SHRM: A STUDY OF HRM PRACTICES AND INFLUENCING ORGANISATIONAL FACTORS

S. POORNA VENKATA SUBRAMANI, M.B.A

ASSISTANT PROFESSOR

THIRUTHANGAL NADAR COLLEGE

CHENNAI-51

gpoorna.venkat@gmail.com

09840220439

Abstract:-

Human resource is the most important asset of any organization and it is also the source of achieving competitive advantage. Managing human

resource is challenging when compared to managing technology, capital and for its effective management an organization requires an effective

Human Resource Management system. It should be supported by sound Human Resource Management practices. HRM practices refers to the

activities directed towards managing the pool of human resources and ensuring that resources are employed to fulfill the organizational goals.

The changes in the market scenario has convinced the industry to facilitate the development of human resources. Employees develop

themselves in a globalized scenario along with necessities that arise in developing new competencies to meet changing requirements,

aspirations etc. Organizations use mechanisms to have competent and motivated employees to ensure managerial effectiveness and growth of

the organization. Nowadays organizations looks at its human resource as an asset that can provide them a sustained competitive advantage.

The changes in business environment with increasing globalization, changing demographics of the workforce, increased focus on profitability

through growth, technological changes and never ending changes that organizations are undergoing have led to increased importance of

managing human resource.

The purpose of this paper is

i) to develop an understanding about the human resource management practices and examine them how they are implemented

across the companies.

ii) study the positive relationship between human resource practices and the influencing organizational factors in terms of self-

realization, status enhancement and soci-economic support.

iii) A three stage model has been put forth in this paper to study the key role played by the HR professionals in strategy

formulation, implementation and evaluation.

Keywords: Human resource management, HRM practices, innovative practices, employees performances, demographics of workforce.

INTRODUCTION

Human resources are the sources of achieving competitive advantage because it manages to convert the resources (money, machine, material)

to output (product/service). In global scenario there is growing importance of Human Resources Management in both business and public life.

The turbulent changes in the business environment brought in the wake of liberalization, globalization, changing technologies, advances in

information technology is presenting managers with a complex and challenging situation. The effective management of human resources

requires a distinctive approach to employment management which seeks to obtain competitive advantage through engaging a highly committed

and skilled workforce with the help of available techniques (Storey, 1995).

The Indian business scenario is characterized by historical rigidities arising due to centralized planning. The practice of protecting Indian

industries through protective tariffs and quotas for decades has led to global competitiveness in terms of quality of products, service and

prices. Indian organizations are asserting themselves to be competitive to meet the international standards. This has led to focus in terms of

long-term strategies, consumer focus, initiative for internal and external communication.

The human resource management has emerged as one of the important areas of organizational practice in the context of industrial and

economic development. The uniqueness of HR requires a different type of attention from managers. It provides both challenge and

opportunity. The firms that have learnt to manage their human resources will have an edge over others because of acquiring and deploying

human resources takes much longer (Barney 1991, Lado and Wilson 1994, Wright 1994).

People bring to their jobs diversity of skills, needs, goals and expectations. They are socialized into organizations through their hiring and

functioning in the organization. One should ensure that the human resource requirements are identified and those requirements are satisfied

through effective methods. The interface between the employees and the organization is critical to the optimal utilization of human resources.

Employees make certain contributions and expect rewards in return and the organization also expect contributions from the person for the

reward. It is at this juncture issues such as HR planning, work analysis, career development, leadership, job motivation, organizational culture

become important (Bulla and Scott 1994, Conway, Briner and Dickman 1996).

To develop an effective HRM system, the organization should have a sound human resource management practices. It refers to the activities

directed at managing the human resources and ensuring that resources are deployed towards the fulfillment of the organizational goals. It may

differ from one organization to another and country to another. In general, SHRM is described as broad, involving all personnel; regarding

employees as one of the important asset of the organization being proactive in its responsibilities and has the objective of improving the

performance and needs of the employees (Schuler & Jackson 1987, Poole 1990, Wright & Snell 1991).

The next section will discuss the types of HRM practices, factors affecting HRM practices and the relationship between HRM practices and

other important organizational factors is then presented.

ORGANIZATIONAL CULTURE

Organizational culture refers to shared meaning held by members that distinguishes an organization from another. It provides the employees

with a clear understanding of the way the things are done in the organization. It is the perceived, subjective influence of the formal system,

informal style of managers and other significant factors – attitudes, beliefs, values and motivation of people in particular organization.

Culture performs a number of functions within the organization, it conveys a sense of identity for the incumbents, facilitates the commitment,

enhances the system stability. It provides the control mechanism that guides and shapes the attitude and behaviour of employees. Companies

with a strong culture are highly successful. The superior performance is achieved if the firm moves from pure technical, rationalistic approach

towards more adoptive and humanistic approach (Litwin and Stringer 1968, Peters and Waterman 1981, Schien 1985, Hitt and Ireland 1987,

Kotter and Heskett 1992).

By considering the performance and managerial leadership along with the HRM practices, it was discovered that a significant relationship

exists between culture and performance (Wilderom and Van den Berg, 1998). The finding illustrates that the more effective HRM practices

which simulantaneously exploit the potential for complimentaries with organizational culture lead to better performance and enhanced

effectiveness. Organizations appreciate the corporate core values self-realization, inventive values, encourage and recognize innovation

creativity and achievement.

TYPES OF HRM PRACTICES

Most of the researches on HRM practices have been conducted in the past and researchers have identified different practices by different

names. Theories on best practices suggests that certain HRM practices either separately or in combination are associated with improved

organizational performance. Researchers have found that those who are well paid, well motivated workers, working in atmosphere of mutual

trust generates high productivity gains and lower cost units ( Lowe and Oliver 1991, Pfeffer 1994, Boxall 1996). Pfeffer (1994) identified 16

practices which denotes best practices which was later refined to the following list:

1. Employment security

2. Selective hiring

3. Self-managed teams team working

4. High compensation on organizational performance

5. Extensive training

6. Reduction in status difference

7. Sharing information

FACTORS AFFECTING HRM PRACTICES

As quoted by Ozutku Ozturkler (2009), the factors affecting the HRM practices include external and internal factors and it differs from one

country to another. Some of the potential factors are as follows:

EXTERNAL FACTORS

The external factors affecting HR practices are those, pressures on the companies that cannot be controlled or changed in favorable condition

in the short term period. It includes some of the following factors:

Economic changes: As a result of the global economic development, the focus of HR practices has shifted from traditional topics such as

internal selection and rewards to the concept such as globalization and international competition.

Technological changes: Technology affects HRM to a greater extent because of greater interaction between the technology and HR. It changes

the way we work, the role we undertake, interactions through which work gets done. Technology provides a series of advantages and alters the

context of HR practices and the way they are implemented.

Demographic shifts: The demographic shift that is, a well educated group with high expectations about careers and job satisfaction has put

enormous pressure on effective utilization of human resources. The workforce is becoming over educated for the jobs available: college

graduates are doing the jobs that a people with basic education performed decades ago, M.B.A’s are filling the jobs that college graduates

once filled. This coupled with prospective employees expectation for meaningful job, is presenting organizations with complex human

resources problem.

Increasing complexity and difficulties of management: Factors that pressure human resources are, in part responsible for making large

organizations general management increasingly complex and difficult. Despite the need for critical attention very little progress has been

made. Most of the corporations are finding it difficult to deal with human resource problems but only few have created the strong proactive

human resources functions.

National culture: Culture has an profound impact on organizational preferences in developing appropriate structure and methods for HR

practices affectivity.

Legislations and Regulations: Legislations or regulations have a direct impact on HR practices. Every country has developed a set of

regulations for the management of human resources, hence the HRM practices have to be modified according to these regulations.

Action of competitors: There are many ways in which companies can gain a competitive edge and sustained advantage over their competitors

among them being the development of comprehensive human resource practices.

INTERNAL FACTORS

The internal environment of an organization strongly affect the HR practices. Some of the internal practices are as follows:

Organizational structure: A company’s structure is important in determining HR practices flexibility and integration. Structural differences

among firms affect the way in which HR practices are designed and implemented.

Business strategy: To gain competitive advantage, firms use different competitive strategies. These strategies are more useful when they are

systematically linked with human resource management practices. Companies can improve their internal environment by making efficient

choices regarding human resource practices that support the organization’s chosen strategy.

History, tradition and past practices: A number of relative factors such as history, tradition, past practices will generate resistance to change

in most organizations.

Employee-Employer Relationship: Employer-employee relations can be improved if the organization implements effective HRM practices. The

consequence of effective human resource management policies will be such that it will play an important role in empowerment, employees

trust in their managers, increase mutual understanding between the employees and the employer and act as a channel between them.

Employees productivity : Certain HRM practices such as working in team, discretion, autonomy in the workplace, pay schemes motivate

employees and generate productivity. Their involvement in terms of delegation of responsibility, getting proposals from employees shall have

a positive impact on their productivity. Some of the human resource management activities such as formal and informal training, job rotation,

integration of functions will also have an impact on employees productivity.

REVIEW OF LITERATURE

Schuler (1992) suggest that Strategic Human Resource Management has different elements including policies, culture, practices. Business

needs of an organization are influenced by its internal factors such as organizational culture, nature of business etc. and external

characteristics-nature and state of economy in which the organization is existing, opportunities and threats presented In the industry can be

influenced by HR activities.

An organization can change its structure with the help of recruitment strategy – downsizing the workforce, training programmes, new reward

strategies, performance management to change the employee behaviour or reinforce the needed one. After the economic liberalization

organizations were forced to change from less efficient and outdated technology to modern technology and prepare people to use it. This was

done to develop and maintain competitive edge in the business environment ( Khan 1999).

The potential value of employees can be increased by collectively enhancing and linking their skills and capabilities in tune with the

contemporary requirement of the market and stay ahead of the competitors. The success of HRM will depend on its ability to harness the

intelligence and spirit of people by creating learning climate. organizations generally focus on directing their HRM efforts towards developing

the competencies, culture, effectiveness among employees either individually or in groups (Singh 2003). Firms shall use different mechanisms

according to their requirements as without a competent and committed workforce to achieve their human resource management goals. Even if

an organization has excellent technology at its disposal it can achieve very little without an effective HR policies. The emphasis has been on

identifying and improving the existing strategies. However this would require complete reversal of values in the existing selection and

training methods. Only then it would be possible to link with the values of socio-cultural context . In order to make an organization effective,

the values of society and cultural settings should be synthesized with the organization and its functioning.

Fombrun, Tichy and Devanna (1984) developed SHRM with emphasis on strong linkage between the organizational strategy, organizational

structure and HR system. Political, economic and cultural forces are responsible for an organization mission and strategy. On the basis of

mission and strategy, organization is structured (i.e) employees are organized to carry out different tasks to achieve organization’s mission.

Hendry and Pettigrew (1992) discuss that a number of internal factors such as organizational culture, positioning of HR, leadership, level of

technology employed, business output directly contribute to the contents of HRM.

SHRM can be seen as guide which provides strategic choices to be made by human resource executives in order to promote the most effective

behaviours that are consistent and aligned with the organization’s strategy. It helps to focus on how firms can position themselves to compete

with the help of strategy analysis in a way that executives can quickly gravitated toward.

PRESENT STUDY

The present study is to examine the relationship between HRM practices and the influential organizational factors and how the human resource

management practices are developed and implemented across the companies. The HRM practices are viewed in terms of planning, recruitment,

selection, training and development, performance evaluation and rewards.

The organizational culture can be seen in terms of self-realization, status enhancement and socio-economic support. Self-realization is

comprised of achievement, advancement, personal development and peace of mind. Similarly status enhancement comprises values of altruism,

authority, prestige, creativity, lifestyles, risk taking and variety. And socio-economic support comprises work values of social relationship and

interaction, comforts, good working condition and economic gains. With reference to the India, society is ridden with insecurities and lack of

resources. Fear of failure leads to giving importance to socio-economic support and status enhancement (Sinha 1990).

For an organization to be effective, workers are important and their commitment is necessary. This conviction can be translated into realty

through a variety of programs which facilitate the individual development and lead to better adjustment with the environment. In the

developing economy the shift in the HRM paradigm have necessitated the review of skills, roles, responsibilities and competencies of HR

managers (Ulrich 1997). The globalized economic environment represents continuous change on society and work, hence HRM should be

evolved I this context. It will benefit if the employees are inculcated with the necessary skills, competencies and motivation (DyerJr 1999).

The understanding of HRM practices will require a comprehensive study of the practices in the organizations. In addition, HRM practices and

organizational culture among private sector organization is studied. This paper also presented in terms of strategy formulation,

implementation and evaluation.

CONCEPTUAL HRM PRACTICES FRAMEWORK

External factors – economic changes, technological changes, national culture, industry/sector characteristics, legislations, action of

competitors.

Internal factors – Organization size, Organizational characteristics, Business strategy, HR strategy, Power/politics, Academic/professional

influence on HR Practices.

Human Resource Management Practices

Competitive advantage, Employee-employer relation, optimum utilization of human resources, service quality, employee commitment,

employee productivity, effective management of human resources, growth and innovation, other benefits.

Overall Corporate Performance

The conceptual framework will indicate how external and internal factors affect HRM practices and how the HRM practices generate certain

benefits for the organization and result in overall corporate performance.

OBJECTIVES OF THE STUDY

i) to develop an understanding about the human resource management practices and examine them how they are implemented

across the companies.

ii) study the positive relationship between human resource practices and the influencing organizational factors in terms of self-

realization, status enhancement and socio-economic support.

iii) A three stage model has been put forth in this paper to study the key role played by the HR professionals in strategy

formulation, implementation and evaluation.

METHODOLOGY

The study is based on a sample of managers from two organizations. The data was collected through mail by using convenient sampling with

an assurance that data obtained would be kept confidential. The sample was obtained from middle level management with the assumption that

they would possess an accurate and comprehensive perception of HRM practices being implemented. The purpose of this sampling was to

obtain an honest picture of HRM practices of the organization.

DESCRIPTION OF THE QUESTIONNAIRE

The questionnaire was divided into two parts – personal profile of the respondent comes in first part, while questions regarding HRM practices

and culture of the organization falls under second part.

ORGANIZATIONS UNDER STUDY

Organization A

Organization A is one of the largest dealer in South India for electrical products. The dealer has been dealing with household appliances and

lighting systems for more 25 years. In its journey for excellence for its products and service the focus on customers remains unwavering. The

journey that the dealer has embarked continues on improving performance and competitiveness at all levels. In the future the dealer’s efforts

will be focused on taking up HRM practices to improve functional skills and strengthen emotional ties between the organization and its

employees.

Organization B

Organization B has a personnel department with no nomenclature. It has progressive welfare practices for employees and their families. Trust

and confidence are built through personalized relationship. The way of life has created culture which leads to effective utilization of human

resources. The functions of performance evaluation, rewards, planning, recruitment and selection are performed by the personnel department.

There is no formal career management scheme.

PROCESS

The proposed model divides the SHRM process into three stages. The first stage is that of formulating business strategy and translating it into

HRM strategic objectives. The second stage is that of implementing HRM system based on HRM strategy. The final stage is that of evaluating

and reviewing the effectiveness and strategic integration of the HRM systems. The three stages are closely inter-linked.

FIRST STAGE (FORMULATION)

Formulation stage provides the foundation for an effective SHRM. The organization recognizes HR department as a business partner and

facilitate it with avenues to be an proactive partner. In this stage, the composition of team formulating the business strategy is important. The

presence of HR head in the team formulating the organizational strategy will boost the proactive strategic linkage of the HRM systems.

The external and organizational context influence the strategy formulation. The external context is characterized by factors like nature and

extent of competition, demography of the available workforce, government policies and laws, economic situation and forecasts, external

stakeholders like suppliers, competitors, etc.

The organizational context denotes the situation that is represented through various departments or functions. The HR head plays an key role

in representing the organization in key HR related issues. Here organizational context refers to the competencies, structural features with their

advantages and limitations, policies and practices that is followed and people management issues.

The availability of required competencies plays an important role in success of strategy formulation. Strategy formulation is affected by the

factors like whether there are any competencies exists, possibility of developing them and training the employees, the existing gap in terms of

human resources. Formulation of HR strategy requires an understanding of the required organizational skills to implement the business

strategy. Elements like acquiring, managing and developing the skills are important for the success of strategy implementation. The

organization structure may set limitations or constraints in the changes required for strategy implementation.

During the formulation stage, the head of the HR department should be able to appraise the management about various policies and practices

that are being practiced and the necessary changes required for successful implementation of business strategy. In the organizational context it

shall be related to a set of unwritten rules that drives the work culture and workforce. He should also be able to convey in terms of certain

changes in the external environment. He/she should be able to convey the changes that are occurring in the labour market and their

implications on the strategy formulation. The business strategy may be based on cost reduction, innovation or quality enhancement.

SECOND STAGE (IMPLEMENTATION)

In the second stage of the process various HRM systems based on HR strategy are implemented. HRM systems like recruitment and selection,

performance management, training and development etc. needed to be aligned with HR strategy. Policies and practices of various HRM

systems are set or modified according to strategy implementation needs. The stage also includes initiating the required interventions for the

organizational development and managing the change during process like restructuring or merger. Automation of the HR practices also enables

the department’s capability to collect and provide the information required for strategy formulation.

THIRD STAGE (EVALUATION)

The extent of alignment of HRM systems with the business strategy and its contribution in achieving the strategic objectives needed to be

evaluated in order to determine the strategic integration. It involved various surveys and evaluation process. The evaluation standards need to

be carefully constructed. However the evaluation is difficult because the management may not be clear on what they want to evaluate – the

efficiency of the HR department, financial returns in terms of productivity, improved performance of the employees of the organization. The

goal achievement and outcome of HR practices and activities should be defined. Performance reviews and associated actions are part of this

stage. The gaps in the integration of HRM systems are identified.

The information collected and reviewed provide feedback for making necessary changes in the implementation process. This information is

important in business strategy formulation.

The process indicates how external and internal factors affect HRM practices and how those practices will generate benefits for the

organization leading to overall corporate performance. The following things in particular should be kept in mind and the HR managers should

carefully analyze them while designing the HRM practices.

1. Linkage between the HRM practices with the long term objectives and strategies of the organization should be given its due

importance.

2. The human resource management practices should be examined from time to time by conducting surveys among the employees and

facilitate the implementation of the proposed changes from time to time.

3. While designing and implementing the HR policies the organization’s existing practices should be kept in mind.

4. HR managers should update themselves with the current HRM practices.

5. The HRM practices differ from one country to another hence due consideration should be given to the organization’s and country’s

environment.

6. The actions of the competitors should be critically examined because it directly or indirectly affects the organization.

7. The line managers should be involved in the process of designing the HR practices because they have direct contact with the

employees and they can provide valuable insights.

CONCLUSION

This paper shows the positive relationship between HR practices and organizational culture and how effectively the human resources can be

managed. The companies which implements such practices with dedication maintains sustained advantage over other players in the market.

Other variables such as competitive advantage, job satisfaction, financial performance, service quality, employee commitment in a positive

manner leads to overall corporate performance. HRM practices should be analysed from time to time and updated accordingly. Planning,

recruitment, selection, training and development, performance evaluation, career management, rewards are significantly related to the

organizational culture. Surveys should be conducted among employees to know their opinion about HRM practices. This will help the

organization to take corrective actions at the right time.

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