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Table of Contents TopicPage No Abstract…………………………………………………………………………………….. 2 Evolution of HR Function………………………………………………………………….. 3 Tata Steel- Historical changes in the HR functions………………………………………… 3 HR functions during Mergers & Acquisitions………………………………………………4 Historical development of the Korean HRM system……………………………………….. 5 Morality of HRM- Classic Ford example…………………………………………………… 6 Future of HR system…………………………………………………………………………7 Conclusion…………………………………………………………………………………… 8 Bibliography…………………………………………………………………………………. 9 1.
Abstract ” HR should not be defined by what it does but by what it delivers- results that enrich the organization’s value to customers, invests and employees” — David Ulrich This article aims to study the relationship between an organization’s history and its human resource functions. Historically, HR functions were developed from a need for an employee grievance redressal system. As both external and internal environments to an organization kept changing, HR as a function developed into a multi faceted integral part of any organization.
Today, HR is considered to be the key factor in the success of the organization. I start with examining the formation and evolution of the HR function before the Second World War, notably the role played by JRD Tata and his deputy Mr. Russi Mody in the development of HR as a separate entity. The article then follows with study of the effect of resistance to change within an HR system among Korean business magnates and how its history inflicted a change in their HR approach. The article then moves on to study an important parameter in the path traversed by HRM systems ??? ‘Morality’.
Organizations which are historically perceived as Ethical can bail themselves out of a potential Moral hazard, intentionally done or otherwise. After a brief overview of the road ahead for HR functions, I conclude the article with my views on the historical influences on HR systems within organizations based on the arguments created within the scope of the study Evolution of HR function Today’s Human Resource (HR) function dates back to nearly eighty years. HR, which was earlier called Personnel focused on a handful of mundane tasks. It lacked authority, leadership, direction and clout.
Gradually, however, it acquired additional responsibilities and began to attract a high caliber of practitioners. Soon, personnel evolved into HR in recognition of the fact that personnel reflected a more traditional reactive function while HR exhibited a commitment to management by anticipation. Today, HR is moving decisively toward becoming more strategically aligned with an organization’s business side. Organizations seeking to establish an HR function should be guided, in part, by staff ratios. Currently, the median ratio of HR staff per number of employees is 0. 9 per 100 (Diane Arthur, Fourth Edition).
Tata Steel- Historical changes in the HR functions Tata Steel (formerly TISCO) has to its credits many firsts, not only in India but also in the world (Dessler & Varkkey; 12th edition). It introduced the first 8 hour working day in 1912, free medical aid in 1915, leave with pay in 1920; schooling for children in 1917; workers provident fund schemes in 1920. These benefits were unknown even in the US and UK at that time. The company set up a Works Committee for handling grievances as early as 1919. In spite of these efforts; Tata Steel had the biggest strike in its history in 1928 lasting over 3 months.
When JRD Tata (JRD, henceforth) became the chairman in 1938, he made a settlement with the then labor leader, Prof Abdul Bari for Rs 2. 5 crore which many Board members did not approve. But the seeds of industrial harmony which JRD planted with Prof Bari survived and flourished under Mr. Michael John, successor of Prof Bari after his death. Between him and JRD there developed a rapport wherein each recognized in the other a thrust towards a common objective- incidentally, set by J N Tata (founder, Tata Steel) himself many decades ago (refer: speech given by Mr. Russy Mody, former MD, Tata Steel, 1980).
The objective was that an industry should not be run merely for the sake of production and profit; that a worker’s needs, fulfillments and his basic necessities were as important as any other consideration in industry. JRD realized that the solution to workers problems were not strikes but discussion and give-and-take between all levels of management and labor. Soon after the 2nd world war, JRD circulated a note to his colleagues which stated that since all kinds of activities of a technical nature required specialization, the handling of human beings also required some sort of specialization.
The note recommended that a department should be created exclusively to handle the problems of human beings in the Company. Thus, in 1947, the Personnel Department at TISCO was formed. Over time, the Personnel Department at Tata Steel evolved from grievance addresser to advisory to Strategic HRM function. But the common objective as cited above which formed the very basis of the Personnel Department in 1947 has helped Tata Steel to become one of the best and most sought after employers in the world. Such strikes have never repeated in the past 80 years history of the company.
The example above shows that if an organization has a strong belief in its vision and guiding principles, it can align its HR function to achieve the desirable levels of success. Tata Steel’s glorious history and the core values embedded by its founder have helped its HR systems bring about the desired organizational change and effectiveness with changing environments. HR functions during Mergers & Acquisitions A merger occurs when two organizations of equal size unite to form a new unit. In the process, the two organizations lose their identity and a new organization comes into being.
Conglomerate mergers take place when the two organizations operate in different industries. A conglomerate is a large company that consists of divisions of often seemingly unrelated businesses. Most conglomerates have generally proven unsuccessful (Ref: Gannon, Pillai). The era of Licence Raj (1947-1990) in India created some of Asia’s largest conglomerates such as Reliance Industries ltd and the Aditya Birla Group. History shows that the failures in M & A’s occur because of the negligence of people related issues.
The four major factors identified by organizations that contribute to acquisition success are all people related: retention of key talent, effective communication, executive retention and cultural integration (Dessler Gary). Prior to 2000, HR tended to be less involved and about half of all M & A’s failed to meet their shareholders expectations. In contrast, 80% of recent M & A’s had satisfactory results. Earlier HR played a very limited role in the Mergers and made significant contributions only during the final integration stage but now participate actively right from evaluation stage to formal integration.
Historical development of the Korean Human Resource Management (HRM )system Conglomerates are called differently in different languages. For example, the Korean Chaebols, Japanese Keiretsus and Zaibatsus are conglomerates. A chaebol is a family owned and managed business group consisting of large companies in many diversified areas. Though they date back to 1896, most big chaebols of today were formed around the mid 1950’s. As of 2000, the total sales of top thirty chaebols account for 92% of the Korean GDP and total exports by the five largest chaebols (Samsung, Hyundai, LG, Daewoo, SK) constitute 55% of all Korean exports.
While Korea showed miraculous economic growth, it failed to make significant progress in HRM. HRM (Ref: Budhwar, Debrah) throughout the 1960’s and 70’s was traditional and in the primary stage where companies considered low wages to be the major strategy for cost reduction and did not realize the need for human resource development. But with the onslaught of slow economic growth during 1990’s, companies growth slowed and opportunity for promotions decreased, calling for a change in the HRM system.
As western HRM system spread in the 1990’s, a clash with traditional HRM occurred, bringing about a period of chaos due to lack of common standards. Many companies adopted results-based performance appraisal systems, ability and performance linked incentive system, specialist training programs under new HRM. Due to economic success in 1980’s and before these organizations failed to realize the need for change and the employees were resistant to change. But in the 1990’s new HRM system with parameters such as early retirement, lay-offs and stock options to employees has been implemented.
During 1990’s, Labor disputes bordered on violent illegal strikes spread like wildfire throughout Korean companies sometimes lasting between 10-20 days. This gave rise to a ‘no work, no pay’ system as well as the change from seniority based to ability based pay system. The three biggest chaebols (Hyundai, Samsung and LG) announced in Dec 1999 that they would all be adopting the employee stock option system from 2000. This meant that the company will pay based on employee contribution and not seniority based.
Also, colleagues in the same grades would differ greatly in their bonuses based on their contribution to organizational success. The transformation of Korean HRM system is a result of simultaneous impact of both the foreign exchange crisis and the digital revolution. The former has forced Korean companies to pursue a global standard whereas the latter has called for a fundamental restructuring in the HRM system. Thus, the brief study of the Koren Industry shows that history has played a major part in shaping the Korean HRM systems.
The HRM systems have undergone a radical change from being employee relationship based to professional output based. Morality of HRM- Classic Ford example (Skinner, Mabey & Clark, 1998) Another important parameter in the historical evolution of HRM functions is “morality” Some of the mission, values and guiding principles at Ford Motors are cited were: “Customers are the focus of everything we do”, “Employee involvement is our way of life” In Feb 1996, Ford admitted to an ‘error’ involving their advertising agency when five black/Asian workers appeared as white men in a promotional material.
Employees involved found this a hurting and humiliating experience in contrast to Ford’s claim of treating people regardless of ethnic origin. The explanation to this event is highly paradoxical. The advertising agency had altered the photograph for promotional usage in Poland where blacks would not be well received by the customers. This contradicts Ford’s value of integrity at the same time supporting the mission of customers is the focus of everything we do. The above contradiction shows how important the Morality of the HRM system becomes when such crisis occur.
Ford, having historically been regarded as highly ethical company in its processes and outreach could get away from a potential hazard through apologies and compensations from the management. Imagine some XYZ automobile company having launched its first product in the market instead of Ford over here!! On the other hand, such paradox between commitment and flexibility, individualism and collective good is a huge challenge for HRM systems to sustain over a long period of time. Future of HR systems The role of HR manager is shifting from that of a protector and screener to the role of a planner and change agent.
Personnel directors are the new corporate heroes. Nowadays it is not possible to show a good financial or operating report unless your personnel relations are in order. Over the years, highly skilled and knowledge based jobs are increasing while low skilled jobs are decreasing. This calls for future skill mapping through proper HRM initiatives. Indian organizations are also witnessing a change in systems, management cultures and philosophy due to the global alignment of Indian organizations. There is a need for multi skill development.
Some of the recent trends that are being observed are: * The recent quality management standards ISO 9001 and ISO 9004 of 2000 focus more on people centric organizations. Organizations now need to prepare themselves in order to address people centered issues with commitment from the top management, with renewed thrust on HR issues, more particularly on training. * To leapfrog ahead of competition in this world of uncertainty, organizations have introduced six- sigma practices. Six- sigma uses rigorous analytical tools with leadership from the top and develops a method for sustainable improvement.
These practices improve organizational values and helps in creating defect free product or services at minimum cost. * Human resource outsourcing is a new accession that makes a traditional HR department redundant in an organization. Exult, the international pioneer in HR BPO already roped in Bank of America, international players BP Amoco & over the years plan to spread their business to most of the Fortune 500 companies. * With the increase of global job mobility, recruiting competent people is also increasingly becoming difficult, especially in India.
Therefore by creating an enabling culture, organizations are also required to work out a retention strategy for the existing skilled manpower. Conclusion Organizations and environmental conditions continually evolve. As a result, it is important to continually asses the ability of its HR system to meet its changing needs. History shows that environmental changes have created the need for constantly redesigning HR systems within organizations to meet the changes successfully. Companies that have perennially neglected the need for a change in their HR systems have found themselves wanting at some or the other point of time.
History of an organization; right from the vision and guiding principles given by its founders, to the values and ethics which are exhibited by companies even today have played a key role in the formation and development of what are known today as Strategic Human Resource Management Systems. History has also shown that the change in HR ethics if any, which form the core of any organization can be detrimental to both its outlook towards its employees and its success in the long run. Bibliography 1.
Gary Dessler & Biju Varkkey; Human Resource Management, 12th edition 2. Understanding global cultures: metaphorical journeys through 29 nations; Martin J. Gannon, Rajnandini Pillai 3. Human Resource Management in Developing Countries; Pawan S. Budhwar, Yaw A. Debrah 4. Experiencing Human Resource Management; Christopher Mabey, Denis Skinner, Timothy Clark; 1998 5. Critical Issues in organizations; Stewart Clegg, David Dunkerley;1990 6. The Routledge companion to strategic human resource management; John Storey;2009 7.
Caudron, S (2003); HR is Dead…Long Live HR. 8. Diane Arthur; Fundamentals of Human Resource Management, Fourth Edition 9. Michael Losey, Sue Mesinger, Dave Ulrich; The Future Of Human Resource Management; 2006 10. James N Baron, Diane Burton and Michael T Hannan; The Road Taken: Origins and Evolution of Employment Systems in Emerging Companies; 1996 11. Edgar H Schein; The Role of Organization Development in the Human Resource Function; Vol 4, 2010 12. http://www. chillibreeze. com/articles_various/human-resources. asp