HR CHALLENGES IN THE COMING ERA
HR CHALLENGES IN THE NEW MILLENNIUM
By Ashit K. Sarkar
(Write-up/presentation made during the prestigious Asia Pacific HR Conclave
as 'The Guest of Honour Keynote Address' - Jan 13 to 15th, 2000 - at The Nehru Center, Worli, Mumbai).
Reported widely in the press, and published in several journals.
We have all along heard that “time moves on steadily and relentlessly”. Then how is it that especially in the new millennium we need to review the challenges for the HR function in organisations? Has it taken a dramatic turn, or is it because the start of the century is a very convenient milestone to take stock? After all, such milestones not only show how far and in what direction we are progressing, but also give the distance to our destination, and are often excellent anchors to take time off to re-examine the future course of action. Be what it may, this article will try to touch on some of the major concerns that need to be tackled for success by the corporate leaders in
now, and in particular by the HR functionaries. I will be covering the background, discuss some of the major reasons and needs - initially on a somewhat conceptual plane - and finally, the challenges at a practical level that are simpler to understand, but still may be vital for future success. Needless to state that nothing is easy to achieve without careful planning & appropriate actions. Therefore, the very first benchmark to tackle is: “if others can do it, so can we!” India
The threats facing managements have been changing with time, and what was a fine solution yesterday may no longer be valid tomorrow! We all know that the world is moving at an extremely fast pace, and that the rate of change is continuing to accelerate, as Alvin Toffler stated so aptly many years ago in “Future Shock”. It can now be said that we have moved to the era of not just change, but an accelerated rate of change. This demands that corrective steps too need to be taken fast without a long drawn wait and see attitude. As compared to the past, the twenty-first century corporations are getting to be globally market driven ones with ‘invest anywhere & share everywhere’ concept. The impact of e–commerce with rapidly changing information technology (IT) will similarly transform conventional business structures dramatically - even smaller organisations will not be immune. These will demand a totally different type of HR strategy and intervention.
Recently I attended and participated in a HR Conclave at the Management Development Institute at Gurgaon, when two bright young HR students, Archana Shekhar & Shivalee Puri, presented an excellent White Paper on “Aligning HR with Strategy”. Despite their limited practical experience, they discussed the theoretical and conceptual issues in considerable detail. Much of it has relevance to the understanding of the current realities facing many Indian organisations and the HR professionals in particular, in order to be able to design and develop appropriate winning HR strategies best suited to meet the changing challenges.
Amongst other issues, the paper highlighted the four stages of growth and evolution process of the Human Resource management (HRM) function as follows:
· The Reactive HRM function: where the main purpose is seen as maintenance of industrial harmony, and avoiding disruption through strikes etc. and exists generally where organisations are operating in near monopoly situations with assured growth - the interactions between HR and operating managers being minimal under normal situations at this stage.
· The Independent HRM Function: where the function is recognised as an independent entity. In this stage, while HR is involved in setting up industrial systems & procedures for operating managers, but is not fully responsible for the monitoring or correcting the problems in the system - only being marginally involved in various processes and other functions or results. Other functions would mostly seek HR’s help in administrative or on few specific issues, and line managers do not see HR as a repository of expertise.
· The Supportive HRM Function: has its own direction with a distinct status within the organisation, and actively contributes to the efforts of other functions in producing results. Organisations requiring product or technology changes rapidly in a competitive scenario generally need such HR involvement with high demands for qualified & competent manpower, often in a high turnover or mobility situation. Emphasis on people development & motivation generation comes from such HR, but their understanding or involvement in total business perspective remains limited or inadequate, even with higher functional participation.
· The Integrative HRM Function: is the stage when the competitive success of the organisation involves HRM significantly in an integrated manner, and demands such capabilities from the HR specialists. Their roles shift from a facilitator to a functional peer with competencies in other functions, and are recognised as an equal partner by the others. The typical HRM in this case is geared to contribute to organisational objectives of profitability and customer satisfaction, and is seen as a vehicle for implementation of quality processes. The department has a responsibility for monitoring employee satisfaction, since it is seen as surrogate to customer satisfaction.
They went on to state that “catalyst for such alignment” was evident from McKinsey’s 7-S framework model. According to this framework, effective organisation change is a complex relationship between seven S’s. HRM is a total matching process between the three Hard S’s (Strategy, Structure & Systems) and the four Soft S’s (Style, Staff, Skills & Super-ordinate goals). Clearly, all the S’s have to complement each other and have to be aligned towards a single corporate vision for the organisation to be effective. It has to be realised that most of the S’s are determined directly or indirectly by the way Human Resources are managed, and therefore, HRM must be a part of the total business strategy.
There is also a great deal of emphasis about the need for “Strategic HRM” today rather than the traditional way of managing the human resource, and we need to understand the implications. The traditional HRM is seen or believed to be both physically and psychologically disassociated from the ‘real work’ in an organisation – as a typical ‘separate’ department. The Strategic HRM on the other hand, represent a much closer and involved linkage – there being two important schools representing SHRM by two very famous institutions – Michigan & Harvard. The first focuses on strategic management, the other on human relations.
group developed the notion of strategic HRM that entailed the interconnection of business strategies, organisational structures and HRM, where HRM systems were best designed to support the implementation of corporate strategy. Michigan
· At the heart of the Harvard approach is the responsibility and capacity of managers to make decisions about the relationship between an organisation and its employees such as to maximise the organisational outcomes for key stakeholders. It focuses on manager’s responsibility to manage four key HRM policy areas: employee influence (participation), human resource flow, and the reward systems and work systems.
· Yet another school of thought called “open” or “contingent” approach argues that competitive advantage will accrue to those best able to exploit environmental opportunities and avoid or survive threats; and that the strategic management of human resource will assist organisations in this by encouraging & generating the appropriate sorts of behaviours, attitudes and competencies from employees.
Whichever way it may be defined, ultimately, a strategic approach to human resource management must culminate in the implementation of policies and practices designed to enable, support and engender behaviours consistent with organisation’s strategic intent. This demands the achievement of a good fit between HR & the business strategy.
Once the strategic plan is formulated, the focus has then to shift to strategy implementation - a process of aligning the functions of an organisation with the strategy in order to achieve the business results.
This valuable academic debate is useful for determining policy and direction and to decide for each organisation the course best suited to meet their vision and mission. They have to formulate their HR philosophy and style after analysing the strengths & weaknesses, their environment and the opportunities & the threats it might present, besides developing the business objectives and the future action plans.
The above may sound quite theoretical, but one of the issues that often exists and need to be corrected, is the identification of the stage of HRM that is best needed for the results in any organisation, and the actual situation that exists, for tackling effectively. It has been my experience that there are considerable differences in what is stated or structured, to what is the actual situation, and specially compared to what is best required. In fact, to a large extent these are often personality driven depending on or varying with personal relationships and the trust between each of the top management members, and are therefore on their individual competencies and limitations, and not necessarily as designed or intended. Many HR managers are often not driven to build other functional or business competencies, and prefer to remain comfortably on the sidelines within their limited domains, rather than become fully integrated in the organisation’s business results. While claiming or wanting greater involvement, they often fail to plan their own training & development needs - this has to be tackled effectively andd on priority. The contributions demanded towards business results by the HR managers need this competence, supported by a suitable organisation structure. This certainly needs attention wherever lacking.
However, at a practical level we must anticipate and prepare for the likely HR challenges in general that exists, or may be expected in the coming future – the main purpose and theme of this article. They are the outcome of:
· Consequent to the vastly increased competition for many, & likely in future,
· Due to rapid development of technology, especially the impact of IT, &
· Internal necessities, and/or resulting from above stated causes.
I venture to suggest that second rate performances by organisations have often been accepted as a fact of life, which did not affect survival in the past. This scenario is rapidly changing, and the earlier pedestrian performance standards will no longer be acceptable. For one thing,
after years of its closed-door policy has embarked to an era of liberalisation. This itself has brought in a very large range of challenges, for which we have little or limited experience. These will pose the greatest threats, unless positive Management strategy and actions successfully prepare them to overcome such threats. India
The first obvious and the most vital issue is the effect of the growing competition from not only the current national players, but specially from highly successful international corporations. Many of them have tremendous muscle, deep pockets and staying power, speedy decision making ability, latest up-to-date technology and also a great deal of experience in managing international challenges. Organisations and their managers will have to meet and beat the high standards of product quality, service and value offered by such global organisations - particularly the image and perceived value. They have to relearn the distribution and marketing alternatives, with the main focus on the previously ignored customer. Whether organisations like it or not, they will have to accept the stark reality that in this new century, it is the customer who has become the king! The HR Managers will therefore, have to heavily contribute to this customer driven scenario by upgrading the skill levels all round, and enhancing the managerial aptitudes and competencies, besides attitudes, within the organisation. Much greater thrusts in effective training and development activities will be necessary at all levels, as also in the attraction, selection, intake & retention of competent & key people. Tom Peters has been reputed to have stated that “people are not assets”, but it is the “right people, who are!”
With technology upgradations, much greater use of IT and forthcoming e-commerce etc. new breed of ‘knowledge workers’ in ‘learning organisations’ will make the differentiation. This intellectual capital will demand much nurturing from the enterprise, in order to give back in the shape of superior results - the HR managers will have to develop effective ways for the organisation to benefit from this resource.
Considerable work will be essential in building a positive organisational climate, within which improving performance level is not only appreciated and rewarded, but becomes a way of life. The HR Team will be only one of the important pillars, and the other functions will certainly and equally have to do a lot of upgrading for improving the organisational results. Team work, will therefore, be a key driver in any organisation, that will demand and result in high performance both at all individual levels and also across functions and teams continuously and consistently.
It goes without saying that the effective management of Industrial Relations will continue to demand a very high priority - not just to ‘do well’, but now for thee very survival of both the organisation as well as employee jobs. The HR managers will have to develop highly effective communication strategies to build understanding and co-operation from the employees and unions for this common objective, before it becomes too late. Instead of confrontative, partnership between unions, employees and management will have to be developed. Maturity from all will be needed with changes in management styles, credibility & trust building exercises – spearheaded by the HR managers. Cost management through productivity improvement, managing flexibility, rapid technological upgradations, and faster response to the market requirements will also warrant the HR Managers to manage such changes with minimum disruption – an unenviable task! The reduction in blue-collar jobs is inevitable, and the white-collar jobs in IT or service areas will need very different strategies, which may require retraining, rehabilitation, multiskilling etc. Part time and contract employment is likely to increase. The Unions memberships and their areas of influence are also likely to be affected, and their focus may shift from wage increases to job security & growth, training for employees & their family members, increasing employability, reduced working hours, unemployment relief, etc. - the HR managers will have to deal with these vital issues.
We are yet to widely experience the severe impact of serious upheavals resulting from organisations failing to meet the growing challenges and becoming sick, and consequently some having to be closed down, bought over, sold, or merged with others. No enterprise can now consider itself as non-vulnerable purely because of their size or past history of success. Managing mergers & acquisitions will be a new challenge for HR managers - restructuring, re-engineering, downsizing or closure or sale of sections or divisions has become a major reality now. Their traumatic impact on the employees will demand competent handling by the HR/Personnel Managers, for which most of us are ill equipped, as are the organisations themselves. Early preparatory work to give HR Managers competency in these new areas is very important – before the actual need that may hopefully not arise one day!
Flatter organisation structures are getting to be the order of the day, instead of fatter organisations - empowerment and modern Management Information systems has made the increase in span of control, delayering and restructuring with optimum manpower utilisation possible. Managerial productivity has been a neglected area for most, and value addition from this area will demand far greater attention.
Use of modern HR techniques and tools will become a necessity to change from the “managing by instinct” syndrome. These will include strategic measurement systems, scorecards, surveys etc. as a base to help make quality decisions.
Competitive compensation, benefits and remuneration strategy with thrusts for ‘payment by results’ will demand much greater focus in the future. The trend will move towards individualised compensation system based on the value addition. These will include Incentive Schemes, Variable Performance based pay, Annual Rewards and Bonus Schemes, Employee Stock Option Schemes etc., which will need to be related to support the organisational objectives. This in turn will require a transparent, well-accepted and fair appraisal system along with procedures for counselling, mentoring and helping employees to develop. Review and redesign of Retiral Benefits and Medical Assistance during & subsequent to the service period including social security needs will require attention. At the same time, the control of the rising employee costs will continue to demand a lot of attention – this does not imply low salaries, but high productivity and result oriented manpower utilisation with competitive payments. The uncontrolled escalation in management salaries and benefits of late in
has made this vitally important satisfier and motivator quite difficult to manage, and very challenging indeed. India
Building of self-driven and committed employees with competencies necessary for high level of sustained performance has always been a major challenge to HR and top managers of any enterprise, and this is getting accentuated day by day. Retention and motivation of key employees, and their backups, will therefore, be a major challenge for which career planning will be important. Creating an open organisation culture with empowered employees, as the foundation to build such commitment, will be another major policy challenge for the HR people in particular.
No organisation can remain an island, and therefore the leadership will have to play a greater role in contributing and participating actively in the environmental and society issues – yet another important challenge. Similarly, planning to manage any disaster – both internal and external - will tax the HR managers, who will have a much larger contributory role in this area in the coming future, along with others.
The list may look formidable, but systematic and competent review and actions will make the challenges of the future manageable. The need, priority and urgency of meeting these challenges will vary considerably from organisation to organisation. However, the performance of HR Managers along with their other team members will be an important key and a vital success factor. They will need far greater support and involvement from the top management and other functions towards maintaining and ensuring the future success of the twenty-first century organisations.
Ashit K. Sarkar
Management Consultant & Advisor,
Palmtree Place, 23 Palmgrove Road, Bangalore560 047 ( ) India
Ph/Fax: (080) 2554-0393/4112-8153 E-Mail: [email protected]
Home Page: http://ashitsarkar.co.nr