Chapter 4: Managing Human Resources

The Concept of Human Resource Management

Human resource management (HRM) is the process of acquiring, training, appraising, and compensating employees, and of attending to their labor relations, health and safety, and fairness concerns. Many firms realize that the human resource function has a substantial impact on a firm’s bottom-line performance. Therefore, they align the firm’s human resource management goals and policies with the strategic goals of the enterprise in order to improve business performance. Strategic human resource management is the linking of the human resource function with the company’s strategies to achieve organizational goals.

Dealing with human resource issues is not the only the HR department’s responsibility. On the contrary, all managers are, in a sense, human resource managers because they all get involved in recruiting, interviewing, selecting, and training their employees. The success of any HRM program requires the cooperation of managers at different levels who must interpret and implement HRM policies and procedures. Even line supervisors select prospective employees, train them, make salary recommendations, and provide performance feedback.

Environment of Human Resource Management

Organizations operate in a changing environment. Internal environmental factors are issues that can be found within an organization’s internal environment. These factors can be indicated as personal and organizational factors, job characteristics in the organization, and interpersonal relationships. Employees have different needs, wants and expectations that change over time. Personal factors such as common values, employees’ perceptions of their roles and motivation affect human resource management. Job boundaries are becoming blurred because of technological developments and changes in today’s business world. Some organizational factors affecting human resource management are the size of the organizations, environmental climate, top management, structure of the organization and the sector, and the characteristics of the industry that the organization operates.

External factors can be defined as factors outside the organizations that cannot be controlled and changed by the organization. External environmental factors affecting HRM are workforce and demographic trends, government regulations, and economic challenges and trends. One of the most powerful forces affecting work organizations is changing worker demographics such as gender, age, ethnicity, seniority, and occupation. All the policies for human resource management should be in accordance with legal regulations. Organizations need to deal effectively with government regulations and HR departments play an important role by monitoring the legal environment and adapting the human resource practices. Every country has its own legislation and regulations. Equal opportunity, occupational health and safety, minimum wage, and industrial relations are affected primarily by legislation. Changes in the national economy also directly and indirectly affect human resource activities of firms in terms of recruitment, employment, redundancy implications, compensation, rewards, and salaries. Organizations should predict the future of the economy and plan their functions.

Human Resource Management Activities to Get the Right People

Many organizations look to ensure that they have the right number of the right people at the right time and at the right place.11 Primary human resource management challenges include determining how many people are needed and for how long, and where the company can provide the employees it needs. Once the organization determines its personnel requirements, it needs to select and hire the best employees to fill the available positions.

Planning is the starting point for all kinds of management processes including human resource management. Human resource management starts with planning which is the development of strategies to meet a firm’s future human resources requirements. Human resource planning is the process of assessing the future human resource need, determining the availability of the type of people needed and creating plans for how to meet the need.

Job analysis is the systematic process of getting detailed information about the skills, duties, and knowledge required for performing jobs in an organization. Job analysis provides a summary of a job’s duties and responsibilities, its relationship to other jobs, the knowledge and skills required, and working conditions under which it is performed. A job description is a written document that identifies, defines, and describes a job in terms of its duties, responsibilities, and work conditions. A job specification is a document containing the minimum acceptable qualifications that a person should possess in order to perform a particular job.

The first human resource planning activity entails forecasting labor demand which is determining how many and what type of employees the firm needs at a point in the future. next step in human resource planning is to estimate how many staff will be employed by the organization in the future. Labor supply is the availability of workers with the required skills in the future. two most commonly used techniques for forecasting human resources supply are the replacement chart and skills inventories. The replacement chart lists each important managerial position, who occupies it, how long that person will likely stay in the job, and who is qualified as a replacement. This technique allows sufficient time to plan developmental experiences for people identified as potential candidates to critical managerial positions. A skills inventory (human resource information system) is a computerized databank containing information on the education, skills, and experience of all present employees. When a manager needs an employee for a position, he or she uses key words to describe the position’s features in terms of skills and education. The computerized system then produces a list of qualified candidates.

The main purpose of human resource planning is to bring together the forecasts of demand and supply for human resources, both current and future. In case of labor shortages, organizations can develop several strategies to overcome these problems. If the shortage is small and employees are willing to work overtime, it can be filled with current employees. If there is a shortage of highly skilled employees, training and promotion of current employees, together with the recruitment of less-skilled employees, are possibilities. In case of a surplus, restricted hiring, reduced hours, early retirements and layoffs may be required to correct the situation. As a last resort, employees are sometimes simply fired.

Recruitment , the first step in the hiring process, consists of a set of activities that improves the number and quality of people who apply for employment, as well as the probability that qualified and compatible applicants will accept employment offers. Recruiting strategy and policy decisions entail identifying where to recruit, whom to recruit, and how recruiting will be done. One of the first decisions is to determine the extent to which internal and external sources and methods will be used. Both promoting from within the organization (internal recruitment) or hiring from outside the organization (external recruitment) to fill job openings have some advantages and disadvantages.

Internal recruiting from within the organization means using various sources developed and managed inside the organization. If an organization has been effective in recruiting and selecting employees in the past, current employees are often the best source of candidate pool. Job posting is publicizing the open job to employees (often by literally posting it on bulletin boards or company intranets) and listing the job’s attributes, like qualifications, supervisor, working schedule, and pay rate. Employee referrals : One of the best sources for individuals who will perform effectively on the job is a recommendation from a current employee. Many organizations have found that their employees can serve an important role in the recruitment process by actively soliciting applications from their friends and associates.

If a company cannot reach new employees by internal recruiting, it needs to open up recruiting activities to outside of the company. The following needs require external recruitment: (1) to fill entry-level jobs; (2) to acquire skills not possessed by current employees; and (3) to obtain employees with different backgrounds to provide a diversity of ideas. A number of methods are available for external recruitment methods. These are advertising, online recruitment, employment agencies, and college recruiting. Advertising : Advertising is one of the most widely used methods of recruitment. Advertising communicates the firm’s employment needs to the public through newspapers, radio, television, or other electronic media. Regardless of the advertising method utilized in determining the content of an advertising message, an organization must decide on the corporate image it wants to project. Online recruitment : Online recruitment is the process of using the internet to actively identify and recruit qualified candidates for an organization. According to a research, social media has become an almost universally adopted hiring tool, with 92 percent of recruiters surveyed using it as part of their process. Employment agencies : An employment agency is an organization that helps firms to recruit employees and at the same time aids individuals in their attempt to locate jobs. There are two kinds of employment agencies: Private and public employment agencies. College recruiting : College recruitment involves sending an employer’s representatives to college campuses to prescreen applicants and create an applicant pool from the graduating classes. It is an important source for management to reach professional and technical employees.

Once the recruiting process has attracted a pool of applicants, the next step is to select someone for hiring. The selection process is to choose the selection process is to choose the right person who can successfully perform a certain job from the pool of qualified candidates. Job analysis, human resource planning, and recruitment are necessary prerequisites to the selection process.

• Step 1- Preliminary screening: Completing an application form is normally the first step in most selection procedures.
• Step 2 - Employment interview: The most widely used selection technique is the employment interview. Job candidates are interviewed by at least one member of the HRM staff and by the person for whom they will be working.
• Step 3 - Employment test: The third step in the selection process is an employment test which measures the aptitudes, skills, abilities, or knowledge of job candidates. Employment tests allow managers to choose candidates according to how they will fit into the open positions and the organizational culture.
• Step 4 - Reference check and background investigations: A reference check is intended to verify what was stated on the application is correct and accurate.
• Step 5 - Physical examination: Physical examination is part of the selecting process when a job requires certain physical abilities from the employees. If HR asks the candidates to take a physical examination, it must be able to show that it is a job-related requirement.
• Step 6 - Selection decision: After going through previous steps that help to collect relevant information about the candidates, the company may decide to make a job offer to an applicant.

Employee orientation is the systematic process of helping new employees learn about the company and getting emotionally attached to the firm. All types of organizations should have some type of orientation program accomplishing such goals as:

1. Make the new employees feel welcome and at home and part of the team;
2. Make sure the new employees have the basic information to function effectively, such as e- mail access, personnel policies and benefits, and what the employer expects in terms of work behavior;
3. Help the new employees understand the organization in a broad sense (its past, present culture, and strategies, and vision of the culture).

HRM Activities That Maximize Performance

Training is a continual process of providing employees with skills and knowledge they need to perform at a high level. Training needs may be determined by conducting analyses on several steps:

• Organizational analysis : From an overall organizational perspective, the firm’s strategic mission, goals, and corporate plans are studied, along with the results of human resource planning.
• Task analysis : The next step of training needs analysis focuses on the tasks required to achieve organizational goals. Job descriptions are important data sources for this analysis level.
• Person analysis : Determining individual training needs is the last step. The relevant questions are, “Who needs to be trained?” and “What kind of knowledge, skills and abilities (KSAs) do employ- ees need.”

Training techniques can be classified as either on-the-job training and off-the-job-training. On-the-job-training (OJT) refers to new or inexperienced employees learning through observing peers or managers performing the job and trying to imitate their behavior . Off-the-job-training involves training methods such as conferences, classroom groups, mobile learning, audiovisual techniques, lectures, computer-based training, and internet-based training.

Performance appraisal is the process of determining and communicating to an employee how he or she is performing on the job. HR departments use the information collected through performance appraisals to make important decisions about HR functions. 360-degree feedback performance is an appraisal system in which information is gathered from top management, supervisors, peers, subordinates, and customers. Performance appraisal process by order is: establishing performance standards, communicating standards and expectations, measuring the actual performance, comparing to standards, discussing results (providing feedback), and lastly decision making.

Compensation can be defined as the total of all rewards provided employees in return for work and services performed. The key objectives of the compensation system for a business organization are retaining the best employees, motivate employees to perform at higher levels, and have the company achieve its strategic goals. Fair pay is what employees generally view as equitable. Internal equity is obtained when employees receive pay according to the relative value of their jobs within the same organization. External equity occurs when a firm’s employees receive pay comparable to workers who perform similar jobs in other firms. The basic compensation that an employee receives, usually as a wage or salary, is called base pay. There are two kinds of base pay categories: hourly and salaried. Wage can be defined as a compensation calculated on a weekly, monthly, or annual basis. A salary is a consistent payment made each period regardless of number of hours worked.

In addition to the basic wage structure, organizations that are sincerely committed to developing a compensation system may prefer to use incentive pay programs. Pay incentives can be defined as compensations that reward employees for their high performance. A bonus is an individual performance incentive in the form of a special payment made over and above the employee’s salary.

At present, employees expect more than just an hourly wage or salary from their employers; they expect additional considerations that will enrich their lives and support work-life balance. A benefit is an indirect reward given to an employee or a group of employees as a part of organizational membership. Benefits are typically unrelated to employee productivity, therefore, while they may be valuable in recruiting and retaining employees, they do not directly affect a worker’s performance.