Unit 5

Strategic and International HRM

 Outsourcing HR activities
Outsourcing HR activities : the word outsourcing is made up of three words.
Outside
Resources
Using
 Outsourcing : describes the procurement of resources from external suppliers
that were generated within the sourcing organization.
The outsiders who are providing the outsourcing services are called as service
providers outsourcing is also called as subcontracting.
HR outsourcing : It is the delegation of human resources (or) HR activities
such as hiring , training and development and maintenance of statutory records
are the usual functions contracted out to outsiders.
National Highway Authority of India is handling projects worth Rs. 45,000 cr.
With a human resource strength of just 570 people working out to ratio of one
person per Rs.100 cr. Diagram.
 Advantages of HR outsourcing
To Reduce labor costs : Hiring employees and training them for a number of
different projects can be costly and time consuming.
To Increase profit and productivity :
By employing skilled manpower in large numbers at lower costs companies can
really increase their productivity this in turn increases the profitability of the
company.
World class technology at lower rates :
Investing in new technology is very costly and risky. So the company can use the
resources of service provides which is expertise and desire to continuously update
their technological solutions, offers.
 Employee Assistance Program (EAP) : Counseling employees and their families on
a personal level is the most likely service to be outsources workers get advice on legal,
financial personal problems and family issues, to help them to deal with, and through
lifes challenges.
Drug Testing : It is a typical outsourced function pre employment drug screenings
are extremely common. Employees send job applicants to various authorized labs
where samples are collected and analyzed
Background Checks : It includes investigations of identifying, verifying
confirmations of educational claims and criminal searches.
Payroll : This is assigned to accounting department but in some firms the duty falls to
HR.
 Benefits Administration : HR department may hire third parties to administer
company benefits such as medical, life insurance, dental vision and disability
programs.
Recruitment : This is the most popularly outsourced process of HRM. The resume
checks and preliminary interviews are conducted by service providers only.
Employee Relocation : Move management firms offer a number of ways to assist
HR personal with transferring an employee from one location to another. Specific
services such as shipping an employees vehicle.
Exit Interviews : During the tenure of the employee, the HR people record their
performance and behavior.
HR Outsourcing Stages
 BPO and call Centre's
Several MNCS are increasingly unbundling (or) vertical de integrating their
activities. Out sourcing also called as business process outsourcing (BPO)
Some of the Indian companies benefits from outsourcing are as follows.
250 engineers of Infosys develop IT applications for BOFA (Bank of
America).
 Merger and Acquisition
Merger :- It is a combination of two (or) more companies either through some
accounts are combined (or) purchase of some amount of company.
Acquisition : It is one company taking over controlling interest in another company
the buyer is definitely the dominant party in acquisition transactions.
Some of the Indian businesses are on an acquisition not just local companies but of
foreign firms as well.
Total steel - Corus (European steel maker)
Vodafone Essar
Ranbaxy Terapia (south Africa)
Daimler Benz Chrysler
Walmart Bharti
 Role of HR in Mergers & Acquisitions:
1) Composition of new Board :
The board should comprise members representing both the firms. Members of the
new board are change agents so that they can carryout the change process dictated by
merger and acquisition.
2) Deciding who will occupy which Job :
The choice of the right person for the right job is crucial otherwise, the success of the
merger will be wasted. In any merger there will be rival claims for senior executive
positions such as CEO, VP, CFO, COO, heads of divisions and heads of departments.
3) Assessing Culture :
The purpose of cultural is to evaluate the factors that may influence the organizational
compatibility, to understand the future cultural dynamics as the deal takes place and to
prepare plans of how the cultural issues should be addressed if the merges (or)
acquisition goes through.
 4) Human Capital Audit :
Human capital audit needs to be focused on two dimensions.
Preventive focused on liabilities such as obligations.
Employee litigations and outstanding grievances. It also compares compensation policies,
benefits and labour contracts of both the firms.
Talent audit which, in the long run would be critical for the success of a merger (or) acquisition
deal.
5) Effective Communication : In M & AS. Communication plays a critical role in several ways.
It seeks to alleviate tensions among employees, particularly of the acquired company, merger
syndromes do occur among employees. Fears such as layoffs, relocations, big is Vs small fish
attitudes. Superiority Vs. Inferiority complexes and victory.
Communication feeds the top management about the integration that should take plane between
the two marrying partners.
Senior management should communicate a vision throughout the company.
 6) Retaining Talent :
Retention of talent assumes relevance as competent employees, particularly of
the target company, tend to leave before (or) after the deal.
It is identifying those employees with gifted skills and capabilities.
Try interventions which would help hold back those talented individuals.
All said and done, what melts any individual is one to one and heart to heart
communication.
7) Aligning Performance Appraisal & Reward System :
Aligning performance measurement and reward system is a challenging task
particularly when the two firm have different policies and one of the parties is
adversely affected by the change.
 8) Managing the transitions :
Transition occurs immediately after the deal and before a new team of managers is in
place.
The integration manager is expected to guide the integration process making sure that
critical decisions are mode and activities are put in place according to an agreed
schedule.
The integration manager needs to educate the bought-out company to understand how
the new management operates. He (or) she can also help forge social connections
among the people of both the partners, enable acquired companys employees to
understand the language of the parent and its way of doing things.
The integration manager needs to act as an arbiter between the two companies and the
work the tendency of the parent to act big and enact big-fish-eat-small fish.
The integration manager and the transition team need to serve as a role model as to how
the new organization should function.
 Six Sigma
Six Sigma is a quality System based on measurements of how well an
organization meets customer requirements.
Six Sigma is a quality improvement program with a goal to reduce the number
of defects to as low as 3.4 parts/million.
It is a benchmark of excellence for product and process quality, popularized
by Motorola based on Zero defect concept introduced by Philip B Crosby.
 Six Sigma is also a measurement of total quality to let the company know how
effective it is in eliminating defects and variations from its processes.
Acc. To Dr. Mikel. J. Harry : Six Sigma is a statistical Measurement, which
helps us in establishing race for total customer satisfaction.
Acc. To Mr. Jack Weich : Six Sigma is a disciplined quality Improvement
methodology that focuses on moving every process that technique the customers
every product and service towards near perfect quality.
 Six Sigma: - Six sigma is a highly disciplined approach used to achieve break
through improvements in manufacturing, engineering and business processes.
It helps reduce the process variations to the extent that the level of defects is
drastically reduced to less than 3.4 defects per million process, product (or)
service opportunities (DPMO).
Six sigma approach relies heavily on advanced statistical tools. Sigma () is Greek
letter that is used to describe variability.
Six sigma projects are identified considering the strategic direction of the
company first, the impact on the bottom line next and finally, the impact on
customer satisfaction.
 1.Define the problem, the voice of the customer, and the project goals,
specifically.
2. Measure key aspects of the current process and collect relevant data.
3. Analyze the data to investigate and verify cause-and-effect relationships.
4.Determine what the relationships are, and attempt to ensure that all
factors have been considered.
5.Seek out root cause of the defect under investigation.
 6. Improve or optimize the current process based upon data analysis using
techniques such as design of experiments, mistake proofing, and standard work
to create a new, future state process.
7. Control the future state process to ensure that any deviations from target
are corrected before they result in defects.
8.Implement control systems, such as, statistical process control, production
boards, visual workplaces, and continuously monitor the process.
 Benefits from Six Sigma: - The following are the key benefits that drive
companies towards six sigma initiative.
They are:
Sharing a Common Goal
Value to customers
Dealing with strategic changes
 Six Sigma in HR Function
Six Sigma is dramatic improvement through re-engineering (or) innovation of the
HR function key points to meet Six Sigma Requirement.

1) What should be done

2) What should be measured
3) How to improve HR process
4) How can HR deal with million people.
 For Six Sigma program the HR team has to
(1)Develop a competency framework to tap existing and latent talents.
(2) Building and execute training models that cover the requirements of 6
process.
(3) Create G retention strategy to ensure that the black belts remain in their
positions fill the completion of the six sigma initiative.
1. Recruitment and Retention
2. Compensation and Rewards :
3.Knowledge Management
4.Change Management
 Benefits of Six Sigma in HR Functions
o Reduce the time required to hire an employee.
o Improve employee orientation processes.
o Reduce expenditures for Recruitment.
o Improve timeliness and the value of employee performance reviews.
o Reduce absenteeism.
o Improve training efficiency.
o Improve employee satisfaction.
o Identify and correct retention issues.
o Reduce Incentive Compensation errors.
o Eliminate Over payments to Terminated Salaried Employees.
o Improve grievance handling process.
o Consolidate employee information databases.
o Integrate multiple payroll systems for remote locations.
o Increase job posting hit rate.
o Increase retention using exit interview information
 The advantages of Six Sigma depend on organization and its circumstances.
The principle advantages of six sigma are as follows:
To reduce variations
To reduce defects
To improve productivity
To enhance customer satisfaction
To improve the profits
To improve the reputation of organization
Role in Six Sigma
Black belt

Master Black belt

Green Belt

Champion (or) sponsor

Implementation leader.
Title Role Experience and skills
Black Belt It is the most critical role. Without a This term is usually developed from
qualified black belt, the process may within the organization, but is re-
fail. People are skilled in six sigma asigned full time to six sigma. Usually
methodology, tools and processes. This a middle manager or a future manager
belt serves generally from 19 months to is developed from this belt. The
two years, and carries out 4-8 projects incumbent must be an expert in
problem solving, data collection and
analysis. He must be organizational
savvy. The focus is on
leadership/coaching, and
understanding of administrative
systems and processes.
Master Black belt This term is coach, mentor, and trainer Master Black belt person is generally
to Black belts. People are expert in six a professional six sigma consultant.
sigma methodology, tools and processes. He must possess substantial
This belt offers hands-on help to Black experience with all the areas
Belts mentioned under Black belt.
Green Belt This belt is similar to Black Belt, but Similar to black belt
holds a regular position while
participating in or leading a six sigma
term
Champion or sponsor Champion initiates and sponsors a Champion or sponsor must be
black belt or team project. This belt is executive-level or key operational
directly accountable for project Results. manager. He is of often member of
 Disadvantages
Six Sigma is exacting but not necessarily exciting
Detraction from creativity
 HR INDEX
An index is composed of individual measures that, when combined, reflect
the success of the overall HR function. So Index of HR performance linked
with organizational effectiveness should be available addition to the HR
field.
Uses of HR Index
Compare present HR performance with past Human Resource performance.
Establish goals and objectives for HR performance
Compare HR performance with industry name.
Compare HR Performance with that of other specific organization.
 HR ROI
Most of the companies are relying on HR departments to increase the Return on
Investment. So every HR department would then employ a lot of methods, to ensure that
the maximum potential for HR-ROI would be realized there are many methods to
maximize its returns on Investment.
One such method is conducting background checks on their applicants. Finding
employees who have decent work experience indecent companies in the industry are the
reasons for better return on Investment.
Again then there is a problem if this background check is done frequently then it may
cause high employee turnover rates the ultimate benefit of setting an HR-ROI comes in
the ability to rationally offer training and development opportunities to high performance
employee.
 Re sults ( Actual performance Expectations
HR ROI
Salary HRD Investment
 ROI for a New HR Activity

A widely used financial measure that can be applied to measure the

contribution and cost of HR activities is Return on Investment (ROI), which is
a calculation showing the value of expenditures for HR activities. It can also be
used to show how long it will take for the activities to pay for themselves.
The following formula can be used to calculate the potential ROI for a new
HR activity

C
ROI
A B
 Emotional Intelligence

Emotional Intelligence
Emotions are reactions to an object, not a trait. They are object specific.
For example, you show your emotions when you are happy about something,
angry at someone, afraid of something moods, on the other hand, are not
directed at an object. Emotions can turn into moods when you lose focus
on the contextual object.
The term Emotional Intelligence (EI) was used by Peter solve of Yale
University and John Mayer of New Hampshire University for the first time
to involve a set of personal and social abilities of an individual.
 Emotional intelligence is the ability to command respect by building
relationship or the ability to get along with the people and situations.

Emotional Intelligence (EI), often measured as an emotional Intelligence

Quotient (EQ) describes at ability, capacity or skill to perceive, assess, and
manage the emotions of ones self, of others, and of groups. It is a relatively
new area of psychological research. The definition of EI is constantly
changing
 Competencies at Work
Job Characteristics theory.
Skill Variety
Task Identity
Task Significance
Autonomy
Feed back
 Skill Variety: - Skill variety is the degree to which the job requires the person to perform
different tasks and involves different skills, abilities and talents.
Task Identify: - Task identify is the degree to which a job enables a person to complete an
entire job from start to finish.
Task Significance: - Task significance is the degree to which the job has an impact on lives
or work of other people.
Jobs that demand skill variety, task identifies and task significance enables employees to
experience meaningfulness of work
Eg: - Cancer researches.
Autonomy: - Autonomy is the amount of freedom, independence and discretion the
employee enjoys in determining new to perform the job.
Eg: - Farmers
 Feedback: - Feedback is the degree to which the job or employer provides the
employee with clear and direct information about job outcomes and
performance.
Eg: - Automobile sales people.
 Work-Life Integration
Worklife Integration is an outcome of people exercising control & choice in their
life to meet lifes challenges
This can be managing work responsibilities alongside their personal & family needs.
The areas of a persons life which require integration will change based on the
individuals life stages
A person in his or her 20s may be balancing career development and social activities
In 30s, when a person gets married & starts a family, family & job responsibilities
become competing challenges
Organizations implement worklife programmes for one or more of
the following reasons:
Attract and/or retain talent
Raise morale
Increase productivity
Save on real estate and overhead expenses
Reduce healthcare costs
Provide work flexibility in response to changing employee needs
Increase commitment
Combat burnout
Be an Employer of Choice
Stay ahead of the competition
 Flexible Work Arrangements (FWA) - An effective FWA takes into account
the nature of the employees job and his/her requirements
Leave Benefits - annual leave, childcare leave, maternity leave and sick leave
Employee Support Schemes - dependent care support, health and wellness
programmes, flexible benefits and time-saving services
Companies that already provide a service as a business could extend it to their
employees at marginal cost, e.g. transportation, laundry, childcare, etc.
 International HRM/Global HRM:
Definition: - International Business is concerned with business activities and
transactions that are carried out across two or more national borders.
International Business is also called as Global Business. The International
Business is the process of focusing on the resources of the Global and
Objectives of the organization on Global Business opportunities and threats.
The term International Business is emerged from the terms international
marketing and export marketing.
 Nature of International Business: -
The nature of I.B. is understood in terms of scope and inter country
comparison.
Wider Scope: - IB refers to the flow of goods across national political borders.
It is much broader in scope.
It involves international marketing, international investment, management of
foreign exchange, procuring international finances from IMF, IBRD, IFC, etc.
Management of international human resources, management of cultural
diversity, management of international production and logistics, international
strategic management etc. Thus IB is broader in scope.
 Inter Country comparative study: - International Business studies the business
opportunities, threats, consumers preferences, behavior, cultures of the societies,
employees, business environment factors, manufacturing locations. Management
styles.
International Business tries to identify, classify and interpret the similarities and
dissimilarities among the systems used to anticipate demand and market products.
Comparative analysis helps the management to evaluate the markets, finances, HR,
consumers of various countries. International Business includes activities of
different nature like:
 Trading: - Export and Import of goods
Manufacturing and Marketing: - Many MNCs small and large do manufacturing
and marketing to other countries.
Sourcing and marketing: - Many MNCs out source the products which they
market at home and or abroad.
Global sourcing for production: - There are firms which source globally their raw
materials required for manufacturing.
Services: - There are large varieties of services done internationally like tourism,
transportation, I.T., Banking, Insurance, Consultancy etc.
Investments: - FDIs are associated with establishment of manufacturing and
marketing facilities abroad.
 Objectives of Global HRM
Some of the important objectives are :
To reduce the risk of international human resource.
To avoid cultural risks.
To avoid regional disparities.
To manage diversifies human capital.
Remaining competitive throughout the world
Maintaining local responsiveness
Capable of transferring learning across globally dispersed units.
 Reasons for Emergence of IHRM
Main reasons for the rapid growth of interest in the field of IHRM are shown in
figure ahead
IHRM Approaches
STRATEGIC HUMAN RESOURCE MANAGEMENT (SHRM)
 Thus, strategic Human Resource Management can be defined as,
According to Truss and Gratton, Strategic Human resource Management is
the linking of human resource management with strategic goals and objectives
in order to improve business performance and develop organizational cultures
that foster innovation and flexibility.
Vision : developing clear vision for creating future.
Versatility : Adapting change and pursuing difficult skills.
Focus : Implementing successful and long lasting change and harmonizing
strategy and change.
Patience : Committing to long-term perspectives of the organization.
 Elements of Strategic Human Resource Management
The elements of Strategic Human Resource Management are :
Human Resource Practices/Strategies:
Employee influence,
Human Resource flow,
Reward systems
Work systems.
 Human Resource Behaviors :
Commitment,
Competence,
Workforce characteristics,
Management Philosophy,
Human resource market/cost
Social values / congruence
Outcomes
Individual well-being
Organizational effectiveness
Societal well-being,
Corporate well-being
 Objectives of Strategic HRM
The major objectives of SHRM are as follows.
To ensure the availability of a skilled, committed, and highly motivated
workforce in the organization to achieve sustained competitive advantage.
To provide direction to the organization so that both the business needs of
the organization and the individual and collective needs of its workforce are
met. This is achieved by developing and implementing HR practices that are
strategically aligned.
 Functions of SHRM
The functions of strategic human resource management is primarily aimed at building
high performance human resource management functions that add strategic value to the
core businesses of an organization.
This requires skills, business mindedness, impact, influence, and essential
competencies for greater business impact.
While elaborating on the functions of strategic human resource management, the role
of human resource management as a Strategic Partner has been emphasized here:
 These functions are :
High Performance Human Resource Management Practices :
Strategic human resource management ensures that an alignment between
business strategy and human resource strategy takes place for superior
organizational performance and competitiveness.
There is a positive link between particular sets of human resource management
practices and business performance as depicted below.
 Following are the measures of organizational performance :
Level of Outcomes
a) HR outcomes : Turnover, absenteeism, job satisfaction.
b) Organizational Outcomes : Productivity, quality, service.
Financial Accounting Outcomes : ROI, profitability
 Level of Analysis
Organization,
Strategic business unit
Plant /site.
Data sources
Survey,
Company records,
Public databases.
Research studies indicate that small increase in human resource management
practices results in signification increase in profits per employee.
Capital Market Outcomes : Stock price, growth returns.
 HR Scorecard
Concept of HR Scorecard
In the new business environment, HR no more means only support services, rather it
plays a strategic role in realizing business goals and improving organizational
performance.
It is a major challenge before the HR professionals to measure the HR performance in
determining the overall organizational performance.
A Strategic HR measurement system called HR scorecard introduced by Becker,
Huselid and Ulrich represents an important lever that firms can use to design and
deploy a more effective HR strategy.
The HR scorecard is a method for human resource to position itself as a strategic
planning partner with line managers and executives in the organization.
 Sample HR Scorecard
HR scoreboard model consists of following seven-step process that ties HR results to
an organizations overall strategy :
Clearly define business strategy
Build a business case for HRM as a strategic asset,
Create a strategy map
Identify HRM deliverables within the strategy map,
Align the HRM architecture with HRM deliverables,
Design the strategic HRM measurement system, and
Implement management by measurement.
 The development of an HR Scorecard must be done with four perspectives in
mind as follows:
A financial perspective to address strategies that satisfy customers
A customer perspective that asks what customer want
An internal perspective that addresses the stated desires of customers and
designs processes consistent with those desire learning perspective that taken into
account .
HR employees can implement steps to align HR goals with the overall company
mission, vision and business objectives.
 HR Scorecard Implementation
It has seven steps model:
Clarify the business strategy
Develop HR Architecture
Create a strategy map of the firm
Business Indicators
Results
Identify HR Deliverables in the map
Align HR Architecture with HR Deliverables
Design HR Scorecard
Execute/Implement
 HR Architecture
The HR function (services)
The HR management system
Supporting policies and practices such as
Create links between promotions and competencies
Provide skills training
Attract and retain high performers
Strategic Employee Behaviors
Paradox theory as a lens of theorizing for
Sustainable HRM
 Sustainable HRM is defined as long-term conceptual approaches and activities aimed at
socially responsible and economically appropriate recruitment , selection, development,
deployment and release of employees.
Sustainable HRM can be used for organizational change situations, as these often make
too great demands on the people involved.
Sustainable HRM could help sustaining employee dignity in case of staff reduction
and warranting their employment on the job market.
 Work-Life-Balance
Growing importance of professional career
Growing importance of private and family life

Individual Responsibility
Increased autonomy and self-determination in questions of professional development

Employability
Focus on continuous development and professional agility rather than specific activity
 Central Objectives in Sustainable HRM
Contributing to achievement of economic objectives
Promoting individual responsibility
Ensuring adequate pay and promoting employee health
Enhancing employability
 Major Instrument of Sustainable HRM
Recruitment: requirement & job profiles; labour market research
Deployment: health management; staff composition; advanced working-time
management
Development: encouraging continuous education; career planning;
promoting individual responsibility & participation
HR marketing: image analysis & improvement
Retention: sophisticated incentive systems
Disemployment: exit interviews; outplacement
Management & Leadership: participative management styles; MBO;
assessment of superiors
 Paradox
According to Oxford Dictionary a paradox is a statement or tenet contrary to
received opinion or expectation; often with the implication that it is marvelous
or incredible
Paradox is the simultaneous existence of two inconsistent states, such as,
between innovation and efficiency, collaboration and competition, or new and
old.
A paradox is an idea involving two opposing thoughts or propositions which,
however, contradictory, are equally necessary to convey a more imposing,
illuminating, life-related or provocative insight into truths than either factor can
muster in its own right.
What the mind seemingly cannot think it must think; what reason is reluctant to
express it must express.
 Keys of Paradox theory
The first key paradox addresses the problem that organizations need to
deploy employees efficiently and effectively to reach organizational objectives
and to remain competitive.
The second key paradox addresses the individual employee level and the
ability of employees to perform, regenerate and develop themselves.
The third paradox is short &long-term paradox: HR practitioners find
themselves faced with contradictory demands between short-termed profit
making (e.g. labour-cost pressure) on the one hand and long-term
organisational viability on the other.
 Applications
Four reasons have been identified for corporate failures of successful
companies:
(1) excessive and fast growth (sales growth, large number of acquisitions,
intensive investment in growth areas),
(2) uncontrolled change (endless restructuring, loss of corporate identity),
(3) autocratic leadership (powerful, overly ambitious CEOs, blind faith in
them, weak boards), and
(4) an excessive success culture (strong competition between employees, high
degree of employee stress, poor communication).
To avoid failure, companies should pursue:
Sustainable growth (limited growth at a firm specific optimum rate),
Stable change (both stability and change),
Shared power (a healthy balance between CEO and board powers, and
A healthy organizational culture with both trust and competition, i.e. an
overall balanced approach.
 Paauwes Model
Paauwes model also integrates the duality between what he calls relational
rationality and economic Rationality.

This is of relevance for sustainable HRM because relational rationality refers

to establishing sustainable and trustworthy relationships with internal and
external stakeholders.
While Paauwe Contrast a relational in addition to an economic rationality, the
literature on SRM Proposes that economic rationality itself is dual if
sustainability is considered to sustain organizational viability.
 These two theoretical ideas are Contrasted here in one model because both point
towards the importance of extending the notion of strategic success in HRM
and because a more complete picture of the theoretical diversity is provided.
The model integrates relational rationality and opposes a dual notion of
economic rationality-efficiency and the substance-oriented understanding of
sustainability.
The consequence is an extended notion of strategic success for sustainable HRM
based on the assumption that, HRM needs to balance both values and value
as well as efficiency and substance.
 The conceptual framework focuses on evaluating broad outcomes of HR activities on a
longer-term basis.
Micro and macro levels of analysis are considered.
On the macro level of analysis, the practical focus lies on raising awareness of HR
executives and corporate managers for the dual problem of HR deployment and
resourcing and on the organization's future HR access to qualified and motivated HR.
On micro level of analysis, unintended and unwanted outcomes of HR decisions on
employees are considered with the particular focus on employee health.
 The spiral on the left-hand side of the model symbolizes that
developments over time operate between the poles of the
different paradoxes and create tensions.
The tensions illustrated in the model on the left-hand side are the
tensions between relational rationality and economic rationality.
The transition point between shifting from on one pole to
another is influenced by the availability of human resources.
 Tensions operate between them.
The right hand side of the model illustrates the tension between
short and long-term aspects.
In the center of the model, the tasks of the HR work system and
organization is to sustain the human resource base and the
sources of resources from within