Friday, July 18, 2008

Inflation's impact on HR function

Inflation is a cyclical economic phenomena, in a globalised world inflation in not just driven by internal economic variables but also get influenced by common economic concerns like global oil prices, entry and exit barriers to economies, food grain production etc. The current inflation trend is cost push inflation which is more driven by the rise in the cost of essentials goods and services. It even leads to rise in wages in excess of any gains in labor productivity, this leads to increase in unit costs of production and thus further spiraling prices.

Generally when Inflation is more demand driven (total demand for goods and services in an economy exceeds the available supply) it leads to increase in the production of goods and services. This means more employment opportunities and higher demand for skilled labour and if supply fails to match the demand for skilled and highly skilled labour, wages move northward and it also leads to higher attrition in organizations where even demand for labour is more.

In case of Cost push inflation the demand for labour does not necessarily goes up,on the other hand organizations looks for ways to reduce cost and reduce redundant work force as the cost of services and managing a non productive workforce goes up. Cost push inflation also leads to demand for higher wages to meet the growing expenses and organizations face dual challenge of managing external as well as internal cost push .This often leads to wage price spiral which means increase in wages will drive cost of goods and services.

In such situations it becomes very critical for the HR team to take the right decisions on:

  • Hiring the best talent-To ensure that the value added is more than the cost

  • Improving productivity - Initiate ways to enhance productivity per employee, to have better retention programs to engage the high performers.

  • Review the compensation and benefits applicable: Change in economic scenario drive the compensation structure, too much of market uncertainty would mean that variable and bonus component of employees needs to be aligned to marked realities.

  • Partner with leadership on decision making- Don't forget the role of the ear piece of senior leadership in your organization, HR has to come up with relevant findings and metrics which helps the organization meet challenges better.

  • Communicate effectively and timely: In such economic scenario it becomes very critical that right information reaches employees at the right time. Even if it's a decision which is likely to negatively impact the compensation or benefits of the employee, it's very critical that the rationale for change and how it will help the organization and its workforce to meet the challenges are well articulated by leadership and HR teams.

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Thursday, July 10, 2008

HR benchmarking and systems

Recently my interview appeared in SCOOP an online HR magazine, it covers industry news , analysis and features the latest from the HR world. The interview covered wide ranges of issues ranging from HR strategies, processes and various other issues which organizations are grappling today. Here is the first part the interview.

On Benchmarking in the field of HR.

Benchmarking in today’s business environment has different context for different organizations.HR practices have also been keeping pace with ever dynamic business environment and every industry presents unique challenges for HR professionals. There are two important aspects which every HR team must try and benchmark against:


Innovative HR Practices: HR practices needs continuous change and innovation, it is key to the competitiveness of any industry. HR teams have to lead in setting new trends in attracting and engaging talent. Today the best places to work are those which have Innovative and engaging HR practices. If you are looking at benchmarking HR practices you need to review the existing practices and then indentify high impact areas which you think are critical for the execution of your business goals and long term employee philosophy.

Humane Processes: I have deliberately used the word humane as we tend to standardize and reduce the human touch in the name of standard HR processes. This is especially true for large organizations as they find it difficult to resolve unique situations through their HR processes.HR teams must set up processes which are more fungible and responsive to employees need rather than just operation ease.HR process benchmarking should focus on creating unique employee experience, in this regard small upcoming companies can provide valuable examples to emulate.

On successful HR system and its implementation?

In my view it’s not just the successful “system” per say which makes the difference. It’s all about the people you have in your team and the way they go on to do their daily job with great excitement and enthusiasm which is the mantra for any successful system. Some of the best organizations have doomed after their best leaders and team members have quit while some of the very ordinary organizations achieve remarkable results by sheer team effort and promoting a culture of co-operation and collaboration.

At present HRIS (Human resources Information System) is the critical backbone of any HR system. In most the of the organizations ccurrently Human Resource Management Systems covers following functions:

HR solutions like client-server (distributed system comprised of both client and server software), Application Service Provider, and SaaS(software as a service) Human Resource Management Systems has enabled HR processes to be structured and streamlined. The manual effort has reduced considerably and helped HR operations to scale their services effectively. These HR systems have helped HR teams to focus more on engaging and developing employees more effectively.

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Tuesday, July 01, 2008

Employee Performance Management System

Talent management is one of the most critical and ever challenging activities for any HR team. Sound performance management system is quintessential for the success of any talent management strategy for any organizations. While lot of organizations have automated their Performance evaluation and rating processes a large number of small and medium enterprises continues to struggle between legacy systems and new age Human capital management systems which integrates different aspects of performance measurement and also integrates it with other ERP and HRIS (human resource information system) .Some of the key factors which needs to be considered while adopting automated IT system based performance evaluation model are:

• A well defined performance management tool should focus on arriving at role based assessment and evaluation matrix which is duly aligned with the competencies defined for each role.

• Ratings must translate into performance index scores and should follow the philosophy of the performance evaluation and distribution method generally followed, for example –MBO, Force rating method or Behaviorally Anchored Rating Scales.

• Key tasks and related competencies for each task should be duly mapped and performance grading should have pre set values assigned to the tasks performed.

• It must consider the various variables which have influence of the final deliverables. These variables will again be unique to the roles and competencies.

• Performance index must be benchmarked for different performance scales (best, average and below average performers)

• It should integrate metrics and milestones from any other HR or Internal systems, to enable evaluator assess more accurately with the help of readily available data for specific tasks.

• Should capture qualitative aspects and clearly identify the strengths and performance highlights like client appreciation, key differentiators and initiatives etc.

• It should help in identifying the developmental needs (training, mentoring etc) on the basis of the gaps, based on the assessment against the desired superior performance level.

• Basis Performance management aspects like SMART Goals (Specific, measurable, attainable, realistic and timely) needs to be factored and assessment must be done again pre defined goals and role based evaluation parameters.

• It must cover relevant feedback and evaluation ratings from all stakeholders apart from the manager and next level reviewer to enable more holistic and 360* overview of the employees performance.

• Periodic review and update features to give a comprehensive assessment for the performance calendar, should not necessarily be open during a particular time during the evaluation window but allow periodic ratings to be weighted for the purpose of cumulative index score.

• It should help in identifying the readiness of the employee to perform a higher role and also capture the future career aspirations.

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