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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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