Human Resource Management in a Changing Environment - Essay Example

Introduction Organisations the world over require sound management practices to ensure survival in the ever increasing competition. Organisations that operate globally or have their operations internationalised have management challenges two folds. Therefore, their management team is needed to constantly come up with policies that will steer their companies through the ever changing environment (Boxall & Purcell 2007). One such management area is that of human resources. Human resource management in a changing environment is a daunting task as the management aims at balancing between what is best for the organisation and employees’ interests. According to Sparrow (2009) employees in a company are the most valuable assets and their interests should therefore be in the forefront while devising policies and in their implementation. This paper will at discussing human resource management and management of organisations in changing contexts. The paper will elaborate this by discussing issues related to HR management and in Tata Consultancy Services. This discussion will aim at uncovering specific challenges in HRM faced by the company as it spreads its operations globally and the underlying issues of compensation policies. Company overview Tata CS is one of the leading companies offering consulting services and a wide range of software related services in the world. The company boasts of being the market leader in these services and more so in IT and outsourcing services in Asia. The company opened its doors in 1968 as a consultancy firm from the outset (TCS 2010). It actually started as a computer centre for the Tata Group. As time went by the management saw it to be prudent to extend the portfolio in offering solutions as well. The company expanded operations quickly and by 1970 it was the first one of its kind and in the area of operation to expand to the American market. This was after conquering the Indian market that had various challenges like the one of License Raj being an unfavourable government regulation. The 1990s saw the company grow tremendously with the rise in the spread of IT, the time of Y2K bug and the emergence of the Euro currency (TCS 2010). The same decade saw the company expand to outsourcing by developing an E-business section which within half a decade later was already giving more than five hundred million dollars to TSC. The company has many subsidiaries it owns the world over some partly while others fully. Its operations span over 40 countries with recorded revenue of about 6 billion US dollars (TCS 2010). The global economic crisis of 2008 affected the company’s operations which saw the management initiate major restructuring changes. It is evident that the company has been constantly changing with the changes in the global market environment. Industrial context TCS operates in the highly volatile IT industry in terms of changing trends in technology and effects of market forces. The business environment in IT and especially in the markets that the company has ventured into is marred by huge competitors as well as an army of small ones. It is important to appreciate that IT is one of the fastest growing sectors of the current world developments (Martin et al. 2008). For this reason its growth means that many are entering into it while the ones already in it trying to expand as fast as they can to beat the competition. This means that the macro-environment of the firm is quite challenging and therefore it posses a huge risk to business survival. The firms in this industry locate their branches and have subsidiaries in fast growing and stable economies (Martin et al. 2008). They also take the emerging markets like Brazil, India and other Asia giants to be a niche. Considering that TCS’s home ground is Asia, the company has to come up with good market strategies that aim at ensuring market leadership at least in the Indian and Asian markets. In this respect the company has not failed as it has become the leader in e-business outsourcing as well as other IT solutions. Having conquered the local and the Asian market the company’s wings have span through the Americas and Europe and it aspires to cover the whole globe by the end of this year i.e. 2010 (Som 2007). After this coverage the fight with the giants in the industry like Microsoft will be aiming at becoming a global leader: a feat so daunting that it requires immense input skills wise and resource wise. Human resource policies of TCS TCS is a well known company by prospective employees and trainees in the Indian, Asian and global IT, e-business and outsourcing industry (TCS 2010). The company is known to lay huge significance towards its human resource function and by so doing offering favourable working environment as well as attractive remuneration. The company also has taken the employees as valuable assets that needed to be utilised in the best way as much as possible. To start with the company ensures it employs the best talent and skill available in its areas of operation. The recruitment process is also a rigorous one that ensures they acquire the best. Trainees are also exposed to the state of the art technology and acquainted with the relevant knowledge and skills necessary to carry out tasks in such a huge and respected company. Legge (2004) suggests that the staffing needs of a company should be well sorted out by having a policy that ensures that the tasks match with the available personnel. This move ensures that each member of staff has adequate amount of work and that chances of being overworked are minimised as much as it is possible. HR managers are therefore charged with the responsibility of allocating duties and placing staff members in the sections they fit most in order to reduce redundancy and improve on efficiency. The company being in a highly changing IT sector ensures that its employees are highly and constantly trained on the emerging trends in the world of information technology. Through this the company is able to gain a competitive edge over its rivals in the same sector by use of sound HR policies. As a result of these strategies the company has seen one of the most stable employees’ turnovers in the Indian and Asian corporate sector. Despite the above measures being put in place the company has had its share of criticism in the latter part of this decade. The criticisms are centred in the compensation structure that the company has been implementing for almost a decade now. The salary structure in force was implemented in the year 2000 where the management adopted the performance-linked structure (TCS 2010). A good section of the employees for a long time had been complaining that although the structure is desirable, its conformity with the industry standards was questionable. The other issue that even made the claims seem justified is that its calculation was not clear to the workers and this was an issue that the employees’ trade union kept question about with the management being reluctant to reveal the exact model. The union was pushing for the company to instead adopt the ESOP scheme which is Employee Stock Option (Khurana et al. 2006). The arguments they were putting across was that the company was supposed to do as the competitors were doing for their employees. Competitors like Satyam and Infosys were already implementing the ESOP scheme which was more understandable and transparent: at least to the eyes of the employees. For these reasons competitors using ESOP were recording lower and lower employee turnover posing a challenge to TCS. The company has a good record of catering for employees’ needs and has had a smooth time with the employees’ union in regards to problems facing employees in general terms. As a normal company operating in a global setup issues as has been highlighted above arise. Organisational context - Human resource issues The company being this huge in its operations makes the management have a daunting task of harnessing the efforts of all employees in realising the common goals and objectives set. This wide span of management calls for utmost control of operations and all undertakings by the employees. It is through this that various hitches develop and will continue to develop, but it is how the company avoids or overcomes them when they arise that matters (Clegget al. 2004). One such case that shall form the basis for discussing HRM in TCS is the management practices that the company adopted in respect to compensation plan. The company had developed a sophisticated system that was based on EVA meaning Economic value Added. Under this system the employees’ salary was categorised into two one being variable and the other portion being fixed. The variable portion was the one that needed calculations more and was the one more subject to change upwards or otherwise depending on the management’s decision to do so. The management considered individual employee performance EVA followed by corporate EVA and lastly the business unit EVA. As these considerations would suggest, environmental changes that aimed at exerting pressure to the organisation were to adversely affect salary scales. Positive changes in the organisation were also to be directly reflected in the salary scales. This strategy was developed in good taste as per the management’s confirmation but to the employees it was not the case. However, it worked well for quite some time for both parties. The system aimed at rewarding employees directly for good returns and at the same time cushion the company against standard costs in case a decline was to be experienced. The company, as it at times happens to some of TCS’s stature, started experiencing problems related to cash flows in 2008 (Srinivasan 2008). The problems engulfed the company a great deal that is was not longer a case exclusive to the management. The design stage The management had immensely been pressured from within by the board to develop measures that aimed at lessening the burden on the company’s budgets and balance sheet. One of the target areas were policy changes in relation to remuneration and staff benefits. These were identified as easier avenues to ease the pressure on assets for the short run before more decisive measures were taken to cushion the company in the long run. The various departments held meetings in trying to see how this will be done but consensus was lacking and patience was running out for the management team. Quick measures were then taken at the end of the 2007 and 2008 financial year. The results for this period’s last quarter offered the triggering effect making the management to take urgent measures to ease pressure on the budget for the coming financial year. According to Delbridge et al. (2006) such decisions aim at reviewing salaries, allowances and other benefits downwards. The first to receive a review was the salary variable component. The biggest basis for this to be the first target was that the previous quarter’s targets in respect to the various EVA were not met. The variable component was slashed by 1.5 percent (Srinivasan 2008). This announcement stirred a widespread condemnation from the employees and from the whole IT industry in India. TCS was at a hot spot this time and many eyes were on it. The major area of criticism in respect to the slash was the basis of this calculation and how the figure was as such and not any higher or lower. This argument was trying to develop the assumption that the company was not calculating its variable components in a clear and transparent manner. The gurus in the IT industry at the time took a different twist and claimed that the company was cruelly going through a turbulent time out of the harsh macroeconomic environment it was operating in. As mentioned earlier the firm has gone deep into the developed world and deeper still in the emerging markets. This kind of phenomenon exposes a firm to a wide range of macroeconomic issues that are quite difficult to manoeuvre through (Gratton 2007). At the time the Indian rupee had been appreciating quite rapidly against the world’s major currencies and in particular the US dollar (GECRC 2009). It is also important to note that the global economic meltdown had also started to show its effects. This meltdown was slowly but surely leading America to recession. This fact alone was to cause ripples in the TCS management as America formed a huge portion of its external market. These few but quite significant factors were predicting a grim short term future for certain but the long term effects were not known as the whole phenomenon has not unfolded (GECRC 2009). These factors coupled with the poor performance in the EVA section made the management to initiate short term measures to curb adverse effects within the shortest time possible. As mentioned earlier squeezing employee packages is taken to be the fast and easy route to navigate through this kind of a problem (Hatch & Cunliffe 2006). However, the company management has assured the employees that once the world economy goes back to normal, which is being expected to be by the end of 2010 the salaries will go back to normal. Companies at moments like this are known to even take a step further to retrench workers and lay off casual ones (Martin & Hetrick 2006). These moves are more related to using the HR section of the company as a tool to ensure survival at all times. These are some of the contemporary human resource issues that companies have been facing. The move particularly for TCS was to set a dangerous precedent more so in the huge outsourcing industry in India. Competitors like HCL, Wipro and Satyam are among those that were to most likely copy this trend (Davis et al. 2006). They actually later implemented their own versions depending on the model of remuneration they had adopted but the issue was clear that the human resource departments were in a big problem in these companies as well as the smaller ones. Conclusion There is an irony in this practice which is quite clear but is also easy to understand. The irony revolves around the companies taking employees as the most valuable assets and yet having them as the first sacrificial lambs when crisis hit. TCS is known to have employees’ needs met but of late the management has been looking into the company’s short term problems and solving them through HR policy changes. It is understandable that the company has been facing problems lately as a result of the changing contexts in its environment. The management has also faced criticism from within but has tried to ease the tensions by assuring the members of staff that the situation is going back to normal soon. The company has also come to see that it is important to consider employees plight and compare its practices with those of the competitors. The changing global business environment has therefore made the company to adopt drastic measures like the case has shown while it is also a fact that some of them are necessary. References Boxall, P & Purcell, J 2007, Strategy and human resource management, 2nd edn, Basingstoke, UK, Palgrave. Clegg, S, Kornberger, M and Psitis, T 2004, Managing and organizations: An introduction to theory and practice, London, Sage. Davis, HJ, Chatterjee, SR and Heuer, M 2006, Management in India: Trends and transition, SAGE. Delbridge, R, Gratton, L, Johnson, G and the AIM Fellows 2006, The exceptional manager: Making the difference, Oxford, Oxford University Press. Gratton, L 2007, Hotspots: Why some companies buzz with energy and others don’t, Harlow, Financial Times/Prentice Hall. Global Economics Crisis Resource Center (GECRC) 2009, Global economic crisis: Impact on business, Cengage Learning. 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