Introduction

Human resources may be defined as the total knowledge, skills, creative abilities, talents and
aptitudes of an organisation’s workforce, as well as the values, attitudes, approaches and beliefs
of the individuals involved in the affairs of the organization. It is the sum total or aggregate of
inherent abilities, acquired knowledge and skills represented by the talents and aptitudes of the
persons employed in the organization.

From the national point of view, human resources may be defined as the knowledge, skills,
creative abilities, talents and aptitudes obtained in the population; whereas from the viewpoint of
the individual enterprise, they represent the total of inherent abilities, acquired knowledge and
skills as exemplified in the talents and aptitudes of its employees.

The concept of Human Capital Management has been around for years, but its meaning remains
ambiguous, and the term is often interchanged with others, such as human resource management,
organization management, and personnel change management. Human capital is the stock of
competencies, knowledge, social and personality attributes, including creativity, embodied in the
ability to perform labor so as to produce economic value. Human capital management is an
approach to employee staffing that perceives people as assets (human capital) whose current
value can be measured and whose future value can be enhanced through investment.

Of all the resources available to an organization, human resources are considered the most
important for attaining the objectives of the organization. Hence, employees are now referred to
as human capital, human assets, or human resources.

The term capital refers to wealth, money, or property. Capital is used to generate more wealth for
an organization. When employees are referred to as human capital, it is implied that they are the
resources that generate more ‘wealth’. Human capital refers to the collective skills and
knowledge of the total workforce of an organization that hold economic value for the
organization. It enhances the productivity and profitability of the organization. In order to ensure
that human capital generates more wealth as well as leads to value creation, it is important that
human capital is utilized and managed efficiently and effectively. When the value of people is
enhanced, it enhances the value of the organization. For example, when an organization provides
opportunities for development and an environment conducive to performance, it will result in
higher levels of retention.

The advent of the era of liberalization and globalization along with the advancements in
information technology (IT) has transformed the world around us. It has brought to centre stage
the importance of human resources, more than ever before. The purpose of human resource
management (HRM) is to enable appropriate deployment of human resources.

In a competitive scenario, effective utilization of human resources has become necessary and the
primary task of organizations is to identify, recruit, and channel competent human resources into

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their business operations for improving productivity and functional efficiency. Several authors
have tried to explain the meaning of human resources and one of the comprehensive definitions
was given by Leon C. Megginson, who described human resources as the sum total of the
knowledge, abilities and attitudes of all the employees of an organization. Effective utilization of
human resources as the sum total of the knowledge, abilities and attitudes of all the employees of
an organization. Effective utilization of human resources would lead to both accomplishment of
individual and organizational goals and creation of assets at the national level. It is in this context
that development of human resources, which involves continuous honing of employee skills, has
become vital for the very survival of organizations, let alone growth and development.

Process consisting of four functions – acquisition, development, motivation, and maintenance of

human resources. ----David A Decenzo and
Stephen P Robbins

Personnel management is the planning, organizing, directing and controlling of the procurement,
development, compensation, integration, maintenance and separation of human resources to the
end that individual, organizational and societal objectives are accomplished. --
--Edward Filippo

According to National Institute of Personnel Management of India, “human resource

management is that part of management concerned with people at work and with their
relationships within the organization. It seeks to bring together men and women who make up an
enterprise, enabling each to make his/her own best contribution to its success both as an
individual and as a member of a working group”.

In the words of Jucius, “human resource management may be defined as that field of
management which has to do with planning, organizing and controlling the functions of
procuring, developing, maintaining and utilizing a labor force, such that the (a) objectives for
which the company is established are attained economically and effectively; (b) objectives of all
levels of human resources are served to the highest possible degree; and (c) objectives of society
are duly coincided and served.

Human resource management (HRM or simply HR) is the management of an organization’s

workforce or human resources. It is responsible for the attraction, training, and rewarding of
employees, while also overseeing organizational leadership and culture, and ensuring compliance
with employment and labour laws (Wikipedia).

HRM is concerned with the people dimension in management. Since every organization is made
up of people – acquiring their services, developing their skills, motivating them to higher levels
of performance and ensuring that they continue to maintain their commitment to the organization
are essential to achieving organizational objectives. This is true regardless of the type of
organization.

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HRM is concerned with getting better results with the collaboration of people. It is an integral
but distinctive part of management, concerned with people at work and their relationships within
the enterprise. HRM helps in attaining maximum individual development, desirable working
relationship between employees and employers, employees and employees, and effective
modeling of human resources as contrasted with physical resources. It is the recruitment,
selection, development, utilization, compensation and motivation of human resources by the
organization.

Scope of Human Resource Management

IIPM has described the scope of human resource management into the following aspects:

1. The Labour or Human Resource Aspect – It is concerned with manpower planning,

recruitment, selection, placement, induction, transfer, promotion, demotion, termination,
training and development, layoff, and retrenchment, wage and salary administration
(remuneration), incentives, productivity etc.
2. The Welfare Aspect – This aspect is concerned with working conditions and amenities
such as canteens, crèches, rest rooms, lunch rooms, housing, transport, education,
medical help, health and safety, washing facilities, recreation and cultural facilities etc.
3. The Industrial Relations Aspect – This is concerned with the company’s relations with
the employees. It includes union-management relations, joint consultation, negotiating
collective bargaining, grievance handling, disciplinary action, settlement of industrial
disputes etc.

Objectives of HRM

Obectives are pre-determined goals to which individual or group activity in an organization is

directed. Objectives of personnel management are influenced by organizational objectives and
individual and social goals. Institutions are instituted to attain certain specific objectives. The
objectives of the economic institutions are mostly to earn profits, and of the educational
institutions are mostly to impart education and/or conduct research etc. However, the
fundamental objective of any organization is survival. Organisations are not just satisfied with
this goal. Further, the goal of most of the organizations is growth and/or profits.

Institutions procure and manage various resources including human to attain the specified
objectives. Thus, human resources are managed to divert and utilize their resources towards and
for the accomplishment of organizational objectives. Therefore, basically the objectives of HRM
are drawn from and to contribute to the accomplishment of the organizational objectives.

The objectives of HRM may be as follows:

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 1. To create and utilize an able and motivated workforce, to accomplish the basic
organizational goals.
2. To establish and maintain sound organizational structure and desirable working
relationships among all the members of the organization.
3. To secure the integration of individuals or groups within the organization by co-
ordination of the individual and group goals with those of the organization.
4. To create facilities and opportunities for individual or group development so as to match
it with the growth of the organization.
5. To maintain high employees morale and sound human relations by sustaining and
improving the various conditions and facilities.
6. To identify and satisfy individual and group needs by providing adequate and equitable
wages, incentives, employee benefits and social security and measures for challenging
work, prestige, recognition, security, status.
7. To strengthen and appreciate the human assets continuously by providing training and
development programs.
8. To consider and contribute to the minimization of socio-economic evils such as
unemployment, under-employment, inequalities in the distribution of income and wealth
and to improve the welfare of the society by providing employment opportunities to
women and disadvantaged sections of the society.
9. To provide an opportunity for expression and voice management.
10. To provide fair, acceptable and efficient leadership.
11. To provide facilities and conditions of work and creation of favourable atmosphere for
maintaining stability of employment.

Management has to create conducive environment and provide necessary prerequisites for the
attainment of the human resource management objectives after formulating them.

Importance of HRM

Significance of HRM can be discussed at four levels which are as follows:

1. Corporate Level – For an enterprise effective HRM leads to attainment of its goals
efficiently and effectively. HRM helps enterprise in the following ways:
a) Hiring required skill set and retaining them through effective human resource
planning, recruitment, selection, placement, orientation and promotion policies.
b) Development of employees by enhancing necessary skills and right attitude among
employees through training, development, performance appraisal etc.
c) HRM also takes care of optimum utilization of available human resource.
d) HRM also ensures that organization has a competent team and dedicated employees
in future.
2. Significance at Professional Level –

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 a) HRM also leads to improved quality of work life, it enables effective team work
among employees by providing healthy environment. It also contributes to
professional growth in various ways such as by providing opportunities for personal
development of an employee.
b) Enabling healthy relationships among teams and allocating work properly to
employees as well as teams.
3. Significance at Social Level – HRM plays an important role in the society, it helps labour
to live with pride and dignity by providing employment which in turn gives them social
and psychological satisfaction.
4. Significance at National Level – HRM plays a very significant role in the development of
nation. Efficient and committed human resource leads to effective exploitation and
utilization of a nation’s natural, physical and financial resources. Skilled and developed
human resources ensure the development of that country. If people are underdeveloped
then that country will be underdeveloped. Effective HRM enhances economic growth
which in turn leads to higher standard of living and maximum employment.

Good HR practices help:

1) Attract and retain talent

2) Train people for challenging roles
3) Develop skills and competencies
4) Promote team spirit
5) Develop loyalty and commitment
6) Increase productivity and profits
7) Improve job satisfaction
8) Enhance standard of living
9) Generate employment opportunities

Successful organizations do not owe their success solely to market realities and sustainable
competitive advantages. Actually, there is a lot more. Successful companies are those that
consider their human capital as their most important asset.

Evolution of the Concept of Human Resource Management

Modern concept human resource management has developed through the following stages:

1. The Commodity Concept – Before the Industrial Revolution, the guild system was the
beginning of human resource management. Guild was a closely knit group concerned
with selecting, training, rewarding and maintaining workers. Industrial Revolution gave
rise to the factory system. Due to the separation of owners from managers, close
relationships between owners and employees were broken. Labour began to be
considered a commodity to be bought and sold.

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 2. The Factor of Production Concept – Under this concept, employees were considered a
factor of production just like land, materials and machinery. Taylor’s scientific
management stressed proper selection and training of employees so as to maximize
productivity. The employees were treated primarily as operating organizations of
machines or mere appendage in the process of production. However, this concept was an
improvement in so far as employees gained through better working conditions and higher
earnings.
3. The Paternalistic Concept – Employees organised together on the basis of their common
interest and formed trade unions to improve their lot. The growing strength of democracy
gave impetus to collective bargaining. The state also recognized that workers had a right
to protection in the employment. Due to all these forces, employers began to provide
schemes to workers. Employers assumed a fatherly and protective attitude towards their
employees. The welfare schemes included health facilities, recreation facilities, pension
plans, group insurance schemes, housing facilities, etc. Employers and employees both
began to realize that they cannot survive and prosper without each other.
4. The Humanistic Concept – Under the paternalistic approach, the employer was providing
benefits to employees as a favour. The humanitarian approach is based on the belief that
employees had certain in alienable rights as human beings and it was the duty of the
employer to protect these rights. The industrial psychologists pointed out that an
employee was not merely interested in material rewards. Rather social and psychological
satisfaction was equally important. This approach is also known as human relations
concept.
5. The Human Resource Concept – Several studies were conducted to analyse and
understand human behavior in organizations. These studies led to analyse application of
behavioral sciences to the problems of individual and group behavior at work.
Motivation, group dynamics, organizational climate, organizational conflict became
popular concepts. Employees began to be considered as valuable assets of an
organization. Efforts were made to integrate employee with the organization so that
organizational goals and employees aspirations could be achieved simultaneously. Focus
shifted towards management practices like two way communication, management by
objectives, role of informal groups, quality circles.
6. The Emerging Concept – Now employees are considered as partners in the industry. They
are gradually being given share in company’s stock membership. Workers’
representatives are being appointed on the board of directors. This emerging trend is
aimed at creating a feeling among workers that the organization is their own. Slowly but
steadily, human resource management is emerging as a special academic discipline and
as a profession. It is growing as a career with distinct specializations like human resource
development, industrial relations.

Thus, human resource management began as a record keeping function. Later on, administration
of labour agreements became its main task. Then it became the corporate conscience keeper

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concerned with morale of employees. After sometime the focus shifted to ‘scientific’ aspect
involving use of systematic techniques for employee selection, training and compensation. Under
the traditional approach employees were considered problems, procedures and costs. The modern
approach, on the other hand, looks upon them as a resource, an asset and an opportunity.

Environment of HRM

From the industrial era or the machine age to the information age – the evolution of the business
environment has been phenomenally fast. In the industrial era, the focus was on manufacturing
goods in a plant. The manufacturing process was organised around the concept of assembly-line
production. This resulted in job specialization in factories. The blue-collar worker performed his
or her part of the job without any idea of how it related to the end product. There was a
separation of ‘planning’ and ‘doing’. The worker was hired to ‘do’ and not to ‘think and plan’.
The white collar workers were rewarded for loyalty.

The end of the twentieth century heralded the era of the post-industrial economy, that is, the
emergence and evolution of the service economy. This era of the service economy came to be
called the ‘age of information and knowledge’. Rather than producing goods, the service firms
produce ‘ideas’. Organisations in the ‘services era’, such as software, financial services, and
biotechnology firms, depend on “intellectual capital”. People create ‘intellectual capital’ and are
therefore the most valuable asset of a firm.

The shift from manufacturing economy to a services economy, from production of goods to
production of ideas, and from the machine age to the information age has been accompanied by
many transformations. The environment within which firms conduct business today is very
different and much more complex and dynamic when compared to the environment 15 years ago.
Firms no longer compete or operate nationally only. Organizations are no longer governed by the
business, legal and political environment of their own nations only. As the world becomes one
global playing field, the environmental changes in countries other than the home country of a
firm affect business decisions and the performance of firms. Several societal and global
phenomena have challenged the management of human resources. Changes in the economic,
business, social and cultural environments have brought about a transformation in the HR
function and the roles and responsibilities of HR professionals.

The term ‘environment’ here refers to the “totality of all factors which influence both the
organization and the personnel sub-system”. External factors refer to technological factors,
economic challenges, political factors, social factors, local and government issues, unions,
employers’ demands, and workforce diversity. Internal factors refer to mission and policies of
the organization, organizational culture, organizational structure, HR systems.

Each of the external factors separately or in combination can influence the HR function of any
organization. The job of HR manager is to balance the demands and expectations of the external
groups with the internal requirements and achieve the assigned goals in an efficient and effective

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manner. Likewise, the internal environment also affects the job of HR manager. The functional
areas, structural changes, specific cultural issues peculiar to a unit, HR systems, corporate
policies and a lot of other factors influence the way the HR function is carried out. The HR
manager has to work closely with these constituent parts, understand the internal dynamics
properly and devise ways and means to survive and progress.

All these environmental factors individually or in combination pose challenges to HRM practices
and philosophy. The challenges like – going global, embracing new technology, developing
human capital, responding to the market, containing costs, increasing productivity, managing
change, responding to the market.

S. Environment Trends Human Resource Challenges

N
o.
1. Business Environment
Globalisation and increased ▪ Managing a global workforce.
competition ▪ Ensuring availability of employees who have the
skills for global assignments
▪ Focussing increasingly on employee
productivity to ensure competitiveness.
Ensuring legal compliance when conducting
business abroad.
Mergers and acquisitions ▪ Managing employee insecurity during mergers
▪ Ensuring continued employee productivity
▪ Developing HR initiatives to manage employee
morale
Downsizing ▪ Managing organisational relationship with
survivors (employees who stay with the firm)
▪ Managing morale and commitment of survivors
▪ Providing outplacement services or relocation
for employees who lose jobs.
▪ Providing personal and family counselling to
employees who lose their jobs
2. Changing Nature of Work
Industry and occupational ▪ Managing workforce with flexible working
shifts patterns
▪ Focussing on competencies during hiring
process
▪ Designing incentive-based compensation
▪ Developing proactive employee development
programmes
Technological ▪ Managing a virtual workforce
advancements ▪ Managing employee alienation
▪ Developing training modules and conducting
programmes to provide employees with required

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 skills
▪ Retraining current employee to manage
obsolescence
▪ Providing work-life balance initiatives
Outsourcing ▪ Managing employee concerns about losing jobs
due to outsourcing
▪ Managing employee morale and productivity
Flexible work arrangements ▪ Managing the loss of organisational control over
work
▪ Developing programmes for motivating the
flexible workforce
▪ Developing ways of ensuring commitment of
the flexible workforce to the firm
3. Demographic, Societal and
Workforce Trends
Workforce Diversity
- Workforce ▪ Devising customised HR strategies for hiring,
composition retraining, and motivating employees belonging
to different generations
▪ Developing lifestyle-driven perks for the new
generation employees
▪ Developing work life programmes

- Workforce ▪ Ensuring the availability of skilled talent to fulfil

availability organisational needs

S. Environment Trends Human Resource Challenges

N
o.
Aging population and ▪ Finding replacement for retirees
workforce ▪ Managing the demand-supply gap for qualified
managerial talent due to a large retiring
workforce
▪ Developing mentoring programmes to ensure
the skills of experienced managers are passed on
to new managers.
▪ Reverse mentoring – in technological
advancements etc
▪ Obsolescence training and retraining of older
employees
▪ Managing retirement policies
▪ Conducting programmes to retain experienced
employees
Educated and knowledge ▪ Ensuring the continued supply of trained
workforce manpower
▪ Training new hires

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Women in workforce
Changing family structures
Global workforce
Contingent
workforce/workforce
flexibility
4. Changing Nature of
Employment Relationship
Personnel Management vs Human Resource Management
Personnel Management – Traditionally, the term personnel management was used to refer to
the set of activities concerning the workforce which included staffing, payroll, contractual
obligations and other administrative tasks. In this respect, personnel management encompasses
▪ Partnering with universities and developing
academic initiatives to meet projected shortage
of skilled manpower
▪ Training employees in computer skills,
communication skills, and customer handling
skills
▪ Emphasizing re-training and development
activities
▪ Strategizing to attract and retain educated and
skilled women workers
▪ Conducting programmes for women who opt for
career breaks
▪ Providing facilities such as creches, flexible
working hours etc.
▪ Developing work-life balance programmes
▪ Developing diversity training programmes
▪ Developing HR initiatives directed to workforce
diversity
▪ Identifying and training expatriate managers for
overseas assignments
▪ Developing equitable pay plans for individuals
working in different countries
▪ Developing systems to motivate the temporary
workforce and elicit commitment from them
▪ Helping the temporary employees to quickly
adapt to the organisation to reach their full
potential
▪ Offering challenging jobs to employees
▪ Managing rewards for enhancing employee
performance
▪ Providing opportunities for enhancing skills
through training, development, and educational
programmes
▪ Developing programmes for employee
commitment
▪ Understanding value differences across different
employee groups and customizing HR
programmes
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the range of activities that are to do with managing the workforce rather than resources.
Personnel management is more administrative in nature and the personnel manager’s main job is
to ensure that the needs of the workforce as they pertain to their immediate concerns are taken
care of. Further, personnel managers typically played the role of mediators between the
management and the employees and hence there was always the feeling that personnel
management was not in tune with the objectives of the management.

Human Resource Management – With the advent of resource centric organizations in recent
decades, it has become imperative to put “people first” as well as secure management objectives
of maximizing the ROI (Return on Investment) on the resources. This has led to the development
of the modern HRM function which is primarily concerned with ensuring the fulfillment of
management objectives and at the same time ensuring that the needs of the resources are taken
care of. In this way, HRM differs from personnel management not only in its broader scope but
also in the way in which its mission is defined. HRM goes beyond the administrative tasks of
personnel management and encompasses a broad vision of how management would like the
resources to contribute to the success of the organization.

Differences between Personnel Management and HRM

Dimensions PM HRM
Beliefs and Assumptions
Contract Careful delineation of written Aim to be ‘beyond contract’,
contracts ‘can do’ outlook
Rules Importance of devising Impatience with ‘rule’
Guide to management action Clear rules/mutuality ‘Business-need’
procedures
Behavior referent Norms/customs and practice Values/Mission
Managerial task vis-à-vis Monitoring Nurturing
labor
Nature of relations Pluralist Unitarist
Conflict Institutionalised De-emphasised
Strategic Aspects
Key relations Labor management Customer
Initiatives Piecemeal Integrated
Speed of decision Slow Fast
Line Management
Management role Transactional Transformational leadership
Key managers Personnel/IR Specialists General/business/line
managers
Communication Indirect Direct
Standardisation High Low
Prized management skills Negotiation Facilitation
Key Levers
Selection Separate, marginal test Integrated, key task

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Pay Job evaluation (fixed grades) Performance-related
Conditions Separately negotiated Harmonisation
Labour management Collective bargaining Towards individual contracts
contracts
Thrust of relations with Regulated through facilities Marginalised (with exception
stewards and training of some bargaining for change
models)
Job categories Many Few
Communication Restricted flow Increased flow
Job design Division of labour Team work
Conflict handling Reach temporary truces Manage climate and culture
Training and development Controlled access to courses Learning companies

What is Strategic HRM?

The emergence of strategic human resource management (SHRM) is an outcome of the concerns
on integration of HRM into the business strategy and adoption of HRM at all levels of the
organization. (In business, strategy would consist of a series of steps such as formulating
business objectives, conducting SWOT analysis, setting organizational goals, identifying
strategic alternatives, and conducting regular evaluation).

SHRM is about systematically linking people with the organization and integrating HRM
strategies into corporate strategies. HR strategies relate to the management of human resources in
an organization to achieve the desired objectives. The focus is on aligning the organization’s HR
practices and policies with corporate plans. This helps organizations to achieve competitive
advantage by creating unique HRM systems that cannot be imitated by others.

Strategic HRM focuses on the relationship of HRM with the strategic management of the
organization. It goes beyond the functional role of HRM and emphasizes proactive HRM at the
strategic level of the organization. Strategic HRM is concerned with the organizational
effectiveness and performance, changes in structure and culture, matching resources to the
present and future requirements of the organization, capability development, employment
relationship, and change management. Since corporate plans are implemented through people
and because human resources provide competitive advantage to the organization, it is important
to integrate HR considerations with the development of the strategic corporate/business plans.

Objectives of SHRM

The major objectives of SHRM are as follows:

- To ensure the availability of a skilled, committed, and highly motivated workforce in the
organization to achieve sustained competitive advantage.

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 - To provide direction to the organization so that both the business needs of the
organization and the individual and collective needs of its workforce are met. This is
achieved by developing and implementing HR practices that are strategically aligned.

The extent of application of SHRM within organizations, as well as the form and content of
SHRM, vary from one organization to another. Strategic human resource management is
practiced in only those organizations that have a clearly articulated corporate or business
strategy. Organizations that lack a corporate plan cannot have SHRM. Rather, in such
organizations, HR personnel carry out the traditional administrative and service roles and are
not concerned with strategic business issues.

Traditional HRM versus SHRM

Traditional HRM SHRM

Responsibility for HR Staff personnel in the HR Line managers; all managers
programmes department responsible for people are HR
managers
Focus of activities Employee relations – ensuring Partnerships with internal
employee motivation and (employees) and external
productivity, compliance with (customers, stakeholders, public
laws interest groups) groups
Role of HR Reactive and transactional Proactive and transformational,
change leader
Initiative for change Slow, piecemeal, and Fast, flexible and systemic, change
fragmented, not integrated with initiatives implemented in concert
larger issues with other HR systems
Time horizon Short-term Consider various time frames as
necessary (short, medium, or long-
term)
Control Bureaucratic control through Organic control through flexibility,
rules, procedures, and policies as few restrictions on employee
behavior as possible
Job design Focus on scientific management Broad job design, flexibility, teams,
principles – division of labour, and groups and cross-training
independence, and specialization
Important investments Capital, products, technology, People and their knowledge, skills
and finance and abilities
Accountability Cost center Investment center

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Link between Business Strategy and HR Strategy

A key factor that influences the linkage between business strategy and HR strategy is the
organisation’s quest to attain competitive advantage. An organization may pursue several
strategies to achieve its goals.

Three types of business strategies that may be adopted by an organization are cost leadership,
differentiation, and focus. This classification of business strategies was advanced by Porter
(1985), and has been extensively used in SHRM literature. According to Porter an organization
may adopt any one of the three business strategies in order to compete successfully in a
particular market, and gain and sustain superior performance as well as an advantage over its
competitors. The three business strategies and their characteristics are:

Types of Characteristics Examples

Business
Strategy
Cost leadership o The firm increases its efficiency, Retailers such as D’Mart, Big
cuts costs so that products/services basket
may be priced lower than the
industry average
o Assumes that a small change in
price will significantly affect
customer demand
o Assumes that customers show
greater price sensitivity than brand
loyalty – this is because the
products/services of each firm are
non-distinguishable
Differentiation o The firm distinguishes its Nike, Sony
products/services from its
competitors or at least attempts to
make consumers perceive that there
are differences
o The firm charges a premium for its
products/services because it offers
its customers something that is
unique, extraordinary, or innovative
o The firm seeks to develop brand
loyalty
Focus o The firm recognizes that different Clothes manufacturers that

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 segments of the market have cater to working women,
different needs and attempts to restaurants that target only
satisfy one particular group families
o The firm can charge a premium for
its services since the market has
overlooked these market segments

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