MMPC 002

HUMAN RESOURCE MANAGEMENT

Indira Gandhi National Open University
School of Management Studies
 MMPC-002
HUMAN RESOURCE
MANAGEMENT
School of Management Studies

BLOCK 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 5

Unit 1 Concept and Evolution of HRM 7
Unit 2 Functions of HRM 23
Unit 3 Environment and HRM 45
BLOCK 2 SOURCING OF HUMAN RESOURCES 65
Unit4 Human Resource Planning 67
Unit 5 Job Analysis, Design and Evaluation 81
Unit6 Recruitment and Selection 91
Unit 7 Socialisation and Mobility 107
BLOCK 3: PERFORMANCE AND COMPENSATION MANAGEMENT 129
Unit 8 Performance Appraisal 131
Unit 9 Career Development 151
Unit 10 Training and Development 166
Unit 11 Compensation and Rewards Management 196
BLOCK 4: EMPLOYER – EMPLOYEE RELATIONS 215
Unit 12 Employee Empowerment 217
Unit13 Grievance Handling and Discipline Management Procedures 235
Unit 14 Unions and Associations 264
COURSE DESIGN AND PREPARATION TEAM
Prof. K Ravi Sankar Prof. Udai Pareek
Director, Indian Institute of Health Management and Research, Jaipur
School of Management Studies,
IGNOU, New Delhi Prof. Gopa Bhardwaj
Delhi University, Delhi
Prof Sanjeev Mital
Vice Chancellor,
Prof. B.D. Singh
Sambalpur University, Odisha
MDI, Gurgaon
Prof. Shalini Garg Prof. C.S. Venkataratnam
School of Management Studies, IMT, Ghaziabad
IP University, New Delhi
Prof. A.M. Sarma
Prof Sumita Misra
Management Consultant, Mumbai
Kalinga School of Management Studies,
KIIT University, Bhubaneswar, Prof. Mirza S. Saiyadain
Fortune Institute of International Business, New Delhi
Prof G Subbayamma
School of Management Studies, Dr. B Ratan Reddy
IGNOU, New Delhi IPE, Hyderabad

Prof. Neeti Agrawal Prof. B B Khanna

School of Management Studies, School of Management Studies,
IGNOU, New Delhi IGNOU, New Delhi

Prof. Kamal Vagrecha Prof. Srilatha

School of Management Studies, School of Management Studies,
IGNOU, New Delhi IGNOU, New Delhi

Dr Anjali Ramteke
Prof. P Jyothi (Course Editor)
School of Management Studies,
Dean ,
IGNOU, New Delhi
School of Management Studies,
University of Hyderabad, Hyderabad
Sh. T V Vijay Kumar
School of Management Studies,
Prof. Nayantara Padhi (Course Coordinator)
IGNOU, New Delhi
School of Management Studies,
Dr. Leena Singh IGNOU, New Delhi
School of Management Studies,
IGNOU, New Delhi

Acknowledgement: Parts of this course have been adapted and updated from the course MS 2: Management of Human
Resource. MS 2 course was prepared by the experts (names mentioned above in Italics) and their profiles are reproduced from the
erstwhile credit page.

MATERIAL PRODUCTION
Mr. Y.N. Sharma Mr. Tilak Raj
Assistant Registrar Assistant Registrar
MPDD, IGNOU, New Delhi MPDD, IGNOU, New Delhi
September, 2021
© Indira Gandhi National Open University, 2021
ISBN:
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission
in writing from the Indira Gandhi National Open University. Further information on the Indira Gandhi National Open University
courses may be obtained from the University’s office at Maidan Garhi, New Delhi-110 068.
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi, by the Registrar, MPDD,
IGNOU.
Laser typeset by Tessa Media & Computers, C-206, A.F.E-II, Jamia Nagar, New Delhi-110025
MMPC 002: HUMAN RESOURCE MANAGEMENT
Human Resource Management (HRM) is a management function that focuses
on staffing, developing, maintaining, and retaining the organization's most
precious resource: its people. HRM is concerned with the organization's plans
and goals, which can be met by making the best use of human resources. This
course lays the groundwork for understanding HR operations and honing
your approach to effectively managing human resources.

This course is divided into four blocks, each with three to four units. The
following is the course outline:

Block 1: Introduction to Human Resource Management

Unit 1: Concept and Evolution of HRM
Unit2: Functions of HRM
Unit 3: Environment and HRM
Block 2: Sourcing of Human Resources
Unit4: Human Resource Planning
Unit 5: Job Analysis, Design and Evaluation
Unit6: Recruitment and Selection
Unit 7: Socialisation and Mobility
Block 3: Performance and Compensation Management
Unit 8: Performance Appraisal
Unit 9: Career Development
Unit 10: Training and Development
Unit 11: Compensation and Rewards Management
Block 4: Employer –Employee Relations
Unit 12: Employee Empowerment
Unit13: Grievance Handling and Discipline Management Procedures
Unit 14: Unions and Associations
After completion of this course you will learn:
 Concept, evolution and functions of HRM;
 Organisational environment and its impact on HRM;
 Functions of sourcing/staffing and induction;
 The need and methods of performance and compensation management;
 Processes of career development and training; and
 How to empower employees, handle grievances and deal with union.
 BLOCK 1
INTRODUCTION TO HUMAN
RESOURCE MANAGEMENT
BLOCK I INTRODUCTION TO HUMAN
RESOURCE MANAGEMENT
Understanding the concept, evolution, and functions of Human Resource
Management (HRM) is essential for learning its application. The
performance of an organisation is influenced by the business environment. As
a result, new processes and functions emerge. The subject of organisational
environment and its significance in HRM along with the concept and
functions of HRM have been explored in this block. There are three units on
this block.

Unit 1: Concept and Evolution of HRM

Unit 2: Functions of HRM
Unit 3: Environment and HRM
 Concept and
UNIT 1 CONCEPT AND EVOLUTION OF Evolution of
Human
HUMAN RESOURCE Resource
Management
MANAGEMENT
Objectives
After completion of this unit you should be able to:

 Understand the meaning and concept of Human Resource

Management (HRM);
 Trace the evolution of HRM;
 Understand the scope and objectives of HRM; and
 Explain various components of HRM;

Structure
1.1 Introduction

1.2 What is HRM?

1.3 Evolution of HRM

1.4 Objectives of HRM

1.5 Importance of HR

1.6 Scope of HRM

1.7 Nature of HRM

1.8 Components of HRM

1.9 Summary

1.10 Self Assessment Questions

1.11 Further readings and References

1.1 INTRODUCTION
―You must treat your employees with respect and dignity because in the most
automated factory in the world, you need the power of human mind. That is
what brings innovation. If you want high quality minds to work for you, then
you must protect the respect and dignity.‖

Mr. N.R. Narayana Murthy, Founder, Infosys Ltd.

Among the five Ms of management, namely, men, money, machines,

materials, and methods., HRM deals with the first M, Men are what we refer
to as "human resources." Human resources are an organization's most
valuable and unique asset. Human resource management is a dynamic and
challenging task for any organisation, especially in the age of globalisation
and rapid technological change. As a result, all managers must be aware of
7
Introduction the concept of HRM and its significance in the workplace. This being the first
to Human unit of the course on HRM, we shall cover the evolution and concept of HRM
Resource
Management along with its objectives and scope. As a field of management functions,
HRM has undergone many changes over the years giving it a strategic role in
an organisation.

1.2 WHAT IS HRM?

HRM is the process of acquiring, developing, maintaining, and retaining
human resources in an organisation with the strategic objective of achieving
organisational goals. So, what is the significance of the term "human resource
management"?

Human: This term refers to an organization's required workforce.

The term Resource refers to an organization's workforce supply.

Management refers to the most efficient use of resources in order to achieve

organisational goals.

Many eminent management scientists have defined HRM in different ways.

Some of the widely used definitions are provided in the Box 1.

Box 1: Definitions of HRM

A. Edwin B. Flippo - ―Human resource management is planning,

organizing, directing and controlling of the procurement,
development, resources to the end that individual and societal
objectives are accomplished‖.
B. Decenzo and Robbins - ―HRM is a managerial process of acquiring
and engaging the required workforce appropriate for the job and
concerned with developing, maintenance and utilization of
workforce‖.
C. Desseler -―the policies and practices involved in carrying out the
‗people‖ or human resource aspects of a management position,
including recruiting, screening, training, rewarding, and appraising
comprises of HRM‖.
D. French Wendell - ―Human resource management is the recruitment,
selection, development, utilization, compensation and motivation of
human resources by the organisation‖.
E. Storey - ―A distinctive approach to employment management which
seeks to achieve competitive advantage through the strategic
deployment of a highly committed and capable workforce, using an
integrated array of cultural, structural and personnel techniques‖.

In essence, HRM is a strategic approach to acquire, motivate, develop and

manage human resources of an organisation. For each of these functions there
are policies which the HR Managers follow keeping in view the
organizational culture.
8
Activity A: Go through different text books and web resources on HRM and Concept and
collate definitions of HRM. Evolution of
Human
Resource
………………………………………………………………………………… Management

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1.3 EVOLUTION OF HRM

HRM has evolved from the Personnel Management (which was the earst-
while management system to manage employees). Going back to the roots of
evolution of personnel management the contributions of Psychologists and
management experts such as Elton Mayo, F.W. Taylor and Robert Owen play
a significant role.Elton Mayo was the founder of the human relations
movement in the 1920s. In the famous Howthorne study, he measured the
relationship between productivity and the work environment. He emphasized
the influence of human relations on worker productivity. Similarly, Robert
Owen is considered to be the creator and initiator of reforms introduced for
workers. He introduced the principle of ‗8 hours work per day‘ . Owen
recognised the importance of improving working conditions in the workplace
and its impact on worker productivity and efficiency. Also worth mentioning
is the contribution of Frederick W. Taylor. Taylor has developed a
differentiated compensation system that rewards employees with higher
performance levels , that are still used in the company. He promoted
Scientific Management through fours principles:

1. Evaluate a task by dissecting its components;

2. Select employees that had appropriate skills for a task;
3. Provide workers with inventives and training to do a task; and
4. Use science to plan how workers perform their jobs.

Human Resources Approach: However, at some stage in early 60s the ‗pet
milk principle‘, (advocating that happy workers are productive workers or
happy cows provide extra milk) of human relationists have been largely
rejected. Recognising the truth that workers are unique in their personal way-
having individual needs. Every employee is a unique and surprisingly
individual wishes. It was considered that each worker is a completely unique
and highly complex character with exceptional desires and values. What
motivates one worker won't encourage any other and being satisfied or
feeling appropriate may additionally have very little effect on the
productiveness of positive personnel. Slowly however steadily, the trend
closer to treating employees as resources or assets emerged.
The contribution of behavioural science to management practice consists
primarily of producing new insights in place of new strategies. It has
advanced and extended right into a useful way of thinking, about the position 9
Introduction of the supervisor, the nature of businesses and the behaviour of an individual
to Human inside an business enterprise.Let us look into these trends more closely by
Resource
Management examing the transformation of personnel management to HRM from one
stage to another by understanding its differences and stages of development.

Stages of Development of HRM

Modern concept of HRM has developed through the following stages (Gupta,
1997).

a) The Commodity Concept: Before industrial revolution, the guild

system was the beginning of personnel management. Guild was a closely
knit group concerned with selecting, training, rewarding and maintaining
workers. Labour began to be considered a commodity to be bought and
sold.
b) The Factor of Production Concept: Employees were considered a
factor of production just like land, materials, machinery. Taylor‘s
scientific management stressed proper selection and training of
employees so as to maximise productivity.
c) The Paternalistic Concept: Employees organised together on the basis
of their common interest and formed trade unions to improve. Also
employers began to provide schemes to workers. Employers assured a
fatherly and protective attitude towards their employees.
d) The Humanitarian Concept: It is based on the belief that employees
had certain inalienable rights as human beings and it is the duty of the
employer to protect. Rather social and psychological satisfaction was
equally important. in human problems of work place. This is also known
as Hawthorne Experiments of Douglas McGregor also generated
considerable interest human relations concept.
e) The Behavioural Human Resource Concept: It aimed at analysing and
understanding human behaviour in organisation. Motivation, group
dynamics, organisational climate, organisational conflict etc. became
popular under this concept. Employees began to be considered as
valuable assets of an organisation. Efforts were made to integrate
employee with the organisation so that organisational goals and
employees aspirations could be achieved simultaneously. Focus shifted
towards management practices like two way communication,
management by objectives, role of informal groups, quality circles etc.
f) The Emerging Concept: Now employers are considered as partners in
industry. They are given share in company‘s stock membership. Slowly
and steadily, HRM is emerging as a discipline.

The table 1 summarises the differences between personnel management and

HRM.

10
 Table 1: Difference between Personnel Management & HRM Concept and
Evolution of
Human
Aspect Personnel HRM Resource
Management Management

Approach Short-term, Reactive, Long term, proactive

Adhoc integrated

Employee relations Pluralist, collective, low Unitarist, individualise

trust high trust

Role Specialist Integrated

Structure Bureaucratic, Flexible, decentralized

Centralised

Focus Cost minimization Maximum utilization

HRM essentially emphasizes and incorporates those expectations which are

not being fulfilled through the traditional personnel management. However,
few management scholars have opened HRM as ―old bottle with a new label‖
(Armstrong, 2020). It integrates in a meaningful way the numerous
subsystems like performance appraisal, career development, organizational
development, rewards management, employee relations etc. In the subsequent
units, we will be covering all these functions in detail.

Activity B: Differentiate between Personnel management and HRM in your

own words by citing examples.

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HRM and its evolution in India

The history of HRM in India dates back to the early 1980s when Mr. Udai
pareek and Mr. T.V. Rao championed the cause of the HRM movement. The
early adopters of the HRM movement include public sector enterprises such
as Bharat Heavy Electricals Limited (BHEL), State Bank of India, etc.
Initially, Indian organizations used to have an industrial relations (IR)
department, which was subsequently re-christened ad the personnel & IR
department, with the welfare department as one of its sub-departments. The
personnel department predominantly suited the blue-collar employees since
their general awareness and educational levels were low and the approach
was more of administrative nature. The growing importance of the service
sector in the Indian economy has also highlighted the importance of change
in approach by the personnel and administrative departments. The profile of
an employee in the new scenario has the following features. 11
Introduction  Employees are mostly in their mid-twenties or early thirties.
to Human
Resource  All employees are educated and their level of general awareness is high.
Management
 Employees are more committed to the profession than to the
organization.
 The rates of attrition and the level of mobility of employees among the
organizations are high.

The organizations have to compete for scarce resources, the most important
among them being the human resources, more so in the case of the service
sector. This has called for the radical transformation of personnel and
administrative departments into human resource departments to reflect the
human facet of organizations. A glance at the structure of various Indian
organizations indicates that the majority of the organizations have
rechristened their personnel and administrative department as human
resource development (HRD) departments. However, this transformation into
the HRM mode is at various stages in different organizations. The
progressive players and market leaders, especially in the IT and service
sectors, have fully adopted this approach while other players are in the
process of adoption.

The transformed HR department performs the following functions:

 Participating in the strategizing sessions of business policy

 Preparing the HR strategies in coordination with the corporate strategies
 Implementing the various HR policies and practices including HR
planning, recruitment and induction, compensation structuring, career
planning, competence mapping, performance management, etc.

Overall, the HR department has outgrown its mere functional role and has
come to assume the responsibility of building the brand for all company to
attract the best available talent in the market and also to retain the existing
talent. This helps in reducing the recruitment cost and the replacement cost
apart from reducing the attrition rates, which helps the organization to
complete its projects in time. (Jyothi, P. and Venkatesh, D.N., 2006)

1.4 OBJECTIVES OF HRM

The primary objective of HRM is to make certain the provision of competent
human resources in the business enterprise so that it will contribute in
reaching organizational objectives.

According to Scott, Clothier and Spriegal, ―The objectives of Human

Resource Management, in an organisation, is to obtain maximum individual
development, desirable working relationships between employers and
employees and employees and employees, and to affect the moulding of
human resources as contrasted with physical resources‖.
Apart from this, there are other objectives too. Specifically, HRM objectives
are four folds: societal, organisational, functional, and personal.
12
Societal Objectives Concept and
Evolution of
The societal objectives are socially and ethically responsible for the needs Human
Resource
and challenges of society. While doing so, they have to minimize the Management
negative impact of such demands upon the organisation. The failure of
organisations to use their resources for society‘s benefit in ethical ways may
lead to restrictions. For example, the society may limit human resource
decisions to laws that enforce reservation in hiring and laws that address
discrimination, safety or other such areas of societal concern.

Organisational Objectives
The organisational objectives recognise the role of human resource
management in bringing about organisational effectiveness. Human resource
management is not an end in itself; it is only a means to assist the
organisation with its primary objectives. Simply stated the human resource
department exists to serve the rest of the organisation.

Functional Objectives
Functional objectives try to maintain the department‘s contribution at a level
appropriate to the organisation‘s needs. Human resources are to be adjusted
to suit the organisation‘s demands. The department‘s level of service must be
tailored to fit the organisation it serves.

Personal Objectives
Personal objectives assist employees in achieving their personal goals, at
least insofar as these goals enhance the individual‘s contribution to the
organisation. Personal objectives of employees must be met if they are to be
maintained, retained and motivated. Otherwise, employee performance and
satisfaction may decline giving rise to employee turnover.

Table 2: HRM Objectives and Functions

HRM Objectives Supporting Functions

A. Societal Objectives 1. Legal compliance

2. Benefits
3. Union-management relations

B. Organisational Objectives 1. Human resource planning

2. Employee relations
3. Selection
4. Training and development
5. Appraisal
6. Placement
7. Assessment
13
Introduction C. Functional Objectives 1. Appraisal
to Human
Resource 2. Placement
Management
3. Assessment
D. Personal Objectives 1. Training and development
2. Appraisal
3. Placement
4. Compensation
5. Assessment
Source: William B. Werther, Jr., and Keith Davis, Human Resources and Personnel
Management, p. 15.

In order to achieve the above objectives, human resource management

undertakes the following activities:
i) Human Resource Planning, i.e., determining the number and kinds of
personnel required to fill various positions in the organisation.
ii) Recruitment, selection and placement of personnel, i.e., employment
function.
iii) Training and development of employees for their efficient performance
and growth.
iv) Appraisal of performance of employees and taking corrective steps such
as transfer from one job to another.
v) Motivation of workforce by providing financial incentives and avenues
of promotion.
vi) Remuneration of employees. The employees must be given sufficient
wages and fringe benefits to achieve higher standard of living and to
motivate them to show higher productivity.
vii) Social security and welfare of employees.

1.5 IMPORTANCE OF HRM

HRM is the central sub-system of an organisation (Figure 1).

Finance
Sub-system

Technical
Material HRM Sub-system,
sub-system Sub-system

Marketing
sub-system

Figure 1: HRM as central subsystem in an organisation

Source: Gupta, 1997

14
As the central sub-system, HRM interacts closely and continuously with all Concept and
other sub-systems of an organisation. The quality of people in all sub-systems Evolution of
Human
depends largely upon the policies, programmes and practices of the HRM Resource
sub-system. Management

The quality of human resources determines in turn the success of an

organisation.

The importance of HRM can be discussed at four levels – corporate,

professional, social and national (Gupta, 1997).

Significance for a Corporate: Human resource management can help an

enterprise in achieving its goals more efficiently and effectively in the
following ways:

a) Attracting and retaining the required talent through effective human

resource planning, recruitment, selection, placement, orientation,
compensation and promotion policies.
b) Developing the necessary skills and right attitudes among the employees
through training, development, performance appraisal, etc.
c) Securing willing co-operation of employees through motivation,
participation, grievance handling, etc.
d) Utilising effectively the available human resources.
e) Ensuring that the enterprise will have in future a team of competent and
dedicated employees.

1) Professional Significance: Effective management of human resources

helps to improve the quality of work life. It permits team work among
employees by providing a healthy, working environment. It contributes
to professional growth in the following ways:

a) Providing maximum opportunites for personal development of each

employee.
b) Maintaining healthy relationships between individuals and different
work groups.
c) Allocating work properly.

2) Social Significance: Sound human resource management has a great

significance for the society. It helps to enhance the dignity of labour in
the following ways:

a) Providing suitable employment that provides social and

psychological satisfaction to people.
b) Maintaining a balance between the jobs available and the jobseekers
in terms of numbers, qualifications, needs and aptitudes.
c) Eliminating waste of human resources through conservation of
physical and mental health.

15
Introduction 3) National Significance: Human resources and their management plays a
to Human vital role in the development of a nation. The effective exploitation and
Resource
Management utilisation of a nation‘s natural, physical and financial resources require
an efficient and committed manpower. There are wide differences in
development between countries with similar resources due to differences
in the quality of their people. Countries are underdeveloped because their
people are backward. The level of development in a country depends
primarily on the skills, attitudes and values of its human resources.
Effective management of human resources helps to speed up the process
of economic growth which in turn leads to higher standards of living and
fuller employment.

Activity C: Enlist the objectives of HRM in an organisation that you are

familiar with.

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1.6 SCOPE OF HRM

According to Dale Yoder, the scope of human resource management is very
wide.

It consists of the following functions:

i) Setting general and specific management policy for organisational

relationships, and establishing and maintaining a suitable organisation
for leadership and co-operation.
ii) Collective bargaining, contract negotiation, contract administration and
grievance handling.
iii) Staffing the organisation, finding, getting and holding prescribed types
and number of workers.
iv) Aiding in the self-development of employees at all levels providing
opportunities for personal development and growth as well as for
acquiring requisite skill and experience.
v) Developing and maintaining motivation for workers by providing
incentives.
vi) Reviewing and auditing manpower management in the organisation.
vii) Industrial relations research—carrying out studies designed to explain
employee behaviour and thereby effecting improvement in manpower
management.

The Indian Institute of Personnel Management (IIPM) has described the

scope of human resource management into the following aspects:
16
1) The Labour or Personnel Aspect: It is concerned with manpower Concept and
planning, recruitment, selection, placement, induction, transfer, Evolution of
Human
promotion, demotion, termination, training and development, layoff and Resource
retrenchment, wage and salary administration (remuneration), incentives, Management

productivity, etc.
2) The Welfare Aspect: This aspect is concerned with working conditions
and amenities such as canteens, creches, rest rooms, lunch rooms,
housing, transport, education, medical help, health and safety, washing
facilities, recreation and cultural facilities, etc.
3) The Industrial Relations Aspect: This is concerned with the company‘s
relations with the employees. It includes union-management relations,
joint consultation, negotiating, collective bargaining, grievance handling,
disciplinary actions, settlement of industrial disputes, etc.

All the above aspects are concerned with human element in industry as
distinct from the mechanical element.

1.7 NATURE OF HRM

Human Resource Management is a process of bringing people and
organizations together so that the goals of each are met. It tries to secure the
best from people by winning their wholehearted cooperation. In short, it may
be defined as the art of procuring, developing and maintaining competent
workforce to achieve the goals of an organisation in an effective and efficient
manner. It has the following features:

1. Pervasive force: HRM is pervasive in nature. It is present in all

enterprises. It permeates all levels of management in an organisation.
2. Action-oriented: HRM focuses attention on action, rather than on
record-keeping, written procedures or rules. The problems of employees
at work are solved through rational policies.
3. Individually oriented: It tries to help employees develop their potential
fully. It encourages them to give their best to the organisation. It
motivates employees through a systematic process of recruitment,
selection, training and development coupled with fair wage policies.
4. People-oriented: HRM is all about people at work, both as individuals
and groups. It tries to put people on assigned jobs in order to produce
good results. The resultant gains are used to reward people and motivate
them toward further improvements in productivity.
5. Future-oriented: Effective HRM helps an organisation meet its goals in
the future by providing for competent and well-motivated employees.
6. Development-oriented: HRM intends to develop the full potential of
employees. The reward structure is tuned to the needs of employees.
Training is offered to sharpen and improve their skills. Employees are
rotated on various jobs so that they gain experience and exposure. Every
attempt is made to use their talents fully in the service of organisational
goals. 17
Introduction 7. Integrating mechanism: HRM tries to build and maintain cordial
to Human relations between people working at various levels in the organisation. In
Resource
Management short, it tries to integrate human assets in the best possible manner in the
service of an organisation.
8. Comprehensive function: HRM is, to some extent, concerned with any
organisational decision which has an impact on the workforce or the
potential workforce. The term ‗workforce‘ signifies people working at
various levels. Including workers, supervisors, middle and top managers.
It is concerned with managing people at work. It covers all types of
personnel. Personnel work may take different shapes and forms at each
level in the organisational hierarchy but the basic objuective of achieving
organisational effectiveness through effective and efficient utilization of
human resources, remains the same.
9. Auxiliary service: HR department exist to assist and advise the line or
operating managers to do their personnel work more effectively. HR
manager is a specialist advisor. It is a staff function.
10. Inter-disciplinary function: HRM is a multi-disciplinary activity,
utilizing knowledge and inputs drawn from psychology, sociology,
anthropology, economics, etc. To unravel the mystery surrounding
human brain, managers, need to understand and appreciate the
contributions of all such ‗soft‘ disciplines.
11. Continuous function: HRM is not a one shot deal. It cannot be practiced
only one hour each day or one day a week. It requires a constant
alertness and awareness of human relations and their importance in every
day operations.

1.8 COMPONENTS OF HRM

Following are the major components of HRM (Sarma, 1998).
Human Resource Organisation: Human resource organisation is concerned
with achieving success by organisation design and development, motivation,
the application of effective leadership, and the process of getting across the
message about what the enterprise is setting out to do and how it proposes to
do it. The fundamental objective of human resource organisation is to ensure
that every aspect of the organisation, employment, motivation, and
management of people is integrated with the strategic objectives of the
business and contribute to the successful achievement of those objectives.
The human resource organisation programme has to take account of cultural
issues so that the desired corporate culture can be developed or reinforced.
Moreover, organisational development programmes and interventions are
needed to achieve better integration, improve teamwork, motivate human
resource, develop proper leadership, facilitate communication system,
manage conflict and change, and obtain commitment.
Human Resource Planning: Human resource planning sets out to define
how many people the organisation wants; the type of people the organisation
needs at present and in the future, in terms of their expertise; and how they
18
―fit‖ the corporate culture. It involves the forecasting of both the supply and Concept and
demand for future labour. It provides the base for recruitment programmes Evolution of
Human
and for human resource development plans. Resource
Management
Human Resource Systems: Human resource systems are the essential
programmes needed to recruit, appraise, pay and look after the health, safety
and well-being of the employees in the organisation. The main key
programmes are:

a) Recruitment management: It is a process of obtaining the required

human resource for an organisation.
b) Information management: It is a method of ensuring that all policies
and practices are to be well articulated and effectively communicated to
the workforce.
c) Training management: It is a system of identification of training needs,
preparation of a training strategy, and an appropriate training system.
d) Performance management: It is a technique of appraising performance
systematically against defined criteria, reviewing progress to date and
assessing the potential for advancement. There are three main appraisal
systems such as performance appraisal, potential appraisal, and
performance coaching or counselling.
e) Reward management: It is a method to ensure that people are rewarded
in accordance with their contribution.
f) Career management: It is a system of charting special career paths for
the individual employees for advancement in the organisation.
g) Health and safety management: It is a system of maintaining a healthy
and safe system of work in an organisation.
h) Discipline management: It is a system of administering discipline to
foster positive employee behaviour that will promote organisational
objectives.
i) Culture management: It is a system of thinking and behaving shaped by
the values, attitudes, rituals and sanctions in an organisation.

Human Resource Development (HRD): Rao (1985) defines HRD as ―a

process by which the employees of an organisation are helped, in a
continuous planned way to: (a) acquire or sharpen capabilities required to
perform various tasks and functions associated with their present or expected
future roles; (b) develop their general enabling capabilities as individuals so
that they are able to discover and exploit their own inner potentials for their
own and/or organisational development purposes; and (c) develop an
organisational culture where superior-subordinate relationship, team-work,
and collaboration among different sub-units are strong and contribute to the
organisational health, dynamism and pride of employees.‖
Human Resource Relationships: Human resource relationships deal with
the handling of employees individually and collectively asmembers of trade
unions or staff associations. Their main aim is to increase co-operation and
19
Introduction trust and to involve employees actively in the company‘s affairs. It also deals
to Human with problem-solving techniques, particularly to solve problems relating to
Resource
Management disciplinary cases and grievances. There are two sides to a dispute in most
organisations: the management and the workers. There is a gap and the means
have to be found to bridge that gap. Whether or not unions exist, it is highly
desirable for the management to develop methods of dealing with employees
collectively. Nonetheless, relationships with unions often involve
confrontations. The necessary techniques must be evolved for encouraging
mutuality and working together in the interests of all.

Unions have to be managed like everything else in an organisation.

Management normally gets the union it deserves. If it handles unions the
wrong way, the results for the organisation can be disastrous. An approach to
collective dealing should be:

(a) the recognition of the union, (b) the respective role performance of
management and union, (c) the type of procedures one can adopt to regularize
relationships with unions, (d) the basic techniques of negotiating with unions,
(e) the mechanism of involvement through participation, both traditional
forms of joint consultation as well as the Japanese import of quality circles.

Human Resource Utilisation: According to Peters and Watennan, to

achieve productivity through people, it is very essential to ―treat them as
adults, treat them as partners, treat them with dignity, and treat them with
respect.‖ These fundamental human relations values provide the base for
productivity management programmes, which use techniques such as method
study to improve efficiency. Both managers and workers must be persuaded
somehow to realise that they have a common interest in increasing output.

The following actions are required to improve the use of human resources:
(a) conduct a productivity drive; (b) improve manpower budgeting and
control techniques;

(c) introduce work measurement; (d) use appropriate payment method by

results; bonus and profit-sharing schemes; (e) improve motivation; (f) involve
employees in improvement programmes; (g) introduce new technology; (h)
negotiate appropriate productivity agreements; and (i) introduce training
programmes based on an analysis of productivity needs.

Human Resource Accounting (HRA): HRA means accounting for people

as the organisational resource. It is the measurement of the cost and value of
people to organisations and involves measuring the costs incurred on
recruiting, selecting, hiring, training and developing employees and judging
their economic value to the organisation. HRA can be very useful in
managerial decision-making. For instance, whether it is recruitment and
selection or replacement of an employee, HRA can provide an estimate of the
cost involved in the process.

Similarly, it can help the management in budgeting for development of

human resources. HRA can also provide data pertaining to turnover costs, the
cost of employee‘s absence and its impact on performance of others.
20
Human Resource Audit: The purpose of a human resource audit is to assess Concept and
the effectiveness of the human resource function and to ensure regulatory Evolution of
Human
compliance. Human resource audit is a vast subject and covers many delicate Resource
aspects of human and organisational interactions. Management

The HRD auditor has to study the organisation design, its objective,
performance of its human resources, as well as the proper maintenance of
HRD climate and practices. The job of the HR auditor is not an easy one. To
gain success, he has to be very selective about the area and procedure he
wishes to follow. Auditing in the field of human resources is a difficult job,
more so because unlike other audits, the auditor has to deal with individuals
vis-a-vis organisational priorities. Therefore, the HR auditor is required to be
very systematic in his job and define the task clearly as to which arena he has
to cover.

1.9 SUMMARY
The human resources of an organisation represent one of its largest
investment. The objectives of HRM include getting the organisation right,
providing effective motivation and leadership, obtaining and developing the
right people, paying and treating them fairly, and getting them involved in
working productively. The attainment of these objectives necessitates the
performance of several functions. The main HRM systems are: (1) appraisal
system; (2) career system; (3) training system; (4) work system; (5) cultural
system; and (6) self-renewal system. All systems and sub-systems of HRM
must be incorporated in the organisation while setting the goals and
objectives. This will also integrate the purposes and processes and make
HRM more meaningful. Human resources functions are many and varied and
include such things as human resource planning, recruiting, selecting,
training, counselling employees, compensation management, and employer-
employee relations. In small organisations, most human resource functions
are performed by owners or operating managers. Large organisations usually
have a human resource or personnel department that is responsible for co-
ordinating and directing the human resource functions. Successful human
resource management is essential to organisational growth and success. In the
light of new challenges, there are indications that human resource people will
play an increasingly important role in an organisation‘s long-range planning
and policy-making activities.

1.10 SELF ASSESSMENT QUESTIONS

1. Define HRM and distinguish it from personnel management.
2. Describe the evolution of HRM and give an overview of its evolution in
India.
3. Explain the importance and scope of HRM.
4. Elaborate the nature of HRM and its relevance in current scenario.
5. What are the components of HRM?
21
Introduction
to Human
1.11 FURTHER READINGS AND REFERENCES
Resource
Management  Jyothi, P. and Venkatesh, D.N. (2006), Human Resource Management,
Oxford latest reprint book is also available
 Gupta, C.B. (1997), Human Resource Management, Sultan Chand
 Armstrong, Michael (2020), A Handbook of Human Resource
Management Practice, Kogan Page

22
 Functions of
UNIT 2 FUNCTIONS OF HUMAN Human
Resource
RESOURCE MANAGEMENT Management

Objectives
After completion of this unit you should be able to:

 Provide an overview of functions of HRM;

 Describe the roles and responsibilities of HR Managers;
 Explain the functions of HR managers; and
 Identify the challenges faced by HR Managers

Structure
2.1 Introduction
2.2 Functions of HRM
2.3 Roles and responsibilities HR Managers
2.4 Functions of HR Managers
2.5 Emerging aspects of HRM function
2.6 Challenges faced by HR Managers
2.7 Summary
2.8 Self Assessment Questions
2.9 Further Readings and References

2.1 INTRODUCTION
The previous unit has laid the foundation of the concept of HRM, its
meaning, nature and evolution. Realising the importance of managing the
human resource of an organisation, managers devote considerable attention
and expertise to attain, maintain and retain human resources. Number of
functions is performed by human resource management department for
utilizing the human resource efficiently. These functions are interrelated and
hold utmost importance not only in managing employees but also in
developing them. This unit is a step ahead on the concept of human resource
management and will provide details on the HRM functions. The unit will
also focus on the roles of HRM which have undergone changes in line with
the changing business environment.

2.2 FUNCTIONS OF HRM

HRM plays the centre stage role in an organisation to meet the challenges of
a dynamic and competitive environment. Due to the changes in the business
environment, the work, workplaces and demographics HR managers need to
reconfigure their roles. However, in general the HRM functions are broadly
of two categories: Managerial and Operational.
23
Introduction HRM Functions
to Human
Resource
Management

I. Managerial Functions II. Operative Functions

A B C D
Planning Organizing Directing Controlling

A B C D E

HR Sourcing Performance and Compensation Integration Employee

Development Management Relations

a) Job Analysis a) Performance a) Job Evaluation a) Employee a) Grievance

b) Human Resource Appraisal b) Wage and Salary Engagement redressal

Planning b) Training Administration b) Employee b) Disciplinary

c) Recruitment c) Management c) Incentives morale Management

d) Selection Development d) Bonus c) Counseling c) Union

e) Placement d) Career Planning e) Fringe Benefits d) Employee Management

and Welfare
f) Induction and f) Social Security
Development e) Ethics and
Orientation Measures
e) Internal HRM
Mobility

f) Transfer

g) Promotion

h) Demotion

i) Retention and
Retrenchment
Management

j) Change and
Organisation
Development

Figure 1: HRM Functions

The figure 1 broadly indicates the HRM functions.

I. Managerial Functions
Managerial functions of human resource management involve planning,
organising, directing and controlling.All these functions influence the
operative functions.

24
 A) Planning: It is a predetermined course of action. Planning pertains Functions of
to formulating strategies of programmes and changes in advance that Human
Resource
will contribute to the organisational goals. In other words, it Management
involves planning of human resources, requirements, recruitment,
selection, training etc. It also involves forecasting of HR needs,
changing values, attitudes and behaviour of employees and their
impact on the organisation.
B) Organising: Organising is essential to carry out the determined
course of action. In the words of J.C. Massie, an organisation is a
“structure and a process by which a co-operative group of human
beings allocates its task among its members, identifies relationships
and integrates its activities towards a common objective.” Thus, an
organisation establishes relationships among the employees so that
they can collectively contribute to the attainment of company goals.
C) Directing: The next logical function after completing planning and
organising is the execution of the plan. The willing and effective co-
operation of employees for the attainment of organisational goals is
possible through proper direction. Tapping the maximum
potentialities of the people is possible through motivation and
command. Co-ordination deals with the task of blending efforts in
order to ensure successful attainment of an objective.
D) Controlling: Controlling involves checking, verifying and
comparing of the actuals with the plans, identification of deviations
if any and correcting of identified deviations. Thus, action and
operation are adjusted to pre-determined plans and standards
through control. Auditing training programmes, analysing labour
turnover records, directing morale surveys, conducting separate
interviews are some of the means for controlling the HRM function
and making it effective.

Activity A: Browse through web resources and prepare an activity report

indicating managerial functions.

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
II. Operative Functions
The operative functions of human resources management are related to
specific activities of managing employees, viz., employment,
development, compensation and relations. All these functions are
interacted with managerial functions. There are five major operative
functions that HR managers carry out.
A. HR Sourcing
B. Performance and development 25
Introduction C. Compensation management
to Human
Resource D. Integration
Management
E. Employee relations

With the changing business scenario these are emerging functions which HR
managers carry out. All these functions will be dealt in detail in the
subsequent blocks of the course, however an essence is presented in the
following paragraphs.

1. HR Resourcing: It is the first operative function of Human Resources

Management (HRM). It is concerned with employing the people
possessing the required kind and level of human resources necessary to
achieve the organisational objectives. It covers functions such as job
analysis, human resources planning, recruitment, selection, placement,
induction and orientation.
i) Job Analysis: It is the process of study and collection of information
relating to the operations and responsibilities of a specific job. It
includes:
 Collection of data, information, facts and ideas relating to
various aspects of jobs including men, machines and materials.
 Preparation of job description, job specifications, job
requirements and employee specifications which will help in
identifying the nature, levels and quantum of human resources.
 Providing the guides, plans and basis for job design and for all
operative functions of HRM.
ii) Human Resources Planning: It is a process for determination and
assuring that the organisation will have an adequate number of
qualified persons, available at proper times, performing jobs which
would meet the needs of the organisation and which would provide
satisfaction for the individuals involved. It involves:
 Estimation of present and future requirements and supply of
human resources based on objectives and long range plans of
the organisation.
 Calculation of net human resources requirements based on
present inventory of human resources.
 Taking steps to mould, change and develop the strength of
existing employees in the organisation so as to meet the future
human resources requirements.
 Preparation of action programmes to get the rest of human
resources from outside the organisation and to develop the
human resources in terms of existing employees.
iii) Recruitment: It is the process of searching for prospective
employees and stimulating them to apply for jobs in an organisation.
It deals with:

26
  Identification of existing sources of applicants and developing Functions of
them. Human
Resource
 Creation/identification of new sources of applicants. Management

 Stimulating the candidates to apply for jobs in the organisation.

 Striking a balance between internal and external sources.
iv) Selection: It is the process of ascertaining the qualifications,
experiences, skills, knowledge etc., of an applicant with a view to
appraising his/her suitability to a job. This function includes:
Framing and developing application blanks.
 Creating and developing valid and reliable testing techniques.
 Formulating interviewing techniques.
 Checking of references.
 Setting up a medical examination policy and procedure.
 Line manager‟s decision.
 Sending letters of appointment and rejection.
 Employing the selected candidates who report for duty.
v) Placement: It is the process of assigning the selected candidate with
the most suitable job in terms of job requirements. It is matching of
employee specifications with job requirements. This function
includes:
 Counselling the functional managers regarding placement.
 Conducting follow-up study, appraising employee performance
in order to determine employee adjustment with the job.
 Correcting misplacements, if any.
vi) Induction and Orientation: Induction and orientation are the
techniques by which a new employee is rehabilitated in the changed
surrounding and introduced to the practices, policies, purposes and
people etc., of the organisation.
 Acquaint the employee with the company philosophy,
objectives, policies, career planning and development,
opportunities, product, market share, social and community
standing, company history, culture etc.
 Introduce the employee to the people with whom he has to work
such as peers, supervisors and subordinates.
 Mould the employes attitude by orienting him to the new
working and social environment.
2. Performance and Development: It is the process of improving,
moulding and changing the skills, knowledge, creative ability, aptitude,
attitude, values, commitment etc., based on present and future job and
organisational requirements.
27
Introduction i) Performance Appraisal: It is the systematic evaluation of
to Human individuals with respect to their performance on the job and their
Resource
Management potential for development. It includes:
 Developing policies, procedures and techniques.
 Helping the functional managers.
 Reviewing of reports and consolidation of reports.
 Evaluating the effectiveness of various programmes.
ii) Training: It is the process of imparting to the employees technical
and operating skills and knowledge.
It includes:
 Identification of training needs of the individuals and the
company.
 Developing suitable training programmes.
 Helping and advising line management in the conduct of
training programmes.
 Imparting of requisite job skills and knowledge to employees.
 Evaluating the effectiveness of training programmes.
iii) Management Development: It is the process of designing and
conducting suitable executive development programmes so as to
develop the managerial and human relations skill of employees. It
includes:
 Identification of the areas in which management development is
needed.
 Conducting development programmes.
 Motivating the executives.
 Designing special development programmes for promotions.
 Using the services of specialists, and/or utilising of the
institutional executive development programmes.
 Evaluating the effectiveness of executive development
programmes.
iv) Career Planning and Development: It is the planning of one‟s
career and implementation of career plans by means of education,
training, job search and acquisition of work experiences. It includes
internal and external mobility.
v) Internal Mobility: It includes vertical and horizontal movement of
an employee within an organisation.
It consists of transfer, promotion and demotion.
vi) Transfer: It is the process of placing employees in the same level
jobs where they can be utilised more effectively in consistence with

28
 their potentialities and needs of the employees and the organisation. Functions of
It also deals with: Human
Resource
 Developing transfer policies and procedures. Management

 Guiding employees and line management on transfers.

 Evaluating the execution of transfer policies and procedures.
vii) Promotion: It deals with upward reassignment given to an employee
in the organisation to occupy higher position which commands
better status and/or pay keeping in view the human resources of the
employees and the job requirements. This function covers.
 Formulating of equitable, fair and consistent promotion policies
and procedures.
 Advising line management and employees on matters relating to
promotions.
 Evaluating the execution of promotion policies and procedures.
viii) Demotion: It deals with downward reassignment to an employee in
the organisation.
 Develop equitable, fair and consistent demotion policies and
procedures.
 Advising line managers on matters relating to demotions.
 Oversee the implementations of demotion policies and
procedures.
ix) Retention and Retrenchment Management: Employers prefer to
retain more talented employees while they retrench less talented
employees. Employers modify existing human resource strategies
and craft new strategies in order to pay more salaries, provide more
benefits and create high quality of work life to retain the best
employees. And managements pay less to the less talented
employees and plan to retrench the misfits as well as unwanted
employees depending upon the negetive business trends.
x) Change and Organisation Development: Change implies the
creation of imbalances in the existing pattern or situation.
Organisation development is a planned process designed to improve
organisational effectiveness and health through modifications in
individual and group behaviour, culture and systems of the
organisation using knowledge and technology of applied behavioural
sciences.
C. Compensation Management: It is the process of providing adequate,
equitable and fair remuneration to the employees. It includes job
evaluation, wage and salary administration, incentives, bonus, fringe
benefits, social security measures etc.
i) Job Evaluation: It is the process of determining relative worth of
jobs.
 Select suitable job evaluation techniques. 29
Introduction  Classify jobs into various categories.
to Human
Resource  Determining relative value of jobs in various categories.
Management
ii) Wage and Salary Administration: This is the process of developing
and operating a suitable wage and salary programme. It covers:
 Conducting wage and salary survey.
 Determining wage and salary rates based on various factors.
 Administering wage and salary programmes.
 Evaluating its effectiveness.
iii) Incentives: It is the process of formulating, administering and
reviewing the schemes of financial incentives in addition to regular
payment of wages and salary. It includes:
 Formulating incentive payment schemes.
 Helping functional managers on the operation.
 Review them periodically to evaluate effectiveness.
iv) Bonus: It includes payment of statutory bonus according to the
Payment of Bonus Act, 1965 and its latest amendments.
v) Fringe Benefits: These are the various benefits at the fringe of the
wage. Management provides these benefits to motivate the
employees and to meet their life‟s contingencies. These benefits
include:
Disablement benefit.
 Housing facilities.
 Educational facilities to employees and children.
 Canteen facilities.
 Recreational facilities.
 Conveyance facilities.
 Credit facilities.
 Legal clinics.
 Medical, maternity and welfare facilities.
 Company stores.
vi) Social Security Measures: Managements provide social security to
their employees in addition to the fringe benefits. These measures
include:
 Workmen‟s compensation to those workers (or their
dependents) who involve in accidents.
 Maternity benefits to women employees.
 Sickness benefits and medical benefits.
 Disablement benefits/allowance.
30
  Dependent benefits. Functions of
Human
 Retirement benefits like provident fund, pension, gratuity etc. Resource
Management
D. Integration: Practicing various human resources policies and
programmes like employment, development, compensation and
interaction among employees create a sense of relationship between the
individual worker and management, among workers and trade unions
and the management.
It is the process of interaction among human beings. Human relations is
an area of management in integrating people into work situations in a
way that motivates them to work together productively, co-operatively
and with economic, psychological and social satisfaction. It includes:
 Employee engagement
 Understanding and applying the models of perception, personality,
learning, intra- and inter-personal relations, intra- and inter-group
relations.
 Motivating the employees.
 Boosting employee morale.
 Developing the communication skills.
 Developing the leadership skills.
 Grievance redressal
 Handling disciplinary cases by means of an established disciplinary
procedure.
 Counseling the employees in solving their personal, family and work
problems and releasing their stress, strain and tensions.
 Providing a comfortable work environment by reducing fatigue,
monotony, boredom and industrial accidents.
 Improving quality of work life of employees through participation
and other means.
E. Employee Relations: The term „industrial relations‟ refers to the study
of relations among employees, employers, government and trade unions.
Industrial relations include:
 Trade unionism
 Collective bargaining
 Industrial conflicts
 Workers‟ participation in management
Emerging Functions in HRM: Apart from the above mentioned
functions of HRM, these are some emerging functions. Human
Resources Management has been advancing at a fast rate. The recent
trends in HRM include:

31
Introduction
to Human
Resource  Strategic HRM
Management
 Ethics and HRM
 HR accounting, audit and research and
 International HRM
 HR outsourcing

Activity B: Prepare a handbook containing the HR functions which can be

used by HR managers.

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

2.3 ROLES AND RESPONSIBILITIES OF HR

MANAGERS
The role of HRM is to plan, develop and administer policies and programs
designed to make optimum use of an organization‟s human resources. It is
that part of management which is concerned with the people at work and with
their relationship within organisation. Its objectives are:

(a) effective utilization of human resources, (b) desirable working relationships

among all members of the organizations, and (c) maximum individual
development.
Human resources functions as primarily administrative and professional.
With the changing scenario they are involved in company‟s overall strategic
management also.

HR professionals have an all encompassing role. They are required to have a

thorough knowledge of the organization and its intricacies and complexities.
The ultimate goal of every HR manager should be to develop a linkage
between the employee and organization because employee‟s commitment to
the organization is crucial. The first and foremost role of HR manager is to
impart continuous education to the employees about the changes and
challenges facing the country in general and their organization in particular.
The employees should know about the balance sheet of the company, sales
progress, and diversification of plans, share price movements, turnover and
other details about the company. The HR professionals should impart such
knowledge to all employees through small booklets, video films and lectures.

The primary responsibilities of Human Resource Managers are:

 To develop a thorough knowledge of corporate culture, plans and
policies;
 To act as an internal change agent and consultant;
32
  To initiate change and act as an expert and facilitator; Functions of
Human
 To actively involve in company„s strategy formulation; Resource
 To keep communication line open between the HRD function and Management

individuals and groups both within and outside the organization;

 To identify and evolve HRD strategies in consonance with overall
business strategy;
 To facilitate the development of various organizational teams and
their working relationship with other teams and individuals;
 To try and relate people and work so that the organization objectives
are achieved efficiently and effectively;
 To diagnose problems and determine appropriate solution
particularly in the human resource areas;
 To provide co-ordination and support services for the delivery of
HRD programmes and services; and
 To evaluate the impact of an HRD intervention or to conduct
research so as to identify, develop or test how HRD in general has
improved individual and organizational performance.
Different management gurus have deliberated different roles for the HR
managers based on the major responsibilities that they full fill in the
organization. Few of the commonly accepted models are enumerated below.
Pat McLagan has suggested nine roles that are played by HR professionals,
which are presented in the Box 1.
Box 1: Roles played by the HR
Professionals.

33
Introduction 1. To bring the issues and trends concerning an organization’s external and
to Human
Resource internal people to the attention of strategic decision makers and to
Management recommend long term strategies to support organizational excellence and
endurance.
2. To design and prepare HR systems and actions for implementation so that they
can produce maximum impact on organizational performance and
development.
3. To facilitate the development and implementation of strategies for
transforming one’s own organization by pursuing values and visions.
4. To create a positive relationship with the customer’s by providing them with
the best services; to utilize the resources to the maximum and to create
commitment among the people who help the organization to meet the
customers needs whether directly connected or indirectly connected to the
organization.
5. To identify the learning needs hence to design and develop structured learning
programmes and materials to help accelerate learning for individuals and
groups.
6. To enable the individuals and groups to work in new situations and to expend
and change their views so that people in power move from authoritarian to
participative models of leadership.
7. To help employees to assess their competencies, values and goals so that they
can identify, plan and implement development plans.
8. He also assists the individual employee to add values in the workplace and to
focus on the interventions and interpersonal skills for helping people change
and sustain change.
9. He assesses the HRD practices and programmes and their impact and to
communicate results so that the organization and its people accelerate their
change and development.

Emerging Roles of HR Managers

According to R.L Mathis and J. H. Jackson (2010) several roles can be
fulfilled by HR management. The nature and extent of these roles depend on
both what upper management wants HR management to do and what
competencies the HR staff have demonstrated. Three roles are typically
identified for HR. The focus of each of them, as shown in Figure 2 is
elaborated below:

Figure 2: Emerging Roles of HR Managers

Administrative Operational Actions Strategic HR

HR practices; Managing employees, Organizational/busines
Legal compliance forms relationship issues, strategies,
and paperwork Employee advocate. HR strategic or planning,
Evaluation of HR effectiveness.

34
1. Administrative Role of HR Functions of
Human
The administrative role of HR management has been heavily oriented to Resource
Management
administration and recordkeeping including essential legal paperwork
and policy implementation. Major changes have happened in the
administrative role of HR during the recent years. Two major shifts
driving the transformation of the administrative role are: Greater use of
technology and Outsourcing.
Technology has been widely used to improve the administrative
efficiency of HR and the responsiveness of HR to employees and
managers, more HR functions are becoming available electronically or
are being done on the Internet using Web-based technology. Technology
is being used in most HR activities, from employment applications and
employee benefits enrollments to e-learning using Internet-based
resources.
Increasingly, many HR administrative functions are being outsourced to
vendors. This outsourcing of HR administrative activities has grown
dramatically in HR areas such as employee assistance (counseling),
retirement planning, benefits administration, payroll services, and
outplacement services.
2. Operational and Employee Advocate Role for HR
HR managers manage most HR activities in line with the strategies and
operations that have been identified by management and serves as
employee ―champion for employee issues and concerns.
HR often has been viewed as the employee advocate in organizations.
They act as the voice for employee concerns, and spend considerable
time on HR crisis management, dealing with employee problems that are
both work-related and not work-related. Employee advocacy helps to
ensure fair and equitable treatment for employees regardless of personal
background or circumstances.
Sometimes the HR‟s advocate role may create conflict with operating
managers. However, without the HR advocate role, employers could face
even more lawsuits and regulatory complaints than they do now.
The operational role requires HR professionals to cooperate with various
departmental and operating managers and supervisors in order to identify
and implement needed programs and policies in the organization.
Operational activities are tactical in nature. Compliance with equal
employment opportunity and other laws is ensured, employment
applications are processed, current openings are filled through
interviews, supervisors are trained, safety problems are resolved, and
wage and benefit questions are answered. For carrying out these
activities HR manager matches HR activities with the strategies of the
organization.
3. Strategic Role for HR
The administrative role traditionally has been the dominant role for HR.
However, it is observed that a broader transformation in HR is needed so
35
Introduction that significantly less HR time and fewer HR staffs are used just for
to Human clerical work.
Resource
Management
Differences between the operational and strategic roles exist in a number
of HR areas. The strategic HR role means that HR professionals are
proactive in addressing business realities and focusing on future business
needs, such as strategic planning, compensation strategies, the
performance of HR, and measuring its results. However, in some
organizations, HR often does not play a key role in formulating the
strategies for the organization as a whole; instead it merely carries them
out through HR activities.
Many executives, managers, and HR professionals are increasingly
seeing the need for HR management to become a greater strategic
contributor to the ―business success of organizations. HR should be
responsible for knowing what the true cost of human capital is for an
employer. For example, it may cost two times key employees„ annual
salaries to replace them if they leave. Turnover can be controlled though
HR activities, and if it is successful in saving the company money with
good retention and talent management strategies, those may be important
contributions to the bottom line of organizational performance.
The role of HR as a strategic business partner is often described as
―having a seat at the board level and contributing to the strategic
directions and success of the organization. That means HR is involved
in devising strategy in addition to implementing strategy. Part of HR„s
contribution is to have financial expertise and to produce financial
results, not just to boost employee morale or administrative efficiencies.
Therefore, a significant concern for chief financial officers (CFOs) is
whether HR executives are equipped to help them to plan and meet
financial requirements.
However, even though this strategic role of HR is recognized, many
organizations still need to make significant progress toward fulfilling it.
Some examples of areas where strategic contributions can be made by
HR Managers are presented in the box 2:
Box 2: Strategic Contributions by HR Managers
 Evaluating mergers and acquisitions for organizational compatibility,
structural changes, and staffing needs
 Conducting workforce planning to anticipate the retirement of
employees at all levels and identify
 workforce expansion in organizational strategic plans
 Leading site selection efforts for new facilities or transferring operations
to international outsourcing locations based on workforce needs
 Instituting HR management systems to reduce administrative time,
equipment, and staff by using HR technology
 Working with executives to develop a revised sales compensation and
incentives plan as new products
 It is the era when for the competitive triumph of the organization there is
a need to involve HRM significantly in an integrated manner, which
36 demands such capabilities from the HR specialists.
The role of HR shifted from a facilitator to a functional peer with Functions of
competencies in other functions, and is acknowledged as an equal partner by Human
Resource
others. The HR is motivated to contribute to organizational objectives of Management
profitability and customer satisfaction, and is seen as a vehicle for realization
of quality development. The department has a responsibility for monitoring
employee satisfaction, since it is seen as substitute to customer satisfaction.

Corporate Vision

HR Soft Ss HR Hard Ss
1. Style 1. Strategy
2. Staff 2. Structure
3. Skills 3. Systems
4. Superordinate goals

Business Strategy

Organisational Effectiveness

Figure 3: Seven Ss Model

According to McKinsey„s 7-S framework model HR plays the role of a

catalyst for the organization. According to this framework (Figure 3),
effective organizational change is a complex relationship between seven Ss.
HRM is a total matching process between the three Hard Ss (Strategy,
Structure and Systems) and the four Soft Ss (Style, Staff, Skills and Super-
ordinate Goals). Clearly, all the Ss have to complement each other and have
to be aligned towards a single corporate vision for the organization to be
effective. It has to be realized that most of the Ss are determined directly or
indirectly by the way Human Resources are managed, and therefore, HRM
must be a part of the total business strategy.

New Roles of Human Resource Management

Human Resource Management in the 'New Millennium' has undergone a
great revolution by questioning the accepted practices and re-inventing the
organizations as well as structures. Many traditional practices have been
thrown out. As an example, it can be seen that hierarchies are vanishing and
there is greater emphasis on flat organizations. It means a great deal of
specialisation and skills. It also means upgrading the norms and standards of
work as well as performance.
37
Introduction The new role of human resource management is much more strategic than
to Human before. Some of the new directions of the role of HRM can be summed up as
Resource
Management follows:

1. A Facilitator of Change: To carry people through upheaval requires the

true management of human resources.
2. An Integrated Approach to Management: Rather than being an
isolated function, human resource is regarded as a core activity, one
which shapes a company„s values. In particular, this can have an impact
on customer service.
3. A Mediator: Establishing and balancing the new and emerging
aspirations and requirements of the company and the individual.

These changes, which are taking place, involve more commitment of the
organization to the development of people by improving performance and
cutting costs. As a result of this, the duration of tenure, which was
traditionally long standing, is now limited, future is becoming less certain,
management opportunities are self determined and motivational factors are
more concerned with enhancing future employability rather than loyalty to
the company and, at the same time, the rewards are going up in terms of
higher salaries. The future creative careers, will require more involved
approach to career development, which will include:

i) Share employees with strategic partner organizations (customers of

suppliers) in lieu of internal moves.
ii) Encourage independence : Employees may go elsewhere for career
development, possibly to return in a few years.
iii) Fund-groups of employees to set-up as suppliers outside the
organization.
iv) Encourage employees to think of themselves as a business and of the
organization„s various departments as customers.
v) Encourage employees to develop customers outside the organization.
vi) Help employees develop self-marketing, networking and consultancy
skills to enable them to search out, recognize or create new
opportunities for both themselves and the organization.
vii) Identify skilled individuals in other organizations who can contribute
on a temporary project basis or part-time.
viii) Regularly expose employees to new people and ideas to stimulate
innovation.
ix) Balance external recruitment at all levels against internal promotion to
encourage open competition, competitive tendering for jobs to
discourage seeing positions as someone„s territory which causes self-
protective conformity.
x) Foster more cross-functional teamwork for self-development.

38
xi) Eliminate the culture of valuing positions as career goals in favour of Functions of
portraying a career as a succession of bigger projects, achievements and Human
Resource
new skills learned. The concept of position is part of the outside static Management
concept of the organization. Positions are out. Processes and projects
are in.
xii) Abandon top-down performance appraisal in favour of self-appraisal
based on internal customer satisfaction surveys and assessing people as
you would suppliers.
xiii) Replace top-down assessment processes with self-assessment
techniques and measure performance in term of results.

Activity C: Present a caselet indicating the traditional HR roles and the

changing roles.

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

2.4 FUNCTIONS OF HUMAN RESOURCE

MANAGERS
A human resource manager charged with fulfilling the objectives of an
organization, should be a leader with high intellectual powers, a visionary
and a philosopher who provides the initiative to shape the future in terms of
leading the human beings in an organization towards more prosperous and
progressive policies. Following are some of the functions of HR managers.

1. Human Resource Manager as an Intellectual : The basic skill in the

human resource field as compared to technologists or financial experts is
the skill to communicate, articulate, understand and above all, to be an
expert when it comes to putting policies and agreements in black and
white. The HR manager‟s man„s skill lies in his command over the
language. HR has to deal with employees and he must possess the skills
of conducting fruitful and systematic discussions and of communicating
effectively. He should also be in a position to formulate principles and
foresee the problems of the organization. This means that he would
require the mental ability to deal with his people in an intelligent manner
as well as to understand what they are trying to say.
2. Human Resource Manager as an Educator : It is not enough that a
human resource man has command-over the language, which, however,
remains his primary tool. He should be deeply interested in learning and
also in achieving growth. Basically, human beings like to grow and
realise their full potential. In order to harmonise the growth of
individuals with that of the organization, a personnel administrator must
not only provide opportunities for his employees to learn, get the
39
Introduction required training and assimilate new ideas but also he himself should be
to Human a teacher.
Resource
Management
3. Human Resource Manager as a Discriminator : A human resource
administrator must have the capacity to discriminate between right and
wrong, between that which is just and unjust and merit and nonmerit. In
other words, he should be a good judge when he sits on a selection
board, a fair person when he advises on disciplinary matters and a good
observer of right conduct in an organization.
4. Human Resource Manager as an Executive : The human resource
manager must execute the decisions of the management and its policies
with speed, accuracy and objectivity. He has to streamline the office,
tone up the administration and set standards of performance. He has to
coordinate the control functions in relation to the various other divisions
and, in doing so he should be in a position to bring unity of purpose and
direction in the activities of the HR department. He must ask relevant
questions and not be merely involved in the office routine whereby the
status quo is maintained. He should have the inquisitiveness to find out
causes of delay, tardy work and wasteful practices, and should be keen to
eliminate those activities from the personnel functions which have either
outlived their utility or are not consistent with the objectives and
purposes of the organization.
5. Human Resource Manager as a Leader: Being basically concerned
with people or groups of people, and being placed in the group dynamics
of various political and social functions of an organization, a Human
resource man must not shirk the role of leadership in an organization.
He, by setting his own example and by working towards the objectives of
sound HR management practices, must inspire his people and motivate
them towards better performance. He should resolve the conflicts of
different groups and build up teamwork in the organization.
6. Human Resource Manager as a Humanist: Deep faith in human
values and empathy with human problems, especially in less developed
countries, are the sine qua non for a Human resource manager. He has to
deal with people who toil at various levels and partake of their joys and
sorrows. He must perform his functions with sensitivity and feeling.
7. Human Resource Manager as a Visionary: While every leading
function of an organization must evolve its vision of the future, the
primary responsibility for developing the social organization towards
purposive and progressive action fall on the personnel man. He should be
a thinker who sets the pace for policy-making in an organization in the
area of human relations and should gradually work out new patterns of
human relations management consistent with the needs of the
organization and the society. He must ponder on the social obligations of
the enterprise, especially if it is in the public sector, where one has to
work within the framework of social accountability. He should be in
close touch with socio-economic changes in the country. He should be
able to reasonably forecast future events and should constantly strive to
meet the coming challenges.
40
2.5 EMERGING ASPECTS OF HRM FUNCTION Functions of
Human
Resource
Along side the changing functions of HRM and changing roles of HR Management

managers there is also evidence of emerging new aspects of HRM function

such as strategy and HRM ethics and HRM, and HRM outsourcing. Some of
them are discussed below.

Strategy and HRM

The primary goal of every organization is to remain and relevant in business.
To achieve this goal, organizations should be effective and efficient in their
operations within the limitations of their resources. Therefore, management
think of strategy, which is referred to as a set of coordinated and monitored
choices and actions within the framework of the organizations. A strategy is
regarded to be more than decisions, also is putting choices into practice.
However, regarding HR management in organizations, there are two basic
types of strategy. (i) competitive business strategy, which involves choice
making and how to serve their customers better; and (ii) human resource
strategy that involve choice making regarding the management of people
within the organization. Further, there is need to harmonize the two strategies
in order to ensure high organizational performance as significant attention
has been given to HR becoming a strategic partner. This concept has led to
the formation of Strategic Human Resource Management (SHRM), which is
an integration of the strategic management and human resource management.
SHRM points to the contribution of HRM to the performance of
organizations, evidently, organizations adopting a particular strategy require
HR practices that may differ from those required by organizations adopting
alternative strategies (Delery and Doty, 1996), meaning that there is an
important link between organizational strategy and HR practices that are
implemented in that organization.

Ethics & HRM

HR practitioners play major role in keeping, disseminating and enforcing
organizational ethics. Some areas of ethical misconduct involving HR
activities are depicted in Table 1. Essentially, these ethical issues generate
fundamental questions about fairness, justice, and truthfulness, therefore
making the study of ethics wide and complex.

41
Introduction Table 1: Examples of Ethical Misconduct in HR Activities
to Human
Resource
Management Types of Misconduct Examples of Employee, Supervisor, and
Managerial Behavior

Compensation  Falsifying expense reports

 Inappropriate overtime classifications
 Misrepresenting hours and time
worked
 Personal bias in performance
appraisals and pay increases

Employee Relation  Personal gains/gifts from vendors

 Intentionally violating safety/health
regulations
 Misusing/stealing organizational assets
and supplies
 Employees lying to supervisors
 Executive/managers providing false
information to public, customers and
ventors

Staffing & Equal Employment  Sexual harassment

 Sex, race, and age discrimination in
hiring, discipline, and termination
 Favouritism an hiring and promotion

Source: Adapted from Mathis & Jackson (2006)

HR Outsourcing
The concept of outsourcing is familiar to us with the term „BPO‟ i.e.
Business process outsourcing. Outsourcing simply refers to the use of another
party or third party to carry out various or specific business operations or
functions. A similar kind of concept newly emerges for the HR functions as
well where the variety of specific HR functions of an organization is
delegated to another outside party who are expert to carry out HR functions.

Challenges that an organization deals with while opting for outsourcing is

which function should be outsourced, to whom it can be outsourced, for how
long the function can be outsourced and how the relationship with the
outsourced company can be managed for getting the functions done
effectively. The mixed thoughts and emotions associated with HR
outsourcing is available in the literature. Many have supported that provides
potential gains in HR functions but desired cost-saving rarely materialized
(Cooke et al., 2005). Although many organizations still opt for outsourcing
their various business activities and in fact decisions to outsource functions
have increased, albeit perhaps cautiously (CIPD, 2011). CIPD(2011) has
explained the potential benefits of HR outsourcing along with the associated
42
challenges. The benefit of „reduced cost‟ comes with the challenge of Functions of
determining which function can be outsourced. If the manager is not aware of Human
Resource
the particular HR functions completely it will lead to the unnecessary Management
increased cost of outsourcing. The benefit of „increased efficiency and speed
of response‟ comes with the loss of tacit knowledge of the organization.
With outsourcing, an organization takes the benefit of a sophisticated e-HR
system of provider but at the cost of losing control over the HR process and
decision making. Along with these benefits, an organization takes the
advantage of HR expertise and knowledge of a third party but have to
dissociate itself with the day-to-day operations of HR decision making. Only
the strategic HR decision making remains with the organization.

2.6 CHALLENGES FACED BY HR MANAGERS

HR activities in organizations are facing some challenges in practice, such as
occupational shifts; quality of available workforce; growth in casual workers;
technological shifts; gender diversity; racial/ethnic diversity; age limit;
gloabalization and organizational restructuring. However, challenges facing
HR managers are seen from two perspectives; internal and external and could
be classified into three: (i) organizational challenges these are internal in
nature and often results from environmental forces that are external by
nature. Some of the issues emanating from the organizations include
organizational restructuring, organizational culture, outsourcing, downsizing
and decentralization; (ii) environmental challenges they are issues emanating
from the external context where the company operates, which has great
influence on performances of organizations. These include; legislation,
globalization, labour demand and supply, an work diversity; and (iii)
individual challenges are the issues regarding employees, how they are being
treated, matching individuals with organizations, employee development,
insecurity, and reward systems, which affects organizational performance.

2.7 SUMMARY
This unit extends the understanding of human resource management with the
functions performed under HRM as a management function. It also described
the roles and responsibilities of HR managers including the emerging
functions.

2.8 SELF ASSESSMENT QUESTIONS

1. Discuss the functions of human resource management with the help of
examples.
2. What are the roles and responsibilities of HR managers?
3. Describe the challenges faced by HR managers citing examples.

43
Introduction
to Human
Resource
Management 2.9 FURTHER READINGS AND REFERENCES
 Jyothi, P. and Venkatesh, D.N. (2006), Human Resource Management,
Oxford
 Gupta, C.B. (1997), Human Resource Management, Sultan Chand
 Armstrong, Michael (2020), A Handbook of Human Resource
Management Practice, Kogan Page
 P Subba Rao, 5th edition, 2014, Personnel and Human Resource
Management, Himalaya Publishing House

44
UNIT 3 ENVIRONMENT AND HRM Environment
and HRM

Objectives
After completion of this unit, you should be able to:

 Understand the Environmental/organisational factors and its influence

on HRM
 Explain the concept of strategic HRM
 Discuss the importance of international HRM
 Understand the concept of HR analytics

Highlight the emerging trends i.e 4th Industrial revolution and Artificial
intelligence and its influence on HRM

Structure
3.1 Introduction
3.2 Organisational environment and HRM
3.3 Strategic Human Resource Management
3.4 International Human Resource Management
3.5 HR analytics
3.6 4th Industrial Revolution and HRM
3.7 Artificial intelligence and HRM
3.8 Summary
3.9 Self-assessment questions
3.10 Further readings and References

3.1 INTRODUCTION
HRM is a major management function for managing people in organisations.
It has evolved over a period of time due to impact of changing orginastional
environment. An organizational environment is composed of several
forces/factors that affect the short-term as well as long term objectives. Since
they have a direct influence on the organization, the human resources of an
organization also get exposed to it and thus their functions and performance
affects. The analysis and scanning of the environment by an HR manager to
proactively devise a course of action for human resource to avoid future
uncertain negative consequences and intense competition. Such scanning is
usually done under two types of environment- internal and external. New
trends and developments are always observed in the HRM operations. Some
of the recent developments include strategic HRM, international HRM, HR
analytics. Similarly the changes in organizational environment which is
drastically changing the HRM operations are 4th industrial revolution,
artificial intelligence are discussed in this unit.
45
Introduction
to Human
3.2 ORGANISATIONAL ENVIRONMENT AND
Resource HRM
Management

Environmental influences are factors that impact the Human Resource

Management operations within an organization. Factors influencing Human
Resource Management are not static. Factors influencing HRM exhibit 1 can
be classified into two categories:

A. External environment
B. Internal environment
Organisational Environment

Exhibit 1: Orgnisational Environment Factors

These factors are constantly changing and HR Managers must continually
monitor these internal and external factors and make corresponding changes
in the HR strategy.

A. External environment: It includes factors like: Government regulations,

economic conditions, technological advancements and workforce
demographics.
a. Government Regulations: Presence of Government regulations
with the introduction of new workplace compliance w.r.t work,
workers and workplace, HR is constantly under pressure to stay
within the law. These types of regulations influence every process of
the HR department, including hiring, training, compensation,
termination, and much more. Without adhering to such regulations a
company can be fined extensively which if it was bad enough could
cause the company to shut down.
b. Economic Conditions: One of the biggest external influences is the
shape of the current economy. Not only does it affect the talent pool,
but it might affect your ability to hire anyone at all. One of the
biggest ways to prepare against economic conditions is to not only
know what‟s happening in the world around you, but also create a
46
 plan for when there is an economic downturn. All companies Environment
canmake due in a bad economy if they have a rainy day fund or plan and HRM

to combat the harsh environment.

c. Technological Advancements: This is considered an external
influence because when new technologies are introduced the HR
department can start looking at how to downsize and look for ways
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.
d. Workforce Demographics: As the older generation retires and a
new generation enters the workforce the human resources
department must look for ways to attract this new set of candidates.
They must hire by adapting different methods and offer different
types of compensation packages that work for this younger
generation. At the same time, they must offer acondusive work
environment.
e. Legal factors like organizational health, trading, competition and
regulations from legal firms directly affect a business. The important
legislations affecting HRM in India are:
i. Factories Act, 1948
ii. Trade Unions Act, 1926
iii. The Payment of Wages Act, 1936
iv. The Minimum Wages Act, 1948
v. Employees State Insurance Act, 1948
vi. Workmen‟ Compensation Act, 1923
vii. The Payment of Bonus Act, 1965
viii. The Payment of Gratuity Act, 1972
ix. The Maternity Benefit Act, 1961
x. The Apprentice Act, 1961
xi. Industrial Employment (Standing Orders) Act, 1946. etc.
HRM must operate within the law and stay updated on legal
changes. Legislative factors determine the grievances HRM has to
address.
The external environment that can affect any business operation can be
summarized as PESTEL (political, economic, social, technological,
environmental and legislative factors). PESTEL changes are continuously
impacting on human resource policies. These factors affect the internal
operations regardless of the fact that they are outside the organization.
a. Political factors include government funding, initiatives and grants.
Political instability, taxation and relationship with other
governments, impact directly on human resource practices.
47
Introduction Therefore, it is important to check these factors prior to establishing
to Human an operation.
Resource
Management
b. Economic factors such as inflation, unemployment, exchange rates,
interest rates, rate of economic development, government and
consumer spending directly affect the organizations. Higher interest
rates hinder investmentas this raises the cost of borrowing. Inflation
in commodity prices may make employees demand more money as
salaries and this will in turn raise operational costs of the company.
An increase in disposable income will as well create a broad market
for the products manufactured by the company.
c. Social factors: Lifestyle, ethics, demographics, education and
culture are some of the social factors that affect the business
operations. Any change in these factors will have a greater influence
in demand for products and the availability of workforce willing to
labor for the company. Understanding the surrounding culture helps
HRM put in place a culture that blends with its environment. Social
changes affect organizational culture and have enabled organizations
embrace cultural differences. HR practitioners need to keep abreast
of social changes in order to fully understand their employees.
d. Technological factors: Technical research, purchasing power,
technological innovation and intellectual capacity affect HR
operations. Any change in technology creates a need to restructure
human resource structure and policies. Technology has found its
way into business operations such as marketing and selling through
online shopping and computer designs to alter how business
functions are carried out. Today, recruitment and selection processes
can easily be done on an online platform. Human resource
management creates online portal to increase efficiency in these
processes. This has eliminated the cost of advertising vacancies as
candidates visit websites to find vacancies.
B. Internal environment: Internal environment factors are also known as
organizational factors. According to Kotler and Armstrong the internal
environment that affect human resource practitioners comprises of
customers, consumers, suppliers, compensation, new entrants and
competitors. HRM professionals need to consider internal environment
in the following aspects;
a. Compensation
The amount of compensation a business offers attracts employees to
an organization or keeps them away. In an economy characterized
by high unemployment rate and many qualified individuals,
compensation may be low. When there are a small number of a
candidates, HRM should attract them by increasing compensation so
as not to lose them to competitors. A survey of compensation
structure of an industry will help a company have competitive offers
in order to gain a competitive advantage over others in terms of
attracting and retaining employees. However, the offer should not be
48 too high in such a way that they bring losses to the company.
 Experienced staff should be given more compensation than recently Environment
recruited graduates in the same job category. and HRM

b. Employee Relations
Human resource activities must consider several factors like training
their staff before promoting them when their recruitment policies are
based on internal promotion. They should monitor retiring
employees so that replacement arrangements are made in time.
c. Customers’ satisfaction
Change in customer preferences need to be taken into account since
this affects service delivery. HRM should hire employees who have
the consumers‟ interest at heart. Continuous training and retraining
is important in order to increase performance thereby satisfaction.
d. New entrants
These are businesses entering into an industry. New entrants offer
competitive salaries that attract employees. HRM should analyze
their industry in order to know new entrants. This will help them
have strategies aimed at retaining in order prevent them from being
poached by the new entrant.
Some of the other important internal factors which can also influence the
HRM operations include the following.
a. Organisations Size: The size of organisation has immense impact
on HR practices. Larger the firm more complex the HR practices.
Large firms, such as international or multinational have additional
scope to their HR implementations. To put it another way, smaller
firms generally have personnel management functions, which could
include either simple or less complicated. The style of management,
whether autocratic or democratic depends on the size of the firms.
b. Organisational Structure: Organizational structure is a system
used to define a hierarchy within an organization. It identifies each
job, its function and where it reports to within the organisation. A
firm's strategy and structure are important in determining HR
practices. With increase in global competition and highly changing
business environment HR practices are becoming more flexible and
integrated. There are important structural differences among firms
that affect the way in which HR practices are designed and
implemented.
c. Business Strategy: To gain competitive advantage, firms use
different competitive strategies. In order that the strategies prove
advantageous they have to besynchronized with the HR policies.
d. Organisation Culture: Organizational culture is a system of shared
assumptions, values, and beliefs, which direct how people behave in
organizations. These shared values have a strong influence on the
people in the organization and dictate how they dress, act, and
perform their jobs. Every organization develops and maintains a
49
Introduction unique culture, which provides guidelines and boundaries for the
to Human behavior of the members of the organization.
Resource
Management
e. Top Management and Line Mangers: The directives of top
management and their concerns could be another factor that impact
HRM practices. HRM Policies depend upon the importance which
top management assign to HR function. The top managements set
the course for formulation and implementation of HR activities.
f. Power and Politics: Organizational power and politics are crucial
determinants of HR practices. While executing new policies and
procedures in the organisation, the role of power and politics is
assumed. HR manager has to identify the critical element of the HR
practices and accurately determine their source of power.

Activity A: Go through an organisations profile or annual report and derive

the factors that influence the functioning of the organisation.

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

3.3 STRATEGIC HUMAN RESOURCE

MANAGEMENT
According to Anthony et. al (1996) strategy can be defined as “the
formulation of organizational missions, goals and objectives, as well as the
action plans for achievement, that explicitly recognize the competition and
the impact of outside environmental forces”. The classical approach of
strategy refers to the ability, capacity and readiness of the management to
make long term planning to make decisions and actions to achieve the
organizational goals effectively. Therefore, management can be seen as “a
field that deals with managerial decisions and actions to improve the long-run
performance of organizations” (Crawshaw, Budhwar& Davis, 2017).
According to them, strategic management incorporates:

1. Organizational identification: It refers to the identification of the

purpose and mission of the organization that currently exists along with
the goals and objectives that an organization strives to achieve with
shared values and culture.
2. Environmental analysis: It refers to analyzing the internal as well as the
external environment in which an organization operates. In assessment
and analysis of internal and external influencing factors, an organization
can identify its strength, weakness, opportunities and threats prevailing
in the business environment. Such an analysis is called SWOT( Strength,
Weakness, Opportunity, Threats) analysis. Apart from SWOT analysis,
PESTEL (political, economic, social, technological, environmental and
50
 legal) analysis is the most used technique to analyze the macro- Environment
environment of an organization. and HRM

3. Strategy formulation: This aims at the identification of the basis for the
firm‟s competitive advantage. The strategy formulation is a complex and
comprehensive step as it needs to flexible enough to incorporate a
dynamic and uncertain business environment.
4. Strategy implementation: This is to make organizational strategy
meeting its desired objectives, its implementation in an effective manner
is crucial. The exploitation of resources effectively, optimum utilization
of management system and implementation of effective HR practices are
required for the implementation of organizational strategies.
5. Strategy evaluation: It is an appropriate strategy is formulated and its
effective implementation is made, it‟s an evaluation at regular interval of
time is necessary to check whether the strategies are meeting their goal
or not. Any deviation or variation in actual and desired result leads to
corrective measure in some or all parts of strategies formulation or
implementation.

All three levels of the organization i.e. corporate, business and functional
area involved in strategy formulation. The corporate level of an organization
defines and develops a strategy for an entire organization. The managerial
decision and actions for business units are defined in strategies formulated by
the business level. To support the functions or operations of business units,
policies, procedures and practices are formulated under functional strategies.
As HRM is one of the biggest functional areas of an organization, therefore
various HR decision and strategy formulation are made at a functional level.
According to Schuler (1989), three fundamental HR philosophies guide and
provides values for managing the people of the organization. These are:
„accumulation‟, „utilisation‟ and „facilitation‟. Whereas Armstrong (2006)
identified four fundamental HR areas that define philosophies and policies in
specific areas of HRM: (i) Employee resourcing ( planning, recruitment,
selection, separation, talent management), (ii) employee development (
training, development, careers, performance management), (iii)employer
rewards (job evaluation, compensation, incentives, benefits), and (iv)
employee relations (participation, involvement, communication, health and
safety).

The understanding of strategic management in the above section would now

help us to assimilate the concept of strategic Human Resource Management.
According to Snell (1989), all those HR activities that support and direction
towards organizational strategies are called strategic human resource
management. Assenting on the same, Armstrong and Long (1994) also views
it as an overall direction in which an organisation would like to move to
achieve its objectives through human resources.

Many times the concepts like strategic Human Resource Management and
human resource strategies are considered one and something. But they are
not. HRM strategy refers to central philosophy an idea to manage people of
the organization by translating HR strategies into HR policies and practices
51
Introduction that are in alignment with the overall organizational strategies. In other
to Human words, Strategic Human Resource Management is a theoretical framework
Resource
Management within HR strategies are formulated that forms a road map for achieving
organizational objectives. According to Crawshaw, Budhwar&Ann Davis
(2017) strategic HRM is "the process that links HRM policies and practices
with the strategic objectives of the organization to improve performance".

Theories of Strategic HRM

In the field of Strategic Human Resource Management, two theories
dominated the academic world namely; the resource-based view of
Barney(1991) and the integration approach.

Berney’s Theory: According to Barney (1991) the human resource

management influence performance that depends on the human capital
(resources) held by the organization. Human capital is the vital resource of an
organisation that works for the organization and contributes toward
organizational success. Though there are other vital resources held by an
organisation like technology, information, finance etc.yet human resources
are the only area wherein an organisation can achieve a competitive
advantage. In the dynamic cut-throat competition in business, to stand alone
and be strong in the market, the organization must acquire and develop those
human resources that are better skilled and capable than the other
competitors in the industry. To achieve a competitive advantage over other
rivals, resources must be rare, valuable inimitable and non-substitutable. And
with unique and valuable human resources, an organisation can achieve a
competitive advantage. The three approaches that can include under
resource-based view are (Crawshaw, Budhwar&Ann Davis, 2017):

1. High-performance management: developing several interrelated

human resource processes and their implementation collectively can
enhance organizational performance (Stevens, 1998).
2. High commitment management: organization performance can
strongly be influenced and enhanced with a high level of mutual
commitment and high level of trust (wood, 1996)
3. High involvement management: communication with employees and
their involvement in the organization process develops a sense of
belongingness amongst them and lead to high performance (Pil and
MacDuffie, 1996).

Integration approach: as the name suggests, it is an integration or link

between the HRM strategies and performance. It works on the principle that
HR policies and practices under HRM must be in alignment with the overall
organizational strategies. Three possible types of integration can be discussed
under this theory: horizontal integration, vertical integration and combined
integration.

A. Horizontal integration
Under such integration, an organisation aims at developing and
reinforcing interconnected HR practices with the view that their
52
 alignment would generate superior outputs. "Underlying this assertion is Environment
the premise that there exists a set of HR best practices that fit together and HRM

and mutually reinforce each other" (Crawshaw, Budhwar&Ann Davis,

2017). In the horizontal integration, the emphasis is on the synergy
between internal fit. “The concept explaining that the combined
performance of a set of HR policies and practices is greater than the sum
of their performance”(Crawshaw, Budhwar&Ann Davis, 2017).
The universalistic model of Delery and Doty(1996) is based on the
assumptions that best HR practices are universally applicable. According
to Osterman (1994) and Huselid(1995), the universalistic theorists, the
assumptions of this model are:
1. The relationship between HR practices and business is linear;
2. Best HR practices can be applied universally everywhere;
3. The key to the concept is Internal Fit.
B. Vertical Integration
Vertical integration aims at developing various HR practices that are
beyond the area of HRM. The basic principle of this concept is that high
performance can be maintained with the right match between business
strategies and HR practices. For instance, to introduce innovative
behaviour within the organization, those HR practices that can encourage
cooperation, interdependence and fostering creative and risk-taking
behaviour are emphasized. Similarly for achieving the high-quality
objectives, the quality of high reliable behaviour is sought. The
contingency model of Delery and Doty(1996) expresses that external fit,
best fit and strategic fit are considered to be the alternative expression of
vertical fit. According to Schuler and Jackson(1987), the assumptions of
this model are:
1. The relationship between HR practices and business performance is
non-linear.
2. The impact of HR practices on performance varies with different
level of critical contingency variables, and
3. External fit is the key concept.
C. Combined Integration
As the name suggests, combined integration is a combination of internal
and external fit. Under this approach, bundles of HR practices are
incorporated. Depending on the context of the organization, a different
combination of HR practices may lead to higher business performances
(MacDuffie, 1995). Adding to this Richardson and Thompson (1999)
commented that with bundles of interrelated and complementing
(horizontal integration) HR practices, a higher level of performance can
be achieved with a higher level of fit with its business strategies (vertical
integration). Delery and Doty (1996) termed this combined integration
approach as a “configuration model”. The assumptions of the
configuration model are:
53
Introduction 1. The relationship between HR practices configuration and business
to Human performance isnon-linear,
Resource
Management
2. HR practices with multiple configurations lead to maximal business
performance, which is called equifinality,
3. The configuration is assumed to be ideal types that are theoretical
constructs rather than empirically observable phenomena and
(Crawshaw, Budhwar&Ann Davis, 2017)
4. The key concept is internal as well as external fit.

Activity B: Using the web resources present a caselet represting the practice
of SHRM in any organisation that you are familiar with.

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3.4 INTERNATIONAL HUMAN RESOURCE

MANAGEMENT
Brewster et al.(2005) stated that “in the twentieth century, the greatest
challenge for both public and private sectors is to operate across the national
boundaries. These challenges can be met with the good international HRM
practices.‟‟

The concept of international human resource management is about managing

human resources across international boundaries. Not only the management
of expatriate, but it is also about the management of people worldwide. These
days almost every firm is a multinational or international firm operating
around the globe. International companies operate with subsidiaries
functioning worldwide having headquarter or parent company located in a
particular country from where managerial functions are managed. These may
be highly centralized or decentralized based on the expansion of the business.
Multinational companies manage the business with several business units in
different countries that are managed as a whole by the central office. The
nature and scope of autonomy may vary.

The report by Welfare(2006) stated that Dr Michael Dickman from the

Cranfield school of management believes that the major difference between
national and international HR practices is the need to see the bigger picture.
He pointed out that there is a difference in complexity levels between the two
and the level of sensitivity required towards a different culture and different
business environments. He argued that understanding of the local context of
the business is required by the international HR managers and issues like
what type of business environment is there? What are the roles of trade
unions? What labour laws prevail? How these people are different and what
54 is their learning and motivation pattern needs to be addressed?
HRM in multinational enterprises Environment
and HRM
The process of procurement, allocation, effective utilization of human
resources in a multinational enterprise is called international human resource
management. International human resource management is about managing
human resource resources worldwide. The basic aim of international human
resource management is to achieve the organizational objectives that are
concerned with global goals accomplishments. A few of the objectives that
an organization strives to achieve through international human resource
management are: (a) achieving competitive advantage in the global markets
(b) achieving efficiency, (c) meeting demands of international markets (d)
achieving flexibility and adaptively to be dynamic in a short period.

Most of the human resource functions that are administered by human

resource departments of MNCs are performed keeping the social, cultural,
legal, economic, political and historical characteristics in mind:

 Human resource planning (HRP)

 Staffing
 Performance evaluation
 Performance evaluation
 Training and development
 Compensation and benefits
 Health and safety
 Labour relations

International HRM Functions

Planning: for the success and effective function of MNC, effective human
resource planning is essential. However, the implementation of human
resource planning is more complex and difficult than domestic HRM
functions. The planning function of HRM must be in synchronization with
the other HR functions like staffing, appraisal, and compensation systems etc.

Hiring: when an organization operates in an international market with

multinational corporations, it ought to follow the local labour market rules of
the subsidiaries. Hiring a local HR consultancy or hiring agency can attract
the required number of the workforce for an MNC. To do so understanding
labour markets and related rules are necessary. For instance, for a country
like India, a multinational organization and exploit the skills and knowledge
of the young workforce effectively. In underdeveloped or developing
countries, an MNC might deal with a less skilled or unskilled workforce.
Such a workforce can be hired at a low wage rate for less technical work.
Staffing: to coordinate and control global operations, MNCs need to have
effective staffing functions. For far-flung global business operations, MNC
looks for the best way to identify and select prospective candidates for a role
in a job. For global business operations, the process and recruitment process
55
Introduction must be so effective that it can attract a good number of qualified candidates
to Human for global business assignments.
Resource
Management
Performance appraisal: the international organization works with a diverse
workforce representing varied culture. Thus culture can help in determining
the nature and type of performance appraisal. For instance, in an
individualistic society of the U.S.A, individual performance assessment is
common. On the other hand, group performance appraisal is highly practised
in Japanese and Chinese culture.

Compensation system: in the local market of subsidiaries, wage legislation

and regulations, labour union demands, and cultural preferences significantly
influences or determines the compensation structure of an organization. Not
only the compensation system of the subsidiary must be consistent with the
local wage rules and regulations, but it must also be in line with the overall
business strategies and objectives.

Training: the international HR manager must develop such training

programs that must fit the particular assignments and individual. The aspects
that need to be considered for effective training programs are:

 Business strategies,
 Job requirements,
 Cultural similarities or differences and
 Communication with local nationals.

Activity C: Differentiate between domestic HRM functions and international

HRM functions citing examples.

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Issues in International HRM

Unlike domestic HRM, international HRM is prone to have many issues that
are global and affect the efficient functioning of HR practices. These can be
classified as globalization, environmental impact, cultural differences,
convergence or divergence of HRM practices in different countries and the
approaches employed to manage expatriates.

A. Globalization
The process of integration of global economies and their markets is
called globalization. It refers to developing a single international market
where good and services, technology and capital can flow easily and lead
to accelerated world trade. Companies that expand their operations
56
 beyond the domestic national boundaries are called global or Environment
international companies. When an organisation expand its reach in the and HRM

world market it attracts many international challenges and issues unlike

what was there in a domestic location. Ulrich(1998) assumes that with
globalisation, an organisation manages to share and move people, ideas,
products and information globally to meet international market
demands.
Bartlett and Ghoshal (1991) presented a concern that globalization leads
to the problem of managing challenges of global efficiency and
multinational flexibility-'the ability of an organization to manage the
risks and exploit the opportunities that arise from the diversity and
volatility of the global environment'. Brewster and Sparrow (2007) also
presented a concern that the nature and scope of international human
resource management are changing rapidly. The globalized HRM has
brought a different approach to deal with HRM in large international
organizations. The concept of local and global is the same but the scope
of operation is quite huge in IHRM where an organisation exploits
international technology, workforce, capital, products and services.
Similarly, all these factors of operation are managed in the home country
with a narrower scope in local HRM.
B. Environmental Impact
An organisation operating globally needs to consider and manage the
business environment in which it is working. The difference inthe
environment in different countries impacts business to great extent. The
closed economy of China possesses different environmental challenges
than an open economy like India. Thus its careful analysis and
assessment are necessary. Gehart and Fang(2005) state that an
environment can present different challenges to business in terms of the
difference in the centrality of markets, institution, market regulations,
labour-union relations, collective bargaining etc. For instance, collective
bargaining as a tool for managing industrial relations is quite
strengthened and practised in Europe than any other countries like the
US, Canada and Japan. Works councils operate mandatorily in western
Europe but not in Japan and the US. Moreover, labour cost is quite high
in western Europe, Japan and the US than in China, eastern Europe and
Mexico.
C. Cultural differences
Since an organisation works beyond the home country boundaries, it
requires a multinational workforce to carry out the operation. These
diverse workforces represent different religion, race, creed, values and
belief. These varied characteristics develop a different yet unique
organizational culture that needs serious attention to be managed.
Hiltrop(1995) identified a few HR areas that are affected by national
culture:
 decisions of what makes an effective manager;
 giving face-to-face feedback;
57
Introduction  readiness to accept international assignments;
to Human
Resource  pay systems and different concepts of social justice;
Management
 approaches to organizational structuring and strategic dynamics.
Hofstede(1980, 1991) perceived the organization as 'cultural bound. He
identified four national cultural dimensions namely: uncertainty
avoidance, masculinity/femininity, power distance and individualism/
collectivism. Hofstede concluded that the cultural values within the
nation aresimilar to the values of individual from different
nations. Taking ahead the research further, Adler(2002) claimed that in
the study of Hofstede, fifty percent of the difference between employees‟
attitude and behaviour is found. This difference is due to national
differences. On the other hand, Gerhart and Fang (2005) stated that only
2 to 4 percent was explained by the national differences.

3.5 HR ANALYTICS
In the parlance of business, the data related to business and its analysis for
decision making is what is known as business analytics. Analytics is about
analysis. Thus it is bound to be associated with various formula, calculations,
scientific methods and statistical techniques for analysis and thus the decision
making. Business analysis has been part of operation research, economics,
finance and marketing. But the business analysis in HR is the recent origin
that is gaining attention at a great pace. With the introduction of data
analytics, organizational decision making witnesses quite several changes.
From operational decision to business and strategic decision, all have now
become more predictive. Thus the entire decision-making process has
become a holistic „predictive decision-making process‟. It is predictive in the
sense that it is capable of predicting the outcome of a decision before its
implementation. Since today‟s business function has started focusing more on
the human resources of organization, so considerable attention has now been
on the HR functions. To carry out the employees focused HR function,
business analytics has been adopted giving rise to HR analytics. The HR
decision tends to be more complex and broad than the other non-HR business
decision. A big and successful business can turn into a catastrophe with the
wrong HR decision. And such a thing can start with the wrong recruitment
and selection. Wrong recruitment decision may lead to attracting less number
of prospective candidates for a job leaving with less option to select. A wrong
and faulty selection process may lead to introducing a mismatched employee
with the organization whose, knowledge, skills, and behaviour do not match
with the organizational jobs, requirement and culture. Ultimately such an
employee would be a liability to an organization than a valuable asset.

Development of HR Analytics
We are all aware that the recent HR decision making is more data-driven and
based on the calculations made on previous or current data. The growth and
development of HR analytics have been because of the changing nature of
HR decision making. With the „predictive‟ perspective of HR decision
58 making, the decision process has now become futuristic and predictive.
Therefore, HR decision making has become more holistic, integrated, Environment
scientific and strategic. Bhattacharya (2017) in his book on „HR Analytics‟ and HRM

discusses the various phases of development of HR analytics. He stated that

in the beginning phase of HR analytics, the data-driven HR decision making
is more descriptive, where HR managers understand the matrics and
complexities of the HR functions and thus gradually broaden the scope of HR
decision making. This helps HR managers to understand the correlation
between the variable associated with HR functions. At the second or current
phase of HR analytics, HR managers work on finding the causation and
making the predictions. This paves the way for predictive analysis where HR
managers are more futuristic and go more deeply into the factors, their
causation to enhance the decision to achieve desired and effective outcomes.
The following figure illustrates the various phases of the development of HR
analytics suggested by Bhattacharya (2017).

Figure 1: Phases of Development of HR Analytics

Source: (Bhattacharya, 2017)

Significance of Human Resource Analytics

HR analytics helps an organization to gather various scientific facts and
figures that help in the HR decision making process. The HR analytics
initiates with the identification of critical areas of HR, stressing strategies and
long-term issue that may affect sustainability. At the next step, available
knowledge and competencies held by the organization are assessed. Before
proceeding to the next step, deviations are identified. This can be done with
the analysis of the organizational data. based on the result drawn with the
help of various statistical and scientific tools and techniques, communication
59
Introduction is made to the HR managers to decide appropriate interventions. In this
to Human way,the HR analytics model operates.
Resource
Management
To carry out operations effectively and easily, HR manager usually starts
with the descriptive analysis where he/she uses the currently available data or
metrics to understand the status of the HR function. Thereafter, statistical and
research techniques are employed for analysis of decisional outcome.finally,
HR managers introduce HR analytics in decision making to assess its
influence on business outcomes and consistency with the organizational
strategies. HR decisions based on data analytics is unbiased and accurate to a
great tune. Decisional biases can be significantly reduced with HR analytics.
Typically the „confirmation bias‟ can be reduced. Quite often the decision of
HR managers is biased as they are based on the available information that
was bounded by their rationality. Such decision making may go wrong and
yield negative consequences. For instance, HR decision that is biased may be
influenced by consensus(i.e result of group thinking), the effect of time
limitation(deadline to achieve target), effects due to ethics, effects of
regulations and laws etc. such type of biases can be eliminated when the
decision is based on HR data and HR trend analysis. (Bhattacharya, 2017)
stated that “professionally designed HR analytics make use of statistical
models to predict thefuture, or the implications of current HR trends,
including decisions on critical future organizational issues, such as
sustainability, growth, revenues and bottom-line changes”.

Despite the introduction of technology in day to day operations of business

entities, HR analytics and predictive decision making is still in a nascent
stage and requires more acceptance by the HR managers. Though
organizations are making a huge outlay in HR analytic based decision
making, many HR managers are still apprehensive about its success and fail
to align their HR decision with the strategic insights of the business. They are
still accustomed to an intuitive decision-making process that has a poor
success rate. Though the concept is new and emerging it is expected to bring
breakthrough in HR decision making.

Activity D: Go through the available models of HR Analytics and present a

synoptic view of these models.

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3.6 4TH INDUSTRIAL REVOLUTION AND HRM

The change and uncertainty is part of the normal course of business. To
survive and grow in such an environment an organization need to transform it
from time to time to match the change. Industries have already witnessed
three industrial revolutions. The first industrial revolution introduced
60
machinery, steam power to run factories and mass production of goods in the Environment
mid 18th and 19th century. The second industrial revolution advances the and HRM

production process with new inventions and technology such as steel mills,
electric lighting, and diesel engines etc. the digital environment brought by
the third industrial revolution in the 19th century with mainframe computers,
semiconductors, the internet, and personal computers. The high-level concept
that is gradually becoming part of our normal daily life, robotics, artificial
intelligence, quantum computing, IOT, 3D printing and driverless cars are
part of the 4th industrial revolution.

Every change, be it small or big influence the business to great extent. A

drastic change in the industry with the introduction of new technology and
complete paradigm shift poses various threats along with benefits to the
business. The 4th industrial revolution has introduced the concept of robotics,
artificial intelligence, quantum computing, IOT (Internet of Thing), 3-D
printing, and driverless vehicles etc into our daily life and business
processing. The sci-fi film like experience is now a part of our daily life. The
use of robots to operate business operation has significantly saved the
operating cost and has increased productivity. Tasks that were repetitive,
dangerous, and time-consuming are now done by robots of artificial
intelligence. Areas where business robots are used:

 Marketing
 Inventory
 Industrial manufacturing
 Entertainment
 Telecommunication

The introduction of the 4th industrial revolution has revolutionized HR

functions. Now the HR managers are more inclined towards saving the cost
of human resources by introducing robotics and technology to perform the
functions that were earlier performed by the human. Automation of jobs,
employing robots or automatic machines in the offices is now major concerns
for HR managers. Although it requires careful assessing the cost and benefit
of automation to the company and employees as well, the trend depicts that
automation is a rapid change. Such change causing great disruption and
resistance, therefore the HR department need to invest in sensitizing the
employees and change the behaviour to accept the new world of work.

A white paper titled “HR4.0: Shaping People Strategies in the Fourth

Industrial Revolution” published in 2019 by the World Economic Forum
examines the key role of HR in defining the work and the workforce in the
fourth industrial revolution. The excerpt of this paper is given below (World
Economic Forum, 2019):

61
Introduction Box 1: HR 4.0
to Human
Resource
Management
1. To develop new leadership capabilities for the 4th industrial revolution
HR manager need to become a cultural ambassador to „create‟, „develop‟
and „embed‟ the culture and become „Digital HR lead‟
2. Integration of technology in the workforce can be effectively managed
by heading the work of “reinvention‟ and„reskilling and being head of
„relevance and „purpose‟.
3. The HR manager should work towards enhancing employee experience
by becoming a specialist in dealing talent of employees and employing
Bot monitor to analyze the talent.
4. The learning culture at the organization must be flexible and
personalized. Such a culture can be maintained by the Chief Learning
Officer (CLO).
5. To value the human capital of an organization, metrics need to be
established where the HR manager must be head of insights and HR data
scientists can be employed in an organization.
6. The organization must be characterized by its diversity and inclusion. An
officer dealing with such issues can bring a substantial change in the
system.

Source: WEF (2019)

3.7 ARTIFICIAL INTELLIGENCE AND HRM

The introduction of science and technology is changing our personal life
rapidly. So is our professional life is also getting affected due to the
introduction of science and innovative concepts at the workplace. A similar
kind of concept that is mushrooming by leaps and bounds these days is
„Artificial Intelligence”. The term was first coined by John McCarthy in
1956. It is no more a thought to be a product of science fiction. Its application
in every sphere of life, profession and industry making it a compulsory
component in human resource management too.

In technical parlance, artificial intelligence is a technology that processes and

generates result based on the previously collected data or previously made
transactions. Human resource management is a function where these
algorithms of artificial intelligence can be applied effectively to streamline
processes and to enhance efficiency. The lead faculty of analytics of
Northeastern University explains that “we as humans see the information in
front of us and use our intelligence to conclude. Machines are not intelligent,
but we can make them appear intelligent by feeding them the right
information and technology.” Amazon, a leading online retail giant that has
lots of business on machine learning system defined artificial intelligence as
“the field of computer science dedicated to solving cognitive problems
commonly associated with human intelligence, such as learning, problem-
solving, and pattern recognition.” Machine learning is so important to
Amazon, they stated, “Without Machine Learning, Amazon.com couldn‟t
62
grow its business, improve its customer experience and selection, and Environment
optimize its logistic speed and quality.” and HRM

The pace at which technology like artificial intelligence is intruding into our
personal and professional life, it tends to have a lasting impact on organizing
and managing human resource and self. Therefore, HR professionals need to
be prepared with the adoption of artificial intelligence in the HR function
with utmost efficacy. The key areas in HR function where artificial
intelligence leading and influencing the working are: „Recruitment and
onboarding‟, “employee retention and internal mobility and „automation of
administrative jobs‟. AI in the recruitment process not only benefits hiring
organization but also applicants with user-friendly application process and
forms, AI can reduce the unnecessary bulk applications, it can help in
rediscovering the right talent with the available database, it reduces time and
unavoidable traditional recruitment costs. With the completion of the
recruitment process with AI, onboarding can be started even outside the
standard office hours, at any time, at any location by accessing the database
of the chatbots remotely. This will save the time of the organization as well
as newly hired.

AI also boosts the internal mobility of the employees and ensures retention.
For increasing employee engagement and enhancing job satisfaction,
personalized feedback surveys of employees, employee recognition systems
can accurately assess and analyze the employees‟ performance and provide
required feedback timely. With artificial intelligence, repetitive,less technical
and clerical work of HR function can be automated and the HR manager can
devote their efforts and time more on strategic function.

3.8 SUMMARY
Our business environment is indulged in uncertainty and diversity. Current
environment not only affects the strategic function of the corporation but also
the human resources of an organization. Therefore an efficient HR manager
needs to understand and analyze the environment to take advantage of the
growth and development of human resources as well as the organization. To
do so HR professionals must be aware of strategic human resource
management so that they can understand extend of influence caused on
business and human resource management strategies. They must also have
cognizance of international human resource management to tackle the
competition in the international market and globalization. Realizing the
recent trend of HR analytics, the fourth industrial revolution and artificial
intelligence, HR managers need to restructure and redesign every function of
human resource management.

3.9 SELF ASSESSMENT QUESTIONS

1. Explain the factors that influence organizational environment.
2. What is Strategic HRM? Discuss few theories of SHRM.

63
Introduction 3. Discuss the importance of international HRM and its necessity in global
to Human business operations.
Resource
Management
4. What is impact of 4th industrial revolution on HRM operations?
5. Explain how is artificial intelligence going to evolve new HRM
functions citing examples.

3.10 FURTHER READINGS AND REFERENCES

Bhattacharya, D. K. (2017). HR Decision Making and HR Analytics. In D. K.
Bhattacharya, HR Analytics Understanding Theories and Applications. Sage.
World Economic Forum. (2019). HR4.0: Shaping People strategies in the
Fourth Industrial Revolution. World Economic Forum.
Anthony, W.P., Perrewe, P.L., &Kacmar, K.M. (1996). Strategic human
resource management (2nd edition). Orlando, FL7 Dryden performance in
Chinese enterprises. Human Resource Management, 47(1), pp. 15-62.
Crawshaw, J. R., Preston, J., & Hatch, A. (2017). Introduction: Context and
Challenges for HRM. In J. Crawshaw, P. Budhwar, & A. Davis
(Eds.), Human Resource Management: Strategic and International
Perspectives (2nd ed., pp. 4-33). SAGE.
Schuler, R. S. (1989). Strategic human resource management and industrial
relations. Human Relations, 42(2), 157–184.
doi: 10.1177/001872678904200204
Armstrong, M. (2006) A Handbook of Human Resource Management
Practice. 10th Edition, Kogan Page Publishing, London.

64