Script for Chapter 1

Human Resource Management (HRM):

Meaning, importance
 Human Resource Management (HRM): Meaning, importance

Chapter 1 Human Resource Management (HRM): Meaning, importance

Synopsis:

As we discussed in the course introduction, Human Resource Management is what most

managers do, whether their formal designations reflect that or not. From now on in this
course, we will refer to Human Resource Management as HRM for convenience. In many
companies, senior managers are rotated across departments or divisions. So, a manager
with qualifications in the area of Finance may also come to head the HRM department. In
small organizations, there may not be a separate HRM department, yet there would be
persons in charge of HRM functions. In short, management of human resources is a
required skill for managers across organizations, whether they have formal degrees in
the area, or not.

Through this course, we will be introducing HRM for current or aspiring professionals
whose primary training was in some other fields - in short, this is a course in HRM for
people with Non-HRM backgrounds. We invite you to participate in our discussion group
to narrate what kind of organization you represent and how you are connected with HRM
function and its processes. Or, if you are fresh graduate from a field where you haven’t
come across HRM before, how you became interested in this subject. For now, we would
discuss the meaning and nature of HRM, which is the primary objective of this session.

In today’s session, we are going to discuss - What is HRM, functions of the HR Manager,
and the currents trends in the role of a Human Resource Manager. Further, we will focus
on the concept and techniques required by non-HR managers along with the personal
aspects of management. Finally, we will conclude with why HRM is essential for non-HR
managers.

Next, we will spend some time looking at how different experts have defined and
explained HRM.

According to Edwin B. Flippo (2007), Human Resource Management is- “the planning,
organization, directing and controlling of the procurement, development, compensation,
integration, maintenance and reproduction of human resources to the end that individual,
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organizational and societal objectives are accomplished”. Adding more, Michael

Armstrong (2006) defined Human resource management as “a strategic and coherent
approach to the management of an organization’s most valued assets – the people
working there who individually and collectively contribute to the achievement of its
objectives”. As Dessler and Varkkey (2011) explained, an organisation consists of
people with formally assigned roles who work together to achieve the organisation’s
goals. A manager is a person responsible for accomplishing these goals by managing the
efforts of the organisation’s people. The following is a diagrammatic representation of
what Human Resource Management is.

Source: Dessler, G., & Biju, V. (2011).

Based on the description we just saw, HRM can be understood as a function involving
acquisition, maintenance, and development of human resources, compensating and
rewarding them, managing relations with them while they are with the organization, and
managing their exit. As you may know or guess, each of these broader functions host a
number of specific processes and activities. For example, acquisition of human resource
may require identification of how many people with what skills and qualification may be
required in future. Maintaining the HR may include caring about their health and safety.

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Reward and compensation may require appraisal of their performance. Discipline would
be essential, while compliance to legal provisions cannot be overlooked. People leaving
the organization may require management of separation process. In the following video,
one can see how even a non-HR manager performs all these processes in his/her daily
life.

You may have a question how all the tasks of an HR Manager are carried out. We
present the process of HRM next.

What is Acquisition of human resource? We sometimes hear, even outside the HR

community, the terms Human Resource Acquisition or Talent Acquisition. These terms
have recently become popular in the context of recruitment. While both the terms have
been used interchangeably, there is a significant difference between the two.
Traditionally, the human resource acquisition process has focused on filling open
positions in the organization, while the talent acquisition aims at building talent pools for
future hiring needs as elaborated by Dessler, G., & Biju, V. (2011).

Now let’s understand that by way of two examples. Abhay is an architect, who is working
for a firm which takes up projects from clients and provides consultation for design and
development of new buildings. Abhay reports to the Chief Architect who has just started
working on a new project. Abhay has just been told by his boss to find and hire two
draftsmen from one of the local engineering colleges. Abhay could get the names of at
least ten engineering colleges in the city, and began to wonder how he was going to get
the two draftsmen for his boss. You are right, he has an HR acquisition problem at hand.
Not too far away, Kartik Patel, the MD of a software services firm was searching for a
senior professional whose joining could enable the company to bid for requirements in
those areas of software development, which the company had not so far. What he is
looking for is a talent, which can then form one of the components of business
development by the company.

At the operational level, though, these two functions are used interchangeably or seen as
overlapping, depending on the needs of the organization.

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Compensation: When we hear the term compensation, we mostly think about "how much
a person is getting paid". Although it is true, it is only one aspect of the term. Of course,
the compensation includes a person’s base pay, but in many organizations, the salary of
an employee is a multi-component package in which perquisites and allowances are
added as a percentage of base pay. Depending on the employee’s responsibilities and
the conditions of the job, expenses incurred may also be reimbursed. For example, Kartik
Patel’s firm may encourage his senior managers to read business magazines and books
so as to keep up with the current events and trends. The expense of subscription to
business magazines, reports and books may be reimbursed by the firm. Or, Abhay may
receive House Rent Allowance which could be 10 percent of base pay, while fuel
expenses incurred by him amy be reimbursed when he submits the actual bills.

Next is Training and Development: Have you ever trained the employees? Training
is the process of refining and enhancing the skills and capability of an employee so as to
improve current and future job performance. While the process is an integral part of
Human Resource Management, a lot of times even Non-HR Managers find themselves
imparting training or helping in the skill development of fellow employees.

If Abhay, the architect demonstrates to his new recruits how to fill up some of the details
required in an RFP or Request for Proposals so that his form could bid for new projects,
he is training his employees.

Even if you may not have appraised someone else’s performance, you may have
received one for yourself, and you may have heard about it from others.
Performance Appraisal, which may be an annual, bi-annual or quarterly exercise, is a
process under which the job performance of an employee is examined and discussed in
order to identify his/her strengths and weaknesses along with the opportunities for
improvement and skills development. In most organisations, appraisal results are used
either directly or indirectly by the management to decide matters relating to pay increases,
bonuses, and promotions.

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 Human Resource Management (HRM): Meaning, importance

Management of Employee Relations: The term Labour Relations, also known as

Industrial Relations, refers to the system in which workers and their representatives,
employees, employers and the government interact to set the ground rules for
governance of fair and amicable work relationships. As a manager, one may have
interacted with the government representatives, employees and/or workers in his/her
department regarding the work environment or related issues. For example, if Abhay is a
consultant for a large construction project, he may come to know that the builder is
responsible to provide basic safety and sanitation on the site for his workers. If they are
expected to stay on the site, temporary living quarters may also have to be constructed.
If the construction project employs male and female workers, they must be paid equally
for equal work. The obligations of employer are often defined by law, and they must be
complied with.

Health & Safety and Fairness: Non-HR-Managers play a vital role in ensuring well-being
or health and safety of employees in the workplace. While managers are not expected to
know the technical or physical aspects of workplace health and safety, they should know
when and how to use existing resources to respond to employee’s concerns. In many
organisations, health and safety responsibilities are within the human resources
department. However, in today’s complex work environments, non HR managers are also
increasingly getting involved in those processes as it is not always possible for the human
resources department to understand and address issues in all the other departments
explicitly. In order to meet these additional responsibilities and ensure smooth functioning
of their departments, managers must understand their health and safety responsibilities
at different supervisory levels within the organisation.

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 Human Resource Management (HRM): Meaning, importance

The visual representation of Human Resource Management Process may be made

as follows.

(Retrieved from the Source: http://www.whatishumanresource.com/human-resource-

management)

As we have seen in the diagram the process involves various functions like human
resource planning, conducting Job analysis, recruitment and conducting job interviews,
selection of human resources, employee orientation and training, compensation, benefits
and incentives, performance appraisals, employee retention, career planning, helping the
employees maintain quality of Worklife, Employee Discipline, prevention of harassments,
human resource auditing, maintenance of industrial relationship, looking after the welfare
of employees and safety issues and compliance with laws. In the end, the departure and
separation of the employees also need to be managed.

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We will discuss these processes and sub-processes of HRM in the coming

sessions as per the schedule.

Now, we will discuss their functional or operating aspects in detail. Whether the
organization is small or large, whether it is a manufacturing unit or a service organization,
whether it is capital-intensive or not, high-tech or not, whether it aims at making profit or
otherwise; it is impossible to imagine its strategy formulation and implementation, the
deployment of technology, or rendering service, catering to the needs of customers and
stakeholders without effective management of human resource.

Experts agree that there are five major functions of management: Planning, Organizing,
Staffing, Leading, and Controlling. In total, these functions represent the management
process. As a non-HR Manager, one may have performed some or all of these functions.
Next, we proceed to understand the specific activities involved in each function:

What is Planning- Planning is a common term and we all plan our activities in our daily
lives, whether it be deciding at what time to wake up in the morning so that we reach
school/college or work on time or deciding how much to spend on a particular activity.
From an organizational perspective, the term planning involves establishing goals and
standards for the organisation. It includes developing rules and procedures for the
company along with the present and future plans to execute and achieve those goals.

If the owner of a start-up is thinking about how many people to hire for the next year
because the business is doing well, and more help is needed, the promoter is not only
planning for the business in the next year, but HRM is involved, too.

Next is Organizing – Organizing involves creating a structure of a task or set of tasks.

Large and complex jobs or work are divided into smaller, more manageable components,
and then are integrated for achieving the final outcome. Specific tasks are assigned to
specific positions so that confusion is avoided. At the organization level, it includes
creation of departments, assigning authority and responsibility to the subordinates and
ensuring proper coordination among those departments.

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If an owner of an online business thinks of opening up a shop while continuing to sell

online, she is structuring her work. Soon her arrangement is going to involve HR in terms
of positions and recruitment.

Staffing: Staffing is a broad term which involves understanding and determining the type
of people to hire, recruiting prospective employees, selecting and allocating employees
to different departments are the major constituents of staffing function. However, once
the employees are hired, also required are functions such as training and developing
employees, setting performance standards, evaluating the performance of the
employees, counselling the employees and compensating the employees satisfactorily.

In the previous example of selling one’s product online as well as offline through a shop,
if the owner is thinking about hiring one shop manager and one shop assistant, as well
as one accountant, and is thinking about what should be their responsibilities,
qualifications and pay, then then she has not only structured the work and created
positions, but she is thinking about Staffing.

Leading: Leading is a versatile term which involves supervising the work of the
subordinates, creating a sense of purpose and direction among them, inspiring and
motivating the employees to accomplish the goals.

Leadership is a multi-dimensional function. It may be difficult to give an example which

illustrates all the dimensions in one. But, let’s say, when the business survives the initial
phase, at some point there may be a question involving how exactly will the growth be
achieved in future. Should there by more shops in more cities, or within one city first?
What new products will be added to the range of offering? Answers of these questions
are closely related to the strategy, which is usually provided by the leader. The direction
provided by the leader decide what kind of organizational capability will be required, and
in turn, that shapes the expectations in terms of employee skills, abilities, knowledge, and
more.

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Controlling: Controlling involves scrutinizing the actual performances with the

established standards and taking corrective action, if needed, in order to reach the goal.
Effective control helps ensure that performance benchmarks are met and deviation from
planned path is either avoided or minimized.

Effective management of HR helps the managers carry out the above functions with
greater effectiveness.

Now we will see some of the roles where a non HR Manager carries out the role of a HR
Manager.

● Conducting job analysis i.e. determining the nature of each employee’s job

● Estimating the need for new employees and recruiting candidates

● Interviewing and selecting the candidates who have applied for jobs

● Orienting new employees

● Training and developing employees

● Compensating employees for their work and accomplishment

● Providing incentives and benefits

● Appraising employee performance

● Communicating (for example instructing, giving feedback, counselling, disciplining)

● Building employee commitment

● Managing discipline, cordial employee relations, and responding to employee

disputes and other issues and problems.

● Complying with legal requirements

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What are the Common Issues and Trends in HRM?

In the modern era, managers face new and diverse challenges every day. Let us look at
some of them and ways to deal with those challenges.

a) Strategic issues

In order to realize the strategic intent of the organization, capabilities are needed. As the
environment changes, these capabilities change, too. The employees of the organization
need to develop competency to perform in ways that help the organization adapt to the
changes and achieve its goals. Effective managers support and guide desired employee
performance through setting up and implementing systems, policies and processes.

This aspect is vital for the organization as desirable employee behavior and skills don’t
develop overnight. It takes thoughtful planning and execution. Desired behaviors may be
best assessed or predicted by the managers working in that department. It is the
responsibility of the management and in turn, of the managers, to ensure that the skills of
the employees don’t become obsolete and that the employees stay productive, not only
in short term but also in medium to long term.

b) Improving Performance

An organization needs to meet its current and future performance needs in line with its
strategy. There would be areas where improvement would be required so that the
expected performance is realized.

The managers nowadays can use three main levers to improve the firm’s performance:

i) Operations of the department- Managers ensure that the human resources

deliver their outcomes effectively.

Some of the ways in which the efficiency of the human resources can be enhanced
are close attention to HR headcount, use of technology such as web-based
employee pre-screening and outsourcing some of the HR activities such as payroll
management.

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ii) Employee cost- Human Resource Manager takes a prominent role in advising top
management about the company’s staffing levels, and in setting and controlling the
firm’s compensation, incentives, and benefits policies.

iii) Strategic management- The HR manager puts in place the policies and practices
that produce the employee competencies and skills the company needs to achieve
its strategic goals. Not only does this makes the employees more robust in their
skill set but also helps achieve the organizational goals while helping the
employees derive satisfaction from their work.

c) Measure Performance and Outcomes

We just saw that apart from the organization’s performance, examples of other important
outcomes of its activity are employee satisfaction and turnover. Measurement is important
for effective management of both. Managers are expected to provide measurable,
benchmark-based evidence of the efficiency and effectiveness of the existing and
proposed performance and outcomes of their departments. Managers use metrics to
measure a number of skills which can be presented to management. To compare their
actual performance and other outcomes to the benchmarks, managers need to develop
a system of benchmarking, observing and measuring performance, and comparing the
benchmarks with the actuals. This can be done in-house as well as with the help of
consultants..

d) Evidence-Based Human Resource Management

Evidence-based human resource management means using the best available evidence
in making decisions about human resource management practices. Some of the
evidences could be analysis of user data, facts analytics and critically evaluated research
or case studies to support human resource management proposals, decisions and
practices. The evidence could be either subjective or objective.

For example, the evidence required for evaluating a training program may come from
subjective evaluations from the trainees. Did the trainees like the program? What are the
strengths and weaknesses of the way program was conducted and of the trainers? In

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other cases, the evidence may come from existing data such as analysis of financial
reports of the company, before and after a change has been implemented.

e) Managers Add Value

In 21st century, the biggest challenge for the managers is to add value by boosting profits
and performance. According to Professor Dave Ulrich and Wayne Brockbank, this is
known as the “HR Value Proposition” or in simpler words, how human resource programs
may be instrumental in achieving the desired goals and enriching the process. In short,
the manager may aim at adding value. “Adding Value” means supporting the firm and its
employees improve their functioning in a measurable way.

f) Talent Management

Talent management is the goal-oriented and integrated process of planning, recruiting,

developing, managing, and compensating employees. It involves putting in place a
coordinated process for identifying, recruiting, hiring, and developing employees.

With employers pressing for improved performance, one survey of human resource
executives found that “talent management issues” were among the most pressing ones
they faced. Managers play a vital role in talent management and thus in ensuring that the
best talent in the industry feels well compensated and happy, resulting in improved
performance for the company.

Common mistakes in HR Function

So far we discussed some basic features of HRM. What if HRM is not effective? We
present some common mistakes that managers make while handling HR functions:-

● Estimate incorrectly the number of new recruits needed: if the estimate is higher
than necessary, the organization will end up hiring more people than needed. You
can imagine the implication of that on the employee costs and morale. On the other
hand, if the estimate is lower than needed, the organization will not have enough

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employees for work required. That may result in unfinished tasks, stress to existing
employees, for example.
● Not plan effectively for recruitment and selection: As we will soon discuss,
recruitment is about generating a pool of potentially suitable candidates who will
apply for the job openings and selection involves filtering from among that pool to
ensure that the organization gets the most suitable employee for a job. If
recruitment and selection are not effective, then the expenses incurred for those
processes will yield lower returns, the job announcements may not reach the right
audience, managers will spend inordinately long time in sifting through the
candidates and the selection process may be biased and haphazard.
● Hire the wrong person for the job: if selection is not effective, the fit between the
job requirement and the ability of the person who is given that job may be poor. As
a result, either the job, or the employee, or both may suffer.
● Do nothing about high employee turnover: Employee turnover is a measure of how
many employees leave the organization each year. Some turnover may actually
be good, but when it is higher than desired, lack of effort to reduce it results in high
recruitment costs, cost of training and orientation, and loss of knowledge.
● Not linking employee performance effectively with pay: It is known that when the
employees performance and their subsequent recognition are in mismatch, there
are consequences for the organization as well as the employees. The employees
who feel neglected may lose motivation and may leave. Organization may not get
adequate return on its investment in HR.
● Not ensure compliance to legal requirements: Some HR managers express that
they are not legal experts. However, that is not true. Ignorance of law is not an
excuse for non-compliance. When the legal obligations are not fulfilled and
compliance not made, company and its managers face action, legal battle, penalty,
and loss of reputation. Employee rights may be unprotected, their morale may be
adversely affected, and employee turnover may increase.
● Neglect of discontent among employees: dissatisfied employees may not be
committed to their jobs and the organization. You can imagine that the quality of
their performance may also come down, deviant work behaviors such as
absenteeism and tardiness may increase. Sometimes strike might be declared.
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● Commit unfair labour practices: After discussing above errors, you might be able
to correctly guess the outcome of unfair practices as well in terms of morale,
satisfaction, motivation, and employee turnover.

If any of the above signs or practices is being followed by any HR or non HR Manager,
assigned with the HR responsibility, it’s time to re-examine the same and follow the
principles of Human Resources Management for better management and productivity of
the employees and thus the organization.

With this we are coming to an end of our first session of our first module. Please
read our online content, participate in the online forum, and answer the questions
we have listed based on what you have learned today. We will see you again soon!

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