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Changing role of Human Resources from share service/staff function to a strategic partner

Abstract In the competitive environment of open economy, strategy and Human Resource Management systems are becoming significant factors for the corporations. The consideration of strategy and HRM systems jointly led to the emergence of strategic Human Resource Management, which is crucial for achieving a corporation's long-term goals. Before the emergence of SHRM as a philosophy, it underwent a long historical evolution. This project attempts to bring this historical evolution of SHRM beginning from different civilization-philosophies through the evolution of personnel management (PM) then evolution of HRM, and finally to the emergence of SHRM. It also presents a critical assessment of this historical evolution. The project finally draws attention to the fact that the corporate have now started of strategic partner- and not in PM or HRM - are people considered strategic resource that is to be used for creating and sustaining competitive advantage for the firm.

Introduction Human Resources is a term used to describe the individual who make up the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations. Human resources is also the name of the function within an organization charged with the overall responsibility for implementing strategies and policies relating to the management of individuals (i.e. the human resources). Earlier human resources was observe as: "all the activities of any enterprise are initiated and determined by the persons who make up the institution; plants, offices, computers, automated equipment, and all else that make up a modern firm are unproductive except for human effort and direction of all the tasks of management, managing the human component is the central and most important task, because all else depends on how well it is done", said by Rensis Likert. The origins of the function arose in organizations that introduced 'welfare management' practices and also in those that adopted the principles of 'scientific management'. From these terms emerged a largely administrative management activity, coordinating a range of worker related processes and becoming known, in time, as the 'personnel function'. Human resources progressively became the more usual name for this function, in the first instance in the United States as well as multinational or international corporations, reflecting the adoption of a more quantitative as well as strategic approach to workforce management, demanded by corporate management to gain a competitive advantage, utilizing limited skilled and highly skilled workers. Objective The objectives of this project is to trace the historical evaluation of SHRM and how human resources has been changing from staff function to strategic partner in todays world.

Evolution of Strategic Human Resources


The history of personal management begins around the end of the 19th century, when welfare officers came into being. As they were women and they were concerned only with the protection of women and girls. It was created because of the harshness of industrial conditions, coupled with pressures arising from the extension of the franchise, the influence of trade unions and the labour movement, and the campaigning of enlightened employers, often Quakers, for what was called industrial betterment. As the role grew there was some tension between the aim of moral protection of women and children and the needs for higher output. During the First World War accelerated change in the development of personnel management, as women were recruited in large number to fill the gaps left by men who went to fight. In 1920s, jobs with the titles of labour manager or employment manager came into being in the engineering industry and other industries where there were large factories, to handle absence, recruitment, dismissal and queries over bonuses and so on. During the 1930s, with the economy beginning to pick up, big corporations in these newer sectors saw value in improving employee benefits as a way of recruiting, retaining and motivating employees. But older industries such as textiles, mining and shipbuilding which were hit by the worldwide recession did not adopt new techniques, seeing no need to do so because they had no difficulty in recruiting labour. In Second World War brought about welfare and personnel work on a full-time basis to produce war materials because an expanded Ministry of Labour and National Service insisted on it, just as the Government had insisted on welfare workers in munitions factories in the previous conflict. So by 1945, employment management and welfare work had become integrated under the broad term personnel management. The role of the personnel function in wartime had been largely that of implementing the rules demanded by largescale, state-governed production, and thus the image of an emerging profession was very much a bureaucratic one. At this time, the HR functions matured and focused largely on labour relations staffing. In India, the Tata Iron and Steel Company (TISCO) was one of the first organizations to set up a personnel department in the year 1947. During 1968, it was critical of both employers and unions; personnel managers were criticized for lacking negotiation skills and failing to plan industrial relations strategies. In the 1960s and 70s employment started to develop significantly and the HRM movement gained further momentum due to the passing of several acts like the Equal Pay Act of 1963, the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974 (ERISA), and the Occupational Safety and Health Act of 1970. So by the end of the 1970s, HRM had taken over the world. Almost all big and medium scale industries had a department to manage their recruitment, employee relations, record-keeping, salaries and wages, etc. Now, the HR department was the apple of the Corporate' eyes because, the Corporate placed a lot of importance on Human Resource Management to avoid plausible law suit. At the same time personnel techniques developed using theories from the social sciences about motivation and organizational behaviour; selection testing became more widely used, and management training expanded.

Towards 1980s, the importance of HR continued to intumesce (swell up) for several reasons like increase in skilled labour, training, regulation compliance, dismissal, etc. The HR managers were the ones who did the hiring and the firing. Around the mid-80s, the term Human Resource Management arrived from the USA. The term Human Resources is an interesting one: it seemed to suggest that employees were an asset or resource-like machines, but at the same time HR also appeared to emphasize employee commitment and motivation.

Human resources management started getting many nick names in its age. Since it was recognized as a separate and important function, it has been called "personnel relations" then it evolved to "industrial relations", then "employee relations" and then, finally, to "human resources". The Industrial Revolution brought the conversion of the US economy from Agriculture-based to Industry-based which led them to require an extremely well-organized structure. Further, this led them to recruit a lot of people. Moreover, the industrial revolution brought in maddening amounts of immigration. Again, to create employment for all the immigrants, recruitment and management of the recruited individuals gained vitality. As such, there was a blaring need for Human Resource Management. The dynamic and competitive business environment resulting from globalization has led management to bring a new focus on how human resources should be organised and managed. The HR function now has to develop more strategic role. The late 1980s and early 1990s witness a visible convergence between HRM and business strategy. In 21st century this convergence has become startlingly obvious with the use of terms, such as knowledge, networked, knowledge based firm, and the virtual organization. Since 2003, the division of people management responsibilities between HR and line was largely unchanged, despite HRs wish to have more work transferred to line managers. It was found that there has not been a great deal of change in terms of the skills needs of the function since 2003. In general, senior HR managers seemed more concerned with the skills required of the business partners such as political and influencing skills than the general skills of function. Today the executives setting out in this multi-stage journey typically begin with some form of diagnostic or assessment to set a baseline of operational effectiveness and current strategic relevance to the business. The outcome of that assessment then drives an action plan and road map toward the ultimate end state of transformed, integrated and business-relevant HR. The HR plays a great role in an organization. The new mission for HR executives is not to transform from the inside out, but the outside in. And to figure out what the business needs and then configure it to that. Then, HR transformation can really take off because it can make an almost immediate impact. HR should start from the business outcomes sought by business partners overseeing mission-critical workforces, and then develop the effectiveness and services required to support that work. By becoming a true business partner, HR also becomes a partner in the ultimate objective of achieving high performance.

Personal Management @Part of mechanistic organization @Bureaucratic @High centralization @High formalization @Low flexibility

HRM (early 1970's) @Part of organic organization @Cross-hierarchical and cross-functional teams @Decentralization @Low Formalization @Flexible

SHRM (early 1980's) @Convergencebetw een HRM and business strategy @Proactive HRM @Concerned with organizational effectiveness and performance

Figure1.1: Evolution of Human Resources function Personal Management Approach The Personnel Management approach remained in vogue till 20th Century remained administrative in nature. The main activities were: Employee record keeping Adherence to the stated policies while implementing functions such as recruitment, training and wage administration Taking welfare oriented measures such as providing medical care, vaccinations, housing facilities and the like Attempting to increase productivity through wage increases and training Dealing with trade unions and trying to solve industrial disputes through collective bargaining and other industrial relations approaches Conducting performance appraisals or report card of past performance to determine pay and promotions

The Personnel Management approach tried to convince workers of the business interests, and convince management of workers interest and social obligations. It rarely had a direct say in the companys strategy and did not involved itself with operations aspects, remaining a purely staff function.

Traditional Human Resources


The latter decades of the twentieth century saw the winds of change starting to affect the personnel management profession. Traditional human resource management remains a staff function, and the exclusive responsibility of the human resource department. A major

role of traditional resource management is reconciling the interests of management and the workforce. The human resource management traditional approach focuses on personnel functions such as Recruitment and selection, performance appraisals, payroll administration, and job analysis, with some employee-centric development initiatives such as training and development interventions, motivation initiatives, and others. Focus on establishing policies, procedures contracts and guidelines, and attempts to drive employee performance and achieve organizational goals by making employees adhere to such carefully crafted documents. The recruitment and selection activity strictly follows laid down norms such as undertaking a job analysis first, advertising the vacancy based on the job specifications and job requirements, collecting resumes, conducting written tests, interviews and any other selection method, as well as creating a rank list based on the published selection criteria. Focus on functional activity and process orientation leads to the establishment of an institutionalized workforce management effort with fixed grades and restrictive movement from one grade to another.

Human Resources Management Approach


While Personnel Management was a strictly staff function, Human Resource management began to become an increasingly line management function, directly interlinked to the core business operations. The major changes in approach from Personnel Management vs. Human Resource Management are:

The recruitment and skill enhancement of the workforce having a direct bearing on organizational profitability, efforts began to increase workers commitment and loyalty. Motivation took the shape of challenging work environment, free holidays, creating an active social community within the workforce, fringe benefits and the like, besides monetary incentives. Training acquired a new Training and Development dimension with the focus on behavioral training to change attitudes and develop basic skills rather than remaining limited to inculcating work-related skills. Wage and Salary Administration became more complex with the introduction of performance related pay, employee stock options etc. The report-card based performance appraisal systems become more proactive with new techniques such as Management by Objectives, 360 degree appraisals and so on. Emphasis on leadership instead of managing

Strategic Human Resource Approach


The evolution of Human Resource Management took a new turn at the end of the century. Increased free market competition at global level and the proliferation of technology and knowledge based industries raised the importance of human resources, and from an obscure role a century ago, human resource management rose to become the most critical

function of an enterprise. The workforce, hitherto considered as resources now became assets and a valuable source of competitive advantage. The thrust of human resource management now lies in trying to align individual goals and objectives with corporate goals and objectives, and rather than enforce rules or dictate terms, act as a facilitator and promotes a participative approach. These changes influenced Human Resources functions in many ways.

Increased reliance on performance based short term contracts instead of long term employment Direct linkage of compensation to the profitability of the enterprise and the employees contribution towards such profitability New dimensions for training and development function by encouraging and facilitating innovation and creativity Motivation through enriching the work experience Performance and Talent Management displacing performance appraisals

Difference between Personal management and Human Resources Management Personal Management is viewed as a tool. The behaviour of which could be manipulated for the benefit of the organization and replaced when it is worn out. It was a routine activity meant to hire new employees and to maintain personal records. It was never considered as a strategic management of business. Human Resources Management would view people as an important source or asset to be used for the benefit of the organization, employees and society.

How is Personal Management different from Human Resources Management


Personal function Maintenance oriented An independent function with independent sub-function Reactive, responding to events when they occur Exclusive responsibility of personnel department Emphasis on monetary rewards Improved performance is a result of improved satisfaction and morale Points of discussion Orientation Structure Human Resources Management Development oriented Consists of inter-dependant parts Proactive, trying to anticipate and get ready with appropriate responses Responsibility of all managers in the organisation Emphasis on higher order needs example; empowering people Better use of human resources leads to improved satisfaction and morale

Philosophy

Responsibility

Motivators

Outcomes

Tries to improve the efficiency of the people and administration

Aims

Tries to develop the organization as a whole and its culture

Difference between Human Resources Management and Strategic Human Resources Management Human Resources Staff personnel in the HR department Point of discussion Responsibility for HR programs Strategic Human Resources Management Line manager; all manager responsible for people are HR managers Partnerships with internal (employees) and external (customers, stakeholders, public interest groups) groups Proactive Andrew transformational, change leader Fast, flexible, and systemic, change initiatives implemented in concert with other HR system

Employee relationshipensuring employee motivation and productivity, compliance with laws

Focus of activities

Reactive and transactional

Role of HR

Slow, piecemeal, and fragmented, not integrated with larger issues

Initiative for change

Short-term

Time Horizon

Consider various time frames as necessary (short, medium, or long-term) Organic control through flexibility, as few restrictions on employee behaviour as possible Broad job design, flexibility, teams and groups, and cross-training

Bureaucratic control through rules, procedures, and policies

Control

Focus on scientific management principlesdivision of labour, independence and specialization Capital, products, technology, and finance Cost centre

Job design

Important investments

People and their knowledge, skills and abilities Investment centre

Accountability

Difference between Strategic human Resources Management and Human Resources Strategies Strategic Human Resources Management A general approach to strategic management of human resources Aligned with the organizational intention about its future direction Focus on long-term people issues Human Resources Strategies Outcome of the general SHRM approach Focus on specific organizational intentions about what need to be done Focus on specific issues that facilitate the achievement of corporate strategy Human resources strategy decisions are derived from SHRM

Defines the area in which specific HR strategies need to be developed Focus on macro concerns such as structure, culture Strategic HRM decisions are built into the strategic business plan

Strategic Partner In todays organizations, to guarantee their viability and ability to contribute, Human Resources managers need to think of themselves as strategic partners. In this role, the HR person contributes to the development of and the accomplishment of the organization-wide business plan and objectives. The HR business objectives are established to support the attainment of the overall strategic business plan and objectives. The tactical HR representative is deeply knowledgeable about the design of work systems in which people succeed and contribute. This strategic partnership impacts HR services such as the design of work positions; hiring; reward, recognition and strategic pay; performance development and appraisal systems; career and succession planning; and employee development. Human Resources as Strategic Partner Executives commit significant resources to ensure that their companys production, service, technology and marketing functions are capable of rapid change. Too often, however, the Human Resources function is not responsive to this rapid rate of change. Where this occurs, companies may be perpetuating or even creating barriers to fully leveraging their human capital. Organizations can begin the process of removing these barriers by assessing the Human Resources function and its alignment with business objectives. Human Resource is responsible for many of the activities involved in planning, acquiring, building and maintaining an organizations human capital. Organizations whose HR departments are disconnected from the business may be compromising their ability to compete. HR can play a role in realizing business objectives by leading organizational change, fostering innovation and effectively mobilizing talent to sustain the firms competitive edge. Given the investment typically required to support an HR organization, it makes good business sense to maximize HRs impact on the business.

Organizations can align HR with the business strategy by conducting a rigorous diagnostic assessment of HRs performance and using the resulting analysis as the basis for strategy development and implementation planning. The following steps provide an overview of the HR assessment process.

Clarify people issues associated with business strategy

Assess HR's role in the organization

Identfy and prioritize performance issues

Development and implement HR strategy, struture, staff and services

Identify and implement metrics to assess HR's performance

Fig:1.1........................................................................ 1.A)Clarify the people issues associated with the business strategy. The Human Resources Manger must work with executives to clarify the business direction and performance expectations, and actively contribute to deciding what tactics are required for managing talent to achieve business goals. For HR this may require learning more about the workings of the business, the competitive environment and the available labour pool. To fully understand the people issues, it is important to ask what is needed to achieve business objectives: What type of talent is required? Do we have the talent within the company or do we have to search outside? Which segments of the employee population are most critical to the strategy? What type of culture do we need to build, not only to achieve the objectives, but also to attract and retain the talent we require? What organizational structures and systems are in place that will help or hinder achieving our goals?

B)Assess HRs role in the organization. Human Resources traditionally transactional role has become multidimensional. In addition to carrying out administrative tasks efficiently, HR also must be knowledgeable about the business strategy and serve as a partner in leading the required changes for the future. For HR to begin influencing change in the company, it is important to first clarify how executives, management, employees and the HR staff perceive HR and its programs and service offerings. This requires asking tough questions about how stakeholders value HRs work.

What has been the role of HR in the organization historically? To what extent is HR seen as administrative? As strategic? As a trusted advisor to business management? How much of HRs time is spent on administration vs. delivery vs. strategy? What does HR do to protect and build the companys investment in human capital? What is the perceived business impact of HRs work?

Identify and prioritize performance issues. The foundation for an effective HR organization is the efficient delivery of HR administrative services. Without this solid foundation, HRs credibility as a knowledgeable business partner and a change leader is greatly compromised. Each of the major functions of HR should be examined for its impact on achieving the business strategy administration and technology, traditional and non-traditional benefits, compensation, performance management, training and development. How efficient is HRs service delivery model? To what extent are the major functions of HR organized to respond to the needs of the overall business and the unique needs of high impact segments of the employee population? What structures, systems, processes and practices need to change?

Develop and implement HR strategy, structure, staff and services to support the business strategy. To achieve the necessary level of agility, HR organizations must constantly assess business needs and their own capability to support those needs. HR must determine its strategic focus based on the business imperatives facing the company. To drive the achievement of business goals, what should be the strategic focus of HR? What is the optimal combination of HR programs and services for protecting and building the companys investment in human capital? What is the most effective and efficient configuration for the HR organization? What staff capabilities are needed within the HR organization? Since effective management of Human Resources cannot be the sole responsibility of the HR department, what capabilities are needed among executives, managers and employees? What specific steps must be taken to create change, and by whom?

Identify and implement metrics for assessing how HRs performance aligns with business objectives. By establishing HR metrics that link back to business objectives, organizations can build an effective connection between HR and the business. Metrics help ensure that plans are executed and provide HR employees with clear and specific goals to rally around. Unfortunately, this critical step of choosing the right performance metrics and setting realistic but challenging targets is often a misstep. Some organizations dont really measure at all, and others put so much emphasis on measurement that there are few resources left for

leading organizational change. Identifying a few meaningful measures for the HR department as a whole, as well as for each of the major functions of HR, is most effective. For example, an organization experiencing reduced productivity and high expenses associated with turnover can implement metrics focused on employee retention. Examples include reduced turnover rates and increased employee job satisfaction ratings for the organization as a whole, as well as for high impact roles and positions. Focusing in on the specific causes of turnover is also important. If the top reasons for leaving are dissatisfaction with supervisors and a lack of confidence in management, targeted metrics for the training and development function can focus on: The impact of supervisor training The effectiveness of performance management Clarification of career paths and guidance for career advancement The implementation of succession planning