.

19 At the national level: Effective use of human resources helps in exploitation of natural, physical and financial resources in a better way. People with right skills, proper attitudes and appropriate values help the nation to get ahead and compete with the best in the world leading to better standard of living and better employment. Box 1.1: Importance of HRM 7 An Introduction to Human Resource Management attract and retain talent train people for challenging roles GOOD HR practices help develop skills and competencies promote team spirit develop loyalty and commitment increase productivity and profits improve job satisfaction enhance standard of living generate employment opportunities 1.6 SYSTEMS APPROACH TO HRM A system is a set of interrelated but separate elements or parts working toward a common goal. A university, for example, is made up of students, teachers, administrative and laboratory staff who relate to one another in an orderly manner. What one group does have serious implications for others? So, they have to be communicating with each other in order to achieve the overall goal of imparting education. The enterprise operations, similarly, must be viewed in terms of interacting and interdependent elements. The enterprises procure and transform inputs such as physical, financial and human resources into outputs such as products, services and satisfactions offered to people at large. To carry out its operations, each enterprise has certain departments known as subsystems such as production subsystem, finance subsystem, marketing subsystem, HR subsystem, etc. Each subsystem consists of a number of other subsystems. For example, the HR subsystem may have parts such as procurement, training, compensation, appraisal, rewards, etc. If we were to view HR subsystem as crucial to organisational performance, an organisation presents itself thus: Figure 1.1: HRM as a Central Subsystem in an Enterprise

20 8 Human Resource Management The various internal subsystems, it should be noted here, of an organisation operate within the framework of external environment consisting of political, social, economic and technological forces operating within and outside a nation. 1.7 HRM AND COMPETITIVE ADVANTAGE Competitive advantage refers to the ability of an organisation to formulate strategies to exploit rewarding opportunities, thereby maximizing its return on investment. Competitive advantage occurs if customers perceive that they receive value from their transaction with an organisation. This requires single-minded focus on customer needs and expectations. To achieve this, the organisation needs to tune its policies in line with changing customer's requirements. The second principle of competitive advantage derives from offering a product or service that your competitor cannot easily imitate or copy. An organisation should always try to be unique in its industry along dimensions that are widely valued by customers. For example Apple stresses its computers usability, Mercedes Benz stresses reliability and quality; Maruti emphasizes affordability of its lower-end car Maruti 800. In order to enjoy the competitive advantage, the firm should be a cost-leader, delivering value for money. It must have a committed and competent workforce. Workers are most productive if (i) they are loyal to the company, informed about its mission, strategic and current levels of success, (ii) involved in teams which collectively decide how things are to be done and (iii) are trusted to take the right decisions rather than be controlled at every stage by managers above them (Thompson). A good team of competent and committed employees will deliver the goals if they are involved in all important activities and are encouraged to develop goals that they are supposed to achieve. In recent years, a new line of thinking has emerged to support this view-known as Strategic Human Resources Management (SHRM). Box 1.2: Competitive Advantage through People Organisations have come to realise, over the years, that improving technology and cutting costs enhance performance only upto a point. To move beyond that point, the organisation's people are its most important resource. In the end, everything an organisation does depends on people. Low cost and high quality cars like Toyota and Saturns are not just a product of sophisticated automated machines. Instead, they are the result of committed employees all working hard to produce the best cars that they can at the lowest possible cost (Dessler). To get the best out of people, the organisation must offer a healthy work climate where they can use their knowledge, skills and abilities fully while realising organisational goals. This is where HR managers play a crucial role that of bridging gaps between employee expectations and organisational requirements by adopting appropriate HR policies, strategies and practices. HRM, it is generally felt now, would often competitive advantage if: HR policies are jointly developed and implemented by HR and operating managers. HR puts focus on quality, customer service, employee involvement, teamwork and productivity. HRM strategies and practices are in tune with employee expectations, customer needs and changing competitive requirements. To be effective, HR strategies must fit with overall organisational strategies, the environment in which the firm is operating, unique organisational characteristics and organisational capabilities. (G. Mejia et al.) 1.8 STRATEGIC HUMAN RESOURCE MANAGEMENT SHRM is the pattern of planned human resource developments and activities intended to enable an organisation to achieve its goals (Wright and McMahan). This means accepting the HR function as a strategic partner in both the formulation of the company s strategic, as well as in the implementation of those activities through HR activities. While formulating the strategic plan HR management can play a vital role, especially in identifying and analysing external threats and opportunities.

21 (Environmental scanning) that may be crucial to the company's success. HR management can also offer competitive intelligence (like new incentive plans being used by competitors, data regarding customer complaints etc.) that may be helpful while giving shape to strategic plans. HR function can also throw light on company's internal strengths and weaknesses. For example, IBM's decision to buy Lotus was probably prompted in part by IBM's conclusion that its own human resources were inadequate for the firm to reposition itself as an industry leader in networking systems (Dessler). Some firms even develop their strategies based on their own HR-based competitive advantage. Software Majors, Wipro, TCS have not slowed down their recruitment efforts during the lean periods, pinning hopes on their own exceptionally talented employee teams. In fact they have built their strategic and operating plans around outsourcing sourcing contracts from US, Europe, Japan and Germany-which would help them exploit the capabilities of their employees fully. HR has a great role to play in the execution of strategies. For example, HDFC's competitive strategy is to differentiate itself from its competitors by offering superior customer service at attractive rates (searching the right property, finishing legal formalities, offering expert advice while negotiating the deal, competitive lending rates, fast processing of applications, offering other financial products of HDFC at concessional rates, door-to-door service as per customers choice etc. (HDFC's growth architecture, Business Today, Jan 6, 2001). Since the same basic services are offered by HDFC's competitors such as LIC Housing Finance GIC Housing Finance, banks and private sector, players like Dewan Housing Finance, Ganesh Housing, Live Well Home, Peerless Abassan etc. HDFC's workforce offers a crucial competitive advantage (highly committed, competent and customer-oriented workforce). HR can help strategy implementation in other ways. It can help the firm carry out restructuring and downsizing efforts without rubbing employees on the wrong side- say, through out placing employees, linking rewards to performance, reducing welfare costs, and retraining employees. HR can also initiate systematic efforts to enhance skill levels of employees so that the firm can compete on quality. Globalisation, deregulation and technological innovation have in recent times created the need for rather, faster and more competitive organisations. Under the circumstances, employee behaviour and performance is often seen as the best bet to push competitors to a corner and enhance productivity and market share. HR practices build competitiveness because they allow for strategic implementation, create a capacity for change and instill strategic unity. 9 An Introduction to Human Resource Management 1.9 TRADITIONAL HR VERSUS STRATEGIC HR SHRM realizes that people can make or break an organisation because all decisions made regarding finance, marketing operations or technologies are made by an organisation s people. So it accords highest priority to managing people and tries to integrate all HR programmes and policies with the overall corporate strategy. It compels people at all levels to focus more on strategic issues rather than operational issues. More importantly, it believes that there is no best way to manage people in any given organisation. Even within a given industry, HR practices can vary extensively, from one organisation to another. Armed with such a flexible approach, SHRM tries to develop a consistent, aligned collecting of practices, programmes and policies to facilitate the achievement of the organisation's strategic objectives.

22 10 Human Resource Management Figure 1.2: The Evolving Strategic Role of Human Resource Management Strategic HR shifts attention, as against the traditional HR's focus on employee relations, to partnerships with internal and external groups. The focus on managing people is more systemic with an understanding of the myriad factors that impact employees and the organisation and how to manage multiple relationships to ensure satisfaction at all levels of the organisation, Strategic HR is transformational in nature, in that it helps the people and the organisation to adopt, learn and act quickly. It will make sure that change initiatives that are focused on creating high performance teams, reducing cycle time for innovation, or implementing new technology are defined, developed and delivered in a timely way" (ULRICH, 1998). Strategic HR is proactive and considers various time frames in a flexible manner. Likewise it permits employees to process work and carry out job responsibilities in a free-flowing way. Rather than being enveloped by tight controls and excessive regulations, operations are controlled by whatever is necessary to succeed, and control systems are modified as needed to meet changing conditions. Job design is organic, specialisation is replaced by cross training and independent tasks are replaced by teams, encouraging autonomy at various levels. Above all, strategic HR believes that the organisation s key assets are its people. It realises that an organisation can have competitive edge over its rivals if it is able to attract and retain knowledge workers who can optimally utilise and manage the organisation s critical resources. In the final analysis people are the organisation s only sustainable competitive advantage [Pfeffer, 1994]. While running the show, strategic HR, of course, argues that any individual in an organisation who has responsibility for people is an HR manager, regardless of the technical area in which he or she works. (See Table 1.1) Strategic HR offers three critical outcomes: increased performance enhanced customer and employee satisfaction and increased shareholder value. These outcomes are accomplished through effective management of staffing, retention and turnover processes, selection of employees that fit with both the organisational strategy and culture, cost-effective utilisation of employees through investment in identified human capital with the potential for higher return; integrated HR programmes and policies that clearly follow from corporate strategy; facilitation of change and adaptation through a flexible, more dynamic organisation; and tighter focus on customer needs, emerging markets and quality. (See Figure 1.3) Table 1.1: Traditional HR versus Strategic HR Point of distinction Traditional HR Strategic HR Focus Employee Relations Partnerships with internal and external customers Role of HR Transactional change follower and respondent Transformational change leader and initiator Initiatives Slow, reactive, fragmented Fast, proactive and integrated Contd

23 Time horizon Short-term Short, medium and long (as required) Control Bureaucratic - roles, policies, procedures Organic-flexible, whatever is necessary to succeed 11 An Introduction to Human Resource Management Job design Tight division of labour; independence, specialisation Broad, flexible, cross-training teams Key investments Capital, products People, knowledge Accountability Cost centre Investment centre Responsibility for HR Staff specialists Line managers Source: Mello Figure 1.3: A Model of Strategic Human Resource Management 1.10 EVOLUTION OF THE CONCEPT OF HRM The early part of the century saw a concern for improved efficiency through careful design of work. During the middle part of the century emphasis shifted to the availability of managerial personnel and employee productivity. Recent decades have focused on the demand for technical personnel, responses to new legislation and governmental regulations, increased concern for the quality of working life, total quality management and a renewed emphasis on productivity. Let us look into these trends more closely by examining the transformation of personnel function from one stage to another in a chronological sequence: Table 1.2 Concept The Commodity concept The Factor of Production concept What is it all about? Labour was regarded as a commodity to be bought and sold. Wages were based on demand and supply. Government did very little to protect workers. Labour is like any other factor of production, viz., money, materials, land, etc. Workers are like machine tools. Contd

24 12 Human Resource Management The Goodwill concept The Paternalistic concept/ Paternalism The Humanitarian concept The Human Resource concept The Emerging concept Welfare measures like safety, first aid, lunch room, rest room will have a positive impact on workers productivity Management must assume a fatherly and protective attitude 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. To improve productivity, physical, social and psychological 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. Employees are the most valuable assets of an organisation. There should be a conscious effort to realise organisational goals by satisfying needs and aspirations of employees. 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. Check Your Progress 2 State whether the following statements are true or false: 1. An organisation s success increasingly depends only on the knowledge but not on skills and abilities of employees. 2. Good human resource practices can help in attracting and retaining the best people in the organisation. 3. A system is a set of interrelated but separate elements or parts working toward a common goal. 4. HR function can also throw light on company's internal strengths and weaknesses. 5. Strategic HR believes that the organisation s key assets are its people LET US SUM UP People have always been central to organisations but their strategic importance is increasing in today's knowledge-based industries. HRM is responsible for the people dimension of the organisation. It is a pervasive force, action-oriented, individuallyoriented, development-oriented, future-focused, and integrative in nature and is a comprehensive function. HRM mainly covers three broad areas: personnel aspect, welfare aspect, and industrial relations aspect. 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. 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. HR can be a source of competitive advantage, when the talents of people working in the company are valuable, rare; difficult to imitate and well organised to deliver efficient and effective results.

25 1.12 GLOSSARY Management: The process of efficiently achieving the objectives of the organisation with and through people. HRM: A process of bringing people and organisations together so that the goals of each one are met, effectively and efficiently. Purpose of HRM: HRM seeks to improve the productive contributions of people to the organisation in ways that are ethically and socially responsible. Competitive Advantage: It allows a firm to gain an edge over rivals when competing. It comes from a firm's ability to perform activities more distinctively and more effectively than rivals. Strategic Human Resources Management: The linking of HRM with strategic goals and objectives in order to improve business performance and develop organisational cultures that foster innovation and flexibility. 13 An Introduction to Human Resource Management Check Your Progress: Answers CYP 1 1. Human resource management 2. Improve 3. Personnel aspects 4. Stockholder; employees CYP 2 1. False 2. True 3. True 4. True 5. True 1.13 SUGGESTED READINGS VSP Rao, Human Resource Management, Excel Books, New Delhi, 2005 P.L. Rao, Comprehensive Human Resource Management, Excel Books, New Delhi, 2004 D.K. Bhattacharyya, Human Resource Management, Excel Books, New Delhi, 2006 Robert L Mathis and John H. Jackson, Human Resource Management, Thomson, 2007 K. Aswathappa, Human Resource and Personnel Management, Tata McGraw Hill, 2007

26 14 Human Resource Management 1.14 QUESTIONS 1. What skills and competencies do HR professionals need to add more value to the HR function? How might these competencies and skills change in the future? How can HR professionals ensure that they are creating value for their organisations? 2. Why is a competitive advantage based on heavy investment in human resources more sustainable than investment in other types of assets? 3. Are people always an organisation s most valuable asset? Why or why not? 4. Do pressures on cost containment work against effective management of people? Why or why not? 5. To be a strategic business contributor, HR managers must enhance organisational performance, expand human capital, and be cost-effective. Discuss how HR professionals must balance the competing demands made on them. 6. How do you think the internet will change the way in which HR processes, such as hiring, compensating, evaluating, and benefits are performed?

27 LESSON 2 ROLES AND POLICIES OF HRM 15 Roles and Policies of HRM STRUCTURE 2.0 Objectives 2.1 Introduction 2.2 Roles of Human Resource Manager Administrative Roles Operational Roles Strategic Roles 2.3 Human Resource Policies Types of HR Policies Advantages of HR Policies Obstacles in Administering HR Policies Characteristics of a Sound HR Policy Coverage of HR Policies Formulation of HR Policies Evaluating the Impact of HR Policies 2.4 Computer Application in Human Resource Management 2.5 Let us Sum up 2.6 Glossary 2.7 Suggested Readings 2.8 Questions 2.0 OBJECTIVES After studying this lesson, you should be able to: Explain the roles of human resource manager Describe the human resource policies Discuss the computer application in human resource management 2.1 INTRODUCTION Human Resource Management is concerned with people at work and their relationships with each other. It may be defined as a set of programmes, functions and activities designed to maximize both personal and organisational goals. It ensures that the organisation attracts and hires qualified, imaginative and competent people. It involves the establishment of various policies to deal with employees and to retain them. Different types of roles of HR manager are Administrative role, operational roles, and strategic roles.

28 16 Human Resource Management 2.2 ROLES OF HUMAN RESOURCE MANAGER Human Resource Managers, nowadays, wear many hats. They perform mainly three different types of roles, while meeting the requirement of employees and customers, namely administrative, operational and strategic Administrative Roles The administrative roles of human resource management include policy formulation and implementation, housekeeping, records maintenance, welfare administration, legal compliance etc. Policy maker: The human resource manger helps management in the formation of policies governing talent acquisition and retention, wage and salary administration, welfare activities, personnel records, working conditions etc. He also helps in interpreting personnel policies in an appropriate manner. Administrative expert: The administrative role of an HR manager is heavily oriented to processing and record keeping. Maintaining employee files, and HR-related databases, processing employee benefit claims, answering queries regarding leave, transport and medical facilities, submitting required reports to regulatory agencies are examples of the administrative nature of HR management. These activities must be performed efficiently and effectively to meet changing requirements of employees, customers and the government. Advisor: It is said that personnel management is not a line responsibility but a staff function. The HR manager performs his functions by advising, suggesting, counselling and helping the line managers in discharging their responsibilities relating to grievance redressal, conflict resolution, employee selection and training. Personnel advice includes preparation of reports, communication of guidelines for the interpretation and implementation of policies, providing information regarding labour laws etc. Housekeeper: The administrative roles of a personnel manager in managing the show include recruiting, pre-employment testing, reference checking, employee surveys, time keeping, wage and salary administration, benefits and pension administration, wellness programmes, maintenance of records etc. Counsellor: The personnel manager discusses various problems of the employees relating to work, career, their supervisors, colleagues, health, and family, financial, social, etc. and advises them on minimizing and overcoming problems, if any. Welfare officer: Personnel manager is expected to be the Welfare Officer of the company. As a Welfare officer he provides and maintains (on behalf of the company) canteens, hospitals, crèches, educational institutes, clubs, libraries, conveyance facilities, co-operative credit societies and consumer stores. Under the Factories Act, Welfare officers are expected to take care of safety, health and welfare of employees. The HR managers are often asked to oversee if everything is in line with the company legislation and stipulation. Legal consultant: Personnel manager plays a role of grievance handling, settling of disputes, handling disciplinary cases, doing collective bargaining, enabling the process of joint consultation, interpretation and implementation of various labour laws, contacting lawyers regarding court cases, filing suits in labour courts, industrial tribunals, civil courts and the like.

29 In some organisations, the above administrative functions are being outsourced to external providers in recent times, with a view to increasing efficiency as also cutting operational costs. Technology is being put to good use to automate many of the administrative tasks. 17 Roles and Policies of HRM Operational Roles These roles are tactical in nature and include recruiting, training and developing employees; coordinating HR activities with the actions of managers and supervisors throughout the organisation and resolving differences between employees. Recruiter: Winning the war for talent has become an important job of HR managers in recent times in view of the growing competition for people possessing requisite knowledge, skills and experience. HR managers have to use their experience to good effect while laying down lucrative career paths to new recruits without, increasing the financial burden to the company. Trainer developer, motivator: Apart from talent acquisition, talent retention is also important. To this end, HR managers have to find skill deficiencies from time to time, offer meaningful training opportunities, and bring out the latent potential of people through intrinsic and extrinsic rewards which are valued by employees. Coordinator/linking pin: The HR manager is often deputed to act as a linking pin between various divisions/departments of an organisation. The whole exercise is meant to develop rapport with divisional heads, using PR and communication skills of HR executives to the maximum possible extent. Mediator: The personnel manager acts as a mediator in case of friction between two employees, groups of employees, superiors and subordinates and employees and management with the sole objective of maintaining industrial harmony. Employee champion: HR managers have traditionally been viewed as company morale officers or employee advocates. Liberalisation, privatisation and globalisation pressures have changed the situation dramatically HR professionals have had to move closer to the hearts of employees in their own self interest. To deliver results they are now seriously preoccupied with: Placing people on the right job. Charting a suitable career path for each employee. Rewarding creditable performance. Resolving differences between employees and groups smoothly. Adopting family-friendly policies. Ensuring fair and equitable treatment to all people regardless of their background. Striking a happy balance between the employee's personal/professional as also the larger organisational needs. Representing workers issues, problems and concerns to the management in order to deliver effective results HR managers have to treat their employees as valuable assets. Such an approach helps to ensure that HR practices and principles are in sync with the organisation s overall strategy. It forces the organisation to invest in its best employees and ensure that performance standards are not compromised.

30 18 Human Resource Management Strategic Roles An organisation s success increasingly depends on the knowledge, skills and abilities of its employees, particularly as they help establish a set of 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, e.g. ONGC 's oil exploration capabilities and Dell's ability to deliver low cost, high-quality computers at an amazing speed) that distinguish an organisation from its competitors. When employees talents are valuable, rare, difficult to imitate and organised, a firm can achieve sustained competitive advantage through its people. The strategic role of HR management focuses attention on how to enable ordinary employees to turn out extraordinary performance, taking care of their ever-changing expectations. The key areas of attention in this era of global competition include effective management of key resources (employees, technology, work processes), while delivering cost effective, value-enhancing solutions. Figure 2.1: Roles of HR Manager Change agent: Strategic HR as it is popularly called now aims at building the organisation s capacity to embrace and capitalize on change. It makes sure that change initiatives that are focused on creating high-performing teams, reducing cycle time for innovation, or implementing new technology are defined, developed and delivered in a timely manner. The HR manager in his new avtar would help employees translate the vision statements into a meaningful format (Ulrich, 1998). HR's role as a change agent is to replace resistance with resolve, planning with results and fear of change with excitement about its possibilities. HR helps an organisation identify the key success factors for change and assess the organisation s strengths and weaknesses regarding each factor. It may not decide what changes the organisation is going to embrace, but it would certainly lead the process to make them explicit. In helping to bring about a new HR environment their needs to be clarity on issues like who is responsible for bringing about change? Why do it? What will it look when we are done? Who else needs to be involved?, How will it be measured? How will it be institutionalized? How will it be measured? How will it get initiated, developed and sustained? Strategic partner: HR s role is not just to adapt its activities to the firm s business strategy, nor certainly to carry out fire-fighting operations like compensating employees. Instead, it must deliver strategic services cost effectively by building a competent, consumer-oriented work force. It must assume important roles in strategy formulation as well strategy implementation. To this end, it must identify