Introduction to Human Resource

Management (HRM)
and
Human Capital Management (HCM)
 Introduction to HRM/HCM
Background/context of Human Resource
Management

Understanding the basics of Human Capital

HRM Functions and Role of Line Managers in HR

Paradigms in Human Resource Management /

Sensitizing on the HR External Environment

Recruitment & Selection

 Understanding the Concepts
Personnel Management Vs Human Resource
Management

Human Resource Management and Human Capital

Management

HRM and HRD – distinction

Job description and Job Specification

Recruitment & Selection

What roles do line managers play in HR functions?

 Introduction to Human Resources
Accepted that we all are human resources, but we
are humans first and resources later (Rutvik Oza).

To win the marketplace, you must first win the

workplace (Doug Conant).
 The Evolution of Management Thoughts

1900 1920 1930 1940 1950 1960 1970

Scientific Management

Administrative Management Theory

Bureaucracy Theory

Human Relation Approach

Management Science

Organization Behaviour

System Theory

Contingency Approach
 Human Relations Approach
The most important contribution to the
human relation approach to management
came from the Hawthorne studies,
performed at the Western Electric
Company, U.S.A., which started in 1924.

Initially, the company’s engineers

examined the effect of illumination on
workers’ productivity by clustering the
workers into: control groups and
experimental groups.

In 1927, Harvard Professor Elton Mayo and

his associates joined the study as
consultants and carried out a number of
experiments.
Key principles of Human Relation Approach
o Productivity is strongly affected by social
and psychological factors, not simply by
physical ability.

o Workers respond to management as a

group.

o Informal system will react with the formal

system.

o Individuals are active and not passive in

an organization.
o Paying positive attention to people has
great deal to do with productivity.

o Non-economic rewards and sanctions are

significant determinants of workers’
motivation and their level of job satisfaction.

o The highest degree of specialization is not

necessarily the most efficient approach.
 Much of the reforms across the world has
focused on moving from administration to
management to governance.

ADMINISTRATION MANAGEMENT GOVERNANCE

 GOVERNANCE
Outcome oriented
MANAGEMENT
(NEW PUBLIC
MANAGEMENT) Citizen empowerment
ADMINISTRATION
(Traditional)
Output (Results) Collaboration and
oriented networking
Focus on processes,
rules and inputs
“Customer” service
focus. Co-Creation
Internal focus; external
environment not important
Privatization/ Government is enabler
outsourcing – facilitator and catalyst
Little concept of “service”
for change
Government is
Government is Provider purchaser
 There are paradigms shifts in HR too as in
administration, management and governance.

HUMAN
RESOURCE
DEVELOPMENT

HUMAN HUMAN
PERSONNEL
ADMINISTRATION
RESOURCE CAPITAL
MANAGEMENT MANAGEMENT
 HUMAN CAPITAL
MANAGEMENT
HUMAN RESOURCE Strategic alignment
MANAGEMENT between HR and
organizational goal
PERSONNEL Functional
ADMINISTRATION specialization
Investment in
Focused on processes, Understanding People/Human Asset
rules and inputs employee
behaviour
Focused on efficiency Outcomes/results
Little focus on oriented
Seen as a clerical continuous HRD
role/record keeping job Continuous Employee
Expenditures on Development
Little attention to people treated as
employee welfare costs
Critical asset for
Competitive Edge
 Personnel/Human Resource Management
 In early days, personnel function was
considered to be a record-keeping job.

 Personnel Administration is concerned with

administrative and routine matters
(maintenance role) of HR functions.

Whereas HR activities in contemporary

organizations is vast ranging from:
attraction, retention/utilization,
compensation, motivation, career planning,
empowerment and maximizing productivity
(HR developmental role).
Human Development is defined as the empowerment of
people to expand their choices through enlargement of
opportunities in such areas as employment, education,
health, nutrition and environment.

HDI Index includes variables like: life expectancy,

education index, standard of living, etc. Bhutan ranks
134 out of 189 country in HDI (MDC category).

Human Resource Development (HRD) is an operational

expression of Human Development and aims at
empowerment of people by intervening/taking
important measures in the fields of education, health,
social environment, physical environment and other
related areas.
 Human Resource Management
 HRM is a concept that puts the human
resource development in an organizational
context.

 HRM in practice represents the concept of

right person in the right place for the right
work for the right length of time.
 Disciplines and functions that influence
organization/business strategy and planning
Time Discipline Concepts/Tools

1960s Economics Econometric models, National Income &

Product Accounting

1970s Marketing Market Share, Matrix Approach to

Business Strategy

1980s Finance Portfolio – Risk and Reward on

investment of asset
1990s Human “People at the Center”
Resource “Investment in people” – Human
Asset/Human Capital/Talent Mgt.
“Creating and Managing Knowledge
Workers”
“HR - Source of the Competitive Edge”
 Importance of HR (Toyota Motor
Manufacturing)
 “People are behind our success;
machines don’t have new ideas, solve
problems, or grasp opportunities….

Every auto plant in the U.S. has

basically the same/similar machineries.
But how people are developed, utilized
and involved varies widely from one
company to another.

The workforce gives any company its

true competitive edge”.
One machine can do the work of
fifty ordinary men. No machine can
do the work of one extraordinary
man.” – Elbert Hubbard 
 Who Performs HR Functions

What are the roles of line managers in HR? - depends on the

organizational policy.

HR Functions are generally carried out both by the line managers

as well as human resource managers.

Line managers are direct contact with the employees and lead the
employees to achieve the targeted objectives/goals. This requires
leadership quality.

Line managers cascade down goals and targets to the employees,

invest time in performance planning, monitoring, coaching and
evaluation, and plan appropriate capacity development for the
employees.

Line managers are also involved in HR planning, recruitment, and

selection of employees. However, line managers require technical
support from the HR managers/specialists.
 Human Resource Functions

- What are common HR functions in an

organization?
 Human Resource Functions
Human Resource Planning

 Aligning HR plans to the mission, vision and strategic goal

of the organization

 Assess Demand of Human Resources

 Assess Supply of Human Resources

 Identify the Gap (D-S = ?)

 Actions to address the Gap (recruit, retrench, train, etc)

 Monitoring and Evaluation

 Recruitment, Selection and Appointment

 Deciding on the sources of recruitment

 Making contact with prospective candidates

 Deciding on the selection process and methods.

 Planning/conducting selection tests

 Tests Validation

 Appointment
 Orientation & Onboarding
Orientation is one component of new-employee socialization
process.

Orientation is one aspect of the onboarding process while

onboarding is an ongoing process of building engagement from the
first contact until the employee becomes established within the
organization.

Onboarding enables a new employee understand organizational

culture, develop productive relationships, learn systems and
organizational protocols, understand performance expectations
and deliverables, and be an active member of the organization.

Does your organization provide systematic orientation and

onboarding programs?
 Training and Development
Developing Training Need Analysis (TNA) is crucial to develop
relevant training.

Training focuses more on the current position and short-term

needs.

Development is associated with systematic capacity

development programs, succession planning and career
oriented development programs.

Do you have only training plan or do you have overall

development plans of the employees? Ask yourself.

How do you measure training and development programs – do

you have a system in place?
 Performance Management
A good performance management system enhances
productivity of employees and enhances value of
employees.

Setting performance standards anchored to performance

targets and with transparency.

Monitoring the employee performance and appraising

performance

Motivating and rewarding & refinement of the system.

 Career Management

Matching individual’s career needs with the

organizational needs.

Providing career information, performance feedback,

developmental assignments, coaching, mentoring,
etc.

Helping employees to self-actualize (self-fulfillment)

their potential.
 Compensation
Legal consideration in compensation – Legislation
affecting compensation, eg. minimum wage, retirement
benefits, overtime pay, etc.

 Providing inputs on any compensation plans.

 Equity – The need for equity is important in

determining pay rates, specifically external equity and
internal equity – pay must compare favorably with
rates in other organizations and it must also be
equitable internally.
 Labour Relations

Labour Unions in many countries are

legalized.

HR personnel must be equipped with

adequate knowledge of labour laws, and
Acts, grievances procedures, collective
bargaining procedures, etc.
 Employee Safety, Health, and Welfare
Compliance to occupational Safety and Health Acts

Occupational injuries and illness must be recorded and

reported

Ensuring Safety Standards in the Workplace

Orienting/Educating Employees and Employers on Safety

and Health

Alcoholism and Substance Abuse

Job Stress and Burnout
Workplace Violence
 Human Capital
 Definitions

 Employees’ knowledge skills and capabilities that are of

economic value to organizations (Snell and Dean, 1992)

 A combination of factors possessed by individuals and

the collective workforce of a firm. It can encompass
knowledge, skills and technical ability; personal traits
such as intelligence, energy, attitude, reliability,
commitment; ability to learn, including aptitude,
imagination and creativity; desire to share information,
participate in a team and focus on the goals of the
organization (Abeysekera and Guthrie, 2005).

 Human capital refers to individual’s knowledge, skills

and expertise. It is the ability of the employees to do
things that ultimately make the company work succeed
(Chowdhury and Mishra, 2010).
 Human Capital Management

It is a concept which treats people as an asset

rather than mere overhead; creating value in the
people through prudent investment and
management practices and approach.

HCM focuses on acquiring, developing, retaining

and leveraging the workforce to enhance
productivity.

Intellectual capital is critical for a creative

economy.
 HRM & HCM
Generally, the terms are used interchangeably.

HRM focused more on administrative HR functions,

systems and processes while HCM aims to maximize the
value of people in an organization. HCM is strategic in
nature.

HCM, besides emphasizing on acquiring KSA and

developing appropriate HR systems, focuses on the
alignment of KSA to the organizational goal and thereby
adding value.
HCM CONNECTS HRM AND ORGANIZATIONAL GOALS/
STRATEGY

AGENCY
HCM
HRM GOAL

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 THE ELEMENTS OF HUMAN CAPITAL

Human Capital

Intellectual capital (eg. Social capital (eg. team

Intellectual capital) work, synergy, co-creation)

Organizational capital
(know-how, goodwill,
database of knowledge)

This resource is part of a range offered free to academics and/or students using Armstrong’s Essential Human Resource Management Practice as part of their course.
For more academic resources and other FREE material, please visit www.koganpage.com/resources and then click on Academic Resources.
 Key Elements of Human Capital
Intellectual Capital
It refers to the creative and innovative brainpower existing within the
organization. It is the intangible asset of the organization (Bontis,
1998).

Social Capital
Social capital is acquired from the collective wisdom. It can be from
outside or within the organization. Social capital is explained as those
factors that allow the people to work collectively to fulfill the mutual
goals. Factors include mutual trust, values and certain standards
(Putnam, 1996).

Organizational Capital
Organizational capital refers to values that are created through structure,
systems, and culture. It also refers to database of information, know
how, experiences, problem solving techniques and other related areas
for effective operation of the organization.
Human Capital Management
(key drivers)
Strategic Partner is about alignment of HR activities to
the organizational goals.

Change Agent function is associated with supporting the

change and transitions in the area of human capital
management in the organization.

Administrative Expert is associated with providing

quality service related to human capital management
with efficiency to the organizations.

Employee Champion function is taking care of

employees’ interest and safeguarding them.
A Environment Assessment of HR (PESTEL)