Introduction
Human Resource Management, or HRM for short, is one of the most important factors in running a successful business, although it is not always handled with the time and emphasis that it deserves. To fully understand what HRM is and its impact on the success or failure of a company, we first need to know what it means.
The function of Human Resource Management is to recruit, develop and use the personnel within an organisation in the manner in which is most suitable to accomplishing the aims and objectives of the organisation.
This effectively translates to “using individuals in the company in the best way possible” although that would be an over-simplified statement that does not echo the true nature and range of HRM. HRM describes all of the strategies and processes that are involved in making certain that all members of staff in a company are pulling in the same direction, and more importantly, in the right direction.
At its core, HRM brings together three major elements that are fundamental to the productive output of the staff. These factors include motivation, management and leadership, and organisational structures. Consequently, HRM can be applied to all levels of management within your organisation, not just the shop floor workers, and it could even be used to modify the structure of those levels of management at the same time. It is a wide-ranging subject that is explained in greater detail in this article.
Why is it Necessary?
Put simply, businesses don’t work without workers. As a result, some level of human resource management is required for any organisation to operate at all, let alone in an efficient and prosperous manner.
Human Resource Management has an effect on every level of your business activities with varying degrees of visibility. The most obvious HRM tasks involve the hiring and firing of employees as well as monetary systems such as payroll. It may also impact on motivation and communication inside your company, which are much more intangible variables but are critical nonetheless.
It also goes without saying that each organisation is different and will have a unique set of issues to face and opportunities to take advantage of. HRM can work as a versatile tool that converts workforce potential into financial profits and can adjust to fully utilise the talents of your firm. Without it, your rivals might be afforded the chance to prosper where you missed out.
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Impact on Business
Whilst this all sounds very interesting and significant, how does it actually influence the daily functions of your company, and more importantly, how will it help to boost the performance and success of your firm? The effect of HRM can be broken down into the following areas.
Recruitment & Training
This is most likely the part of a business that is most associated with human resources - recruitment. Almost every business in the world, and particularly companies that are growing, have to recruit people to work for them. Either current employees have left, or new opportunities have arisen which mean there are roles that need to be filled.
It is also important to keep your staff training procedures up to date to make sure that your workforce is fully capable of doing the job they are there to do. Regardless of whether it is a fresh piece of legislation or a new piece of technology that changes the marketplace, there is an on-going need to keep your company up-to-date and ready to make use of any opportunity. There is a phrase that states that “if you are not moving forward you are going backwards” which can be applied to business.
You may also discover that the expensive practice of external recruitment can be averted if your company has sufficient training facilities in place. It is much easier to train an existing employee to a higher level and then use outside recruitment to fill the gap left at the lower level than it is to hire straight to a higher level. This technique can be used at almost every level of management inside your company.
Employee Relations
Once you have the right people working for you it is important to keep them working for you, and to make certain they are doing a decent job. This can be achieved by means of good employee relations. The most evident employee relations practice is the art of motivation - a wide topic by itself - but other employee relations issues can include disciplinary and grievance management. All of these things are an essential part of the overall HRM picture.
Finances
You can’t keep employees at your company by good motivational techniques only. They’ll want to be paid a fair sum and on time. Payroll should be one of the primary systems that is developed when you start a company, but they still need to be taken care of and updated when personnel join, leave or switch pay grade.
Industrial Relations
Many companies will have to work with trade union or other workers rights organisations which can be very forceful when defending the interests of their members. When interacting with such bodies it is beneficial to have individuals within your organisation who can communicate effectively with them whilst keeping the interests of your own organisation in mind as well. The need for good industrial relations is far more prevalent in public sector firms.
It should be clear that a company international business is unable to operate successfully without having motivated and capable staff.
Workforce Planning
We have seen the impact that human resource management may have on a company and on the whole it looks like good HRM will have a positive effect on any organisation. As a rule, this is the case, but effective HRM doesn’t just occur overnight. It should be designed according to the targets of the organisation and then performed thoroughly.
One way to apply HRM ideas to your business is via workforce planning - a system that has the goal of making sure your staff can finish the upcoming tasks needed for your company to be successful. It can be defined as:
Definition
Workforce planning is the method of anticipating in advance the human resource requirements of any enterprise, both in terms of the number of employees required and the appropriate skill mix. Recruitment and training procedures are devised with a long term focus in order to ensure that the organisation is able to function without being limited by a lack of appropriate labour.
Requirements
Analysing your workforce requirements is vital to the proper planning of your staff in the short-term and long-term future. If your company is subject to seasonal changes in demand, for example in the tourism industry, or is prone to seasonal fluctuations in staff levels then your workforce planning must take these variables into consideration. Also bear in mind any approaching retirements or periods of maternity/paternity leave or you could suffer from a shortage of qualified personnel.
Recruitment
Whether you are recruiting externally or from within your existing workforce you still need to find the correct person to fill the position. As part of your workforce planning you ought to draw up a job description that describes the function that will be undertaken as well as a person specification which will give an indication of the type of individual that would be a good fit for the job and your organisation.
Selection
The selection procedure can be as involved or as easy as you deem necessary. Over and above standard job interviews there are a number of ways you can learn about about candidates for your jobs, including aptitude tests, group interviews and even psychometric testing.
Training & Development
The main goal of staff training and development is to produce a better standard of worker in your organisation. Workforce planning can use training to plug upcoming gaps in the skill set of your staff and is usually quicker and more economical than external recruitment.
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Workforce Motivation
It almost goes without saying that properly motivated employees are going to deliver a better standard of work and have a greater quantity of production than unsatisfied workers. This improved work rate will undoubtedly lead to a rise in the profitability of a business.
Essentially, all motivational practices can be separated into two sets that are often referred to as the “carrot and stick” approach to motivation. The analogy refers to the two approaches to make a donkey carry your belongings, either by tempting it with a carrot, or threatening it with a hit from a stick!
Whether you use the carrot strategy or the stick approach will largely depend on your own management style, as well as the industry you work in and the type of people that you hire. Regardless of your approach, motivational factors can be broken down into a further two groups; financial and non-financial motivators.
Financial
The most common financial motivators are payment plans. You can pay staff in numerous different ways, either a set amount for a fixed service, by an hourly or daily fee, or a rate related to production, such as a commission structure.
Another financial motivation technique involves what are called incentive schemes, where additional financial rewards are given out for good overall performance. This may include commission beyond a fixed salary, performance-related pay grades or even offering a share of company profits.
Non-financial
Several human resource theorists have their own ideas about the different factors that motivate people to do the job, although these are often seen as an added bonus to an employee. It is broadly acknowledged that income is the critical motivational factor for the vast majority of people.
The Changing Face of HRM
As previously mentioned, HRM is a flexible application that is there to match the features of your workforce to the objectives of your business. As such, it has had to keep adapting to a corporate climate that is continuously changing for one reason or another. Furthermore, it is a good idea to continuously review your own HRM policies and not to rest on your laurels.
Perhaps there is a new piece of government legislation that may have an impact of how your business can carry out its trading, or maybe a new manufacturing technology will come along that can revolutionise your sector. Either way, if you want to ensure that your workforce is performing to its maximum level then your HRM system should be adaptive enough to cope with an ever-changing economy.
