Discuss the relationships among KSAs (knowledge, skills, and abilities), job analysis, organizational strategy, and HR activities.

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Alignment of HR Practices with Organizational Strategies

G. Venkat Rao & D.Jayarama Krishna

The present study, made in an inte grated Navaratna public sector unit viz. Visakhapatnam Steel Plant, ex amines the configuration, alignment and integration between HR p ra c tices (Welfare, Compensation Man agement, Structure and Policies, H R Flow, H R D, Communication Sys tems, P erfo rm a n ce M anagem ent, Culture and In d u stria l Relations) and the O rganizational Strategies (Primary Statements: Vision State ment, Mission Statement, Core Val ues a nd Core C om p eten cies and Supportive Statem ents: Corporate Strategy, Business Strategy, HRM Strategy). Out o f a sample o f 183 employees, drawn from top manage m ent p o s itiv e responses were re ceived from 165. The study was car rie d out with the help o f F actor A n a ly sis, M eans A n a ly sis and Pearson Correlation. No correlation was fo und between Structure & Poli cies and Business and H R M strat egies.

G Venkat Rao is Asst.Professor, Department of HRM, Dr.L.Bullayya P.G.College, Visakhapatnam, E-mail: [email protected]. D.Jayarama Krishna is Deputy Manager (EMD), Visakhapatnam Steel Plant.

Introduction

Human resource management is a varied subject and interlinked with in ternal and external dynamics. Human resource management as a profession has gathered enough material and faced changes to meet the strategic requirements (Sparrow & Pettrigew, 1990). Human resources management cannot be viewed in isolation and has to be systematically assessed with or ganizational goals. The role of a HR manager is to be a strategic partner (Ulrich, 1998). The strategic require ments are be addressed by the human resources management. The globaliza tion effect has created impacts on workforce demographics, bottom-line, market reach, technological changes, intellectual capital, and the importance o f m anaging hum an re so u rces (Devanna, Fombrum & Tichy, 1981; Wright & Snell, 1998).

Speaker (2000) views activities of relations, compensation and planning as strategic with high value. Sparrow (1986) postulates strategic human re source management as implementa tion of practices that generate the be-

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HR Practices & Organizational Strategies

haviors and competencies to gain its stra tegic goals. The welfare management has graduated to strategic human re source management, and the concept has originated from resource based view. Strategic human resource management provides people oriented solutions to busi ness problems.

Organizational & HRM Strategies

Organizational strategy is a detailed assessment from which it derives its evo lution and the objectives of existence. The strategy spells out the direction o f the business. The corporate strategy is that strategy made at corporate level to cre ate competitive advantage in the market place. Evaluation o f the competitive im plications of broad trends, analysis of competitors, identification of growth op portunities and creation o f successful brands are involved in the corporate strategy. Porter’s (1980) corporate strat egies are growth, stabilization and re trenchment. Growth is the expansion, development and creation of new assets and business. The business through con solidation acquires stabilization and re trenchment strategy involves rightsizing the business. Porter (1980) clarifies busi ness strategy as planned deployment of resources and creation of an environment to achieve stated objectives. The busi ness strategy is the action plan which designs, executes and evaluates the course to attain the stated objectives. Patra (2011) clarifies that business strat egy is the purpose, goals, objectives and plans to attain the business goals. There fore the term is to be understood in the perspective o f business environment.

Porter (1980) classifies business strategies as generic and competitive strategies. The cost leadership strategy focuses on either low cost or high cost premium market. The strategy derives direction from the strategic intents; the sources for these intents are vision, mis sion and organization objectives. The vi sion is a statement of the future o f the organization that is compelling and driv ing force, mission is more articulate, measurable, written and focused over time. The objectives are framed with above intentions. The primary objective of HRM may be categorized into four objectives societal, organizational, func tional and personal. The societal objec tives refer to legal compliance, benefits, union-management relations; organiza tional objectives are categorized as hu man resource planning, employee rela tions, selection, training and development, appraisal, placement, assessment; the functional objectives may be appraisal, placement, assessment; and the personal objectives are training and development, appraisal, placement, assessment. HRM is strategic by its very nature and all its elements have strategic linkages (Wright & McMahan, 1992).The core competen cies refer to those unique qualities of the human resources that determine the or ganizations competitive advantage. The core values are the standards of moral ity for which the organization stands.

The stra teg y derives direction from the strategic intents; the sources for these intents are vi sion, mission and organization ob jectives.

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The HRM practices are procure ment, development, compensation, inte gration and maintenance (Edwin Fillipo, 1980). Harvard Business Review model defines practices as HR flow, work flow and reward flow. HRM practice refers TcTorganizational activities directed at managing the pool o f human resources and ensuring that the resources are em ployed towards the fulfillment o f the or ganizational goals. The contribution of HRM to organization strategy is best achieved by having the best fit. This stra tegic fit aims at utilization o f human re sources to achieve organizational goals. Salamam-Graeme (2000) view fit as planned deployment o f human resources and its activities. This fit refers to two kinds, horizontal fit and vertical fit. Hori zontal fit is the alignment o f HRM prac tices and vertical fit refers to the align ment o f these practices with the man agement strategy. Porter (1980) clarifies that these practices and alignment brings organizational excellence.

The determinants of horizontal fit and vertical fit may be classified as:

• HR function factors: HR policy, op tion, investment and budget.

• Capability and ability factors: HR manager’s capability, top manager’s a b ility and support, em p lo y ee’s knowledge and skills.

• Firm level factors: nature of strategy, values and culture.

The approaches to integration o f strategies may be grouped into three ty p e s ’: con tin g en cy approach, best

p ractice approach and bundled ap proach (Salaman Graeme, 2000). Con tingency approach is based on situ ational variables namely decision, es poused values and situation. The best practice approach relies on such prac tices which are universal, proved as the best and on application provides com paratively superior performance. The bundling approach refers to combina tion o f best practices and contingency practices as per the requirement. Each o f th e HR p r a c tic e s o p e ra te s as com plem entary or supplem entary to each other. The empirical studies by Huselid and Becker (1997) have estab lished relationship between financial returns, human resource management (HRM) system, operational excellence and alignment with business strategic goals. Further, perceptual performance is high when HR strategies are aligned with organizational strategies (Youndt, Snell, Dean, & Lepak, 1996). Smith (1982) has examined the HR practices followed at different stages o f organi zational growth and Schuler and Jack- son (1987) have classified generic strat eg ies o f HR p ra c tic e s as dynam ic growth, extract growth and turnaround strategy. Sumantra Ghoshal and Chris topher B artlett (1997) emphasize on M cK insey’s 7-S fram ew ork and the need for the alignment o f seven orga n iz atio n al v a ria b les; su p ero rd in ate g oals, strategy, stru c tu re , system s, staff, skills, and style. Core competen cies are the unique abilities o f the hu man resources which give distinct com petitive advantage (Hamel & Prahalad, 2002).The core values are the building blocks o f the culture and determine the

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extent o f vertical and horizontal fit. The alig n m en t o f core co m p eten cies and core values w ith HR strategies is an area o f priority.

The alignment of core competen cies and core values with HR strat egies is an area of priority.

M ethodology

The p resen t study w as m ade in an integrated N avaratna public sector unit, V isakhapatnam Steel P lant (a unit u n der R ashtriya Ispat Nigam Limited) and exam ines the co nfiguration, alignm ent and integ ratio n betw een HR p ractices an d th e o r g a n iz a ti o n a l s tr a t e g ie s . V isakhapatnam Steel P lant is a tu rn around organization from 2001 and ex p a n d e d its p r o d u c tio n c a p a c ity to 6.5million tons o f iron and steel through internal accruals. The annual turnover in 2014 is R s .10,500 crores and p ro fit able. The V isakhapatnam Steel Plant p r o v id e s d i r e c t e m p lo y m e n t to 18 ,4 4 0 (E x ecu tiv es:6 ,3 19, N on-E xecu tives: 11,597 and Trainees:524) and with productivity o f 350 tons per person. The study is made w ith the follow ing two dim ensions: 1.HR p ractices, 2 .O rg an i zational strategies.

The HR Practices are conceptualized into nine factors and organizational strat egies into seven intent factors. The study was conducted with the objective to ex amine the extent o f alignment o f the HR practices with the organizational strate gies. Further, it sought to find out the fac tors influencing the strategic fit between

the human resources practices and the organizational strategies. The hypothesis framed for the study is:

H0: There is an alignment o f Human Resources Practices with Organizational Strategies.

The sample is selected from the uni verse by applying convenience sampling technique. The sample size is 10% o f the universe drawn from executives in the grade o f senior manager (E-5) to Execu tive Director (E-9) i.e. 183 employees. The questionnaire was distributed to the selected sample and the responses re ceiv ed w ere 165. The p erce n tag e o f questionnaires received was 90% o f the sample selected, w hich is good for a study o f this nature. The study was dis seminated with the help o f factor analy sis, the factor loadings were duly noted, subsequently means were calculated and Pearson Correlation test was applied to study the significance o f the relationship. The mean scores are graded as follows for descriptive analysis:

1. > 4 is High 2. >3 and < 4 is M oderate 3. < 3 is Average 4. ^ 2 is poor

R esults

The data collected is tested for its reliability with Cronbach’s Alpha reliabil ity test. The reliability coefficients (Table 1) for personnel and employment, H R Practices and Organizational Strategies are greater than 0.6 which is considered as acceptable.

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Table 1 Cronbach’s Alpha Reliability Coefficients

Reliability Coefficients

Personnel and Employment details H R Practices Organizational Strategies

No. of Items Alpha No. o f Items Alpha No. o f Items Alpha

7 0.7205 54 0.9114 24 0.9130

Table 2 KMO & Bartlett’s Test

Kaiser-Meyer-Olkin Measure o f Sampling Adequacy. .864 Bartlett’s Test o f Sphericity Approx. Chi-Square 565.830

D f 36 Sig. .000

Table 3 Communalities Extraction Method: Principal Component Analysis.

Initial Extraction

Structure & Policies 1.000 .256 HR flow 1.000 .225 Culture 1.000 .723 Performance Mgt 1.000 .608 Compensation 1.000 .444 Welfare 1.000 .524 Industrial Relations 1.000 .506 HRD 1.000 .495 Communications 1.000 .543

Table 4 Total Variance Explained

Initial Eigen values

Extraction Sums of Squared

Loadings

Component Total % of Variance Cumulative % Total % o f Variance Cumulative %

1 4.322 48.028 48.028 4.322 48.028 48.028 2 .946 10.508 58.536 3 .847 9.411 67.947 4 .764 8.491 76.438 5 .559 6.210 82.648 6 .491 5.452 88.100 7 .461 5.123 93.223 8 .380 4.224 97.447 9 .230 2.553 100.000

Extraction Method: Principal Component Analysis.

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Table 5 Component Matrix-Rotation Method: Varimax with Kaiser Normalization.

Component

Structure & Policies .506 HR flow .474 Culture .850 Performance Mgt .780 Compensation .666 Welfare .724 Industrial Relations .711 HRD .703 Communications .737

Rotation converged in 1 iteration.

The validity o f the HR practices was established with factor analysis. The Kaiser-Meyer-Olkin Measure o f Sam pling Adequacy was 0.864 and it is more than the requirem ent (.60) and Bartlett’s Test of Sphericity was signifi cant (Table 2). The communalities with initial value 1 and its extractions were derived (Table 3). Further, when extrac tions were made using Principal Compo nent Analysis (Table 4) with Eigen val ues > 1, the total variance is explained

Table 6 KMO and Bartlett’s Test

by one factor (48.028 per cent). The com ponent m atrix on rotation using Varimax w ith K aiser N orm alization (Table 5) shows the factor loadings (0 .4 7 4 -0 .8 5 0 ).

The Organizational strategies fac tors were also tested with factor analy sis and the factors have met the re quirements. The Kaiser-M eyer-Olkin Measure o f Sampling Adequacy was 0.86 and B artlett’s Test o f Sphericity was significant (Table 6). The commu nalities with initial value 1 and extrac tions are derived using principal com ponent analysis (Table 7) and all found to be above 0.558. The variance ex plained by two factors (Table 8) is to the extent o f 70.40 per cent. The com ponents were rotated using Varimax with Kaiser Normalization and was con verged on 3 iterations (Table 9). The Vision, M ission and Core Competen cies are Primary. Corporate Strategy, Business Strategy and HRM Strategy are supportive to primary.

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .860 Bartlett’s Test of Sphericity Approx. Chi-Square 500.144

df 21 Sig. .000

Table 7 Communalities Extraction Method: Principal Component Analysis.

Initial Extraction

Vision 1.000 .766 Mission 1.000 .706 Corp. Strategy 1.000 .666 Business Strategy 1.000 .754 HRM Strategy 1.000 .790 Core Values 1.000 .688 Core Competencies 1.000 .558

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Table 8 Total Variance Explained

Initial Eigenvalues

Extraction Sums of Squared

Loadings

Rotation Sums of Squared

Loadings

Comp- Total % of Cumula- Total % o f Cumula Total % of Cumula- onent Variance tive % Variance tive % Variance tive %

1 3.855 55.067 55.067 3.855 55.067 55.067 2.907 41.534 41.534 2 1.073 15.332 70.399 1.073 15.332 70.399 2.021 28.865 70.399 3 .566 8.089 78.489 4 .463 6.612 85.101 5 .398 5.683 90.784 6 .347 4.962 95.746 7 .298 254 100.000

Extraction Method. Principal Component Analysis.

Table 9 Rotated Component Matrix

Component 1 2

Vision .856 .179 Mission .791 .284 Corp. Strg .550 .603 Business Strg .168 .852 HRM Strg .204 .865 Core Values .809 .183 Core Competencies .722 .193

Rotation Method: Varimax with Kaiser Normal ization. Rotation converged in 3 iterations.

The data is analyzed under the fol lowing groups: a)Profile Analysis, b)H R Practices, ^O rg an izatio n al Strate gies and d)Alignm ent between H R Practices and Organizational Strategies o f VSP.

Profile Analysis

The descriptive statistics of the pro file variables consisting of personal and employment data was analyzed. The age - gender profile distribution for males (53.9 percent) and females (7.3 percent) in 40 - 50 years age group is

maximum. The gender - department dis tribution shows males in the works de partm ent as 84.8 percent and non - works department as 7.9 percent and 92.7 percent females are only from non works departm ent. The resp o n d en ts’ distribution designation wise is as fol lows: Senior Managers are 18.2 percent, AGM ’s are 50.3 percent, DGM ’s are 21.8 percent, GM’s are 9.1 percent and ED is 0.6 percent. The grades include from E5 to E9 and from both works and non-works departments. Table 10 Descriptive Statistics

Mean Std. Deviation

Age 3.25 .57 Length of Service 3.05 .60

HR Practices

The W elfare, C om pensation and Structure and Policies were the high- est p rio rity for W orks D ep artm en t whereas Welfare, Structure and Poli cies and Compensation were for Non- Works Department(Table 11). The per-

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ception o f the Works Department em ployees in the order o f mean ranking are Welfare (77.2 percent: 3.86), Com pensation Management Practices (77 percent, x:3.85), Structure and Policies (76.80 percent, x: 3.84) , H R Flow (74.5 percent, x:3.73) H R D (74.40 percent, x:3.72), Communication Sys tems (74.40 percent, x:3.72), Perfor mance M anagem ent (73.90 percent, x:3.70), culture (72.60 percent, x:3.63) and Industrial Relations (72.60 percent , x:3.63) and all the dimensions have moderate scores.

The perception o f the Non - Works Department employees in the order of mean ranking are Welfare (82.60 per cent: x:4.13), Structure and Policies (79.20 percent, x: 3.96), Compensation Management (78.60 percent, x:3.93), Communication (78.40 percent, x:3.92), Performance Management (76.13 per cent, x:3.81), Industrial Relations (76.20 percent, x:3.81), H R D (75.60 percent, x:3.78), Culture(74.60 percent, x:3.73) and HR Flow(74percent, x:3.70). Except for Welfare (x: 4.13 and is high) all the dimensions have moderate scores.

Table 11 Means of HR Practices and Organization Strategies

HR Number Means Organization Number Means Practices of Factors Strategies of Factors

Works Depart

ment

Non- Works

Depart ment

Works Non- Works

Depart ment

Structure and Policies

6 3.84 3.96 Vision 7 4.02 4.15

HR flow 7 3.73 3.70 Mission 6 3.97 4.1 Culture 12 3.63 3.73 Corporate

Strategy 4 3.84 3.98

Performance Management

6 3.70 3.81 Business Strategy

2 3.69 3.54

Compensation Management

4 3.85 3.93 HRM Strategy 2 3.66 3.66

Welfare 7 3.86 4.18 Core Values 2 4.18 4.36 Industrial relations HRD Communication

4 5

3.63

3.72 3.72

3.81

3.78 3.92

Core Competencies

1 4.15 4.36

Organizational Strategies

Organizational strategy is defined as the strategies that are adopted by the organization to achieve its main objec tives. The organizational strategies are spelt out through the following intent statements: primary statements; vision

statement, mission statement, core val ues and core competencies and support ive statements; corporate strategy, busi ness strategy and HRM strategy.

The perception of the Works Depart ment employees(Table 11) on Vision Statement (x:4.02, 80.40 percent) Mis-

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sion Statement (x:3.97, 79.40 percent) Corporate Strategy (x:3.84,76.80percent) Business Strategy (x:3.69,73.80percent), H R M Strategy (x:3.66,73.28 percent) Core Values (x:4.18, 83.60 percent) and Core Competencies(x:4. 15,83 percent) are high to moderate. The perception of the Non - Works Department employees on Vision Statement (x:4.15,83 percent), Mission Statement (x:4.1,82 percent), Corporate Strategy (x:3.98,79.60 per cent), Business Strategy (x:3.54,70.80 percent), H R M Strategy (x:3.66, 73.28 percent),Core Values (x:4.36, 87.20 per cent ) and Core Competencies (x:4.36, 87.20 percent) are reasonably high and moderate.

Alignment

In order to test the hypothesis that there is perfect alignment o f HR prac tices with organizational strategies cor relation statistics was used, correlation analysis is done using SPSS package. The test was done in the following man ner for comprehensive analysis: The H R practices are correlated with organi zational strategies factor wise, the result ant matrix along with significant values are shown in Table 12.The values are tested for significance at 5 percent and 1 percent level. The correlation matrix shows that HR flow is correlated with structure & policies and core competen cies at 5 percent level. Further, structure

Structure & policies are not cor related with business strategies and HRM strategy.

& policies is not correlated with business strategies (r=0.127) and HRM strategy (r=0.048) whereas all other factors are correlated with each other at 1 percent level. The findings are very interesting as both business strategy and HRM strat egy are correlated (r=0.600) at 1 percent, but not with structure and policies. The hypothesis was not found to be true due to non-correlation of structure & policies with business strategy and HRM strat egy. Therefore, structure & policies re quires attention.

Discussion

The reliability and validity of the in strum ents were estab lish ed . As the sample is drawn from senior level man agement the age - gender distribution in terpretation reveals that maximum num ber o f employees is found to be in the age group o f 40-50 years. The majority o f respondents are from Works Depart ment and male (84.5 percent). The dis tribution has AGM cadre employees from Works (39.4 percent) and Non-Works (10.9 percent) departments. The compo sitions from senior management shows m a jo rity are n o n -n a tiv e s o f Visakhapatnam. The designation-length of service has relation but in a few cases the length of service is less in AGM cadre as there is direct recruitment at senior cadre. The Department - Length of ser vice relationship shows majority from Works (57 percent) and Non-W orks (10.9 percent) departments and are in the service period of 20-30 years. Further, 17.0 percent o f Works Department and 2.4percent o f Non-Works Department employees are having more than 30 years

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G. Venkot Rao & D.Jayarama Krishna

of service. Therefore, the employees are associated with the organization for a rea sonable length of time. Further, all the re spondents are from E-5 to E-8 grades.

The percentage and means of the factor of HR practices from Works De partment (74.57 percent) and Non-Works Department (79.20 percent) have agreed about the existence of perfect structure and policies in Visakhapatnam Steel Plant. All the HR practices are having high to moderate means with significant inter correlation. Except for HR flow all other factors were inter-correlated at 1 percent level. In the next step, the fac tors o f organizational strategies were analyzed and the findings were reason ably good.

The vision, mission statements, core values and core competencies were per fect for both Works and Non-Works de partments. And they form the primary strategies. The analysis o f Corporate Strategy, Business Strategy and HRM Strategy are moderate for Works and Non-Works departments and form sec ondary strategies. The correlation figures reveal that factors of HRM practices and organizational strategies are aligned with each other except structure and policies with business strategy and HRM Strat egy-

Factors of HRM practices and or ganizational strategies are aligned with each other except structure and policies with business strategy and HRM strategy.

The structure and policies are per ceived as moderately perfect but the same has no relation with business and HRM strategy. Therefore the hypothesis was found to be untrue. The deployment of human resources in a systematic pat tern to enable an organization to achieve its goals (Mathis & Jackson, 1985; Beer, Spector, Lawrence, Mills & Walton, 1984) and its alignment with corporate and business strategies is a crucial determi nant to the success o f the organization. The delivery of HR practices is a signifi cant competency o f HR professionals (U lrich, B rockbank, Yeung & Lake, 1995). The structure and policies in this study were not aligned as perceived be cause of internal or external factors.

The study results are exceptional as structure and policies as HRM practices failed to align with business strategy and HRM strategy whereas it aligned with corporate strategy. Future studies may be oriented to examine whether perfect alignment with corporate strategy leads to excellence and whether independent role is played by each o f the organiza tional strategies on alignment with HRM practices.

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