11
HUMAN RESOURCE POLICIES
Chapter Objectives
To understand the meaning of policies and its importance in driving performance and culture in an organization.
To design a process for framing policies and procedures.
To understand the People Capability Maturity Model (PCMM) framework.
Opening Case
Aniket tried borrowing the entire amount that he needed for his company from the bank. He did not want to approach venture funds because he had heard from his friends about their interference and he wanted none of it. In the last week of December in 2009 he was almost ready to give it up. He was not getting sleep and all he would be left wondering was ‘Is it worth it?’ None of the banks seemed to buy his idea. In the end, encouraged by his wife he decided to sell his huge plot of land, close to Salt Lake, Kolkatta, to pursue his dream.
He finally started his legal transcription company called ‘Mangotech’ in 2009 at Bengaluru. Two of his senior colleagues from his earlier legal transcription company joined him as head of operations and head of finance. Within six months, he had rented a facility which had a seating capacity of 175, and quickly hired 37 employees. Ashok Singh, his operations head, put the entire transcription process in place and also got involved in hiring the first few batches of people. Their experience in the field of ‘medical transcription’ helped them tide over the initial teething problems the company faced. The company was successful in getting enough business to keep all its employees engaged full-time. Within a year the number of people who were on board was nearing 100.
As the company grew it wanted to get larger clients and for that scale was very important. They needed to grow the team quickly. As Mangotech was a relatively new and unknown company, he found it difficult to attract candidates with qualitative experience, quite a number of mediocre students used to apply too. They nevertheless preferred to hire, graduates/undergraduates those with at least one year of solid experience from smaller transcription firms around Bengaluru. Their hiring and selection process was rather haphazard, nevertheless they managed to fill in the required gaps (read: vacancies) much before time.
Aniket did not feel the need to hire a human resource manager as he thought the incumbent manager would not have an eight hour job. So he took on the mantle of the HR manager himself. Most of his time went in recruitment and selection-related work. Frequently, he used to take the help of his team leaders to aid him in the recruitment and selection process. Team leaders had around more than four years of relevant experience.
Things on the business front were going well, but Aniket had this uneasy feeling that all was not right the way things were happening inside the start up. He had heard rumours that one of the team leaders had got all his old friends in and had built a small fiefdom inside the operations department. Many a times team leaders complained to him about one getting favoured over the other by the managers—the other day Amit Rana a young kid was cribbing ‘I would also love to buy a bike if the company would give me a subsidized loan—but then here you need to know the top bosses if you want any benefit!’ Every time he heard anything like this, he made sure that he investigated things to the last detail and fixed it. But then most of his time was going in troubleshooting only. But it was the fake certificates scam that was the last straw.
Recently, one of their clients made it a mandatory requirement as a part of its contract with Mangotech to do a background check of the employees. Aniket asked Rohit Kalsi from the administration department to take this job in addition to his other responsibilities. Therefore, Rohit collected the names of those employees who were put on the project on an ongoing basis and did what was required to be done as a part of the background check as per the service level agreement (SLA) with the client. Rohit was not able to do the background checks in time because he had been busy in some other things and there was a stack ready to be dealt with. It was then that he came upon this ‘racket’ accidentally. He saw that five of the employees had the same passing percentage and passed out from the same graduate college. ‘This couldn't be a coincidence, could it?’, he said to himself. Aniket was startled when he heard this. On investigating this issue further, they found that 40 per cent of the employees both transcriptionists and team leaders were caught in this web, i.e., ‘fake CV scam’. Their CVs itself were fake—details such as educational qualification, work experience, etc. were fake and the documents submitted to the company were also fake; some of the employees had not even submitted the relevant documents. On checking he realized that some of the personal files of the employee only had the employee's CV. He could not even figure out which of the team leaders and interviewed those candidates. The candidates who were in the pipeline and awaiting an offer letter had also quoted false details.
Aniket, a distraught man, called up his senior level friends at two other professional managed transcription companies and poured his heart out to them and discussed this issue at length with them. He had hoped that the others would also be battling with the same kind of problems. But the conversations only made him realize the lack of maturity in his organizational HR processes. At the end of the conversation, when he realized the problem, he hurriedly called his senior team to discuss the problem.
Questions
What do you think is the real problem?
What is the action plan you could draw up to save Mangotech?
The greater part of the world's troubles is due to questions of grammar.
—Michel de Montaigne (1533–1592), French philosopher and writer
Grammar is the logic of speech, even as logic is the grammar of reason.
—Richard Chenevix Trench
You must be wondering what the relationship between HR policies and grammar could be—where is the connect? Let us try to figure it out! What do you reckon would happen if language did not have grammar? It is difficult to contemplate, but just try! Without grammar would there be a way to judge the quality of language, will it be possible to communicate if you and I had our own rules to construct our sentences. What would be the result? Chaos! Its quite the same if we did not have traffic rules on the road. What would be the result? Chaos! Now think of an organization where there are no rules, no standards, no norms about when one should come to work, what is one's entitlement in terms of leave and holidays—What would be the environment like?—Chaotic! … and thriving in that kind of chaos is neither easy nor advisable. The articulation of HR policies in an organizational life is akin to the use of grammar in language and the use of traffic lights on the road. Their merit, however, does not lie in being just articulated (like grammar or traffic rules) but in their effective implementation.
HR policies are systems of codified deci ions, established by an organization, to support all people-related act vities inside the organization.
11.1 DEFINING HR POLICIES
HR policies are systems of codified decisions, established by an organization, to support all people-related activities inside the organization. Since each organization has a different set of circumstances, it, therefore, develops an individual set of HR policies. A policy is a plan of action. It is a statement of intention that commits the management to a general course of action.
FOOD 4 THOUGHT
Do policies define culture or culture define policies?
Policies and culture reinforce each other! Proactive policy making can be used to build a culture or dismantle it. Consider the following two situations:
A traditional family-run organization makes a change in its travel policy. Earlier the senior management would travel business class and the rest of the employees would travel economy class. The changed travel policy requires all employees to travel economy class for a journey less than four hours and business class travel for all employees for travel beyond four hours. How will this policy affect the culture of an organization? It will help build a more egalitarian culture in the organization.
A large multinational in a competitive business has work life balance schemes in place. The policies mandate all employees to necessarily not be in the office beyond a certain hour in the evening and if employees have to stay late they have to take prior permission. However, the senior managers do not find it offensive to call their junior colleagues on the phone on a weekend or at odd hours to ask for a report to be e-mailed to them. For working late they tell their teams to send in a request which they would approve for working late in office. So in this case we see that culture prevails over the policy.
Hence policy is not the solution to all maladies of mismanagement—however, policies can be leveraged to establish healthy workplace practices.
No set of HR policies can cover every situation that might arise, though one may try to create ‘fool proof’ policies, employees will scan the polices microscopically to find loop holes in the same. By necessity, policies must contain general principles that are applied to each situation as it develops. They influence employee behaviour. If different employee behaviours are required to implement different strategies, then HR policies should systematically vary with organizational strategy (Miles and Snow, 1984; Purcell, 1989; Schuler and Jackson, 1987a, b). Yet, other external and internal factors could also influence HR policies and practices. For example, government regulations and demographics play a role in HR practices. In unionized environments labour contracts may limit the ability of organizations to tailor HR policies to organizational strategy. These potentially conflicting factors may weaken ties between strategy and HR policy. Even if the strategy/HR linkage is weak, employer policies are presumed to be closely tied to the employment contract.
11.1.1 Need for HR Policies
HR policies are required to be put in place for a variety of reasons.
To Ensure Compliance with Existing Legislation
Policies are laid out to comply with existing laws. For example, it is essential for all organizations to have a sexual harassment policy in place. Therefore, even if the organization never felt the need to have one, it will need to articulate one and formalize it to comply with existing regulations.
To Develop a Consistent Approach
Consider this—an organization has a presence all over India. Salesmen are based out of different locations and are required to travel to meet customers. The regional manager in Chennai is cost-conscious and insists that employees travel by the least expensive mode of travel. On the other hand, the regional manager at Mumbai insists on the numbers and lets their good performers use an air-conditioned cab to travel while the others have to rough it out in a bus. What do you think would be the outcome of such an approach? There will be widespread dissatisfaction in all quarters. In such a case a domestic travel policy is helpful in setting the rules clearly in a way that all employees can avail of the same entitlements.
Need for HR policies
- To ensure compliance with existing legislation
- To develop a consistent approach
- To support the general management strategy
- To introduce best practices from the industry
- To protect the organization
- Communicate values to employees
- To guide employees how to deal with various situations
To Support the General Management Strategy
HR policies can drive the business strategy of the organization. For example, policies of an organization which adopts the cost-leadership strategy will drive cost optimization. A travel policy might insist that travels should be planned in advance (so that the cheapest tickets could be availed) and discourage unplanned travel by asking for extra approvals for last-minute travel plans.
The 20 per cent time is a well-known part of the Google philosophy to encourage innovation in its peoples. It enables engineers to spend one day a week working on projects that are not necessarily in their job descriptions. They are free to use the time to develop something new and this policy has paid them rich dividends. The Google Art Project (GAP) is the result of this policy. GAP allows viewers around the world to view the interiors of a selected number of art works from their currently 17 museums across the world.
To Introduce Best Practices from the Industry
Policies are an excellent method to introduce best practices from the industry. For example, an organization might let employees take leave for community work by introducing a policy for the same.
To Protect the Organization As Well As the Employee
Policies protect both the organization as well as the employee. It reduces the risk of corporate liability or employee lawsuit. For example, a performance management policy can protect the organization from false claims by an employee of unfair removal from service. On the other hand, it protects employees from arbitrary and discriminatory actions by the management.
To Communicate Values to Employees
The design and implementation of policies are a great way of letting employees know what values and behaviours the organization welcomes as well as rejects. For example, recruitment and retention policies might outline the way the organization values a diverse workforce, learning and development policies might support this by making it mandatory for all to attend a culture, gender sensitization workshop. In fact, some organizations articulate core values of the organization in its HR policies manual for the readers to realize the philosophy which has driven the organization to articulate policies in a certain way.
To Guide Employees How to Deal with Various Situations
As the organization grows it keeps putting policies in place based on situations that it encounters so that there is a framework of understanding to deal with a similar situation in the future. An Indian company implementing projects in Saudi Arabia was faced with a situation where one of its project managers died in a road accident. It turned into a messy affair with the local government officials, scared colleagues, distraught family which could not go there (it is not easy for a woman to travel to Saudi Arabia). It was a situation which no one had earlier encountered. But after the organization had dealt with the situation, it put in place the process that operations in any country ought to have a policy on how to handle accidents and deaths when operating on foreign soil.
A policy provides generalized guidance on the approach adopted by the organization for its employees on various aspects of employment whereas a procedure is what action should be taken in line with the policy.
11.1.2 Difference Between Policy and Procedure
HR policies should be distinguished from procedures. A policy provides generalized guidance on the approach adopted by the organization for its employees on various aspects of employment. A procedure on the other hand is what action should be taken in line with the policy. HR policies are the most complicated ones to establish; they are also the most important. Policies identifying acceptable behaviour and the process to be followed in remedying inappropriate conduct or situations have saved many employers from costly lawsuits or damage claims (while the lack of those policies has doomed others to a costly fate). Every company needs to get the documentation in place, so in times of trouble one would know how to handle requests or challenges under these particular rules.
Another term which gets used for procedures in the organizations today is ‘Standing Operating Procedure’ or SOP. This refers to an organization's unique procedures, which are not standard to any other organization.
11.1.3 Characteristics of Policies
HR policies should have the following characteristics:
- They should be linked to the business strategy and in fact, drive it through all the people processes.
- All HR policies should complement one another, so that they work in tandem to achieve organizational objectives.
- They should be able to adapt to the situation and also to employees.
- They should be open and transparent.
- They should be aligned with the culture of the organization.
- They should be developed with the involvement of employees.
- They should be communicated to all employees in a way that they understand and appreciate the policies and their link with the business strategy and the core values of the organization.
- They should be easily understood, containing no jargon so that all employees are able to understand it without difficulty.
- They should be accessible to all employees.
- They should be practical and enforceable—with logical implementation.
- They should be supported by managers—including the support from the senior managers.
11.1.4 HR's Role in Policy Formulation
The entire accountability of the design and implementation of HR policies falls under the purview of HR. This, however, does not mean that others in the organization are not involved. In fact, the leadership of the organization is responsible for giving direction to the articulation of people processes and senior managers have to contribute with their rich operational perspective while HR acts as the conscience keeper of the organization keeping the interests of the employees at heart. Tactically, the HR department is responsible for:
- Developing policies and communicating them to all employees.
- Providing all the forms and documents required for policy implementation.
- Reviewing, adding, deleting or revising policies to ensure that they remain at par with legislation or company needs.
- Interpreting policies, ensuring that they'are applied fairly and equitably throughout the organization.
- Assisting managers in applying policies to work situations such as hiring new employees, conducting performance appraisals or disciplining subordinates.
Process of designing policies
- Articulate the organizational people philosophy
- Gather information
- Develop and write the policy
- Obtain management support for the policy
- Obtain legal view
- Implement the policy
- Decide on communication plan
- Interpret and Integrate the policy
11.2 PROCESS OF DESIGNING POLICIES
When one reads a policy document it looks like a simple document and quite obvious in its contents. Such a simple policy is worthy of respect. However, to design a policy which encompasses all aspects of the issue at hand and still is simple is a very difficult task. A good policy formulation has to always go through a defined process. Figure 11.1 is a pictorial representation of the entire process.
Figure 11.1 Process of designing policies
11.2.1 Articulate the Organizational People Philosophy
The first step to form any kind of policy is that the organization needs to be clear on how it wants to manage its people. This is an important part of the HR strategy of the organization. It is not enough to think or believe that all organizations want to treat their people well and that this can be said to be the people philosophy. A people philosophy is a much broader view on how an organization treats its people. ‘Employee First, Customer Second’ is the people philosophy of HCL Technologies. A well-articulated people philosophy becomes the guiding beacon when policies are being written out.
11.2.2 Gather Information
After the philosophy has been articulated, information has to be gathered on what all areas policies are required. One way to look at is looking at all functions of HR such as recruitment, selection, employee induction, compensation etc. and list out all policies which might be required. On the Internet there are scores of checklists to ensure that you do not miss out any. Another important thing to remember is that other than those required by the law statutorily it is not essential for all organizations to have all policies. Policies should be reflective of the business that the organization is in.
Often organizations have a policy framework but certain situations need either redefining or framing new policies. For example, if the actions of employees indicate confusion about the most appropriate way to dress when making a client presentation or at a office informal get together, then a dress code is required. Another example is the widespread use and abuse of social networking at the workplace. This has forced organizations to formulate polices on personal use of mail and internet at work.
Views in the News
Some organizations maintain a carefully crafted policy (written or unwritten) on office relationships. They range from encouragement to discouragement to no policy at all.
Aptech encourages married couples at the workplace.
SAP Labs in Bengaluru has an internal portal which carries matrimonial. It, however, does not allow a relative to report to one another.
At HCL Technologies, if two employees get married they are gifted with a gift cheque and the company also has a portal ‘genie’ that helps employees, especially married couples find homes, trade white goods and concierge services in case they are moving house.
At Intel Corporation, Bengaluru, there is a ‘non-fraternization’ guideline. As per this guideline no romantic relationship is permitted by managers with anyone in their direct, indirect or matrix management chain.
Companies are also aware that an office relationship which goes bad can land up as a harassment case. Therefore, organizations have a sexual harassment committee in place and make sure that employees are made aware as to what constitutes and what does not constitute as sexual harassment.
Source: Adapted from Shreya and Sulekha (2011).
11.2.3 Develop and Write the Policy
Organizations should draw out a template in which all policies have to be written. A general template includes the following:
- Objective of the policy
- Scope of the policy—who does it cover, exceptions, if any
- Policy description in detail
- Procedures explained
- Responsibilities
- Forms to be used
A good practice for the author of the policies after each policy has been written out, is to ask ‘what if’ questions to make certain the policy covers the basics and the normal exceptions and questions. However, one should not be obsessed with this because no policy ever covers every possible contingency. This is the very reason why refining the policies at regular intervals is very important.
It is a good idea to select several employees, or even a small pilot group, to read the policy and ask any questions they might have about the policy. This review provides feedback whether employees will be able to understand and follow the policy. HCL Technologies uses an opinion survey to gather feedback from its employees about policies during the formulation stage.
Field Guide
Template of a Policy Document with Illustrations
A Policy and Procedure Format
There can be tons of formats that can be drafted for HR policies. This is a typical traditional—‘old fashioned format’. We have covered one sample format for your ready reference.
Major Elements of the Format
The HR policy should begin with a heading that provides basic nomenclature. The heading may not have a number. The other major elements are as follows:
Policy statement
Scope
Accountability
Definitions
Forms
Procedure
References
Approvals
Heading
A typical heading includes the HR policy's title, a reference number, its effective date and its edition or revision. This is generally done in the ‘header’ of the document and page number in the ‘footer’ of the document.
Title
The title is the general subject matter of the HR policy.
Number
A reference number is normally assigned to each policy. It could be either a consecutive assigned number for referral purposes, such as 001 or 100 etc. If there are several functions within the organization issuing policies, the reference number may reflect the various functions. Versions would also include policies that may apply to separate locations or functions of the organization.
The heading generally appears at the top of the first page of the policy and procedure. However, some organizations place the heading, or an abbreviated version of it, at the top of every page of the document.
For example:
Title: Time and Attendance Policy |
Number HR 007 |
Effective Date: August 2011 |
Edition: Fifth Revision |
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It is the policy of the organization for all employees to report for their scheduled work in a timely fashion unless unavailable due to a reason beyond their control.
The policy statement may also have several elements.
Scope
This policy and procedure applies to all employees of the organization at all locations. (The policy statement may have sub-elements, beginning with a definition of its scope. It identifies the employees and locations of the organization that are covered by the policy. In many organizations, almost all policies apply to all employees at all locations, but that may not always the case.)
Accountability
3.1. Employees
Employees are accountable for reporting to work at 9 a.m., i.e., scheduled starting time and remaining through their scheduled work day till 6 p.m., unless unable due to reasons beyond their control.
Employees are accountable for notifying the person to whom they report to about their unavailability and the reason for their absence.
3.2. Managers and supervisors
If an employee exceeds the allowable number of tardiness and/or absences, or is unavailable for work for an extended period, or fails to notify the manager, then the manager or the factory manager is accountable for taking preliminary action and then notifying the respective HR managers.
(Accountability would refer to implementation, administration and performing of the policy.)
Definitions
4.1. The following definitions apply to the interpretation and implementation of this policy:
Absence. An employee not being at work for an entire workday as scheduled.
Tardiness. An employee not being at the assigned work-station at the scheduled time.
Scheduled Starting Time. The time determined by the employee's supervisor/manager at which employees are to be at their work-stations ready to begin work.(Any definitions unique to the policy, procedure and terms that require specific definitions should be included.)
Forms
5.1. Employee's Report at Absence
5.2. Employee Attendance Record
(Not all policies may require forms.)
Procedure
6.1. The steps of implementation are spelt out. At times there could be a policy that covers several topics. Each topic becomes a subsection. For example, a policy and procedure covering length of service may only have a single procedure, but a policy and procedure covering recruitment may have subsection on method of sourcing-recruitment advertisements, job sites, recruitment firms and so on.
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7.1. Discipline policy
Often a policy has a relationship with one or more other policies. For example, a policy and procedure covering absenteism of employees may require elements from a policy on leave practices.
Approvals
Approved by:
Approval date:
Director—Personnel
15 July 2011
Revision: Five
Replaces (earlier version): 15 July 2010
The last section records the approval of the policy. It includes who approved it, when it was approved, the revision number, and the date of the edition the revision replaced.
11.2.4 Obtain Management Support for the Policy
The policies then should be discussed with senior managers to check that all policies are aligned with the larger business strategy of the organization. A good way could be to have a representative group of senior managers go through the policy and ask questions and give feedback which could be incorporated into the policy (Figure 11.1).
11.2.5 Obtain Legal View
It is important that the policy makers seek the view of a legal expert to check if all policies are compliant with law. An Indian multinational organization may customize policies used in its Indian operations to American use. However, it is important to check that all policies are compliant with the legal environment in the United States to protect the organization against any non-compliance.
11.2.6 Implement the Policy
Implementation of the policy will include understanding of the policy, by all who are a part of the process in implementing it, as well as the employees to whom the policy would be applicable. It is always advisable to have documentary evidence that the employee has read and understood the policy. This could be done on a piece of paper with the employee sign off on a second sheet. Employees can sign off that they have received and understood the policy, yet retain a copy for their own files (Figure 11.1). A sample signoff statement to use could be:
I acknowledge receipt of an understanding of the policy. The policy is effective (date) until further notice.
_________________________________
Employee signature
Where policies are put on the company intranet an electronic acceptance can be also implemented.
11.2.7 Decide on Communication Plan
New policies ought to have a dedicated communication drive to make it understood by all. On an ongoing basis it could be included in the employee handbook and employee intranet.
11.2.8 Interpret and Integrate the Policy
Policies should be flexible and responsive to change. For this the company should have a process to review policies on a regular basis or be open to any changes which employees or managers might suggest. There could be a policy review group which these suggestions could be directed to. The policy review group can be a group formed by employee representative, HR and management representative. It is also advisable to archive and date former policies that any policy replaces. It might be required for legal or other reference in the future.
FOOD 4 THOUGHT
Policies Responsive to Times
In 1974, an angry Sudha Murthy had to write a letter to JRD Tata to protest against job discrimination against women in Telco. Today, most Indian companies are committed to providing equal employment opportunities for all.
More than 35 years later things have changed. Now Indian corporates are doing their bit to retain the women workforce for all obvious reasons. India's rate of female participation in the labour force is 34.2 per cent and is the lowest in the BRIC countries. Google Inc. has taxis on call for employees, a particular draw for women who may need to rush home to take care of the sick, elderly or children.
Wipro runs on-site camps during the school holidays in spring. Infosys offers its female employees sabbaticals, extended maternity leave and enhanced training when they come back to work. Ernst & Young involves the families and has parents and in-laws come to see the work place and meet their managers.
Source: Adapted from ‘Google, Infosys Fight “Daughterly Guilt” to Lure Indian Women’, The Economic Times, 9 March 2011.
HRM in Action
Office Tiger implemented the career planning and growth policy to stem attrition (8 per cent annual attrition). Based on the policy the employees who were just ‘call answering specialist’ could rise to a financial analyst or a research professional or any other role that they were interested in.
Wipro Spectramind offered select employees an MBA course at Symbiosis Institute. Around 180 employees opted for this course. There was a catch to this—if the employees left the organization mid-way, they would have to leave the course too. In this way career planning policies not only figured out career paths of employees but also helped to retain the employees.
11.3 MEASURING HR POLICIES
During the last few years there has been a growing importance of measuring the effectiveness and efficiency of HR in quantifiable terms. HR has now become accountable for strategic action plans, budgets and results. Hence, companies need to design a way to measure all of this. In a recent publication entitled ‘Management Accounting Guidelines: Human Resources—Accountability’, authored and distributed by The Society of Management Accountants of Canada, several measures for all HR functions are provided.
For example, measures associated with the recruitment and selection function are:
- staffing forecast accuracy
- recruitment response time
- recruitment success rate
- cost per hire
- quality of hire
- retention rate
- compensation structure maintenance
- cost of benefits
- turnover rate
Global Perspective
HR policy can be a challenging subject in the global workplace.
International organizations usually have a broad policy framework for the entire organization which outlines the core values, and people philosophy of the organization. Based on this broad guideline, country-specific policies are drafted as per the requirements of local business and the local people.
However, it is not as easy as it sounds. Consider this situation. In a multinational organization headquartered from India, a sales planning meet was organized in Mumbai. All sales professionals from all over the world had to come over to discuss the plan for the coming year. The conference was organized in a large five star hotel in the suburbs. The hotel stay entitlement for many of the sales executives was not five star hotel, but the conference organizers for reasons of convenience (that everyone stay in the same hotel) got the sales people to occupy the rooms on a twin sharing basis. Corporate HR insisted that people from other subsidiaries should also be housed on a twin sharing basis in the rooms. Corporate HR did not think it important to consult the country HRs for (what they thought) was such a small thing as room allocation. But when all had arrived this became a big issue. Employees from the developed countries refused to share rooms as they found the whole idea not acceptable at all. Their country travel policy had specified limits for different levels and single room hotel tariff was affordable. In the end, they were allocated single rooms, most of the Indian staff got accommodated in double rooms, some checked out in a huff to go and stay with their relatives in protest of this seemingly discriminatory treatment. The quandary that corporate HR was in was how to maintain parity between different subsidiaries. In such issues lies the challenge in policy formulation in the global environment.
Similarly, there are a host of metrics which are worked out for different HR functions and the measure is a feedback for how well the organization is faring and inputs from them are taken to tweak policies.
11.3.1 People Capability Maturity Model
One way of measuring capability of HR policies and processes is using the People Capability Maturity Model (PCMM) framework. PCMM is a wonderful tool to check the alignment of HR processes to organizational strategy. It also offers a roadmap for implementing workforce practices that continuously improve the quality of an organization's workforce. The standard classifies organizations into five categories: Level 1 to Level 5 as shown in Figure 11.2.
Each level can be broadly understood from the nomenclature:
| Level 1: | Initial—Inconsistent management |
|
Establishing repeatable practices would take an organization to Level 2. |
Level 2: |
Managed—Work unit management |
|
Establishing standardized best practices would take an organization to Level 3. |
Level 3: |
Standardized—Business line management |
|
Establishing quantitatively managed practices would take an organization to Level 4. |
Level 4: |
Predictable—Capability management |
|
Establishing continuously improving practices will take an organization to Level 5. |
Level 5: |
Optimizing—Change management |
Figure 11.2 shows the levels in PCMM and Figure 11.3 explains the PCMM architecture.
Features of the standard:
- For guiding the progress of an organization the standard outlines 22 work processes (as outlined in Figure 11.3). Each level has certain defined process areas. For example, process numbers 1–6 have to be put in place for Level 2. These processes form the foundations for processes at the higher level.
- Each process area has 3–5 goals which have to be achieved.
- The achievement of goals is measured by institutional processes which prove:
- The organization's commitment to perform: Commitment to perform describes the actions the organization must take to ensure that the activities constituting a process area are established and will endure. This typically involves establishing organizational policies, executive management sponsorship and organization-wide roles to support practices to develop workforce capability.
- The organization's ability to perform: Ability to perform describes the preconditions that must exist in the unit or organization to implement practices competently. This typically involves resources, organizational structures and preparation to perform the practices of the process area.
- Measurement and analysis of practices performed: Measurement and analysis describe measures of the practices and analyses of these measurements. These typically include examples of measurements that could be taken to determine the status and effectiveness with which the practices performed have been implemented.
- Verification of implementation: Verifying implementation describes the steps to ensure that the activities are performed in compliance with the policies and procedures that have been established. This typically encompasses objective reviews and audits by executive management and other responsible individuals.
Figure 11.2 Five levels of PCMM
Figure 11.3 PCMM architecture
Lets us understand with the help of an illustration.
Illustration
For Level 2 one basic work process to be set is ‘Staffing’.
The Goals of Staffing are outlined as follows by the standard:
Goal 1: |
Individuals or workgroups in each unit are involved in making commitments that balance the unit's workload with approved staffing. |
Goal 2: |
Candidates are recruited for open positions. |
Goal 3: |
Staffing decisions and work assignments are based on an assessment of work qualifications and other valid criteria. |
Goal 4: |
Individuals are transitioned into and out of positions in an orderly way. |
Goal 5: |
Staffing practices are institutionalized to ensure they are performed as managed processes. |
The achievement of goals is measured by institutional processes which prove:
The organization's commitment to perform: This is what the standard interprets as commitment shown by the organization.
The organization's ability to perform: The standard outline that, within each unit, each individual is assigned responsibility and authority to ensure that staffing activities are performed.
Measurement and analysis of practices performed: Responsible individuals plan and coordinate the staffing activities of their units in accordance with documented policies and procedures.
Verifying implementation: Measurements are made and used to determine the status and performance of staffing activities. Examples of measurements may include percentage of commitments met.
Thus, People CMM serves as a guide to measure the success of HR policies in the organization.
Source: Adapted from ‘People Capability Maturity Model—Version 2’.
Trail Blazers
TCS was the first company in India to implement PCMM. In 2001, the HR processes of TCS were subjected to audit and four centres of TCS were assessed at PCMM Level 4 (version 2.0). The assessment was carried out by Bill Curtis who had pioneered this concept. Phiroz Vandrevala, Exec. VP (Corporate Affairs) at TCS said, ‘When we looked at PCMM, the whole issue was that employees are key resources in our business. Previously, the subjectivity in terms of how you deal with employees was simply based on one criterion: how well you pay the employees. There was no bias of evaluating how well you treat them. PCMM is more about how you treat employees and does one have a fair method of compensating employees. It tries to address that based on a person's performance’. By August 2004, TCS achieved the PCMM Level 5.
Application Case
Microsoft India's HR Policies
Background
In 2008, Microsoft India Corporation Pvt. Ltd (Microsoft India), the Indian subsidiary of Microsoft Corporation was ranked as no. 1 in the list of the best companies to work for in India. Surveyed jointly by Business Today and TNS Global. It was also believed to be one of the most sought after companies for information technology professionals in India. Right from its beginning in 1975, Microsoft had been an innovator in computer software and related services. Its product portfolio included the Window series of operating system, software for clients, the very famous MS Office, games and software for mobile phones etc. It started its Indian operations in the year 1990, setting up Microsoft India in New Delhi. Later, it expanded its footprint in India by bringing all its main units of business into the country.
HR Approach
For more than a decade, hiring of IT workforce has been a challenge for almost all companies that have set their hub in India. They came with the intention of taking advantage of low-cost, technically competent labour present here, compared to the European and the US markets. As a result, there arose a huge demand for skilled labour in this sector and hence, many companies had to develop a strategic HR approach to retain and manage talent. Microsoft India had very friendly HR policies and practices all across in locations. Excellent in execution of policies was to be one of the main pillars on which the foundation and growth of HR relied upon.
HR Policies: Recruitment, Selection and Induction
According to their recruitment and selection policy they recruited freshers and experienced professionals from campuses. Their selection included a written test and couple of rounds of personal interview. They used to visit high -ranked educational institutions such as IITs and it was one of the most sought after brands for the brightest professionally qualified students of India. For experienced professionals, they scouted for candidates and conducted at least a minimum of four rounds of interviews—which included technical and HR interview too. They focused on those candidates that had sound computer science basics, sharp applications in creating superior-quality software and those that had the ability to understand technology. They also conducted special recruitment drives for women. For induction, they had a formalized structure and a ‘buddy’ ‘assigned’ to each new recruit to help them to apt to the company's culture.
Training and Development
They had a very robust training policy titled ‘Leap Engineer Acceleration Programme’ (LEAP), which imparted personal and technical skills required to carry out the job. It also had a mentoring system that helped the employees in seeking guidance from their mentors through an interactive learning process. They also conducted tons of technical and management training programmes, and also encouraged job rotation. The company also identified young and bright professionals with strong leadership potentials and prepared them for various leadership roles ahead. Their employee development measures helped to retain employees by providing employees for growth.
Career Management
They provided for both lateral and vertical growth for all its employees. Their career management policy permitted employees to move between various business units according to their area of interest. They were also exposed to other business units by way of mentoring from senior professionals of Microsoft worldwide.
As indicated earlier their policy on women's empowerment organized ‘The Microsoft One India Women's Conference’, which was held annually for all women employees. It provided them a platform to share their experiences in overcoming hurdles in their career growth path and in establishing work–life balance.
Flexible Work Timings
They had a flexible work timings policy for its employees. They worked according to their convenience. Hence, they succeeded in infusing a sense of discipline in its employees. This also served as a retention scheme for employees.
Compensation and Benefits
Their packages were at par with or higher than the industry standard. Their compensation policy included plenty of benefit programmes which were evaluated twice a year too. Their benefit programmes included: professional counselling and support services for employees and family members, crèche reimbursements for women employees, assistance programmes in case of emergency and tuition assistance programmes which included financial assistance to meet tuition expenses.
Performance Management
They had a very candid policy for evaluating performance of employees. They followed a transparent process, so as to enable employees to identify their performance levels and realize exactly what it takes to reach to the next level. They identified high performers and offered them monetary as well as non-monetary rewards, ACE awards (Architects of Excellence) were given to those that contributed to customer satisfaction. Every quarter, a group of high performers were invited to share their experiences with a larger audience.
Work–life Balance
‘Bring Your Child to Work’ was one of their policies on work–life balance and this was done to improve work–life balance among its employees. This programme was a family-friendly HR policy—where more than 500 children across various locations participated in the programme.
Employee Retention Initiatives
Since they had a high level of career growth, they did not face a high level of attrition. Their policy on reward and recognition was also robust and thereby they strived to create an enjoyable workplace along with satisfying compensation packages. The policy also had an ‘Employee Value Proposition’ (EVP) that articulated what the company offered to its employees. Some of the needs were: enjoying each day, working in an energizing environment, employee-friendly benefits, recognizing great work, building career for life etc. They also launched a programme called ‘You and Microsoft, Living the Experience Together’. This programme needed employees to work on cutting edge technologies, work with teams from the USA in producing new products. It also provided a fun workplace with recreational facilities such as X-Box, video gaming and other relaxation activities.
HR Metrics @ Microsoft India
Metrics were developed to define and track effectiveness of the HR function at Microsoft India. They tracked performance of HR practices in order to assess the return on investment (ROI) from various HR initiatives and then compared them against the investment made.
The two important metrics they devised were the ‘Succession Planning Indicator’ (SPI) and ‘Succession Planning Usage’ (SPU). SPI indicated employees who were ready to take lead roles and those who were one step away from taking lead roles. SPU indicated the percentage of leadership position filled with those of the list of succession plans. The first was aimed at measuring the organizational preparedness to run the business without interruptions and the second was to measure the organization's efficacy in utilizing such plans while filling up the gaps in the lead positions.
At Microsoft, they measured all critical people metrics. They can be categorized as:
Organization: Size of the organization, the number of positions that are vacant, line HR and function ratios.
Organizational Health: Workgroup Health Index, Microsoft Pulse Index, Microsoft Culture Index.
Staffing: Hiring statistics—types of hires, source and channel-wise hiring, internally closed positions, the amount of expenditure spent on hiring, lead time, percentage of hiring plan, offer/acceptance rates, reasons for offer decline.
Talent Management: Quarterly and annually tracking systems, reasons for attrition, percentage of retention of high positions and promotions and usage.
Diversity: Ratio of women hired vis-à-vis set targets, percentage of women talent losses, reasons for attrition, percentage of women in leadership succession pipeline, percentage of managers and employees completing the Microsoft diversity training programmes, percentage of other hiring—differently abled employees.
Manager Capability: Span of control, organizational depth, percentage of managers to non-managers.
Learning and Development: Field Readiness Index, number of employees trained on development programmes, number of managers trained through management excellence framework.
Leadership Development: Percentage of leadership hires, percentage of leadership attrition, succession planning index.
Rewards: Percentage of annual budget used on rewards and recognition programmes.
Compensation: They also run market surveys to ensure competitive positioning on compensation.
Source: Adapted from Shankar and Ramalingam (2010).
Questions
Identify and make a list of all policies that Microsoft put in place.
What is the EVP (employer value proposition) of the company? How do you think the HR policies have helped Microsoft India to feature in the list of ‘Best Companies to Work for in India’?
In a NUTSHELL
- HR policies are systems of codified decisions, established by an organization, to support all people-related activities inside the organization.
- We need policies to ensure compliance with existing legislations, to develop a consistent approach, to support the general management strategy, to introduce from the industry, to protect the organization, communicate values to employees and guide employees how to deal with various situations.
- The difference between policy and procedure is that while a policy provides generalized guidance on the approach adopted by the organization towards its employees on various aspects of employment, a procedure is what action should be taken in line with the policy.
- For designing HR processes the organization has to first articulate the organizational people philosophy, gather information and then develop and write the policy. Written policies should be shared with legal experts to check their legal compliance. It is a good practice to involve employees too. The policy should be implemented and communicated to people by HR.
- An HR policy may contain objectives of the policy, scope of the policy, policy description in detail, detailed procedures, responsibilities and the different forms to be used.
- The PCMM framework assesses organizational processes and then rates them on a scale from Level 1 to Level 5. The framework assesses organizations on its ability to develop capabilities, build teams and a team culture, performance management of people and shaping of its workforce.
Drill Down
- ‘How to develop essential HR policies and procedures’, by John H. McConnell, Amacom. This book details about step by step method to develop HR policies and procedures in an organization.
- ‘The Chief HR Officer: Defining the New Role of Human Resource Leaders’ by Patrick M. Wright, Jossey Bass. This book is a guide as to what is happening to the field of HR through the eyes of those in charge of it.’
Field Guide
Sample Checklist of Policies
The list in each company could be exhaustive and it is impossible to list down all the policies that any company may have. Here is a checklist which could be used to decide which all policies an organization needs to frame.
1. Recruitment and selection policy
1.1. Recruitment policy
1.2. Selection (written tests/tele or personal interviews)
1.3. Employee referral scheme
1.4. Internal job postings
1.5. Employee re-hire
2. Induction policy
3. Work-related policy
3.1. Identity cards
3.2. Work hours (Corporate Office/Head Office/Branches)
3.3. Attendance
3.4. Time off (policy for late-in/early departure)
3.5. System of time-office and on-duty regularization/leave regularization
3.6. Communication
3.7. Compensatory off
4. Work norms policy
4.1. Location and duties of employment
4.2. Equal opportunity
4.3. Absenteeism
4.4. Dress code
4.5. Workstations
4.6. Personal records/information
4.7. Use of computer
4.8. Use of internet and e-mail
4.9. Confidentiality agreement
4.10. Outside employment
4.11. Conflict of interest
4.12. Outside causes and political activity
4.13. Related employees
4.14. Gifts and gratitudes
4.15. Financial controls and records
4.16. Safety
4.17. Security checks
4.18. Smoking
4.19. Policy against sexual harassment
4.20. Working at home
4.21. Violations of work rules
4.22. Disciplinary action
4.23. Grievance handling
4.24. Accidents
5. Compensation and benefits policy
5.1. Grade structure
5.2. Salary structure
5.3. Loans/financial assistance (personal loans/education grants etc.)
5.4. Insurance (group mediclaim, personal accident)
5.5. PF/gratuity
5.6. Retirement benefits
6. Performance evaluation policy
6.1. Probation and confirmation
6.2. Performance evaluation process
7. Learning and development policy
7.1. Training philosophy
7.2. Mandatory training
7.3. Soft skills training
8. Work life benefits
8.1. Company car
8.2. Mobile phone
8.3. Laptop
8.4. Company housing
8.5. Club membership
9. Rewards and recognition policy
9.1. Employee suggestion programmes
9.2. Employee recognition programmes
9.3. Promotions
9.4. Fast track programmes
9.5. Performance bonus and incentives
10. Time off from work
10.1. Leave
10.2. Holidays
11. While on work
11.1. Local official travel
11.2. Outstation (within India) official travel
11.3. International official travel
11.4. Relocation/transfer/deputation
12. Separation policy
12.1. Resignation
12.2. Notice period
12.3. Exit formalities
12.4. Exit interview
12.5. Retirement
12.6. Dismissal
12.7. Redundancy
13. Forms directory
13.1. Manpower sanction form
13.2. Travel entitlements
13.3. Expense reimbursements
13.4. Personal loan form
13.5. Training nomination form
13.6. Exit-interview form
13.7. Group mediclaim policy
Field Guide
Detailed Policy (An Illustration)
Sample table of contents of a performance management policy of an organization?
General
What is the purpose of this Standard Operating Procedure (SOP)?
Am I covered by this SOP?
What are the rating official's responsibilities?
What are the reviewing official's responsibilities?
What is the role of HR?
Who is my rating official?
Who is my reviewing official?
What is the appraisal period?
What is the minimum appraisal period?
Can my rating official extend my appraisal period?
How does my rating affect other personnel decisions?
Preparing and issuing a performance plan
What is a performance plan?
How is my performance plan documented?
What criteria must performance standards meet?
What are the timeframes for establishing performance plans?
What should I do if I don't have a performance plan in place?
Who develops performance plans?
How does my rating official revise my performance plan?
Monitoring performance
What is a progress review?
When is a progress review held?
How do rating officials document progress reviews?
Preparing and issuing a rating.
Are there different types of ratings?
Does the organization prescribe a forced distribution (quotas) of ratings?
Recognizing and rewarding
How would my supervisors recognize and reward employee performance?
What types of performance awards does the organization have?
What is the procedure for recommending and approving?
How does the organization ensure that awards are equitably distributed?
What happens to the award recommendation after the approving official signs it?
Who obtains approval for awards exceeding the respective authority of approving officials?
Others
What happens if my performance is minimally successful?
Can my supervisor delay my within-grade increase rather than deny it?
Can I have an HR or another employee representative present when my supervisor counsels me about my performance?
What if my deficient performance is due in part to medical and/or personal problems?
What is the procedure for removing me from my position after failing a performance improvement plan (PIP)?
What is the role of the deciding official in an adverse action?
Can I appeal, grieve, or dispute a reduction in grade or termination action for unacceptable performance?
How do I file a grievance or dispute?
Review Questions
- What does an HR policy mean? What role does it play in the HR strategy of the organization?
- Are policy and procedure the same? What is the difference between them?
- Describe the process of design and implementation of HR policies in an organization.
- How does an organization measure the effectiveness of its HR policies?
Exercises
- Infosys implemented a tool called iRACE which was a performance and career management tool. Due to certain reasons the employees were very disgruntled and went online in saying and writing many unkind and at times untrue things about the organization. Many organizations have faced the brunt of the internet in different cases. What kind of a policy do you think organizations could put in place to tackle such situations?
- Choose an industry between four of your classmates and find out about the HR policies of that organization. Compare your findings and present it to the class.
- Many organizations are troubled by the number of hours employees spend on social networking sites. Discuss this problem with your friends and write a policy to address this issue.
- Given below is an extract from ‘Quality Management Systems: Requirements of “ISO 9001 2008 Standards”’. This extract deals with the requirements on the Human Resource piece of the quality systems. After reading this extract make a list of all the policies and procedures you would identify to be designed and implemented to fulfil the requirements of this standard.
6.2 Human Resources
6.2.1 General
Personnel performing work affecting conformity to product requirements shall be competent on the basis of appropriate education, training, skills and experience.
Note: Conformity to product requirements can be affected directly or indirectly by personnel performing any task within the quality management system.
6.2.2 Competence, training and awareness
The organization shall
- determine the necessary competence for personnel performing work affecting conformity to product requirements
- where applicable provide training or take actions to achieve the necessary competence
- evaluate the effectiveness of the actions taken
- ensure that its personnel are aware of the relevance and importance of their activities and how they contribute to the achievement of the quality objectives and
- maintain appropriate records of education, training, skills and experience.
References
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