CHAPTER- ONE

Human Resource Management - Overview

1.1 What is human resource management?

Before defining what human resource management it is important to see separately what human, resource
and management is. An organization is made up of different types of resources, namely men, material,
money, information and machinery. Of this, the first one is a living one. We can define this resource as a
skilled, educated and motivated man power and it implies a social animal. It is the human/people that
make use of non-human resources. Hence, people are the most significant resource in an organization.
Besides being a living being, human resource differs from non-human resources, because, by nature
human beings are with different and complex resources (they are heterogeneous in a sense that they differ
in personality, perception, emotions, values attitudes, motives/needs and mode of thoughts. Their
behavior to stimuli/environment is often inconsistent and unpredictable. Modern human resource also
characterized by their level of education, skill and better awareness of their interest and rights. In line
with this, management is the act of getting things done through the effort of this people resource. In
human resources context, management means efficient and effective utilization of human talents,
knowledge, talents and skills.

Human resource is the skill, knowledge, experience and talent of employees working for the organization.
On the other hand, it refers to the sum total of all inherent ability, acquired knowledge and skills
represented by the aptitudes, attitudes and talents of organizational workforces. Human resource
management is one aspect of management which deals with procurement, maintenance and utilization of
human resource. It is an art of managing people at work in such a manner that they give their best to the
organization for achieving its set goals.

We can also define Human resources management in many dimensions.

 Human Resources management can be defined as the process of accomplishing organization

objectives by acquiring, retaining, terminating and properly using human resources in organizations.
 Human resources management is a function performing in an organization that facilitates the most
effective use of people or employee to achieve individual and organization goals.
 Human Resources management is an activity that aims at acquiring the right quality and quantity of
employees, putting them at right positions at right time for the attainment of individual and
organizational goals.
 According to Robbins, HRM is concerned with people dimension in management. Since every
organization is made up of people, acquiring their services, developing their skills, motivating them
to a higher level of performance and ensuring that they continue to their commitment to the
organization are essential to achieving organizational objectives. This is true, regardless of the type of
organization- government, business, education, health or others.
1.2 Functions of human resource management
 Utilization of human resource effectively and efficiently.
 Developing employees in quantity and quality through training and development – this function
involves activities meant to improve the knowledge, skills, aptitudes and values of employees so as to
enable them to perform their job in a better manner in future. These functions may comprise training
to employees, executive training to develop managers, etc…
  Job analysis – is a systematic process of determining duties and responsibilities.
 Procurement – it involves procuring the right kind of people in appropriate number to be placed in the
organization. It consists of activities such as Human resource planning (is a process by which an
organization determines how it should acquire its desired manpower to achieve the organizational
goals), recruitment, selection, placement and induction or employee orientation.
 Employee safety and health/ maintenance activities- concerned with protecting and promoting
employees while at work. For this purpose, various benefits such as housing, medical, educational,
transport facilities, etc. Are provided to employees. Several social security measures such as
provident fund, pension, gratuity, group insurance etc are also arranged.
 Compensation – it involves determination of wage and salaries matching with contribution made by
employees to organizational goals. In other words, this function ensures equitable and fair
remuneration for employees in the organization. It consists of activities such as job evaluation (the
process of establishing the value or worth of jobs in a job hierarchy), wage and salary administration,
bonus, incentives etc.
 Discipline – this is to insure suitable working conditions concerning on employee disciplines. They
should respect rules and regulations of the organization.
 Equal employment opportunity – no bias regarding on age, sex, religion, history, and other criteria.
1.3 History and evolution of human resource management

The foundation of HRM will be studied along the lines of the development of management schools of
thought, which are supposed to be the roots and sources of HRM. These schools of thought are: scientific
management, classical organization theory, the human relations movement, and other thoughts in the
modern era. All of these are discussed as follows.

Scientific Management

The classical thought of scientific management is the root of organizational behavior. The earliest
attempts to study productivity problems in organizations came from efficiency experts seeking to improve
worker productivity. Frederick W. Taylor, who works primarily in steel mills, developed the scientific
method. The objective of management is to secure the maximum prosperity of each employee. Taylor’s
scientific management focused on employees as individuals. His principles states that:

 Employees be carefully selected and trained  Good relation between management and
to perform their job employees,
 Fair distribution of job between  He believed that increasing worker’s wages
management and employees, would raise their motivation and make them
 Scientific education and development of more productive.
workmen

The principal objective of management, according to Fredrick W. Taylor is to secure the maximum
prosperity for the employer, coupled with the maximum prosperity for each employee. The primary
concern of Taylor was that results of higher productivity should equally benefit all people i.e., workers,
employers; and consumers in the shape of:

 Higher wages to the workers,  Payment of lower prices for the products by
 Greater profits to the management, and the consumers.
Classical Organization Theory

This perspective focused on the efficient structuring of overall organizations. The most important
contributor of this theory was Hennery Fayol. He identified fourteen principles management these are:

 Division of Labor - Division of labor is a principle of breaking down (dividing) lager tasks into
their component parts and assigning workers to each part.
 Authority - Authority may be defined as the right to give orders and the power to exact obedience.
 Discipline - Discipline may represent obedience, good behavior, and outward marks of respect.
 Unity of Command - Unity if command is a principle indicating that each employee must receive
instructions from only one person (from one superior only).
 Unity of Direction - Unity of direction demands that those operations within the organization that
have same objective should be directed by only one manger using one plan.
 Subordination of Individual Interest to the Common (General) Interest - This principle suggests
that in any undertaking, the interest of employees should not take precedence over the interest of
the organization as a whole: the interests of one person or group should be subordinate to those of
the organization.
 Remuneration - Remuneration represents compensation of personnel for services rendered.
 Centralization - Centralization is a process of concentrating decision –making authority at the
center.
 Scalar Chain - often called hierarchy, is the chain of supervisions ranging from the ultimate
authority to the lowest ranks.
 Order - as principle, indicates that materials and people should be in the right place at the right
time.
 Equity - Managers should be both friendly and fair to their subordinates. Equity combines
kindliness and justice. Employees must be treated equally and fairly.
 Stability of Staff - means creating an atmosphere of stability of tenure for employees.
 Imitative - Subordinates have to be given the freedom to conceive and carry out their plans, even
though some mistakes may result. Imitative indicates the ability of thinking out and executing.
 Esprit de corps - Esprit de corps denoted a sense of harmony and unity among the members of an
organization.

The Human Relations Movement

The human relations schools of thought (movement) have emerged as a critical response to the
weaknesses (shortcomings) of the classical approaches. It has been often said that the classical approaches
are less concerned with the human dimensions of the work place. The early thinking has been heavily
criticized for merely giving more attention to the production, efficiency, and structural aspects of an
organization than its human elements. The early critics have come mainly from the human relations
pioneers like Elton Mayo and others.

Scientific management, for instance, has its own limitations; it made people feel like machines (not
human beings) in the work place. Many employees and theorists rejected Taylorism, favoring instead an
approach that focused on employees’ own views and emphasized respect of individuals. At the forefront
of this orientation is Elton Mayo. Human relations rejected the economic perspective of work and focused
on social factors. The Hawthorne studies began in 1927 at Western Electric’s Hawthorne Works near
Chicago. Starting with scientific management, they tried to discover ways to improve employee
performance. Puzzling results caused them to call in Elton Mayo to repeat the studies. Mayo discovered
the concept of social systems.

People are the moving force of any organization. Technology alone cannot bring about enhanced work
output. Other factors need to be taken into account. Among such other factors that need to be considered,
the social climate or the working environment of an organization are significant variables and should
never be lost sight of. This precisely, was the chief postulate/contention of the human relations school.
The point underscored was that sociology and not mechanics or physics is the prime determinant of work
performance; man is a social being and nit a cog in the machine. In the words of Keith Davis,
“Organizations combine science and people, technology and humanity”.

The concept of human resource management also related with the industrial revolution. During this period
many industries were emerged and large number of employees were started to work in those industries.

Development of HRM in Different Societies

I. Primitive society - During the primitive society ‘Natural division of labor ‘ was based on criteria like
age, sex, race and so on and the leadership was based on natural division of labor. The elders were usually
taking the role of administration and the youth were administered. The relationship between the
administrators and the administered was based on mutual concern with no antagonistic contradictions.

II. Slave Society- Administrative relationship during this period was between the slaves and the slave
owners. Slave owners had absolute authority on the slaves and slaves were not considered as human
beings and human resource. They were rather considered as tools or animals that were hunted, captured,
bought and sold in the market and killed. There were strong antagonistic contradictions between
‘workers’ (slaves) and employers (slave owners)

III. Feudal Society- In the feudal society land was basic economic resource and the society was divided
in to two. The land lords and peasants

The peasants earned their living by working on the land of the lords. The land lords were administering
the peasants (‘workers’) who were obliged to pay several types of taxes to the land lords in exchange of
farming on the land. The taxes were too harsh which left the peasants between life and death. This
unhealthy relationship between the land lords and peasants led to antagonistic relationships with no
proper human resource concept.

IV. Capitalist Society- This society emerged with the industrial revolution in about 1750. It marked a
shift from hand or manual labor to the use of machinery because of the invention of steam engine. The
industrial revolution which began in the mid eighteenth century in England was characterized by the
development of machinery, the linkage of power to machines and the establishment of factories employed
many workers. Extensive specialization of labor where individual workers performed very narrow tasks
was introduces leading to human resource specialization.

A. The early stage of capitalist society- The capitalist society was divided in to two with respect to HR
and administration as owners of capital and labor.
 At the beginning the owners of factories were managing employees of their organization and their
primary objective was to have maximum profit. They gave much emphasis to mechanization and profit
than to human resource wellbeing. They concentrated on reducing HR costs by employing the following
methods.

 poor and unpleasant working conditions

 long working hours
 minimum payment
 employment of children
 Physical punishment etc.
Such harsh treatment led to antagonistic contradictions and this phase of capitalism caused the creation of
labor unions.

B. Later stage of capitalism - This stage is marked by industrial revolution and the emergence of
theories, principles and guidelines of administration. The owners now could not effectively
administer or supervise their workers. This was mainly because the employees/ labor was becoming
more skillful and had better knowledge of the job than the owners themselves. This made the owner
to delegate the task of administration to better skilled and knowledgeable workers selected from the
workforce. This marked the separation of capital in to ownership and administration. The workers
which had been delegated the authority of administration did not administer the organizations as the
owners did because they had dual responsibility to the owners and to the workers. The workers
started to come up with theories, administrative principles and guidelines.
1.4 Objectives of human resource management
The primary objective of HRM is to insure the availability of right people for right jobs so as to the
organizational goals are achieved effectively. In other words HRM works to provide efficient and
effective workforce. This grand objective can further be divided in to the following sub-objectives.
 To help the organization to attain its goals effectively and efficiently by providing competent and
motivated employees. For organizations HRM contribute in achieving the profit and productivity
objectives through client satisfaction.
 To utilize the available human resource effectively.
 To enhance job satisfaction of employees to the fullest level.
 To develop and maintain the quality of work life which makes employment in the organization a
desirable and personal and social interaction.
 To help maintain ethical policies and behaviour inside and outside the organization
 To establish and maintain cordial relation between management and employee.
 To reconcile individual and group goals with the organization goals.
1.5 Human Resource Management Environments

Almost all the activities and functions of human resource administration are influenced by numerous
environmental factors. The environment of HRM consists of all forces and actors that do surround and
affect the operation as well as survival of the organization. Organizations do not exist in isolation from
their surroundings. Instead, they exist and operate within their environmental context. Organizations
affect the environment in some ways; and are in turn, affected by the environment. The environment that
HRM operates can be classified into two broad categories: the external environment and the internal
environment. The effects of these factors may be positive or negative depending on the circumstances.
A. The external environment consists of all forces (factors) that affect the organization from its outside
and exert their own influence on HRM activities. External factors are factors that influence HRM
activities from outside the organization and are outside the scope and control of the organization.
External factors provide opportunities and threats to the HRM functions and activities of an
organization. These includes:

Economic environment - This from economics points of view considering human resources. Economy
might get ups and downs time to time. At peak of economic cycle many employees are employed so
selection is difficult, but at economic cycle falling there are excessive unemployment that makes selection
to easy. On the other hand personal income level also a significant influence on wage and salary level.
Growing unemployment and reservation in employment also affect the choice of recruitment and
selection of employees in organizations.

Technology - Technology change come along with new and current issues. Advancement in technology
affects human resource activities in the following ways.

 It reduces human interaction at work place.

 It requires job holders that are professionals, and knowledgeable in the job they perform.
 Workers mostly are unable to cope up with new technologies, because technology makes the job
more intellectual and upgraded.

Political environment - Government rules and regulations concerning on equal employment

opportunities, affirmative action to make fair employments, to avoid discriminations against national
origins, sex, religion, minority and etc in requirement, selection, selection, evaluation, planning,
orientation and training.

Labor unions – labor unions are formed to safeguard the interest of its members. They represent the
interest of employees on such issues as working conditions, wage, salary, fridge benefits, employee’s
rights, grievances process and work hour.

Geographical or location of organization: this shows that whether the organization location exist far
(country side) or at the center. For organization those exist in urban it is easy to conduct requirement and
holding of professionals. But far existing organization workers might asks desert allowances.

Labor market condition - it indicates about supply of employees from environments and it is the action
of seeking competent employees from the labor market to become productive. When there is excess labor
availability in the market it easy for a manager to get competent employees and the opposite is true when
there is labor shortage.

B. Internal environment - Organizations are not only affected by the external environmental factors.
Other internal factors also affect and shape the operations of an organization from within. Internal
factors belong in some way to the organization itself. All internal factors, unlike the external forces,
are said to be controllable by the organization’s management. The major internal environmental
forces of an organization may include the following factors: the management system, employees and
the firm’s personnel system, organizational structure, policies and procedures, facilities and
materials, the organizational climate, production and service giving activities, properties finance and
accounting systems.
  Strategy: It is an executive decision as to the future direction of an organization in the long run which
decided by top level management. E.g. cost reduction, innovation strategy, Growth strategy, creative
strategy.
 Goals: Example, growth, survival, satisfaction of employer, quick expansion and diversification of
their products and services.
 Mission: The purpose of existence of organizations.
 Organization style - this may be;
 Bureaucratic organizations – characterized by centralized decision making/employees
involvement to a decision is not allowed, close supervision, impersonal relationship etc.
 Democratic/Participative organizations – characterized by wide span of control, multi
directional communication, employee participation.
 Leadership style and experiences – leader’s style in an organization affect employee’s choice of
organizations. Good leaders develop through a never-ending process of self-study, education, training
and experience. This guide will help you through that process. To inspire your people into higher
levels of teamwork, there are certain things you must be, know, and, do. These do not come naturally,
but are acquired through continual work and study. The best leaders are continually working and
studying to improve their leadership skills.
 Autocratic leadership – such leaders are production oriented, they give more emphasis to their
production, than the people/employees they do in their organization. In the absence of workers
participation in management workers consider themselves to be just employees having no
commitment to the objective of the organization.
 Democratic leadership – this type of leaders are people oriented, they give more emphasis for
their employees’ motivation, participation in decision etc. workers participation in management
gives commitment and responsibility to employees.
 Organizational culture - organization culture includes a set of values, believes, norms which are
commonly shared by organizational members and distinguishes the organization from other
organizations. E.g. value for time, get the best people and set them free, absenteeism, and lateness to
a job.
 Nature of the work – The ground task of human resource management is to match the ability,
interests and knowledge of employee with the nature of the tasks. Ability to do work, physical
exertion, environmental pleasantness, time dimension of work, empowerment requirements,
relationship on work etc affects HR activities.
1.6 Models of HRM

There are no universal characteristics of HRM. Many models exist, and practices within different
organizations are diverse, often only corresponding to the conceptual version of HRM in a few respects.
Boxall et al (2007) remarked that: ‘Human resource management covers a vast array of activities and
shows a huge range of variations across occupations, organizational levels, business units, firms,
industries and societies.’

A distinction was made by Storey (1989) between the ‘hard’ and ‘soft’ versions of HRM.

1. The hard version emphasizes that people are important resources through which organizations
achieve competitive advantage. These resources have therefore to be acquired, developed and
deployed in ways that will benefit the organization. The focus is on the quantitative, calculative and
 business-strategic aspects of managing human resources in as ‘rational’ a way as for any other
economic factor. process emphasizing ‘the close integration of human resource policies with business
strategy which regards employees as a resource to be managed in the same rational way as any other
resource being exploited for maximum return’.
2. The soft version of HRM has its roots in humanism – an approach devoted to human interests that
views people as responsible and progressive beings. It also traces its origins to the human relations
school founded by Elton Mayo (1933), which believed that productivity was directly related to job
satisfaction and that the output of people will be high if they like their co-workers and are given
pleasant supervision. It involves ‘treating employees as valued assets, a source of competitive
advantage through their commitment, adaptability and high quality (of skills, performance and so
on)’. It therefore views employees as means rather than objects. The soft approach to HRM stresses
the need to gain the commitment (the ‘hearts and minds’) of employees through involvement,
communication, leadership and other methods of developing a high commitment, high-trust
organization. In contrast, the hard version of HRM sees employees as ‘valued assets and as a source
of competitive advantage through their commitment, adaptability and high level of skills and
performance’.

People and their collective skills, abilities and experience, coupled with their ability to deploy these in the
interests of the employing organization, are now recognized as making a significant contribution to
organizational success and as constituting a major source of competitive advantage.

1.7 Importance of HRM

The main purpose of HRM is to provide efficient and effective workforce which in other words is to have
right people with the right talent, knowledge and experience that are able to contribute towards the
achievement of objectives.

Human resource has different purposes to different stakeholders. These include:

A. HRM To Owners - To owners of an organization HRM has to play the purpose of assisting the
achievement of objectives. To business organizations HRM should contribute in achieving the profit
and productivity objectives.
B. HRM To Employees - Employees of a given organization require the HRM to assist them personal
goals such as:

 adequate income  room for growth and development

 job security  Better quality of work life etc.
 pleasant working conditions
C. HRM to the society -

The society requires HRM to contribute to the product quality and to high societal values including fair
competition, healthy environment, economic and social development etc.

D. HRM to the Law - Government requires HRM to comply with the laws and regulations of the state
which may include:
 Avoiding discrimination.
 allowing equal employment opportunities
 Fair treatment of workers.
 Application of the minimum pay provisions etc.