HRM Session 1

HRM focuses on enhancing organizational effectiveness by ensuring that organization has

the right people, in right number, performing the right role to maximum potential is the
objective of HRM. Business challenges like globalization, organizational growth, technology,
change, and intellectual capital has transformed the role of HRM from a mere
admin/support function to a function of strategic importance in business organizations.
The activities performed by HRM function include,
-

Human resource acquisition (HR Planning and job analysis, recruitment and
selection, induction and placement),

Managing human capital (Performance management, Training and development,

Career management)

Rewarding (compensation and benefits, employee welfare, benefits and employee

engagement),

Exit (manpower and human capital analysis and accounting).

The effectiveness and efficiency of HRM function will be reflected on a firms

profitability, growth, (employer) branding, legal compliance, and CSR.
HR strategy in any organization(s) is derived from its Business strategy (e.g. differentiation,
cost leadership). HR strategy will be translated into HR systems and practices (like hiring
policies, training and development activities, performance management systems and
employee retention). Effective HRM practices will result in positive employee attitudes
(satisfaction, commitment etc.,) and behaviour (OCB); these attitudes and behaviour in turn
creates organizational effectiveness (refer to slide no.13 in PPT1). Hence integrating HR
strategy with Business strategy is the key to success in organizations. This principle of
aligning HR policies and practices with business strategy is known as Strategic Human
Resource Management (SHRM).
SHRM essentially involves formulating and executing HR policies and practices that produce
employee behaviour and attitude that enables the organization to meet its strategic aims.
External competitive environment (STEP forces) and internal strengths & weaknesses (SWOT
analysis) of an organization determines its strategic situation. Based on their strategic
situation firms will proceed with their strategic plan (e.g. expansion, diversification,
cutting cost); to support these strategic objectives organizations will execute HR policies
and practices (recruitment & selection, training & development, PMS etc.,). (refer to slide
no.5 in PPT2)

Infosys
The journey of Infosys since its inception in early 80s to economic downturn in 2002
demonstrates the importance of aligning organizations strategic situation with strategic
plan and strategic plan with HR strategies. Mr. Narayan Murthy, founder of Infosys was
professional, ethical, people focused and believed in wealth creation and its distribution.
1981-91: during the early years of Infosys, the external environment of was non-conducive
for the company and Infosys strategy essentially revolved around body shopping
(consultation).
1991-2001: Economic liberalization resulted into reduced trade restrictions which in turn
lead to demand enhancement; however, at the same time competition crop up both from
domestic firms and few (smaller) MNCs. To meet the growing demand manpower of the
company increased tremendously, people focused practices were adopted. Focus was on
improving brand equity. Key strategies during this period focused on developing Offshore
development centers (ODCs) and Global Delivery Model (GDM). During this period the HR
practices focused on enhancing emotional bonding of employees world class campus,
ESOPs, HALE, C-life, customized training, challenging and overseas job opportunities etc.,
are some of the HR practices observed in the company. The period was characterized by a
strong link between the firms HR policies and Strategy (of the GDM through better quality
and productivity)
2002-03: The external environment changes in these years witnessed economic downturn,
SEBI restrictions, intensified competition and restrictions on US B1 visa; internally company
witnessed reduced employee satisfaction, raising costs, SOP, variable pay system was
introduced. These changes lead to change in the business strategy; consulting, ITES/GDM,
BPO operations were started operating as independent firms. Infosys HR practices were
unable to keep pace with the changed strategy (of focusing on productivity and turnaround
time while diversifying at the same time) resulting in the company falling out of the
employer of choice rankings.
The key issue in this case is about the linkage between HR practices and company strategy.