Introduction
Human Resource Management, or HRM for short, is one of the most important factors in running a prosperous business, though it is not always treated with the time and emphasis 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 following is a good definition:
The function of Human Resource Management is to recruit, develop and utilise the workers within an enterprise in the manner in which is most appropriate to accomplishing the aims and objectives of the organisation.
This essentially translates to “using individuals in the company in the best way possible” although that would be an over-simplified statement that does not reflect the real nature and range of HRM. HRM describes all of the techniques and processes that are involved in ensuring that all members of staff in a business are pulling in the same direction, and more importantly, in the right direction. Without having good human resource management a business will be expending effort on tasks that it may not directly gain from.
At its core, HRM combines three primary 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 within your company, not just the shop floor staff, and it may even be used to modify the framework of those levels of management as well. It is a broad subject that is explored in more detail in this article.
Why is it Necessary?
Put simply, businesses don’t work without employees. As a result, some level of human resource management is needed for any business 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 various degrees of visibility. The most obvious HRM tasks involve the hiring and firing of employees as well as financial systems such as payroll. It can also impact on motivation and communication within your company, which are much more intangible factors but are crucial nonetheless. Bad HRM practice in these less visible arenas can have a negative impact on your company but go undetected for long intervals.
It also goes without saying that each business is different and will have a different set of challenges to face and opportunities to take advantage of. HRM can work as a versatile tool that converts workforce power into financial profits and can adapt to fully utilise the strengths of your firm. Without it, your rivals may well be afforded the chance to prosper where you missed out.
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Impact on Business
While this all appears very interesting and significant, how does it actually influence the daily functions of your business, and more importantly, how will it help to improve the performance and profitability of your company? The impact of HRM can be broken down into the following areas.
Recruitment & Training
This is probably the part of a company that is most affiliated with human resources – recruitment. Nearly every company in the world, and especially businesses that are expanding, have to recruit people to work for them. Either existing employees have left, or new possibilities have arisen which mean there are jobs that need to be filled.
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. Whether it is a new piece of legislation or a new piece of technology that changes the industry, there is an on-going need to keep your business up-to-date and ready to make use of any opportunity.
You may also find that the expensive process of external recruitment can be avoided if your organisation has sufficient training facilities in place. It is far easier to train an existing worker to a higher level and then use external recruitment to fill the gap left at the lower level than it is to hire straight to a higher level. This strategy can be used at almost every level of management within your organisation.
Employee Relations
Once you have the right people working for you it is necessary to keep them working for you, and to make certain they are doing a good job. This can be accomplished through good employee relations. The most obvious employee relations exercise is the art of motivation – a broad topic by 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 sum and on time. Payroll must be one of the primary systems that is created when you launch a company, but they still need to be taken care of and updated when staff join, leave or change pay grade.
Industrial Relations
Numerous companies will have to work with trade union or other workers rights establishments which can be very forceful when protecting the interests of their own members. When interacting with such bodies it is beneficial to have people within your organisation who can communicate comfortably with them whilst keeping the interests of your own company in mind at the same time.
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Workforce Planning
We have seen the effect that human resource management may have on a company and overall it seems like good HRM will have a beneficial effect on any business. 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 apply HRM concepts to your business is through workforce planning – a system that has the aim of making sure your staff can finish the upcoming tasks required for your business to be successful. It can be defined as:
Definition
Workforce planning is the method of anticipating in advance the human resource needs of any organisation, both in terms of the quantity 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 organisation is able to operate without being limited by a shortage of appropriate labour. It is a bit of a balancing act, but when done correctly can produce many benefits.Workforce planning can be split into four main parts; requirements, recruitment, selection, and training and development.
Requirements
Evaluating your workforce requirements is vital to the proper planning of your workforce in the short-term and long-term future. If your business is subject to seasonal changes in demand, such as in the tourism industry, or suffers from seasonal fluctuations in staff levels then your workforce planning needs to take these factors into consideration.
Recruitment
Whether you are hiring people externally or from inside your existing workforce you still want to find the right individual to fill the position. As part of your workforce planning you should 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 kind of individual that would be a perfect fit for the job and your company.
Selection
The selection procedure can be as involved or as easy as you deem necessary. Beyond 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 main goal of staff training and development is to produce a much better quality of worker in your company. Workforce planning can use training to plug upcoming gaps in the skill set of your workforce and is commonly quicker 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 output and have a greater quantity of output than unhappy workers. This improved working rate will inevitably lead to a rise in the profitability of a business.
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 belongings, 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 companies today.
Whether you use the carrot approach or the stick strategy will largely depend on your own management approach, as well as the business you work in and the type of individuals that you employ. Regardless of your method, motivational factors can be broken down into a further two sets; financial and non-financial motivators.
Financial
The most common financial motivators are payment plans. You can pay staff in many different ways, either a fixed amount for a set service, by an hourly or daily fee, or a rate related to production, such as a commission structure.
Another financial motivation method involves what are called incentive schemes, where by additional financial rewards are given out for good overall performance. This may include commission above a fixed salary, performance-related pay levels or even providing a share of company profits. Again, the motivating aspect here is the money alone.
Non-financial
Several human resource theorists have their own ideas about the other factors that motivate people to work, although these are often seen as an added bonus to a worker. It is widely acknowledged that money is the main 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 stated, HRM is a flexible application that is there to match the features of your workforce to the objectives of your organisation. As a result, it has had to keep adapting to a business climate that is continuously changing for one reason or another.
Perhaps there is a new piece of government legislation that may have an impact of how your company can carry out its trading, or maybe a fresh manufacturing technology will come along that can revolutionise your sector. Either way, if you want to make certain that your staff is performing to its highest level then your HRM strategy should be adaptive enough to cope with an ever-changing world.