TOPIC 8: HUMAN RESOURCE MANAGEMENT

Every organization, large or small, uses a variety of capital to make the business work. Capital
includes cash, valuables, or goods used to generate income for a business. For example, a retail
store uses registers and inventory, while a consulting firm may have proprietary software or
buildings. No matter the industry, all companies have one thing in common: they must have people
to make their capital work for them. This will be our focus throughout the text: generation of
revenue through the use of people’s skills and abilities.
What Is HRM?
Human resource management (HRM) is the process of employing people, training them,
compensating them, developing policies relating to them, and developing strategies to retain them.
As a field, HRM has undergone many changes over the last twenty years, giving it an even more
important role in today’s organizations. In the past, HRM meant processing payroll, sending
birthday gifts to employees, arranging company outings, and making sure forms were filled out
correctly—in other words, more of an administrative role rather than a strategic role crucial to the
success of the organization. Jack Welch, former CEO of General Electric and management guru,
sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.…
Remember, HR is important in good times, HR is defined in hard times”.
It’s necessary to point out here, at the very beginning of this text, that every manager has some
role relating to human resource management. Just because we do not have the title of HR manager
doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers
deal with compensation, motivation, and retention of employees—making these aspects not only
part of HRM but also part of management. As a result, this topic is equally important to someone
who wants to be an HR manager and to someone who will manage a business.
Human Resource Management was originally known as personnel or people management. In
the past, its role was quite limited. Within any company or organization, HRM is a formal way of
managing people. It is a fundamental part of any organization and its management. The main
responsibilities of the personnel department include hiring, evaluating, training, and compensation
of employees. The human resources department deals with any issues facing the staff in their
working capacity within an organization. HR is concerned with specific work practices and how
they affect the organization’s performance.
Today, Human Resources Management deals with:
 Anything related to managing people within a company or organization. This means
decisions, strategies, principles, operations, practices, functions, activities, and the methods
used to manage employees.
 The type of relationships people have in their places of employment and anything that
affects those relationships in a positive or negative way.
 Ensuring that employees are satisfied with the conditions of their employment. This leads
to better services and production of goods and helps the company’s success.
When we talk about human resources in a business situation it means the workforce, i.e., the
employees of a company and what skills and energy they bring. This includes any ideas, creativity,
knowledge, and talents that employees bring with them and use to help the organization be
successful. In other words, the resources a person has or the knowledge and experience developed
over the years.
HRM focuses on bringing in (recruiting) new employees with new talents for the company and
managing employees. Another function is to guide and help said employees by providing direction
when necessary. In a large organization, with a lot of people, it is important to have a department
that specifically focuses on staff issues. These issues are things like hiring, performance
management, organizational development, training, occupational health and safety, motivation
incentives, communication, workplace culture, and environment.
Human Resource Management is now a vital part of any organization. Every company or
organization is required to have this department. It helps with increasing the morale of workers by
working on relations between employees and their employers and constantly striving to make them
better. The HR department also provides any support employees need to assist them improve their
performance. The HRM function extends to assessing the productivity and/or success of every
department in an organization or business. It assists each department and helps them improve their
work. It also intervenes when necessary to help solve any problems that might arise with regards
to employees’ work. Getting better results from the company’s workers is another job of HRM.
When a business has valuable, rare, and/or unique human resources it will always have a
competitive advantage over other similar organizations. Below are the criteria used in Human
Resource Management – when using these effectively, a company can make an impact in its
particular field.
a) Value Building: People who try hard to decrease costs and to provide a service or product
unique to customers, can increase their own value as employees and that of the company.
Organizations also use empowerment programs, quality initiatives, and strive for continual
improvement in order to increase the value that employees bring to the company.
b) Rarity: When the skills, knowledge, and abilities of employees are not equally available to
all companies in the same field, the company that has these people, has a very strong
advantage. This is why top companies endeavor to hire and train the best and the brightest
employees. This way they gain advantage over their competitors. In some cases, companies
will even go to court to stop other organizations from taking away their valued employees.
This proves that some companies have clearly identified the value and the uniqueness of
certain employees.
c) Incomparability: Employees give their companies competitive advantage when their
capabilities and contributions cannot be reproduced by others. That is, the knowledge and
skills that they bring to the organization are unique and not easily found elsewhere. Certain
corporations such as Disney, Southwest Airlines, and Whole Foods have, over the years,
developed very distinctive cultures that get the most from employees. These cultures are
difficult for other organizations to imitate. Southwest Airlines, for example, rewards the
 employees who perform well. It is also able to maintain employees’ loyalty through
offering free airfares and profit sharing in the company.
d) Organized work force: People with unique talents can help a company achieve a
competitive advantage when they can easily be reassigned to work on new projects without
much notice. In order for this to happen teamwork and co-operation are needed and the
creation of an organized system.
The criteria above show the importance of people power and also the link between human
resources management and performance management. Many high-functioning organizations now
know that their success depends on the knowledge and skills of their employees, or, their human
capital. Human capital is aligned with the economic value of employees with the right knowledge,
skills, and abilities. Their knowledge and skills have economic value. Managing human capital
properly is imperative for any organization wanting to maintain a competitive advantage. In some
ways it is the most important part of an organization’s human resource function.
The Objectives of HRM
The objectives of HRM are the goals of an organization. Individual or group activities are then
organized in such a way so as to achieve those objectives or goals. Organizations and companies
aim to secure and manage certain resources, including human resources, to achieve the specified
goals.
Human resources must therefore be managed in a way that uses their resources to achieve the
organizational objectives/goals. Basically, the objectives of HRM come from and contribute to
achieving organizational objectives.
Objectives of HRM:
1. To establish and use a workforce that is able and motivated, in order to achieve the goals
of an organization.
2. To create the desirable organizational structure and working relationships among all the
members of the organization.
3. To integrate individuals and/or groups within the company by matching their goals with
those of the company.
4. To ensure individuals and groups have the right opportunities to develop and grow with
the organization.
5. To use what human resources a company has in the most effective way to achieve
organizational goals.
6. To ensure wages are fair and adequate and provide incentives and benefits thereby
satisfying both individuals and groups. Also, to ensure ways of allowing recognition for
challenging work, prestige, security and status.
7. To have continual high employee morale and good human relations by establishing and
improving conditions and facilities within the organization.
 8. To improve the human assets by providing appropriate training programs on a continual
basis.
9. To try to effect socio-economic change in areas such as unemployment, under-employment
and inequality by distributing income and wealth. This way society can benefit. Added
employment opportunities for women and the disadvantaged will also be impacted in a
positive way.
10. To offer opportunities for expression.
11. To ensure that the organizational leadership works in a fair, acceptable and efficient
manner.
12. To ensure a good working atmosphere and employment stability by having proper facilities
and working conditions.
Principles of Human Resource Management
The HR department has transformed significantly from the task-oriented nature of administration
it used to be in the 1980s. It is now viewed as a strategy-focused extension of every firm. The HR
department thrives on specific principles, as highlighted below:
1. Commitment- One aspect that the HR department tries to deal with is job security. To guarantee
job security, many employees know that they need to show commitment to the company and their
job duties. The HR management comes in to put measures in place that ensure that staffing levels
correspond to the company’s needs and that, in the process, assure employees of their long-term
positions within the organization. The firm demonstrates its long-term commitment to the workers
by providing regular training, performance evaluations, and goal-setting activities.
2. Competence- Competence is one of the core principles that supports a company’s growth and
development. It is also an aspect that affects employees’ job satisfaction and how the company
benefits society. The success of a firm depends on the competency of its employees. The HRM
department tries to sustain workforce competency by providing training opportunities. It also
schedules orientation programs, which provide avenues to enlighten new employees on a
company’s mission and objectives.
Training and orientation are essential in improving employees’ skills, knowledge, and
competency. The benefit of having a competent workforce is that it leads to the production of safe
and reliable products and services that consumers can rely on. In the absence of a high level of
competence, a company will be susceptible to lawsuits and legal claims resulting from the products
and services that it renders.
The Role of HRM
Keep in mind that many functions of HRM are also tasks other department managers perform,
which is what makes this information important, despite the career path taken. Most experts agree
on seven main roles that HRM plays in organizations. These are described in the following
sections.
a) Staffing
You need people to perform tasks and get work done in the organization. Even with the most
sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM
is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary
package. Within the staffing function, there are four main steps:
 Development of a staffing plan. This plan allows HRM to see how many people they should
hire based on revenue expectations.
 Job analysis. This involves defining the various aspects of a job through job description
and specification. Through job description, the HRM department identifies the tasks
required for a specific job while the latter defines the requirements an individual needs to
fulfill that job.
 Sourcing. This encompasses the different techniques a company employs to attract
potential candidates to fill a given position. This can be achieved through internal and
external advertisements.
 Development of policies to encourage multiculturalism at work. Multiculturalism in the
workplace is becoming more and more important, as we have many more people from a
variety of backgrounds in the workforce.
 Recruitment. This involves finding people to fill the open positions.
 Screen and Selection. In this stage, people will be interviewed and selected, and a proper
compensation package will be negotiated. This step is followed by training, retention, and
motivation.

b) Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of
the jobs of HRM is to develop the verbiage surrounding these policies. In the development of
policies, HRM, management, and executives are involved in the process. For example, the HRM
professional will likely recognize the need for a policy or a change of policy, seek opinions on the
policy, write the policy, and then communicate that policy to employees. It is key to note here that
HR departments do not and cannot work alone. Everything they do needs to involve all other
departments in the organization. Some examples of workplace policies might be the following:
 Discipline process policy
 Vacation time policy
 Dress code
 Ethics policy
 Internet usage policy
 c) Compensation and Benefits Administration
HRM professionals need to determine that compensation is fair, meets industry standards, and is
high enough to entice people to work for the organization. Compensation includes anything the
employee receives for his or her work. In addition, HRM professionals need to make sure the pay
is comparable to what other people performing similar jobs are being paid. This involves setting
up pay systems that take into consideration the number of years with the organization, years of
experience, education, and similar aspects. Examples of employee compensation include the
following: Pay, Health benefits, Stock purchase plans, Vacation time, Sick leave, Bonuses etc
d) Retention
Retention involves keeping and motivating employees to stay with the organization.
Compensation is a major factor in employee retention, but there are other factors as well. Ninety
percent of employees leave a company for the following reasons:
1. Issues around the job they are performing
2. Challenges with their manager
3. Poor fit with organizational culture
4. Poor workplace environment
Despite this, 90 percent of managers think employees leave as a result of pay. As a result, managers
often try to change their compensation packages to keep people from leaving, when compensation
isn’t the reason they are leaving at all.
Task: Discuss some strategies to retain the best employees based on these four factors.
e) Training and Development
Once we have spent the time to hire new employees, we want to make sure they not only are trained
to do the job but also continue to grow and develop new skills in their job. This results in higher
productivity for the organization. Training is also a key component in employee motivation.
Employees who feel they are developing their skills tend to be happier in their jobs, which results
in increased employee retention. Examples of training programs might include the following:
 Job skills training, such as how to run a particular computer program
 Training on communication
 Team-building activities
 Policy and legal training, such as sexual harassment training and ethics training
f) Dealing with Laws Affecting Employment
Human resource people must be aware of all the laws that affect the workplace. An HRM
professional might work with some of these laws:
  Discrimination laws
 Health-care requirements
 Compensation requirements such as the minimum wage
 Worker safety laws
 Labor laws
The legal environment of HRM is always changing, so HRM must always be aware of changes
taking place and then communicate those changes to the entire management organization. Rather
than presenting a chapter focused on HRM laws, we will address these laws in each relevant
chapter.
g) Worker Protection
Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal
of setting federal or state standards to ensure worker safety. Unions and union contracts can also
impact the requirements for worker safety in a workplace. It is up to the human resource manager
to be aware of worker protection requirements and ensure the workplace is meeting both federal
and union standards. Worker protection issues might include the following:
 Chemical hazards
 Heating and ventilation requirements
 Use of “no fragrance” zones
 Protection of private employee information
h) Communication
Besides these major roles, good communication skills and excellent management skills are key to
successful human resource management as well as general management. We discuss these issues
in Chapter 9 “Successful Employee Communication”.
i) Awareness of External Factors
In addition to managing internal factors, the HR manager needs to consider the outside forces at
play that may affect the organization. Outside forces, or external factors, are those things the
company has no direct control over; however, they may be things that could positively or
negatively impact human resources. External factors might include the following:
 Globalization and offshoring
 Changes to employment law
 Health-care costs
 Employee expectations
 Diversity of the workforce
 Changing demographics of the workforce
 A more highly educated workforce
 Layoffs and downsizing
  Technology used, such as HR databases
 Increased use of social networking to distribute information to employees
For example, the recent trend in flexible work schedules (allowing employees to set their own
schedules) and telecommuting (allowing employees to work from home or a remote location for a
specified period of time, such as one day per week) are external factors that have affected HR.
HRM has to be aware of these outside issues, so they can develop policies that meet not only the
needs of the company but also the needs of the individuals.