Human Resource Management is a pervasive function of management. It is performed by the managers at different levels in the organisation.

The proper management of the human factor in industry involves careful handling of the relationships among individuals at work in the undertaking. It consists in maintaining these relations on a basis which enables all those engaged in the undertaking to make their best personal contribution to the effective working of the undertaking.

Learn about the challenges faced by HR Managers in India:-

1. Mergers and Acquisitions 2. Changing Workforce Profile 3. Workforce Diversity 4. Increasing Quality Consciousness 5. BPR 6. Ethical Issues. 7. Globalisation


8. Caste System 9. Religious Sentiments Attached to Tools and Instruments 10. Doctrine of Karma 11. High-Performance Work Practices 12. Absenteeism 13. Employee Turnover 14. Work-Life Programmes 15. Training.

Challenges Faced by Human Resource Managers in India

Challenges Faced by HR Managers in India With Role of HR Professionals

Human Resource Management is a pervasive function of management. It is performed by the managers at different levels in the organisation. The proper management of the human factor in industry involves careful handling of the relationships among individuals at work in the undertaking. It consists in maintaining these relations on a basis which enables all those engaged in the undertaking to make their best personal contribution to the effective working of the undertaking.

Environment of an organization is dynamic and goes on changing. Business environment of India before economic liberalization and after economic liberalization is quite different. This is true for human resource management environment too because human resource management environment depends to a great extent on overall business environment.

In the changing environment, HR professionals have to face challenges and issues of different types because of emergence of the following features which have significant impact on human resource management practices.


They are explained as under:

Challenge # 1. Mergers and Acquisitions:

Every organization strives for growth which may come either through grass-root projects or mergers and acquisitions. Grass-root projects have the limitation of gestation period while mergers and acquisitions provide quick entry in the market. In merger, one organization merges another organization and merged organization does not exist while in acquisition, one organization acquires the control of another organization in totally or any of its part.

Liberalization has paved the way for mergers and acquisitions and many companies have become conglomerates through this process- Hindustan Unilever, ICI India, RPG Enterprises etc.; many overseas companies are acquiring Indian BPO (business process outsourcing companies; many Indian IT companies are acquiring overseas IT companies; and so on.

While mergers and acquisitions have business sense as they result in synergistic effect (2+2=5 effect), they create the challenge of integrating acquiring and acquired companies. In the absence of proper integration between the two, merger and acquisition efforts are likely to nullify which have been shown by various cases of mergers and acquisitions.


Mergers and acquisitions create two types of problems before HR professionals:

i. People Attrition:

In many cases of mergers and acquisitions, rate of people attrition is very high. This happens in those cases where the work culture of acquiring company is not perceived to be positive as compared to that of acquired company. If key personnel of the acquired company leave it, the merger and acquisition becomes meaningless. Therefore, HR professionals of the acquiring company have to retain such people.

ii. Differences in HR Practices:

HR practices in acquiring company and acquired company may differ.

Such differences may be on the following aspects:

a. Matching jobs and individuals — high matching versus low matching.

b. Development of people — high concern versus low concern.

c. Performance appraisal — modern versus traditional.


d. Compensation — competence-based versus job-based.

e. Promotion — merit-based versus seniority-based.

f. Participation — high versus low or nil.

g. Work culture — high performing versus low performing.


In these situations, HR professionals have a big challenge to integrate the people of acquired company with the working pattern of acquiring company as people of the acquired company tend to develop the following feelings-

a. Initial anxiety and stress in the mind of people.

b. Fear of loss of jobs.

c. Transfer to new locations.


d. Job changes including new roles and assignments.

e. Change in remuneration and benefits.

f. Change in career paths.

g. Change in power, status, and prestige.

h. Problems of adjustment with new organizational culture and work practices.

Challenge # 2. Changing Workforce Profile:

Over the period of time, there has been a tremendous change in Indian workforce profile. Earlier our labour force was considered to be illiterate and all HR activities used to be geared to meet job demand and expectations based on that illiteracy. Now the situation has completely transformed.


Today, labour force is more educated, skill-oriented, comparatively younger, and has high expectations. This is true with managerial personnel too. With increasing facilities for acquiring skills in management and technical field, the average age of executives has dropped considerably. For example, in Infosys Technologies, the average age of employees is 25 years.

At the level of CEOs, “in the last five years, the age of the CEO has dropped from 47 to 40 years,” says Ronesh Puri, Head of Executive Access, a personnel search firm. He further asserts that “either you make it to the top by 45 or you don’t. After 50, it is death. Even we have stopped accepting bio-data of people above that age because you can’t all them unless they are brilliant or looking for non-executive positions.”

With the changing profile of people, their expectations have also changed, both in terms of financial compensation and working conditions. Because of the younger age groups, employees are prone to job hopping. Therefore, there are challenges before HR department to have realistic job preview so as to avoid unrealistic expectations from the jobs which may not be fulfilled later, design of suitable retention strategy, and developing quality of work life.

Increasing Role of Knowledge Workers:

The profile of knowledge workers is completely different from that of other types of workforce. With increasing use of knowledge in economy, the economy has been divided into two broad groups- old or industrial economy and new or knowledge economy. Knowledge economy derives its strengths from use of knowledge of its human resources.

Human resources in knowledge economy are known as knowledge workers. Though the concept of knowledge workers may include all human resources who are primarily engaged in getting things done through the use of knowledge, from HRM point of view, knowledge workers are those individuals whose jobs are designed around the acquisition and application of information, for instance, jobs in IT or IT-enabled services organizations.


Knowledge workers tend to be different from other workers; they have certain unique personality and occupational characteristics. Because of unique characteristics of knowledge workers, managing them effectively poses serious challenge before HR professionals.

Following characteristics of knowledge workers are important from HRM’s point of view:

i. Challenging Jobs:

Knowledge workers want to have challenging jobs which require the use of latest technology and practice. While this is a welcome feature from organization’s point of view, it poses practical problems. No organization can provide latest technology in totality as it also requires people for work that is routine and maintenance-oriented.

ii. Autonomy:

Knowledge workers are quite creative and innovative, and creativity and innovation cannot flourish in tightly-controlled work environment. As a result, knowledge workers need more autonomy and work culture characterized by decentralized decision making, open communication, facilitative leadership, and de-bureaucratized structures.


iii. Immediate Feedback and Rewards:

Knowledge workers tend to consider themselves as high achievers; a high achiever looks for immediate feedback about his performance. Knowledge workers want immediate and frequent feedback from their peers, team members, and leaders. When they think of a breakthrough idea, they want someone around to talk about it. Similarly, they require and expect immediate and frequent rewards in recognition of their good work.

iv. Professional Commitment:

Knowledge workers show more commitment to their profession as compared to the organizations they serve. While professional commitment is a welcome sign as it enables knowledge workers to continuously update their knowledge and skills, but this is a dangerous sign from employing organizations’ point of view.

Knowledge workers tend to seek positions that facilitate life-long learning. In this process, they switch from one organization to another. It may be mentioned that turnover rate of knowledge workers is significantly higher as compared to other workers.

v. Lifestyle:


In general, in today’s context, every employee prefers a lifestyle which suits him most. This is happening because of environmental pressure which tends to create stress. However, knowledge workers tend to give very high importance to lifestyle. That is why they prefer those employers whose employment practices promote work-life balance through measures such as flexi-time, telecommuting, job sharing, health promotion, and on-the-job child care.

Based on the above characteristics of knowledge workers, HR professionals have to adopt the following practices:

a. Recruit and select those knowledge workers who fit with overall job requirements, both in terms of technical and behavioural competence. Generally, knowledge workers over-emphasize their technical competence.

b. Develop behavioural competencies in knowledge workers to support their technical competencies.

c. Create an environment in which knowledge workers can work up to their full potential.

Realizing the importance of knowledge economy and the role of knowledge workers therein, many companies in knowledge economy have changed the name of their HR department to knowledge management department.

Challenge # 3. Workforce Diversity:

With passage of time, workforce diversity is increasing because of changing environment. Workforce diversity refers to dissimilarity of employees in an organization at a point of time. Diversity is defined in terms of age, cultural background, physical abilities/disabilities, race, religion, and sex.

Reasons for Workforce Diversity:

There are a number of reasons, both within environmental and organizational contexts, which lead to workforce diversity.

The major reasons are as follows:

i. A large organization has jobs of different nature requiring employees with varying skill sets and a single group of similar employees may not have those varying sets.

ii. Recruiting personnel from diversified groups may enable an organization to enhance effectiveness of its marketing strategy. For example, Hindustan Unilever prefers to recruit woman employees to promote and sell those products which are generally bought by women.

iii. Workforce diversity leads to creativity and innovation. There is a famous saying ‘creativity lies in diversity and not in similarity’. Creativity and innovation are key to organizational success in the present environment.

iv. An organization has social responsibility. In order to discharge this responsibility, the organization recruits personnel belonging to specific groups- differently abled, economically backward, and other disadvantageous groups,

v. To meet legal requirements, certain types of organizations have to recruit personnel belong to specific social classes- other backward classes (OBC), scheduled castes (SC), scheduled tribes (ST), ex-servicemen, etc. For example, public sector has to follow this practice.

HR Implications of Workforce Diversity:

Workforce diversity is just like a two-edged sword; it can cut both ways. If managed properly, it can be a source of organizational strength. If not managed properly, it can bring chaos in the organization.

Though in managing workforce diversity, every member of the organization is equally responsible, the role of HR professionals in this context is quite significant because many of the ill effects of workforce diversity can be overcome through suitable HR policies and practices.

HR professionals may take the following actions to reap the full benefits of workforce diversity:

i. Fair Organizational Policies:

HR professionals can help the organization to devise policies related to employees that are fair to all. The policies should not discriminate the employees on any basis which is not directly related to work outcome, for example, gender, age, religion, nationality, etc. If discrimination is made on any such basis, it is likely to create hatred among employees that may be detrimental to the organization.

ii. Training and Education Programmes:

While training and education programmes are common with most of the organizations, these programmes put emphasis on developing work- related skill sets.

In an organization having high level of workforce diversity, these programmes should also cover such areas as creating awareness about the need for workforce diversity, helping employees to understand value of workforce diversity, providing the skills necessary for working in diverse work teams, and providing skills and development activities necessary for diverse groups to do their jobs and have the opportunity for advancement.

iii. Career Planning and Development Programmes:

HR professionals can undertake career planning and development programmes for unprivileged or underprivileged employees who cannot immediately match their more privileged counterparts. Such employees may be physically impaired personnel, late career employees, ex-servicemen, scheduled caste/tribe employees, etc. While framing career planning and development programmes, special attention can be paid to such employees.

iv. Mentoring Programmes for Less Privileged Employees:

In an organization, generally, employees needing special attention are in minority. For such employees, special mentoring programmes may be organized. Mentoring is a kind of counselling and providing guidance to a person who is facing some unusual problem.

Challenge # 4. Increasing Quality Consciousness:

With the increased competition at the global level and discerning customers, more and more organizations are becoming conscious about the quality of their products/services. Quality is a sense of appreciation that something is better than something else. From operational point of view, quality means focusing on the creation of increasingly better products/services at progressively more competitive prices.

Increasing quality awareness has generated the adoption of the following practices:

i. Total quality management.

ii. Emphasis on Kaizen.

iii. Moving towards six sigma.

i. Total Quality Management:

Fiegenbaum has defined TQM as follows- “Total composite of product and service characteristics of marketing, engineering, manufacturing, and maintenance through which the product and service in use will meet the expectations of the customers.”

Total quality management comprises the following processes:

a. Quality Process:

Quality process involves the understanding of who the customer is, what his needs are, and how these needs can be satisfied. Thus, quality process comprises different steps through which complete satisfaction is provided to the customer.

b. Continuous Improvement:

There is continuous process of improving the product quality and its delivery. The process comprises the plan-do-check-act (PDCA). Practice of PDCA cycle generates numerous opportunities for further improvement. Management of PDCA cycle involves continuously evolving objectives, policies and methods to achieve goals, education and training to employees, implementation, checking causes for low quality, taking appropriate actions, and preventing recurrence.

c. People Process:

People Process deals with initiating and maintaining the TQM. It is carried out through the involvement of all employees on the basis of three values- intellectual honesty, self-control, and respect for others. Thus, TQM is not concerned only with shop-floor management but it involves the total organization and its personnel in terms of their support to the philosophy of TQM.

Principles of Total Quality Management:

For applying total quality management in an organization, certain principles are required. Deming, one of the early proponents of total quality management, has suggested 14 points to apply TQM in an organization. These points are popularly known as principles of total quality management.

These are as follows:

I. Create constancy of purpose of improvement of product and service.

II. Adopt the new philosophy that increasing quality is necessary for corporate survival.

III. Cease dependence on mass inspection to ensure quality from the start.

IV. End the practice of awarding business on price tag alone; develop long-term relationships with suppliers to ensure supply of quality products/services.

V. Constantly and forever improve the system of production and service.

VI. Institute modern methods of training on the job.

VII. Institute leadership to motivate employees for continuous learning to improve quality.

VIII. Drive out fear so that employees can seek any information about total quality management practices.

IX. Break down barriers between staff areas to ensure mutual cooperation among different departments and units.

X. Eliminate slogans, exhortations, and targets for the workforce to ensure employees’ attention on quality.

XI. Eliminate numerical quota to ensure that only quantity is not emphasized.

XII. Remove barriers to pride of workmanship.

XIII. Institute a vigorous programme of education and training.

XIV. Take action to accomplish the transition to total quality management.

In applying total quality management in an organization, managers face certain problems because there are two types of barriers which work against TQM.

These are as follows:

a. There may be some organizational barriers in the form of lack of support for TQM. TQM can be practised at the shop-floor level successfully only when it has support of the management — top, middle, and lower levels.

b. There may be some attitudinal barriers which provide impediments to TQM. These may be in the form of attitudes towards training needed, management styles, and approach towards quality.

Both these problems can be overcome by developing proper climate for improving quality, systematic training, and participation and empowerment of employees. Thus, role of HR personnel is quite important in applying TQM in the organization.

ii. Emphasis on Kaizen:

Along with TQM, organizations are putting emphasis on kaizen for improving their product quality. Kaizen is a Japanese term which means continuous improvement or improvement over improvement. Kaizen involves a wide range of areas — customer orientation, total quality control, quality improvement, zero defect, just-in-time, new product development, productivity improvement, worker discipline, suggestion system, small group activities, and cooperative labour management relations.

Kaizen involves personnel at all levels of the organization — top level, middle level, supervisors, and workers.

For adopting kaizen in an organization, the role of top management and HR department is crucial. Top management should initiate the actions by committing to kaizen, develop systems, procedures, and structures suitable to kaizen, and provide climate for the participation of people in the process.

The role of HR department is to prepare personnel at various levels to participate in kaizen by providing them relevant training. Kaizen has been introduced in Japan and practised there in most of the companies.

iii. Moving towards Six Sigma:

The recent trend in managing and improving quality and processes related to these is moving towards six sigma, a concept popularized by General Electric, a US company, during 1990s. Six sigma uses statistical techniques to improve business processes and can be used in both manufacturing and service sectors.

The basic features of six sigma are as follows:

a. It is a structured method for improving business processes. The method, called DMAIC (define, measure, analyze, improve, and control), is supported by an assortment of statistical tools.

b. It measures statistically how well a business process is performing. A process that performs at six sigma produces only 3.4 defects out of every million opportunities to produce a defect. The processes that perform at lower sigma levels produce more defects per million opportunities. It is possible that a process may produce at even higher level than six sigma implying still lower defects, but six sigma has become popular as the standard for excellence in process performance.

c. It involves an organizational mind-set in which people make decisions based on data, look for causes of problems, and define defects based on customers rather than internal requirements, seek to control variation, and track leading indicators of problems to prevent them from happening.

Role of HR Professional in Improving Quality:

HR professionals may play the following roles in improving quality:

a. Designing suitable training programmes to develop skills which are relevant for improving quality.

b. Generally, a project team is constituted with many professionals for applying six sigma in an organization. HR professionals may help management to constitute the project team by suggesting the names of persons who fit with requirement of project team. Further, HR professional can work as members of the project team.

Challenge # 5. Business Process Reengineering:

Along with offering quality products and services to the customers, organizations have started serving customers by reducing the time taken to serve the customers. This effort has given a new concept in management, known as business process reengineering (BPR). BPR is basically a fundamental process of redesigning business processes so as to gain economy in performing these processes.

Hammer and Champy have defined BPR as follows:

“Business process reengineering is the fundamental rethinking and radical redesign of processes to achieve dramatic improvement in critical, contemporary measures of performance such as cost, quality, service, and speed.”

Business processes refer to the manner in which work is organized and coordinated to produce the desired product/service. For example, execution of sale order is a business process. An organization may have several such processes.

Objectives of Business Process Reengineering:

Throughout the world, companies have used BPR as a tool for generating competitive advantage. Though the concept of BPR emerged and practised in Japan, it could not catch the attention of people in other parts of the world because of lack of widespread publicity of the concept. Subsequently, US automobile companies adopted BPR concept. Since then, BPR was adopted in many countries, including India.

The main objectives of BPR are as follows:

i. Elimination of Unnecessary Processes:

As the organizations grow over the period of time, many processes are added but without deleting the old processes to get organizational work done. As a result, organizations become process-oriented rather than result-oriented. This system started showing weaknesses as the competition increased.

BPR aims at eliminating these unnecessary processes as BPR starts with putting a question- how relevant is the process to the central activities of the organization? If a process is not relevant, it must be eliminated.

ii. Reduced Cycle Time:

BPR aims at reducing cycle time for completing a process by reducing the number of steps involved in the process. By combining elimination of unnecessary processes and reduced cycle time, BPR increases the degree of competitive advantage to a company.

Process of BPR:

BPR entails developing a business process model of how organizational activities function, analyzing relationships among business units, and implementing change that would eliminate redundant processes and make business units more effective.

Thus, BPR process will proceed through different steps in a sequence which are as follows:

i. Developing business vision and process objectives.

ii. Identifying processes to be redesigned.

iii. Measuring performance of existing processes.

iv. Identifying opportunity for applying information technology.

v. Building prototype of new process.

i. Developing Business Vision and Process Objectives:

Before going through the process of redesigning business processes, it is desirable that business vision is defined clearly so that business processes function in tune with the vision. Organizational vision represents the challenging portrait of what the organization would be in future. It implies that the organization should create projections about where it should go and what major challenges lie ahead.

Based on its business vision, the organization should define the objectives of business processes, that is, how business processes would contribute to business vision. There may be different ways in which business processes contribute to business vision such as lowering costs by shortening process cycle time, enhancing customer value by matching quality/cost and service/time, providing timely information to various internal stakeholders, and so on.

ii. Identifying the Processes to be Redesigned:

After defining business vision and process objectives, the organization should identify those processes that need redesigning. At the initial stage, it is desirable to identify those processes that are performed repeatedly and have greatest potential payback such as manufacturing process, order receiving and execution, product shipping, data entry, etc.

Weaknesses of these processes can be identified on the basis of their symptoms. Symptoms of inefficient processes include excessive data redundancy and re-entering information, too much time spent in handling exceptions and special cases, or too much time spent in corrections and re-work.

The analysis should identify which organizational group owns a process, which organizational functions/departments are involved in the process, and what changes are required. The required changes may be identified on the basis of business vision and process objectives. After performing these functions on the initially selected few processes, the similar exercise should be taken for other processes.

iii. Measuring Performance of Existing Processes:

Before going through redesigning, performance of existing processes should be measured to find out the type of reengineering needed. Many methods can be used to measure the performance of a process to determine whether an opportunity exists to improve its efficiency, effectiveness, and adaptability. Two commonly used methods are benchmarking and process evaluation.

Benchmarking collects and analyses data to determine the performance of a process. For this purpose, either the processes of industry leader locally or globally can be chosen or organization best-in-the-class can be chosen irrespective of the industry to which it belongs. The organization can measure the performance of its processes vis-a-vis benchmarked organization to find out whether reengineering is needed.

iv. Identifying Opportunity for Applying Information Technology:

With the development and widespread use of information technology (IT), more emphasis is being placed on how IT can be used to support a process and redesign the process accordingly. In contrast to this approach, the conventional method of process design first establishes a process and then assesses the information requirements and how IT can fulfil these requirements.

Thus, in the new approach, IT can be allowed to influence process design from the start. For example, if an organization needs inventory reserve to prevent stock-outs, it can design just-in-time inventory and stockless supply systems keeping in view the role that can be played by telecommunication networks and electronic data interchange.

Thus, processes involved in just- in-time inventory and stockless systems should be designed keeping in view the support provided by above IT systems.

v. Building Prototype of New Process:

The organization should design a new process on an experimental basis, anticipating a series of revisions and improvements until the redesigned process is put into actual operation. The prototype must be tested to measure its performance and incorporate needed changes.

As far as possible, the testing should be in realistic environment. After the testing phase is over and necessary corrections are incorporated, the process can be put into operation.

Role of HR Professionals in Business Process Reengineering:

BPR is a kind of organizational change in which HR professionals have to be involved right through the stage of initiation of a change and its implementation and post-implementation evaluation as each change has HR implications.

In BPR, HR professionals can play the following roles:

i. Facilitating Benchmarking of New Processes:

When an organization thinks of changing its business processes, the basic question emerges is- what kind of changes are to be brought in the processes so that organizational purpose is served adequately. Very often, the answer of this question is found in terms of benchmarking.

Since HR professionals are quite familiar with organization development efforts, they keep track of what kind of business processes are doing better and can suggest valuable processes to be benchmarked.

ii. Acting as Catalyst to Promote Acceptance of Change:

BPR involves organizational change and employees resist organizational change as it disturbs their existing way of doing things. However, without willing acceptance of change by the employees, the change cannot be brought effectively. HR professionals can work as catalyst to promote smooth acceptance of change because they are in a better position due to two factors.

First, HR professionals interact with employees throughout the organization. They also put forward the case of employee welfare before the higher level management. Therefore, they are more acceptable to the employees in case of bringing any change in the organization. Second, HR professionals are behaviourally equipped to remove emotional vulnerability of the employees that is likely to emerge as a result of the change.

iii. Working as System Specialists:

As system specialists, HR professionals can take systems approach in BPR. Generally, when a business process is reengineered by bringing desirable change in it, the process in itself may be effective but may affect other processes adversely if comprehensive approach in BPR is not undertaken. Since HR professionals act as system specialists, they can overcome the problem.

iv. Identification of In-House Talent for BPR:

Comprehensive BPR is a long-drawn process and involves lot of time. If the organization is large enough, BPR may involve a number of years in completing all steps in BPR. Generally, organizations take the help of external consultants for this purpose who work as external change agents.

However, their role in BPR remains limited to tender advice about BPR and how the advice can be put in practice. For implementing BPR, consultants train relevant organizational personnel who work as internal change agents. The role of HR professionals becomes quite important in identifying these personnel as the former have the comprehensive knowledge about the competence of the latter to act as internal change agents. In this way, the long-drawn process of BPR can run smoothly.

v. Integrating HR Plans to New Processes:

The outcome of BPR exercise is the emergence of new processes which are better than the old ones. However, working with new processes may require new skill sets in employees. In those cases where new processes are based on the extensive use of information technology (IT), perhaps, new employees may be required who are competent in handling IT.

These features require HR professionals to integrate HR plans to new processes which may involve recruitment of new employees, training the existing employees to work according to new processes, and so on.

Challenge # 6. Ethical Issues in Human Resource Management:

Ethical issues in management have been accorded high priority by many forward-looking organizations since long. However, these issues have received added importance because of emergence of corporate governance in management throughout the world including India. From management, ethical issues have percolated to functional areas including human resource management.

Ethical issues in management and HRM are in the form of business ethics which refers to a set of moral principles that should play significant role in guiding the conduct of managers and employees in the operation of any organization. These moral principles help in deciding what is right or wrong action. The implication of ethics is that only right actions should be taken and wrong actions should be avoided.

In HRM, ethical issues emerge virtually in all functions as manipulators try to find out ways for unethical practices everywhere.

An illustrative list of ethical issues in five broad functions of HRM is given below:

i. HR Acquisition:

In HR acquisition, unethical practices may be in the form of giving exaggerated narration of organization and job in job advertisement and giving unrealistic job preview to attract candidates, discriminatory selection to benefit certain persons based on religion, caste, gender, or any other criterion not related to job performance, discrimination in placing employees in the organization, etc.

ii. HR Development:

In HR development, unethical practices may be in the form of showing preference to certain groups of persons in putting on fast track career path, sending the persons for training programmes specially those organized by outside agencies, etc.

iii. Performance and Compensation Management:

In performance and compensation management, unethical practices may be in the form of appraising certain persons on the criteria which are not objective and related to job performance, offering higher initial compensation and subsequent pay rise to non-deserving persons to favour them, giving incentives and benefits much higher in comparison to job performance, and so on.

iv. Motivation and Maintenance:

In motivation and maintenance, unethical practices may be in the form of providing false information to employees to affect their views on employee-related matters, offering alternative work schedule options to certain favoured employees only, practising pseudo participation just to impress employees, lack of adequate measures for safety, promotion of underserving employees to favour them, unnecessarily infringing privacy of employees, sexual harassment, and so on.

v. Industrial Relations:

In industrial relations, unethical practices may be in the form of adopting penal actions against those employees who might be efficient but not obeying the unethical orders of higher ups, instigating some employees to form trade union just to weaken the recognized trade union, victimization of trade union leaders, and so on.

Need for Ethics in Human Resource Management:

A basic question emerges very frequently- is there really a need for ethics in HRM when unethical practices in the society have become almost rules than exceptions? At least operationally, this question is justified because those who opt for unethical practices stand to gain though in short term only. However, need for ethics in HRM can be justified both theoretically and operationally.

Theoretically, ethics is justified if we take it in terms of action and counter action. This suggests that any action which is undesirable will not be effective in the long term because there will be counter action which will negate the earlier action. Thus, unethical action will bring temporary result only.

Operationally too, ethics is justified as those organizations which adopt ethical HR practices are in a better position to attract and retain talent.

Thus, in the contemporary society, need for ethics in HRM is due to the following reasons:

i. Moral Consciousness:

Every individual is morally conscious. Since an organization is a collectivity of individuals for certain specified objectives, it tends to behave ethically. Organizations tend to feel that their long-term survival depends on ethical behaviour and any unethical behaviour is a short-term aberration. Because of this feature, there is a proverb, ‘honesty is the best policy in the long term’.

ii. Credibility:

Ethical behaviour helps in building credibility of an organization. Credibility of an organization is an essential phenomenon because through it, the organization protects its identity. Identity of an organization refers to what it is and what kind of perception people have about it.

Credibility of the organization depends on trustworthiness, transparency, and honesty. For an organization, building credibility is a long-drawn process but its tarnishing is a short one. High credibility can be maintained through continuous ethical behaviour.

iii. Environmental Pressure:

An organization is not an island in itself but is an organ of the society. Therefore, various organs of the society put pressure on the organization to behave ethically. For example, unethical HR practices may be checked by union concerned; employees of the organization which adopt unethical HR practices may leave it; and so on.

Because of this in-built control mechanism of the society, there are more chances of ethical behaviour and less chance of unethical behaviour. However, the effectiveness of this in-built control mechanism depends on its relative force which, in turn, depends on the social structure.

iv. Legal Pressure:

Ethical behaviour evolves from the social system. Thus, ethical behaviour is evolutionary. In this evolution process, there is a possibility that, sometimes, it may not be clear whether a particular behaviour is ethical or unethical. In order to avoid this dilemma, most of the societies enact laws which define ethical and unethical behaviour.

These legal provisions are of mandatory nature. In HR, there are numerous legal provisions related to how to deal with employees.

Role of HR Professionals in Inculcating Ethics in HRM:

Role of HR professionals in inculcating ethics in HRM is quite significant. Organizations which are serious in infusing ethics in various areas including HRM undertake training programmes to make their employees aware about ethical standards and how these standards can be maintained.

Sometimes, ethical dilemmas emerge that contain uncertainty in defining ethical/ unethical practices because of lack of obvious differences between the two. Through ethics training, such dilemmas can be resolved easily. In order to make ethics training programmes effective, it is desirable that top management involves itself in the programmes so that the participants are impressed about the seriousness of ethics.

Further, such programmes may be conducted by internal personnel with suitable and required inputs from external consultants. Involvement of internal personnel in changing employee behaviour having moral implication is more effective than its alternative.

Challenges Faced by HR Managers in India – Caste System, Religious Sentiments and Doctrine of Karma

1. Caste System:

The Indian society is characterised by the all-pervading caste system. In the hierarchy of the caste system, Brahmins, Kshatriyas, Vaisyas and Shudras are in the descending order of social status ranks. The functions of each of these groups, known as Varnas, have also been traditionally prescribed. The functions assigned to the Brahmins included studying, teaching, sacrificing, assisting others to sacrifice, giving alms and receiving gifts.

The Kshatriyas were allotted the functions of studying, sacrificing, using weapons and protecting life and property of the people. The Vaisyas were assigned the functions of studying, performing sacrifice, giving alms, rearing cattle and above all trading, doing business and adopting occupations involving craftsmanship and manufacture. The Shudras were required to serve higher caste men. Usurpation of the functions allotted to one Varna by the other has been a taboo.

The caste system has traditionally emphasised superiority and inferiority of social status ranks, inequalities among people based on birth, social distances and restrictions on the choice of occupations.

Although, with the advent of democracy, emergence of welfare state, spread of education, growing social and political awareness among people, intermingling of population and widespread recognition of human rights, the rigidity associated with the caste system has appreciably crumbled, but the remnants of the past restrictions on the choice of occupations, and elements of social inequalities among castes can be found in many sectors of economic activities and employment even today.

Instances are not rare when workmen belonging to higher castes take the directions of a low-caste superior with scorn. Even today, higher caste people are reluctant to work on dirty and disagreeable manual jobs such as scavenging, carrying loads on head, work involving use of leather and so on.

2. Religious Sentiments Attached to Tools and Instruments:

A notable feature of the Hindu society has been deep-rooted religious sentiments attached to tools and instruments used in production, construction and other economic activities. Every year, on the stipulated day, they worship Lord Vishwakarma, the god of all sorts of manufactures, construction and material creations; clean their tools, instruments and machines; decorate the workplaces and pay oblations to these aids in various ways.

They do not use these on the day of worship. Many work-shops and industrial establishments of various sizes, such as Tata Motors, other factories in Jamshedpur and many other industrial establishments in various parts of the country remain closed on that day to enable the workmen to worship the god of all material creations.

Even during strikes and agitations, workers in the country never think of damaging tools, instruments and machines. This is in sharp contrast to deliberate damages to machines and other articles of workplaces by militant unions such as Luddites in the UK, many others in the USA and France in the early stages of spread of unionism.

Such a conviction amongst Indian workers has obvious manifestations in various areas of HR management. The management is assured about proper upkeep of machines and instruments. Employees are generally willing to take up training programme related to use of new machines and to assist less skilled fellow-workmen in learning new skills. The conviction also promotes greater job satisfaction and team-work.

3. Doctrine of Karma:

The doctrine of Karma, which has been prevalent in the Indian society from times immemorial, has also been a potential factor influencing the behaviour and activities of people at work. The doctrine suggests that everyone in the Hindu society should discharge his allotted duties in accordance with the prevalent social and religious norms, and that he will reap the fruits of his deeds and misdeeds in the next and subsequent lives.

On the basis of this premise, a large number of people in the country including work-people believe that their fortunes and misfortunes in the present life have been the outcome of deeds and misdeeds of their past lives, and as such, many of them feel that these cannot be changed by their efforts.

When applied to the setting of business and industrial organisations, it can be experienced that even when employees are dissatisfied with the management’s decision of their demotion, termination of service, wage-cuts, denial of promotion etc., they avoid raising much hue and cry conceding that these have been the result of their misdeeds in the past life.

In the same way, if they are benefited in one way or the other, they take it as the fruit of their good deeds in the past life. In brief, it can be said that the management is relieved of many of its worries, which could have emerged in the absence of influence of the doctrine of Karma on the employees.

Other Social Factors:

In addition to the above, certain other social factors have also come to exercise influences on many areas of human resource management. Factors based on religion, tribe, language, region, politics, customs and traditions and law and order situation also have their bearing on human resource management in the country.

There are examples of workers forming formal or informal groups, even unions, based on caste, religion, tribe and region, which have inhibited establishment of homogeneity among work-people. These social factors have a cumulative effect on various areas of human resource management, particularly attitudes, job satisfaction, morale, motivation and behaviour of work­-people.

Challenges Faced by HR Managers in India – Financial Impact of HRM on Business

To measure the financial impact of HRM on business, the important domains to be covered are:

1. High performance work practices

2. Employee attitudes

3. Absenteeism

4. Turnover

5. Work-life programmes and

6. Training

It must be remembered that money alone is not the barometer to measure the effectiveness of HRM activities. The expenses on activities such as employment of differently-abled people, managing diversity and providing child care must be considered in a larger social context.

To know how an organization creates value from its human resources, it is not the number of tests administered, the number of insurance claims settled or the no of employee suggestions received. The value lies on two dimensions viz. cost control and value creation.

i. Cost Control:

It is reducing the costs in HR functions and enhancing the operational efficiency of the entire organization.

ii. Value Creation:

This is to ensure that right from the HR functions to HR- related policies/practices, through competencies, motivations and employee behaviours, the entire HR system interacts with the process of implementing organizational strategy.

To be most useful, HR measurements must focus on outcomes that are directly relevant to the strategic objectives of a business. In terms of corporate finance there are three different ways to measure effectiveness of HR activities.

Those are:

a. By Enhancing Return:

It is to achieve expected performance of employees. Companies improve returns by selecting for specific skills and by training for specific skills.

b. By Reducing Risk:

Risk reduction is achieved by lowering the variability in performance and by eliminating factors that might reduce performance. Firms achieve this by screening out counterproductive behaviours, helping troubled employees through Employee Assistance Programmes and implementing policies to ensure compliance with company’s rules and regulations.

c. By Increasing Liquidity:

This is to improve flexibility to adapt to changing business needs. Firms achieve this by providing training in transferable skills, by selecting for skills that are not task specific and by employing people based on their adaptability and ability to learn.

1. High-Performance Work Practices:

The activities under high-performance work practices, in general, include:

i. Distributing responsibilities down to the employees.

ii. Emphasizing the line managers as HR managers.

iii. Decentralization of decision making, and

iv. Linking employee performance with financial performance of department/organization.

If the HR managers require higher investment in people, they must be able to prove that the benefits of implementing high-performance work practices must outweigh the costs of implementation.

The following practices have been found to be associated with increases in productivity (measured as output per worker), as well as with the firm’s long-term financial performance:

1. Employing valid staffing procedures.

2. Developing organizational cultures that emphasize team work and respect for people.

3. Employee involvement in decision making.

4. Linking employee compensation with company’s or worker’s performance, and

5. Training.

The above practices will have greater impact on organizational performance if implemented together as a system. The extent to which these practices will pay off actually depends on the skill and care with which the HR practices are implemented to solve real-time business problems and to support a firm’s operating and strategic initiatives.

Behavior Costing:

It is attaching economic estimates to the consequences of employee behaviours such as absenteeism, turnover and job performance of employees/managers.

1. This approach does not measure the value of an employee or manager as an asset, but rather it considers the economic consequences of his/her behavior.

2. This is an expense model of HR accounting which takes into account the costs of recruitment, selection, retention, development and utilization of people.

3. In this approach the costs and benefits of the activities of all employees, managerial as well as non-managerial, are determined.

4. Standard cost-accounting procedures are applied to employee behavior.

5. Each of the elements of behavior to which cost is assigned is identified and care is taken to see that each behavioural cost element must be separate and mutually exclusive from the others.

6. There are direct measures, indirect measures, controllable costs and uncontrollable costs in this approach.

7. Direct measures refer to actual costs, such as the accumulated, direct cost of recruitment.

8. Indirect measures are usually expressed in terms of time, quantity or quality (e.g., If the time taken per interview and the interviewers’ hourly pay are known then it is simple to convert time per interview into cost per interviewer).

Controllable and Uncontrollable Costs:

Controllable costs are the costs under the control of HR department/organization through prudent HR decisions. Uncontrollable costs are the costs which are beyond the control of the organization.

For example, if the higher turnover is due to better salary, more opportunity for promotion and career development elsewhere, the costs associated with turnover are somewhat controllable through improved HR practices. However, if the turnover is due to factors such as fatal accidents, poor health or transfer of spouse, then the costs are uncontrollable.

The main objective of HR costing is not simply to measure costs, but also to reduce the costs of human resources by devoting resources to the more “controllable” factors.

2. Employee Attitudes:

An attitude is how positive or negative, or favourable or unfavourable a person feels towards another person, an event or an object. It is an enduring organization of motivational, emotional, perceptual and cognitive process with respect to some aspect of the individual’s world.

Attitudes have Three Elements:

i. Cognition – The knowledge an individual has about the object of the attitude.

ii. Emotion – The feelings of the individual towards the object.

iii. Action – The readiness to respond in a predetermined manner to the object.


Job satisfaction – It is multidimensional made up of attitudes towards pay, promotion, co-workers, supervisors, the work itself and so on.

Organization commitment – It is a bond or linking of an individual to the organization that makes it difficult for the individual to leave.

Managers are more interested in employees’ job satisfaction and. commitment because of the relationship between attitudes and behavior. Employees who are dissatisfied with jobs and who are not committed strongly to their organizations will-

i. Tend to be absent or late for Work,

ii. Quit early, and

iii. Place less emphasis on customer satisfaction.

Sears Model:

Sears, Roebuck and Co applied behavior costing methodology to study the relationship between employee attitudes, customer behavior and profits.

Sears produced a model and created a balanced scorecard for the company that showed pathways of causation from employee attitudes to profits.

For example, the model shows that a 5-point improvement in employee attitudes will drive a 1.3 point improvement in customer satisfaction in the next quarter which, in turn, will drive a 0.5% improvement in revenue growth.

The challenges of realizing the full benefit of the model includes three important components:

1. Creating and refining the employee-customer-profit model and the measurement system that supports it,

2. Aligning the management around the model to run the company, and

3. Using the model to build business literature and trust among employees.

3. Absenteeism:

In business context absenteeism is any failure of an employee to report for or to remain at work as scheduled, regardless of reasons. The term scheduled is significant as it automatically excludes vacations, holidays, other duty, medical leave, and so on. Whether the absence is ‘excusable’ or not, from business point of view employee is absent.

Absence will cost money. If workers are permitted to vary their work time to fit their personal schedules, if they need not ‘report’ to an office and if they are accountable only in terms of results, as in the case of teleworkers, then the concept of ‘absenteeism’ does not arise.

4. Employee Turnover:

Measuring and analyzing the costs of employee turnover is important because the costs of hiring, training and developing employees are investments. Turnover is defined as any permanent departure of employees from an organization.

Rate of turnover (%) = (No. of turnovers/Average workforce size) x 100

i. Controllable turnover is ‘voluntary’ on the part of the employee.

ii. Uncontrollable turnover is ‘involuntary’ caused by retirement, death, spouse transfer etc.

iii. Turnover is functional where the employee’s departure is beneficial to the organization.

iv. Turnover is dysfunctional where the departing employee is someone the organization would like to retain.

v. High performers who are difficult to replace represent dysfunctional turnovers.

vi. Low performers who are easy to replace represent functional turnovers.

The crucial point in analyzing the turnover is not how many employees leave but rather the performance and replaces ability of those who leave versus those who stay.

Components of Turnover Costs:

Turnover costs, generally, include three major categories, viz., separa­tion costs, replacement costs, and training costs.

1. Separation Costs:

There are three elements in separation costs:

i. Exit Interview – This includes the cost of the interviewer’s time and the cost of the terminating employee’s time.

ii. Administration – This includes the cost related to termination such as removal of the employee from the payroll, termination benefits and turn-in of company equipment.

iii. Separation Pay – Depending on the contractual agreement some firms are liable for payment of separation pay.

2. Replacement Costs:

These include the following:

i. Advertisement/communication of job availability in print/electronic media.

ii. Pre-employment administrative functions such as accepting and registration of applications, verifying of referees etc.

iii. Interviews, preliminary as well as final.

iv. Testing i.e., assessment procedures.

v. Staff meeting to discuss the need for replacement to recheck job analyses/job specifications, to pool information on the candidates and to finalize hiring.

vi. Travel and moving expenses- Travel expenses for all those who attend the interview and travel plus moving expenses for those who are hired. This includes travel expenses of experts/specialists who are invited as members of interview panel.

vii. Post-employment acquisitions and communicating information about the company, job etc.

viii. Medical examination.

3. Training Costs:

These include three components:

i. Informational literature such as handbook, manual etc.

ii. Formal training programmes which include the costs of trainers, training materials, space, equipment’s etc.

iii. On-the-job training.

In addition to the above the major cost associated with employee turnover is:

i. Reduced productivity during the learning period,

ii. The loss of contacts/leads of the exiting employee, and

iii. The time spent by coworkers in guiding the new employee.

5. Work-Life Programmes:

Work-life or work-family programme is based on the fact that employees of all categories, in an organization experience personal or family problems which are likely to affect their job performance adversely. Work-life or work- family programme includes benefits or working conditions provided by the management to help an employee balance work life and personal life.

These programmes, generally, include:

1. Child and dependent care such as onsite or near-site child care or elder care centres and summer/weekend programmes for dependents.

2. Flexible working conditions such as flextime, job sharing, teleworking, part time work and compressed work weeks.

3. Leave options such as maternity/paternity/adoption leaves, sabbaticals, and phased reentry.

4. HR services which include cafeteria benefits, parenting skill development, health/financial management, exercise facilities, and professional/personal counseling.

5. Cultural concerns to take care of employees’ non-work issues and sensitive family issues.

Implementation of the work life programs depends on the following factors:

i. Organizational size.

ii. Percentage of women in the organization.

iii. Percentage of younger employees (<35 years).

iv. Type of ownership (public vs. private).

v. Organization’s track record in HR management.

Surveys showed that size of the organization and track record in HR management only were associated with the adoption of work-life programmes. While larger organizations provided individual support (personal counseling and relocation assistance), leave, life-career guidance and child/dependent care benefits, the organizations rated high on HR management tended to implement flexible work options, individual growth plan and life-career policies.

Since implementation of work-life programmes involves considerable expenses the relevant questions to be answered are:

i. Is it primarily an attraction and public image?

ii. Is it for retention of talent?

iii. Are the benefits overriding the costs involved?

6. Training:

Managements are interested in assessing the results of training to determine whether training is worth the cost. Though well-developed technology is available to evaluate training it is not that easy as managements prefer to receive information about the financial results of training programmes rather than the overall impact of such programmes (low, average or high).

Measures of Training Outcomes:

The outcomes of training can be assessed through indirect measures and direct measures. These include measurements in job performance or decrease in errors, scrap or waste. Indirect measures can be converted into estimates money impact of training by using a cumbersome method known as utility analysis. Utility analysis adopts a strategic focus by comparing the payoffs from various types of training to assist decision-makers in allocating training budgets and specifying the types of employees to be trained.

The issues involved in indirect measures are:

i. The criteria to be used in judging the effectiveness of each training programme,

ii. The transfer of trained skills from the training to the job, that is exhibiting of skills on the job, and

iii. Break-even values, which show the length of time the observed effect, would need to be maintained to recover the cost of training.

Direct measures of training outcomes include cost savings and increased sales.

The important point to be considered is that it is necessary to evaluate the effect and utility of each training programme before drawing overall conclusions such as training is a good investment or training is a waste of time and money.