Introduction
Human Resource Management, or HRM for short, is one of the most critical elements in running a successful business, though it is not always handled with the time and focus that it deserves. To fully understand what HRM is and its influence on the success or failure of a company, we first must know what it means.
The purpose of Human Resource Management is to recruit, develop and utilise the staff within an enterprise in the manner in which is most suitable to accomplishing the aims and objectives of the enterprise.
This effectively translates to “using individuals in the business in the best way possible” although that would be an over-simplified assertion that doesn’t echo the real nature and scope of HRM. HRM describes all of the strategies and processes that are involved in making sure that all members of staff within a business are pulling in the same direction, and much more importantly, in the right direction. Without good human resource management a company will be spending energy on jobs that it may not directly benefit from.
At its center, HRM brings together three primary elements that are essential to the productive output of the staff. These elements include motivation, management and leadership, and organisational structures. As a result, HRM can be employed on all levels of management in your company, not just the shop floor staff, and it could even be used to adjust the framework of those levels of management as well. It is a wide-ranging subject that is explored in greater detail in this article.
Why is it Necessary?
Quite simply, companies don’t run without workers. As a result, some level of human resource management is necessary for any business to operate at all, let alone in an efficient and prosperous manner. Even if you don’t appreciate exactly how HRM affects the day-to-day running of your company you will surely be using some sort of HRM in order to keep trading.
Human Resource Management has an impact on every level of your business activities with various 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 business, which are much more intangible aspects but are important nonetheless.
It also goes without saying that each company is different and will have a specific set of issues to face and opportunities to take advantage of. HRM can work as a versatile tool that converts workforce potential into financial gains and can adapt to fully utilise the strengths of your company.
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Impact on Business
While this all sounds very interesting and important, how does it actually impact on the daily functions of your company, and more importantly, how will it help to improve the performance and profitability of your company? The effect of HRM can be broken down into the following areas.
Recruitment & Training
This is probably the part of a business that is most affiliated with human resources - recruitment. Nearly every company in the world, and particularly businesses that are expanding, need to recruit people to work for them. Either existing employees have left, or new opportunities have arisen which mean there are roles that have to be filled.
It’s also important to keep your staff training procedures up-to-date to make certain that your workforce is fully capable of doing the job they are there to do. Whether it is a fresh piece of legislation or a new piece of technology that alters the marketplace, there is an on-going requirement to keep your organisation 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 find that the expensive process of external recruitment can be averted if your company has adequate training facilities in place. It is much easier to train an existing worker to a higher level and then use external recruitment to fill the gap remaining at the lower level than it is to recruit directly to a higher level.
Employee Relations
When you have the right men and women working for you it is necessary to keep them doing work for you, and to make sure they are doing a decent job. This can be accomplished 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 may include disciplinary and grievance management. All of these factors are an important part of the overall HRM strategy.
Finances
You cannot keep employees at your company by good motivational techniques only. They’ll want to be paid a fair amount and on time. Payroll should be one of the very first systems that is developed when you launch a company, but they still need to be taken care of and updated when personnel join, leave or change pay grade. Improper management of your payroll program can quickly lead to catastrophe in terms of your staff.
Industrial Relations
Numerous firms will have to work with trade union or other workers rights establishments which can be very forceful when protecting the interests of their members. When interacting with such bodies it is advantageous to have individuals within your company who can connect comfortably with them whilst keeping the interests of your own business in mind as well. The need for good industrial relations is significantly more prevalent in public sector companies.
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Workforce Planning
We have seen the impact that human resource management may have on a company and overall it looks like good HRM will have a beneficial effect on any business. As a rule, this is the case, but good HRM doesn’t just happen overnight. It should be planned according to the objectives of the organisation and then carried out thoroughly.
One way to implement HRM concepts to your business is via workforce planning - a system that has the aim of making sure your staff can finish the upcoming tasks needed for your business to be successful. It can be defined as:
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 needed and the proper skill mix. Recruitment and training policies are designed with a long term focus in order to ensure that the company is able to function without being limited by a lack of appropriate labour. It is a bit of a balancing act, but when done properly can produce many benefits.
Requirements
Evaluating your workforce requirements is essential to the proper planning of your staff in the short-term and long-term future. If your company is subject to seasonal shifts in demand, for example in the tourism industry, or is prone to seasonal fluctuations in staff levels then your workforce planning must take these factors into consideration. Also bear in mind any future retirements or intervals of maternity/paternity leave or you could suffer from a shortage of qualified personnel.
Recruitment
Whether you are hiring people externally or from inside your existing workforce you still need to find the correct person to fill the position. As part of your workforce planning you should draw up a job description that describes the job that will be carried out as well as a person specification which will give an indication of the type of person that would be a good fit for the job and your business. By mixing and prioritising the components of these two documents you will be able to identify the ideal job candidate.
Selection
The selection procedure can be as involved or as easy as you deem necessary. Outside of regular job interviews there are numerous ways you can learn about applicants for your jobs, including aptitude tests, group interviews and even psychometric testing. These sophisticated techniques might not be applicable to all workforce planning assignments but are an alternative to employers.
Training & Development
The primary goal of staff training and development is to develop a better standard of worker in your company. Workforce planning can use training to fill upcoming gaps in the skill set of your staff and is generally faster and more economical than external recruitment.
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Workforce Motivation
It almost goes without saying that properly motivated workers are going to deliver a better standard of work and have a greater quantity of production than unhappy workers. This improved work rate will inevitably lead to a rise in the profitability of a business. Yet motivation remains a bit of taboo subject amongst some managers.
Essentially, all motivational tactics can be separated into two models that are often called the “carrot and stick” approach to motivation. The analogy relates 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!
Whether you use the carrot strategy or the stick strategy will largely depend on your own management approach, as well as the industry you work in and the type of individuals that you hire.
Financial
The most common financial motivators are payment schemes. You can pay staff in many different ways, either a fixed amount for a set service, by an hourly or daily rate, or a rate linked to production, such as a commission structure.
Another financial motivation method involves what are called incentive schemes, where by additional financial rewards are handed out for good performance. This may include commission beyond a fixed salary, performance-related pay levels or even providing 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 a worker. It is broadly acknowledged that money is the key motivational factor for the vast majority of people. If you want to learn more about these ideas I would recommend looking up the work of Elton Mayo, Abraham Maslow as well as Fredrick Herzberg.
The Changing Face of HRM
As previously mentioned, HRM is a flexible application that is there to match up the characteristics of your staff to the goals of your business. As a result, it has had to keep changing to a business climate that is constantly changing for one reason or another.
Maybe there is a new piece of government legislation that will have an effect of how your business can carry out its trading, or maybe a fresh manufacturing technology will come along that can revolutionise your industry. Either way, if you want to make certain that your workforce is performing to its optimum level then your HRM system should be flexible enough to cope with an ever-changing economy. After all, what might seem like a threat to many will often appear as an opportunity to a shrewd entrepreneur.