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CHAPTER 1

INTRODUCTION AND METHODOLOGY

1.1 Introduction

The human resource function has evolved over time. The cotton textile

industry in Bombay (Mumbai) and jute industry in Bengal started to employ

labour welfare officers before and during the Second World War. The first

concern for workers welfare was shown in the factories Acts of 1881 and

1891; but these were only limited to the working hours of women and children.

The report of factory labour commission, appointed by the Government of

India in 1907, led to the factories act of 1911.

In 1929 the Royal Commission on labour in India was set up under the

chairmanship of J. H. Whitely "to enquire into and report on the existing

conditions of labour in industrial undertakings and plantations in British India,

on the health efficiency and standard of living of the workers and on the

relations between employers and employed." It made its report in 1931

covering all aspects of labour problems, including employment of women and

children, migration, hours of work, conditions of work, industrial relations and

welfare. This historic report profoundly influenced all future thinking on labour

problems. Of the 24 labour enactments adopted during the years 1932 to

1937, 19 were in implementation of the recommendation of the whitely report,

but it was not until 1948 that a really Comprehensive Factories Act appeared

on the statue book.

A labour officer was first appointed in the Bombay factory of a large chemical

company in 1941. His functions were limited to keeping of individual records,

looking after welfare activities, supervising administration of labour legislation

and attending to minor disputes concerning hourly rated staff. In 1947,

recruitment and selection of unskilled labour was added to his functions. A

labour officer with similar functions was appointed in the Calcutta (Kolkata)

factory in 1945. In 1951 the designation was changed to personnel officer,

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and since date there has been a great change in the range of his personnel

functions.

The early 1970's witnessed the emergence of the term HRM as a replacement

for Personnel Management. The change in terminology also suggests a

change in the objectives and boundaries of the function. The dynamic and

competitive business environment resulting from globalization has led a new

focus on how human resources should be organized and managed. The early

80's saw the emergence and increase in the use of the term strategic HRM.

The late 1980's and early 1990's witnessed a visible convergence between

HRM and strategy. In the 21st century this convergence has become

startlingly obvious with the use of terms such as 'knowledge', 'networked',

'knowledge based firms' and 'virtual organizations’ when the adjective

strategic is prefixed to HRM it puts an emphasis on the ways in which HRM

contributes to competitive advantage and organizational effectiveness.

1.2 Review of Literature:

The role of human resource management in gaining competitive advantage

has been discussed in the western literature since the early eighties. Schuler

and MacMillan (1984)1 discussed how companies can strategically utilize their

infrastructure requirements to gain competitive advantage, particularly through

their human resources and human resource management practices. Although

there are many ways by which companies can gain a competitive advantage,

as MacMillan (1983)2 has suggested, one way often overlooked is through

their human resource management practices. HRM practices enable

companies to gain competitive advantage in two major ways: one is by

helping themselves and the other is by helping others. There appears to be a

significant benefit from having HRM considerations represented in strategy

formulation stage rather than only in the complementation stage.

Schuler (1992)3, proposed the 5-p model of strategic HRM which melded

various HR activities with strategic needs. These five P's (HR Philosophy,

Policies, Programmes, Practices and Processes) according to him can be

categorized into strategic on the basis as to whether they are systematically

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linked to the strategic needs of the business. One benefit of the 5-P model is

that it shows the interrelatedness of activities that are often treated separately

in the literature. This separate focus perhaps necessary for research

purposes tends to understand the complexity of how HR activities influence

individual and group behaviour. Thus by using the 5-P model we may gain

greater understanding of this complex interaction.

Roy Massey (1994)4 explored the reasons as to why strategic HRM is a

critical issue facing NHS trusts in U.K. He identified the risk associated for not

taking a strategic approach. According to Roy organizations that do not adopt

a strategic approach are easily recognized by a fragmented and ad-hoc

approach to the development and implementation of human resources

activities. In those organizations that do not adopt a strategic approach,

existing approaches often act as barriers to the implementation of strategy

rather than as levers to support or facilitate it, they are at risk of reacting to

somebody's agenda. Failure to have a strategic approach to HRM will directly

impact on the performance of the organization, however it is measured.

Critically, failure to take a strategic approach will have implications for costs,

efficiency, productivity and quality.

Rozhan bin Othman (1996)5, examined the relationship between strategy and

HRM practices in the Irish Food Industry. The main focus of the study was to

examine the relationship between competitive strategy and HRM practice.

The study utilized a sample from the Irish Food Industry. Firms with more than

25 employees were selected for the study that gave a sample of 497 firms. A

questionnaire addressing two key areas of HRM practice and strategy was

developed and marked to the personnel / human resource managers of all

these firms. The findings of the study did not support any of the hypothesis

forwarded. This suggested that the impact of strategy on HRM practice is les

pervasive, if it exists at all, than suggested in HRM literature. Instead, the

evidence showed that when controlled for employment size, none of the

strategies associated with HRM practice can be considered distinct. Other

variable, specially the presence of a HRM department, appear to exert more

influence over the form of HRM practices of the organization.

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Othman, R and Ismail Z (1996)6 undertook an empirical examination of the

relationship between HRM practice and strategy in the service and

manufacturing sectors in Malaysia. The study was based on the assumption

that given the certain characteristics of the service firms, they should develop

a more strategic HRM practice than manufacturing firms. In the above study

545 firms from the four industries representing the manufacturing sector

(electronics / electrical, textile, food and plastic) were selected. A total of 367

firms from the two industries (Banking and Financial Services) representing

the service sector were selected, thus the total number of firms involved in the

study were 912. The findings of the study did not show much support that the

HRM practices of organizations are distinctly related to their strategy. The

difference between the manufacturing and service firms perusing these

strategies did not indicate that service firms exhibited stronger fit between

HRM practice and strategy.

Denise S, and Christopher M (1997)7, investigated how human resource

strategies are conceived, designed and implemented in organizations as

perceived by the managers involved. The data for the study was collected

through a questionnaire from 723 managers studying the Open University

MBA programme, Northampton. The study conducted showed that most HR

changes are organization wide and are intended to enhance organizational

performance and support the achievement of primary business objective.

There was a clear board level involvement at initiation and planning stages,

the responsibility for implementations was unclear. It appears that

organizations were not effective in managing strategic HR change and

continued to make the same mistake, despite the availability of theories in the

literature.

Ulrich, D, (1998)8, in 'A New Mandate for Human Resources' published in

Harvard Business Review, argues that HR has never been more necessary

today than ever. According to him the competitive forces that managers face

today will continue to confort in the future, demand excellence. The efforts to

achieve such excellence through a focus on learning quality, teamwork and

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reengineering are driven by the way organizations get things done and how

they treat people, and these are fundamental HR issues. According to him,

HR can help deliver organizational excellence in the following four ways :- first

HR should become a partner with senior and line managers in strategy

execution, second it should become an expert in the way work is organized

and executed, delivering administrative efficiency to ensure that costs are

reduced while quality is maintained, third it should become a champion for

employees, vigorously representing their concern to senior management and

at the same time working to increasing employee contribution, that is

employees commitment to the organization and their ability to deliver results

and finally, HR should become an agent of continuous transformation,

shaking processes and a culture that together improve an organizations

capacity for change.

Ulrich, D (1997)9 in 'Measuring Human Resources an overview of practice and

a prescription for results’, Human Resource Management, questions whether

human resource (HR) practice make a difference in business results.

According to him the relationship between HR practices and business results

is based on a rather simple premise: better deployment and use of HR

practices should correlate with higher business result. He cites various studies

undertaken in the 80’s and 90’s, some of the studies cited were that of Susan

Nkomo who examined the correlation between how much firm invested in HR

planning processes and business results. She found no correlation;

investment in HR planning did not correlate with business performance. A

research project called organization and strategic information service (OASIS)

was undertaken as a joint venture among strategic management associates,

Hay consulting and University of Michigan. The result of OASIS showed some

relationship between specific HR practices and business results but they did

not produce overall indicators of how HR practices affect business

performance. Two larger scale surveys involving many organizations were

conducted to find such relationship, survey 1 between strategy and HR, and

survey 2 between HR and financial performance. In survey 1, Randall Schuler

and Susan Jackson collected data from a large cross section of firms and

showed how under different strategic conditions, HR practices would vary.

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This work presented empirical evidence of the strategy - HR alignment, but

did not then link this alignment to business results. In survey 2, Arthur Yeung,

Wayne Brockbank, Dale Lake and Ulrich found that HR practices not only

varied by strategy, but that the alignment of HR and strategy had an impact

on business performance.

Other studies have focused on HR practices and financial performance in

specific industries. Studies have shown relationship between progressive HR

practices and firm performance in manufacturing, cooperative and innovative

HR practices and organizational productivity in steel plants and bundles of

integrated HR practices and higher productivity and quality in automotive

plants. A comprehensive study and the relationship between human resource

practices and firm performance was undertaken by Mark Huselid, a professor

at Rutgers University and his colleagues. They drew on research which

identified high performance work practices across a number of firms.

They worked to show relationship between HR practices and financial

performance of large (more than 100 employees) publicly traded firms. Data

was collected on 968 firms (28% of those sampled). They examined the

impact of higher work performance practices on the organizational

performance measures: turnover, productivity and financial results. For

turnover, they found that a one standard deviation increase (about 25%) in

work performance reduces turnover by 7.05% on a per employee basis. For

productivity they found that each standard deviation increase in work

performance equaled a 16% increase in productivity (measured by sales per

employee). For financial performance one standard deviation increase in work

practice yielded $ 27,044 in sales, $18,641 in market value and a $ 3,814

increase in profits.

Ulrich argues that though HR measurement is complex, difficult and at time

confusing, but it can and must be done when HR professionals start with a

clear understanding of business goals (often measured in financial term), they

can turn those business goals into measurable HR practices. Such efforts

focus attention on what HR practices, professionals and departments must

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deliver to the business. Conceptualizing, defining and operationalizing these

deliverables are critical steps towards HR measurement.

Brian E Becker, Mark A, Huselid, Peter S Pickus and Michael F. Spratt

(1997)10 , based on responses to more than 30 questions from a sample of

740 firms, Huselid and Becker created an index of each firms HRM system

reflecting the degree to which firm has deployed a HPWS (A HPWS - High

Performance Work System are generally thought to include rigorous

recruitment and selection procedures, performance contingent incentives

compensation system, and management development and training activities

linked to the need of business). Huselid and Becker have consistently found

that firms with higher values on the index, other things equal, have

economically and statistically significant higher levels of firm performance.

They further estimate that plausible changes (a one standard deviation

improvement) in the quality of the firms HPWS are associated with changes of

market value of $15,000 - $60,000 per employee. For a firm with 10,000

employees this increase represents more than half a billion dollars in market

value.

Stephen T. and John J. Rodwell, (1998)11 in their article examined the level of

operational and strategic involvement by human resource department the

influence of HR departments and the level of strategic integration as

predictors of human resource management performance. They surveyed 146

senior line managers and HR executives in Commercialized and non

commercialized public sector agencies in Australia. Their results indicated a

positive relationship between the degree to which operational HR activities

were transferred to line managers, HR influence, Strategic integration and the

performance of the HRM function. Relationship was found between the level

of strategic involvement by HR department and perceived performance of the

function. The study highlighted the challenges faced by HR practitioners

needed to be operational to be valued strategically.

Patrick Wright, et al (1999) 12 in their study compared HR and line executives’

evaluation of the effectiveness of the HR function in terms of its service

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delivery, roles and contribution. They conducted survey in 14 organizations

and collected response from 44 HR and 59 line executives. The survey

indicated that HR executives consistently rated the function higher than line

executives and the greatest differences were observed on the more important

and / or strategic aspects of HR.

Brian E. B. and Mark A. H. (1999)13 in their article synthesized findings from

five case studies conducted in firms known to be leaders in the management

of people. They attempted to provide some insight into the "state of practice"

through the presentation of five detailed case studies describing the HRM

strategies employed by firms known to be leaders in the management of

people. They interviewed more than 60 senior executives across these five

companies. Using a detailed, structured interview format and extensive

evaluation of background data, they interviewed the senior HR and line

leadership in each of the following firms a) Herman miller b) Lucent c) Praxair

d) Quentan and e) Sears. This data along with an extensive evaluation of

background material provided by each company, provided the authors details

on how these leading firms use their HRM systems to implement their

competitive strategies and active their operational goals.

Pawan S Budhwar (2000)14 evaluated the levels of strategic integration of

HRM into the corporate strategy and devolvement of responsibility for HRM to

line managers in the UK manufacturing sector. The aim of the study was to

analyze the scenario of integration and devolvement in the UK, second to

identify and highlight main determinants that classify organizations into high or

low integrated developed ones and third to present the main perceptions of

personnel specialists regarding the two concepts so as to gain an

understanding about the main logic which surrounds these practices in the

UK. The sample for the study was 93 firms having 200 or more employees

from six industries (Food processing, Plastics, Steel, Textiles,

Pharmaceuticals, and Footwear). The level of integration was measured on

the basis of the following four scales.

1) Representation of personnel on the board.

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2) Presence of a written personnel policy.

3) Consultation of personnel (from the outset) in the development of

corporate strategy.

4) Translation of personnel / HR strategy into a clear set of work

programmes.

The level of devolvement was measured on the basis of primary responsibility

with line managers for HRM decision making, change in the responsibility of

line managers for HRM and percentage of line managers trained in

performance appraisal, delegation, motivation, team building and foreign

language. The average score of the summated integration scale for all 93

organizations was found to be 0.50, which shows a moderate level of

integration being practiced in the UK industry. The summated scales

demonstrate a low level of devolvement of the sample. 63.3 percent practiced

low levels of devolvement of HRM to line managers.

Watson Wyatt's (2002)15 Human capital index (HCI) study showed that

superior HR practices are not only correlated with improved financial return,

they are in-fact, a leading indicator of increased shareholder value. The

yearlong study, a follow up to the firm’s landmark HCI study in 1999, reported

that companies with the best HR practices provided a 64 percent total return

to shareholders, over a five year period, more than three times the 21 percent

total return to shareholders for companies with the weaker HR practices. The

HCI study was based on a comprehensive survey of human resource

practices at 750 North American and European Companies with a track

record of at least three years of total returns to shareholders, 1000 or more

employees and minimum of $100 million in revenues or market value. The

study also showed precisely which HR practices that play the greatest role in

creating shareholders value. According to the study, a significant

improvement in all practices was associated with a 47 percent increase in

market value. The 43 practices are divided into five key areas and the

research quantified exactly how much an improvement in each area is

expected to increase a company’s market value.

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Table 1.1 Expected change in market value associated with a

significant improvement in HCI dimension

HCI Dimension Expected change in market value associated with a significant improvement in HCI dimension

Total Rewards and accountability 16.5%

Collegial, flexible workplace 9.0%

Recruiting and retention excellence 7.9%

Communications integrity 7.1%

Focused HR service technology 6.5%

Total 47.0%

The other highlights of the study included that the efforts to link pay to

performance through stock option programmes, incentive / profit sharing plans

or higher pay for top performers was associated with a 6.3 percent increase in

market value overall. Companies that gave employees easy access to

communication technologies saw a 4.2 percent gain in market value and

companies that supported flexible work arrangements such as flextime,

telecommuting and job sharing had 3.5 percent higher market value.

Dirk Buyens (2001)16, carried a research to obtain an understanding of how

management perceives the added value of HRM. The way the strategic role of

HRM is perceived by three groups of managers closely involved with the

management of human resources. A qualitative cross sectional research

design was used. The research population consisted of three categories

mangers (1) Top managers (2) human resource managers and (3) line

managers. The sample of top managers and the sample of HR managers

were randomly and independently selected based on a directory containing all

organizations located in Belgium. One hundred twenty HR managers were

selected and contacted, 97 of them agreed to participate in the study,

revealing an 81% response rate. 60 top managers were contacted and 38 of

them were willing to participate (63% response rate). The sample of line

managers consisted of 178 subject attending a seminar on HRM. Together

their sample consisted of 313 subjects. In total 256 originations were

represented in the study. The data was collected through in depth interviews,

focus groups and a questionnaire containing open ended questions. Data

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obtained from the interviews and focus groups were analyzed in three phases.

Firstly all interviews and focus groups were typed out and / or transcribed.

Secondly for each question a qualitative analysis of the answers were carried

out at the level of the sample. Thirdly results from this analysis were

compared for all the samples having answered a particular question. Ulrich’s

model on added value of HRM was used for analyzing the way subject

described the added value of HR function. Subject’s answers were compared

with the four domains of added value Ulrich distinguished. (HRM as a

strategic partner, change agent, employee champion and administrative

expert). These four roles are described as four result domains in which HRM

creates value for the organization. Management of strategic human resources

includes activities aimed at alignment of HRM and the business strategy.

Management of change includes ensuring that the organization has the

capacity for change, while management of firm infrastructure has to do with

the organization of an efficient HR administration. According to this model,

management of strategic human resources is only one of the four domains in

which HRM can deliver value to business. According to the study it was found

that line managers considered the HR practices such as selection, training

and career development as a major HR responsibility instead of defining it as

a part of their own responsibility. The domain most frequently mentioned by

top managers was management of transformation and change. The finding

corresponds with the increasing importance of change management and

restructuring (often leading to downsizing) for the majority of organizations,

caused by increased competitive pressures and changing technologies.

Change management has become a major concern for top management and

they see HRM as one of the function through which these change

programmes can be developed and implemented successfully. HR managers

most frequently mentioned "management of employee" as the area in which

HRM has an added value for the organization. The individualization of the

employment relationship and a growing need for competent and motivated

people could explain this concern. This domain was also considered to be

important by many top managers. Line managers cited much less value

developing activities of HRM that could be situated in this domain. Although

several managers also described contributions of HRM situated in the domain

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of "Management of strategic human resources" this was obviously not the

major area in which HRM was perceived to deliver value. This was true for the

three groups of managers. This finding confirmed the authors proposition that

the question about the value added of HRM cannot be answered correctly by

focusing exclusively on the strategic role of HRM.

They concluded that according to the participants in their sample, HRM can

deliver value within different areas, ranging from administration to strategy

formulation. Many top managers and HR managers and to a lesser extent,

line managers, stressed that there are several other areas in which value can

be and has to be delivered. This confirms the multiple role model designed by

Ulrich (1997). The author in the conclusion quotes Schuler about the

opportunity for HRM to shift from an 'employee advocate' to a "member of the

management team". He stressed that this requires that HRM be concerned

with bottom line, with profits, organizational effectiveness and survival. It

means addressing human resource issues as business issues. The data from

the study suggests that top management does value this role by situating

HRM at the value driven stage of the involvement level. He argued that in

order to become a member of the management team, HRM to be centrally

involved with the business at the level of strategy formulation and

implementation but also as employee champion, administrative expert or

change agent. Like Schuler (1990) argues "the ideal organization has the HR

manager jointly working with the line manager solving people related business

issues. Ulrich’s model (1997) calls for a focus on what HRM delivers rather

than on what it does. Indirectly the focus domains he distinguishes to describe

the value added of the HR function relate to the discussion about the linkages

between HR strategy and HR activities. When we look at much of the rhetoric

on strategic HRM, this is focused at the level of strategic integration of HRM

and the role of HRM function as a strategic partner. This contracts with our

daily experience of HR professionals working at diverse tasks, some of them

being purely administrative (e.g. screening application letters) and other being

highly strategic (e.g. development of a competency management system).

Both can be equally valuable if looked at by their contribution to the

organization. Their results tend to confirm this proposition and they come

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close to Tichy et. al's (1982) advice to recognize the HR function to reflect the

operational, managerial as well as the strategic needs of the business.

According to Tichy et al (1982), the operational level is best served by a

traditional functional personnel department, fulfilling the classical functions like

selection, compensation etc. The managerial level must be organized to cut

across the sub functions identified at the operational level. The strategic level

activities require an elite senior human resource management that is

supported by strong managerial human resource services. The major

contribution of this research is in its focus on the way HRM is perceived by

major partners within the organization. This perception determines HRM's

place in the organization and consequently the way the global term "strategic

HRM" is concretized. The model developed can be used by organizations to

map the added value of their HR function. Once this picture becomes clear, it

can be used in the next stage as an instrument to indicate result domains for

HRM and to evaluate its functioning or to concern future employees of the HR

department. The added value of the HR function is relative, varying between

companies. The next step in this research according to the researcher should

be the examination of the variables which come into place in order to predict

the added value and the involvement of HRM in a specific organization. Which

circumstance laid on the basis of highly involved versus an almost neglected

HRM. When these variables are detected, the research model can be further

developed and used in practice not only to evaluate the HR function, but also

to change it in the desired direction by working on the valuables behind.

Figure -1.1 The Added Value of the HR function: four result domain

Long term

Management of strategic human resources

Management of transformation and change

Processes People

Management of firm infrastructure Management of employee contribution

short term

Source: Ulrich (1997), Human Resource Champions, Boston: Harvard

Business Press, pp.24

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Figure -1.2 Integrated Involvement of the HR function

Source: Buyens, D. (2001) "Adding value through Integration and

Involvement" working paper, V.L.G. Management School, Believue, pp. 37

Added value of the HR function: Description of 15 Response categories

1) Translation of business strategy into HR policies and practices

2) Coaching of line management.

3) Implementing rather than advising role.

4) Balancing organizational and individual needs.

5) Developing the right time frame for change processes.

6) Coaching of cultural changes.

7) Overcoming barriers to change

8) HRM with heart and soul.

9) Human potential as driving force.

10) Valuing the employee

11) Heart beat of the organization.

12) Bridge between employee and organization.

13) Managing costs

14) Delivery of functional HR services.

15) Social and legal issues.

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Grouping of response categories along the four result domains for HRM.

Result Domain Answering Category

Management of strategic human resources

HRM as a strategic partner

Translation of business strategy into HR policies

and practices.

Coaching of line management people managers

implementing rather than advising role.

Management of transformation and

change

HRM as a change agent

Balancing organizational and individual needs.

Developing the right time frame for change

processes

Coaching of cultural changes

Overcoming barriers to change

Management of employee contribution

HRM as employee champion

HRM with heart and soul.

Human potential with driving force valuing the

employee.

Heartbeat of the organization

Bridge between employees and organization.

Management of firm infrastructure.

HRM as Administrative expert

Managing costs

Delivery of functional HR services

Social and legal issues.

Description of the added value at the four stages of involvement.

A) Value driven HRM : 1) Influencing polices based on

expertise.

2) Guarding fundamental values.

3) Initiating change

4) Other

B) HRM as an intelligent

toolbox

: 1) Preparing employees for change.

2) Coaching others (line and

employees)

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3) Translate decision into action.

4) Developing and offering tools.

5) Others

C) Executive HRM : 1) Informing and communicating about

decisions.

2) Relationship with labour unions.

3) Service delivery

D) Reactive HRM : 1) Resolve conflicts

Source: ibid

Naresh K and Pawan S. Budhwar (2002)17 based on the review of SHRM

literature identified five strategic HR issues. The study focused on how the

important organizational factors i.e. structure and culture affect the strategic

management aspects of HRM. In addition they investigated how three HR

factors; HR strategy, HR competencies and HR outsourcing affect

management of human resources. The study examined the following five

strategic HR issues.

1) The relationship between organizational structure and the HR function.

2) The relationship between organizational culture and the HR function.

3) Types of HR strategies companies follow

4) HR competencies needed to manage the HR function for competitive

advantage, and

5) The what, how and why of HR outsourcing.

The key concern of this study was to obtain richer and deeper insight into

SHRM issue using qualitative research method. The research design followed

the three rationales below.

1) An industry based study comprising number of companies within the

industry.

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2) Multiple sources of evidence and

3) Semi - structured interviews

The statistical data published by the Singapore Department of statistics,

Singapore Ministry of Trade and Development Board and the Singapore 1000

– 1998/1999 directory was used for sample selection. The manufacturing

sector was considered as a strategically important sector to the Singapore

economy. Moreover as companies in this sector were facing greater

challenges in their quest to progress their value chain of activities and

innovate continually while reducing their cost. Thus it was thought that they

require more strategic deployment of their human resources. From the

Economic survey of Singapore, published by the Ministry of Trade and

Industry (MTI, 1999), the researchers selected an industry with highest sales

and employment within the manufacturing sector. The electronic products and

components industry had the highest output of approximately SG $ 63 billion

and an employment size of 127700 workers. In total 95 companies from the

electronics product and components were selected for the study, out of these

five companies responded. Four companies from the machinery and

equipment industry, the next industry with the highest output in the

manufacturing sector responded. The total nine companies formed the

sample of the study. The sample size is within the limit as suggested by

Eisenhardt (1989) and Yin (1994). Data was collected through separate, semi

structured interviews with CEO's, Senior or line managers and HR managers.

The data was analyzed following Miles and Hubermans (1994) proposals for

qualitative data analysis. The thematic analysis procedure for grounded

theory recommended by Glasser and Strauss (1967) was followed.

Categories were developed according to research questions to provide labels

in order to group the issues and themes identified. The qualitative evidence

was systematically content analyzed and sorted under relevant categories.

The categories represent items of common meaning (Cunningham and

Debrah, 1995).

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The major findings of the study were as follows.

The data revealed that the HR function is increasingly playing an important

role in organizations. The majority of CEO's and line managers were seeking

much greater and more proactive involvement of the HR function in

organizational activities. The researchers observed a consistent trend of HR

evolving into a more strategic function. These finding contrasts with those of

the study conducted by Yuen and Yeo (1995) on a sample of 182 companies

in Singapore. They reported that the HR function was playing a traditional

"Personnel" role rather than being an active strategic partner.

Qualitative data gathered from the study suggested that the role played by the

HR function differed from one culture to the other. In companies with the

control based culture, HR activities were limited to administrative aspects and

union issues. Line managers usurped major HR programmes and activities.

Training investments were on the lower side. Communication was top, down,

rewards were based on fixed guidelines and there was little employee

involvement. HR practices were standardized and reactive. HR played the

traditional "personnel" role. In companies with an emphasis on Commitment,

employees were considered as assets, to encourage a commitment based

culture, companies had formed cross functional teams and employee

involvement was widely practiced. Other HR initiatives included items such as

information sharing and provision of communication channels, lifelong

learning, extensive benefits, formal dispute resolution procedures and training

and retraining, even at the time of the Asian economic crisis, instead of

redundancies.

Another interesting finding of the study was regarding companies in transition

stage. Companies transforming themselves from a controlled based to a

commitment based culture. In these companies the HR function was also

seeing a corresponding transformation from an administrative and reactive to

a strategic and proactive function. Regarding HR competencies it was found

that they lacked HR competencies. They were specially deficient in strategic

HR status. According to the researchers the HR department was doing

extremely average jobs. They failed to recognize the scope and scale of their

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job. This is because the HR people were promoted from within and they do

not have formal HR training. Consistent with Ulrich et al. (1995) and

Cunningham and Debrah (1995), the study found that technical HR

knowledge, people management skills, business knowledge and analytical

and visionary skills were all critical competencies for HR managers. As far as

HR strategy was concerned it was found that HR strategy existed in four

forms, informal and not communicated, informal and communicated, formal

and not communicated, and formal and communicated.

There was a relationship between HR strategy and the extent of HR and

strategy integration. Companies with an integrative linkage had an HR

strategy that was formal and widely communicated. Regarding HR

outsourcing most of the respondents suggested that outsourcing of major HR

activities was a fad and could pass. CEO's, HR managers, and line managers

indicated that the HR function would always be performed within

organizations, even if HR was playing a purely administrative role. Interviews

however did identify some potential HR activities that could be outsourced in

future.

Mundane, administrative and no value added activities.

Recruitment of contract workers and sourcing of high executive

positions and specialists and

Specialized or one day training courses.

The study contributes to the field of strategic HRM by empirically testing some

of its core theories. It also provides useful information to policymakers.

However to further confirm the findings of the study more research should be

conducted in the industries according to the researchers.

Mario Raich (2002)18 in “HRM in the knowledge based economy in there an

afterlife?” points out that the nature of work has changed in human history.

Not so long ago in the agricultural society, it was focused on the soil. In the

more recent history it was capital driven. This was the so called industrial

society. We are still partially in this society, but more and more we are

20

entering the knowledge society. In that society work is linked to knowledge

and learning, which makes most of the working and management models

absolute. In an agricultural society time is work and work is dependent on the

seasons. In the industrial society time is money, because capital is the main

value. In the knowledge society, time is life, we do not live any more to work,

we work again to live. This means we have new paradigm in the knowledge

society and in the knowledge economy in relation to work, to time and

consequently to values. It is no longer the activity and the amount of work that

is creating new values, but the knowledge and its application. Knowledge is

no longer, time dependent, therefore our perceptions of time will change.

These paradigm changes were explored in the article. According to the author

the role of HR in business organization has changed. By HR, the author

meant people in business. This means employees, management, strategic

partners, consultants, freelancers, portfolio and customers. HR professionals

can become highly valued business partners if they are ready, willing, and

able to speak business language, if they know which HR practices can help

enhance the business and if they are willing to engage in the change and

transformation processes. The HR managers have a real possibility to

become the highly valued business partners that they always wanted to be.

With the new paradigm of Business partner the HRM is covering a much

larger part of the corporate ground.

Ashok Som (2003)19 in his working paper describes how innovative HRM

practices are being adopted by Indian firms to brace competition in the post

liberalization period. It discusses the need for new skills, new policies and

innovative HRM practices. The article was based on the case research over a

period of 5 years (1997-2002) in 11 large Indian organizations in 9 industries.

Each organization a leader in its own industry had undergone extensive

restructuring processes to brace itself for the impending competition that has

arisen with the phased deregulation of the industries due to liberalization and

privatization policy adopted by the Indian Government way back in 1991. The

author interviewed numerous manages in each company, analyzed

documents provided by the companies and those obtained from public and

archival sources. The author kept track of the 11 organizations to record any

21

changes in their business and HRM strategies during the last 5 years. The

research focus was to understand the role of HRM strategies during an

organizational redesign and performance improvement processes.

The adoption of innovative HRM strategies in some of the Indian companies

have improved business performance and provided multinational enterprises

two important lessons. First Indian corporates are late movers but are fast

bracing to competitive pressures. Second Indian firms have now more

resources to invest in developing innovative HRM strategies which translates

to cost reduction mechanisms, integration of support functions such as

information technology, in their work processes, boosting morale of

employees and high retention of skilled employees.

Innovative HRM strategies build and develop trust within the organization

increase morale of employees and reinforce the role of well being within the

firm over time. For senior executive, building trust and retaining key personnel

is one of the major challenge during turbulent and hyper competitive

environment. Though MNE's have deep pockets, which is an important driver

in the labour market, but the study of 12 firms showed that Indian firms are

relentlessly trying to reduce employee turnover by innovative HRM strategies.

Table 1.2 Innovative HRM practices adopted by Indian Companies

during the post liberalization period.

Company Industry Strategic Initiative Adoption of HRM polices

Bharat Petroleum

Corporation Limited

(BPCL)

Petroleum Face deregulation of

petroleum industry

Retain Customers

Maintain profitability

Redeployment and retraining

of employees.

HRM regarded as an

important support service.

Revamped performance

appraisal system

Mahindra &

Mahindra Ltd.

Automobile

Tractor

Creation of productive

labour force.

Rationalize

BPR to reinvent business

processes.

Flat structure that encourages

22

Company Industry Strategic Initiative Adoption of HRM polices

manufacturing process team work.

Outsourcing workforce for

advanced and non core

activities.

Mehta Group Cement Curtail competition

between the two

companies belonging to

the group.

Develop synergy in

terms of structure

manpower & resources

Redefinition of organization

structure

Redeployment policy to

optimally utilize human

resources.

Maruti Ltd. Automobile Utility

car segment

Launch new models for

diverse markets.

Increase dealer

network.

Reduce costs and

increase operating

efficiencies

Hire professional HR

managers.

Make HR responsible for

internal Communication and

relations with union

Creation of an excellent

compensation policy.

State Bank of India Bank Face competition from

foreign and private

banks

Trim the size of its

workforce to cut costs

Segmenting the HR

department into levels with

specific duties.

Introduce VRS to cope with

automation.

Arvind Mills Textiles Recover from the

change in the fashion

industry.

Increase exports

Implementation of innovative

recruitment procedures.

Development of synergies

between top management and

workers.

Clariant (I) Ltd. Chemicals Transition from Sandoz

to Clariant

Introduction of the CLAP

programme

Change the mindset of the

employees to a more modern

23

Company Industry Strategic Initiative Adoption of HRM polices

outlook.

Wipro Corporation I.T. Sustaining the wealth of

their human capital

Introducing employee stock

option scheme.

Infosys I.T. Accept the challenges

of globalization

Employee driven campus

programs like 'Infosys

toastmaster club' to provide

support to employees.

Construction of a leadership

institute to foster the qualities

of leadership within the

employees.

Leadership through INSTEP

programe where 3-6 months

internships are given to

students from across the

globe.

Ranbaxy Pharmaceutical Climb up the curve of

globalization

PEP Programme

Backward integration, new

drug invention

Tisco (Now Tata

Steel)

Steel Focus on current growth

Enhance accountability

Cost reduction

Building cross functional

teams of high performing

professionals with clear career

paths for individuals.

Revamped its performance

management system by

aligning KRA's strategy at all

levels.

Institutionalized tailored

management development

program for officers.

24

Source: Som, A. (2003) "Bracing competition through innovative MRM in India

firms: Lessons for MNE", working paper ESSEC research centre Hirsch,

pp.19

Bhatnakar, J and Sharma, A (2003)20, conducted research to investigate

whether there was significant difference in the perception of the four strategic

HR roles among line and HR managers of public sector units and

multinational organizations, and also check the validity of the instrument

(Ulrich and Conner) in Indian conditions. The second aim was to find out the

impact of background variables on HR roles and whether HR and line

managers differ significantly or not in the perception of these roles. The third

aim was to find out whether the nature of technology in which the managers

are nested affects these roles. Keeping these objectives in mind their study

was designed in two phases. The first was a pilot study where the tool used

was tested on four organizations which were purposively chosen and then

random sampling was conducted and data was collected from 44 managers.

The second phase of research was conducted over 600 managers randomly

chosen from nine industrial sectors, selected randomly. They used the human

role assessment survey questionnaire (Conner and Ulrich 1996) which was

administered on the sample. This questionnaire has 40 items, which have to

be rate on a five point likert scale and measures the four rates of Strategic

Partner (SP), Administrative Expert (AE), Employee Champion (EC) and

Change Agent (CA). The business partner (BP) role is the summation of the

four roles. This can range between 40 – 20, above 160 is high quality while

below 90 is low HR quality. The cronbach alpha for the instrument was found

to be 0.97 and this is above the standard 0.70 threshold (Nunnally and

Bernstein 1994). The background factors of age, gender, educational level

and type of manager was gathered through the questionnaire in their survey

research.

It was found that there was no difference between the perception of the

strategic partner role in PSU and MNC’s between line and HR managers. The

quality of this role was found to be of moderate quality as the mean value for

PSU was 27.5 and that of MNC was 31.0. This indicated that there was

25

difference and the quality of the role was higher in MNC. This result is

supported by the findings of Ulrich, who stated that firms scoring high in the

functional quadrants score low in the strategic quadrants. The result is also

supported by the studies of European countries where this role was emerging

as low (Breoster 2002). Kandula (2000) in his study of 59 Indian organizations

tested the relationship between strategic response of organizations and

worker development and found that there was the low level of involvement of

HR professionals in formulation and implementation of strategy. Another

finding of the study was that there was a significant difference in the

administrative expert role in PSU’s and MNC’s and the role of MNC’s of

higher quality than PSU’s. The result is supported by research studies of

Singh (1999), who found that in India, the HR activities mostly have day to

day concerns. Similarly Ulrich (1997) found that the administrative expert role

at Hewlett Packard was more of a service delivery role. The result of the

survey (cited in Saini et al 1999) support the earlier finding of functional

efficiency, that the HR departments in India had a higher level of sole

responsibility for decisions over pay and reward levels (35.9%), industrial

relations (29.4%) health and safety (24.8%), recruitment (23%) and workforce

expansion and reduction (18.1%). Thus many research studies support the

strong functional role of HR.

It was also found that there was significant difference between the employee

champion role of PSU and MNC. The mean value of this role was found to be

highest than the mean value of all the other three roles, both in case of public

sectors as well as multinational corporations.

This could be attributed to the fact that the HR role is mostly perceived to be

that of welfare kind, wherein the legal framework of the country requires HR

managers to give the welfare of the employees the top priority. This is well

supported by the findings of Schuler (1999), who found that this role was

strong in countries like Germany and the Netherlands. Indian literature

dominates on the prospective of the original labour welfare role which was

expanded into industrial relations and personnel administration. Further it was

found that there was a significant difference of perception of the change agent

26

role in PSU's and MNC's. Similarly there was significant difference between

the business partner role in PSU's and MNC's. The second phase in which

600 managers were selected randomly, it was found that correlation

coefficient of the hierarchical level of the managers is positive and significantly

correlated to Business partner role, rest of the background valuables were not

found to be significant. It was also found that there was a significant difference

in the perception of five roles among the line managers and HR managers.

These results were in line with prior research conducted by Conner and Ulrich

(1996), Bhatnagar and Sharma (2002), where HR managers reported higher

value for themselves than their line counter parts. For inter firm comparison, it

was found that there was significant difference across organizations for the

four roles. The mean value for IT sector was found to be highest (147.85),

while for the dairy sector it was the lowest. Though as per Ulrich’s (1997)

interpretation the means indicate that the Indian managers perceive moderate

quality of HR roles as none of the means come close to 160 level of high

quality. The role which had the highest mean in the sample was that of

administrative expert, the change agent role and strategic partner role were at

the same level, while the employee champion role had the lowest mean.

Bhatnagar J and Sharma A (2003)21 conducted a study to find out whether

there were significant difference in the four strategic HR roles and whether

there were any significant organizational differences in the perception of these

four roles. With the above aim in mind the research study was conducted in

10 Indian organizations in the National Capital region of India. The study was

based on two stage sampling technique. In the first stage, 10 organizations

were selected on purposive basis. All the ten firms were large and

represented a variety of industries including manufacturing, financial services,

chemical software, fast moving consumer goods (FMCG) and power

transmission. In the second stage 119 managers from all levels i.e. top,

middle and operational were selected from these organizations through

sample random sampling techniques. The study attempted to validate Ulrich’s

(1996), human role assessment survey questionnaire. The data colleted was

analyzed using descriptive statistics and bi-variate analysis using ANOVA,

with respect to the mean values of the four strategic roles, indicated that the

27

mean values ranged from 30.93 to 33.43 only. A high variance was found in

employee champion role. The administrative expert role was found to be the

highest (33.43) among the four roles. This finding was supported by the

research of Ulrich (1997) which found that the transactional role of HR was

the most dominant. The research study of Fisher (1989) was also in

consonance with the results, where it was pointed out that most of the work

conducted by HR practitioners still consists of “Traditional personnel

administration activities, and that strategic human resource management is

taking place primarily at the corporate level’. Ulrich (1997) states that, “Firms

scoring high in the functional quadrants score low in the strategic quadrant

‘yet the strategic partner role was not the lowest in the study which is against

the trends reported by Bhatnagar and Sharma (2002) and Ulrich (1997), who

reported strategic partner role to be the lowest in their studies. As far as the

business partner role (summation of the four roles) in these organizations was

concerned the mean value was found to be the highest (150.3) in the FMCG

firm. The mean value of 110 in a software firm, which demonstrates moderate

quality of the strategic role was explained to be as a result of the

environmental pressure the sector had experienced. The means for the

quality of the role ranged from 150.3 to 110 which indicate moderate quality.

To find the question of significant difference between these roles and between

the organizations the researchers conducted the bi-variate two-way ANOVA,

without replication. No significant differences were found in the mean values

between the four strategic HR roles. This implies that all the four roles are

present in the organizations but they are close to each other and HR

managers are following a merged approach, not delineating the strategic roles

with the functional roles. Research studies of Ulrich (1997) and Bhatnagar

and Sharma (2002) do not support this trend. It was found that there were

significant differences between the organizations in terms of strategic HR

roles. This was well supported by the mean value of the business partner role.

The highest value was 150.3 while the closest was 110. The findings is well

supported by the research studies of Ulrich (1997) and Bhatnagar and

Sharma (2002) and Wright et. al (2001). The differences between the

organizations may be due to variations in organizational climate, leadership

styles, organizational learning, capability of the firm, empowerment and

28

commitment levels of the managers within these organizations. Further

research studies may look at these relationships and greater inferences in

detail can be brought out about the strategic HR roles in Indian organizations.

John Sullivan (2004)22 in his article "Clarifying the strategic role of HR' in the

newsletter of workplace performance technologies (ptg) Ltd., focused on

defining the role and purpose of the HR department, identifying who is the

customer and communicating the impact taking responsibility for all people

management responsibility. There are various models that outline the different

focus areas found in average HR department. Without doubt the most famous

one in the "four quadrant" or "business partner" model developed by Dave

Ulrich at the University of Michigan. As effective as the model is according to

the author it fails to define the role of strategic planning. As an alternative to

the four quadrants the author offers the "Five HR contribution" model that the

author believes describes both the basic and strategic levels of HR

contribution. HR "work" can be classified into five distinct levels from the basic

to the strategic. These levels include

Level One - Information, management and basic transactions: Every HR

department must provide basic information, answer employee - manager

questions and complete operational level transactions. These are the oldest

and most elementary of HR services and include: processing of new hire

documentation, payroll, separation and benefits, enrolment changes.

Providing answers to employee and manager questions pertaining to benefits,

employment law etc.

Level Two - Providing functional services: In addition to level one activities

a majority of HR department, provides services that comprise what many

would agree are the essential services of an staff organization. This level

incorporates many of the activities that include the standard functional areas

within HR including staffing, compensation, benefits, employee relations and

training.

29

Level three - Coordination of efforts to improve productivity: In level

three HR activities begin to fall under the umbrella of some planned

contribution and take on more tactical emphasis. This coordinated effort exists

to impact one of the primary goals of every major corporation i.e. increasing

productivity. In the case of HR that goal translates into increasing or

maximizing workforce or employee productivity.

Level four - Development of competitive advantage through talent: Level

four signifies a major transition point as HR work begins to providing strategic

contribution. Increasing competitive advantages is a focused effort which

ensures that each key HR program and service is best in class when

compared directly to that of competing firms. In level four the focus of HR

efforts in on the external environmental component where prior to this every

HR effort was internally focused. Typical competitive advantage building

efforts include.

Competitive analysis of people program found in competing organization

Workforce planning and productivity forecasting

Employment branding.

Competitive intelligence gathering

Level five - Develop solutions to strategic business problems and

opportunities: Level five represents the pinnacle of work providing strategic

contribution. Efforts in this level go well beyond influencing employee

productivity. It attempt to address strategic business problems in areas such

as product development, product / service quality, customer service and

corporate policy. Typical strategic business problems and opportunity efforts

include -

HR involvement in turnaround teams.

HR consultation in product design and development efforts.

Analysis of workforce management impact on time to market.

Management of performance culture.

HR involvement in merger and acquisition planning.

30

Being strategic means being a proponent of productivity not employee. Many

traditional HR theorist and practitioners have cast the role of HR as an

"employee advocate" someone who helps employees when they have

conflicts with managers. In sharp contrast, others (especially those who

advocate a performance culture) accept this notion as antithesis of being

strategic. While neither position is totally right or wrong, the employee

advocate has some inherent weakness. Strategic HR presents a new

challenge that few HR departments universally accept today, the challenge of

managing workforce productivity. For some the issue to accept accountability

for managing productivity is an issue of control, for others it is the lack of

clearly defined customers that muddles their existence. Regardless, becoming

strategic requires that all HR efforts become coordinately united under a

uniform set of goals and objectives. Firms can use the five level of HR

contribution model to determine their current standing and map course to

becoming more strategic.

Cathy Sheeha (2005)23, in their research of Australian Enterprises trend to

find out what do senior HR, finance and line managers consider to be the key

current and emerging supports and barriers to the success of HRM

integration. Dyer (1984) had argued that within the area of strategic human

resource management, a qualitative approach and more specifically the use

of case analysis provides an important, intense understanding of key issues.

The research used indepth semi structured interview with senior HR, finance

and line managers in 13 case study organizations. These semi - structured

interviews allowed the researches to explore the full range of factors that had

emerged. The use of cross section of managers provides insights from

managers who view HRM from inside as well as outside the HR function.

Purcell (1995) had previously asked this approach and has advised that

interviews that are restricted to HR professionals may produce a subjective,

biased view of the HR role. Accordingly the researchers conducted interview

with the finance managers to confirm the perceptions of HR manager with

respect to HR involvement at the strategic planning level and interviews with

line managers are used to confirm perception of the factors that impact on the

31

devolution of HR to the line. The three sets to managers provided a suitable

cross check of perceptions at various levels and a rich source of information.

The cases chosen for the analysis did not represent a cross section of all

possible industry groups. An attempt was made by the researcher to identify

companies that were characterized by some “extreme” feature as suggested

by Eisenhardt (1989). The current researcher similarly targeted companies

with a commitment to HRM by using 13 of the companies that had

participated in the best practice program, originally initiated by the Australian

Federal Government in 1991. To assist with the wording of the more

structured items of the interview, the researcher made contact with colleagues

in the area and copies of relevant interview schedule were attained and

incorporated into the interview format. To enhance the validity of the fieldwork

a pilot study was conducted in two organizations, this helped in the refinement

of the interview schedule. Interviews were then initiated in 15 companies

which were later reduced to 13. All interviews were taped with the permission

of the interviewer and the scripts were analyzed using a qualitative analysis

package, as advised by Ticehurt and Veal (1999) and Miles and Muberman

(1994). The most widely used and the most effective software in Coding and

Shaping and understanding data QSR NUD*IST (Non-Numerical unstructured

data indexing, searching and theorizing) was used. In the current research the

completed verbatim scripts were analyzed around the three areas

characterizing the goal of strategic HRM integration. A further node was then

created under each of the three primary nodes called results. Using the

software a search for common theme within each of the node provided

information about emerging supports and barriers to each of the area

associated with the HRM goal of integration. The analysis revealed that in 11

out of 13 companies, organizational structure relationship supported HRM

integration. Specifically this included HR representation at the senior

committee level, a direct reporting relationship with the CEO and attempts to

develop HRM responsibilities to line managers. Further analysis of results

revealed, however, that other factors emerged as having a more critical role in

strategic HRM integration and these factors included the strategic

commitment, business values and business acumen of the HR managers,

CEO support and a corporate cultural commitment to HRM. The results

32

indicated that the transition from personnel to HRM actually occurs at two

levels. At a superficial level, HRM integration involves a relatively straight

forward set of structural alterations that will reflect changing expectations and

responsibilities within the organization. The change also involves however,

more substantial underlying adjustments to complex set of beliefs, Values and

learned ways of coping. In most of the organizations reviewed in the research,

it was clears that the decision to implement a HRM approach required a

certain set of symbolic gestures and ritualistic change. Examples of these

would include the decision to make the HR manager a part of the senior

committee, setting up a direct HR reporting relationship to the CEO and

increasing HRM responsibilities of line managers. The findings of the research

showed that such symbolic changes did not result in desired outcomes. The

HR manager may be positioned at the senior committee level but if he / she is

not committed to understanding the business, their contribution is devalued

accordingly. This conclusion aligns with Caldwell’s (2001) finding that HR

leadership in the boardroom may actually come from managers who have had

experience as line managers rather than from the ranks of personnel

profession. If the HR manager can show that they have run a business, they

will have credibility in the boardroom (Caldwell, 2001).

The implications of the research for HR managers are that with respect to

career development, HR professionals need to broaden their business

experience base. Research by Dowling and Fisher (1997) showed that

younger HR professionals are more likely than older members to have started

their career in the HR area. This reflects a growing recognition of human

resources as a definite, promising career choice. Result of this research,

however, indicated that this tendency to specialize early on in a career may

not necessarily be helpful in developing an appropriate set of business skills.

HR professional need to be familiar with as many functional areas in the

organization as possible so that they can make fully informed, considered

contributions to any strategic discussion. The commitment of the CEO and the

company for HRM were important drivers in the realization of expected HRM

outcomes.

33

Peter Goodge (2005)24, in his article highlighted the reasons for the move to

HR partnering and the advantages it can bring to the organization. He

stressed that the inescapable pressure on HR to change comes from two

fronts. Level field competition and low cost alternatives. Level, field

competition arises when restrictions on competition are removed and

businesses compete on equal terms. These restrictions could be access to

markets, control of key technology, ownership of expert knowledge, legal

regulation, location and accepted structures. Organizations on leveled fields

compete in many ways, products, customer service, technology, innovations,

expertise, sales etc. Companies replicate other’s successes quickly no one

has a sustained competitive advantage. The challenge is continuously to

create the temporary advantages that win share and create profit for a while.

The organizations people create and recreate short lived advantages. That is

why HR is and will remain central to modern competitiveness. On a deleveled

field, great HR becomes crucially important. However if organizations want

more from HR they should look critically at current HR structure and practices.

HR partnering is invariably seen as the mechanism for making the big

changes that enable HR to make significant strategic and competitive

contribution. The second inescapable pressure on HR is the growth of low

cost alternative HR services, both technological and human. Today’s IT is

easy to use, intelligent and economic. It can provide many of the services HR

has provided. So, at a time when organizations ask HR to and greater value,

they also want lower costs. And those are the essence of HR partnering. HR

professionals make real contributions to strategy and its implementation while

low cost alternatives deliver routine HR services. The three essentials of

successful HR partnering according to the research are understanding,

resources and credibility. The tactics for building understanding are

Engaging executives in a debate about future business challenges and

the importance of HR in meeting those challenges.

Exploring what the business will need from HR and how it will

contribute to the business.

Accessing what the business thinks of HR today.

Gauging the appetite for change among executives and within HR.

34

Benchmarking HR’s costs and performance against the competitors.

Debating about how HR could be different.

Articulating the final vision for HR partnering as a document or

presentation.

Resources include hardware, services and abilities all needed to be in place

as HR partnering is implemented, especially when the organization decides to

implement HR partnering quickly. The third essential for successful partnering

is that HR has to be credible. Credibility gives HR partners access to all the

business makes people listen, underpins influence and strengthens

relationships. This can be brought about by delivering beneficial change i.e.

making a real difference to the business, demonstrating the contribution of the

HR to business i.e. being serious about the evaluation of every project and

publicizing great results, measuring HR’s overall contribution to the business,

using balanced score card or a similar process and finally taking a line

management project to demonstrate that HR understands the business, are

able to get things done and can deliver results outside HR.

Yao Sheng Liao (2005)25 conducted a study to find out how the alignment of

HRM control and business strategy affects firm performance. The data for the

study was collected from computer and peripheral equipment industries in

Taiwan. This industry was selected as they have similar market structure and

they are subjected to similar environmental uncertainty. A sample of 636 firms

listed in Taiwan Business Directory having revenue above NT$ 10 million, and

each having at least 100 employees. This procedure eliminated the possibility

of including very small firms that might not have formal HRM procedure. The

presidents of each firm were contacted to ask for their participation in the

study. Each president was mailed a cover letter and a questionnaire designed

to assess business strategy, HRM control system, and performance. In total

218 of the 636 presidents returned usable questionnaires (34%). The three

measures of business strategy developed by Huang (2001) were used i.e.

cost reduction, innovation and quality enhancement. The study used three

measures of HRM control developed by Snell (1992) i.e. behavior control,

35

output control and input control. Performance measure respondents were

asked to compare the performance of their firms with that of the competitors

according to four performance indicators i.e. market share, profit growth,

return on investment and sales growth.

The study used hierarchical regression analysis in order to isolate the main

affects of business strategy and HRM control on performance and to

independently assess how each HRM control moderated the relationship

between business strategy and performance. It was found that there was

significant relationship between business strategies and firm performance.

Cost reduction strategy was significant predictor of performance. Innovation

strategy had a marginal positive effect on performance. Also behavior control

had a significant main effect on performance and input control was also a

positive predictor of performance. The results indicated that HRM control does

in fact moderate the strategy performance relationship. The interaction of

input control and cost reduction was negative for performance, that of

behavior control and cost reduction strategy was positive, that of behavior

control and innovation strategy was negative, and that of input control and

innovation strategy was positive. Overall the findings indicated that firms

should be well advised to focus on processes as a basis for HRM particularly

if their chief concern is with internal operations and efficiency. Therefore,

when firms use cost reduction strategy as a business level strategy and

behavior control based HRM methods, performance can be facilitated. In

contrast, when firms adopt cost reduction strategy with the emphasis on input

control as HRM approach, performance tends to suffer. The interaction

between innovation strategy and input control revealed that the highest

predicted value of performance was for high innovation strategy with high

input controls. However the lowest predicted performance occurred when low

innovation strategy combined with low input control. In the interaction between

innovation strategy and behavior, the highest predicted value of performance

was for low innovation strategy with low behavior control, and the lowest

predicted performance occurred when high innovation strategy combined with

high behavior control. These findings reveal that when a firm emphasis

innovation strategy, the use of input control will make performance better,

36

when behavior control is emphasized the use of innovation strategy will make

the firm performance suffer. In conclusion the researcher argues that

strategies are only a means towards an end. Determining how best to

implement a strategy require an analysis of what controls are needed to

achieve the desired results.

The general conclusion from the study was that behvaioural and input

approaches offer the most potential as a basis for improving performance

through HRM, while an orientation based soley on output may not be

influential, However, the value of any approach of HRM control can be

augmented or diminished by simultaneously matching the HRM to the type of

business strategy adopted by firms. The potential effects of these decisions

on firm performance appear to be substantial. The practical implications of the

study lies in finding that firms should use an appropriate combination of HRM

control systems. Failure to do so will lead to poor performance. The results

also suggest that firms should link HRM with strategic goals and objectives in

order to improve business performance. The study however had several

limitations. The data examined was one time data which reflects only a

snapshot, secondly the study focused only on financial performance as

opposed to other index of firm effectiveness, third the study was focused only

on the interaction of business strategy.

Anandan Pillai (2006)26, in his article on HR issues in BPO’s traced the growth

of BPO industry in India and the HR problem in these organization. According

to him BPO’s in India are facing serious problems of employee attribution.

Repetitive low end jobs, physical and psychological problems and few career

growth opportunities are the major reasons cited for high attribution rate. This

disadvantage has increased the operating costs of BPO’s and is considered

to be a threat to the growing industry. HR policies need to be framed to suit

the different kind of employee across the ladder. The BPO entities need to

create a brand identify for their firms amongst the society to ensure not only

inflow of employees but also their consistent retention. The organizations also

need to rise up the value chain and develop youngsters for knowledge

process outsourcing (KPO).

37

Pawan S. Budhwar, Harh K. Luthar and Jyotsna Bhatnagar (2006)27

investigated the dynamics of human resource management practices (HRM)

and systems in the business process outsourcing (BPO) sector in India. Given

the exploratory nature of research, the authors adopted a mixed method

approach comprising in- depth interview of managers, self completing

questionnaires and secondary sources. The direct source of information was

the HR managers of India BPO's who were interviewed. These interviews

were conducted and data was collected from a total of 51 (30 captive and 21

third party) Indian BPO's situated in north, near Delhi. These managers

provided qualitative data on firms HRM practices and elaborated on their

experiences with these practices. Apart from qualitative information, the

participants also completed a questionnaire related to a number of HR

practices and policies. The interview schedule consisted of a number of

sections. The first section had 15 questions on demographic details of both

the interviewees and their companies. The next section examined the nature

of HR department and the organizational structure of the firm. This was

followed by a series of sub sections on HRM practices including recruitment,

training and development, compensation, appraisal / assessment, career

management, attrition / employee turnover and retention and the type of

challenges facing the HR department. In addition to this a 23 item, self

completing questionnaire on various aspects of procurement, employee

involvement and employee turnover were completed by the HR managers.

The sample firms were spread over various sectors such as IT and software,

accounting and finance, telecommunications, banking and insurance, health,

pharmaceuticals, energy and travel. A range of both inbound and outbound

activities carried out by these firms. According to the study the emerging

picture of Indian BPO's is similar to their OCC's counterparts in developed

countries. They seemed to be adopting tightly controlled structure that is cost

efficient, bureaucratic, and has a customer oriented philosophy which results

in monotonous activities carried out by operators or "graveyard shifts" with

usually timed bathroom breaks. Media reports denote such BPO's as "new

age sweatshops" and people working in them as "cybercoolies" who are fresh

38

graduates, lack core competencies, and have little chance of climbing the

corporate ladder (George 2005).

Most of the firms under study had more or les similar organizational structure

consisting of four to seven vertical levels of management with different

designations. 90 percent of the sample firms have an HR department, and the

average HR department had 20 employees. HR manager was the most used

designation in the sample firms (37%), followed by GM and HR Director. The

top HR personnel are given an average of 20 days training annually. Most HR

departments had roughly three layers, Vice President, HR Manager and

Executives. Information related to HRM is regularly communicated to the top

director who can be CEO, COO or CMD of the firms. Most companies were

found to hold a regular fort nightly or monthly meeting between the top HR

manager and top directors in which information related to recruitment, HR

targets, Key HR metrics, attrition, satisfaction, surveys and market trends are

shared.

Against the established norms of traditional Indian companies where HR still

plays a reactive role (Budhwar Sparrow, 1997) their results showed a clear

emphasis on allowing the HR function in the sampled BPO firms to play a

strategic role. Most of the firms had an HR strategy (written or unwritten) and

a corporate policy for HRM (94%). Furthermore, HRM was represented at the

board level and integrated into the corporate strategy from the outset, and the

concepts of the HR strategy are translated into clear work programs (94%). A

majority of the firms reported that their HRM function had become more

proactive over the last three years (77%). These results were comparable to

those firms operating in western nations, especially in Europe and confirm the

growing strategic nature of HRM.

Kair Anderson, Brian K Cooper and Cherrine J. Zhu (2005)28 in their working

paper examined the extent to which strategic HRM (SHRM) is practiced and

its impact on financial performance. The authors proposed three hypotheses.

39

H1a : There will be positive relationship between strategic HRM alignment

and firm financial performance.

H1b : There will be positive relationship between senior management

committee membership of HRM and firm financial performance.

H1c : There will be a positive relationship between a documented HRM

strategy and firm financial performance.

H2 : There will be a positive interaction between line management training in

HR practices and development on firm financial performance.

The data for the study was based on a stratified random sample of publicly

listed firms from the Australian Stock Exchange (ASE) database. A population

of 961 firms was available from the database of ASE as of May 2003. Due to

cost limitations in surveying the entire population, a stratified random sample

(N=231) by industry sector was selected. Anonymous questionnaire were

marked to the senior human resource managers in each firm, accompanied

by a covering letter and reply paid envelope. Follow up phone calls were

made two weeks after the initial mail out in an effort to increase the response

rate and to verify that the company had a HR department or function. These

follow up calls identified 15 firms did not have a formal HR function, clearing

216 eligible respondents. Of this the authors received 66 completed

questionnaire of a response rate of 31%. Despite a relatively small sample

size this is a typical rate for mail surveys to managers (Barach 1999). In terms

of managerial seniority most respondents reported being either senior (44%)

or middle (30%) manager. The majority of managers (61%) were based in the

firms HRM department. Mean firm size as measured by the number of full

time equivalent (FTE) employees was 3096. In respect of industry,

organizations in the manufacturing sector accounted for 24% of the sample.

The service industry sector accounted for another 23% of the sample (This

included organization in financial services, retail stores, food preparation and

entertainment) with a further 20% in resources (mining exploration) and 33%

40

in other industries including a wide variety of miscellaneous industries from

power distribution to information technology.

Strategic HRM alignment with business objectives and strategies was

measured by 10 items, each rated on a five point scale ranging from (1) ‘not

at all’ to 5 “to a great extent”. Items developed from the literature (Budhwar

2000b, Teo 2002) were (1) HR practices help achieve business objectives (2)

HR practices are used to implement business strategies (3) HRM involvement

in business decision making (4) HR strategy is formulated based on business

strategy (5) HRM involved in coordination of the business, accessibility of HR

information (6) Alignment between business and HRM strategies (7) Senior

HR Manager is a strategic partner for line managers (8) HRM involvement in

development of employee programs (9) HRM involvement in development of

work procedure and (10) HR is part of the organization mission statement.

The cronbach's alpha for the instrument was found to be 0.94. The 10 items

were averaged to form a composite measure, with higher scores indicating

greater strategic alignment. The researcher also asked whether the firm had a

documented HRM strategy (0=no, 1=yes) and if the senior HR manager was

member of the senior management committee. (0=no. 1=yes). The variable of

line management development was measured by asking respondents to

indicate the involvement of line manager in the execution of five HR practices

i.e. recruits new people, selects applicants, trains employees, executes

performance assessment and designs job roles. The variable of line

management training in HR practices was measured by asking respondents

to indicate the proportion of line managers trained in firm to execute HR

practices. Firm financial performance was calculated using the frame work of

O’shannasy (2004), four items were used to measure financial performance

(1) return on equity (ROE), (2) return on assets (ROA), (3) Market growth and

(4) profitability. Ratings of each performance indicator were made relative to

the industry's average one a five point scale from (1) very poor to (5) very

good. This preliminary study contributed to the understanding of the

relationship between the valuables of strategic HRM integration, development

and firm performance. The results of the study indicated that HRM was

integrated into the organizations core business operations, although such

41

strategic alignment was only at a moderate level. From the committee

membership perspective senior management integration was high (83%).

That means majority of organizations provide the most senior HR manager

with a formal position on the most senior management team. Majority of the

organizations had a formal documented HRM strategy (65%). In comparison,

Budhwar (2000) reported that in the U.K. manufacturing sector only 44% of

firms reported to have a HRM strategy and 55% had HR manager with

committee membership. The evidence regarding development showed that

line managers were involved in the execution of HR practices; the level of

training for line managers to perform these practices was moderate. The

result of the study supported the hypothesis that the relationship of

development and firm financial performance can be strengthened if firms

engage in more line management training in executing practices. The study

found a positive relationship between strategic HRM alignment and financial

performance, controlling other valuables. This indicated that alignment of HR

strategy and practices particularly through involvement in the development

and implementation of organizational strategies is a predictor of firm

performance. No sufficient evidence was found to indicate a relationship

between other HRM proctors (e.g. presence of documented HRM strategy,

senior management committee membership) and financial performance. The

result of the preliminary research had indicated a moderate level of HRM

practiced within Australian organizations.

Teo Stephen (2007)29 in his study explores the adoption of strategic human

resource management (HRM) by examining the extent of linkages between

HRM and business planning using the Golden and Ramnujam's (1985)

strategic framework. The sample consisted of Australian organizations from

the monopolized statutory PSO's within the state of Queensland according to

the 1997 official list of corporate public sector organizations (PSO's). The

population consisted of 20 entities operating within diverse industries and

geographical locations. A questionnaire was used and respondents were

requested to choose one statement in each question which best described the

extent of integration between HRM and the business planning (or strategic

integration) in the organization before and after corporation. Eleven

42

corporations responded to the survey, representing a response rate of 61

percent. These included five public utilities and six port authorities PSO's

employing a total of 5479 (equivalent full time) employees. HRM department

in the 11 PSO's had different sizes, ranging from a minimum one to a

maximum of 108 practitioners with a median of 5 practitioners. The findings of

the study suggested that corporatization had provided the impetus for the

people management function to be more involved in the strategic planning

process. Consistent with previous findings in the Queensland public sector,

this study had demonstrated that the level of strategic integration in the

corporatized PSO's was low. Few PSO's had attained a high level of linkage

between people management and the strategic management process. After

corporatization there was an overall improvement in the overall level of

strategic integration.

Connie Zheng, John Rolfe and Lee Di Milia (2007)30 conducted a research to

examine the link between strategic human resource management and

business performance of the coal industry in central Queensland. They

conducted face to face interviews and surveys to collect the data. Invitations

to participate in the study were send by email to 34 managers in charge of

mine site operations, human resources, training, safety and environment and

community relations sections of their companies. Eight managers responded

and were interviewed. A survey questionnaire was sent to 156 managers

employed by mines in central Queensland. The survey was returned by 32

participants, including 6 with incorrect addresses and 3 with incomplete

answers. Complete information was provided by 23 participants (16%

response rate). The analysis of the data indicated that some degree of

strategic human resource management was employed by coal companies. It

appeared that the linkage between HRM strategy and organization outcome

was less obvious than the linkage between business strategy and

organizational outcome. There was a weak link between strategic HRM and

business performance in the context of coal industry in central Queensland.

This does not support the conventional strategic HRM theories and outcome

from empirical studies, which advocate a strong link between strategic HRM

43

and firm performance (Wright and McMohan 1992, Eratton et al. 1999)

Becker, Huselid and Ulrich 2001; Stavrou and Brewster 2005).

Syed Akhtar, Daniel Z Dling and Gloria L (2008)31, in their study examined the

validity of strategic human resource management practices and their effects

on company performance in a sample of 465 Chinese enterprises. Data was

collected through two questionnaire surveys among general managers and

HRM directors on product / service performance of their companies and a

range of strategic HRM practices. Their findings indicated that a valid set of

strategic HRM practices (training, participation, result oriented appraisals, and

internal career opportunities) affect both product / service performance and

financial performance. Employment security and job descriptions contributes

uniquely to product / service performance, where as profit sharing contributes

uniquely to financial performance.

1.3 Statement of the Problem of the Study

There has been a transition in the Indian economy from Agriculture to

manufacturing and services. The service sector now contributes more than

fifty percent to the GDP of the nation. The contribution of the IT sector to the

GDP has been continuously increasing. The IT sector is knowledge based

and heavily depends upon the human resources.

The HRM function in these organizations has to be proactive and needs to be

strongly linked to the overall business so as to succeed in a highly competitive

market. We can state the problem of the study through the following

questions.

1) What is the overall quality of the services provided by the HR

department in IT and ITES organizations?

2) Whether the HR departments perform more of operational function

or strategic function?

44

3) Are there any differences in perception of the HR roles by the

employees and the HR staff in these organizations?

1.4 Significance of the Study:

The competitive landscape is changing and new models of competiveness are

needed to deal with the future challenges. Organizational capability has

become a source of competitiveness and if line managers and HR

professionals are to become the champions of organizational capability, then

a new agenda for both HR practices and HR professional must emerge. As

champions of competitiveness, HR professionals must focus more on the

deliverables of their work than on doing their work better. They must create

mechanisms to deliver HR so that business result quickly follows.

The role of human resource management in gaining competitive advantage

has been discussed in the western literature since the early eighties. Although

there are many ways by which companies can gain competitive advantage,

one way often overlooked is through their human resource management

practices. HRM practices enable companies to gain competitive advantage in

two major ways. One is by helping themselves and the other is by helping

others. There appears to be a significant benefit from having HRM

considerations represented in strategy formulation stage rather than in

implementation stage.

Many empirical studies (Rozhan 1996, Ismail) found that there is very less

impact of strategies on HRM practices. Also no significant difference was

found between HRM practices in manufacturing and service firms in Malaysia.

Most of the firms did not give much attention to HRM practices (Christopher

1997).

However many other studies (Brain E Becker, Hudid, Pikus, Spratt 1997)

found significant relationship between HRM practices and firm performance.

Many of the studies conducted were focused on manufacturing firms and

were mostly carried out in UK, USA, Australia and other countries. Very few

studies were carried out in India and in the services sector.

45

The Indian economy has been witnessing a growing contribution of the

service sector to the gross domestic product (GDP). Services now contribute

more than fifty percent to the GDP. Due to its very nature the service sector is

highly dependent on the value of its human resources. The employee costs

constitute around 40 to 70 percent of the total turnover of business in this

sector. Among the service sector, over the past decade, the information

technology (IT) industry has become one of the fastest growing industries in

India. The key segments that have contributed significantly to the industry's

exports include - software and services (IT services) and IT enabled services

(ITES) i.e. business services. Over a period of time India has established itself

as a preferred global sourcing base in these segments and they are expected

to continue to fuel growth in the future.

The current study was undertaken to address the research gaps that exist in

the field of the strategic role of human resource in information technology (IT)

and Information technology enabled service (ITES). Many studies have shown

a positive relation between strategic HRM practices and firm performance.

However very few studies were conducted in the Indian context to find out the

role of HR in IT and ITES organizations. The study carried by Budhwar (2006)

focused on the HRM practices in BPO's located in North India, but did not

study the extent to which the HR department plays a administrative or

strategic role. Bhatnagar and Sharma (2003) tried to find out the extent to

which the HR plays a strategic role in about ten organizations in National

capital region (NCR). No sector specific study on the role of HR has been

carried out; the present study aim to fill this gap by finding out the role played

by HR in IT and ITES organizations.

1.5 Research Objective

The objectives of the study were as follows -

1) To asses the quality of the human resource functions in information

technology organizations.

46

2) To find out the extent to which the strategic role is performed by the

human resource function in information technology organizations.

3) To find out whether there is any variation between the operational

and strategic role of human resource function across these

organizations.

4) To compare the perception of the human resource functions role by

employees and human resource department staff.

5) To suggest measures for improving the strategic role of human

resource in information technology organizations.

6) To suggest measures for improving the overall quality of human

resource function in information technology organizations.

1.6 Research Hypotheses

The study was based on the following hypotheses.

1) The quality of current services provided by the human resource

function in information technology organizations is poor.

2) The human resource function performs more of Administrative role

than the strategic role.

3) There is significant difference of perception between the employees

and the human resource staff about the role of human resource

function in information technology organizations.

1.7 Research Methodology

The study is based on both primary and secondary data. Both primary and

secondary data was collected for the present study.

47

Primary data: The primary data for the study was collected through the

following methods and techniques.

Sample population: The population for the study consisted of all the

companies registered with the software technology parks of India (STPI)

Pune, National Association of Software and Services Companies

(NASSCOM) Pune, Software exporters association of Pune (SEAP) and

Maratha Chamber of Commerce, Industries and Agriculture (MCCIA) directory

of IT and ITES organizations in Pune. Many organizations are members of

two or more of these associations. There are approximately 600 IT and ITES

organizations in Pune city.

Sample Selection: A total of 120 organizations were selected from the

sample population using simple random sampling method. Out of these about

69 organizations respondent to the questionnaire used for data collection,

from which there was low response (less than 5 questionnaires) from 39

organizations. The final sample for data analysis consisted of 30 organization

which is representative of the sample population.

Research Instrument: The questionnaire of Human resource role

assessment survey designed by Ulrich and Conner was used for the study.

The questionnaire consists of 40 questions designed to find out the different

roles performed by the human resource function. These four roles are

administrative expert, employee champion, change agent and strategic

partner. Each question has to be rated by the respondent on a five point likert

type scale of 1 to 5. 1 denotes low and 5 denotes high quality of the current

quality of the role of the human resource function. The sum of the scores

(ranging from 40-200) for all these roles provides the overall quality of human

resource services within an organization. Total score above 160 is considered

high, indicating a perception of high quality in the delivery of human resource

services. Total score below 90 indicate human resource services perceived as

being of low quality overall. The allocation of scores among the four roles

48

indicates the extent to which the human resource function performs the

operational and strategic role.

The questionnaire was administered to over 495 respondents comprising of

386 employees and 109 human resource staff.

The instrument was tested for its reliability using cronbach’s alpha. The

cronbachs alpha for the instrument was found out to be 0.85 which indicates

that the instrument is highly reliable.

Informal interviews of the human resource heads, managers and executives

were also conducted to find out the roles performed by the human resource

function and their views about the role of human resource department.

Data Analysis: The data collected from the respondents was codified and

entered into the system. The data was analyzed using SPSS (Statistical

Package for Social Sciences) package software. The data was analyzed with

the help of various statistical tools like mean, mode, median, standard

deviation and various appropriate statistical tests.

1.8 Scope of the study

The study deals with the role of human resource management in the

information technology sector in Pune city. It covers the multiple roles

performed by the HR departments in the organization like the administrative,

strategic, employee champion and change agent role

The study also tries to find out the extent to which the strategic and

administrative roles are performed in the IT organization and the extent of

variations in there roles across organizations. It also focuses on the

perception of the employees and the HR staff towards the services provided

by the HR department and tries to access the quality of services provided by

the HR departments in the Information Technology organizations in the Pune.

49

The HR problems of IT organizations and the study of quality of services

across different sectors in outside the scope of the present study.

1.9 Limitations of the study

1) The study is based on the sample organization from IT & ITES

organizations only, hence the conclusion drawn are difficult to be

generalized for organization in other sectors.

2) The study is restricted to units located in Pune city only hence has

geographical limitations.

3) Many organization did not allow its employees to be interviewed, hence

an in depth analysis about their opinion could not be obtained.

4) The respondents did not provide their personal information and many

of the HR staff could not provide sufficient time for detailed discussion.

5) The study is based on the perception of the employees and the HR

staff about the role of HR in their organization, there might be

difference between the perceived role and actual role of HR in their

organizations.

50

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