Everything you need to learn about the challenges of human resource management.The world order is changing dramatically and is in the process of complete transformation.

The impossible things of yesterdays have become possible today and the impossible things of today will become possible tomorrow.

That is why it is said that change is the only permanent aspect of nature. Managing people (Human Resources) in the present context is not an enviable task as it is mired in many challenges.

The concept of self-sufficient nations is losing importance and the concept of Global Village is emerging Management of organisations is bound to cope up with the radical transformation by developing new techniques and practice in the global perspective after carefully analysing the real challenges being faced by the professional managers.


The challenges of human resource management can be studied under the following heads:-

1. Competitive Challenges 2. Emerging Challenges 3. Recent Challenges 4. Future Challenges 5. Common Challenges.

A: The competitive challenges of HRM are:-

1. Globalization 2. Ever Changing Technology 3. Change Management, 4. Managing Human Capital 5. Responding to Market Forces 6. Containing Costs 7. Demographic and Employee Concerns and 8. Managing Diversity.


B: Emerging Challenges of HRM which are also affecting modern organizations are:-

1. Going Global 2. Corporate Restructuring 3. From Touch Labor to Knowledge Workers 4. Workforce Diversity 5. Embracing New Technology 6. Growing Employee Expectations 7. Managing Talent or Human Capital 8. Responding to the Market 9. Proactive Industrial Relations Strategy 10. Ethics at the Workplace. 11. Managing the Managers and 12. Contribution towards Success of the Organisation.

C: The recent challenges of human resource management are:-

1. Work Force Diversity 2. Organizational Restructuring 3. Changing Nature of Work 4. Golden Handshake 5. Total Quality Management (TQM) and 6. Six Sigma.


D:  Some future challenges of HRM are:- 1. The Role of HRM Manager 2. Flexibility and  Diversity at Workplace.

E: The common challenges of HRM faced by HR professionals in India are:- 1. Recruitment, 2. Attrition, 3. Salaries and Bonuses, 4. Job Satisfaction and 5. Training.

Challenges of Human Resource Management: In the Present and Future Scenario

Challenges of Human Resource Management – Competitive Challenges of HRM in the Present Scenario

Managing people (Human Resources) in the present context is not an enviable task as it is mired in many challenges. The competitive challenges include globalization, technology, managing change, retaining human capital, responding to market forces and cost containment.

The competitive challenges are compounded by concerns for employees influenced by diversity, age, gender issues, job security, educational levels, employee rights, privacy issues, work attitudes and family problems.

Challenge # 1. Globalization:


Many companies are seeking business opportunities in global markets to grow and prosper as domestic markets are shrinking. Globalization is the trend towards opening up foreign markets to international business and investment. The impact of globalization on business and HRM is enormous.

Impact of Globalization on Business:

i. Competition as well cooperation with foreign companies has become an important focal point in the present business context.

ii. For large companies the vision is to offer customers anything, anytime, anywhere.


iii. Well known products are losing their national identities.

iv. There are many free-trade agreements between nations.

v. Even though there is improvement in the standard of living of people consequent to globalization, there is still the fear of loss of jobs in certain sections of people.

vi. People in developing countries fear that developed countries are exploiting their natural resources resulting in a ‘have/have not’ world economy.


vii. Corporates are discovering that being socially responsible helps the people at the bottom line. Corporate social responsibility is to operate in the best interests of the people and communities affected by its activities.

Impact of Globalization on HRM:

i. HR managers have to balance a complicated set of issues related to different geographies, cultures, employment laws and business practices.

ii. HR managers find it difficult to gauge the knowledge and skills of foreign worker and how to train them.


iii. The different languages and cultures of foreigners make things more complicated.

iv. It is a real challenge to relocate managers and workers.

v. Training managers on foreign cultures and procedures before they take up foreign assignments is time-consuming.

vi. There must be adjustment of compensation plans to ensure equity among the employees who are posted to different parts of the world.

vii. The most different task is retaining the employees in the face of culture shock faced by the employees and their families.

Challenge # 2. Ever Changing Technology:

The effect of advancements in information is so dramatic that organizations are changing the way they do business. Use of internet to do business is so pervasive in both large and small organizations that e-commerce is rapidly becoming a challenge.


As computer-mediated work style is resulting in ‘virtual’ office in which people can work from home or any outstation spots, the implication for HRM are mind-boggling.

Impact of Technology on HRM:

i. Advanced technology tends to reduce the number of jobs which require less skill and to increase jobs requiring high skills.

ii. The shift from ‘touch labour’ to ‘knowledge workers’ has resulted in retraining of employees on higher responsibilities.

iii. Knowledge based training has become very important.

iv. HRIS has become a potent weapon to lower administrative costs increase productivity, speed up response times and improve decision making and customer service.


v. Information technology has resulted in automating routine activities, alleviating administrative burdens, reducing cost and improving productivity in the HR department.

vi. As HR managers are able to access the employee records themselves, delay and wastage of stationery are reduced.

vii. Apart from the routine activities software’s are being used to recruit, screen and pretest applications online.

viii. Setting up of goals and measuring of performance are also done through online.

ix. As routine HR activities are done quickly and efficiently through computerization, HR managers can concentrate more effectively on the firm’s strategic direction such as forecasting personnel needs, planning for career and promotion and evaluating impact of firm’s policies.

x. HR managers, by sharing information online with production department, are able to make production managers to come up with better production practices and cost control solutions.

Challenge # 3. Change Management:


The major forces driving changes in organizations as well as HRM are globalization and technology. In the present business scenario business success mostly depends on how changes are managed. Companies are successful as they develop a culture that keeps moving all the time. In highly competitive business environment, change management is the core competency of organizations.

Changes could be reactive, proactive or both. Reactive change is one where change occurs after external forces have already affected performance. In the case of proactive change, change is initiated to take advantage of environmental opportunities. The main thrust of change management program is to involve employees in establishing continuous innovation and excellent customer service.

Role of HR in Change Management:

i. Most of the companies report at least one change initiative occurring in the HRM.

ii. HR managers have to concentrate on responsibilities, job assignments and work process whenever change occurs.

iii. HR managers play a vital role in overcoming resistance to change through effective communication and counseling.


iv. They have higher responsibilities to envision the future, communicate the vision to employees, set clear expectations for performance and develop capability to execute by reorganizing people and other resources.

Challenge # 4. Managing Human Capital:

Human capital is the knowledge, skill and capabilities of individuals that have economic value to the organization. As human capital is intangible and elusive, it cannot be managed the way jobs, products or technologies are managed. This is because human capital is owned by the employees themselves and not by organizations.

Managing human capital is highly crucial because if valued employees leave an organization, they take their human capital with them and any investment made in training and development is lost. Hence, success increasingly depends on an organization’s ability to retain and manage human capital.

Role of HRM in Retaining and Managing Human Capital:

Managers must continue to develop superior knowledge, skills and experience within their workforce to build human capital.

i. Staffing programs should focus on identifying, recruiting and hiring the best and brightest talent available.


ii. There must be effective training skill enhancement and opportunities for development on the job.

iii. Managers must provide development assignments and ensure their job duties and requirements are flexible enough to allow for growth and learning as highly valued intelligence tends to be associated with competences and capabilities learned from experience.

iv. Talent should not be left unused. There must be efforts to empower employees and encourage their participation to fully utilize the available human capital.

v. In many companies, managers are evaluated on their progress towards meeting development goals that focus on skill development and gaining new competencies and capabilities. In many cases pay is attached to additional knowledge or skill acquired.

vi. HR programmes and assignments are the means through which knowledge is transferred among employees.

vii. HR managers and line managers each play an important role in creating organization that understands the value of knowledge.

viii. Documenting the skills and capabilities available to the organization, and

ix. Identifying the ways of utilizing the knowledge to benefit the firm.

Challenge # 5. Responding to Market Forces:

In the present scenario of business competition is inevitable. Managers are required to take care of the customers’ needs of quality, innovation, variety and responsiveness. Total quality management (including six sigma) and process reengineering are two important approaches to respond to customers.

I. TQM, Six Sigma and HRM:

Total Quality Management (TQM) is a set of principles and practices which include understanding of customer needs and striving for continuous improvement from the start. Many TQM programmes, initially thought to be a cure-all for every problem, failed to respond to customer needs and to improve quality.

This was attributed to little changes in organizational philosophies and HR programmes. Later, many companies start adopting a more systematic approach to quality known as Six Sigma.

Six Sigma is a statistical process used to translate customer needs into a set of optimal tasks that are performed in concert with one another. Six Sigma includes many major changes in management philosophy and HR programs. Six Sigma process is able to find out the mistakes before they happen. In a true Six Sigma environment variations from standard is only 3.4 defects per million.

HR and Six Sigma:

i. The importance of HR to Six Sigma begins with the formation of teams and extends to training, performance management, communication, culture and rewards.

ii. Through Six Sigma training individuals progress from ‘green belt’ to eventually ‘black belt’ status.

iii. In some companies HR positions are reserved for black-belt certified professionals.

iv. In six sigma process, the stress is on motivation, change in corporate culture and employee education.

v. HR programs are essential to help balance to opposing process viz. the need for order and control and the need for growth and creativity.

II. HR and Reengineering:

Reengineering is fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality service and speed. In reengineering managers start over from scratch in rethinking.

a. How work should be done?

b. How technology and people should interact? and

c. How the organization be structured?

In the above decisions in reengineering, HR issues play an important role:

i. Managers create an environment for change.

ii. Reengineering efforts depend on effective leadership and communication processes. It requires the administrative systems reviewed and modified.

iii. All the essential components of HRM viz., selection, job description, training, career planning, performance appraisal, compensation and industrial relations require changes to complement and support reengineering efforts.

Challenge # 6. Containing Costs:

Managers are increasingly under pressure to lower cost and improve productivity to maximize efficiency. Similar to other functional departments, HR department also is required to show financial results. HR department is in a dilemma to contain costs related to people.

i. Labour costs are one of the larger expenditure of any organization, particularly, in service-and knowledge-intensive firms.

ii. Healthcare costs pose a much bigger burden to the firms.

To contain operational costs, firms are resorting to many activities such as downsizing, outsourcing, offshoring and employee leasing, which all have a big impact on HR policies and practices.

a. Downsizing or Rightsizing:

It is the planned elimination of jobs. It is also called ‘smart cost reductions’. Instead of terminating employees some firms resort to early retirement, voluntary separation programs and sabbaticals for continuing education.

Downsizing is not a short-term answer. Now, it is being increasingly used to adjust to changes in technology, globalization and the firm’s business direction. However, while some firms improve efficiency and lower costs, many others fail to reap any benefits by downsizing.

Downsizing, instead of reducing costs, may backfire through the following hidden costs:

i. Severance and rehiring costs.

ii. Accumulated vacation and sick-day payments.

iii. Lumpsumpension benefits.

iv. Loss of trust in the management resulting in reduced business.

v. Unavailability of skilled workers when the firm comes back to form.

vi. Potential lawsuits from terminated workers.

vii. Reduced productivity as the remaining workers are likely to be demotivated.

It is hard to get dedicated and productive workers when the company is known for terminating employees whenever there is a problem. Downsizing signals that employees are expendable. There are companies which consider employees as assets/intellectual capital, make special efforts to reassign and retrain employees to new positions when their jobs are eliminated.

b. Outsourcing:

It means hiring someone outside the company to perform tasks that could be done internally.

Nowadays, it is common to find hiring of:

i. Accounting firms to take care of financial services of firms,

ii. Advertising agencies to handle product/service promotions,

iii. Software companies to develop data processing systems, and

iv. Law-firms to handle legal issues.

In many companies, maintenance, security, catering and payroll are being outsourced to increase the organization’s flexibility and lower its overhead costs. Outsourcing is gaining momentum as the executives feel that they could concentrate on their core activities rather than wasting their time and energy on peripheral activities. Increasingly outsourcing is changing the way HR departments operate. But, whether outsourcing has resulted in reduced cost or not is a moot question to answer.

c. Offshoring:

It is almost similar to outsourcing, the main difference being that the jobs are done by people of other countries. It is also called ‘global sourcing’. Cost reduction is the overwhelming motivator of off shoring. Companies in developed countries are able to save a substantial amount in offshoring jobs to developing countries where the highly educated workers can perform the same as workers of developed countries.

But there are problems to face such as finding the right foreign vendors, productivity loss during transition, domestic lay off costs, language inadequacy, offshore countries’ regulations and political/economic instability.

HR managers will be able to help the management in offshoring by addressing issues such as skill and language requirements, labour costs, alternative talent pools, workforce training, retraining and change management.

d. Employee Leasing:

It is the process of terminating employees who are then hired by a leasing company and contracting with the leasing company to lease back the employees. Generally, smaller companies opt for employee leasing. The leasing company takes over management of smaller company’s HR functions and becomes a co-employer to its employees.

The value of employee leasing lies in the fact that an organization can essentially maintain its working relationships with its employees and shift some of the costs to the leasing firm for a fee. The impact of employees leasing on HRM department is that it paves the way for getting rid of the department.

Downsizing, outsourcing, off shoring and leasing may appear to reduce costs. But in reality these activities may lower the productivity because of unwillingness to work, demotivation and hostile work environment.

Lower productivity leads to higher inputs and lower outputs. Hence, HR specialists suggest that increasing investments in employees (raising labour costs) many result in greater returns due to increased productivity.

Challenge # 7. Demographic and Employee Concerns:

HR managers need to be concerned about the changes taking place among the workforce and their expectations in addition to the competitive changes. Demographic changes and cultural changes cause considerable impact on HRM.

Demographic Changes:

Diversity (employee back­ground), age, gender and education levels are the major components in demographic changes.

i. Diversity:

Consequent to globalization the workforce in developed as well as developing countries have, increasingly become heterogeneous – people from various races, regions, language, culture, IQ etc. The impact of heterogeneity of workforce on HRM is mind boggling. HR managers go in for special training to manage diversity in workforce.

ii. Age Distribution:

Imbalance in the age distribution of workforce has significant implications:

a. When many employees near retirement managers are concerned that the expertise of older employees is likely to be lost too rapidly.

b. Some companies try to retain the retiring employees. Good health and longer life expectancies play the major role in extended work lives. Some retirees take up jobs for economic reasons.

c. Recruiting older employee may result in higher healthcare costs. But as older workers have fewer dependents there will be other cost savings.

d. When older workers are reemployed there is savings is training costs, transition costs and recruitment costs.

e. If the age variation is wide, the problems normally encountered with ‘generation gap’ will always exist.

It is left to the ingenuity of the managers to develop career path for various age groups to smooth out gaps in the numbers and kinds of employees.

iii. Gender Distribution:

Of late, the workforce in developed as well as developing economies has considerably more women workers in all levels. There are many mothers with school-going children continuing in various capacities. One of the reasons for more women taking employment is that their educational level is increasing relative to men.

a. Organizations which want to attract the talent of women workforce are taking measures to ensure that women are treated on par with men is terms of advancement opportunities and compensation.

b. Organizations interested in engaging women talents must be prepared for parental leaves, part time employment, flexible work schedule, job sharing, telecommuting and child/elder care assistance.

c. Though no big difference has been observed between women and men workers, managements have to take a little extra care to manage women-related problems such as sexual harassment, maltreatment in men-dominated groups, etc.

iv. Rising Level of Education:

The educational level of workers in the developing countries has increased considerably over the years. There are industries like IT which require higher levels of education. The earnings from education in the happening industries are quite attractive.

Inspite of higher educational level, industries are facing many problems:

a. While the complexity of jobs is increasing significantly, the skill gap is huge and widening.

b. A majority of degree-holders have only limited reading and writing abilities.

c. Organizations have to spend huge amount on basic skills training of the employees.

d. Companies are experiencing difficulties to find trained and certified workers such as fitters, electricians, plumbers, mechanics, etc.

e. Organizations have to offer higher compensations package to attract talented candidates.

f. HR personnel have the onerous duty of identifying the required- talents among the educated applicants.

Cultural Changes:

The attitudes, beliefs, values and customs of people are an integral part of any culture. Culture influences the behavior of people towards the job and environment with respect to work assignments, leadership style, performance appraisal, compensation and reward system. As in the case of other components of environment, culture is also undergoing continual change affecting HR policies and practices.

i. Employee Rights:

Due to continued collective bargaining employees have acquired many rights such as right to equal employment opportunity, union representation, a safe and healthy work environment pension plans, social security plans, etc. Employees have the right to sue the organizations in the event of violation of any rules.

ii. Concern for Privacy:

As employees are more concerned about leaking of their personal details, many companies have developed comprehensive privacy policies. Some companies lock up employee files, conduct background checks on employees who have access to others’ files, educate employees in fraud prevention and control with outside firms specializing is identify theft. HR department has the greatest responsibility is protecting privacy of employees.

iii. Changing Attitude towards Work:

a. Today employees at the higher end are not much concerned about success in terms of financial benefits. They aspire for more than just monetary gains.

b. Personal fulfillment, self-expression and balance of life between work and family form the key factors of job attitudes.

c. People tend to be focused on finding interesting jobs and multiple careers rather than just continuing in well-paid jobs.

d. Only for a few people the priority is moving up the ladder.

e. People look out for meaningful but less complicated ways of living.

As the lifestyles and job attitudes of employees are changing, HR managers are required to change the ways of motivation and managing people. HRM has become more complex than it was when employees were concerned primarily with economic gains.

iv. Balancing Work and Family:

There is economic as well psychological blending between work and family. Organizations are required to find out options to manage ‘two-wage-earner’ and ‘single-parent family’ situations. ‘Family-friendly’ firms go in for flexi time, daycare, part-time work, job sharing, maternity leave, parental leave, telecommuting, and executive transfer to desired locations, spouse involvement is career planning, assistance to family problems through counseling etc.

To attract and retain talent, HR managers have to play many an unconventional role in ‘family-friendly’ organizations which are likely to be challenging in the face of striking a balance between employee satisfaction and employee productivity.

Challenge # 8. Managing Diversity:

Managing diversity means being adequately aware of characteristics common to employees and at the same time managing these employees as individuals. The most important aspect of diversity management is valuing diversity in the work place followed by developing appropriate culture, arranging needed opportunity and providing effective leadership.

Developing Appropriate Culture:

i. Fostering mutual respect and a sense of belonging,

ii. Accepting differences,

iii. Providing diversity-training programs,

iv. Maintaining equity in performance expectations, pay and rewards, and

v. Promoting multicultural employees.

Arranging Needed Opportunity:

i. To develop new skills,

ii. To help climb the ladder to reach top positions,

iii. To encourage differently-abled and minority people, and

iv. To motivate affirmative action.

Providing Effective Leadership:

i. Taking all employees seriously,

ii. Recognizing the capabilities of all employees,

iii. Supporting all employees without any discrimination,

iv. Respecting the cultural beliefs and need of all employees, and

v. Accepting people who speak different languages.

Challenges of Human Resource Management – Challenges of HRM Faced by Modern Organisations

The world order is changing dramatically and is in the process of complete transformation. The impossible things of yesterdays have become possible today and the impossible things of today will become possible tomorrow. That is why it is said that change is the only permanent aspect of nature.

The concept of self-sufficient nations is losing importance and the concept of Global Village is emerging Management of organisations is bound to cope up with the radical transformation by developing new techniques and practice in the global perspective after carefully analysing the real challenges being faced by the professional managers.

Modern organisations are faced with the following environmental challenges:

Challenge # 1. Going Global:

In order to grow and prosper, many companies are seeking business opportunities in global markets competition – and cooperation-with foreign companies has become an important focal point for business. There is a concern that the growth of these huge organisations will conflict with the boundaries of sovereign nations & that national interest may be sacrificed to the multinational corporate goals.

The future may see the rise of supranational government regulations and control of multinational business enterprises to ensure that they operate within the framework of national sovereignty of each host country.

HR department would be required to grapple with globalization of business & manage the problems of:

(i) Unfamiliar laws.

(ii) Foreign Languages.

(iii) New Practices.

(iv) Fierce competition.

(v) Unknown attitudes.

(vi) Changed management styles, and

(vii) Overseas work ethics.

Challenge # 2. Corporate Restructuring:

Reorganizations resulting from acquisitions, mergers and divestiture have a significant bearing on organisational levels.

Employees face anxiety and uncertainty about their places like:

(i) Loss of job, pay and benefits.

(ii) New roles and assignment.

(iii) Transfer to new locations

(iv) Changes in career possibilities, status and power.

(v) Loss of identify with the company.

(vi) New colleagues, bosses and subordinates.

The pace of mergers and acquisition is likely to accelerate in future. Internal restructuring is also gaining momentum as corporates downsize and flatten themselves to meet increasing competition from multinationals. As layers get trimmed, workload increases and promotional opportunities are reduced.

Challenge # 3. From Touch Labor to Knowledge Workers:

The introduction of advanced technology tends to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill. In general, this transformation has been referred to as a shift from “touch labor” to “knowledge workers”, in which employee responsibilities expand to include a richer array of activities such as planning, decision making and problem solving.

As the centre of gravity in employment is shifting from manual workers to knowledge workers, new human resource practices and policies are needed. This is because intellectuals resist the command and control model that business adopted from the military. Knowledge workers want autonomy, challenging jobs, immediate feedback and rewards.

Today’s workplace presents new challenges such as workplace privacy, employee theft and workplace violence before managers.

Challenge # 4. Workforce Diversity:

In modern organisations, management of diverse workforce is a great challenge. Workforce diversity can be observed in terms of male & female workers, young & old workers, educated and uneducated workers, unskilled skilled and professional employees etc. Moreover, many organisations also have people of different castes, religions and nationalities.

Workforce diversity has created new challenges for HRM.

Increasing number of women in the workforce require move flexible work, schedules, child care facilities, maternity leave, transfer to husband’s place of posting. Ageing workforce creates problems of better health care facilities and higher pensions costs.

Focus has to be shifted from quantity to quality of life. Today employees seek a greater balance between work life & personal life.

Challenge # 5. Embracing New Technology:

Technological advancement have boosted productivity & replaced many blue collar jobs with highly skilled jobs. Telecommunications are making it relatively easy for many to work at home. Office automation (personal computers, word processing management information system etc.,) continue to change the nature of office work. Computer aided manufacturing & office processes require better trained and more committed employees.

IT industry required high quality staff. As technology & skilled become obsolete very fast, there is need for continuous updating of knowledge & skills.

Hiring, training & developing and retaining talent have become key challenges in the IT Industry. No company can operate successfully without strong HR policies in place.

Challenge # 6. Growing Employee Expectations:

Employee expectations and attitudes are changing. Traditional inducements, such as job security, compensation, housing and the like don’t attract and motivate today’s workforce. Employees want empowerment and leadership by example. The traditional bureaucratic model will have to yield place to a more humanistic model due to changing psychosocial system. Their expectations are – employee involvement, Flexible work arrangement i.e., home office, company support for employee’s family etc.

Managing human relations is becoming increasingly difficult as rules & regulations are not being accepted unquestioningly.

Challenge # 7. Managing Talent or Human Capital:

Advancement in science & technology and mass production has given rise to giant companies employing thousands of workers. The performance of the company depends on the quality of the people employed. This has increased the significance of managing talent or human capital in organisation.

The ideas that organisations “Compete through people” highlights the fact that success increasingly depends on an organization’s ability to manage talent or human capital.

To build human capital in organisations, managers must continue to develop superior knowledge, skills and experience within their workforce. Staffing programs focus on identifying, recruiting and hiring the best and the brightest talent available. HR managers have to do a good job of providing developmental assignments to employees.

Challenge # 8. Responding to the Market:

Meeting customer expectations is essential for any organisations. In addition to focusing on internal management issues, manager must also meet customer requirements of quality, innovation, variety and responsiveness. These standards often separate the winners from losers in today’s competitive world.

How well does a company understand its customer’s needs? How fast can it develop and get a new product to market? How effectively has it responded to special concerns? “Better, faster, cheaper”- these standards require organisations to constantly align their processes with customer needs.

Management innovations such as total quality management (TQM) and process reengineering are but two of the comprehensive approaches to responding to customers. Implementation of these approaches in the organisation is a great challenge in front of HR managers.

Challenge # 9. Proactive Industrial Relations Strategy:

Trade unions and workers now realise that strikes and militancy have lost their relevance. Trade unions will have to compete with employees for workers’ loyalty. A proactive strategy towards industrial relations is needed. A renewed focus on development and deployment of key people is the need of the hour.

Challenge # 10. Ethics at the Workplace:

The biggest challenge before HRM is to protect the interests of weaker sections. Job discrimination and sexual harassment are emerging as key issues. Affirmative action is needed to deal with them.

With changing structure of the workforce new values are emerging in organizations.

Some of these are:

(i) Emphasis on quality of life rather than quantity.

(ii) Equity and justice for employees over economic efficiency.

(iii) Pluralism and diversity over uniformity and centralism.

(iv) Participation over authority.

(v) Individual over the organisation.

Challenges of Human Resource Management – Emerging Challenges: Globalization, Corporate Re-Organizations, New Organizational Forms and Employee Expectations

1. Globalization:

Growing internationalization of business has its impact on HRM in terms of problems of unfamiliar laws, languages, practices, competitions, attitudes, management styles, work ethics and more. HR managers have a challenge to deal with more functions, more heterogeneous functions and more involvement in employee’s personal life.

2. Corporate Re-Organizations:

Reorganization relates to mergers and acquisitions, joint ventures, take over, internal restructuring of organizations. In these situations, it is difficult to imagine circumstances that pose a greater challenge for HRM than reorganizations itself. It is a challenge to manage employees’ anxiety, uncertainties, insecurities and fears during these dynamic trends.

3. New Organizational Forms:

The basic challenge to HRM comes from the changing character of competitions. The competition is not between individual firms but between constellations of firm. Major companies are operating through a complex web of strategic alliances, forgings with local suppliers, etc.

These relationships give birth to completely new forms of organizational structure, which highly depend upon a regular exchange of people and information. The challenge for HRM is to cope with the implications of these newly networked relations more and more, in place of more comfortable hierarchical relationships that existed within the organizations for ages in the past.

4. Changing Demographics of Workforce:

Changes in workforce are largely reflected by dual career couples, large chunk of young blood between old age superannuating employees, working mothers, more educated and aware workers etc. These dynamic workforces have their own implications for HR managers and from HRM point of view is a true challenge to handle.

5. Employee Expectations:

With the changes in workforce demographics, employee expectations and attitudes have also transformed. Traditional allurements like job security, house, and remunerations are not much attractive today; rather employees are demanding empowerment and equality with management. Hence it is a challenge for HRM to redesign the profile of workers, and discover new methods of hiring, training, remunerating and motivating employees.

6. New Industrial Relations Approach:

In today’s dynamic world, even unions have understood that strikes and militancy have lost their relevance and unions are greatly affected by it. The trade union membership has fallen drastically worldwide and the future of labor movement is in danger. The challenge before HRM is to adopt a proactive industrial relations approach which should enable HR specialist to look into challenges unfolding in the future and to be prepared to convert them into opportunities.

7. Renewed People Focus:

The need of today’s world and business is the people’s approach. The structure, strategy, systems approach which worked in post war era is no more relevant in today’s economic environment which is characterized by over capacities and intense competition. The challenge of HR manager is to focus on people and make them justifiable and sustainable.

8. Managing the Managers:

Managers are unique tribe in any society, they believe they are class apart. They demand decision-making, bossism, and operational freedom. However in the post liberalization era, freedom given to managers is grossly misused to get rid of talented and hardworking juniors.

The challenge of HRM is how to manage this tribe? How to make them realize that the freedom given to them is to enable them make quick decisions in the interest of the organization and not to resort to witch-hunting.

9. Work Force Diversity:

Another challenge for HRM is to protect the interest of weaker sections of society. The dramatic increase of women workers, minorities and other backward communities in the workforce has resulted in the need for organizations to reexamine their policies, practices and values.

In the name of global competition, productivity and quality the interests of the society around should not be sacrificed. It is a challenge of today’s HR managers to see that these weaker sections are neither denied their rightful jobs nor are discriminated against while in service.

10. Contribution to the Success of Organizations:

The biggest challenge to an HR manager is to make all employees contribute to the success of the organization in an ethical and socially responsible way. Because society’s wellbeing to a large extent depends on its organizations.

Challenges in Human Resource Management – Recent Challenges: Work Force Diversity, Organizational Restructuring, Changing Nature of Work and Golden Handshake

Challenge # 1. Work Force Diversity:

The Indian work force is characterized by diversity such as more women entering the work force, minority group members, older workers, etc. The diverse work force has become a challenge for the HR manager. One is that organizations claim they seek to maximize diversity in the workplace. The second is that the traditional human resource system will not allow diversity, only similarity.

Economic and Technological Change-Technology has become the hall mark of modern organizations. The explosive growth of information technology linked to the internet has ushered in many changes throughout the organization. The ‘fall of hierarchy’ has given birth to the ‘virtual organization.’

Globalization- New Economic Policy, 1991, has globalized the Indian economy and Globalization has given rise to MNCs.

The MNCs are characterized by their cultural diversity, intensified competition and variations in business practices.

Challenge # 2. Organizational Restructuring:

Organizational restructuring is used to make the organization competitive. As a part of organizational changes, many organizations have ‘right sized’ themselves in various ways such as eliminating layers of managers, closing facilities, merging with other organizations, or out placing workers.

Downsizing- Downsizing occurs when a company permanently reduces its workforce. Corporate downsizing is often the result of poor economic conditions and/or the company’s need to cut jobs in order to lower costs or maintain profitability. Downsizing may occur when one company merges with another, a product or service is cut, or the economy falters.

Downsizing also occurs when employers want to “streamline” a company – this refers to corporate restructuring in order to increase profit and maximize efficiency. Downsizing results in layoffs that are often followed by other restructuring changes, such as branch closings, departmental consolidation, and other forms of cutting pay expenses. In some cases, employers are not fired, but instead become part-time or temporary workers (to trim costs).

Challenge # 3. Changing Nature of Work:

With change in technology, the nature of jobs and work has also changed. One of the significant changes in the nature of work is from manual to knowledge work. The challenge posed by the changed environment is fostering HRM practices to respond to the need and requirement of knowledge workers.

Every organization depends increasingly on knowledge -patents, processes, management skills, technologies and intellectual capital. As a result of these changes, organizations are giving growing emphasis to their human capital, i.e. knowledge, education, training skills and expertise of their employees.

Challenge # 4. Golden Handshake:

A stipulation in an employment agreement which states that the employer will provide a significant severance package if the employee loses their job. A golden handshake is usually provided to top executives for loss of employment through layoffs, firing or even retirement. Payment can be made several ways, such as cash, or stock options.

A golden handshake is a hefty severance package which is offered to senior executives and other high ranking employees. Often, the terms of a golden handshake are included in a hiring contract, and they are viewed as insurance against sudden or involuntary job termination.

A golden handshake may also be offered to an employee to encourage him or her to retire; this is common in systems like schools, where long-term employees make more money, and it can be more cost efficient to hire entry level teachers.

The specifics of a golden handshake vary, depending on the position. Typically it includes a lump sum of money, and it may also include stock options or securities, continued insurance coverage, or payment into retirement accounts. A golden handshake also typically includes a few weeks of full pay, especially if the employment termination was sudden, allowing the former employee a chance to recover.

Golden handshakes can also be sweeteners for mandatory retirement. In industries where retiring long-term employees is a cost effective business decision, a golden handshake is almost used like a punishment. If the employee declines to retire, the offer will be retracted, and the employee may take a loss. Employees may also be asked to retire due to declining job performance or age, in which case a company may wish to provide recognition of the employee’s years of loyal service.

In an instance where a golden handshake is part of an employment contract, it pays to read the terms carefully, and to clarify questionable terms. Employees may want to ask whether golden handshakes will still be offered if companies liquidate or go into bankruptcy. It is also important to ask about conditions in which the severance package will not be offered.

Challenge # 5. Total Quality Management (TQM):

TQM describes a management approach to long-term success through customer satisfaction. In a TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work. In a TQM effort, all members of an organization participate in improving processes, products, services and the culture in which they work.

The methods for implementing this approach come from the leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, and Joseph M. Juran. Total quality management is a management system for a customer-focused organization that involves all employees in continual improvement. It uses strategy, data, and effective communications to integrate the quality discipline into the culture and activities of the organization.

Total quality management is an integrative philosophy of management for continuously improving the quality of products and processes. TQM is based on the premise that the quality of products and processes is the responsibility of everyone involved with the creation or consumption of the products or services offered by an organization, requiring the involvement of management, workforce, suppliers, and customers, to meet or exceed customer expectations.

Challenge # 6. Six Sigma:

Six Sigma is a set of tools and strategies for process improvement originally developed by Motorola in 1985. Six Sigma became well known after Jack Welch made it a central focus of his business strategy at General Electric in 1995. Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects or errors and minimizing variability in manufacturing and business processes.

It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization (“Champions”, “Black Belts”, “Green Belts”, “Orange Belts”, etc.) who are experts in these very complex methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction and/or profit increase).

The term Six Sigma originated from terminology associated with manufacturing, specifically terms associated with statistical modeling of manufacturing processes. The maturity of a manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products it creates.

Challenges of Human Resource Management – Future Challenges: Role, Flexibility and Diversity

Human resource management is faced with the following challenges:

1. The Role of HRM Manager:

The role of the Human Resource Manager is evolving with the change in competitive market environment and the realization that Human Resource Management must play a more strategic role in the success of an organization. Organizations that do not put their emphasis on attracting and retaining talents may find themselves in dire consequences, as their competitors may be outplaying them in the strategic employment of their human resources.

2. Flexibility:

With the increase in competition, locally or globally, organizations must become more adaptable, resilient, agile, and customer-focused to succeed. And within this change in environment, the HR professional has to evolve to become a strategic partner, an employee sponsor or advocate, and a change mentor within the organization.

In order to succeed, HR must be a business driven function with a thorough understanding of the organization’s big picture and be able to influence key decisions and policies.

In general, the focus of today’s HR Manager is on strategic personnel retention and talents development. HR professionals will be coaches, counselors, mentors, and succession planners to help motivate organization’s members and their loyalty. The HR manager will also promote and fight for values, ethics, beliefs, and spirituality within their organizations, especially in the management of workplace diversity.

3. Diversity at Workplace:

The dimensions of workplace diversity include, but are not limited to: age, ethnicity, ancestry, gender, physical abilities/qualities, race, sexual orientation, educational background, geographic location, income, marital status, military experience, religious beliefs, parental status, and work experience. All of these dimensions are putting a challenge to HR managers.

The future success of any organizations relies on the ability to manage a diverse body of talent that can bring innovative ideas, perspectives and views to their work. The challenges and problems faced of workplace diversity can be turned into a strategic organizational asset if an organization is able to capitalize on this melting pot of diverse talents.

With the mixture of talents of diverse cultural backgrounds, genders, ages and lifestyles, an organization can respond to business opportunities more rapidly and creatively, especially in the global arena, which must be one of the important organisational goals to be attained. More importantly, if the organizational environment does not support diversity broadly, one risks losing talent to competitors.

This is especially true for multinational companies (MNCs) who have operations on a global scale and employ people of different countries, ethnic and cultural backgrounds. Thus, a HR manager needs to be mindful and may employ a ‘Think Global, Act Local’ approach in most circumstances.

The challenge of workplace diversity is also prevalent amongst Singapore’s Small and Medium Enterprises (SMEs). With a population of only four million people and the nation’s strive towards high technology and knowledge-based economy; foreign talents are lured to share their expertise in these areas.

Thus, many local HR managers have to undergo cultural-based Human Resource Management training to further their abilities to motivate a group of professionals that are highly qualified but culturally diverse.

Furthermore, the HR professional must assure the local professionals that these foreign talents are not a threat to their career advancement. In many ways, the effectiveness of workplace diversity management is dependent on the skillful balancing act of the HR manager.

One of the main reasons for ineffective workplace diversity management is the predisposition to pigeonhole employees, placing them in a different silo based on their diversity profile. In the real world, diversity cannot be easily categorized and those organizations that respond to human complexity by leveraging the talents of a broad workforce will be the most effective in growing their businesses and their customer base.

Challenges of Human Resource Management – Common Challenges: Recruitment, Attrition, Salaries, Bonuses, Job Satisfaction and Training

There are various common challenges our Indian colleagues face which may improve support and collaboration between managers in both locations.

The common challenges are:

1. Recruitment

2. Attrition

3. Salaries and bonuses

4. Job Satisfaction

5. Training

Common Challenge # 1. Recruitment:

Recruitment is a function that requires business perspective, expertise, and ability to find and match the best potential candidate for the organisation. The biggest challenge for HR professionals is to source or recruit the best people or potential candidate for the organisation.

In the last few years, the job market has undergone some fundamental changes in terms of technologies, competition in the market, etc. In an already saturated job market, where the practices like poaching and raiding are gaining momentum, HR professionals have to face and conquer various challenges to find the best candidates for their organisations.

The major challenges faced by the HR Professionals in recruitment are:

i. Adaptability to Globalization:

The HR professionals are expected to keep in tune with the changing times, i.e., the changes taking place across the globe.

ii. Lack of Motivation:

Recruitment is considered to be a thankless job. Even if the organisation is achieving results,’ work of the HR department or professionals are not appreciated or recognized for recruiting the right employees and performers.

iii. Process Analysis:

Speed of the recruitment process is the main concern of the HR in recruitment. The process should be flexible, adaptive, cost effective and responsive to the immediate requirements.

iv. Strategic Prioritization:

The emerging new systems presents both an opportunity as well as a challenge for the HR professionals. Therefore, reviewing staffing needs and prioritizing the tasks to meet the changes in the market has become a major challenge for the recruitment professionals.

Common Challenge # 2. Attrition:

Today’s businesses are more dependent on their top performers to innovate and provide services that differentiate a company from its fierce competitors which suggests that corporations are reliant upon their human assets to survive and thrive.

Changing work force demographics, such as the shrinking of the most desirable labor pool (25-34 year olds) and downsizing, have led corporate America to search for answers to recruiting and retaining the strategic asset of the twenty-first century: talented people.

Retaining top talent was less an issue in the past, but the shifting tides of the unspoken employee/employer contract have created new trends in the workplace.

The old contract expected employees to:

i. Work hard

ii. Be loyal

In return, they would have:

i. A job for life

ii. A home away from home

iii. Regular salary increments

iv. A good opportunity for a promotion

But as the new contract is substantially different which states that employees must now work harder, doing not just their own jobs, but the jobs of their former co-workers who were “right-sized”, job security is extinct, promotions are scarce, salary increases are modest, and the constant uncertainty of change is almost guaranteed; is it surprising that employee loyalty is on the demise and talented individual contributors feel less bonded to their organizations?

A Nasscom Hewitt-Associates Survey shows that the cost of attrition is 1.5 times the annual salary of an employee. Costs are due to loss of productivity, temporary replacement, and new recruitment and training.

The attrition rate is linked to a number of causes, one being the average age of the employee. 87 percent of the BPO employees are under the age of 30. Only 10 out of every 100 people will ever make it to consultant level and one out of every 100 to line manager.

This shows that the job is stressful as employees are moved from one process to another and are given little time to adjust. The work environment has rigid rules and strict monitoring mechanisms by which employees become affected by sleep disturbances due to working irregular hours.

Last but not least, regular poaching by competitors contributes to employees leaving the organisation for better career opportunities.

Common Challenge # 3. Salaries and Bonuses:

According to Gevrey of Trans works, “New hires are offered a competitive salary of anywhere between USD 200 and USD 300 a month, which is very interesting for Indian youngsters. Those who are capable and loyal to the company get a chance to move up within a reasonable period of time. There are financial bonuses for best performers. We recently gave a bonus of a scooter worth a USD 1000.”

Common Challenge # 4. Job Satisfaction:

Job satisfaction is one of the most important links to retain employees. In order to manage the expectations of the recruit, it is important that the job description and role of the employee in the organization should be clearly understood when entering the organisation.

A Tesco employee segmentation survey in 2005 indicates that there are five broad attitude segments of people working within their workforce- 25 percent are work-life balancers; 18 percent are pleasure seekers; 25 percent want it all; 16 percent live to work whereas 16 percent work to live.

Thus, by understanding the drives and needs of each segment the organisation can tailor the employment proposition and improve retention.

Common Challenge # 5. Training:

Gevrey thinks that the recruit’s level of competencies and their job expectations can only be fully understood in the initial training programme. Interpersonal and intercultural training should also be included in the later stage of this program.

Once the employees move up the ladder they find very little time for training. If there is a lack of leadership training on the operational level then it is reflected on the work floor and consequently on the job satisfaction of the employee.

“In certain cases, when we have two candidates,” says a Bangalore BPO manager, “one candidate may be technically very competent but low on soft skills and the second candidate scores very well on soft skills. So what we do is take the guy lower on the technical skills and give him intensive training on the job and assign him on to a leadership profile.”

The Recruitment Process:

Satish Seetharam, Manager at Bosch in Bangalore says, “We look at the business requirements first. We make sure that the job profile we are looking for not only matches with the skills and competencies but also the job expectations of the candidate. An open discussion with the candidate gives insight into how long he will be staying with us.”


The challenges for HR managers in India are truly different from challenges faced in the West. Though the attrition rate is high, Indian HR managers are very people-oriented, whereas their western counterparts are far more process and task-oriented.

According to Gevrey, Indian organizations value the happiness of the employee and consequently the well-being of his extended family.

The employee is given leave to take his mother to the hospital, or is allowed to attend the wedding of a neighbor or to mourn a family member on the other side of the country.

The well-being of the employee on a personal level is considered to be extremely important for the organisation. Western HR managers understand this and take this into consideration when working with Indian colleagues.

Workforce Diversity:

During the past decades, the term “diversity” has been widely used to refer to the demographic composition of a team which is usually measured in empirical studies, using the compositional approach, which focuses on the distribution of demographic attributes—e.g., age, ethnicity, gender-within teams. Researchers studying team diversity and organizational demography both assess the extent to which members of an organizational unit are similar or dissimilar to each other.

Also both use indices of variation (not central tendency) to assess the composition of organizational units (teams, departments, entire organizations).

Rapidly changing business environment poses new challenges for the organization. Globalization and development in technology have caused people belonging to different countries, regions, lifestyles and cultures to work together. It has created new growth opportunities for the organization. At the same time, it also results in additional challenges for the HR managers.