Any system has the following core features – Inputs, Processes & Procedures, Output, and Feedback. When we think of HRM systems, we can look at these features as
- Inputs- People with their Knowledge, Skills, Abilities, and personalities.
- HRM Processes, Procedures, and Policies
- Outcomes- Organizational Perspective and Employee Perspective
- Feedback – Internal or External
Core objectives of any HRM system from Org side
- Productivity or Performance (Ability * Motivation* Opportunity)
- Job Satisfaction
- Motivation or Engagement
- Low Attrition
Objectives from Employee side
- Employee Contract: When an employee joins a company, there is a formal contract between employee and company. It is HR’s responsibility to make sure terms are fulfilled (leaves, medical benefits, etc)
- Psychological Contract: A more important aspect from the employee’s side is a psychological contract which is unwritten, for example, the firm will help employees to learn and grow.
HR system has following processes
- Recruitment and Selection
- Performance Management -> Compensation (Increments & Incentives), Training and development
- Exit Processes
HR Environment impacting policies
- Product Market
- Labor Market
- Government regulations
- Social environment
- Organization Culture
- Business strategy
- Org Size
- Lifecycle stage
Any organization goes through various lifecycle stages like startup -> Growing -> Mature -> Decline. HR policy will be impacted by the current stage of the organization. For example, an org in the startup phase will have different policies to attract organizations like profit-sharing in terms of ESOPs.
Innovative Strategy: Firms need employees to be innovative, risk-taking, develop new skills, and exchange ideas. Firms allow employees to become stockholders by providing stock options as part of pay.
Quality Enhancement Strategy: Firms that are looking to gain a competitive advantage by improving the quality of products and production. Mostly comes with a fixed job description but employees need to be flexible and adaptable to new technologies. Performance appraisals are mostly short-term and result-oriented.
Cost reduction strategy: Firms with relatively fixed and explicit job descriptions try to gain a competitive advantage by cost reduction strategy. Narrowly designed career paths encourage specializations, expertise, and efficiency. Appraisals are short-term and result-oriented.
Different organizations are looking for different aspects in an employee. For example, a startup would look for employees
- Ready to experiment
- Tolerance for failure- fail fast and learn
- Problem solver
- Handle ambiguity
Innovation = AMO (Ability * Motivation * Opportunity)