Human resource management is a broad term which includes all the dimensions of managing the living resource of the organization in the ways organizations respond to its employees and their actions both individually and collectively. HRM is designed to describe the broader range of issues associated with the employees and the situations in which the employment contract involved to make the working environment more agreeable to empower people in the real sense. It goes beyond the concept of employment relations and industrial relations. HRM is more a strategic role as it evaluates to the highest management table, it suggests an upstream role in practice. It is concerned to attempt and develop more congruent and integrated HR policies which oppose the piecemeal technique that is apparent in the traditional role of personnel. Gautam (2015) stated that it is also concerned with the individual level issues of the employees such as the performance related pay, mechanisms of communication, rights of employees, and the contract of an employee. Management of people is the most important resource in the organization.
The functions of HRM is concerned with the hiring of employees, motivating them to achieve the organizational objectives, and maintaining the workforce. It deals with the issues regarding the human capital of the organization including hiring, training, and development of underperformers, compensation plan, communication, and administration. According to (RajAdhikari and Gautam (2010) argued that it is a strategic approach to acquire, develop, motivate and achieve the commitment of human capital of the organization. The role of HRM in developing countries like Nepal is different from developed countries. As in Nepal, the role of this department is to work in alliance with top management to manage the team for smooth operations of the organization. In every organization HR department is essential because it can bring the organization on track to achieve its long term objectives. HRM is equally important in both small enterprises and large organizations. In small organizations it is not developed as in the large organizations, however, the personnel manager is appointed to perform the staff functions.
In the broader view, HRM has two major functions one is the managerial and other is operative functions. As its name managerial refers to the managerial functions including the planning, organizing, controlling, and directing human resource. While the operative fuctions includes procurement, development, integration, compensation, maintainance, and emerging issues. According to the study of Mahajan and Sekiguchi (2016) procurement in HRM refers to the induction of new entrants to the organizations through a set of procedures. To hire an employee there are a set of plans and execution of certain actions not limited to job analysis, planning, recruitment and selection process, placement of newly hired employees, induction, transfer of employees, promotion and separation. The development stage is highly important and it has great impacts on the performance of an individual. It includes performance evaluation, training on need base where the employee is lacking certain skills. Promotion and demotion of employees based on their performance reflected in the performance appraisal stage, and finally the career planning of the employees. The compensation plan refers to the payment and rewards of the employees to motivate them to achieve the objectives of the organization. Compansation is basically comprised of job design, work schedule, basic salary, incentives, bonuses, and promotion. It includes both intrinsic and extrinsic rewards. The intrinsic rewards are in monetary terms while the extrinsic rewards are nonmonetary. Integration is the most important function of the HR department which refers to the health and safety issues of the employees, social security and benefits for the employees and employee welfare. Maintainance of human capital is another essential role to ensure a peaceful work environment for all employees. It includes the grievence redressal, building teams, discipline policy, IR, trade unions, and collective bargaining. Finally, the emerging HR issues in the modern work environment is the essential function including HR audits, HRIS, research on HR issues, and personal record (Bhattarai, 2018).
The multinational organizations are actively practicing the functions of HRM due to their huge setup and professional people. While the local organizations are adapting these standards. Kandel et al., (2019) argued that the localization strategy of these MNCs can allow them to act according to the culture and the regulations of the country where they are operating. To behave as a local firm to get an acceptance in the local community however follow the essential rules and regulations which are set by the parent company. The human resource strategies are developed according to the local norms and believe, local government system, however, the company has to continue its standardized procedures which are not in contradiction to the local country’s laws and beliefs. The standardization is followed in order to reduce the costs and results in better performance and profitability (Mishra, 2018). The HR practices may have double pressure in an international set up to adopt the local norms and laws, and internal consistency. Both of these pressures are in opposite directions, so the HR professionals have to maintain a balance between both of these. As the localization is important for local acceptance and harmony, while the standardization can improve performance and profitability. In terms of HR, localization is essential for motivation, and employees engagement, while in globalization the local employees are not feeling secure. The external environment is also exerting pressure on HR management. The HR manuals are highly influenced by the technological advancement, economic conditions of a country and the political situations of the country(Mwaniki & Gathenya, 2015). Some MNCs are using similar HR system in other countries as well, they are transferring their policies tto other countries. This approach is called the convergence theory discussed by the HR researchers. This theory refers to the hypothesis which states that several sets of principles are accepted by the organizations in the host countries regardless of the local contexts. This theory also states that the differences in countries can causes differences in HRM as well. It is not practically applicable to have the same system throughout the world. According to Parameswari and Yugandhar (2015) Vroom’s expectancy theory states that every individual have different goals, so through a uniform strategy all these employees can be only be motivated in a condition that both the performance and their struggles are positively correlated. Furthermore, the higher performance can yield better rewards and these rewards can satisfy their needs. For achieving efficiency in the processes HR managers have to find the values of employees. As the theory suggests that every employee have a different level of expectations from the organization (Shrestha, 2017).
HRM practices in Nepal
Nepal is small country situated in South Asia near India and China. It is a least developed state where the per capita income is $ 750. It is the poorest country in the world, according to the Human Development Index it is currently ranked 157th. The economic growth of country is low, and it increased by 3.51 percent in the last decade. Agriculture is the main source of employment and income generation. The growth of the industrial sector is also not satisfactory, however steady growth is recorded in the last two decades. After the liberalization and privatization policy of the country in the 1990s the concept of HRM rose, before this era, Nepali organizations did not use any précised HR strategies (Rettberg, 2016; Azmi & Mustaq, 2015). After the privatization strategy organizations improved the compensation and focused on the payments and benefits to raise the performance. The role of the HR department initiated and training and development programs were initiated to increase the skills and knowledge of employees. However, still, these organizations are in the learning phase. The multinational organizations were taking interest in Nepali market after the 1990s, as the MNCs are expanding their market shares from developing countries to least developed nations. They have properly integrated HR function in these regions. The success of these organizations is based on the implementation of suitable operations according to the distinctive cultures. These suitable practices refer to the HRM as it has the most localized aspects across various functions. This paper will evaluate the HRM policies and practices followed by the multi national organizations and in Nepal and its impacts on the local organization to develop their HR strategies. The HRM got momentum through the arrival of foreign Joint Ventures, MNCs, and international NGOs during the 1990s. Managing the employees effectively by the multinational organizations has gradually evolved Nepali businesses to adopt these practices. Before that, the administration in Nepali organizations had no proper strategies to manage their human capital.
Nepali Rastra Bank and HR Function
Here we will discuss the example of Nepal Rastra Bank which has successfully adopt HR functions in all its commercial banks and in 2000 they started the sensible HR practices. An effective HR function is one of its core objectives to reform programs such as the financial sector strategy statement and financial sector reform program in 2000 and 2004 respectively. In NRB before 2000, there was no HR department as a separate body. Initially bank had updated its recruitment services, as they involved the HR companies to provide them their services, and later on, they also provided training and development to their employees through HR professional organization. Moreover, the company adopted HR functions including recruitment procedures, training, and development, HR manual, through outsourcing recently. Mohan Ojha is one of the pioneers of HR entrepreneur in Nepal who has closely observed that in the last two decades HR management scenario has evolved in the country (Newbusinessage.com, 2018). In the 2000s only a few organizations were having proper HR management departments in Nepal, however, now more than 500 organizations are having well-established HR departments (DeCenzo et al., 2016). Furthermore, he added that many business schools have started MBA programs in HRM during the last decade to produce professionals in this field to fill the gap of skilled workforce for the industry. HR departments in MNCs are highly integrated upgraded in Nepal which became a benchmark for the local organizations. Similarly, the banking industry is rapidly adopting and bringing improvement in HR practices according to the current needs of employees and management. However HR management in Nepal yet needs more improvement and currently, it is in its primitive stage. Still big organizations which have a huge turnover in sales are stuck with a simple implementation of basic functions of HR. These functions include tasks of daily activities such as payroll management, salaries, contracts of employees, job descriptions, and leave management, etc.
HR challenges and its management
There are many challenges faced by organizations in Nepal. Human capital in Nepal is not properly managed by the organizations where they are executing their services. There is low productivity due to lack of training and development in the organizations in Nepal. Capacity building, acquiring new skills, and proper motivation can reduce the dissatisfaction level and improve the performance graph of employees (Bratton & Gold et al., 2017). There are issues of demotivation, burnout, employees turnover intention, and worklife balance, which are highly ignored in many local companies in the country. Here we will highlight some of these challenges briefly, which can be overcome through proper HR strategies.
The employee turnover is higher in the local organizations for many reasons, including low salary, fewer chances of personal growth due to poor management and planning, personal issues, and poor work environment. To overcome this issue organizations need to uplift the job satisfaction level of their employees. When job satisfaction is raised it will boost job engagement (Farndale et al., 2018). In job, engagement employees are working beyond their job descriptions and they are highly motivated to cover some extra miles for their organization. As in Nepal HR management is not yet evolved completely so their focus is not over these issues, and the role of HR is to fill the vacant postions through recruitment function of HR. Managing the outflow of competent employees from the organization can consequently decrease the competitiveness of the organization. Considering the banking sector of Nepal which is heavily relied on the human capital and it always has an issue to retain its employees. Job engagement has a positive influence on the performance of the employees and organization, however, it needs a proper HR strategy to uplift the morale of the employees through different rewards strategies. To predict and manage the turnover intention it is essential to understand the employees’ engagement with their jobs and organization (Biswakarma, 2015). Globally businesses are driven by knowledge and with intellectual capital, it can achieve a competitive edge for the organization. During this modern era, major success factors of an organization is based on the diverse and dynamic external factors.
HR and Modern Technology
HR management was considered as the paper-intensive work of the organization in the past with the least innovation and adaptation of the latest technology. However, in the modern world, it became a technology-driven function of the organization. The latest technology has helped this department ot mitigate its broader scope of challenges such as talent acquisition, competitive pays, employees engagement and succession plans (Bhandari & Bhandari, 2017). All its fuctions are automated which made HR department more efficient. Performance appraisal is evolved through the use of latest software of HR and made it feasible for HR professionals to analyze performance through 360-degree feedback and other techniques. Most of the multinational companies are using Oracle, CoreHR, Workday HCM, etc for managing its human capital. HRIS is an integrated tool used by the HR department to keep a record of all employees and can retrieve easily. There are certain specified software solutions for each function including Payroll service, performance solution, employee engagement tools, and recruitment solution. In developed countries, these solutions are widely used to collect data for next frontiers in HRM which include artificial intelligence, used to measure the performance of human resource in the most efficient ways. It can reduce the paper work and save time and cost of the organization. Moreover, the data can be easily analyzed, stored, and retrieved in the future. The online database used for recruitment and the data of each candidate is stored in a pool which can be used in the future. It is useful for the organization to find the best workforce and hire them for the organization. As in large organizations, there are thousands of employees working in different departments, it is not easy for the HR department to maintain and analyze the performance through manual procedures. So the use of these solutions has become the key trend among all the multinational ventures and well established local organizations.
Available skilled workforce
In developing nations it is hard to find skilled labors and executives in the job market. It is an external factor which can influence the workforce planning of the organization. The ability to hire qualified employees from the labor market which can affect the employment rates. In some organizations, highly skilled workers are required such as health care organizations, and banks, etc. According to Ojha et al., (2016) the factor of the labor pool is highly influenced by the geographic location. The HR professionals need to focus on the recruiting efforts in the region and also influence the pay packages. In countries like China, there is a large number of skilled workforce with nominal salaries, depends on the economy, education, and other functions. In Europe and America, the per capita income is high and there is a scarcity of manpower which has increased the demand. It resulted in higher wage rates in these countries.
Nepal government has reduced the restrictions on foreign investors after privatization. Government regulations have a great impact on the Human Resource Management department. These laws are reflecting in the HR policies and it has a great impact on the organizations. Most of the HR policies are aligned with the government laws such as the labor laws, registrations and licensing, and rules regarding the employment. HR planning procedures are followed by the Government of Nepal, the concerned ministry regulates all the business concerns and provides approvals to the business after a certain set of documentation. Automation and use of latest technology in the government system are very low, mostly they use the manual systems and outdated technology. Employment of foreigners and expatraits also needs proper guidelines from the government. Minimum wages and work schedule is defined by the government which should be strictly followed by all the organization. There is still a huge gap in HR implementation in Nepal both from the government, and organizations end. There is no proper human resource development policy in Nepal, however, it is continued.
Economic force is a broad level force which can influence the rate of growth and industrial production, as well as the per capita incomes. The industrial labors and globalization can effect the overall HR policies and strategies of the organizations. It has a strong impact on the employment, recruitment and selection process, and the wages rates of the employees. In developing countries, the unemployment rate is higher, and the per capita income is lower. There is strong competition for a position, however, skills are not up to the requirements of the organization.
Political influence on HR strategy
The political environment is also having a strong impact on the Human Resource practices of the organization. In a democratic system, the expectations of workers are higher that their wellbeing will be protected. Political set up of the country can guide the business practices, especially the wages rates, and the company rules regarding labors rights, trade unions, use of technology, and other regulations. In some governments the taxes are increased, regulations become strict so it can affect the employment level in the organization.
The HRM practices in Nepal is evolved after the privatization in the 1990s, however, it is flourished after the arrival of multinational corporations. HRM practices in developing countries are not properly implemented, and the organizations having the personnel manager is doing the basic HR functions to maintain the employee’s record. The multinational organizations have localized their functions due to the local acceptance and cultural differences in the host and home countries of the company. In Nepal, the HR department has started its proper practices after the 2000s and still, it is in the development phase. The multinational orgnizaions in developing nations put their efforts to formulate a better set instead of considering much on the localization.
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