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Human Resource Management

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Human Resource Management (MGT501)
Lesson 6
After studying this chapter, students should be able to understand the following concepts:
A. The Personnel Management
B. History of Personnel Management
C. Shifting from Personnel Management to HRM
This lecture provides meaning about the basic concept of personnel management, historical perspective of
the development of HRM department in organization and the factors that played important role in
conversion of personnel management department to Human Resource management Department.
A. The Concept of Personnel Management
The term personnel Management and Human Resource management refer to the same processes. Human
resource management is a modern term that emerged during the 1970s and won final acceptance in 1989.
Both terms, however referred to the same thing; the personnel who work for a company represent that
company's human resources.
Although Human Resource Management department as we know them did not generally exist until the
1940s, the activities performed by these departments were not all brand new; in fact, many of the Human
Resource practices and programs that we see today ace roots in the earlier times.
Human Resource Management (HRM) historically known as personal management, deals with formal
system for the management of the people within the organization. As many well-known companies report
that they are trying to transform their workforce into a source of completive advantage.
HR mangers have many concerns regarding their workers. These concerns include how to mange layoffs,
address reduced employee loyalty, create a well trained highly motivated work force that can deliver higher
quality and productivity. Mange and increase diverse workforce and contain health care cost.
HRM has been undergoing transformation. In 1970s, the job of the HR manger was to keep their
companies out of court and in compliance with the increasing number of regulations governing the work
place. In the 1980s HR mangers had to address staffing costs related to mergers and acquisitions and
downsizing. The economic issues related to an increasingly global and completive workplace characterize
the 1990s. Beside these concerns Firms are also facing some other challenges regarding workforce before
we take up the HR challenges that face managers, we need to define manager and say a word about where
human resources fit into the organization. Managers are people who are in charge of others and are
responsible for the timely and correct execution of actions that promote their units' successful performance.
B. History of Personnel Management
A group of people becomes an organization when they cooperate with each other to achieve common
goals. Communication among them is therefore important. But people have individual motivations, which
often differ, from the corporate goals. An effective organization is one which succeeds in getting people to
accept that cooperating to achieve organizational goals also helps them to achieve their own goals provided
they are adequately rewarded through extrinsic and intrinsic rewards. This is achieved primarily through
leadership and motivation.
Employers therefore increasingly view human resource management from a strategic perspective, and as an
appropriate means through which the chasm between organizational and individual goals can be narrowed.
As it has been aptly observed:
"Part of the problem is that we have split off human resource management from the general management
problem, as if there were some other kind of management other than human resource management. As long
as organizations are based upon the coordinated action of two or more people, management is by definition
human resource management.
Despite the proliferation of writings and studies on HRM, there is a wide gap between the rhetoric and the
reality, though the gap has been narrowing in the 1990s. There is as yet inadequate research to ascertain the
extent to which practice matches corporate policy statements, and the impact of HRM policies and practices
Human Resource Management (MGT501)
on employee behavior and morale. To have a major impact on enterprises, HRM has to be diffused across
an economy, rather than remain islands of excellence. Nevertheless, promoting excellent models of HRM
stimulates interest in better people management.
HRM has three basic goals, which contribute to achieving management objectives. The first is integration of
HRM in two senses: integrating HRM into an organization's corporate strategy, and ensuring an HRM view
in the decisions and actions of line managers. Integration in the first sense involves selecting the HRM
options consistent with (and which promote) the particular corporate strategy. The option is determined by
the type of employee behavior expected (e.g. innovation) needed to further the corporate strategy. For
instance, the HRM policies in relation to recruitment, appraisal, compensation, training, etc. differ according
to whether the business strategy is one of innovation, quality enhancement or cost reduction. A strategy of
innovation may require a pay system less influenced by market rates but which rewards creativity, and the
pay rates would even be low so long as there are ways of making up the earnings package. A cost reduction
strategy may lead to pay rates being strongly influenced by market levels. Similarly, training and
development would receive less emphasis in a cost reduction strategy than in one where the objective is
innovation or quality. But such integration is difficult without securing the inclusion of a HRM view in the
decisions and practices of line managers. This requires that HRM should not be a centralized function.
A second goal of HRM is securing commitment through building strong cultures. This involves promoting
organizational goals by uniting employees through a shared set of values (quality, service, innovation, etc.)
based on a convergence of employee and enterprise interests, which the larger Japanese enterprises have
been particularly adept at.
A third goal of HRM is to achieve flexibility and adaptability to manage change and innovation in response
to rapid changes consequent upon globalization. Relevant to HRM policies in this regard are training and
multi-skilling, re-organization of work and removal of narrow job classifications. Appropriate HRM policies
are designed, for instance, to recruit, develop and retain quality staff, to formulate and implement agreed
performance goals and measures, and to build a unified organizational culture.
C. Shifting from Personnel Management to HRM
The increasingly important role of HRM is reflected in the transformation of the personnel management
function from one of concentrating on employee welfare to one of managing people in a way, which
matches organizational and individual goals and providing employees with intrinsic and extrinsic rewards.
Therefore, today Human Resource Management (HRM), historically known as personal management, deals
with formal system for the management of the people within the organization. Many well-known companies
report that they are trying to transform their workforce into a source of completive advantage.
Stages of shifting of Personnel Management to HRM:
First, HRM earlier reacted piece-meal to problems as they arose. Effective HRM seeks to link HRM issues
to the overall strategy of the organization, with the most effective HRM policies and practices integrated
into such corporate policies and strategies to reinforce or change an organization's culture. Integration is
needed in two senses - integrating HRM issues in an organization's strategic plans and securing the
acceptance and inclusion of a HRM view in the decisions of line managers. The HRM policies in respect of
the various functions (e.g. recruitment, training, etc.) should be internally consistent. They must also be
consistent with the business strategies and should reflect the organization's core values. The problem of
integrating HRM view business strategy arises, for example, in a diversified enterprise with different
products and markets. In such cases it is difficult to match HRM policies with strategies that could vary
among different business activities, each of which may call for different HRM policies.
Second, building strong cultures is a way of promoting particular organizational goals, in that "a 'strong
culture' is aimed at uniting employees through a shared set of managerially sanctioned values ('quality',
'service', 'innovation' etc.) that assume an identification of employee and employer interests.
However, there can be tension between a strong organizational culture and the need to adapt to changed
Human Resource Management (MGT501)
circumstances and to be flexible, particularly in the highly competitive and rapidly changing environment in
which employers have to operate today. Rapid change demanded by the market is sometimes difficult in an
organization with a strong culture. IBM has been cited as a case in point. Its firmly-held beliefs about
products and services made it difficult for it to effect changes in time, i.e. when the market required a radical
change in product and service (from mainframe, customized systems, salesmen as management consultants
to customer-as-end-user, seeking quality of product and service) to personal computers (standardized
product, cost competition, dealer as customer). Nevertheless, in the long term a strong organizational
culture is preferable to a weak one.
Third, the attitude that people are a variable cost is, in effective HRM, replaced by the view that people are
a resource and that as social capital can be developed and can contribute to competitive advantage.
Increasingly, it is accepted that competitive advantage is gained through well-educated and trained,
motivated and committed employees at all levels. This recognition is now almost universal, and accounts for
the plausible argument that training and development are, or will be, the central pillar of HRM.
Fourth, the view that the interests of employees and management or shareholders are divergent and
confliction - though substantially true in the past - is giving way to the view that this need not necessarily be
so. As organization, which practices, effective HRM seeks to identify and promote a commonality of
interests. Significant examples are training which enhances employment security and higher earning capacity
for employees while at the same time increasing the employee's value to the enterprise's goals of better
productivity and performance; pay systems which increase earnings without significant labor cost increases,
and which at the same time promote higher performance levels; goal-setting through two-way
communication which establishes unified goals and objectives and which provides intrinsic rewards to the
employee through a participatory process.
Fifth, top-down communication coupled with controlled information flow to keep power within the
control of management giving way to a sharing of information and knowledge. This change facilitates the
creation of trust and commitment and makes knowledge more productive. Control from the top is in
effective HRM being replaced by increasing employee participation and policies, which foster commitment
and flexibility that help organizations to change when necessary. The ways in which the larger Japanese
enterprises have installed participatory schemes and introduced information-sharing and two-way
communication systems are instructive in this regard.
In enterprises that tend to have corporate philosophies or missions, and where there are underlying values
that shape their corporate culture, HRM becomes a part of the strategy to achieve their objectives. In some
types of enterprises such as ones in which continuous technological change takes place, the goal of
successfully managing change at short intervals often requires employee cooperation through emphasis on
communication and involvement. As this type of unit grows, "If there is strategic thinking in human
resource management these units are likely to wish to develop employee-relations policies based on high
individualism paying above market rates to recruit and retain the best labor, careful selection and
recruitment systems to ensure high quality and skill potential, emphasis on internal training schemes to
develop potential for further growth, payment system designed to reward individual performance and
cooperation, performance and appraisal reviews, and strong emphasis on team work and communication ...
In short, technical and capital investment is matched by human resource investments, at times reaching near
the ideals of human resource management.
Shift of personnel management to HRM took place in three stages:
Records and
1. Records and Administration
2. Accountability Regulations
3. Competitive Advantage
Records and Administration
In first stage the primary activities, which were carried out by personnel department, were, Planning
Company picnics Scheduling vacations, Enrolling workers for health-are coverage, Planning retirement
parties These concerns include how to mange layoffs, address reduced employee loyalty, create a well
Human Resource Management (MGT501)
trained highly motivated work force that can deliver higher quality and productivity, mange and increase
diverse workforce and contain health care cost.
Accountability Regulations
During this stage primary framework of rules and regulations started emerging tin the organization. In
1970s, the job of the HR manger was to keep their companies out of court and in compliance with the
increasing number of regulations governing the work place. In the 1980s HR mangers had to address
staffing costs related to mergers and acquisitions and downsizing. The economic issues related to an
increasingly global and completive workplace characterize the 1990s. Beside these concerns
Competitive Advantage
The aim of this shift stage is from merely securing compliance to the more ambitious one of winning
commitment. The employee resource, therefore, becomes worth investing in, and training and development
thus assume a higher profile. These initiatives are associated with, and maybe are even predicated upon, a
tendency to shift from a collective orientation to the management of the workforce to an individualistic
one. Accordingly management looks for 'flexibility' and seeks to reward differential performance in a
differential way. Communication of managerial objectives and aspirations takes on a whole new importance.
What separates or distinguishes HRM from the traditional personnel function is the integration of HRM
into strategic management and the pre-occupation of HRM with utilizing the human resource to achieve
strategic management objectives. HRM "seeks to eliminate the mediation role and adopts a generally unitary
perspective. It emphasizes strategy and planning rather than problem solving and mediation, so that
employee cooperation is delivered by programme of corporate culture, remuneration packaging, and team
building and management development for core employees, while peripheral employees are kept at arm's
HRM strategies may be influenced by the decisions taken on strategy (the nature of the business currently
and in the future) and by the structure of the enterprise (the manner in which the enterprise is structured or
organized to meet is objectives). In an enterprise with effective HRM polices and practices, the decisions on
HRM are also strategic decisions influenced by strategy and structure, and by external factors such as trade
unions, the labor market situation and the legal system. In reality most firms do not have such a well
thought out sequential HRM model. But we are considering here is also effective HRM, and thus a model
where HRM decisions are as strategic as the decisions on the type of business and structure.
At a conceptual level the interpretations of HRM indicate different emphases, which lead to concentration
on different contents of the discipline. The various distinctions or interpretations indicate that HRM "Can
be used in a restricted sense so reserving it as a label only for that approach to labor management which
treats labor as a valued asset rather than a variable cost and which accordingly counsels investment in the
labor resource through training and development and through measures designed to attract and retain a
committed workforce. Alternatively it is sometimes used in an extended way so as to refer to a whole array
of recent managerial initiatives including measures to increase the flexible utilization of the labor resource
and other measures, which are largely directed at the individual employee. But another distinction can also
be drawn. This directs attention to the 'hard' and 'soft' versions of HRM. The 'hard' one emphasizes the
quantitative, calculative and business-strategic aspects of managing the headcounts resource in as 'rational' a
way as for any other economic factor. By contrast, the 'soft' version traces its roots to the human-relations
school; it emphasizes communication, motivation, and leadership. There are several ways in which HRM
has changed earlier attitudes and assumptions of personnel management about managing people. The new
model of HRM includes many elements vital to the basic management goal of achieving and maintaining
Table of Contents:
  1. INTRODUCTION TO HRM:Growing Importance of HRM, Road Map of the Course
  2. ESSENTIALS OF MANAGEMENT:Concepts and Essential of Management, Managerís Roles
  3. ORGANIZATION AND COMPONENTS OF ORGANIZATION:Open versus Closed Systems, The Hawthorne Studies
  4. PEOPLE AND THEIR BEHAVIOR:Why to work in organizations?, The Goals of Organizational Behavior
  5. INDIVIDUAL VS. GROUP BEHAVIOR:What Are Roles?, Problem solving Team
  6. PERSONNEL MANAGEMENT TO HUMAN RESOURCE MANAGEMENT:Records and Administration, Competitive Advantage
  7. HRM IN A CHANGING ENVIRONMENT:Productivity, New Trends at Work Place
  8. How organization Cultivate a Diverse Workforce, STEPS TOWARD MANAGEMENT OF DIVERSITY
  9. FUNCTIONS AND ENVIRONMENT OF HRM:Compensation and Benefits, Safety And Health, Interrelationships of HRM Functions
  10. LINE AND STAFF ASPECTS OF HRM:Authority, Line versus Staff Authority, Staff Manager
  11. LEGAL CONTEXT OF HR DECISIONS:Doing the Right Thing, Affirmative Action, Unintended Consequences
  12. HUMAN RESOURCE PLANNING (HRP):Benefits of HR Planning, Forecasting Human Resource Availability
  13. STRATEGIC PLANNING AND HRIS:HRís Strategic Role, Human Resource Information System, Common HRIS Functions
  14. JOB ANALYSIS:Purposes of the job Analysis, Questions Job Analysis Should Answer
  15. JOB ANALYSIS:Methods of Collecting Job Analysis Information, Observation, Source of Data
  16. JOB ANALYSIS (CONTD.):SURPLUS OF EMPLOYEES FORECASTED, Diversity through Recruiting Efforts
  17. SOURCES OF RECRUITMENT:ALTERNATIVES TO RECRUITMENT, Quantity of the Applicants, Quality of the Applicants
  18. SELECTION:Initial Screening, Advantages of Successful Screening
  19. SELECTION TESTS:Characteristics of Properly Designed Selection Tests, Guidelines for Conducting an Interview
  20. SELECTION PROCESSÖ CONTD:Background Investigations, Physical Exam, Selecting Managers
  21. SOCIALIZATION:Compensation and Benefits, Team Membership, Stages in socialization Process, Training and Development Trends
  22. TRAINING AND DEVELOPMENT:Learning, Phases of Training, Why Transfer of Training Fails
  23. MAXIMIZING LEARNING:Following up on Training, Repetition, Feedback, Purposes of T & D
  24. CAREER MANAGEMENT:Individual career planning, Career Planning and Development Methods
  25. PERFORMANCE:Determinants of Job Performance, Why is performance measured?, Performance Management
  28. COMPENSATION SYSTEM:Pay, Job Pricing, Compensation: An Overview, Compensation Surveys
  29. BENEFITS:Total Compensation, Discretionary Benefits (Voluntary), Workplace Flexibility
  30. ROLE OF MONEY IN PERFORMANCE OF EMPLOYEES:Types of Pay-for-Performance Plans, Empower Employees
  31. MOTIVATION:The Motivation Process, Motivational Theories, Challenges of motivating employees
  32. OCCUPATION, HEALTH & SAFETY:Physical Conditions, Accident Investigation, Smoking in The work place
  33. STRESS MANAGEMENT:Symptoms of Stress, Managing Stress,
  34. COMMUNICATION IN ORGANIZATION:Burnout, Social Support at Work & Home, Communication in organization, Meetings
  35. TRADE UNIONS:Collective Bargaining, The HRM Department in a Nonunion Setting, Phases of Labor Relations
  36. CONFLICT AND NEGOTIATION:Transitions in Conflict Thought, Individual Conflict Management Styles
  37. POWER AND POLITICS:Sources of Power, Advantages and Disadvantages of PowerPower and Politics in Context
  38. EMPLOYEE RIGHTS AND DISCIPLINE:Contractual Rights, Management Rights, Disciplining Employees,
  39. DISCIPLINE (CONT...):Factors to Consider when Disciplining, Disciplinary Guidelines, Employee Separations
  40. LEADERSHIP:The Leaderís Behavior, Situational Theories of Leadership, Becoming a Leader
  41. REVISION (LESSON 12-21):Plans, Job Specification, Human resource planning, Selection Process, Corporate Culture
  42. REVISION (LESSON 22-26):Training, Case Study Method, Training, Performance
  43. REVISION (LESSON 27-35):Classification Method, Compensation, Empowerment, Mediation
  44. INTERNATIONAL DIMENSIONS OF HRM:Global Corporation, Type of staff members, Approaches to Global Staffing
  45. CONCLUSION & REVIEW:Strategies for Gaining Competitive Advantage, High-performance Work System