Introduction
Human Resource Management, or HRM for short, is one of the most critical factors in running a successful business, although it isn’t always treated with the time and emphasis that it deserves. To completely understand what HRM is and its impact on the success or failure of a business, we first need to know what it means. The following is a satisfactory definition:
The purpose 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 organisation.
This basically translates to “using people in the business in the best way possible” though that would be an over-simplified assertion that doesn’t reflect the true nature and range of HRM. HRM describes all of the methods and processes that are involved in making sure that all members of staff in a company are pulling in the same direction, and much more importantly, in the right direction. Without good human resource management a business will be expending effort on jobs that it may not directly gain from.
At its core, 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. Consequently, HRM can be employed on all levels of management within your company, not just the shop floor workers, and it could even be used to adjust the framework of those levels of management at the same time.
Why is it Necessary?
Quite simply, companies don’t run without workers. As such, some level of human resource management is needed for any organisation to operate at all, let alone in an efficient and profitable manner.
Human Resource Management has an effect on every level of your business activities with various degrees of visibility. The most obvious HRM tasks include the hiring and firing of staff as well as monetary systems such as payroll. It can also impact on motivation and communication inside your company, which are much more intangible variables but are crucial nonetheless.
It also goes without saying that each company is unique and will have a unique set of challenges to face and opportunities to take advantage of. HRM can act as a versatile tool that converts workforce potential into financial gains and can adjust to fully utilise the strengths of your firm.
HRM is a general business approach and could be employed on firms who register a company and almost any other type of business too.
Impact on Business
Whilst this all appears very interesting and important, how does it actually influence the daily functions of your company, and more importantly, how will it help to enhance the performance and success of your company? The effect of HRM can be broken down into the following areas.
Recruitment & Training
This is probably the area of a business that is most associated with human resources – recruitment. Nearly every company in the world, and particularly companies that are growing, need to recruit people to work for them. Either existing employees have left, or new possibilities have arisen which mean there are jobs that must be filled. HRM can ensure your recruitment process gets the appropriate people into the right roles 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 new piece of legislation or a new bit of technology that alters the industry, there is an on-going need to keep your company up-to-date and ready to take advantage of any opportunity.
You may also discover that the expensive practice of external recruitment can be avoided if your company has adequate training facilities in place. It is far easier to teach an existing worker to a higher level and then use outside recruitment to fill the gap left at the lower level than it is to hire directly to a higher level.
Employee Relations
When you have the suitable men and women working for you it is important to keep them working for you, and to be sure they are doing a good job. This can be achieved via good employee relations. The most obvious employee relations practice is the art of motivation – a broad topic itself – but other employee relations issues may include disciplinary and grievance management.
Finances
You can’t keep employees at your company by good motivational techniques alone. They’ll want to be paid a fair sum and on time. Payroll ought to be one of the very first systems that is created when you start a company, but they still need to be maintained and updated when personnel join, leave or change pay grade. Incorrect management of your payroll program can quickly lead to disaster in terms of your workforce.
Industrial Relations
Numerous companies will have to deal with trade union or other workers rights organisations which can be incredibly forceful when protecting the interests of their members. When interacting with such bodies it is advantageous to have people within your organisation who can communicate effectively with them whilst keeping the interests of your own company in mind as well.
Among the quickest ways to identify whether private limited companies have very good employee relations is to ask existing staff if they are happy in their work.
Workforce Planning
We have seen the effect 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 does not just happen overnight. It should be designed according to the goals of the organisation and then carried out thoroughly.
One way to apply HRM concepts to your company is through workforce planning – a system that has the aim of making sure your staff can finish the upcoming tasks required for your company 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 quantity of employees required and the appropriate skill mix. Recruitment and training policies are devised with a long term focus in order to ensure that the company is able to function without being limited by a shortage of appropriate labour. It is a bit of a balancing act, but when done correctly can bring about many benefits.Workforce planning can be split into four main parts; requirements, recruitment, selection, and training and development.
Requirements
Analysing your workforce demands is essential to the proper planning of your workforce in the short-term and long-term future. If your company is subject to seasonal changes in demand, such as in the tourism industry, or is prone to seasonal fluctuations in workforce then your workforce planning must take these factors into consideration. Also bear in mind any upcoming retirements or periods of maternity/paternity leave or you could suffer from a shortage of qualified employees.
Recruitment
Whether you are hiring people externally or from within your existing workforce you still want to find the right person to fill the role. As part of your workforce planning you should draw up a job description that describes the role 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. By combining and prioritising the components of these two documents you will be able to identify the ideal job applicant.
Selection
The selection procedure can be as involved or as easy as you deem necessary. Over and above regular job interviews there are numerous ways you can learn about candidates for your jobs, including aptitude tests, group interviews and even psychometric testing.
Training & Development
The primary goal of staff training and development is to produce a much better standard of worker in your organisation. Workforce planning can use training to fill upcoming gaps in the skill set of your workforce and is commonly quicker and more cost effective than external recruitment. Training and development may also go some way toward motivating your staff.
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Workforce Motivation
It practically goes without saying that well motivated employees are going to deliver a better standard of output and have a higher quantity of output than unhappy workers. This improved working rate will inevitably lead to an increase in the profitability of a business. Yet motivation is still a bit of taboo topic amongst some managers.
Essentially, all motivational practices can be separated into two sets that are often referred to as the “carrot and stick” approach to motivation. The analogy relates to the two ways 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 old idea but the principle is still relevant to companies today.
Whether you use the carrot approach or the stick strategy will generally depend on your own management approach, as well as the industry you work in and the type of individuals that you hire. Regardless of your method, motivational factors can be broken down into a further two groups; financial and non-financial motivators.
Financial
The most common financial motivators are payment plans. You can pay staff in a number of different ways, either a fixed amount for a fixed service, by an hourly or daily rate, or a rate linked to production, such as a commission scheme. Whichever method is employed, the workforce is motivated to work because they will get money for doing so.
Another financial motivation method involves what are called incentive schemes, where by additional financial rewards are handed 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.
Non-financial
Several human resource advocates have their own thoughts about the different factors that motivate people to work, although these are often seen as an added bonus to an employee. It is widely acknowledged that money is the key motivational factor for the great majority of people.
The Changing Face of HRM
As previously mentioned, HRM is a versatile application that is there to match up the characteristics of your staff to the objectives of your organisation. As such, it has had to keep adapting to a business climate that is constantly changing for one reason or another.
Maybe 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 will revolutionise your sector. Either way, if you want to make certain that your workforce is performing to its maximum level then your HRM system should be flexible enough to cope with an ever-changing economy. After all, what may seem like a risk to most will often appear as an opportunity to a good entrepreneur.
