2 History and Environment of HRM: Challenges of HRM, HRM Environment; Strategic HRM

Garima Jain

epgp books

 

1. Learning Outcome:

After completing this module the students will be able to:

  • To know the history of HRM.

  • To have an idea about the challenges of Human resource management.

  • Understand the Environment of HRM.

  • Have a basic idea of Strategic Human resource management.

Source: http://www.hrinasia.com/wp-content/uploads/2014/09/evolution_hr_.jpg

2. Introduction

For any organisation to function effectively, it must have resources of men (Human Resource), money, materials and machinery. The resources by themselves cannot fulfill the objectives of an organisation, they need to be collected, coordinated and utilised through human resources. Hence, Human Resource Management (HRM) has emerged as a major function in organisations.

Source: https://image.slidesharecdn.com/3atta2ihrm-140511062704-phpapp01/95/human-resource-management-8-638.jpg?cb=1399789996

3. History of HRM

As a part of subject it is important to study the history of HRM. HRM is a relatively new term, emerged during the 1970’s. Many people still refer to it as Personnel management which is its older name.

 

Studies on HR were initially guided by Taylor’s scientific management principles and then graduated through the Hawthorne studies to the behavioural school based on the theories of Abraham Maslow, Hezberg and Douglas McGregor. Kautilya’s Arthashastra states that there existed a sound base for systematic management of resources during 4th century B.C. The early adopters of HRM movement included public sector enterprises such as Bharat Heavy Electricals limited (BHEL), State Bank of India etc. Initially Indian firms had Industrial relations (IR) department. Later on Personnel and IR department were made which was part of Welfare department as its sub departments.

Significant change occurred during the period of Second World War (1936-1945). It was during this period that training became popular. Trade unions also evolved during this time. In 1948, the factories act made appointment of welfare officers compulsory in industrial establishments which are having 500 or more workers.

During the 1960’s the personnel function began to increase. Apart from welfare, labour welfare, industrial relations and personnel administration integrated into the personnel management. During the 1980’s, experts began to talk of HRM challenges and Human Resource Development (HRD). The two professional bodies “Indian Institute of Personnel Management” (IIPM) and “National Institute of Labour Management” (IILM) merged to form “National Institute of Personnel Management” (NIPM).

 

In the 1990’s the emphasis shifted to human values and productivity through people.

Various developments in the 21st century made the arrival of knowledge and IT era. Thus beginning in the 1920’s the subject of HRM has grown into a matured profession.

Table 1 – History of Human Resources

Source: http://www.creativehrm.com/hr-management-history.html

4. Challenges of HRM

 

HRM has undergone tremendous change in the past. With the ongoing changes in Human Resources Management (HRM), it is important that the HRM team be aware of the various challenges that it is facing today.HR managers are facing many challenges in present business scenario like Globalization, workforce diversity, technological advances, changes in political & legal environment, and changes in economic environment, and training & development. It is important that managers, executives and HR employees, specifically, be aware of the challenges that today’s HRM team may face. HR professional can’t afford to ignore these challenges rather they design and execute innovative ways of developing skills and competencies of human resources to prepare them to accept the emerging challenges. These challenges can be categorized according to their primary focus:

Source: https://image.slidesharecdn.com/hrm-130709071241-phpapp01/95/human-resource-35-638.jpg?cb=1373354043

4.1. Globalization

Globalization is the process of internationalization of markets, politics and legal systems called global economy at a political and economic level. It means that world trade and financial markets are becoming more integrated. Growing internationalization of business has its impact on HRM in terms of problems of competitions, attitudes, management styles, work ethics, unfamiliar laws, languages, practices etc. HR managers have a challenge to deal with more heterogeneous functions.

4.2. Workforce diversity

Workforce diversity include age, ethnicity, ancestry, gender, physical abilities/qualities, race, sexual orientation, educational background, geographic location, income, marital status, military experience, religious beliefs, parental status, and work experience.

The future success of any organizations relies on the ability to manage a diverse body of talent that can bring innovative ideas, perspectives and views to their work. The challenge and problems faced of workplace diversity can be turned into a strategic organizational asset if an organization is able to take advantage of these diverse talents. With the mixture of talents of diverse cultural backgrounds, genders, ages and lifestyles, an organization can respond to business opportunities more rapidly and creatively in the global environment which must be one of the important organizational goals to be attained. If the organizational environment does not support diversity, organisations have risk of losing talent to its competitors. This is especially true for multinational companies who have operations on a global scale and employ people of different countries ethical and cultural backgrounds. Thus, a HR manager needs to employ a “Think Global, Act Local approach” in most circumstances.

4.3. Technological advances

There is a challenging task of adapting rapid technological changes which influence the nature of work and generate obsolescence. Advanced technology has tended to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill.
New technology creates unemployment which leads to shortage of skilled manpower. Thus, technological change brings difficulties and challenges in organization.

4.4. Changes in the political and legal environment

Many changes in political and legal environment lead to creating new laws, and organisations needs to follow all these laws while doing business. It is the responsibility of Human Resource manager to anticipate the changes and prepare organization to face them without any breakdown in its normal functioning.

4.5. Changes in the Economic Environment

Changes in economic environment impact a number of factors on production like scarcity of raw materials and other inputs (including power and electricity), encouragement of the culture of consumerism, increasing consumer awareness, demand for quality products, increasing trend of inflation, and decrease in the purchasing power of rupee.

With these spiraling effects, HR Manager has to deal with ever increasing aspirations of workers for higher wages and other material benefits and mounting costs on the employee welfare and other benefits. In an inflationary economy, the resources tend to become scarce and the costs of men, machine and materials multiply.

4.6. Training and development

With the advent of new products and technologies, organisations require employees who are more skilled and knowledgeable. On the other hand, with the need to cut training costs, training itself often suffers. Yet employee’s “skill development needs” still to be addressed. Many companies are meeting this challenge by providing eLearning opportunities and on the job training that allow employees to receive the training they need without the expenses associated with travel, on-site trainers and hours away from their jobs.

These are only a few of the many challenges an HR department must be prepared to deal with. Knowing in advance what type situation might arise will help you to be better equipped in the event that it does.

5. HRM Environment

An HRM environment comprises of many elements which are both inside and outside the organisation.In a rapid changing society, organizations present challenges that require early solutions. In order to have an effective HR program, managers give careful attention to all these challenges.

A HRM manager balances with the needs of the organization and the realities of the internal and external environments.

Some environment factors which have significant implications on HRM environment are the decreasing trend of availability of middle-managers, unemployment, education and skills gap, the adoption of advanced technology, lifestyle adjustments for dual-career couples and the influx of immigrants.

                 Source: http://www.itdl.org/journal/mar_08/images/Fig%204-1.gif

 

5. 1 Internal Environment

 

These are the internal forces or factors which have influence on HR activities of the organisation. These consist of unions, organizational culture and conflict, professional bodies, and organizational climate. A brief mention of these is as follows:

5.1.1. Unions

A trade union is an association of workers or management formed to protect their own individual interests. HR activities like recruitment, selection, training, compensation, industrial relations and separations are carried out in consultation with trade union leaders. Unions play important role when a new wage agreement needs to be signed.

5.1.2. Organisational Culture and Conflict

Each organisation has its own culture that differentiates one organisation from another. Organization culture reflects the past and shapes the future. It is the product of all organization features – its people, its past, its successes and its failures. Few core values or beliefs shape its culture. Thus, culture is sharing of some core values or beliefs by the members of the organisation.

“Value for time” is the culture of Reliance Industries Limited. The culture of Tata conglomerate is “get the best people and set them free”. IBM is known for its service and L&T is known for its professionalism.

There is often conflict between organisational culture and employee’s attitude. Individuals have personality, organizations have cultures. Conflict usually surfaces because of dualities such as – personal goal v/s organisational goal, discipline v/s autonomy, rights v/s duties, self confidence v/s arrogance, participation v/s anarchy. Such conflicts have their bearings on HR activities in an organisation.

5.1.3. Professional Bodies

The NIPM (National Institute of Personnel Management) as the HR professional body regulates the functions of HR practitioners in India. Regular Training programs, seminars, conferences, workshops are being held by the NIPM for the benefit of HR people. The NIPM has also laid down a code of ethics and the HR professionals are expected to declare their allegiance to the code. The code is beneficial as it reminds HR people about their ethical obligations toward the employees, organization, profession and society.

5.1.4. Organizational climate

Organisational climate refers to the prevailing atmosphere that exists in an organization and its impact on employees. Organizations can be friendly or unfriendly, open or secretive, rigid or flexible, innovative or stagnant.

The major factors influencing the climate are leadership and communication style. It is reflected in the level of employee motivation, job satisfaction, performance, and productivity, and thus has a direct impact on organizational profits. HR managers play a key role in helping line managers throughout the organisation to establish and maintain a positive organisational climate.

Shift from an anarchy to flexibility at IBM

The bureaucratic climate at IBM, characterized by centralized decision making, hierarchy of command, job security, and a strict promote-from-within policy, has been identified as a key factor in the firm’s difficulties in maintaining a competitive position on both domestic and foreign fronts in the early 1990s. Under the leadership of Chief Executive Officer (CEO) Louis Gerstner, the climate was totally revamped. Unnecessary bureaucracy was eliminated and the firm was infused with intrapreneurs. The HR department was restructured into a more autonomous organization—a separate company known as Workforce Solutions (WFS). The results were excellent: delivery of HR services at a much lower cost, enhanced commitment to HR, greater flexibility and responsiveness to customer needs, streamlined HR processes, and the introduction of innovative HR programs.

5.2 External Environment

 

These are the forces external to an organisation and have influence on HR functions. The external environment of HRM consists of Government regulations, economic conditions, labour market, technological advancement and diversity. A brief mention of these factors is as follows:

Source:https://2012books.lardbucket.org/books/beginning-management-of-human-resources/section_06/cff772060cd59eeceeb524290ab78eea.jpg

5.2.1 Government Regulations

 

Introduction of new workplace compliance standards has compelled HR department to be under constant pressure to stay within the law. These regulations influence every process of the HR department, including hiring, training, compensation and termination. Violations of such regulations can lead to extensive fine or to the closure of company.

 

5.2.2 Economic Conditions

 

One of the external influences is the shape of economy. It may affect the talent pool or it might affect the ability to hire anyone at all. The best way to prepare against adverse economic conditions is to know what’s happening in the world around you and subsequently create a plan for when there is an economic recession.

 

5.2.3 Labour Market

It is the geographic area from where a firm recruits employees. The labour market is often different for various employee groups within an organization. While clerical and technical employees are generally hired locally, senior managers and highly specialized employees are hired often nationally or even internationally. The labour market affects role of HR as it is untailored and often uncertain.

 

5.2.4 Technological Advancements

Technological advancement is considered an external influence to the organisation. When new technologies are introduced, the HR department start downsizing the work force and to save money. A job that used to take 2-4 people could be cut to one done by a single person. Technology is revolutionizing the way we do business and not just from a consumer standpoint, but from an internal cost-savings way. HR department tends to become more upgraded, more challenging, employees become more skilled and knowledgeable.

 

5.2.5 Diversity

Work force of any factory comprises of people from different nations. People belonging to different cultures, races, religions, gender work together in an organization.HR managers must learn to live with these diverse behaviors. Diversity if managed in a proper way can increase creativity and innovation in the firms, decision making can also be improved which is very essential for effective working of an organisation.

HR Managers make sure that every type of external influence is listened to and proper procedures are followed to avoid lawsuits and sanctions.

Source:https://upload.wikimedia.org/wikipedia/commons/5/58/Transition_from_Personnel_Management%2C_Human_Resource_Management%2C_ Human_Capital_Management_to_Aspiration_Management.jpg

6. Strategic HRM

Before we try to explain the meaning of strategic HRM, let us first define the terms strategy and strategic management.

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Strategy is associated with the long-term decisions taken at the top of the enterprise. The term strategy is frequently being used in the present-day corporate world. It envisages thinking ahead to survive and grow in a highly competitive environment. Strategy is concerned with determining which option will provide maximum benefits.

 

According to Jauch and Glueck, “Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation.”

 

Strategic management is the process of formulating, implementing and evaluating business strategies to achieve organisational objectives.

 

Cunningham’ has defined “strategic management as a manner by which organisations plan to deal with the various aspects of management like problem perception, divergent thinking, substantial resources, decisions making, innovations, taking risks and facing uncertainty”.

 

According to Bourgeois, “Strategic management is a means by which management in an organisation establishes purpose and pursues that purpose through the co-alignment of organisational resources with environmental opportunities and constraints”.

 

Strategic human resource management refers to the process of developing practices, programs and policies that help achieve organisational objectives. These practices, programs and policies need to be aligned with organisational strategies. The study of strategic management, therefore, emphasizes monitoring and evaluating environmental opportunities and threats in the light of an organisation’s strengths and weaknesses.

 

Further Strategic human resource management considers the implications of business strategy for all HR systems within the organization by translating organisation’s objectives into specific people managementsystems. The specific approach applied and process utilized will vary from organisation to organisation. The study of strategic management, therefore, lays importance on monitoring and evaluating environ- mental opportunities and threats in the light of a organisation’s strengths and weaknesses. Thus, strategic HRM means a strategic look at HR functions in line with the business functions of an organisation.

 

Strategic HRM, therefore, is concerned with the following:

  • Analyse the opportunities and threats existing in the external environment.

  • Formulate strategies that will match the organisation’s (internal) strengths and weaknesses with environmental (external) threats and opportunities. In other words, make a SWOT analysis of organisation.

  • Implement the strategies so formulated.

  • Evaluate and control activities to ensure that organisation’s objectives are duly achieved.

The nature of strategic HRM becomes clearer when contrasted with traditional HRM. The table 2 shows the difference between traditional HR and Strategic HRM.

Table 2 – Difference between Traditional HR and Strategic HR
Source:http://www.slideshare.net/Rajdipsinhjadeja/strategic-hrm-34507832

7. Summary

Human resource management has changed in name various times throughout history. The name change was mainly due to the change in social and economic activities throughout history.HR is a product of the human relations movement of the early 20th century, when researchers began documenting ways of creating business value through the strategic management of the workforce. The function was initially dominated by transactional work, such as payroll and benefits administration, but due to globalization, company consolidation, technological advances, and further research, HR as of 2015 focuses on strategic initiatives like mergers and acquisitions, talent management, succession planning, industrial and labor relations, and diversity and inclusion.

HR practice is becoming more and more challenging day by day; they face problems like retention,attraction of employee, dealing with different cultural people, managing work force diversity, technological and informational changes. To overcome with these challenges training (Cross cultural training and technological and informational training) is necessary of HR people. Organisations try to use human resource effectively, they face several managerial challenges. They deal with these challenges effectively, out-perform those that do not.

An HRM program functions in a complex environment comprising several elements both inside and outside the firm. In order to have an effective HR program, HR managers must give careful attention to all aspects of the environment.

Strategic HRM refers to the process of developing practices, programs and policies that help achieve organizational objectives. What is essential is that these practices, programs and policies need to be aligned with organizational strategies and it is quite different from the traditional HRM.

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Books and References

  • Jyothi, Venkatesh. Human Resource Management. Oxford University Press

  • Rao, Mamoria. Personnel management. Himalaya Publishing House

  • Practicehrm.blogspot.com/2009/09/history-of-hrm.html