Human resource management (HRM)

The process of acquiring, training, appraising, and compensating employees, and

of attending to their labor relations, health and safety, and fairness concerns.

“Human”
represents the dimension of HRM which relates to the soft aspects such as
commitment of employees through participation and the most important assets
being the employees.

“Resource”
represents the hard aspects such as the strategy link of HRM and the importance
of efficient utilization of employees.

“Management”
represents the role of HRM as part of management that implies that it’s not only
an administrative function that carries out the formulated policies but also a
managerial function that contributes to strategy formulation

Strategy:
Is a course of action of where we want to be

Strategic management ( include implementation phase)

– The process of identifying and executing the organization’s mission
by matching its capabilities with the demands of its environment.

Strategic Management Process (cont’d)

– Step 1: Define the Business and Its Mission

– Step 2: Perform External and Internal Audits

– Step 3: Translate the Mission into Strategic Goals

– Step 4: Formulate a Strategy to Achieve the Strategic Goals

– Step 5: Implement the Strategy

– Step 6: Evaluate Performance

Strategic plan
– A company’s plan for how it will match its internal strengths and
weaknesses with external opportunities and threats in order to
maintain a competitive advantage.

Vision
– A general statement of its intended direction that evokes emotional
feelings in organization members.

Mission
– Spells out who the company is, what it does, and where it’s headed.

Types of Strategic Planning

Corporate-level strategy
– Identifies the portfolio of businesses that, in total, comprise the company and
the ways in which these businesses relate to each other.
• Diversification strategy implies that the firm will expand by adding new
product lines.
• Vertical integration strategy means the firm expands by, perhaps,
producing its own raw materials, or selling its products direct.
• Consolidation strategy reduces the company’s size
• Geographic expansion strategy takes the company abroad.
Business-level/competitive strategy
– Identifies how to build and strengthen the business’s long-term competitive
position in the marketplace.
• Cost leadership: the enterprise aims to become the low-cost leader in an
industry.
• Differentiation: a firm seeks to be unique in its industry along dimensions
that are widely valued by buyers.
• Focus: a firm seeks to carve out a market niche, and compete by
providing a product or service customers can get in no other way.
Functional strategies
– Identify the basic courses of action that each department will pursue in order to
help the business attain its competitive goals.
Three basic challenges HR’s Strategic Challenges
 The need to support corporate productivity and performance improvement
efforts.
 That employees play an expanded role in employers’ performance
improvement efforts.
 HR must be more involved in designing—not just executing—the
company’s strategic plan.
Functions of HRM
(1)Acquisition of human resources: There are two steps involved in acquisition
process:
a) Recruitment: Recruitment is a process by which organizations locate and
attract individuals to fill job vacancies.
b) Selection: Selection is a process of measurement, decision making and
evaluation.
(2) Development of human resources: After selecting and recruiting individuals in
the right position of the organization the next function is to train and develop
them, so that they can become efficient employees and work toward the
achievement of the organization goal.
(3) Motivation of human resources: The motivation function is one of the most
important functions. After training and developing the employees the HR
manager should stimulate them to work well. For motivation purpose the H.R
manager have to give the employees some compensation and benefit package.
(4)Maintenance of human resources: The last phase of the H.R.M. function is
called the Maintenance function. For maintaining the people H.R.M should go for
some method of providing a safe and healthy work place. Labor relation &
collective Bargaining.
Personnel Management
Managing personnel is the process of making sure the employees (not the
customers) are as productive as they can be. This can include hiring, firing, or
transferring people to/from jobs they can do most productively.

Importance of HRM
1) Formulation of HR policies 5) Utilization of Human Resources
2) Implementation of HR Policies 6) Development of Labor Management
 Relation
3) Review of employee needs 7) Overall development of organization
4) Development of social welfare

Strategic Human Resource Management

– The linking of HRM with strategic goals and objectives in order to
improve business performance and develop organizational cultures
that foster innovation and flexibility.

– Formulating and executing HR systems—HR policies and activities—

that produce the employee competencies and behaviors the
company needs to achieve its strategic aims.

HR’S Strategic Roles

 HR professionals should be part of the firm’s strategic planning
executive team.
– Identify the human issues that are vital to business
strategy.
– Help establish and execute strategy.
– Provide alternative insights.
– Are centrally involved in creating responsive and market-
driven organizations.
– Conceptualize and execute organizational change.
HR’s Strategy Execution Role
The HR department’s strategies, policies, and activities must make sense in terms
of the company’s corporate and competitive strategies, and they must support
those strategies

HR’s Strategy Formulation Role

 HR helps top management formulate strategy in a variety of
ways by.
– Supplying competitive intelligence that may be useful
in the strategic planning process.
– Supplying information regarding the company’s
internal human strengths and weaknesses.
Build a persuasive case that shows how—in specific and measurable terms
—the firm’s HR activities can and do contribute to creating value for the
company
HR Challenges

 Acquisition: Create a readily deployable talent pool.

 Managing Change: As the organizations are going Global, managing change
is a major problem faced by the Managers and how to make people
acquainted with the changes
 Managing low attrition rate/ employee turnover: More competition also
adds to high attrition. Now here is the opportunity for the HR manager to
play safe and introduce good retention strategies.
 Balancing work and personal life: By flexi work hours, maternity leaves and
vacations are some of the options in hand.
 Consultative approach: Developing continuous dialogue, open
communication, participative decision making is very important for
implementing consultative approach.
 Work Culture: Due to acquisition and mergers taking place it becomes
important for the HR Manager to develop the work culture
 Stress and Conflict: Long working hours, target pressures, high competition
etc adds stress and conflicts in the Organization. It is the duty of an HR
Manager to have proper responses to the stress and conflict before it
causes damage to someone’s' personality. It’s a challenge.
 Restructuring Organization: As the trend is changing, Manager’s needs to
develop a new organizational structure that enables a more efficient and
flexible operation and serves better its businesslike activities in the future.
 Globalization: Companies are going global due to which the workforce
diversity is increasing. Managing these people with different religious,
cultural, moral background is a challenging task for the HR Managers in
21st Century.

Personnel Aspects of a Manager’s Job

 Conducting job analyses (determining the nature of each employee’s
job)
 Planning labor needs and recruiting job candidates
 Selecting job candidates
 Orienting and training new employees
 Managing wages and salaries (compensating employees)
  Providing incentives and benefits
 Appraising performance
 Communicating (interviewing, counseling, disciplining)
 Training and developing managers
 Building employee commitment
Why HR Is Important to all the Managers
* Hire the wrong person for the job
* Experience high turnover
* Have your people not doing their best
* Waste time with useless interviews
* Have your company taken to court because of your discriminatory actions
* Have your company cited under federal occupational safety laws for unsafe
practices
* Have some employees think their salaries are unfair relative to others in the
organization
* Allow a lack of training to undermine your departments effectiveness
* Commit any unfair labor practices
Line manager
A manager who is authorized to direct the work of subordinates and is
responsible for accomplishing the organization’s tasks.

Staff manager
A manager who assists and advises line managers.
Line Managers’ HRM Responsibilities
1. Placing the right person on the right job
2. Starting new employees in the organization (orientation)
3. Training employees for jobs new to them
4. Improving the job performance of each person
5. Gaining creative cooperation and developing smooth working relationships
6. Interpreting the firm’s policies and procedures
7. Controlling labor costs
8. Developing the abilities of each person
9. Creating and maintaining department morale
 10.Protecting employees’ health and physical condition

Functions of the HR Manager

1. A line function: The human resource manager directs the activities of the
people in his or her own department, and perhaps in related areas (like the
plant cafeteria)
2. A coordinative function: The human resource manager also coordinates
personnel activities, a duty often referred to as functional authority (or
functional control). Here he or she ensures that line managers are
implementing the firm s human resource policies and practices
3. Staff (assist and advise) functions. Assisting and advising line managers is
the heart of the human resource manager s job. He or she advises the CEO
so the CEO can better understand the personnel aspects of the company s
strategic options. HR assists in hiring, training, evaluating, rewarding,
counseling, promoting, and firing employees.

Authority
The right to make decisions, direct others’ work, and give orders.

Managers usually distinguish between line authority and staff authority.

Line authority
The authority exerted by an HR manager by directing the activities of the people
in his or her own department and in service areas (like the plant cafeteria).
Staff authority
Staff authority gives the manager the right (authority) to advise other managers
or employees.

A Changing HR Environment
Globalization
The tendency of firms to extend their sales, ownership, and/or manufacturing to
new markets abroad.
HR Metrics
Human Resource (HR) metrics are measurements  used to determine the value
and effectiveness of HR initiatives, typically including such areas as Turnover,
training, return on human capital, costs of labor, and expenses per employee

Absence Rate
[(Number of days absent in month) ÷ (Average number of employees
during mo.) × (number of workdays)] × 100
Cost per Hire
(Advertising + Agency Fees + Employee Referrals + Travel cost of applicants
and staff + Relocation costs + Recruiter pay and benefits) ÷ Number of
Hires
Health Care Costs per Employee
Total cost of health care ÷ Total Employees
HR Expense Factor
HR expense ÷ Total operating expense

Human Capital ROI

Revenue − (Operating Expense − [Compensation cost + Benefit cost]) ÷
(Compensation cost + Benefit cost)
Human Capital Value Added
Revenue − (Operating Expense − ([Compensation cost + Benefit Cost]) ÷
Total Number of FTE
Revenue Factor
Revenue ÷ Total Number of FTE
Time to fill
Total days elapsed to fill requisitions ÷ Number hired

Training Investment Factor

Total training cost ÷ Headcount
Turnover Costs
Cost to terminate + Cost per hire + Vacancy Cost + Learning curve loss
Turnover Rate
[Number of separations during month ÷ Average number of employees
during month] × 100
Workers’ Compensation Cost per Employee
Total WC cost for Year ÷ Average number of employees
Cost per hire:
It is the cost associated with a new hire. It is not only important to know how
much it cost in hiring, but it is also important to see if the money spent is used
to hire right people. (Boudreau; Lawler & Levenson, 2004)[3]

Time to fill up the open position:

It is the total days to fill up a job opening per each job. The shorter the time, the
more efficient of the HR department in finding the replacement for the job

HR expense factor:
It is the ratio between total company expense and HR expense. It shows if the
expenses on HR practices are too much in terms of the whole company expense.

High performance work system (HPWS)

High performance work system (HPWS) is a specific combination of HR practices,
work structures and processes that enhances employee skill, knowledge,
commitment, involvement and adaptability. The key concept in HPWS is the
system.

HR scorecard
The HR scorecard is a strategic HR measurement system that helps to measure,
manage, and improve the strategic role of the HR department.

There are five steps to create an HR scorecard:

1. Create an HR strategy map

Human resource strategy mapping is a visual representation of how HR
activities link to and add value to strategic business goals. Incorporating
leading and lagging indicators on a strategy map allows HR to assess how
well its activities align with strategic business goals.

– Must know what the company’s strategy is.

– Must understand the causal links between HR activities, employee
behaviors, organizational outcomes, and the organization’s
performance.
– Must have metrics to measure all the activities and results involved.
2. Identify HR deliverables
The HR scorecard is meant to measure leading HR indicators of business
performance. Leading indicators are measurements that predict future
business growth. These are called HR deliverables. They are also known
as HR metrics, and more specifically HR KPIs, as they are metrics that are
linked to the business strategy.

3. Creation of HR policies, processes, and practices

 Policies: A strong employer branding policy will help in building a strong
reputation that will help in becoming a top employer
 Processes: Key to decreasing lead time will be an optimization between
how recruiters and managers communicate. Oftentimes, managers take a
long time to review resumes and plan interviews with candidates. Changing
these slow processes into workflows that guarantee next-day action, can
decrease the time to hire with days, sometimes weeks. This is one of the
many processes that can be implemented to enable better performance on
the HR deliverables.
Another example could be the application process for candidates. The
candidate experience will be vital to attracting top candidates and in
ensuring a good rating in the top employer benchmark.
 Practices: This looks at the specific practices that help HR achieve the
aforementioned deliverables.
4. Aligning HR systems
5. Creating HR efficiencies

The HR balanced scorecard

A balanced scorecard is a strategy performance management tool – a semi-
standard structured report that can be used by managers to keep track of the
execution of activities by the staff within their control and to monitor the
consequences arising from these actions.

Measures the HR function’s effectiveness and efficiency in producing employee

behaviors needed to achieve the company’s strategic goals
The scorecard lists financials goals, customer goals, internal business goals, and
innovation & learning goals. These four goals give a good overview of what the
company tries to achieve, i.e. the company strategy.

Benefits of a High Performance Work System (HPWS)

 Generate more job applicants
 Screen candidates more effectively
 Provide more and better training
 Link pay more explicitly to performance
 Provide a safer work environment
 Produce more qualified applicants per position
 More employees are hired based on validated selection tests
 Provide more hours of training for new employees
 Higher percentages of employees receiving regular performance appraisals