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Chapter-II
Review of Literature
2.0-Introduction:
The concept of the HRM has become dominant in researches relating to
industrial settings and other intuitions in the globalised era. Many studies have brought
into light many issues concerning the human factor in organizations. Most of these
studies led to the development of various new models and theoretical constructs on
such issues as human relations, leadership, organizations climate, motivation,
personality, career development and welfare and so on. These studies have also
underlined the necessity for and significance of inter-disciplinary research. Further,
they indicated the present methodological tendency is not to unduly generalize, such as
e.g., by constructing universally valid economic laws, but rather to relate social theories
as much as possible to actual life as we know it. Hence, it may be pertinent to review
some studies which have bearing upon People Management/ HRM to show how the
present study is distinct from the earlier studies.
According to Millward. et.al.,(1992), the 1990 studies found evidence of a shift
from collectivism to individualism, with a marked decline in trade unionism, and a
significant increase in the sort of approaches to participation and communication that
are embraced by HRM, such as team briefings, quality circles and newsletters. There
was also evidence of organisational changes such as the increasing involvement of line
managers in personnel activities.
Cully. et. al., (1999), survey found that human resource matters were often
incorporated in wider business plans. They concluded that there was evidence that a
number of practices consistent with a human resource management approach were
‘well entrenched in many British workplaces’.
Kersley. et. al., (2006) in their preliminary findings of the 2004 survey showed
that most of the HR practices which the earlier surveys had identified had become
consolidated or were increasing in use.
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According to Henderson (2011) in recent years much of the discussion about
methods of work organisation had concerned ‘high-performance’; ‘high-commitment’ or
‘high-involvement’ work practices. These were practices that were intended to enhance
employee commitment and involvement, often by increasing employees’ participation in
the design of work processes and the sharing of task-specific knowledge. The most
commonly cited practices included team working, cross-training (or ‘multi-skilling’) and
the use of problem-solving groups.
Team working was the most common, almost three-quarters (72%) of
workplaces having at least some core employees in formally designated teams. The
incidence and operation of team working had changed little since 1998. Where team
working was in place, it was ‘usually embedded among staff ’: four-fifths (80%) of
workplaces with team working extended it to at least three-fifths of core employees. In
83% of workplaces with team working, teams were given responsibility for specific
products and services, and in 61% they could jointly decide how work was done.
However, in just 6% they were allowed to appoint their own team leaders.
Cross-training involves training staff to be able to undertake jobs other than
their own. Two-thirds (66%) of workplaces had trained at least some staff to be
‘functionally flexible’; again, this proportion had changed little since 1998 (69%). Around
one-fifth (21%) of workplaces had groups of non-managerial employees that met to
solve specific problems or discuss aspects of performance or quality. The equivalent
figure in 1998 had been 16%. Almost half (48%) of all workplaces had trained at least
some core employees in team working, communication or problem-solving skills in the
previous year.
The authors of the 2004 Workplace Employment Relations Survey (2004 WERS)
identified many of the key themes current in HRM and noted the interest in the UK in
‘high-performance’, ‘high-commitment’ or ‘high-involvement’ work organisation and
practices. This was confirmed by a study funded by the UK government Department of
Trade and Industry (DTI) and conducted in association with the CIPD. High-
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Performance Work Strategies: Linking strategy and skills to performance outcomes
(DTI/CIPD, 2005) comprised detailed case studies of a sample of 10 firms drawn from
the Sunday Times 100 Best Companies to Work for 2004, and a survey of nearly 300
firms.
In addition to reinforcing the findings of the 2004 WERS survey this report
provided further empirical evidence on present managerial interests in the management
of people in the UK. The case studies established good practice in a range of ‘high-
performance work practices’ (HPWPs), these being defined as: a set of complementary
work practices covering three broad areas or ‘bundles’ of practices covering:
� high employee involvement practices – e.g. self-directed teams, quality circles
and sharing/access to company information;
� human resource practices – e.g. sophisticated recruitment processes,
performance appraisals, work redesign and mentoring;
� reward and commitment practices – e.g. various financial rewards, family-
friendly policies, job rotation and flexi-hours.
It was found from the case studies that leadership was regarded as crucial in
creating, shaping and driving these high-performing organisations. Skills development
was focused on achieving specific business outcomes and levels of performance. In most
of the case studies, high levels of training and continuous development were regarded
as fundamental to success, and tacit skills and institutional knowledge were perceived as
relatively more important than technical skills. Employees could learn all the time as part
of their normal work and were encouraged to innovate and improve performance
(individual, team and organisational).
International Labour Organization and the International Federation of Training
and Development Organisations (IFTDO) (ILO) ILO/IFTDO, 2000 report concluded:
Increasing evidence is becoming available about the connections between people
management and development and ‘the bottom line’. Researchers have identified three
ways in which this occurs: through the use of best HR practice; getting the right ‘fit’
between business strategy and HR practices; and using specific ‘bundles’ of practices,
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varied according to organisational context. The case studies used in the ILO/IFTDO
research show significant evidence of the use of all these approaches. They bear witness
to the search by organisations for an alignment between practices and outcomes and
active searching for examples of good practice.
The empirical evidence supporting the idea that ‘better’ management of people
should lead to ‘better’ performance at individual, team and organisational level –
everything else being equal – is probably true. Common sense would also suggest it is
wise to take what management theorists call a ‘contingency’ approach to this question.
That is, instead of looking for a universally applicable set of HR practices that will
inevitably lead to better performance in all cases, the specific circumstances of the
situation has be taken into consideration.
In fact, the Department of Trade and Industry/ Chartered Institute of Personnel
and Development DTI/CIPD (2005) report found that different ‘bundles’ of high-
performance work practices seem to be effective in different industry sectors:
There is no ‘one best way’ or ‘one best set of practices’: this is not a tick-box
approach. The crucial component is the business strategy, because this underpins the
choice of practices, the way they are implemented and their effectiveness in improving
performance. It is the business strategy that gives the high-performance working
practices their dynamism and provides the framework against which performance can
be evaluated and improved. ...
In July 2006, in an article entitled ‘Technology dinosaurs’, The Economist reported
that exactly 25 years after the launch of the IBM 5150 – the famous IBM PC which led
the personal computing revolution – many of ‘Silicon Valley’s former high-fliers’ were in
trouble. Dell’s share price had hit a five-year low following a profit warning; Intel was still
losing ground to AMD; Silicon Graphics had filed for bankruptcy; and Borland had laid
off a fifth of its staff and was about to sell the best-known part of its business. Even
Microsoft had just announced that it would buy back 8% of its shares for some $20
billion – ‘a sign that its high growth days are behind it’, according to The Economist.
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Noting that companies which start off with a successful product often fail to stay the
course, the article concluded that having a great business idea often creates a false
sense that the firm is stronger and more successful than it really is, and that ‘failure to
evolve leads to extinction’. Evolution means managing and developing people.
Actually sustainable competitive advantage comes only from the skills, experience,
creativity, imagination and brainpower of people. In the modern economy it is relatively
easy to raise capital to fund a bright idea, but managing the human resources of an
organisation to turn that idea into a business and achieve sustainable competitive
advantage – how to create and build the next BMW or the next Apple – is the single
most important management challenge in the twenty-first century, and that’s what
ambitious MBAs want to be involved in.
To do this, managers have to know about people. Of course they need to know
about other things like strategy, finance and marketing as well, and they really do need
to understand the technology underlying their businesses, but they must know about
people. They have to understand HRM and be able to work with specialists in that field.
According to Huselid (1995), the way a firm manages its people affects the
profitability and stock price of an organization. His research was based on 968
responses to a survey of the senior human resource professionals in a sample of 345
firms representing all major industries. Huselid observes that the magnitude of the
returns for investment in high performance work practices is substantial. A one-
standard deviation increase in such practices is associated with a 7.05% decrease in
turnover and on a per employee basis $ 27,044 more in sales and $ 18,641 and $ 3,814
more in market value and profits respectively. A subsequent study conducted by
Huselid and Becker (1997 - 1996 of 702 firms) found even larger economic benefits. A
one-standard deviation improvement in the HR system index was associated with an
increase in shareholder wealth of $41,000 per employee. A study of more than one
hundred German companies found a strong link between investing in employees and
stock market performance. Companies which place workers at the core of their strength
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produce higher long term returns to shareholders than their industry peers, observe
Bilmes et. al., (1997).
MacDuffie (1995), has demonstrated how higher productivity and better quality
in 62 car assembly plants was associated with internally consistent sets of innovative
people management practices. In these plants, productivity rose even higher, however,
when the people management practices were used in conjunction with a flexible work
system, backed up by quality discussion groups, team working and job rotation.
This research reveals that “people management is not only critical to business
performance: it also far outstrips emphasis on quality, technology, competitive strategy
or research and development in its influence on the bottom line” (West and Patterson,
1998).
However, the ‘people management’ in this context does not necessarily involve
technically sophisticated human resources policies and practices, or the input of human
resources specialists. Half of the firms surveyed did not have an individual in charge of
human resources, and more than two-thirds had no written personnel strategy.
Managers generally described the approach to training as reactive, and only 6 per cent
of the firms had organized training strategies. However, where workforce satisfaction
was such an important predictor of future productivity, it was clear also that: “people
management is not just about traditional human resources practices such as
recruitment, appraisal and training. It is important to take account of the whole person
and address the satisfaction of all employees across a range of areas”.
According to West and Patterson, the most enlightened organisations: “consider
many aspects of employee satisfaction, including their needs for growth and
development, their sense of security, relationships with colleagues and supervisors, the
balance between home and work, and even physical fitness”.
More than this holistic approach to employee satisfaction, how employees see
their company as a community is an equally important predictor of productivity and
profitability. In particular, according to the Sheffield research, the human relations
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climate of the organisation appears to have a significant influence on performance. A
concern for welfare, good communication, high quality training, broad autonomy and
respect for employees collectively create a community climate.
Good management of people can add as much as one-third to the market value
of a company, according to the Human Capital Index compiled by management
consultancy Watson Wyatt. The index was developed by identifying 30 human
resources practices grouped into key areas:
� excellence in recruiting, � clear rewards and accountability, � flexible workplace, and � communications integrity.
The use of these people management practices was then surveyed in more than
400 publicly-traded United States companies with a minimum of $100 million revenue.
After analyzing the relationship between human resources practice and objective
financial data, each firm was given a Human Capital Index score between 1 and 100.
Watson Wyatt believes their research has proved the existence of a direct
correlation between firms which have good human resources policies and practices and
their return on shareholder value. The study found that, over a five-year period, total
returns to shareholders were nearly twice as high for high-index companies (103 per
cent) as for low-index ones (53 per cent). Excellence in recruiting was found to have
the most potential for shareholder gain (10.1 per cent), followed by clear rewards and
accountability (9.2 per cent), flexible workplace (7.8 per cent), and communications
integrity (4 per cent).
David Francis, of the Centre for Research in Innovation Management at the
University of Brighton, believes we can be more definite that successful companies have
a distinctive approach to people management (Pickard, 1997). He says the consistency
of the picture which emerged from research in 62 organisations in the upper quartile of
their business sectors “made an important case for a distinctive paradigm for the
management of people”.
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The findings led to a five-point model of the successful organisation:
� Business planning is shared among all staff; � A ‘win-win’, high-energy culture is achieved through developing policies and
practices which are felt to be fair, promoting high expectations and celebrating success;
� People are continuously developed, using competencies derived from the company’s strategic plan, with a focus on self-awareness, initiative and interpersonal skills;
� Employees work in teams, with co-operation between teams as well as � within them; � Communication is three-way: up, down and across.
This research also shows (Crouch, 1997) that there are stages along each of
these five paths – shared goals, shared culture, shared learning, shared effort, and
shared information – and that elements of good practice must be established at each of
these stages before the organisation can move forward. And the survey companies
stress that new practices and attitudes must be allowed time to become established:
any attempt to push forward before people are ready can distort the culture of the
organisation.
Mark Huselid, David Ulrich (1997) and others, work on demonistrates that the
people management issues need to be integrated totally with the organization’s
management and change processes. This suggests that human resources specialists
should have wider-ranging roles and more open briefs than might presently be the
case. In addition, they need to be linked closely – organizationally, intellectually, and
emotionally – to the organisation and its managers.
Indeed, many human resources specialists may need to remind themselves of
the profound ways in which ‘human resources management’ and ‘people management’
are different. It is true that human resources management is too important to be left to
human resources managers. Yet, and at the same time, people managers – those who
are in ‘line’ positions with direct responsibility for the performance of the people they
manage – have never needed more support from their human resources specialists. But
are they able to provide the right kinds of support?
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Perhaps not surprisingly, analysis of Huselid’s sample of United States firms
reveals that they have higher levels of technical human resources management
effectiveness than of strategic human resources management effectiveness.
Other research (Huselid, Jackson and Schuler, 1997) shows that there are
significant relationships between strategic human resources management effectiveness
and employee productivity, cash flow and market value – but no meaningful
relationships between technical human resources management effectiveness and firm
performance.
Huselid found, an increase of one standard deviation in overall human resources
management effectiveness corresponded to an estimated increase of 5.2 per cent in
sales per employee, 16.3 per cent in cash flow, and 6 per cent in market value.
Investments in human resources, demonstrably, can be a source of competitive
advantage and better business performance.
David Guest (2000) laments the low ‘take up’ of the 18 ‘high performance’
human resources practices identified by his research. Only 1 per cent of the
respondents to this survey used more than three-quarters of the practices and applied
them to most employees. At the other extreme, 25 per cent of firms used fewer than
one quarter of the practices.
Douglas Anderson (1997) suggests: “There must be a congenial corporate
culture, capable and assertive human resource leadership, and truly supportive top
management. ... Like the other essential business tasks, human resource management
is the responsibility of operating management, not of the human resource department.
Still, human resources practitioners must take a leadership role in identifying the people
issues and opportunities that face the organisation and the specific initiatives that will
support the business strategies and objectives.”
The work of Patterson. et. al., (1997) might have reached what they describe as
“dramatic” conclusions about the impact of people management practices on business
performance, but their report concludes with seven straightforward recommendations:
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� Senior managers should regularly review people management objectives, strategies and processes and make changes or introduce innovations accordingly.
� Senior managers should monitor employee satisfaction and commitment on a regular basis using standardized surveys.
� Senior managers should monitor employee perceptions of the organization’s culture – examining, for example, the extent to which employees feel they are able, supported and equipped to do their work.
� Organisational changes should be made to promote job satisfaction and employee commitment.
� Human resources management practices should be reviewed in the areas of recruitment and selection, appraisal, training, reward systems, job design, and communication.
� Senior managers should receive training and support which enables them to provide effective vision and direction for the organization’s ‘people management’ strategies.
� The central element of each organization’s philosophy and mission should be a commitment to the skill development, well-being and effectiveness of all employees.
A study has been undertaken by Visweswara Rao (1990) in Hindustan Shipyard
Ltd., regarding human resource management practices. He has focused on the need
for innovative and creative structure of human resource management system keeping
in view the long-term strategies and objectives of the organization particularly the
objectives of personnel division.
Ravi (1993) in his thesis study on various facets of human resource management
in sugar industry under the public and co-operative sectors in Vizianagaram and
Visakhapatnam districts in the state of Andhra Pradesh reviewed the personnel policies
and practices in the two selected units. His emphasis was mainly on industrial relations
and work environment rather than personnel policies and practices such as recruitment,
selection, training and development.
Rastogi (1994) in his article mentioned that the human resource management
strategy has to be tailored to suit the business environment of the economy in the
wider context of globalization for achieving optimum results in the conduct of industry
both at macro level and in its micro setting.
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Business Today (1995) surveyed 350 companies on HRM issues and to see how
people are managed in different organizations across the country. The survey
concluded that the road to successful HRM is a long one and much of it remained
unraveled.
Ammannaya (1995) in his study on human resource management in banking
mentioned that banks should recognize their human resources and see that they adopt
a pro-active human resource management system in the place of existing reactive
system.
In a study in paper industry, Rao (1995) observed that human resource in India
is a crucial factor in globalization and Indian manpower will find its own level in terms
of wages and job opportunities in international markets. While pointing out the
setbacks he mentioned that the industry investment in research and development is
poor and the human resources development institutions suffer from lack of adequate
funding. He suggested in his presentation that a new programme has to be planned for
workers…He concluded that the Indian paper industry is at cross roads. The challenges
before it are many and options require a strong motivation to the paper challenges,
development of a competent, dynamic and able human resource for paper industry.
The Center for Human Resource Development at Jamshedpur (1996) surveyed
the HR practices of 53 public and private sector organizations. The survey observed
that in some of the organizations the top management favours supportive personnel
policies, a positive organizational culture, and training.
Dwivedi (1996) in his article on Human Resource Management observed that
innovations in training methods and other human resource management practices such
as performance appraisal, manpower planning and their effective use are necessary to
meet global challenges.
Chaudari (1997) has traced different trends in human resource management in
India right from its inception in his article. He suggested that the corporate goal and
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business ought to be linked with the functional goal and strategy. All human resource
managers must acquaint the employees from the shop floor to the top management
with the essential data.
Rao (1999) studied various organizations from public and private sectors,
software and MNCs like Larsen and Turbo, TELCO, SAIL, Crompton GE, Coca Cola,
PepsiCo, Hughes Software Systems, HLL, Modi Xerox, NIIT, HCL and so on and found
that they owe their leadership position in their sectors to the detailed application of
HRM doctrines.
Budhwar (2000) in his study on the factors influencing HRM policies and
practices, pointed out the significant correlation between a set of contingent variables
(that is age, size, ownership, life-cycle stages, HRM strategies of an organization, type
of industry, and union membership) and four HRM functions of recruitment and
selection, training and development, compensation, and employee communication. He
further suggested four national factors namely national culture, institutions, dynamic
business environment, and business sector which influence Indian HRM policies.
Jacob (2001) in his paper on developing competencies for the new human
resource management mentioned that the traditional way of human resource
management should be replaced with innovative approaches in managing people. He
stressed that the organizations have to take into account aspects like strategic
orientation of human resource management, vision sharing, employee empowerment,
team working and continuous learning with a view to evolve comprehensive and
meaningful human resource management.
Mohanthy (2001) made a study on the origin of human resource management
and its relationship with personnel management and human resource development. He
collected the data by mailing questionnaires to human resource executives in different
industries. His study revealed that human resource development is a part of human
resource management aimed at developing the competencies of people and to bring
out the behavioral change.
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Mishra (2001) has focused on the New Challenges Roles and Competencies of
human resource management. In his article he mentioned that in the future
organizations role of human resource function will be that of a trendsetter and should
shape companies and work places according to the needs of people and companies.
Sujith & Shailendra (2002) has focused on the strategic role of human resource
management in the age of downsizing. They highlighted that although downsizing is a
strategic corporate imperative in a competitive world, the process of downsizing must
not only be humane, but must appear to be human.
Appa Rao (2003) studied HRM Practices and he has covered human resource
planning, recruitment, selection, employee compensation system, human resource
development, industrial relations and other aspects. He collected data from 450
respondents in Hindustan Shipyard Ltd through employee schedule. The outcome of
the study revealed the functioning of the participative management scheme is not up to
the mark and suggested to improve’ participative management culture. As it is believed
to be conducive for promoting suitable organizational culture. HRM activities can be
better organized and implemented if the top management attaches sufficient
importance.
Harsh and Papori (2003) analyzed the trigger of changes in the business science,
primary in wake of liberalization, globalization, privatization and modernization today,
and these have become imperatives for success. In the present globally competitive
business scenario efforts to increase productivity and profitability never ends.
Organizations are becoming more and more dynamic in nature, challenges of managing
people depends on strategic human resource plans which require good management of
people techniques to maintain productivity, profitability and quality.
Jyotsna and Anuradha (2003) interpreted that the liberalization policy and
competition with growing number of multinationals have put a lot of pressure of the
human resource function. The research focuses on the business partner roles of human
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resource, namely strategic partner, administrative expert, employee champion and
change agent roles.
Chakravathi (2006) made an attempt to study the human resource management
policies and practices in sugar manufacturing units with special reference to East and
West Godavari districts of Andhra Pradesh. He suggested that the sugar industry has to
give priority to restructure and reorient the development concerned with human
resource management. At the same time, due to the growing size of the industry in
terms of technology and man power, the sugar industry has to adopt and devise to
accommodate the people trained in human resource management policies and practices
by increasing the functional differentiation of the personnel/human resource
management departments. This would help to modernize the human resource
practices of the sugar industry.
More recently there have been a spate of studies, which have looked at HRM
practices, HR roles, commitment, empowerment, and organizational learning capability
within the strategic HRM paradigm (Bahl, 2002; 2004; 2005; 2006; Sharma and
Khandekar 2001, 2002, 2003; Singh, 2004). Lynton and Pareek (2002) suggested the
business partner role of HR. Bhatnagar and Sharma (2002) favoured the administrative
expert role but Ulrich (1997 a) found the transactional role of HR as the most dominant.
These results are well supported by Saini et al. (1999) who observed that the HR
departments in India had a higher level of sole responsibility for decision on pay and
reward levels (35.9 percent), industrial relations (29.4 percent), health had safety (24.8
percent), recruitment (23.8 percent), and workforce expansion and reduction (18.1
percent). Interestingly, Wright et al.; (2001), in their study, have also highlighted the
same point about the line executives providing the best HR services to its subordinates.
Sreeramulu (2004) studied on Human Resource Practices in Visakhapatnam Port
Trust. He revealed that, human resource activities can be better organized and
implemented if the top management attaches sufficient importance. He felt that the
corporate philosophy lacks rigidity and needs flexibility.
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Porter (1985) argued that HRM can help a firm to obtain competitive advantage
by lowering costs, by increasing sources of product and service differentiation, or by
both. Achieving competitive advantage through human resources requires that these
activities be managed from a strategic perspective. Writers on strategic HRM focused in
specific areas: (a) human resource accounting, which attempts to assign value to
human resources in an effort to quantify this organizational capacity (Flamholtz,
1971;Frantzreib, Landau, & Lundberg, 1977), (b) human resources planning (Baird,
Meshoulam, & DeGive, 1983; DeSanto, 1983; Galosy, 1983; Olian & Rynes, 1984; Russ,
1982; Stumpf & Hanrahan, 1984, (c) responses to a strategic change in the
environment (Ellis, 1982; Fombrun, 1982; Lindroth, 1982; Maier, 1982; Warner, 1984,
(matching human resources to strategic or organizational conditions (Gerstein &
Reisman, 1983; Harvey, 1983; Leontiades, 1982; Migliore, 1982; Snow & Miles, 1983;
Sweet, 1982). In this last category recruiting, selection, and retention (Galosy, 1983);
compensation systems (Migliore, 1982); domain choice (Snow & Miles, 1983);
productivity (Deutsch, 1982); and other specific elements are examined. Dyer, (1984);
Smith, (1982); Tichy, Fombrun, & Devanna, (1982); Wills & Dyer, (1984), noted that
the strategic management of human resources is a multidimensional process with
multiple effects. Fombrun (1982) identified and, Russ (1982) argued that "human
resources are probably the last great cost that is relatively unmanaged." Cheek (1973)
indicated that personnel departments cannot effectively manage cost improvements
through productivity increases due to inadequate staff and an inability to channel
resources to alternate undertakings.
Gerstein and Reisman (1983), Harvey (1983), Leontiades (1982), Migliore
(1982), Sweet (1982), and many others have described human resources strategies as
developing a match between certain strategic or organizational conditions and certain
specified aspects of human resource processes or skills. Although the notion of fit, or
congruence, is appropriate, narrow focus seriously limits its usefulness. Most studies
deal exclusively with managers, often looking no deeper in the organization than the
chief executive officer or top management team.
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According to Khatri (1999), people are one of the most important factors
providing flexibility and adaptability to organizations. Rundle (1997) argues that one
needs to bear in mind that people (managers), not the firm, are the adaptive
mechanism in determining how the firm will respond to the competitive environment.
Several scholars have (Barney, 1991; Lado and Wilson, 1994) noted that
managing people is more difficult than managing technology or capital. However those
firms that have learnt how to manage their human resources well would have an edge
over others for a long time to come because acquiring and deploying human resources
effectively is cumbersome and takes much longer (Wright et al., 1994).
According to Schuler & Jackson, (1987); Schuler & MacMillan, (1984); Wright &
Snell, (1991) HRM practices refer to organizational activities directed at managing the
pool of human resources and ensuring that the resources are employed towards the
fulfillment of organizational goals.
Kok Jan de et. al., (2003), opined that researchers variously refer to certain sets
of HRM practices influenced by the HRM profession as “best practice,” or “high-
performance” (Huselid, 1995), “formal” (Aldrich and Langton, 1997; de Kok and
Uhlaner, 2001; Heneman and Berkley, 1999), “sophisticated” (Golhar and Deshpande,
1997; Hornsby and Kuratko, 1990; Goss et. al., 1994; Wagner, 1998) or as
“professional” (Gnan and Songini, 2003; Matlay, 1999). Pfeffer (1994; 1998), argued
the most appropriate term is “Best HRM Practices”.
Boxall, 1996; Lowe and Oliver, 1991; Pfeffer, 1994; found that those well-paid,
well motivated workers, working in an atmosphere of mutuality and trust, generate
higher productivity gains and lower unit costs
Pfeffer (1994) identified 16 practices which denote best practice. This was later
refined to the following seven practices:
� Employment security
� Selective hiring
� Self-managed teams/team working
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� High compensation contingent on organizational performance
� Extensive training
� Reduction in status difference
� Sharing information
Redman and Matthews (1998) identify an ‘HRM bundle’ of key practices which
support service organizations quality strategies, they are:
� Careful recruitment and selection, for example, ‘total quality recruitment’, ‘zero
defects recruitment’, ‘right first time recruitment’.
� Extensive remuneration systems, for example, bonuses available for staff willing
to be multi-skilled.
� Team working and flexible job design, for example, encouraging a sense of
cohesiveness and designing empowered jobs.
� Training and learning, for example, front line staff having enhanced interpersonal
and social skills.
� Employee involvement, for example, keeping employees informed of key
changes in the organization.
� Performance appraisals with links to contingent reward systems, for example,
gathering customer feedback to recognize the work by employees over and
above their expected duties, which in turn is likely to lead to a bonus for staff.
Saxena and Tiwari (2009) examined the HRM Practices implemented by leading
IT Companies such as TCS, Infosys and Wipro in India. They developed the 3cTER
Framework of HRM practices and identified Training and Development, Employer-
Employee Relations, Recognition through Rewards, Culture building, Career
Development, Compensation and Benefits as important HRM Practices.
According to Kane and Palmer, (1995) legislations and regulations are frequently
cited as having a direct impact on HR practices. Every country has developed a set of
regulations for the management of human resources, so, the HRM practices have to be
designed or modified according to these regulations.
Jackson. et. al., 1989; Kane and Palmer 1995; Poole and Jenkins, 1996;
Narsimha, 2000 in their study found that there are many ways in which companies can
gain a competitive edge or a lasting and sustained advantage over their competitors,
among them being the development of comprehensive human resource practices.
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Kochan et. al., (1984) opine that the presence or absence of unions in
organizations is a salient variable known to be associated with some HR.
Milkovich and Boudreau, (1991) have compiled a lengthy list of organizational
characteristics related to HR practices. The important internal factors are as follows:
Organisations Size: According to (McPherson,2008) evidence suggests that there is a
large number of small firms that do not institute formal HR practices in large
organizations , for each functional level there may a need for a different HR department
(Jackson et. al.,1989; Kaynak, et. al., 1998).
Organisational Structure: A firm’s strategy and structure are important in
determining HR practices flexibility and integration. There are important structural
differences among firms that affect the way in which HR practices are designed and
implemented (Garwin, 1986; Tomer, 1995; Hudson et. al., 2001).
Business Strategy: To gain competitive advantage, firms use different competitive
strategies .These strategies are more productive when they are systematically liked with
human resource management practices Companies can improve their environment by
making efficient choices about human resource practices that consistently support their
chosen strategy (Milkovich and Boudreau,1991; Schuler,1992).
Human Resource Strategy: HR strategy is an important determinant of both
intensity and diversity of HR practices (Gravan et al., 2008). As a rule HR practices are
shaped in accordance with HR strategy.
History, Tradition and past practices: A number of closely related factors, such as
history, traditions and past practices tend to generate resistance to change in most
organizations (Kane and Palmer, 1995; Pardo and Fuentes, 2003).
Ondrack and Nininger, 1984; Kane and Palmer, (1995). The influence of top
management on HR practices is acknowledged by most writers, even if only to the
extent of advising that top managements support should be present in designing and
implementing HR policies.
79
Okpara and Wynn, (2008), opined that Line Management participation in
designing and implementing HR activities is the key to organizational success. Since line
managers are responsible for creating value, they should integrate HR practices in their
work, Alas. et. al., (2008).
Tsui and Milkovich (1987) found that organizational power and politics as
exercised by various constituencies are crucial determinants of HR practices.
According to Kane and Palmer (1995), HR staffs are often involved in the
decision making process about HR policies and practices. Their knowledge about
alternative HR practices may represent important variables in their own right.
Various models of HRM have been developed from time to time by different
teams of the researchers. All these models have helped the HR practitioner to
effectively manage the human resources. Some of the important models have been
discussed as follows:
Harvard Model:
The Harvard model (Beer et. al.1984) works as a strategic map to guide all
managers in their relations with employees and concentrates on the human or soft
aspect of HRM. It strives at employee commitment not control. It also works on the
premise that employees needed to be congruent, competent and cost effective.
Michigan Model:
The Michigan model (Devanna et. al., 1984) focuses on hard HRM. It holds that
people should be managed like any other resources and so obtained cheaply, used
sparingly, developed and exploited fully. It also emphasized the interrelatedness of
HRM activities. According to this model, selection, appraisal, development and rewards
were geared towards organizational performance.
Guest Model:
Guest comparative model (Guest, 1997) works on the premise that a set of
integrated HRM practices will result to superior individual and organizational
80
performance. It advocates a significant difference of HRM from PM. It holds that HRM
strategies like differentiation, innovation, the focus on quality and cost reduction will
lead to practices like better training, appraisal, selection, rewards, job designs,
involvement, and security leading to more quality outcomes; commitment and
flexibility. It will then affect performance in that productivity will increase; innovation
will be achieved as well as limited absences, labour turnover, and conflict or customer
complaints.
Warwick Model:
This model was developed by Hendry and Pettigrew (1990) at centre for strategy
and change, Warwick University in early 1990s. It emphasizes on analytical approach to
HRM. It also recognizes the impact of the role of the personnel functions on the human
resource strategy content.
According to Penrose (1995); Barney (1991), competitive advantage can be
developed and sustained by creating value in a way that is rare and difficult for
competitors to imitate and the quality the human resource within is difficult to imitate.
Tzafrir. et.al., (2004) conducted a survey to find out the consequences of
effective human resource management practices on employees trust. The result
indicated a positive and significant influence of empowerment, organizational
communication and procedural justice as determinants of employees trust in their
managers. The result also indicated that procedural justice mediates the impact of
employee development on their trust in their managers.
Vanhala and Ahteela (2011) in their study found that employee trust in the
whole organization is connected to perceptions of the fairness and functioning of HRM
practices.
Bailey (1993) presented an argument for the application of promoting HRM
practices on the grounds that human resources are frequently underutilized. Employees
often perform below their potential. Bailey points out that HRM practices may have an
influence on employee skills and motivation.
81
Tsaura and Lin (2004) empirically explored the relationship among human
resource management practices, service behavior and service quality in the tourist
hotels. The results indicated that HRM practices had partially a direct effect on
customer perceptions of service quality and an indirect effect through employees’
service behavior.
Shahnawaz and Juyal (2006) compared various HRM practices in two different
organizations—a consultancy/research based organization and a fashion firms. The
study also aimed at assessing how much of commitment in the two industries can be
attributed to HRM practices. HRM practices were found significantly different in two
organizations and mean scores on various HRM practices were found more in the
fashion organization. Regression results showed that various HRM practices were
significantly predicting organizational commitment in both organizations and also when
they were combined.
Chew and Chan (2008) examined the impact of HR practices on permanent
employee’s organizational commitment and their intention to stay and found that
organizational commitment was positively affected by person-organization fit,
remuneration, recognition, and an opportunity to undertake challenging employment
assignments. Intention to stay was significantly related to person-organization fit,
remuneration recognition, training and career development. Further, they found that
training and career development was not significantly related to organizational
commitment and challenging assignments was not significantly related to intention to
stay.
Rondeau and Wager (2001) examined the relationship between HRM practices,
workplace climate and perceptions of organizational performance, in a large sample of
Canadian nursing homes and found that nursing homes, which had implemented more
‘progressive’ HRM practices and which reported a workplace climate that strongly
valued employee participation, empowerment and accountability tended to be perceived
to generally perform better on a number of valued organizational outcomes.
82
Chand and Katou (2007) conducted a study to investigate whether some specific
characteristics of hotels affect organizational performance in the hotel industry in India;
and to investigate whether some HRM systems affect organizational performance, they
found that hotel performance is positively associated with hotel category and type of
hotel and hotel performance is positively related to the HRM systems of recruitment and
selection, manpower planning, job design, training and development, quality circle, and
pay system.
Joseph & Dai (2009) found that there are significant connections between HRM
practices and firm performance; that the strategic alignment of HRM is also a driver for
firm performance.
Nayaab. et. al., (2011), found that HRM practices contribute to the enhanced
banks performance. The result indicated that HRM practices like training, employee
participation in decision making was found significantly related with banks performance.
Osman. et. al., (2011) found that the effectiveness of implementing HR practices
in a company does indeed have a major impact towards a firm’s performance. The
findings also show that HR practices have an impact of nearly 50 percent on firm
performance.
Hyde. et. al., (2008) examined the impact of HRM practices on firm profitability.
They found that little support for a positive relationship between HRM practices and
firm profitability.
Fey Carl F. (2000) investigated the relationship between human resource
management (HRM) practices and the performance of 101 foreign-owned subsidiaries
in Russia. The study’s results provide support for the assertion that investments in HRM
practices can substantially help a firm perform better.
Ngo. et.al., (2008) examined SHRM (Strategic Human Resource Management)
practices in China to assess the impact of these practices on firm performance and
employee relation climate and found that SHRM practices have direct and positive
83
effects on financial performance, operational performance, and the employee relations
climate.
Cully. et. al., (1999); Boselie and Wiele (2002) show that certain HRM practices,
such as working in teams, greater discretion and autonomy in the workplace and
various employee involvement and pay schemes, do motivate workers and generate
higher labor productivity. Employees’ involvement in terms of delegation of
responsibility and systems of collecting proposals from employees may have a positive
impact on productivity.
According to Arthur (1994), Wallace (1995), Banker. et. al., (1996), opined that
cross functional teams, job rotation, quality circles and integration of functions may all
contribute positively to labor productivity.
Soomro. et. al., (2011), found that HRM practices (training, selection, career
planning, employee participation, job definition, compensation, performance appraisal)
were correlated positively with the employee performance.
Tripathy and Tripathy (2008) found that the majority of the IT companies
sampled, institute such HRM practices that are complex in nature and a majority of the
IT companies do follow such HRM practices which can be termed as adaptive in nature.
Panayotopoulou and Papalexandris (2004) found that HRM has a more significant
influence on growth / innovation indices as opposed to financial performance.
Li. et. al., (2005) examined the relationship between HRM, technology innovation
and performance in China and found that employee training, immaterial motivation and
process control have positive effects on technological innovation, while material
motivation and outcome control have a negative influence on technological innovation.
It is also found that technological innovation is positively related with performance.
Petrescu and Simmons (2008) examined the relationship between HRM practices
and workers overall job satisfaction and their satisfaction with pay. The result indicated
that several HRM practices raise workers overall job satisfaction and their satisfaction
with pay.
84
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