Overview of Human Resource Management

1.1

Introducing the Concept of Human Resource Management

Management is the process of efficiently getting activities completed with and through other people and the concept of human resource management (HRM) is related to the people dimension of management. It involves all management decisions and practices that directly affect or influence the people or Human Resources, who work for the organization. The function of human resource management has come a long way from playing the role of an administrator to playing the role of a business partner, contributing directly to the organizations attainment of overall objectives. For any organization, to compete with HR management at the forefront, it is imperative to create a unique system most conducive to the organizations structure. Human resources management therefore involves the acquisition of employees of the right calibre, developing their skills, motivating them to high levels of performance and ensuring that employees continue to maintain their commitment to the organization. Purpose of Human Resource Management The purpose of the HRM in any organization is to enable the improvement of employees performance and their contribution to the organizations in a strategic, ethical and socially responsible manner.

1.2

Evolution of Human Resource Management

The utilization of people for productive purposes has always been there. It can be traced to ancient times, but during the course of the past century, efforts to best manage human resources have become more formal and specialized. The history of HRM can be characterized in two ways: one way is to see how HR has evolved in the twentieth centuryfrom the early days when it was seen as a disciplinary system to the present day when it is expected to play a consultative and leadership role (as elaborated in the following table); the other way is to look at HR as having moved through four broad phases. A. Craft System. The association of the master craftsworkers (Craft guilds) supervised quality and methods of production and regulated conditions of employment. Such method was suited to domestic industry, conducted on the masters premises.

B. Scientific Management. The basis of the scientific method is that there is one best way to do a job. This one best way will be the most efficient, therefore the least expensive and fastest. The development of mass production with the industrial revolution transformed the organization of work in two important ways. 1. Tasks were subdivided and performed by unskilled workers. 2. Manufacturing grew to the size that a hierarchy of supervisors and managers became necessary. C. Human Relations. The first important discovery in the social context of mass production resulted from the famous experiments undertaken by the U.S. social scientists Elton Mayo and Fritz Roethlisberger. Their discoveries led to further research on the social factors associated with work. The idea that human relations alone will increase productivity failed. D. Organizational Science. The organizational science approach focuses more on the total organization and less on just the individual. HRM, as we currently know it, grew out of the organizational science trend and combines learning from the previous movements with current research in the behavioral sciences.

Table: Evolution of HR Management Time Period Before 1890 1900-1910 HR Focus Industrial technologies Employee well being HR Activity Disciplinary systems Health and safety programs National Cash Register (NCR) forms first personnel department to handle employee issues Period of scientific management Example Event

1920s

1930s

Task design, efficiency and impact of work groups on individual workers Unionization of workplace Passage of major labor laws

1940s

Employee benefits and compensation

Time and motion studies Employee counseling and testing Communication programs anti-union campaigns Personnel becomes staff support to operational line units Wage increases Cost-of-living adjustments Pension, health and

Major labor relations legislations: Norris-La Guardia Act National Labor Relations Act General Motors and the United Auto Works sign first contract with escalator cause

1950s

Employee relations Specialized personnel functions

1960s

Employee participation

1970s

Government intervention

1980s

Employee recognition Displacement

1990s

Changing demographics of workforce Technology

2000 and beyond

Strategic HR planning

other benefit plans Training and development Separate divisions within personnel established: recruitment, labor relations, training, benefits etc. Employee involvement Management by Objectives, Quality circles, Sensitivity training Employee rights issues now regulated in areas of discrimination, equal opportunity, safety and health and various benefit reforms Enrichment of employee knowledge, skills and abilities through: job rotation, formation of integrated task teams and outplacement Diversity programs Employees rights issues Global perspective Information technology Transition from service and support to consultative and leadership role

The Hawthorne Studies from the human relations movement find widespread applicability

Peter Druckers encyclopedic The Practice of Management (1954) finds widespread applicability Griggs v Duke Power is the first US supreme court employment discrimination case.

William Ouchis Theory Z examines the applicability of Japanese employment practices to Western Companies

About 70 percent of married women areemployed, more than double the 1960 rate

Exemplified by David Ulrichs Book Human Resources Champions which examines the role of HRM in the 21st century

1.3

Human Resource Management Model and Subsystems Organizational

Societal

Professional

Figure: Human Resource Management Model and Subsystems The diagram shows the interaction between HR objectives and activities and their interaction with the environment. 1. Objectives of Human Resource Management Organizational Objectives Forming and maintaining an efficient and motivated workforce Enabling an organization to reach its goals

Functional Objectives:

Employing the skills and abilities of the workforce efficiently to achieve organizational objectives Communicating HRM policies to employees

Societal objectives: Being ethically and socially responsive to societal needs Minimizing the effect of societal demands on the organization Personal Objectives: Helping individual employees reach their goals, leading to their contribution to the organization. Keeping the workforce satisfied and motivated

2. Human Resource Management Subsystems

Frameworks and challenges o The challenges the organization faces include changing demand of workers, international and domestic competitors, professional ethics and the government to name a few. Challenges can also arise from within the organization such as competition amongst departments with regard to budget etc. Preparation and selection o Data on various jobs in the organization and its future needs, background information of each employee, database of talent pool, etc are fed into the Human Resource Information System (HRIS). This information plays a crucial role in job design, in setting job standards and requirements, and in estimation of future needs, which enable the HR department to be proactive in recruitment and selection. Development and evaluation o Newly placed employees are developed through training. This leads to a o productive workforce. Evaluation of employees is accomplished through performance appraisals. Appraisals enable the workers to receive feedback on their performance which in turn leads to further development. Compensation and Protection o Retention and maintenance of an effective workforce is managed through

compensation. The compensation must be relative to that of employees contribution to the organization; this also includes incentives for increasing motivation.

Besides paying salary and incentives, organizations need to protect the rights of the employees and this is accomplished partly through health and safety benefits.

Employee relations and assessments o Employee relations try to promote effective communication to ensure o employee satisfaction. Healthy communication amongst employees and management increases productivity. Counseling and mentoring are part of HR departments efforts for the employee. This process starts with self-assessments that help to identify strengths and weaknesses, which in turn leads to employee satisfaction and organizational development. 3. External Environment The external environment holds the following challenges: Demographic challenges: workforce diversity Diversity exists in people through their core values, personal / physical appearance, organizational placement etc. It is not only race, gender and religion that define diversity. It is imperative that the organization understand its nature of diversity present in its current workforce. It is also important that the organization proactively maintain a diversified workforce that reflects the general population. It is the role of HRM to accommodate the diverse workforce in an organization in order to adapt to the radical changes in the environment. Technological challenges Job requirements and standards change due to ever changing technology. Increased technological dependence may be positive or negative for the organization. Worker alienation is one of the downsides of technological advancement. The upside includes the reduction of costs that would have incurred for compensating jobs previously held by employees that are now being done through automation. Furthermore, technology is posing challenges that ought to be met with more intense communication, change in the dimension of leadership, new training modules etc. Economic challenges Economic challenges put the pressure on management to increase the productivity of employees. Expansion of the economy leads to the necessity of newer employees and training programs. Therefore, there is an increasing demand for better working conditions, higher wages and other benefits. Recession, a very crucial economic challenge, emphasizes the necessity of a proficient workforce. Through monitoring the environment continuously HRD can be proactive in dealing with swings in the economy.

Government Enforcement of laws gives the government direct control over the organizations activities. It thus has an immediate impact on the management and human resources. One of the roles of the HR Department is to look into compliance issues and develop proactive measures to minimize any obstacles that are created through the enforced laws. The laws implemented by the government include mainly laws concerning employment discrimination, labour management and unionization, employment contracts and benefits etc. Cultural challenges Population growth rates and demographic changes mirror changes in our culture. Changing values have for example, led to increased participation of women in the workplace. Changes in peoples opinion of work has led to employees demanding longer vacations, more holidays, non conventional work schedules etc as a way to ensure work-life balance. 4. Internal environment The internal or organizational environment holds the following challenges: Unionization Unions represent a monumental challenge to an organization. Some organizations believe that it is in the interest of the organization to discourage unions; while others feel it is an effective way to hear the voice of the employees. For both unions and management (including the HR Department) of any organization, the aim is to achieve company objectives without infringing any part of the agreement between them. Information systems The acquisition, storage and the retrieval of timely information is a challenge for the HRD. Accurate, timely and relevant information is crucial to the efficient performance of an HRD. The effectiveness of HR decisions depend on nature of the information used. Organizational culture and conflicts The culture of an organization is a reflection of its people and its achievements. The concept of equifinality deals with the concept of choosing the best route from multiple routes to reach an objective while simultaneously maintain the organizations culture. It is always a challenge for the HR Department to orient employees and assist in adapting them to the culture of the organization.

5. Dealing with Environmental Challenges

6. Current & Future Challenges of Human Resource Management

With the advent of the twenty-first century, HRM may face some of the biggest challenges since its definition as a separate staff function some ninety years ago. Several of the factors that have transformed HRM into a more strategic function are as follows: A. Corporate Reorganizations. Corporate reorganizations through mergers, acquisitions, divestitures, and massive restructuring or gaining economies by combining efforts have become commonplace. These types of reorganizations usually affect many employees at all levels of the organization. Potential changes include the following: 1. 2. 3. 4. 5. 6. 7. 8. Loss of job, pay, and benefits Job changes, including new roles and assignments Transfer to new geographic location Changes in compensation and benefits Changes in career possibilities Changes in organizational power, status, and prestige Staff changes, including new colleagues, bosses, and subordinates Change in corporate culture and loss of identity with the company

B. Global Competition. Organizations are now competing in the global business environment. Their challenges are not limited to market penetration and acquiring cost advantage, but also manage a diverse array of human capital all across the globe. Also, major adjustments in the relationships between employees and employers have occurred. Many workers have had to move to the service economy for jobs. 1. Many organizations are forming international joint ventures (IJVs). An IJV is achieved when a new organization or partnership is formed by two or more companies from different countries for the purpose of conducting a new business. Several HR issues are related to IJVs. The HR professional is becoming increasingly involved in the success of the IJV. For example, the selection, placement, training, and compensation of employees selected to work in the IJV is a major concern of HR professionals.

2.

C. Cyclical Growth. Cyclical organizational growth has meant that employees have to cope with uncertainty by continually upgrading their skills and by being prepared for sporadic layoffs. Managing HR during an economic downturn will be a significant challenge in the new century. D. Increasing Diversity in the Work Force. 1. There has been a rapid and dramatic growth in the number of women and minorities in the work force. This has forced organizations to reexamine policies, practices, and values. Many changes have occurred. Yet many organizations still lack women and minorities in high-level managerial roles. 2. Dual-career families, in which both partners are actively pursuing professional careers, are forcing organizations to reconsider relocation decisions and policies. The dual-career family is much more restricted than the single-career family in its ability to relocate, possibly hindering organizational flexibility in acquiring and developing needed talent.

3.

The average age of the senior management employees is coming down. With qualified employees moving fast up the career ladder, there is an increasing number of employees facing career plateaus. This is becoming a challenge for the HR department.

E. Employee Expectations. 1. As education levels have increased among the population, the values and expectations of the employees have shifted. This has resulted in an increased emphasis on employee participation at all levels of the organization. 2. Employees are also expecting an improved quality of work life, owing in part to technological advantages. 3. Another expectation that may increase in the future is the flexibility to work at home, as employers take steps to support employees family responsibilities.

F. Organizations as Vehicles for Reaching Societal Goals.

1. 2.
3.

Organizations are increasingly being expected to play a role in the accomplishment of social and political goals in the process of earning a profit.
Legislative requirements require organizations to deal fairly with diverse workforce while hiring, promotion, and other aspects of business operations. Societal and legislative changes will affect organizations and their HRM policies and practices.

1.4

Strategic Role of Human Resource Management

Successful companies are those that consider their human capital as their most important asset; and organizations focus on the value of this human capital pool so as to have a direct business impact (and be able to measure that impact in a meaningful way). Facts and figures are the quantitative elements of successful management, yet the qualitative aspects, are those that actually make or break an organization. The central challenge of any society is the continuous improvement of its organizations. Factors that require organizations to continuously innovate and determine their competitive advantages include: Rapid change Rapid technological advancements High levels of uncertainty about basic business circumstances Increasing costs Changing demographics More limited supplies of trained and skilled labor Rapidly changing government legislation and regulations Increased globalization of industries

Under these conditions in the basic business environment, an organizations continued success lies in its ability to attract, train, and retain high performing employees. The traditional view of Human Resource Management The traditional view of HRM typically includes the following activities: Human resource planning Recruitment Job analysis Establishing performance review systems Wage, salary and benefits administration Employee training

Personnel record keeping Legislative compliance (affirmative action, EEO, etc) Labor relations

Much of the time of HR units in the traditional view is spent on: 1. Gathering, tracking and maintaining employee data 2. Ensuring compliance with internal operational processes, legislations and other external regulations, and union terms and conditions 3. Help with the implementation and administration of traditional HR routines 4. Developing new HR systems and procedures The traditional role of personnel departments are centered on limited functional tasks, and the staff and its activities are isolated from the real work and profit-making heart of the organization. Strategic Human Resource Management (SHRM) This approach includes all the activities carried out in the traditional view of HRM, but also incorporates the development of new structural and cultural patterns to utilize an organizations human resources more effectively in order to meet changing market conditions and other factors in the basic business environment. SHRM assists an organization in achieving its strategic objectives and competitive advantages, by promoting efficiency of employees and interacting with other functional areas within the organization. SHRM practices include: High levels of employment security High levels of information sharing Selective hiring procedures Emphasis on teams and decentralized decision making High employee pay structures Extensive employee training Procedures promoting the reduction of status distinction among employees

Traditional vs. Strategic views of HRM (a) Personnel the traditional view The Organization Personnel Staffing Pay Training

Research and Development Production

Finance

Marketing

(b) HRM the strategic view

Theoretical perspectives Different theoretical models suggest different perspectives of practicing strategic human resource management in an organization. Some view SHRM is universalistic while others look at HR functions as an integrated bundle of practices. Another school of thought considers developing own human capital is the core strategic orientation to HR management.

There are seven key elements that are required in developing SHRM in an organization, no matter which perspective is adopted: 1. 2. 3. 4. 5. 6. Internally transforming HR staff and structure Enhancing administrative efficiency Integrating HR into the strategic planning process Linking HR practices to the business strategy and to one another Developing a partnership with line management Focusing on the value of the human capital pool within an organization so as to have a direct business impact 7. Measuring the impact of the organization in a meaningful way Universalistic perspective This approach states that there is one best way to manage human resources. SHRM transforms best traditional HRM practices into a limited set of financially measurable HR procedures that are universally applicable and directly relate to the performance of the organization. Strategic best-fit perspective This approach involves matching and adopting specific HR practices to the organizations overall business strategy, such as other HR policies and practices, and important elements of the organizations strategic plan. There are three aspects of fit within this perspective: Horizontal fit It refers to the consistency among various HR policies within the organization. E.g., if an organizations selection process seeks to hire highly innovative, risktaking employees, the organizations performance appraisal and reward system must also evaluate and reward innovation and risk-taking. Vertical fit The extent to which HR policies are consistent with the organizations overall business philosophy. E.g., if an organizations competitive advantage in its industry is their customer-oriented business strategy, the organizations HR training programs must contain elements that assist employees to develop and polish their customer relations skills. External fit The degree to which HR practices of the organization are aligned with specific aspects of the external environment. E.g., demographic changes occurring in the external environment result in a more multicultural workforce. Diversity management training, remedial language training, or new approaches to selection of employees from non-majority cultures may be required as part of the overall HR system to fit this new external environment and enhance the competitive value of the employees. Configurational perspective As employee performance is determined by a number of factors as opposed to one, this approach states that various configurations, or bundles, of HR practices go together and collectively improve business performance. It is based on the assumption that employment

practices often complement and support each other; so the implementation of one employment practice is more effective when it is adopted in combination with other practices that complement it. Configurational perspective is different from the universal perspective in that certain bundles, or quality circles, are effective in certain industries or in certain business conditions; other bundles should be used in other industries or under different business circumstances. Resource-based perspective This approach is built around the idea that organizations gain competitive advantage when they possess resources that are rare, valuable, difficult for competitors to emulate, and organized in a manner so as to maximize their overall worth to the organization. The organizations success can be achieved by enhancing an organizations ability to acquire, develop, utilize and retain employees with high competence levels relevant to the organizations activities. This can be achieved by solving the following SHRM questions: 1. How can the HR function aid in either increasing revenues or decreasing costs in the organization; that is, adding value? 2. How can the HR function identify and best utilize the rare skills and characteristics of the employees? 3. How can the HR function help create a labor force that is very difficult for other competitors to imitate? 4. How can the HR function help structure the organization so that it can make the most of its human capital advantage? There are three major implications of the resource-based perspective on SHRM:

1. HR managers must focus on the human capital pool within their firm, i.e. the
existing skills, abilities and knowledge of the organizations employees at any one particular time. Organizations can gain competitive advantage by -

a. Developing a human capital pool consisting of higher overall levels of skills,

abilities and knowledge than its competitors b. Ensuring the human capital pool is closely aligned with the strategic objectives of the organization c. Constant monitoring and feedback of the characteristics of the human capital pool, as its nature is subject to change over time 2. HR managers must develop systems to ensure that the employees discretionary behavior is directed towards and in line with strategic activities that contribute to the organizations benefit.

3. HR managers must focus on the development of multiple approaches as opposed to single practices to affect employee performance. These practices must include, apart from traditional HR functions, activities related to critical aspects of an organizations life, such as organizational culture and leadership.