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Introduction

Human Resource Management, or HRM for short, is one of the most important elements in running a prosperous company, though it is not always handled with the time and focus that it deserves. To fully understand what HRM is and its impact on the success or failing of a business, we first need to know what it means.

The function of Human Resource Management is to recruit, develop and use the workers within an organisation in the manner in which is most suitable to accomplishing the aims and objectives of the organisation.

This basically translates to “using individuals in the company in the best way possible” though that would be an over-simplified statement that does not echo the real nature and scope of HRM. HRM describes all of the methods and processes that are involved in making certain that all members of staff in a company are pulling in the same direction, and more importantly, in the right direction. Without having good human resource management a company will be spending effort on jobs that it may not directly gain from.

At its core, HRM brings together three major elements that are essential to the productive output of the workforce. These factors include motivation, management and leadership, and organisational structures. Consequently, HRM can be employed on all levels of management in your company, not just the shop floor personnel, and it can even be used to modify the framework of those levels of management at the same time. It is a broad subject that is explored in greater detail in this article.

Why is it Necessary?

Quite simply, companies don’t operate without employees. As a result, some level of human resource management is needed for any organisation to operate at all, let alone in an effective and profitable manner. Even if you don’t realise exactly how HRM affects the day-to-day running of your enterprise you will surely be using some form 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 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 inside your company, which are far more intangible factors but are crucial nonetheless.

It also goes without saying that each company is unique and will have a different set of issues to face and opportunities to take advantage of. HRM can work as a flexible tool that converts workforce power into financial profits and can adjust to fully utilise the strengths of your company. Without it, your competitors may be afforded the chance to prosper where you missed out.

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Impact on Business

Whilst this all appears very interesting and important, how does it actually impact on the daily functions of your company, and more importantly, how will it help to enhance the performance and profitability of your firm? 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. Almost every company in the world, and particularly businesses that are expanding, must recruit people to work for them. Either existing employees have left, or new opportunities have arisen which mean there are roles that must be filled. HRM can make sure your recruitment system gets the appropriate people into the right roles at a cost-effective price.

It is 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 changes the marketplace, there is an on-going requirement to keep your business up-to-date and prepared to make use of any opportunity.

You may also discover that the expensive process of external recruitment can be averted if your company has sufficient training facilities in place. It is much easier to teach 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.

Employee Relations

When you have the right men and women working for you it is important to keep them working 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 exercise is the art of motivation – a broad topic by itself – but other worker relations issues may include disciplinary and grievance management.

Finances

You cannot keep employees at your organisation by good motivational techniques only. They will want to be paid a fair sum and on time. Payroll ought to be one of the very first systems that is developed when you start a business, but they still need to be taken care of and updated when staff join, leave or change pay grade.

Industrial Relations

Many firms will have to work with trade union or other workers rights establishments which can be very forceful when defending the interests of their members. When dealing with such bodies it is advantageous to have individuals within your organisation who can connect comfortably with them whilst keeping the interests of your own organisation in mind at the same time.

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Workforce Planning

We have seen the impact that human resource management may have on a company and generally it seems like good HRM will have a good effect on any business. As a rule, this is the case, but good HRM does not just occur overnight. It should be planned according to the targets of the organisation and then performed thoroughly.

One way to implement HRM concepts to your company is via workforce planning – a process that has the aim of making sure your staff can complete the upcoming tasks needed for your company to be successful.

Definition

Workforce planning is the process of anticipating in advance the human resource needs of any organisation, both in terms of the number of employees needed and the appropriate skill mix. Recruitment and training policies are designed with a long term emphasis in order to ensure that the organisation 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 produce many benefits.

Requirements

Analysing your workforce requirements 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 suffers from seasonal fluctuations in workforce then your workforce planning must take these factors into consideration.

Recruitment

Whether you are recruiting externally or from within your existing workforce you still want to find the correct person to fill the position. As part of your workforce planning you ought to draw up a job description that describes the role that will be undertaken 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.

Selection

The selection process can be as involved or as easy as you deem necessary. Beyond regular job 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 primary goal of staff training and development is to develop a much better standard of worker in your business. Workforce planning can use training to fill upcoming gaps in the skill set of your workforce which is usually quicker and more economical than external recruitment. Training and development may also go some way towards motivating your staff.

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Workforce Motivation

It almost goes without saying that properly motivated employees are going to produce a better standard of work and have a higher quantity of output than unsatisfied workers. This improved work rate will undoubtedly lead to a rise in the profitability of a business.

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 refers to the two ways to make a donkey carry your belongings, either by tempting it with a carrot, or threatening it with a strike from a stick! It is a fairly old idea but the basic principle is still relevant to businesses today.

Whether you use the carrot approach or the stick approach will largely depend on your own management approach, as well as the business you work in and the type of individuals that you hire. Irrespective of your approach, motivational factors can be broken down into a further two sets; financial and non-financial motivators.

Financial

The most common financial motivators are payment schemes. You can pay staff in many different ways, either a set amount for a set service, by an hourly or daily rate, or a rate related to production, such as a commission scheme.

Another financial motivation method involves what are called 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.

Non-financial

Several human resource advocates have their own ideas about the different factors that motivate people to do the job, although these are often seen as a bonus to a worker. It is widely acknowledged that income is the key motivational factor for the majority of people. If you want to learn more about these ideas I would recommend looking up the work of Elton Mayo, Abraham Maslow and Fredrick Herzberg.

The Changing Face of HRM

As previously stated, HRM is a versatile application that is there to match up the characteristics of your workforce to the objectives of your organisation. As such, it has had to keep changing to a business climate that is constantly changing for one reason or another.

Perhaps 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 new manufacturing technology will come along that will revolutionise your sector. Either way, if you want to ensure that your staff is performing to its highest level then your HRM strategy should be flexible enough to cope with an ever-changing economy.