Rekha had joined New Designers, an FMCG company. The company had lately diversified into luxury goods for high-end users. It had opened new high-design outlets in select department stores to promote its new design products such as jewellery and home decorations. It recruited fresh MBAs from prestigious institutions like the IIMs to promote the new products. Rekha, who had been to a premier management school, was one of New Designer’s recruits. She was born and brought up in a middle-class family in Karnataka and had studied mostly in Kar-nataka and Chennai. After a two-month induction programme, she was posted in Mumbai as sales manager. She was given a target of 10 crore for the year, and three sales executives who were all local girls recruited from Mumbai by the regional manager. Rekha was quite excited about her new posting, but at the same time was apprehensive about living in Mumbai. She had done her summer placement partly in Mumbai, but, as she had been staying with a friend at the time, she had not really had a chance to experience the city. All that she knew was that she had little time to hunt around for a house, given the ambitious target. She decided to get going from day one. She approached the VP (marketing), who organized her stay in the company guest house until such time as Rekha found a house. Driven by the target, and with a high achievement motivation, Rekha started working with intense involvement. In 15 days, she was able to establish many contacts and get a feel of the market. She was beginning to feel that the 10 crore target might be easily achievable. During those two weeks, she did not think too much about her accommodation. She sounded out a few friends about exploring accommodation possibilities. She was certain, though, that the first two months on the job were going to be crucial as the festival season was approaching, and a lot of buyers would make their purchase decisions over the course of the next month. She was happy with her progress and the prospect of meeting her target.
Two weeks later, after a hard day’s work, she returned to the guest house to discover the HR chief from the head office, whom she had met only twice during her induction, waiting for her. She was surprised. As soon as he saw her, he said, ‘So you are Rekha. Who gave you permission to stay here in this guest house? It is meant only for senior officers of the company. I understand you have been staying here for the last two weeks. You should vacate the place immediately’
Rekha was shell-shocked and explained to him about the target given to her, how she was new to the city, had had no time to look for a flat and that she had been told by the secretary to the VP (marketing) to stay, as the latter had spoken to the CMD’s office. The HR head replied, ‘Your VP or CMD’s office doesn’t decide who stays here. There is a policy and we set the policies. You are not eligible to stay here. Please vacate this place within the next 24 hours’
Scared and upset, Rekha stopped working for the next few days and started hunting for accommodation. The few days she lost affected her tempo and severely damaged her motivation to achieve her targets. She felt that for the HR head, status considerations seemed to be much more important than achieving company targets. Also, the HR head had behaved as though it was not his responsibility to help managers find accommodation. Was it worth working for such a company? Nonetheless, she continued with New Designers for the next three years because the marketing chief was a very good boss and always made her and the other employees feel that they contributed a good deal to the company. Five years after she left the company, she still found the ugly incident with the HR chief deeply traumatic. She once said that if that had not happened, she might have set a new benchmark in the company’s sales turnover that year and added 2 crore more to it.
An HR research study from Yale University has established that there is a direct link between the percentage of time people feel positive emotions at their workplace and the likelihood of their continuing in the job (Goleman, et al 2002). The researchers also found that cheerfulness and warmth spread most easily. However, in Asian cultures, negativism perhaps spreads more easily. A frustrated employee can do a lot of damage to the company and to herself/himself. HR managers should always make efforts to establish good cheer, keep motivation levels high and plan effective interventions. An unscrupulous and insensitive HR manager can do more damage than good to the human resources of a company.
HR managers have various sources of power. These include:
A good HR manager draws power from her/his own work and accomplishments, the extent to which she/he has been able to empower the line managers, the extent to which she/he has contributed to the CEO’s effectiveness, and the extent to which she/he has been able to empower employees and the HR department as a whole, and make them indispensable.
In an article entitled ‘Why we hate HR?’ Keith Hammonds (2005) outlines four reasons why HR departments are disliked. These are:
To get HR to contribute, Hammonds suggests the following:
The era when technology, finance and systems gave firms a competitive advantage has come to an end. All these are more easily available than before and in some cases available in abundance. What is not available as easily are competent people. In the absence of competent people, those who are responsible for procuring them, maintaining them and multiplying them become a strategic resource and give a firm its competitive advantage. Hence, competent people and HR departments are becoming strategic and critical. This should explain the ever-increasing compensation in the Asia Pacific region. In fact, Asian managers are in demand everywhere, and the West has recognized their competencies as much as they have recognized the market opportunities in the Asia Pacific region.
What makes an HR manager such a strategic resource?
What are the roles that HR managers are expected to perform, to become strategic resources? What are the competencies needed to perform such roles?
In this section, we shall discuss some key theoretical frameworks of HR.
In 1975, L&T appointed two consultants from IIM Ahmedabad to study the performance appraisal system and make recommendations for improving it. The two consultants studied the existing system through interviews and suggested a new system. In the new system, ‘… performance appraisal, potential appraisal, feedback and counselling, career development and career planning, and training and development get distinct attention as unique parts of an integrated system, which we call the human resources development system’ (Pareek and Rao 1975; 1998: 24). This system was proposed as a separate one with strong linkages with the personnel (human resources) system. Pareek and Rao, in their second report of the human resources system at L&T, recommended that the personnel function be viewed as human resources function (HRF), and suggested a trifurcated function: personnel administration, HRD and worker affairs. Further, adding organization development (OD) to the HRD function, the consultants recommended that ’Since OD is being added now, it is necessary to strengthen that part of HRD. We therefore recommend that the company may appoint a manager (OD) with two officers to do a lot of research work, which will soon start (Pareek and Rao 1977: 139).
The consultants distinguished HRD from the other components of HRF, and also integrated the components of HRF structurally and system-wise. Structurally, HRD was to be a subsystem of HRF and the integration of this with the other two subsystems (personnel administration and worker affairs) was to be done by the person at the director level, for example, vice-president (personnel & HRD), through task forces and subsystem linkages. Inter-system linkages were outlined between various HRD subsystems to build an integrated system. Pareek and Rao also outlined a philosophy for the new HR system. They outlined 14 principles to be kept in mind when designing the HRD system. These principles dealt with both the purpose of HRD systems and the process of their implementation (Pareek and Rao 1975).
In sum, the integrated HRD systems approach of Pareek and Rao (1975) has the following elements: (a) separate and differentiated HRD department with full-time HRD staff; (b) six HRD subsystems, including OD; (c) interlinkages between the various subsystems; (d) fourteen principles of design; and (e) linkages to other subsystems of HRF. After L&T accepted these recommendations in full and started implementing them, SBI, the single largest Indian bank, and its associates decided to use the integrated HRD systems approach to create a new HRD department. A large number of organizations in India have since established HRD departments.
As HRD came into prominence between 1995 and 2000, other frameworks and models came into existence. Some of these are briefly reviewed here.
Strategic HR framework The strategic HR framework, formulated by Ulrich and Lake (1990), aims to leverage and/or align HR practices to build critical organizational capabilities that enable an organization to achieve its goals. This framework offers specific tools and paths to identify how a firm can leverage its HR practices. Business strategy, organizational capabilities and HR practices are the three important elements in this framework. Dave Ulrich (1997) presents a framework for HR professionals in terms of four key roles: (a) management of strategic human resources; (b) management of the firm’s infrastructure; (c) management of employee contribution; and (d) management of transformation and change. The activities for managing strategic human resources include: aligning HR and business strategy, organizational diagnosis, re-engineering organization processes, shared services, listening and responding to employees, providing resources to employees, managing transformation and change, and ensuring [the] capacity for change.
The management of a firm’s infrastructure involves constant examination for improving the HR processes, the need for HR professionals to act as administrative experts to ferret out unnecessary costs, improve efficiency and constantly find new ways to do things better, and the need to undertake activities leading to continual re-engineering of the work processes. HR professionals are required to design and deliver efficient HR processes for staffing, training, appraising, rewarding, promoting and otherwise managing the flow of employees through the organization. The activities for managing employee contributions include listening, responding and finding ways to provide employees with resources that meet their changing demands. The activities for managing transformation and change include identifying and framing problems, building relationships of trust, solving problems, and creating and fulfilling action plans.
Integrative framework The integrative framework offered by Yeung and Berman (1997) identifies three paths through which HR practices can contribute to business performance: (a) building organizational capabilities; (b) improving employee satisfaction; and (c) shaping customer and shareholder satisfaction. Yeung and Berman argue for dynamic changes in HR measures to re-focus the priorities and resources of the HR function. They argue that HR measures should be business-driven rather than HR-driven, impact-driven rather than activity-driven, forward-looking and innovative rather than backward-looking, and instead of focusing on individual HR practices should focus on the entire HR system, taking into account synergies existing among all HR practices.
Human capital appraisal approach The human capital appraisal approach, outlined by Friedman, Hatch and Walker (1998) of Arthur Andersen, is based on the belief that there are five stages in the management of human capital: clarification stage, assessment stage, design stage, implementation stage and monitoring stage. There are five areas of human capital management: (i) recruitment, retention and retirement; (ii) rewards and performance management; (iii) career development, succession planning and training; (iv) organizational structure; and (v) human capital enablers. A 5×5 matrix using these five stages and five areas could be used to evaluate and manage human capital well. For example, in the clarification stage, managers examine their human capital programmes to fit into their strategy and overall culture. They may also examine each of the areas to fit into the strategy, and so on.
HRD score card approach An approach formulated by Rao (1999) envisages that HR interventions—in order to make the right business impact—should be mature in terms of HRD systems, competencies, culture (including styles) and business linkages. A well-formulated HRD audit assesses the maturity level and appropriateness of each of the HR subsystems and HR structures, the level of competency of HR staff, line managers and top management, the HRD culture (defined in terms of openness, collaboration, trust, autonomy, proaction, authenticity, confrontation and experimentation), and the compatibility of the style of top management and HR staff with HRD culture, and the extent to which all the systems and practices result in employee and customer satisfaction. Rao outlined these as a part of the HRD score card approach.
The HR score card approach has been promoted by Dave Ulrich and his team. While most companies are aware of good financial and operational strategies, they have an extremely limited understanding of strategies for developing human capital (HRD strategies).
The HR score card approach is based on the research work and experiences of Dave Ulrich and his associates. The main points are:
The Sears story illustrates how HR, if aligned with strategy, can boost a company’s performance. When Sears was incurring losses in billions in the early 1990s, its reorganization involved making it a compelling place to shop. But to make it a compelling place to shop, the company had to make it a compelling place to work. Through an effective implementation of vision, effective measurement systems, and monitoring, Sears has been able to turn itself around in a big way.
Sears developed objective measures for each of the three compelling places (a place which focuses on vision, effective measurement and monitoring). For example, support for ideas and innovation helped Sears establish itself as a compelling place to work. Similarly, by focusing on making Sears a fun place to shop, it became a compelling place to shop. The company identified the behavioural objectives and competencies needed by employees to accomplish these goals. It created a Sears University and changed the recruitment policy, job design, performance management, and so on, aligning these parameters with strategy.
In short, for HR to create value, a firm needs to structure each of its HR systems in a way that relentlessly emphasizes, supports and reinforces a high-performance workforce.
Studies indicate that the HR practices of high-performing organizations differ substantially from those of low-performing ones. The following are the characteristics of high-performing organizations:
The PCMM approach Curtis and team (1995) developed the people capability maturity model (PCMM) for software organizations. PCMM aims at providing guidance on how to improve the ability of software organizations to attract, develop, motivate, organize and retain the talent needed to steadily improve their software development capability. The strategic objectives of PCMM are:
A fundamental premise of the maturity framework is that a practice cannot be improved if it cannot be repeated. In an organization’s least mature state, systematic and repeated performance of practices is sporadic. PCMM describes an evolutionary improvement path, from ad hoc, inconsistently performed practices to a mature, disciplined and continuously improving development of the knowledge, skills and motivation of the workforce.
It is intended to help software organizations to: (a) characterize the maturity of their workforce practices; (b) guide a programme of continuous workforce development; (c) set priorities for immediate actions; (d) integrate workforce development with process improvement; and (e) establish a culture of software engineering excellence. It is designed to guide software organizations in selecting immediate improvement actions based on the current maturity of their workforce practices. PCMM includes practices such as improving the work environment, communication, staffing, managing performance, training, compensation, competency development, career development, team-building, and culture development. PCMM is based on the assumption that organizations establish and improve their people management practices by progressing through the following five stages of maturity: initial, repeatable, defined, managed and optimizing. Each of the maturity levels comprises several KPAs that identify clusters of related workforce practices. When performed collectively, the practices of a KPA achieve a set of goals considered important for enhancing workforce capability.
In maturing from the initial to the repeatable level, the organization installs the discipline of performing basic practices for managing its workforce. In maturing to the defined level, these practices are tailored to enhance the particular knowledge, skills, and work methods that best support the organization’s business. The core competencies of the organization are identified and the workforce activities are aligned to the development of these competencies. In maturing to the managed level, the organization uses data to evaluate how effective its workforce practices are and to reduce variation in their execution. The organization quantitatively manages organizational growth in workforce capabilities, and, when appropriate, establishes competency-based teams. In maturing to the optimizing level, the organization looks continuously for innovative ways to improve its overall talent. The organization is actively involved in applying and continuously improving methods, for developing individual and organizational competence (Curtis et al. 1995).
All these approaches share a lot of common features. All of them have the following characteristics with varying degrees of emphasis:
The integrated systems approach of Pareek and Rao envisaged a separate HRD department for the effective design and implementation of HRD systems. It envisaged strategy as a starting point (as in Ulrich and Lake 1990), and therefore focused on all the systems to achieve business goals and employee satisfaction. It aimed at synergy (as in Yeung and Berman’s integrated approach), proposed the phased evolution of the HRD function (as in PCMM approach) and included most of the elements of the human capital approach.
On the basis of experience and work with HR departments in India and other countries in the Asia Pacific region, TVRLS has identified ten roles for HR professionals at senior levels. The most important of these roles is that of an intellectual capital builder (Rao 2008). The others are the leadership and managerial roles required to build intellectual capital. In organizations like Microsoft, Infosys, Wipro and TCS tangible assets constitute less than 5 per cent of the market value. About 95 per cent to 99 per cent of the market value consists of their intellectual capital. HR has a role in building intellectual capital. Doing this means aiming at long-term capital formation. This requires activities that yield long-term capital rather than those that merely produce short-term results. Unfortunately, today’s CEO is under pressure to deliver short-term results and looks to the HR manager to achieve business results rather than seeing her/him as an intellectual builder. Once the importance of long-term capital building is understood, the role of HR changes and there is likely to be a better appreciation for HR interventions that contribute to long-term capital building, such as culture capital, value capital and other forms of intellectual capital.
Based on the Indian experience and the studies by Michigan University and the Society for Human Resource Management (SHRM), the 10 competency clusters identified by TVRLS for effectively performing the discussed roles are:
Cultural sensitivity is critical in elevating the role of HR managers, as they deal with the sensitive issue of people and their feelings. The competencies required for elevating HR vary from organization to organization and from one period to another. They should be based on the following contexts:
Asian styles are different from those of the West. Some of the distinguishing features of Indian culture that have an impact on HRD competencies are:
Thus, we need to consider the requirements of the organization. It becomes difficult to apply a universal skill set. HR managers should start a self-selection process to delineate the competency requirements of the organization they join. Bodies like the National HRD Network can facilitate the process by profiling the competency requirements of different industries and, at the same time, pursuing the competency models that have universal applications.
An HRD audit of 12 Indian corporations in 2003 revealed the pathetic state of HRD implementation (Rao 2003). Table 10.1 presents a summary of the extent to which Pareek and Rao’s integrated system approach (1975) is followed in the 12 organizations. The observations are derived from various audits.
It is clear from Table 10.1 that 25 years after the integrated HRD systems approach was made available in India, it has been very poorly implemented. ‘In sum, it looks as if Indian corporations still have a long way to go in using all the principles and getting the best benefits out of HRD’ (Rao 2003). While the HRD systems approach is very simple and has been locally evolved with the help of Indian managers, it has not been well implemented because of the following factors:
TABLE 10.1 Extent to which the integrated systems approach is being followed
Element | Extent to which followed |
---|---|
1. Differentiated structure with separate HRD department and full-time staff | 1. None of the organizations has differentiated HRD structures; less than 50% have full-time HRD staff |
2. Six subsystems of HRD | 2. Only two of the subsystems implemented reasonably well: training and performance appraisal; potential appraisal, career planning and OD are weak |
3. Interlinkages between subsystems | 3. Only performance appraisal linked to training; full potential of performance appraisal not used |
4. Designed with 14 principles in focus | 4. Principles not used, though occasionally some components figure in terms of company values |
5. Linked to other systems of HRF | 5. Done by default as HRD doesn’t have a separate identity |
The following are the important prerequisites for HR professionals to use any of these models:
An assessment and development centre conducted for HR managers by TVRLS between 2003 and 2005 has indicated that some of them have a very good knowledge of the business while others know a great deal about one or two subsystems. HR functional knowledge is a significant area where young managers need to improve a lot. Most of them have been found to be subsystem managers and occasionally even leaders, rather than showing functional versatility.
More ADCs and HRD audits are needed to test the competencies of HR managers and to assess the roles and competencies needed to perform strategic HR roles. The National HRD Network is already taking steps in this direction. This is an urgent need. The future is bright for HR professionals who recognize that HR will soon come to occupy centre stage and drive everything else.
TABLE 10.2 Time allocation by 12 HR managers (in hours)
In 2002, TVRLS conducted a self-renewal workshop for 20 participants from the HR departments of some of India’s most well-known companies. The participants were all senior managers cutting across the manufacturing, service and IT sectors. At the end of the one-day workshop, the participants were required to come up with an action plan for the rest of the year. They were asked to note down some of the key activities in which they would like to invest their time and expertise in five areas of self development: change management, strategic partnerships, championing employees and administration. Table 10.2 presents their time allocation. Calculate the ROI on each category of activities by making your own assumptions on R-COT and O-COT.
Becker, B. E., Huselid, M. A. and Ulrich, D., 2001, The HR Scorecard: Linking People with Strategy and Performance, Cambridge, MA: Harvard Business School Press.
Curtis, Bill, William, E. H., and Sally, M., 1995, Overview of the People Capability Maturity Model, Pittsburgh, PA: Software Engineering Institute, Carnegie Mellon University.
Friedman, B., Hatch, James, and Walker, David M., 1998, Delivering On the Promise: How to Attract, Manage and Retain Human Resources, New York: Free Press.
Goleman, Daniel, Boyatzis, Richard and Mckee, Annie, 2002, ‘Primal Leadership Realizing the Power of Emotional Intelligence’, Harvard Business School Press, Copyright © 2002 Daniel Goleman. (see http://www.worldcat.org/wcpa/ servlet/DCARead?standardNo = 157851486X&standardNoType = 1 &excerpt = true).
Hammonds, Keith, 2005, “Why We Hate HR,” Fast Company, 1 August, www.fastcompany.com/magazine/97/open_hr.html.
Huselid, M.A., 1995, ‘The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial’, The Academy of Management Journal, 38(3): 635–72.
Huselid, M. A., and Becker, B.E., 1996, ‘Methodological Issues in Cross-sectional and Panel Estimates of the Human Resource-Firm Performance Links’, Industrial Relations, 35: 400–422.
Pareek, U. and Rao, T. V., 1975, ‘HRD System in Larsen & Toubro’ (unpublished consultancy report), Ahmedabad: Indian Institute of Management.
———1977, The HR Function in Larsen & Toubro, Ahmedabad: Indian Institute of Management.
———, 1982, Designing and Managing Human Resource, Systems, New Delhi: Oxford and IBH.
———, 1998, Pioneering Human Resources Development: The L&T System, Ahmedabad: Academy of Human Resources Development.
Rao, T. V., 1999, HRD Audit,New Delhi: Response Books.
———, 2003, Future of HRD, New Delhi: Macmillan.
Rao, T. V., 2008, HRD Score Card 2500: Based on HRD Audit, New Delhi: Sage Response Books.
Ulrich, D., 1997, The Human Resource Champions: The New Agenda for Adding Value and Delivering Results, Cambridge, MA: Harvard Business School Press.
Ulrich, D. and Lake, D., 1990, Organizational Capability: Competing from the Inside Out, New York: Wiley.
Yeung, A. K. and Berman, B., 1997, ‘Adding Value Through Human Resources: Reorienting Human Resource Measurement to Drive Business Performance’, Human Resource Management, 36(3), pp. 321–35.