Introduction
Human Resource Management, or HRM for short, is one of the most important factors in running a successful company, though it is not always treated with the time and emphasis that it deserves. To completely understand what HRM is and its influence on the success or failure of a business, we first must know what it means. The following is a good definition:
The purpose of Human Resource Management is to recruit, develop and use the workers within an enterprise in the manner in which is most suitable to accomplishing the aims and objectives of the enterprise.
This basically translates to “using individuals in the company in the best way possible” though that would be an over-simplified statement that doesn’t reflect the real nature and scope of HRM. HRM describes all of the strategies and procedures that are involved in making certain that all members of staff within a company are pulling in the same direction, and much more importantly, in the right direction.
At its core, HRM combines three major elements that are fundamental to the productive output of the staff. These factors include motivation, management and leadership, and organisational structures. As a result, HRM can be applied to all levels of management inside your company, not just the shop floor staff, and it could even be used to alter the structure of those levels of management as well.
Why is it Necessary?
Put simply, businesses don’t operate without employees. As a result, some level of human resource management is necessary for any business to operate at all, let alone in an efficient and profitable manner. Even if you don’t appreciate exactly how HRM affects the daily running of your company you will certainly be employing some sort of HRM in order to keep trading.
Human Resource Management has an impact on every level of your business activities with varying degrees of visibility. The most apparent HRM tasks involve the hiring and firing of staff as well as financial systems such as payroll. It may also impact on motivation and communication inside your company, which are much more intangible factors but are critical nonetheless. Bad HRM practice in these less visible domains can have a damaging impact on your company but go undetected for long intervals.
It also goes without saying that every company is unique and will have a unique set of issues to face and opportunities to take advantage of. HRM can work as a versatile tool that translates workforce potential into financial profits and can adapt to fully utilise the talents of your firm. Without it, your rivals could be afforded the chance to prosper where you missed out.
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Impact on Business
While this all sounds very interesting and important, how does it actually impact on the daily operations of your business, and more importantly, how will it help to enhance the performance and profitability of your firm? The effect of HRM can be broken down into the following areas.
Recruitment & Training
This is most likely the area of a business that is most associated with human resources – recruitment. Almost every business in the world, and particularly companies that are growing, must recruit people to work for them. Either current employees have left, or new possibilities have arisen which mean there are jobs that must be filled. HRM can make sure your recruitment process gets the right people into the right jobs at an affordable price.
It’s 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 industry, there is an on-going requirement to keep your organisation up-to-date and prepared to make use of any opportunity. There is an expression that states that “if you are not moving forward you are going backwards” which can be applied to business.
You may also find that the expensive practice of external recruitment can be avoided if your organisation has sufficient training facilities in place. It is far easier to train an existing employee to a higher level and then use external recruitment to fill the gap left at the lower level than it is to hire directly to a higher level.
Employee Relations
Once you have the suitable men and women working for you it is important to keep them doing work for you, and to make sure they are doing a decent job. This can be achieved via good employee relations. The most evident employee relations practice is the art of motivation – a broad topic itself – but other employee relations issues can include disciplinary and grievance management.
Finances
You cannot keep employees at your company by good motivational techniques alone. They will want to be paid a fair amount and on time. Payroll must be one of the first systems that is created when you start a company, but they still need to be maintained and updated when staff join, leave or change pay grade.
Industrial Relations
Several 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 dealing with such bodies it is beneficial to have people within your organisation who can connect effectively with them whilst keeping the interests of your own organisation in mind at the same time.
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Workforce Planning
We have seen the impact that human resource management can have on a company and on the whole it looks like good HRM will have a beneficial effect on any company. As a rule, this is the case, but good HRM does not just happen overnight. It should be planned according to the targets of the organisation and then carried out thoroughly.
One way to implement HRM ideas to your company is via workforce planning – a process that has the aim of making sure your workforce can finish the upcoming tasks needed for your company to be successful.
Definition
Workforce planning is the process of anticipating ahead of time the human resource requirements of any organisation, both in terms of the number of employees required and the appropriate skill mix. Recruitment and training policies are designed with a long term focus in order to make sure that the company is able to operate without being limited by a shortage of appropriate labour. Workforce planning can be split into four main areas; requirements, recruitment, selection, and training and development.
Requirements
Evaluating your workforce demands is vital to the proper planning of your staff in the short-term and long-term future. If your business is subject to seasonal shifts in demand, such as in the tourism industry, or suffers from seasonal fluctuations in staff levels then your workforce planning must take these factors into consideration.
Recruitment
Whether you are hiring people externally or from inside your existing workforce you still need to find the right person to fill the role. As part of your workforce planning you ought to draw up a job description that describes the function that will be carried out 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 business.
Selection
The selection process can be as involved or as simple as you deem necessary. Outside of regular job selection interviews there are a number of ways you can learn about about candidates for your jobs, including aptitude tests, group interviews or even psychometric testing. These sophisticated techniques may not be relevant to all workforce planning assignments but are an alternative to recruiters.
Training & Development
The principal goal of staff training and development is to develop a much better standard of worker within your organisation. Workforce planning can use training to fill upcoming gaps in the skill set of your workforce and is generally faster and more cost effective than external recruitment.
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Workforce Motivation
It practically goes without saying that well motivated employees are going to deliver a better standard of work and have a greater quantity of production than unsatisfied workers. This improved working rate will inevitably lead to a rise in the profitability of a company.
Essentially, all motivational practices can be separated into two models that are often called the “carrot and stick” approach to motivation. The analogy refers to the two approaches to make a donkey carry your possessions, either by tempting it with a carrot, or threatening it with a hit from a stick! It is a relatively dated idea but the basic principle is still relevant to businesses today.
Whether you use the carrot strategy or the stick strategy will largely depend on your own management style, as well as the business you work in and the type of people that you employ.
Financial
The most common financial motivators are payment schemes. You can pay staff in many different ways, either a set amount for a set service, by an hourly or daily rate, or a rate related to production, such as a commission scheme. Whatever method is used, the workforce is motivated to work because they will receive money for doing so.
Another financial motivation method involves what are known as incentive schemes, where by additional financial rewards are handed out for good overall performance. This may include commission beyond a fixed salary, performance-related pay grades or even providing a share of company profits. Again, the motivating aspect here is the money alone.
Non-financial
Many human resource advocates have their own ideas about the other elements that motivate people to do the job, although these are often seen as a bonus to a worker. It is broadly acknowledged that income is the critical motivational factor for the vast majority of people.
The Changing Face of HRM
As previously stated, HRM is a flexible application that is there to match up the features of your workforce to the objectives of your organisation. As a result, 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 constantly review your own HRM policies and not to rest on your laurels.
Perhaps there is a new piece of government law that may have an impact of how your company can carry out its operations, or maybe a fresh manufacturing technology will come along that can revolutionise your sector. Either way, if you want to ensure that your staff is performing to its optimum level then your HRM system should be flexible enough to cope with an ever-changing economy.