Bangalore HR summit - 2003: Quantum innovations in HR

In 2003, the IHRD conducted their usual annual Bangalore HR summit. The following is the text of the paper that I delivered. The overall theme was 'From HRM to Strategic HRM: The paradigm shift in HR' and the sub theme was 'Quantum Innovations in HR practices'.

The Chairman on my panel was Mr. Emmanuel David, VP HR Of Volvo India, Bangalore. In the question answer session, some one from the audience asked refering to India or Indians saying things do not work in India in a certain way etc. Mr. David's response is still vivid in my mind. He was critical of the way in whcih an Indian was deprecating the very ways in which the commenter was also party to or contributive.

Looking back I relate the dichotomy between Bharat and India, the traditional rural India and the more enlightened urbanised India the latter of which sort of feels tied up by the slower, less glamorous Bharat. Nevertheless, Mr. David's comment about the condescending question was enlightening if taken in the right perspective.

Abstract

This paper looks into the current conceptualisation of SHRM and recognises transformational Strategic HRM as opposed to process oriented traditional HRM.

It also tries to bring in the concepts of competitive advantage and its necessary concomitant, knowledge Management as one of the key factors according increasing credibility to Strategic HRM. It is argued that in the knowledge economy, investment in HR can alone generate future streams of returns.

Examining the different strategic perspectives, drawn from the paper by Delery and Doty, an attempt is made to expose the universalistic perspective as too one dimensional and contingency perspective too iinadequate to generate quantum leaps from the strategic point of view.

This paper also encourages HR to the adoption of contrarian views with the help of some examples.To do so the configurational approach is proposed to be used as a platform and as the type likely to generate quantum innovations while recognising its amenability more to abstractions as opposed to the explicit empirical.

From Human Resource Management to Strategic Human Resource Management

Introduction :


1.For the purpose of this paper at the outset it is prudent to postulate the conceptualization of strategic HRM as opposed to plain vanilla HRM.

“ Strategic HRM involves the development of a consistent, aligned collection of practices, programs, and policies to facilitate the achievement of the organization’s strategic objectives.” ( Jeffery A. Mello)

The emphasis on the qualifiers rightly imply that traditional HR was inconsistent (with the strategic intent), that traditional HR was inadequately aligned and also that if at all it helped the organization achieve the strategic objectives it was more accidental than intentional. It also implies that strategic Human resource Management is a matter of alignment or congruence.

The intentional is a qualifying term that is at the core of anything professional. Strategic HRM in this vein is a movement towards transformational rather than process oriented action. It is a movement from traditional predictability oriented bureaucratic control to organic, free- flowing control; from specialization to broader job design; from independent tasks to group tasks; from command and control to more autonomous modes; from people as costs approach to people as investment approach from a reactive approach to a proactive approach ( Jeffery A . Mello )

2. From the process oriented approach of HRM, HRM has come a long way. For instance the mere process of recruitment of yesterday has been transformed into a mission with the strategic intent of becoming an “ employer of choice’’ and to hire and retain the best and the brightest.

Or from merely adopting a few practices that one accidentally came across in a conversation, organization have evolved benchmarking as a fairly common and institutionalized practice.

Thus from a mere transactional mode HR has moved towards a transformational mode integrated with the firm’s strategy. And were transactions are unavoidable organizations
have moved to the automating and contracting out mode.

3. New techniques like balanced score cards (BSC) have been used among other things for accountability and what is more, not only for past and present performance but also for things that are the drivers of future performance (Kaplan and Norton ). What has been always felt as a lacuna in managing the long term along with the short term has been made more manageable with the use of such innovations in technique.

A major extension is the adaptation of the human resource function for such diverse organizations such as a hospital, a church, the government and the military and also complementarily, the adoption by these diverse organization of HRM as opposed to a more traditional, bureaucratic, sometimes dogmatic, command and control model. Not with standing the development of the discipline of management from military imperatives this is one instance of the tail wagging the dog, this time more acceptably.

4. The above adaptation and reciprocal adoption can be viewed as a recognition accorded to the HR function as the common factor in such diversified endeavours. What has thus always been intuitively known and said, but viewed with a certain amount of suspicion, especially by those from non- HR streams, namely that ‘ HR is the most crucial function in any organization’, is vindicated as moreover, strategically crucial.

5. Among the many critiques, strategic HRM has been derided as some ploy to bring an otherwise traditional staff function in to prominence. But the merger of the concept of competitive advantage has brought forth increasing credence to the domain as the non – replicability (uniqueness ) element of competitive advantage, the other element being customer value (Pfeffer ) is largely a function of the human resource of an organization through application of knowledge management practices. The unsaid part here is that to date none have brought forth a better alternative to knowledge management than the implicit talent retention and culture building of all superior human resource practices.

Human resource, competitive advantage and innovation

6. A human resource system is defined as a set of distinct but interrelated activities, functions and processes that are directed at attracting, developing and maintaining (or disposing of ) a firm’s human resources. (Lado and Wilson )

A basic premise of competitive advantage is that organizational competencies that are heterogeneous and immobile form the basis of sustained competitive advantage. Many years ago Schumpeter (1934) recognized that innovation and entrepreneurship constituted the crux of the capitalistic economic system. Sustained economic development was possible only when firms engaged in a process of ‘creative destruction’ referring to the carrying out of new combination of resources, methods, system and processes to generate new products and service that effectively fulfilled actual and potential needs of customers. Whatever we today refer to as innovation is this ability to generate revolutions in the industrial domain. The ability to rapidly adapt to these revolutionary changes can earn and sustain higher returns relative to firms that lack these competencies (Delery and Doty )

7. Wesley (1990) has pointed out that HR managers and professionals may contribute to the development and utilization of managerial competencies through participation in strategic conversations. Because they serve as an important strategic node in the communication of information between top management and the rank and file (Nonaka,1988). HR managers in turn are uniquely suited to categorise strategic human issues as opportunities and threats which is a necessary step in the strategy formation process (Dutton & Jackson , 1987).


8. Lado and Wilson (1992) raises the distinction between input based competencies and out put based competencies. Input based competencies encompass the physical resources,
organizational capital resources, human resources, knowledge skills and capabilities that enable a firm’s transformational processes to create and deliver products and service that are valued by customers. Output based competencies include all knowledge based strategic assets, such as corporate reputation, image, product or service quality and customer loyalty.

It is easy to see that because these competencies (largely centered around the Human resources) entail large amounts of firm specific investments in financial, technological, Human and organizational resources that are developed over a considerable period of time and are not easily tradable, they and they alone can generate future streams of economic returns and thus be potent sources of sustained competitive advantage.

Competence enhancing HR systems

9.HR managers can play an active role in articulation the strategic vision and thereby be instrumental in information and realization of strategic vision / mission. HR can further be viewed as a repository of such socially generated knowledge about firm specific knowledge, skills, abilities, relationship and work related values of its employees. They are what labour economists term ‘organizational capital.

10.In the acquisition of input based competencies, HR has obviously a key role to play as in hiring, exploiting imperfections in the labour market, and fostering firm specific human capital. A contrarian view of human resource investment strategy might be to stockpile and train human resources during periods of economic downturn for use in the future, since during downturns human resources are more likely undervalued in the market. Illustrations in the Indian context include some of the information Technology companies who hired in the last lean season when recruitment was other wise lackluster.

11. Miner, (1987) posits a ‘serendipitous strategy of job design in which jobs are created around the unique experiences, knowledge, skills, interest and abilities of current employees or newly hired employees. Taking a cue from the above, Indian firms can think of adopting the practice of many western universities and companies where companies co-opt students students to work with them for specified periods to see ‘what they can contribute to the firm’ rather than recruit people for certain prescribed skills as job specification. The outcomes in creativity far outweighs the incongruence of a person organization fit, in which case it is in the best interests of both the organization as well as the person to disengage from each other.

12.In a similar vein, Jovanovic argued that because they reflect a rare person – job fit, idiosyncratic jobs may result in higher employee productuvuty. This goes against the current grain of thinking which is to mould the employee to suit the firm and involves considerable challenges because be definition socialization and acculturisation does not favor idiosyncrasies. But once again adopting well thought and positive contrarian views may be the direction that future strategic HRM should take.

HRM under the different strategic perspectives

13. Organizations that follow different strategic utilize different HR practices. (Schuler and Jackson, 1988, Arthur, 1992).

Taking a universalistic perspective, Pfeiffer argued that greater use of 16 (HR) management practices such as participation and empowerment, incentive pay, employment security, promotion from within and training and skill development results in higher productivity and profit across organizations. This line of thinking has given the “best practices” approach to SHRM.

Many of the practices enumerated in the above best practices have also been referred to as the 7 practices in the universalistic approach. These are internal career opportunities, training systems, appraisals, profit sharing plans, employment security, voice mechanisms (grievance and suggestions), job definitions (whether tightly defined or loosely defined).

However, this perspective is too one-dimensional from a strategic point of view since, by definition, there is not much leeway in options, as by implication it follows that espousal of the practices (whatever be the other variables)leads to results. But ,in the strategic intent, depending on other factors including rapidly changing external conditions, desired end results may vary, in which case, the perspective provides few options.

14. Another approach, namely the contingency approach argues that in order to be effective, an organizations’ HR policies must be consistent with other aspects of the organization. This approach is what often results in organizational fit or congruence arguments. However, while universalistic perspective is prescriptive in a one shot attempt, the congruence approach assumes a more or less static system so that ‘fit’ is indeed possible over a considerable period in time which assumption is inadequate in rapidly changing times.

The ‘congruence’ approach is the most prevalent interpretation of Strategic HRM because it yields to simplistic explanations. Read the above along with the SHRM definition in the beginning of this article.

15. Configurational perspective emphasize the pattern of HR practices and horizontal (internal consistency, the consistency with other sub systems including non-HR ones) and vertical fit (congruence with other characteristics, implicitly external). This one goes one step ahead of the congruence approach of the contingency approach as it takes into consideration external milieu as well. This contrarian example of recruitment in lean periods, co-opting of university students by companies and Jovanovic’s encouragement of hiring idiosyncratic employees, all cited previously in this article are by hindsight derived from such configurational perspective thinking.

To quote from Delery and Doty, ‘Configurational arguments are complex than either universalistic or contingency theories. Configurational theories draw on the holistic principles of enquiry to identify configurations or unique factors that are posited to be maximally effective. These configurations represent non-linear synergistic effects and higher order interactions that cannot be represented with traditional bivariate contingency theories. Configurational theories incorporate the assumption of equifinality by positing that multiple unique configurations of the relevant factors can result in maximal performance. These configurations are assumed to be ideal types that are theoretical constructs rather than empirically observable phenomena. As a consequence of these differences, configurational theorists working in SHRM, must theoretically derive internally consistent configurations of HR practices, or employment systems that maximize horizontal fit, and then link these employment systems to alternative strategic configurations to maximize vertical fit’.

This implies that while considering the conceptualization, design, development implementation, institutionalization and subsequent adaptations of SHRM, the organization has to look at its objectives, the various subsystems in its internal and external environment, likely changes in its strategic intent arising out of the need for alignment with changing configurations of external reality and ever expanding nature of the larger context of redundancy and refresh cycles due to technological developments / innovations and the consequent synergy and adjustments generated in the economy. In short it takes systems theories to include external systems as well and thereby generating options exponentially.

This is the perspective that has the potential to generate many an innovation as it compels escape from the linear and bivariate constraints of the other two perspectives. In short it argues in favour of quantum leaps in creativity.



References

1. Delery, John E, Doty, Harold D: Methods of theorizing in Strategic Human Resource Management: Test sof Universalistic, Contingency and Configurational performance predictions: Academy of Management Journal. 1996, Vol 39, No. 4 802-835

2.Lado, Augustine A, Wilson Mary C: Human Resource Systems and sustained competitive advantage: A competency Based Perspective: AMR 1994, Vol 19, No 4 699-727

3.Kaplan, Robert, W and Norton, David P. TheBalanced Score card: Translating Strategy into Action. Boston: HBS Press 1996

4 Mello, Jeffrey A; Strategic Human Resource Management

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