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Human Resource Management (HRM) is a process of bringing people and organizations together so that the goals of each are met. It is that part of the management process which is concerned with the management of human resources in an organization. It tries to secure the best from people by winning their wholehearted cooperation. In short, it may be defined as the art of procuring, developing and maintaining competent workforce to achieve the goals of an organization in an effective and efficient manner.

Today’s organizations are facing challenges upon following levels:

Environmental Challenges

Organizational Challenges

Individual Challenges

Environmental Challenges

Most organizations face external contexts that are complex, dynamic and increasingly global. This makes the context increasingly difficult to interpret. To cope with often incomplete and ambiguous contextual data, and to increase their understanding of the general external context, organizations engage in a process called ‘external environmental analysis’. All managers, including HR managers, need to be aware of the importance of scanning the external context in a systematic way.

A number of models exist that can help managers in analysing the external environment. Such models provide a framework to identify external opportunities and threats. Opportunities arise when an organization can take advantage of conditions in its external environment to formulate and implement strategies that enable it to improve performance. Threats arise when conditions in the external environment endanger the integrity of the organization’s activities. As shown in Exhibit 1 an organization’s external environment has two major parts:

Macroenvironment

Industry

The macro environment is composed of social, economic, political and technological elements in the broader society that can influence an industry and the organizations within it. The industry environment is the set of factors that directly influences an organization and its actions and responses. Managers have to analyse competitive forces in an industry’s environment in order to identify the opportunities and threats confronting an organization.

Environmental challenges refer to forces external to the firm that are largely beyond management’s control but influence organizational performance. The important environmental challenges today are:

Globalization,

Economy

Work force diversity,

Technology

Evolving work and family roles,

Skill shortages and the rise of the service sector

Each of these are discussed in the subsequent section

Globalization

Globalization is not a recent phenomenon. Some analysts have argued that the world economy was just a globalized 100 years ago as it is today. Yet the term is used since the 1980’s, reflecting technological advances that have made it easier and quicker to complete international transactions, both trade and financial flows. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication.

“…integration of business activities across geographical and organizational boundaries.”

“The capacity to treat the world as one market while…dealing with many culturally diverse merchants.”

“…the process by which markets expands to include competitors for customers and productive inputs without regard to national boundaries”.

“…doing business with a worldwide focus… rather than doing business in an international market with the focus from a home-country viewpoint.”

Many companies are already being compelled to think globally, something that doesn’t come easily to firms long accustomed to doing business in a large and expanding domestic market with minimal foreign competition. Weak response to international competition may be resulting in upwards layoffs in every year. Human resources can play a critical role in a business’s ability to compete head-to-head with foreign producers. The implications of a global economy on human resource management are many.

Globalization has increased the importance of HRM in organization. It has led to the development of many new areas of HR activity such as; the transfer of work to different geographical locations, either to outsourced providers or on a global in-sourcing basis; the e-enablement of many HR process; greater sophistication in the HR information technology, new structures for international HR functions; greater competition for talented staff at all levels of organization. In particular, there has been a very strong marketing, corporate communication and IT influence on the HR function. The HR function is realigning itself in response to this process of cross-function globalization (building new alliances with these functions) creating new activity streams and new roles and skills required of the HR function (Sparrow, Brewster and Harris, 2004).

Economy

Several changes in the economy have important implications for human resource management, these include the changing structure of the economy, the development of e-business, and more growth in professional and service occupations. Growth in these occupations means that skill demands for jobs have changed, with knowledge becoming more valuable. Not only have skill demands changed, but remaining competitive in a global economy requires demanding work hours and changes in traditional employment patterns. The creation of new jobs, aging employees leaving the workforce, slow population growth, and a lack of employees who have the skills needed to perform the jobs in greatest demand means that demand for employees will exceed supply. This has created a “war for talent” that has increased the attention companies pay to attracting and retaining human resources.

Technology

The world has never before seen such rapid technological changes as are presently occurring in the computer and telecommunications industries. One estimate is that technological change is occurring so rapidly that individuals may have to change their entire skills three or four times in their career. The advances being made, affect every area of a business including human resource management.

Workforce Diversity

According to Thomas (1992), dimensions of workforce diversity include, but are not limited to: age, ethnicity, ancestry, gender, physical abilities/qualities, race, sexual orientation, educational background, geographic location, income, marital status, military experience, religious beliefs, parental status, and work experience.

Many companies are now realizing the advantages of a diverse workplace. As more and more companies are going global in their market expansions either physically or virtually (for example, E-commerce-related companies), there is a necessity to employ diverse talents to understand the various niches of the market. For example, when China was opening up its markets and exporting their products globally in the late 1980s, the Chinese companies (such as China’s electronic giants such as Haier) were seeking the marketing expertise of Singaporeans. This is because Singapore’s marketing talents were able to understand the local China markets relatively well (almost 75% of Singaporeans are of Chinese descent) and as well as being attuned to the markets in the West due to Singapore’s open economic policies and English language abilities. (Toh, R, 1993)

With this trend in place, a HR Manager must be able to organize the pool of diverse talents strategically for the organization. He/She must consider how a diverse workforce can enable the company to attain new markets and other organizational goals in order to harness the full potential of workplace diversity.

Evolving Work and Family Roles

The proportion of dual-career families, in which both wife and husband (or both members of a couple) work, is increasing every year. Unfortunately, women face the double burden of working at home and on the job, devoting 42 hours per week on average to the office and an additional 30 hours at home to children. This compares to 43 hours spent working in the office and only 12 hours at home for men. More and more companies are introducing “family-friendly” programs that give them a competitive advantage in the labor market. These programs are HR policies that companies use to hire and retain the best-qualified employees, male or female, and they are very likely to payoff. For instance, among the well known organizations / firms, half of all recruits are women, but only 5% of senior management are women. Major talent is being wasted as many women drop out after lengthy training because they have decided that the demanding 10- to 12-year management track requires a total sacrifice of family life. These firms have started to change their policies and are already seeing gains as a result. Different companies have recently begun offering child-care services as well to facilitate women workers as well as are introducing alternative scheduling to allow employees some flexibility in their work hours.

Skill Shortages and the Rise of the Service Sector

Expansion of service-sector employment is linked to a number of factors, including changes in consumer tastes and preferences, legal and regulatory changes, advances in science and technology that have eliminated many manufacturing jobs, and changes in the way businesses are organized and managed. Service, technical, and managerial positions that require college degrees will make up half of all manufacturing and service jobs. Unfortunately, most available workers will be too unskilled to fill those jobs. Even now, many companies complain that the supply of skilled labor is dwindling and that they must provide their employees with basic training to make up for the shortcomings of the public education system. To rectify these shortcomings, companies currently spend large amount year on a wide variety of training programs.

ii. Organizational Challenges

Organizational challenges refer to concerns that are internal to the firm. However, they are often a byproduct of environmental forces because no firm operates in a vacuum. Still, managers can usually exert much more control over organizational challenges than over environmental challenges. Effective managers spot organizational issues and deal with them before they become major problems. Only managers who are well informed about important HR issues and organizational challenges can do this. These challenges include the need for a competitive position and flexibility, the problems of downsizing and organizational restructuring, the use of self-managed work teams, the need to create a strong organizational culture, the role of technology, and the rise of outsourcing.

An organization will outperform its competitors if it effectively utilizes its work force’s unique combination of skills and abilities to exploit environmental opportunities and neutralize threats. HR policies can influence an organization’s competitive position by a) Controlling costs, b) Improving quality, c) Creating distinctive capabilities and d) Restructuring

a) Controlling costs

One way for a firm to gain a competitive advantage is to maintain low costs and a strong cash flow. A compensation system that uses innovative reward strategies to control labor costs can help the organization grow. A well-designed compensation system rewards employees for behaviors that benefit the company.

Other factors besides compensation policies can enhance a firm’s competitiveness by keeping labor costs under control. These include: better employee selection so that workers are more likely to stay with the company and to perform better while they are there, training employees to make them more efficient and productive; attaining harmonious labor relations; effectively managing health and safety issues in the workplace and structuring work to reduce the time and resources needed to design, produce, and deliver products or services

b) Improving quality.

The second way to gain a competitive advantage is to engage in continuous quality improvement. Many companies are implementing total quality management (TQM) initiatives, which are programs designed to improve the quality of all the processes that lead to a final product or service. In a TQM program, every aspect of the organization is oriented toward providing a quality product or service.

c) Creating Distinctive Capabilities

The third way to gain a competitive advantage is to utilize people with distinctive capabilities to create unsurpassed competence in a particular area (for example, 3M’s competence in adhesives, and Xerox’s dominance of the photocopier market).

d) Restructuring

A number of firms are changing the way the functions are performed. The past two decades have witnessed a dramatic transformation in how firms are structured. Tall organizations that had many management levels are becoming flatter as companies reduce the number of people between the chief executive officer (CEO) and the lowest-ranking production employee in an effort to become more competitive. This transformation has had enormous implications for the effective utilization of human resources. Since the late 1980s, many companies have instituted massive layoffs of middle managers, whose traditional role of planning, organizing, implementing, and controlling has come to be equated with the kind of cumbersome bureaucracy that prevents businesses from responding to market forces. It is estimated that two thirds of the jobs eliminated in the 1990s were supervisory/middle management jobs.

New relationships among firms are also fostering hybrid organizational structures and the blending of firms with diverse histories and labor forces. Mergers and acquisitions, in which formerly independent organizations come together as a single entity, represent two important sources of restructuring. A newer and rapidly growing form of inter organizational bonding comes in the form of joint ventures, alliances, and collaborations among firms that remain independent, yet work together on specific products to spread costs and risks.

To be successful, organizational restructuring requires effective management of human resources. For instance, flattening the organization requires careful examination of staffing demands, workflows, communication channels, training needs, and so on. Likewise, mergers and other forms of inter organizational relations require the successful blending of dissimilar organizational structures, management practices, technical expertise, and so forth

iii. Individual Challenges

Human resource issues at the individual level address the decisions most pertinent to specific employees. These individual challenges almost always reflect what is happening in the larger organization. For instance, technology affects individual productivity; it also has ethical ramifications in terms of how information is used to make HR decisions (for example, use of credit or medical history data to decide whom to hire). How the company treats its individual employees is also likely to affect the organizational challenges we discussed earlier. For example, if many key employees leave the firm to join competitors, the organization’s competitive position is likely to be affected. In other words, there is a two-way relationship between organizational and individual challenges. This is unlike the relationship between environmental and organizational challenges, in which the relationship goes only one way few organizations can have much impact on the environment. The most important individual challenges today involve, productivity, empowerment, brain drain, job security and matching people and organizations.

Productivity

Productivity is a measure of how much value individual employees add to the goods or services that the organization produces. The greater the output per individual, the higher the organization’s productivity. Two important factors that affect individual productivity are ability and motivation. Employee ability, competence in performing a job, can be improved through a hiring and placement process that selects the best individuals for the job. It can also be improved through training and career development programs designed to sharpen employees’ skills and prepare them for additional responsibilities. Motivation refers to a person’s desire to do the best possible job or to exert the maximum effort to perform assigned tasks. Motivation energizes, directs, and sustains human behavior. A growing number of companies recognize that employees are more likely to choose a firm and stay there if they believe that it offers a high quality of work life (QWL).

Empowerment

In recent years many firms have reduced employee dependence on superiors and placed more emphasis on individual control over (and responsibility for) the work that needs to be done. This process has been labeled empowerment because it transfers direction from an external source (normally the immediate supervisor) to an internal source (the individual’s own desire to do well). In essence, the process of empowerment entails providing workers with the skills and authority to make decisions that would traditionally be made by managers. The goal of empowerment is an organization consisting of enthusiastic, committed people who perform their work ably because they believe in it and enjoys doing it (internal control). This situation is in stark contrast to an organization that gets people to work as an act of compliance to avoid punishment (for example, being fired) or to qualify for a paycheck (external control).

Work Time

Flextime – the practice of permitting employees to choose, with certain limitations, their own working hours. Compressed Workweek-any arrangement of work hours that permits employees to fulfill their work obligation in fewer days than the typical five-day workweek. This approach adds many highly qualified individuals to the labor market by permitting both employment and family needs to be addressed. Workplace flexibility is expected to be on the rise as the future workplace, the ‘virtual office’ is characterized by creative and flexible work arrangements. As more employees work off-site-up to two thirds of an organization in the 21st century – there will be an increase in emphasis on performance and results as opposed to the number of hours worked. In addition, off-site employees can expect to attend fewer meetings. Specified work will become much more collaborative and management will spend nearly all its time managing cross-functional work teams who enjoy a lot of autonomy

Quality of Work Life (QWL)

High quality of work life is related to job satisfaction, which in turn is a strong predictor of absenteeism and turnover. A firm’s investments in improving the quality of work life also payoff in the form of better customer service. High employment rate, low inflation and Steady economic growth provide opportunity and rising living standards. Technological advance has enabled the world’s population to grow with improved living standards for most.

Brain Drain

With organizational success more and more dependent on knowledge held by specific employees, companies are becoming more susceptible to brain drain-the loss of intellectual property that results when competitors lure away key employees. High-Tec firms are particularly vulnerable to this problem. Such important industries as semiconductors and electronics suffer from high employee turnover as key employees, inspired by the potential for huge profits, leave established firms to start their own businesses. This brain drain can negatively affect innovation and cause major delays in the introduction of new products. To make matters worse, departing employees, particularly those in upper management, can wreak considerable havoc by taking other talent with them when they leave. To combat the problem of defection to competitors, some firms are crafting elaborate ant defection devices. For example, Compaq computer has introduced a policy that revokes bonuses and other benefits to key executives if they take other employees with them when they quit. Micron Technology staggers key employees’ bonuses; they lose un-awarded portions when they leave.

Matching People and Organizations

HR strategies contribute to firm performance most when the firm uses these strategies to attract and retain the type of employee who best fits the firm’s culture and overall business objectives. For example, one study showed that the competencies and personality characteristics of top executives could hamper or improve firm performance, depending on what the firm’s business strategies are. Fast-growth firms perform better with managers who have a strong marketing and sales background, who are willing to take risks, and who have a high tolerance for ambiguity. However, these managerial traits actually reduce the performance of mature firms that have an established product and are more interested in maintaining (rather than expanding) their market share. Other research has shown that small high-tech firms benefit by hiring employees who are willing to work in an atmosphere of high uncertainty, low pay, and rapid change in exchange for greater intrinsic satisfaction and the financial opportunities associated with a risky but potentially very lucrative product launch

CHALLENGES FOR HUMAN RESOURCE MANAGERS

Issues facing HR are expected to change dramatically in the next decades. HR programs and the HR function have increased pressure to relate to the business strategy and show a return on investment. Customer focus needs to be included in all HRM practices. New technology combined with economic uncertainty will mean that administrative and transactional HR activities will be delivered via technology creating less need for HR professionals to provide these activities. Thus, HR professionals must play special roles in dealing with these changes and must develop specific competencies to support these roles.

Employee Engagement

Products and process alone can’t help organizations to sustain loyal customers. They also need highly-motivated, dedicated and involved employees who are very passionate about their work and their organization; in short, they need “engaged employees”. But, nurturing engaged employees requires a lot of effort and skill on the part of HR managers and calls for a different HR philosophy in the organization.

We need employee engagement to serve as a core competency of an organization that would provide sustainable competitive advantage. We know employee engagement towards their work, throw few test “symptoms”, i.e., feeling of creating value, having a direction to follow, an air of trust, creating engaged employees through top management endorsement, a work environment to cherish, innovative leadership and clear growth trajectories, ‘one step up from commitment’. Employee engagement is the new buzzword. A successful business is directly linked to the commitment of its employees. Employee engagement ensures the successful execution of any business strategy.

Talent Management

One of HR’s most challenging jobs now involves managing talent. Much has changed in recent years to make this an increasingly critical area for HR. Among the issues that have made the talent management job more difficult are: frequent restructuring, a growing reliance on outside hiring, flatter organizations with fewer growth options, a tighter job market (at least in the long term), the aging workforce and the decline of clear career paths, as we mentioned above that it create a big challenge before the HR. In order to retain its most valuable stakeholders, an organization must find innovative ways to continually recruit its own employees. Retaining top quality talent is an enormous challenge facing corporations today and it is duty of HR to cope with it. In order to build effective retention and deployment strategies, companies must maintain visibility into and communication with their employees.

An organization’s capacity to hire, develop and retain talent is the most crucial business process as there is a definite correlation between intangible assets and market capitalization, according to the protagonists of talent management. It is due to these intrinsic intangible values that some companies are perceived as more valuable than others.

Managing ‘Virtual’ Human Resources

Change in technology results in a change in the structure, design and environment of an organization Organizations today operate in a workspace, which is much more broadly defined, than it was earlier. Connectivity within and outside the organizations, creates a world of virtual organizations.

A virtual company is usually a highly networked organization that extensively contracts out activities that were once performed in-house, allowing both speed and flexibility. The key to success in a virtual corporation is connectivity, i.e., the ability to network with a large number of independent companies. In essence, there will be a movement, a trend towards a decentralized model of HR.

HR managers will have to accommodate employees in their virtual work locations and find ways to manage corporate culture, socialization and employee orientation. In order to obtain and maintain a competent workforce, they must act as organizational performance experts and shape employees behavior without face to face meetings.

HR Issues and Cross Cultural Management

Another expected change in HR is the ‘Global Business’ concept world trade knew a major growth during the last years and there is forecasted as well the growth of international businesses, especially among small firms. Organization rely more and more organization HR specialists as the facilitators of work across borders and among different cultures. Therefore, they must be knowledgeable of other cultures, languages and business practices. They will be required to develop and manage an international workforce, maintain written and unwritten corporate polices for transportability to other cultures, keep top management informed of the costs of not paying attention to the transnational issues and provide their services to a variety of locations world wide.

Organization must take into account cultural differences that shape managerial attitudes, when developing multinational management programs. For e.g., British managers value individual achievement and autonomy, whereas French managers appreciate competent supervision, fringe benefits, security and comfortable conditions, while Indian managers gives more importance of their culture and tradition.

HR managers must therefore be familiar with and understand other cultural norms to promote organization diversity. An organization that recognizes and promotes cultural diversity will benefit because it will be employing the market that it serves. With increasing globalization and competition within the market, a diverse workforce is conducive to attracting and retaining a strong client base. While competing in an international market, employees from diverse national backgrounds provide language skills and understanding of other cultures. HR professionals will also be responsible for providing cultural sensitivity training for the organizations employees and for managers throughout the entire organization. (Czebter, Anamaria, 2002)

Managing Issues of Work Life Balance in Organisations

The challenge of work/life balance is rising to the top of many employers’ and employees’ consciousness. In a society filled with conflicting responsibilities and commitments, work/life balance has become a predominant issue in the workplace. Research by Parasuraman and Greenhaus (2002) documented that segments of the workforce may be subject to unique work/family pressures, yet often have few sources of support. The under-representation of these groups of individuals with potentially difficult types of work/family pressures represents a major gap in work/family research and employers’ understanding of their needs. Typically, studies have focused on employed men and women who are married or living with a partner or those with children. Omitted from research are single-earner mothers and fathers, single and childless employees with extensive responsibility for eldercare, blended families with children from both partners’ prior marriages, families with shared custody of children, and grandparents raising their grandchildren.

In their highly acclaimed book, Work and Family–Allies or Enemies, Friedman and Greenhaus (2000), two leaders in work/life balance, help us understand choices we make as employers and individuals regarding work and family. To handle work/life balance, Friedman and Greenhaus emphasize that working adults learn to build networks of support at home, at work, and in the community. Conflict between work and family has real consequences and significantly affects quality of family life and career attainment of both men and women.

With the growing diversity of family structures represented in the workforce in the new millennium, it is important that human resource professionals better understand the interface of work and family relationships and the resulting impact in the workplace. Human Resource professionals seeking innovative ways to augment their organization’s competitive advantage in the marketplace may find that work/life balance challenges offer a win-win solution.