shrm unit 3-2011

MBA – IV SEM

Strategic Human Resource Management

Manav R

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Presentation by Tanushree Gulati

Syllabus Unit III

HR Systems:

Staffing systems,

Reward and compensation systems,

Employee and career development systems,

Mergers and acquisitions,

Outsourcing and off shoring.

Selection is the process of choosing a candidate from a group of applicants who best meets the selection criteria for a particular position

To sustain the high level of competitive

advantage a firm requires talented and skilled workers (Liao & Chu 2006)

Huselid (1995) has found that organisational productivity and high performance depends on the selection of the right person, which is also a pathway to reduced turnover

HR Systems: Staffing systems

Michie and Sheehan-Quinn (2001) have identified a positive link between hiring a manager and employees, and the creation of the right culture for organisational growth.

The right person chosen for the requisite qualifications and knowledge is placed in the appropriate job position to decrease the cost, and maximise the profits by means of their merit and talent (Vlachos 2008).

HR Systems: Staffing systems

Cho, et al. (2006) have identified that there is a positive and significant relationship among HRM practices and staffing (recruitment source, pre selection test, IQ test, structured interview, and biographical information blank of the organisation) for improving financial or profit performance.

HR Systems: Staffing systems

Reward and compensation systems

Huselid (1995) asserts that the compensation system is recognised as employee merit and it is widely linked with firm outcomes.

Compensation refers to all monetary

payments and all commodities used instead of monetary to reward employees.

In the same vein, Wan (2008) asserted that compensation should be considered based on performance, not on the basis of seniority or length of service in organisation

The expectancy theory (Vroom 1964) suggests that rewards, that can be understood as a form of direct and indirect compensation packages, have potential to influence employee work motivation.

Thang (2004) posits that compensation and

reward can be powerful tools for getting efforts from the employees to fulfill the organisational goals.

Reward and compensation systems

Career Development Systems through Performance appraisal

Performance appraisal is a continuous process rather than a 'once a year' exercise. It is the formal system of periodical assessment and evaluation of an individual's or team's job performance and providing feedback.

Stone (2002) has asserted that in the

competitive environment, organisations need to keep improving performance to survive

Employee and career development systems

Employee and career development systems

Levin (1986) has identified some uses of performance appraisal, for career development, such as assessment of employee training needs, employee merit appraisal, determining of employee salary, feedback and suggestion of employee past performance and employee development.

Thang (2004), “how well employees are performing their jobs, is due to how well a suitable HRM related decision is made”.

Performance appraisal provides information that is dealt with

employee salary, training needs, compensation, promotion as well as employee development, transfer and employee feedback (Huber 1983).

Employee and career development systems

HR Performance and Benchmarking

Benchmarking Comparing specific measures of performance

against data on those measures in other “best practice” organizations

Common Benchmarks Total compensation as a percentage of net

income before taxes Percent of management positions filled internally Dollar sales per employee Benefits as a percentage of payroll cost

Doing the Benchmarking Analysis

Return on Investment (ROI)Calculation showing the value of expenditures for

HR activities.

A = Operating costs for a new or enhance system for the time periodA = Operating costs for a new or enhance system for the time period

B = One-time cost of acquisition and implementationB = One-time cost of acquisition and implementation

C = Value of gains from productivity improvements for the time periodC = Value of gains from productivity improvements for the time period

B A

C ROI

HR Business Performance Calculations

Source: Adapted from Jac Fitz-Enz, “Top 10 Calculations for Your HRIS,” HR Focus, April 1998, S-3.

HR Business Performance Calculations

Source: Adapted from Jac Fitz-Enz, “Top 10 Calculations for Your HRIS,” HR Focus, April 1998, S-3.

Doing the Benchmarking Analysis

Economic Value Added (EVA) A firm’s net operating profit after the cost of

capital (minimum rate of return demanded by the shareholders) is deducted.

Cost of capital is the benchmark for returns for all HR activities.

Utility analysis Analysis in which economic or other statistical

models are built to identify the costs and benefits associated with specific HR activities

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Mergers and Acquisitions

Merger Result of an agreement between two

companies to join their operations together

Acquisition One company buys another company

intending to control the activities of the combined operations

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The Formation Processes of M & A’s and HR Challenge

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Mergers and Acquisitions in US Billions

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Facts Firms Take into Consideration When Deciding on a Target Country

the growth aspiration of the acquiring company

risk diversification technological advantages a response to government policies in a

particular country exchange rate advantages favourable political and economic conditions effort to follow clients

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IHRM and its Role in Employee Relations (M&A)

The quality of employee relations, ranging from employee support to employee resistance is influenced by variables such as the

similarity between management styles of the two organizations

type of cross-border combinationscombination potential in terms of efficiency gains

extent of organizational integration

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Employee Resistance Endangers M&A Performance

HRM role (task and human integration) visibility and continuity of leadership communication processes integrating mechanisms acquired personnel retained voluntary personnel loss

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Human Integration Process

especially difficult to manage and takes time both firms are embedded in their own

national, institutional and cultural settings

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Typical Cross-Border M&A Problems

within first year of merger, up to 20% of executives may be lost. Over a longer time frame, this tends to increase even further.

personnel issues are often neglected.

a high number of M & As fail or do not produce the intended results.

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HR Activities in the Phases of a Cross-Border M & A

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Strategic HRM and the Role of the HR Function in M&As

Starting points in HRM practices high HRM involvement early in the M&A process fit between business, M&A and HR strategies decisions about resources involve staffing and

retention issues, with termination decisions being particularly important

training and development programs appraisal and reward systems

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Strategic HRM and the Role of the HR Function in M&As

values that shape employees priorities and decision making

strategic approach and aligning the HRM activities with the M&A strategy with respect to resources, processes and values

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Strategic HRM and the Role of the HR Function in M&As

create a strong team including a mix of both expatriates and local members of top management

language skills and sensitivity toward cultural differences crucial skills for M&A success

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Strategic HRM and the Role of the HR Function in M&As

IHRM roles strategic partner administrative expert employee champion change agent

A Comparative Approach to HRM in M&A Processes

Post-integration trends in HRM practices convergence across nationalities in HRM policies

(performance-related pay, training and team-based product development)

adjustments to suit the local culture

American HRM reflected a short-term individualistic national business culture

A Comparative Approach to HRM in M&A Processes

Japanese HRM reflected long-term, consensual, team-based, collectivist national philosophies

French companies displayed an ethnocentric approach

German companies were the most anxious to adopt international practices

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Post-Acquisition Trends in HRM Practices

Outsourcing

Outsourcing is contracting with another company or person to do a particular function.

Almost every organization outsources in some way.

Typically, the function being outsourced is considered non-core to the business.

The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.

Recently companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry.

Those processes could be done more efficiently, and therefore more cost-effectively, by other companies with specialized tools and facilities and specially trained personnel.

The most common forms of Outsourcing are information technology outsourcing (ITO) and business process outsourcing (BPO).

Outsourcing

Business process outsourcing encompasses call center outsourcing, human resources outsourcing (HRO), finance and accounting outsourcing, and claims processing outsourcing.

Dominant outsourcing service providers in the information technology outsourcing and business process outsourcing fields include IBM, EDS, CSC, HP, ACS, Accenture and Capgemini

Outsourcing

Process of Outsourcing

The process of outsourcing generally encompasses four stages:

1) strategic thinking, to develop the organization's philosophy about the role of outsourcing in its activities;

2) evaluation and selection, to decide on the appropriate outsourcing projects and potential locations for the work to be done and service providers to do it;

3) contract development, to work out the legal, pricing and service level agreement (SLA) terms; and

4) outsourcing management or governance, to refine the ongoing working relationship between the client and outsourcing service providers.

Process of Outsourcing

Off shoring

When the work which is Outsourced by a company is being done in a different country the process is known as offshoring.

Offshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring

"Re-shoring" (sometimes "Backshoring") is offshoring that has been brought back onshore.

After its accession to the World Trade Organization (WTO) in 2001, the People's Republic of China emerged as a prominent destination for production offshoring.

After technical progress in telecommunications improved the possibilities of trade in services, India became a country leading in this domain though many parts of the world are now emerging as offshore destinations.

Off shoring

QUESTIONS ANSWERS