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Strategic HumanResource Management

(A New Perspective for Steel Industry)

Dr. P.K. Mohanty


Role of Strategic Human Resource Management (SHRM): Key to ... 3

© Author

No part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording and/or otherwise without the prior written permission of the publishers.

First Edition : 2014

Published by : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd.,“Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004.Phone: 022-23860170/23863863, Fax: 022-23877178E-mail: [email protected]; Website: www.himpub.com

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Dedicated to


Role of Strategic Human Resource Management (SHRM): Key to ... 5


Globalization of business has changed the scenario of managementin the country. The times are changing and there is an increasing need tocope with the ever changing forces of competition, the technologicalonslaught and the growing realization of knowledge management. Thenew economic environment has compelled the leaders and managers oforganizations to look forward – to understand the rules of survival intheir business and beyond mere survival to set their organizations on thepath of prosperity and growth. Today, the HR function has a morestrategic role. A changing business environment can influence theoutcome of current operations, stakeholders and corporate strategy as awhole. Since 1990, there has been an increased focus on strategic role ofHuman Resource Management (HRM) and now HRM has becomestrategic in nature. Strategic Human Resource Management (SHRM) isconcerned with the relationship between HRM and StrategicManagement in an organization.

This book brings to light the strategic human resource approaches,which are needed to cope with the changing business environment. Italso helps to bring overhauling organizational excellence by identifyingpitfalls and timely attributing corrective measures through need-basedHR strategy. This book emphasizes on post-liberalization effects andperformance of SAIL and TATA STEEL from 1991 till date with focuson HR initiatives and other turnaround strategies to make organizationas profitable and competitive as possible. The true insights of free andfrank opinions of more than two hundred employees of SAIL and TATASTEEL, captured by the author about the implementation of variousturnaround business alignment strategies in this book is foundinteresting and praiseworthy.

I believe that this book “SHRM – A New Perspective for SteelIndustry” will serve as professional companion to management students,researchers and HR managers.

Dr. K.K. RayProfessor,

IIM, Raipur

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Liberalization and Globalization has changed the scenario ofmanagement in the country. Today, we look forward to competition atglobal market. It is not enough to just manage an organization but needof the hour is to manage any organization with effectiveness andefficiency. Today, Human Resource Management should be viewed asstrategic function not as routine function. It can facilitate achievementsof goals of the organization as HR strategy is linked with businessobjectives of the organization.

Every business organization must adopt a corporate strategy tooperate in a global business environment if it wants to survive. Nocompany, either big or small, will be able to continue its successfuloperation with a secluded business philosophy in the years to come.Hence, only way to go ahead is to adopt a strategic managementphilosophy for a global market.

The liberalization of 1991 has exposed the Indian companies,which were under protection for over four decades, to a process ofglobalization. Now, global companies are very much here in Indiaputting forward a strong competition. Evidently, Indian companies haveno option but to change their outlook, philosophy, programmes,priorities, perspectives and their business strategies. They have to acceptthe new challenges and improve their efficiency and quality to suit theglobal standard and extend their operational canvas to other nations.

The book “Strategic HRM – A New Perspective for Steel Industry”is exclusively focusing post-liberalization effect on India’s steel industry,with special emphasis on SAIL and TATA STEEL as well as their HRstrategies, business policies and strategic planning perspective.

This book is organized into eight chapters. Chapter I, focuses onstrategic role of Human Resource Management (HRM) and how HRMhas become strategic in nature after globalization of business.

Chapter II introduces the global scenario of steel business andIndian steel industry after liberalization.

Chapter III emphasises on TATA Steel and SAIL’s endeavorduring post-liberalization period.

Chapter IV focuses on the scope and methodology of the study.

Role of Strategic Human Resource Management (SHRM): Key to ... 7

Chapter V describes performance of Indian Steel Industry duringpre-liberalization period from 1985 to 1990 with specific study onperformance of SAIL & TATA STEEL.

Chapter VI emphasizes on post-liberalization effects andperformance of SAIL & TATA STEEL from 1991 till date. Executivestudy is being done on modernization process, performancemanagement, HR initiatives, other turnaround strategies with referenceto literature survey, analysis of corporate plans, in-house journals andmanuals, etc. This Chapter also includes a case study of turnaroundstory of Rourkela Steel Plant (RSP). The study is based on majorturnaround and implementation strategies adopted by the CEOs to makethe organization as profitable and competitive.

Chapter VII is the main theme of the book, where the opinions ofexecutives and workmen of SAIL & TATA STEEL are analyzed withquestionnaire form and statistical analysis are being made to know theaccuracy of study. Major focus is given on global HR and IR issues,global business policies, new HR policies, restructuring of manpower,HR strategies linked with business philosophy, vision and mission,strategic human resource perspectives, Knowledge Management,Compensation, Recognition system, Training and Development,Recruitment and Promotion policies, and impact on IR issues. Further,the hypotheses are tested through statistical methods to establish theeffectiveness of the statement adopted for the above study purpose.

Chapter VIII deals with findings of the study and conclusion,focused on process of liberalization changes in SAIL & TATA STEELthat constitutes useful learning for managing their respective futures.Based on results of analysis, the conclusions show the direction ofchange process initiatives adopted by SAIL & TATA STEEL arepositive and growth-oriented. At last, some suggestions andrecommendations are given to accelerate the change initiatives of boththe organizations (SAIL & TATA STEEL) and make them consistentresult-oriented.

This book is intended for all HR Professionals, ManagementStudents and Researchers and Steel Industry Personnel. I believe, it canserve as an effective guide and reference to them for implementation ofHR strategies aligned with business goals of respective organizations.

Dr. P. K. Mohanty

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I express my gratitude to Dr. P.K. Mohanty, Professor, Departmentof Business Administration, Utkal University and Dr. K.M. Sahoo,Ex-Professor, Department of Personnel Management & IndustrialRelations, Utkal University for their guidance and support.

My sincere thanks to Mr. Avinas Prasad, Ex-VP (IR), Mr. NadeemKazim, Head (Management Development), Mr. R.N. Mishra, Head(IR – Legal), TATA STEEL, Mr. S.N. Patnaik, DGM (IndustrialEngineering), Mr. Rehaman Khan, DGM (Town Admn.), Mr. P.K.Mohanty, Mr. A.K. Bose of Rourkela Steel Plant for their valuablesupport and help during my visits for data collection. My sincere thanksto SAIL Management (RSP, BSP, Bokaro Steel Plant, DSP, Salem SteelPlant, CMO and Corporate Office) and TATA STEEL Management fortheir constant support and help provided me during my frequent visit totheir respective organizations. I thank all the respondents whoparticipated in this study. Without their cooperation, this study could nothave been completed.

I appreciate my friend, Dr. P.K. Das, Reader in Chemistry, GMCollege, who has contributed some suggestions to improve my qualityof work.

I am particularly thankful to Mr. Ghanashyam Parida, Senior Asst.,OPTCL for his personal interest in rendering service of typing andcomputer graphics for this book.

Special thanks are due to Mr. Rabindra K. Maharana, Mr. TrinathDas, Mr. Bireswar Pati, Mr. Gaurav Das, Dr. Himansu Sekhar Nanda,Mr. Himansu Patnaik and Mr. Joga Jeeban Sahoo for their continuoussupport and suggestions while editing the book. I am grateful toMr. Anil Sehgal, Director, Amtek Group of Companies for hisunstinting support, encouragement and inspiration throughout thepreparation of this book.

I am thankful to Mr. P.C. Panigrahi, Director (Personnel),Mahanadi Coalfields Ltd (MCL) for his valuable guidance whilepreparation of this book.

Role of Strategic Human Resource Management (SHRM): Key to ... 9

I am grateful to Mr, Niraj Pandey. Director and Mr. Bijoy K. Ojha,Manager and Staff of Himalaya Publishing House Pvt. Ltd. for theirkeen interest in publishing this book.

I am indebted to my parents, who have been providing mecontinued love and inspiration to achieve success in life. At last but notleast, I express my heartfelt gratitude to my wife, Dr. Banalata Mohanty,Reader in Zoology, Dhabaleswar College of Science and Technology,Odisha who has been the driving force and inspiration behind thecompletion of this book.

Dr. Prabodh Kumar Mohanty

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1. Role of Strategic Human Resource Management(SHRM): Key to Organizational Excellence 1 – 13

2. Global Scenario of Steel Business and Indian SteelIndustry after Liberalization 14 – 28

3 TATA STEEL & SAIL’s Endeavour duringPost-liberalization Period 29 – 45

4. Scope and Methodology of Study 46 – 525. Performance of Indian Industry during

Pre-liberalization Period from 1985 to 1990with Specific Study on SAIL & TATA STEEL 53 – 82

6. Post-liberalization and Performance ofSAIL & TATA STEEL (1991 to 2013) 83 – 210

7. Executives’ & Workmen’s Opinion Poll(SAIL & TATA STEEL) and StatisticalAnalysis of Results 211 – 264

8. Findings of the Study and Conclusion 265 – 289Appendices 290 – 307

Role of Strategic Human Resource Management (SHRM): Key to ... 11



Subject Page No.

2.1 World’s Largest Economies (GDP in US$ Billion) 16

2.2 County-wise Crude Steel Production 21

2.3 County-wise Crude Steel Production (2011-12) 22

2.4 Overview of Indian Steel Industry (Crude SteelProduction 2006-11)


2.5 Import of Finished (Carbon) Steel during 2001-02 to2011-12


2.6 Production of Pig Iron and Finished (Carbon) Steelsince 2002-03 to 2011-12


3.1 Net Profit of TATA STEEL (2009 to 2013) 32

5.1 A Picture of the Central Government Public Sector 55

5.2 Performance of the Top 15 Public SectorUndertakings of the Central Government


5.3 Employment in the Public Sector of India inComparison with the Private Sector


5.4 Thrust Activity (1985-90) 64

6.1 Directors’Workshops 88

6.2 Savings on Techno-economic Parameters 103

6.3 Strategic Thrust Areas 106

6.4 Production Capacity of SAIL after Expansion thePresent Annual Capacity of Rourkela Steel Plant


6.5 Manpower Trend 154

6.6 Post-expansion of Production Plants – RSP 154

6.7 Post-expansion Production Plant (in Million Tonsper annum)


6.8 TATA STEEL’s SGA Performance in 2005 185

6.9 TATA STEEL’s Suggestion ManagementPerformance for 2005


6.10 Scores given by World Steel Dynamics to 12 World-class Steel Makers (Score of 1 on a Parameter is


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Lowest and 10 Highest)

7.1 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.2 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.3 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.4 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.5 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.6 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.7 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Executives)


7.8 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


7.9 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


7.10 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


7.11 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


7.12 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


7.13 Statistical Analysis of Questionnaires (SAIL &TATA STEEL Workmen)


8.1 Performance Related to Pay (Ref: Vicky Wright) 277

Role of Strategic Human Resource Management (SHRM): Key to ... 13



Subject Page No.

1.1 Components of SHRM 21.2 Recommended Model of SHRM 101.3 HRM Strategic Model 111.4 Model of SHRM 112.1 Factors Influencing Global Business 172.2 Crude Steel Production in 2011 233.1 The Big League in Steel Production Capacity

(in Million Tons)31

5.1 Production Highlights (Million Tons)(1985-86 to 1990-91)


5.2 Profit (1985-86 to 1990-91) (in ` Billion) 62

6.1 Year-wise Profit (1993-2000) 99

6.2 Production (1993-94 to 1999-2000) 99

6.3 Overview of SAIL (Figures in Bracket are CrudeSteel Production Capacity in Million Tons)


6.4 Production Performance of Saleable Steel of SAIL(MT)


6.5 Manpower Productivity 122

6.6 Sales Turnover 124

6.7 Exports (Million Tons) 125

6.8 Steel Consumption in India 130

6.9 Framework for Unlearning and Relearning 1326.10 Crude Steel Production of RSP 1536.11 Organization Set-up of RSP 1536.12 Labour Productivity 1546.13 Year-wise Profit – RSP 1556.14 Samskar Model 1566.15 AVG Converter Life in SMS-I 1576.16 AVG Converter Life in SMS-II 1586.17 TATA STEEL at the Strategic Inflection Point in


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6.18 Vision-2007 of TATA STEEL 170

6.19 TATA STEEL: Building Blocks to Excellence 174

6.20 Pathway to Business Excellence through the MalcolmBaldridge Model


6.21 TPM at TATA STEEL 184

6.22 Various Phases of Knowledge Management at TATASTEEL


6.23 Year-wise Profit (TATA STEEL) 189

6.24 Corporate Governance of Tata Group 193

6.25 Process Innovation across the Entire Supply Chain 195

6.26 Potential Impact of e-commerce 196

6.27 Year-wise Production of TATA STEEL 206

7.1 Strategic Human Resource Perspective 228

7.2 The Performance Management Model(Ref. Pam Pocock)


7.3 Values Underlying Organizational Change(Ref: David Packard)


7.4 Leadership Mission Model 255

8.1 Changing Role of HR (Ref: Ashok Chanda and ShilaKabra)


8.2 HR Strategy House Model (Ref: Ashok Chanda andShila Kabra)


Role of Strategic Human Resource Management (SHRM): Key to ... 15

Learning Outcomes:When you finish this chapter, you should: Be able to differentiate between HRM and Strategic HRM Know about need of SHRM. Understand linkage of HR Strategy into business strategy. Envisage outsourcing and co-sourcing. Be familiar through various SHRM models for organizational

excellence. Know internalization of Human Resource Management – a

learning outcome for strategic perspectives.


With increasing competition and changing economic and businessenvironment, many CEO’s have recognized people’s capabilities as acompetitive advantage and therefore, HR has become an important and acritical business function. Since 1990, there has been an increased focuson the strategic role of Human Resource Management (HRM) and nowHRM has become strategic in nature. Strategic Human ResourceManagement (SHRM) is concerned with the relationship between HRMand Strategic Management in an organization.

Strategic Human Resource Management is an approach whichrelates to decisions about the nature of employment relationship,recruitment, training and development, performance management,reward and employee relations.



Role of StrategicHuman Resource

Management (SHRM):Key to Organizational


16 Strategic Human Resource Management ...

Wright and Mc Mahan (1992) defined SHRM is the pattern ofplanned human resource deployment and activities intended to enablethe firm to achieve its goals.

Need of SHRM To ensure the availability of a skilled, committed and highly

motivated workforce in the organization to achieve sustainedcompetitive advantage.

To provide direction to the organization so that both thebusiness needs of the organization and the individual andcollective needs of its workforce are met.

This is achieved by developing and implementing HR practicesthat are strategically aligned.

Four Components of SHRM

4. Clear cut &meaningful peopleactivities, policies& procedures toachieveorganizationalexcellence


1. HR primary sourceof competitiveadvantages

3. Patterns & plans,HR StrategyIntegration into aBusiness Strategy.

2. Activities of HRProgrammes andpractices.

Fig. 1.1: Components of SHRMBecause of relentless process of Globalization, companies face

similar problems in the market place. In order to be successful, theymust adopt similar solutions to these common problems.

HR is becoming more strategic on two counts. First, HR is a riskmanager and second, HR facilitates the growth of engagement capital,

Role of Strategic Human Resource Management (SHRM): Key to ... 17

both of which have a huge impact on franchise valuation. Traditionalengagement approaches provide a readymade solution but the lack oflong-term benefits and perspectives which ignores up to 70% of thereasons why employees disengage.

Today’s HR professionals contribute to creating engagementcapital to improve employee effort, retention and key business outcomes.As we balance short-term improvements with engagement drivers thatsustain engagement overtime, there is a greater alignment of the HRfunction to an organization’s strategic needs. One of the key pieces infranchise risk management is smooth succession. An effectivesuccession management strategy by HR overcomes four risks.

1. Vacancy risk in critical positions.2. Readiness risk among designated successors.3. Transition risk as new leaders move into roles4. Portfolio risk from poor deployment of leaders across the


Linkage of HR Strategy into Business StrategyEffective links of the HR strategy would ultimately lead to the

desired result of profitability and customer satisfaction. It is for thisreason that some HR professionals advocate that successful efforts inHR strategy begin with the identification of strategic business needs.The internal and external environments are intermittent variables, whichare linked with action plans for each year and consequently the HRsystems leading to the strategic business needs.

Further, other strategies such as marketing, finance, production,system, etc., integrate with HR strategy as a part of corporate strategy ofthe organization to meet the business requirements. Now, HR strategyevolution has brought a change effect in all aspects of HR outlook,systems, belief, structure as well as the expectations of business fromthis strategic function. HR is now the architecture for change. Thesuccess of the HR strategy lies in its effective links with the businessstrategy.

It is clear that HR, over a period of time – has emerged as one ofthe key strategic decision-making areas, what are some of the factors –internal and external that have contributed to the strategic aspect of thehuman resources function. With capital and technology in abundantsupply, there is very little differentiation in the marketplace. The onlytrue differentiation turns out to be people. It is the workplace that createsa credible, long-term relationship with the customer base. HR is the keyenabler in moving all people vectors in the right direction. HR is alsoaccountable for creating long-term employee value proposition. The best

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HR organizations engage its thoughtful discussions to collect data andtest assumptions to implement an authentic employment valueproposition that is a source of competitive advantage.

Evolution of SHRMBusinesses have had strategies since the earliest days of commerce.

Early strategic thinking focused on medium – and long-term planning.Michael Porter (1999) in competitive strategy “explained that every firmcompetiting in an industry has a competitive strategy, whether explicitor implicit. The strategy may have been developed explicitly through aplanning process or it may have evolved through the activities of thevarious functional departments of the firm”.

After liberalization of economy in 1990s competition in IndianIndustry started relentlessly to maintain high standards quality, cost andcustomer friendly products at par excellence with global organizationsthrough unified strategy, comprehensive and integrated plans aligned toorganizational objectives with focus on HR strategy. Indian companiesnow rank amongst the list of Fortune 500 companies and manysuccessful global organizations.

An exponential growth, competitive edge over peers, innovative atevery level and effective leadership-companies in India Inc that havestood out and made a distinct mark for themselves (with these attributes)fall in a new category of companies driven to excel.

Bill Gates had a dream of making Microsoft the number onesoftware organization in the world. Gates displayed an acute businessacumen and a very insightful vision to software field through strategicplanning in a continuous basis and developed user-friendly packageswhich were unheard of before.

Competitive Leadership – a Long-term BusinessStrategy

Today, competitive leadership is perceived as an effective businessimperative that resourcefully drives everything; the organization doeseach day at all level.

In today’s era, it is critical for companies to never take their eyesoff building long-term capability platforms. Sustainability of theorganization crucially depends on how long-term value addition issustained through an environment of engaging new ways thinking inevery segment of the organization and this is the essence of the fastcatching on trend of ‘thought leadership’.

Role of Strategic Human Resource Management (SHRM): Key to ... 19

Thought leadership is about believing in a powerful idea andgiving it shape through conviction and executing it to deliver value tothe business. Organizations who believe in thought leadership provideopportunities for generating new ideas, innovative solutions and doingthings differently. In the context of thought leadership, a leader cutsacross a clutter and evaluates an idea purely from its power of helpingthe business.

“In today’s world, which can be easily called an era driven by thepower of ideas, the organizational leaders should breed thoughtleadership in the organization and encourage employees to reinvent andinnovate at the same time.” as said Ramesh Bawa, MD & CEO, IL&FSFinancial Sources. D. Sundaram, Vice-Chairman and MD, TVS CapitalFunds Limited is of the opinion that thought leadership in many waysfocuses on the long-term horizon of the company and contributessignificantly to drive market and cost leadership.

Thus, thought leadership is a long term business strategy thatdrives everything the organization does each day and at all levels. Athought leader is an innovator in a very specific niche and customers inthat niche recognize value and most importantly are willing to pay forthat leadership position.

Outsourcing & Co-sourcingWith the process of outsourcing having its roots in the Industry for

a long time, another similar concept of co-sourcing has begun to emergeslowly to take its place by offering additional benefits and advantages.

Co-sourcing is a process wherein a function or task is notcompletely outsourced but is instead kept partially within the domain ofthe company and partially handed over to an external vendor. Everycompany today seeks a certain control of all its departments andfunctions, so as to keep a check on the performance levels and at thesame time, retain the knowledge and experience gained by carrying outthose functions. As a result, the concept of co-sourcing is takingcompanies by fire and is grabbing their attention.

Therefore, co-sourcing or outsourcing both have their pros andcons. But, it is vital for organizations to identify which form fits the billaptly and complements organizational goals.

Impact of Technology on HRMNew skills required: As new technologies are developed and

implemented, there is an urgent need to upgrade existing employeeskills and knowledge if the organization wants to survive and flourish ina competitive world. Additionally there will be growing demand for

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workers with more sophisticated training and skills especially inemerging ‘hot’ sectors like telecommunications, hospitality, retailing,banking, insurance, biotechnology and financial services. For example,service-sector employee requires different skills than those utilized inmanufacturing. They need strong interpersonal and communicationskills as well as the ability to handle customer complaints in a flexibleway.

Downsizing: New Technologies have decimated many lower endjobs with frustrating regularity. Increased automation has reducedemployee head counts everywhere. The pressure to remain cost effectivehas also compelled many a firm to go lean, cutting down extra fat ateach managerial level. The wave of merger and acquisition activity, inrecent times has often left the new, combined companies to downsizeoperations ruthlessly. The positions that have been filled up withworkers possessing superior technical skills and knowledge has alsotilted the poser base (in many emerging industries) from management totechnical workers. It is not uncommon today for managers to havelimited understanding of the technical aspects of their subordinates’work. Managing the expectations of knowledge workers is going to bemajor area of concern for all HR Managers in the years ahead.

Why? Consequences? Managing Survivors of downsizing Automation Restructuring Mergers Acquisitions Competitive pressures Cuts payroll expenses Eliminates extra layers Improves functioning if firm’s product and service profiles is

good Shocks those left out Shattering impact on employee motivation and morale if not

managed properly Bitterness, anger disbelief and shock need to be handled

properly Give information as to why the action had to be taken Tell how it is going to help the firm and employees in the long-


Role of Strategic Human Resource Management (SHRM): Key to ... 21

Collaborative work: Technological change has resulted inhierarchical distinctions being blurred and more collaborative teamworkwhere managers, technicians and analysts work together on projects.Team-based incentive plans have also made it necessary for all classesof employees to work in close coordination with each other.

Telecommuting: The rapid advance in technology has led to therelocation of work from the office to the home. Telecommuting hasbecome the order of the day where employees work at home, usuallywith computers and use phoned and the Internet to transmit letters, dataand completed work to the home office. Companies have been able toincrease their applicant pool through this mode and employees have alsobeen able to live further away from cities and gain considerably due tosavings in rents, transportation, etc.

Internet and intranet revolution: Internet and informationtechnology have enabled companies to become more competitive bycutting costs. Manufacturers, bank, retailers, and you name anythinghave successfully harnessed computer technology to reduce their costsand deliver want satisfying goods and services to customers at anamazing speed. Even in HR, internets and intranets are being used tohandle training, benefit administration, performance management andout placement functions, in recent times. The cumulative impact of newtechnology is so dramatic that at a broader level, organizations arechanging the way they do business. Use of the internet to transactbusiness has become so commonplace for both large and smallcompanies that e-commerce is rapidly becoming the organizationalchallenge of the new millennium. Managing virtual corporations andvirtual workers in this technology-driven world is going to pose toughchallenges for HR Managers in the years ahead.

Role of HR in a virtual organization: A virtual organization isnetwork of companies or employees connected by computers. Virtualworkers work from home, hostel, their cars, or wherever their worktakes them. The human resources function plays a unique role in avirtual organization:

1. Psychological fit: The lack of face-to-face interaction in virtualorganization virtually compels HR professionals to determinethe psychological fit between different units initially.

2. System alignment: Given the lack of physical proximity, itbecomes even more critical that the organization’s mission,vision and measures be aligned and that all parties are familiarwith these issues, the HR function can play an important role inthis task.

22 Strategic Human Resource Management ...

3. Reconsider rewards: In a virtual unit, very few permanentexits. In many cases, the organization will be staffed withworkers having different motivational forces. So rewardingeach entity in an effective way becomes an important job.

4. Reconsider staffing needs: In a virtual organization, mostemployees work on a contractual basis. Finding people withrequisite skills, knowledge and motivation levels become animportant activity.

5. Build partnerships: Virtual, teams have to be built fromscratch paying attention to their unique requirements. Theconcept of employment needs to be replaced by the concept of‘partnership’ especially when most tend to work independentlyaway from the permanent employees or owners of theorganization.

6. Develop leaders: Leaders become the major forces for buildingtrust, creating a mission and instilling a sense of belonging tothe organization HR can play a major role in ensuring thatleaders assume these responsibilities and meet them in aneffective away.

Creating a Strategy Oriented HR SystemCreating a strategy oriented HR system requires new skills on the

part of HR professionals. They must have the competencies required tocreate HR systems that produce strategically relevant employeebehaviors. They need to understand the strategy formulation process.They must be adept at identifying the workforce implications andrequirements of the new strategy and at crafting HR policies andpractices that produce those workforce requirements. They must have asufficiently wide breadth of business knowledge to be able tounderstand how the company creates value, and to see how the firm’sHR system can contribute to that value-creation process. The HRprofessional has to understand how business operates. Justunderstanding the details of recruiting selecting and training is no longersufficient.

In today’s competitive environment, the manager cannot leave thenature of the HR system, the actual HR policies and practices to change.Managers usually try to create High-Performance Work Systems(HPWS). The HPWS is a set of HR policies and practices that maximizethe competencies, commitment, and abilities of firm’s employees inpractice. This means that each HPWS HR activity produces measurablesuperior results. It is to be noted that the high-performing companiesstructure their recruiting activities so as to produce qualified recruits,

Role of Strategic Human Resource Management (SHRM): Key to ... 23

much more extensively. Also high-performing firms hire employeesbased on selection tests and provide training to new employees muchmore extensively. The bottom line is that management cannot leave theirHR systems unmanaged. A research program with over 2,800corporation firms that use HPWS policies and practices do perform at asignificantly higher level much more extensively than those that do not.The evidence suggests that a high performance HR practices,particularly combined with new technology, produce better productivity,quality, sales, and financial performance.

For example, the high performing firms generally emphasizeplacing employees in self managing, cross functional teams. In fact, thewhole thrust of the HPWS firm’s are superior in recruiting, screening,training, and other HR practices are required to build the sort of highlytrained, empowered, self governing and flexible work force thatcompanies today need as a competitive advantage.

The need for HPWS became apparent as global competitionintensified in the 1990s. Companies needed a way to better utilize theirhuman resources as they strove to improve quality, productivity andresponsiveness.

The HR manager needs a way to translate the firm’s new strategyinto specific, actionable HR policies and practice. Managementformulates a strategic plan. That strategic plan implies certain workforcerequirements, in terms of the employee skills, attributes, and behaviorsthat HR must deliver to enable the business to achieve its strategic goals.For example, Employees must dramatically improve the level ofcustomer service, more computer literate employees needed to run newmachines getting installed. Given these workforce requirements, HRmanagement formulates HR strategies, policies, and practices aimed atachieving the desired workforce skills, attributes and behaviors. Thesemay take the form of new selection, training, and compensation policiesand practices. Ideally, HR management then identifies Scorecardmetrics; it can use to measure the extent to which its new HR initiativesare supporting management’s strategic goals.

Internationalization of Human ResourceManagement – a Learning Outcome for StrategicPerspectives

It is important to note that the companies which wish tointernationalize can do so only if they have the required corecompetencies such as operational capability, managerial skills, ability towork with foreign partners and/or in foreign countries and so forth.

24 Strategic Human Resource Management ...

Once a company has gone international in one form or other, whatHRM policies and practices should it adopted in a foreign country? Theanswer depends on the form of internationalization and the extent anddepth of the company’s involvement in the local market. The HRMrelated issues in a foreign country are relevant only if the companyrecruits and manages people in that country. Importing, exporting,franchising, licensing and portfolio investment do not involve employeemanagement as part of a foreign operation in the host country.

Recommended models of SHRM for OrganizationalExcellence



Marketing Operations



Safety andHealth

Customers Competition Labor Market

Unions Society

Global Environment ExternalEnvironment United States

Internal Environment

Environment of Global Human Resource Management

Fig. 1.2: Recommended Model of SHRMRef: Global Human Resource Management (Prentice Hall


Role of Strategic Human Resource Management (SHRM): Key to ... 25

Fig. 1.3: HRM Strategic Model








Businessunit Strategy




Laws RegulatingEmployment


Model of SHRM

Fig. 1.4: Model of SHRM

Developing the

Personal commitment

Organization Design

Work Flow

Core Competencies

Business Process

Job Design

Human Capital


‘Reason for Being

Purpose of Businessfor Market


Organizational Culture

support Purpose

‘Leadership Mind’

to Excellence

Customer Service Ethics

Set-up ActionPhilosophy

HRM Strategic Success Model

Functions that

Propel VisionOrganization Development

Embrace ChangeHR Business Strategy

Excel at ManagementCompetency Modeling

Strategize and MeasurePerformance Management

Exhibit LeadershipTraining and Development

Realize PotentialExecutive Coaching

26 Strategic Human Resource Management ...

Need of Industry–Academia CollaborationThere is no doubt that Industry-Academia collaboration is one of

the successful ways to fight skill shortage. Candidates are now expectedto demonstrate initiative and confidence to take on business challenges,and to portray a positive brand image that is necessary while facing acustomer. Whatever the route, the onus of helping students keep pacewith the dynamic business environment lays with the academia.Modification of academic curriculum and its implementation istraditionally a long process involving careful research, curriculumdesign, customization and delivery.

Limitations of SHRMMany organizations have not adopted SHRM due to following

reasons:1. Focus on short-term performance: Most organizations

determine compensation on the basis of current performanceand they do not consider long-term investment in people.

2. Lack of organizational processes: Even today, many HRprofessionals do not understand the whole organizationalprocesses and they are unable to link HR strategies toorganizational strategies.

3. HR role lacks strategic perspective: HR in manyorganizations is still doing administrative functions and stereo-type personnel management functions. So they fail to adoptunified HR strategy, linked with business objectives of theorganization.

4. Difficulty in quantifying HR functions: Many HR managersare still finding difficult to quantify the costs and benefits ofHR activities.

5. Less importance to employees training: Many organizationsare yet to adopt employees training as learning process to adopttechnological changes. Most employees resist changes intechnology and do not co-operate with their leaders.


HR is seen as an integral part of corporate strategy of SAIL andTATA STEEL both the organizations have corporate plans tosubstantially raise production introduction of large scale modernizationand automation through HR interventions and strategies.

Role of Strategic Human Resource Management (SHRM): Key to ... 27

Today, the HR function has a more strategic role. A changingbusiness environment can influence the outcome of current operations,stakeholders and corporate strategy as a whole. The HR function playsan important role in viewing and integrating business opportunities,stimulating employees, developing employee strengths and creatingcorporate teams that share the company’s vision and translate thisconcern into profit.

Mr. C.S. Verma, Chairman, SAIL reiterated that steel industrydirectly contributes around 2 per cent to India’s Gross Domestic Product(GDP) and its weight in the Index of Industrial Production (IIP) is 6.2per cent. The future of steel plants would be beneficiated by iron orereplacement to crude iron to increase productivity and reduce theconsumption of fuel, use of latest technology, innovations driven byenergy and environment conservation with competitive strategic HRMpolicies to make India as pioneer in global steel market.


1. Narang Unnati (2012), Time to Strategise, Ascent, The Times of India,January, 11. 2012.

2. Chevalwal Arshie (2012), Thought Leadership a Long-term BusinessStrategy, Ascent, Times of India, January 2012.

3. Chanda Ashok & Kabra Shilpa (2002), Human Resource Strategy,Response Books, pp. 39-47.

4. Haberberg Adrian & Rieple Alison (2008), Strategic Management–Theory and Practice, Oxford Publication, pp. 7-49.

5. Agarwal Tanuja (2008), Strategic Human Resource Management,Oxford University Press, pp. 1-20.