Introduction
Human Resource Management, or HRM for short, is one of the most important factors in running a successful company, though it isn’t 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 must know what it means. The following is a satisfactory definition:
The function of Human Resource Management is to recruit, develop and use the staff 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 methods and procedures that are involved in making certain that all members of staff within a company are pulling in the same direction, and more importantly, in the right direction.
At its core, HRM combines three major elements that are essential to the productive output of the workforce. 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 workers, and it could even be used to alter the structure 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 work without workers. As such, some level of human resource management is necessary for any business to operate at all, let alone in an effective and profitable manner. Even if you don’t appreciate exactly how HRM affects the daily running of your enterprise 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 evident HRM tasks include the hiring and firing of staff as well as financial systems such as payroll. It may also impact on motivation and communication within your business, which are far more intangible factors but are critical nonetheless. Inadequate HRM practice in these less visible arenas can have a negative impact on your organisation but go undetected for long intervals.
It also goes without saying that every organisation is different and will have a different set of issues to face and opportunities to take advantage of. HRM can act as a flexible tool that translates workforce potential into financial gains and can adjust to fully utilise the talents of your company.
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Impact on Business
Whilst this all appears very interesting and significant, how does it actually influence the daily operations of your business, and more importantly, how will it help to boost the performance and success of your company? 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 affiliated with human resources - recruitment. Nearly every business in the world, and particularly businesses that are growing, have to recruit people to work for them. Either current employees have left, or new possibilities have arisen which mean there are jobs that need to be filled. HRM can make sure your recruitment process gets the appropriate people into the right jobs at a cost-effective price.
It’s also important to keep your staff training procedures up to date to make sure that your staff 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 bit of technology that alters the industry, there is an on-going requirement to keep your business up-to-date and prepared to take advantage 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 adequate training facilities in place. It is far easier to teach an existing staff member 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. This technique can be applied at almost every single level of management inside your business.
Employee Relations
Once you have the suitable people working for you it is necessary to keep them working for you, and to make certain they are doing a decent job. This can be achieved through good employee relations. The most obvious employee relations exercise is the art of motivation - a wide topic itself - but other employee relations issues may include disciplinary and grievance management. All of these things are an essential part of the overall HRM strategy.
Finances
You cannot keep employees at your organisation by good motivational techniques only. They’ll want to be paid a fair sum and on time. Payroll ought to be one of the initial systems that is developed when you launch a company, but they still need to be maintained and updated when personnel join, leave or switch pay grade. Poor management of your payroll program can rapidly lead to disaster in terms of your staff.
Industrial Relations
Several firms will have to work with trade union or other workers rights establishments which can be very forceful when defending the interests of their own members. When interacting with such bodies it is beneficial to have people within your company who can communicate effectively with them whilst keeping the interests of your own business in mind as well.
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Workforce Planning
We have seen the impact that human resource management can have on a business and overall it looks like good HRM will have a beneficial effect on any organisation. As a rule, this is the case, but effective HRM doesn’t just happen overnight.
One way to apply HRM concepts to your company is via workforce planning - a system that has the goal of making sure your staff can complete the upcoming tasks required for your business to be successful. It can be defined as:
Definition
Workforce planning is the method of anticipating ahead of time the human resource requirements of any organisation, both in terms of the quantity of employees necessary and the proper skill mix. Recruitment and training policies are devised with a long term emphasis in order to make sure that the organisation is able to operate without being limited by a shortage of appropriate labour.
Requirements
Evaluating your workforce demands is vital to the proper planning of your workforce in the short-term and long-term future. If your company 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 recruiting externally or from within your existing workforce you still need to find the correct person to fill the role. As part of your workforce planning you ought to draw up a job description that describes the job that will be undertaken as well as a person specification which will give an indication of the type of individual that would be a perfect fit for the job and your company.
Selection
The selection procedure can be as involved or as simple as you deem necessary. Over and above regular job selection interviews there are numerous ways you can learn about candidates for your jobs, including aptitude tests, group interviews or even psychometric testing.
Training & Development
The principal goal of staff training and development is to develop a much better quality 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 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 unhappy workers. This improved working rate will inevitably lead to an increase 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 referred to as 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 approach or the stick approach will generally depend on your own management style, as well as the industry you work in and the type of individuals that you employ.
Financial
The most typical financial motivators are payment schemes. You can pay staff in numerous different ways, either a set amount for a fixed service, by an hourly or daily rate, or a rate related to production, such as a commission structure.
Another financial motivation method involves what are known as incentive schemes, where additional financial rewards are given out for good performance. This may include commission above 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 theorists have their own ideas about the different factors that motivate people to do the job, although these are often seen as a bonus to an employee. It is widely acknowledged that income is the key motivational factor for the majority of people. If you would like to learn more about these theories I would recommend looking up the work of Elton Mayo, Abraham Maslow and Fredrick Herzberg.
The Changing Face of HRM
As previously mentioned, HRM is a versatile application that is there to match up the features of your staff to the goals of your organisation. As such, it has had to keep adapting to a business climate that is continuously changing for one reason or another. Moreover, it is a good idea to continuously evaluate your own HRM procedures and not to rest on your laurels.
Perhaps there is a new piece of government legislation that will 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 maximum level then your HRM strategy should be flexible enough to cope with an ever-changing economy.
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