HUMAN RESOURCE MANAGEMENT

Environmental Context

By Geetha RaviShankar Lecturer RJSIMS

NEW

ECONOMIC POLICY( N EP) AND

CHANGING

BUSINESS

Objectives of NEP To pull the country out of economic crisis. To accelerate the rate of growth

Salient Features of NEP Liberalization Privatization Globalization

Reasons for NEP

Fall in prices Fall in foreign exchange reserves Poor performance of PSUs First Gulf war caused spike in oil prices which caused a major BoP crisis in India in India India asked for $1.8 billion to bailout loan but IMF in turn demanded reforms. As a result NEP was inaugurated by PM P.V.Narasimha Rao under guidance of FM Manmohan Singh in 1991 Reasons for NEP Fiscal deficit was 5.4% of GDP which rose up to 8.4 in 1990-91. In 1991 interest liabilities rose up to 36.4% of the government expenditure. Country was moving towards debt trap There was-mounting adverse Balance of Payment situation

LIBERALIZATION

Liberalisation is a new economic policy by which several restraints on the Indian Economy like licensing, price control, financial control,etc.that led to corruption, undue delay and inefficiency were reduced.

ECONOMIC REFORMS UNDER LIBERALISATION

Abolition of licensing De-reservation of production areas Expansion of production quantity Freedom of importing capital goods
Role of RBI shifted from a regulator to a facilitator FIIs were allowed to invest in India Domestic and international banks emerged

Industrial sector reforms

Financial sector reforms

External sector reforms

Foreign exchange reforms Foreign trade policy reforms

Fiscal reforms
Tax reforms Efforts to ensure VAT reforms in all states

PRIVITISATION
Privitisation is a process of involving the private sector in the ownership or operations of a state owned enterprise The ownership of PSUs is being sold-off gradually to private entrepreneurs.

Privitisation
Outright sale of Government Enterprises

Withdrawal of Government Ownership and Management from Mixed enterprises

GAINS FROM PRIVITISATION

100% Commitment and efficiency

Evil effects of Privitisation

Competition Up gradation & Modernisation

Self Interest supersedes social interest Weaker section suffers

Promotes Consumer Sovereignty & Diversification of Production

GLOBALISATION

The increasing internationalization of trade, particularly financial product transactions. The integration of economic and capital markets throughout the world. Bringing the world closer through better world-wide communication, transport and trade links. The creation of a "Global Village", where members of the same industry from around the world interact on a large scale. Unrestricted flow of goods and services, technology and expertise among different countries of the world Process associated with increasing openess,growing economic interdependence deepening economic integration in the world economy

IMPACT OF GLOBALISATION ON HR
i. Democratization and pressures for more labour rights in countries where such rights have been restricted. ii. More liberalization and deregulation . iii. Competition for investment iv. Increased economic interdependence of nations. v. Capital, information and technology flows are on the increase . vi. Internationalization of enterprises and creation of mergers and alliances . vii. Customer-driven (and not product-driven) global and local markets, but at the same time segmented markets . viii. Competitiveness increasingly based (not on low wages or natural resources) on knowledge/innovation, skills and productivity.

POSITIVE IMPACT OF NEP

Economic activities have picked up and GDP has shown a significant increase. It has stimulated industrial production Increase in Government revenues and decrease in fiscal deficits Substantial increase in forex reserves It has checked inflation and flow of goods and services has increased Consumer sovereignty has widened. India has been recognized and emerging super power. Monopoly replaced by competition. Flow of foreign investment has increased.

NEGATIVE IMPACT OF NEP

Agriculture has been totally neglected Growth process concentrated to urban areas Consumerism has increased Lopsided growth process Might result in economic colonialism Cultural erosion

BUSINESS ENVIRONMENT

Business environment includes all those internal and external factors which directly or indirectly influence business.

Internal Environment
Organizational Structure

Production Finance Marketing Human Resource R&D

Management & Leadership Styles

EXTERNAL ENVIRONMENT OF BUSINESS

External
Micro Environment
(All Stakeholders) Shareholders Creditors Competitors Suppliers Customers Marketing Intermediaries,etc.

Macro Environment
(STEPIN)
Socio-Cultural factors Technological factors Economic Factors Political Factors International factors Natural Factors

SOCIO-CULTURAL ENVIRONMENT
Attitude of the people towards work Wealth Family Marriage Religion Education Ethics Human Relations Social responsibilities

CULTURAL ENVIRONMENT
Culture isCumulative

Subjective

Prescriptive

Learned

Socially Shared

TECHNOLOGICAL ENVIRONMENT
Technology

Reduces the cost of production Reduces the size of inventories. Reduces delivery time Reduces incidents of lock-outs and lost sales

Reduces rush orders

Responds to market changes quickly Cuts down over production Reduces unnecessary movement of forwarding and back-tracking

Reduces paper work and wasteful process

Facilitates planning production level accurately Avoids physical movement of employees, suppliers and customers

TECHNOLOGICAL ENVIRONMENT
Availability and developments in technology can have a powerful influence on global business strategy: e.g.

Access to bandwidth PC ownership Technology and sales processing payments and sales Compatibility of technologies in Business Management accounting systems, language differences, etc.

ECONOMIC ENVIRONMENT

All these factors need to be considered in any global business venture:

Tax System Economic Systems-(Capitalistic, Mixed or Communistic) Investment Considerations and Allowances

Sophistication of Financial Markets ease with which capital can be moved and raised

Economic Growth & Economic Transition Inflation Monetary and Fiscal Policies interest rates, tax regimes, government aid Balance of Payments Exchange Rates

ECONOMIC TRANSITION CAN BE ACHIEVED BYLiberalisation of economic activities. Optimum utilization of resources Dispensing with licensing system and regulated markets Macro economic stabilization through marketoriented instruments Privitisation Establishment of legal frame-work to secure property rights and transparent market regulations

 Regional Economic Trading Blocs

Economic Union Common Economic Union Market Customs Union Free trade area Free trade among members Common External Trade Policy

Free Trade Area (FTA)

Customs Union (CU) Common Markets Economic Union

Political Union

Factor Mobility Harmonization of Economic Policies

POLITICAL ENVIRONMENT
The form of Government(Democracy,Totalitarian,etc.) Political rights and Civil liberties of Citizens (free & fair elections, minority rights,equality,liberty and justice) Political stability Political risksConfiscation-nationalization of property without compensation. Expropriation-nationalization of property with compensation.

POLITICAL ENVIRONMENT(CONTD.)
Nationalization- It refers to the shifting of ownership of private property to the government. Domestication- foreign business firms relinquish control and ownership in favour of domestic investors. General Instability risks -These are risks due to social, political religious unrest in the host country. Operation risk - These are due to the imposition of controls on foreign business operation by the host Government.

INDICATORS OF POLITICAL INSTABILITY

Corruption Social Unrest (Communal conflicts, ethnic conflicts,etc.) The Negative Attitudes of Nationals ( Exploitation,colonialism,repatriation, to foreigners,etc.) Policies of the Host Government

LEGAL ENVIRONMENT
Kinds of Legal Systems Common Law(Traditions ,customs,culture,precedent and assuage) Civil Law-Detailed set of laws ( It includes contracts and agreements) Theocratic Law-based on religious precepts like Hindu law,muslim law,etc.

PROPERTY RIGHTS
Property right refers to usage of others resources for a price. Methods of violation of property rights Private Action-(theft, blackmailing and piracy) Public Action-Collecting income from individuals by the Government or by politicians Labour Legislations- They are mostly enacted based on the resolutions of IMF. (Minimum wages Act,stipulations regarding work conditions)

IMPLICATIONS OF STRUCTURAL REFORMS ON HRM IN INDIA

1.Impact on Job Design& Analysis
Introduction of BPRE(Business Process Re-Engineering) (team work,multi-skills,flexible work,work-sharing) Team-design is taking precedence over job-designing Transformation through computerization and automation Broad-banding replaced narrow jobs Retrenchment strategies Training & redeployment Industry free from unionism

Impact on Human Resource Planning

Outsourcing certain operations Shifts in organization Structure(flat structures were adopted) Team-designing replaced job-designing Internal skill mobility planning Government stopped insisting on choosing employees from disadvantaged community after globalization in order to attract FDIs Trade union insistence on internal candidature disappeared post-globalization. Eliminated interference of Trade Unions and Government on Human Resource Planning

Impact on Employment Practices

Reduction in the gap b/w national business environment and international business environment Mobility of labour between countries Development of modern HR recruitment techniques like employee-referrals,outsourcing,e-recruitment,walk-in,consultin,etc. For achievement of competitive strategies by emphasizing on soft skills of employees like aptitude,attitude,emotional testing ,etc. Elimination of trade union/Government/political interference for recruitment Reduction in supervision and enhancement in productivity Selecting candidates with multi-skills rather than with expertise in a single area. Empowerment of employees Reduction in cost due to on-line interviews and selection

Impact on Performance Appraisal(PA)

PA ratings used for employee development (through identification of employee weaknesses )rather than for their punishment Evolution of modern PA techniques like- the 360 degree PA system where all-round feed back is taken. Developing performance measures to assess the value addition of HR Alignment of PA systems with strategies Creation of internal performance consultants Shift in PA systems has eliminated the need for unionism in organizations

Impact on HRD(Human Resource Development)

Downsizing of organisation structure Building Organization structure based on the characteristics of organization structure Job enrichment at all levels Creating autonomous jobs Performance planning and development Employee empowerment Encouraging team-work Culture building and competence building Motivation ,confidence and commitment building Structuring business groups Providing training and retraining Developing reward system leading to HRD

IMPACT ON HRD CONTD.

Introducing innovative techniques for organizational development Developing the skill of adoptability Encouraging proactive learning Developing value system centered around competition To develop programmes to satisfy the social needs of employees

Impact on Salaries and Benefits

Higher Salaries and Benefits for employees Salaries based on employee performance levels. Individual bargaining taking precedence over collective bargaining. Salaries fixed on the basis of skill,talent and commitment of the workers.

Managing Workforce Diversity

Coping with ethnic diversities Diversity due to age,religion,etc. Diversity due to physical capabilities Cultural diversity Geographical diversity Cross national diversity International diversity

Response of management to structural adjustments

Change in Organization Structure Globalization has replaced functional,geographical,matrix organization structures by

flat,teambased,strategic,empowered,flexible,decent ralized structures. Employee participation encouraged in management activities Companies aim at acquiring competitive advantage.

Response of management to structural adjustments(Contd.)

Employee empowerment. Performance based payment and compensation. Few rules. Humanistic principles replaced mechanistic principles. Individual bargaining is replaced by collective bargaining. More fringe benefits given to employees Employee motivation is assuming significance.

Response of workers to structural changes

Employees started preferring individual negotiations to Collective Bargaining Employees prefer to participate in management activities and decision making Individual grievance redressal assumed significance over industrial disputes Attrition rate is increasing since employees shift jobs for higher compensation and better benefits Productive efficiency of workforce is increasing Workers are becoming more versatile and multiskilled They have become more adaptive and flexible to changes

Response of Trade Unions to structural changes

Trade Unions are decaying slowly Insistence on internal candidature is not there Individual Bargaining is Replacing Collective Bargaining Individual grievance redressal is replacing Industrial Conflicts Trade Union Membership is declining Unions size is also declining after globalization.