Human Resource Management

Definitions of HRM:

Human resources management (HRM) is a management function concerned with hiring,

motivating and maintaining people in an organization. It focuses on people in organizations.
Human resource management is designing management systems to ensure that human talent
is used effectively and efficiently to accomplish organizational goals.

HRM is the personnel function which is concerned with procurement, development,

compensation, integration and maintenance of the personnel of an organization for the
purpose of contributing towards the accomplishments of the organization ‘s objectives.

NATURE OF HRM
HRM is a management function that helps manager‘s to recruit, select, train and develop
members for an organization. HRM is concerned with people‘s dimension in organizations.
The following constitute the core of HRM
 HRM Involves the Application of Management Functions and Principles. The
functions and principles are applied to acquiring, developing, maintaining and
providing remuneration to employees in organization.
 Decision Relating to Employees must be Integrated. Decisions on different aspects of
employees must be consistent with other human resource (HR) decisions.
 Decisions Made Influence the Effectiveness of an Organization. Effectiveness of an
organization will result in betterment of services to customers in the form of high
quality products supplied at reasonable costs.
 HRM Functions are not Confined to Business Establishments Only but applicable to
non business organizations such as education, health care, recreation and like. HRM
refers to a set of programmes, functions and activities designed and carried out in
order to maximize both employee as well as organizational effectiveness.

Features of HRM or characteristics or nature

 HRM involves management functions like planning, organizing, directing and

controlling
  It involves procurement, development, maintenance of human resource
 It helps to achieve individual, organizational and social objectives
 HRM is a mighty disciplinary subject. It includes the study of management
psychology communication, economics and sociology.
 It involves team spirit and team work.

Significance/importance/need of HRM:

HRM becomes significant for business organization due to the following reasons.
 Objective:-
 HRM helps a company to achieve its objective from time to time by creating a
positive attitude among workers. Reducing wastage and making maximum use of
resources etc.
 Facilitates professional growth:-
 Due to proper HR policies employees are trained well and this takes them ready for
future promotions. Their talent can be utilized not only in the company in which they
are currently working but also in other companies which the employees may join in
the future.
 Better relations between union and management :-
 Healthy HRM practices can help the organization to maintain co-ordinal relationship
with the unions. Union members start realizing that the company is also interested in
the workers and will not go against them therefore chances of going on strike are
greatly reduced.
 Helps an individual to work in a team/group :-
 Effective HR practices teach individuals team work and adjustment. The individuals
are now very comfortable while working in team thus team work improves.
 Identifies person for the future :-
 Since employees are constantly trained, they are ready to meet the job requirements.
The company is also able to identify potential employees who can be promoted in the
future for the top level jobs. Thus one of the advantages of HRM is eparing people for
the future.
 Allocating the jobs to the right person :-
 If proper recruitment and selection methods are followed, the company will be able to
select the right people for the right job. When this happens the number of people
leaving the job will reduce as the will be satisfied with their job leading to decrease in
labour turnover.
 Improves the economy:-
 Effective HR practices lead to higher profits and better performance by companies
due to this the company achieves a chance to enter into new business and start new
ventured thus industrial development increases and the economy improves.

Scope of HRM

The major HRM activities include HR planning, job analysis, job design, employee hiring,
employee and executive remuneration, employee motivation, employee maintenance,
industrial relations and prospects of HRM.

The scope of Human Resources Management extends to:

Ø All the decisions, strategies, factors, principles, operations, practices, functions, activities
and methods related to the management of people as employees in any type of organization.

Ø All the dimensions related to people in their employment relationships, and all the
dynamics that flow from it.

The scope of HRM is really vast. All major activities n the working life of a worker – from
the time of his or her entry into an organization until he or she leaves it comes under the
purview of HRM. American Society for Training and Development (ASTD) conducted fairly
an exhaustive study in this field and identified nine broad areas of activities of HRM.

These are given below:

 Human Resource Planning
 Design of the Organization and Job Selection and Staffing
 Training and Development Organizational Development Compensation and Benefits
Employee Assistance Union/Labour Relations

Functions Of HRM:

The functions performed by managers are common to all organization. Generally the
functions performed by Human Resource Management may be classified into two categories.
They are I. Managerial Function and II. Operative Function

I. MANAGERIAL FUNCTION:

1. Planning:This involves predetermined course of action. In this process organizational

goals and formulation of policies and programmes for achieving them are chalked out. A well
thought out plan makes execution perfect and easy.

2. Organising:This is a process by which the structure and allocation of jobs are determined.
Organising involves each subordinate a specific task, establishing departments, delegating
authority to subordinates,establishing channels of authority and communication, and
coordinating the work of subordinates.

3. Staffing:This is a process by which managers select, train, promote and retire the
subordinates. This involves in deciding the type of people to be hired, recruiting prospective
employees, selecting employees, setting performance standard, compensating employees,
evaluating performance, counseling employees, training and developing employees.

4. Directing:Directing is the process of activating group efforts to achieve the desired goals.

5. Controlling:

This is the process of setting standards for performance, checking to compares see how actual
performance compares with these set standards and taking needed corrective action.

II. OPERATIONAL FUNCTION

1. PROCUREMENT: Procurement function is securing and employing the people having
required level of human resources essential for achieving the organizational objectives. It
involves job analysis, human resources planning, recruitment, selection, placement, induction
and handling internal mobility.

a) Job Analysis: It is the study and collection of data relating to the operations and
responsibilities of a specific job. It includes:
 Collection of data and information and facts relating to the various aspects of jobs
including men, machines and materials.
 Drawing up of job description, job specification, job requirements and employee
specification with which nature, levels and quantum human resources can be
finalised.
 Providing the guidelines, plans and the basis for job design and for all operative
functions of HRM.
b) Human Resources Planning:This is the process which assures the organisation that it
will have adequate number of qualified persons, at requisite times, performing in a way to
satisfy the needs of the organisation and also provide satisfaction to the individual
employee, so employed. The process involves:

 Estimating the present and future requirements of human resources based on

objectives and long range plans of the organisation
 Calculation of net human resource requirements based on the present availability of
human resources.

 Taking suitable steps to identify, mould, change and develop the strength of existing
employees so as to meet the future requirements.
 Preparation of action plans to acquire the balance human resources from outside the
organisation and to develop the existing employees.

Recruitment:It is the process of searching for future employees (requirement) and

ensuring they apply for jobs in the organisation. It involves:Identification of existing
sources of candidates and developing them.Seeking out and identifying new sources
of applicants.Motivating the right type of candidates to apply for jobs in the
organisation.Ensuring a healthy balance between internal and external sources

c) Selection

It is the process of ascertaining the qualifications, experience, skill, knowledge etc. of an

applicant to ascertain his / her suitability for the job applied for. This includes:

 Developing application blanks.

 Creating and developing valid and reliable testing techniques.
 Formulating interviewing techniques.

 Checking of references.
 Setting up for medical examination policy and procedure.
 Line Managers to be involved in the decision making.g. Sending letters of
appointment
 Employing the selected candidates, when he reports for duty
e) Placement

It is the process of allotting to the selected candidate the most suitable job, as per the job
requirements and employee specifications. This function includes:

 Counselling the concerned managers regarding the placement

 Overseeing the follow-up studies, employee performance appraisal to monitor
employee adjustment to the job, in the coming days.
 Correcting wrong / misjudged placements, if any.
f) Induction and Orientation

These are procedures by which a new employee is rehabilitated in the new surroundings and
introduced to the practices, procedures, policies, people etc. of the organisation. It includes:

 Familiarizing the employee with company philosophy, objectives, policies, career

planning and development, company product, market share, history, culture, etc.
 Introduce the new employee to the people - his colleagues, supervisors and
subordinates

 Mould the employee by orientation methods to the new working conditions

2. HUMAN RESOURCES DEVELOPMENT:

This process involves improving, moulding, and developing the skills, knowledge, creativity,
attitude, aptitude, values, commitment etc. based on the present and future job and company
requirements.

a) Performance Appraisal:

It is the continuous and systematic evaluation of individual employees with respect to their
performance and their potential for future development. It includes:

 Enunciating policies, procedures and techniques.

 Assisting functional managers.
 Reviewing and summarizing reports.
 Evaluating the effectiveness of various programmes.
b) Training:

It is the process of transmitting the employees the technical and operating skills and
knowledge. It includes:

 Identification of training needs of the individuals and for the organisation

 Developing appropriate training programmes.
 Assisting and advising the management in the conduct of training
programmes.Transmitting requisite job skills and job knowledge to the employees.

 Assess the effectiveness of training programmes.

c) Management Development: It is the process of designing and conducting appropriate
executive development programmes so as to develop the managerial and human relations of
skills of the employees. It includes:

 Identification of the areas in which management development is needed.


 Conducting development programmes.

 Motivating executives / managers.

 Designing special development programmes / assessment procedures for promotions.

 Utilizing the services of specialists - both internal and external for development and
/or Institutional (external) development programmes.

 Evaluating the effectiveness of executive development programmes.

d) Career Planning and Development:

It is the planning of one's career and implementation of career plans by means of education,
training, job search and acquiring of work experience. It includes:

 Internal mobility - vertical and horizontal transfers, promotion and demotion.


 Transfer - process of placing employees in the same level jobs where they can be
utilised more effectively as per the needs of the organisation. This also means –
developing transfer policies, offering assistance and guidance to employees under
transfer orders and evaluating transfer policy periodically.

 Promotion - it deals with the upward assignment of employees to occupy higher
positions (with better status and pay) in consonance with resources of employees and
job requirement. The Department must ensure that

 
 Equitable, fair and consistent promotions are formulated and administered.


 employees are given assistance and guidance on the subject of
Managers and
 promotion.

 
 Execution of promotional policies is as per policies and procedures.
  Demotion - is the downward assignment of, an employee in an organisation. The
Department must ensure that:

  
Equitable, fair and consistent demotion policies are drawn up.
 
 Assisting and advising employees regarding demotions.

 
 Ensure fair implementation of demotion policies and procedures.

e) Organisation Development:The planned process drawn up to improve organisational

effectiveness through changes in individual and group behaviour, culture and systems of
the organisation - drawing models from applied behavioral science.

3. COMPENSATION MANAGEMENT:

The process of providing equitable, fair and adequate remuneration to the employees. This
process involves - Job evaluation, wage and salary administration, incentives, bonus, fringe
benefits, social security measures and so on.

a) Job Evaluation - the process of determining the relative worth of jobs:

 Select suitable job evaluation techniques.


 Classify jobs in to various categories.

 Determining relative worth of jobs in various categories.

b) Wage and Salary Administration - developing and operating an appropriate wage and
salary programme. It will necessitate:

 Initiate a wage and salary survey.


 Determining wage / salary rates based on various factors.

 Proper administration of Wage and Salary Programmes.

 The periodical evaluation of its effectiveness.

c) Incentives - formulation administration and reviewing the schemes of payment of
financial incentives in addition to regular wages and
 Formulation of incentive schemes.

 Assisting managers on its operation.

 Periodical review to evaluate effectiveness and relevance.

d) Bonus - payment of statutory bonus according to the Payment of Bonus Act, 1965, and its
latest amendments

e) Fringe Benefits - various benefits at the peripheral area of the wage. Organisation
provides these primarily to motivate the employees and to meet their contingencies. Benefits
include: Disablement benefit, Housing facilities, Educational facilities to employees’
children, Canteen facilities, Conveyance facilities, Credit

facilities, Legal assistance, Medical, maternity and welfare facilities and Company stores.

f) Social security measures -These measures are in addition to fringe benefits, which
include:

 Workmen's compensation to those workers (or their dependants) who are involved in
accidents.

 Disablement benefits and allowance.

 Dependent benefits.

 Retirement benefits like Provident Fund, Pension, Gratuity etc

4. INTEGRATION FUNCTION

It is the process of reconciling organizational goals with those of its members. Integration
involves motivating employees through various financial and non financial incentives
providing satisfaction , handling employees grievances through formal grievance ,collective
bargaining ,workers participation in management , conflict resolution developing cordial
human relationship employee consulting improving quality of work life. It includes:
 a. Motivation: it is the force which instigates an employee to work in a proper direction

b. Job satisfaction: it is the amount of satisfaction and contentment derived from ones
job, its pay and environment.

c. Grievance redressal: various problems and conflict which are amongst the
employees should be properly and cordially handled

d. Collective bargaining: It means negotiating with the managers on various terms and
conditions.

e. Conflict management: It refers to effective and efficient management of conflict

arising in the organization.

f. Participation of employees: Employees should be given a chance to participate in

the working of the firm with their suggestion

g. Discipline: It is one of the most essential requirements of organization for its smooth
and efficient working.

5. MAINTENANCE:

It is concerned with promoting physical and mental health of employees by providing

various benefits and facilities

a. Health: it provides health facilities, medical aid etc.

b. Safety: it provides security measures like PF, pension, gratuity, injury/disablement
benefits allowances, group insurances etc.

c. Welfare schemes; health, safety and welfare measures are designed to preserve the
HR of the organizations.

d. Personnel records: they are maintained to keep entire records of the employees and
update them.

e. Personnel research: Research is conducted to check whether HR is sufficient as per

the current status.
Challenges and Issues in Human Resource Management
Human resource management (HRM) is adopted by many companies because of its
benefits. But at the same time, various challenges and issues may emerge in front of
managers of human resource department while performing their duties.

Any capable HR manager would work on these issues and challenges to prevent the
organizational activities from being obstructed. But they must first identify these
issues. Such issues and challenges are described here.
Recruiting new staff
A hand is picking a man from a group of people.
Companies sometimes need to recruit new talent for various reasons such as an
increase in project scope, operations. While recruiting, HRM faces major challenges
i.e. selecting the best candidate and making the hired candidate familiar with the
environment and culture.

HRM has to select such candidates which are not only technically expert but socially
too because the company cannot receive expected output from employees who are
unable to socialize. This affects the productivity of the company.

Retention
Hiring employees is not only the challenge that HRM faces; retaining them is also
one. Retention of employees is essential to minimize employee turnover rate. This is a
major challenge for HRM because of following reasons:

i.Contingent workforce
The contingent workforce includes part-time, temporary contract and work-at-home
employees. Maintaining such employees in the company is a challenge because they
are less attached to the company. So it becomes a major duty of HRM to make such
employees feel that they are a part of the company in order to retain them for a long
term.
ii. Demand of expert employees
Personnel with greater professional and technical knowledge are highly demanded in
the job market as such employees have the ability to keep their company ahead in the
race. Such employees are an invaluable asset for any company and HRM should focus
on maintaining them.
iii.Training
Skilled workers are the key to the smooth functioning of the organization. Therefore,
HRM should manage on-site (within the workplace) as well as off-site (outside the
workplace) job training for employees.

iv.Productivity
Maximizing profit and minimizing cost is the essence of productivity. Higher the
productivity level, more successful will be the company. HRM should always focus
on maintaining high productivity level.

Despite HRM’s continuous effort, the company might sometimes get an

unsatisfactory result. In such case, it should thoroughly analyze the situation and
make a proper conclusion i.e. whether it is the result of inefficient employee or
inadequate resources. If an inefficient employee is the case, HRM should look
forward to train employee, or even recruiting new staffs while it should find
alternative resources for sufficient input if inadequate resources are the case.

V.Health and safety

It is one of the essential functions of HRM to collect its staff’s complete information,
including health information. It is necessary for employee’s personal safety. Keeping
health information about employees help the company in knowing what kind of tasks
or activities are safe for their employees to participate in.

Maintaining health information is also necessary to avoid the risk of legal

complications. Several companies at present provide health insurance to its employees
as a fringe benefit. In lack of proper health information about employees, various
legal issues may arise when such insurance is claimed.

vi.Workforce diversity
The composition of the workforce is getting diverse at present situation. Here
diversity is not only created by age, gender, educational background and religion but
also by the nature, personality and background of workers.

With more diversification of workforce, issues related to bullying, harassment,

discrimination, etc may arise, to control which HRM should formulate and implement
strict rules and regulations.
DEFINITION OF HUMAN RESOURCE PLANNING

According to Vetter, “HRP is the process by which management determines how the
organization should move from its current man power position to desired manpower
position. Through planning, management strives to have the right time, doing things
which result in both the organization and individual receiving maximum long run
benefits”.

According to Gordon Mc Beath, “HRP is concerned with two things: Planning of

manpower requirements and Planning of Manpower supplies”.

OBJECTIVES OF HUMAN RESOURCE PLANNING

Forecasting Human Resources Requirements: HRP is essential to determine the

future needs of HR in an organization. In the absence of this plan it is very difficult
to provide the right kind of people at the right time.

Effective Management of Change: Proper planning is required to cope with

changes in the different aspects which affect the organization. These changes need
continuation of allocation/ reallocation and effective utilization of HR in
organization.

Promoting Employees: HRP gives the feedback in the form of employee data which
can be used in decision-making in promotional opportunities to be made available for
the organization.

Effective Utilization of HR: The data base will provide the useful information in
identifying surplus and deficiency in human resources. The objective of HRP is to
maintain and improve the organizational capacity to reach its goals by developing
appropriate strategies that will result in the maximum contribution of HR.

IMPORTANCE OF HRP
HRP is the subsystem in the total organizational planning. Organizational planning
includes managerial activities that set the company’s objective for the future and
determines the appropriate means for achieving those objectives.

HRP PROCESS

HRP effectively involves forecasting personnel needs, assessing personnel supply

and matching demand – supply factors through personnel related programmes. The
HR planning process is influenced by overall organizational objectives and
environment of business
Unit V
Human Resource Audit

Auditing has been a usual practice in the field of finance, particularly because it is a
constitutional obligation. However, in case of Human Resource, there is no legal binding to
implement auditing. Some of the companies favor the process of Human Resource audits.
Human resource audit is a tool which appraises effectiveness of human resource functions of
an organization.
scope of human resource audit:
The Human Resource Audit is an organized official process, which is designed to investigate
the strategies, policies, procedures, documentation, structure, systems and practices with
respect to the organization's human resource management. Human Resource Audits are not
regular practices aimed at problem solving. Instead of directly solving problems, HR audits,
help in providing insights into probable causes for existing and future dilemmas.
Figure: Scope of human resource audit

Human resource audit is conducted to ensure compliance, improve HR practices, train

managers of company, prepare for potential government audit or litigation, gain an
understanding of department's environment, and show a "good faith effort and correct errors.
Basic principles of audits are to identify the Scope, develop a Questionnaire, collect Data,
benchmark Findings, provide Feedback about Results, create Action Plans and foster Climate
of Continuous Improvement.
The main intent of audit in human resource is to clarify desired practices of HR work and
roles within the organization (HR Department, Line Managers), to establish a baseline for
future improvement, to evaluate current effectiveness, to standardize practices across multiple
sites within a division or company, to assess current knowledge and skills required of HR
practitioners and to improve performance levels to key customers within the organization.
There are two types of audit that include internal and external audit.
Internal audit: The internal audit is conducted by the company's own staff as a part of their
control activities.
External audit: The external audit is conducted by outsiders specifically employed for this
purpose. The advantage is to get the employed for this purpose is unbiased evaluation by
competent people of the manpower management function.

Preparation for an Audit

Auditor Engagement:If using internal resource, it is better to employ them formally with
clarity on scope and select persons who are nonpolitical or those who are not high on
hierarchy. Also, if internal persons are auditing there must be training in auditing.
Data gathering:Completion of a self-assessment questionnaire significantly expedites the
audit process and allows for better audit planning.
On-site access: The on-site portion of the audit is the most important.
Human resource audit process: The human resource audit process is conducted in different
phases. Each phase is designed to build upon the preceding phase so that the organisation will
have a very strong impression of the HR function. The general process of conducting an audit
includes seven key steps that are to determine the scope and type of audit, develop the audit
questionnaire, collect the data, benchmark the findings, provide feedback about the results,
create action plans and foster a climate of continuous improvement.
Scope and type of the audit: To reveal the needed information, it is vital to establish exactly
what areas should be targeted for check. If the organization has never audited its human
resource function, or if there have been current significant organizational or legal changes,
the audit team can carry out a comprehensive review of all human resource practice areas.
Alternatively, if concerns are limited to the sufficiency of a particular process or policy, the
audit must concentrate a review of that particular area.
Develop the audit questionnaire: In next step, it is important to invest enough time in
developing a comprehensive document that obtains information on all the subjects of the
inquiry. A list of specific questions must be composed to ensure that the questionnaire is
complete.
Collect the data: The next stage includes the actual process of assessing specific areas to
collect the data about the company and its human resource practices. Audit team members
will use the audit questionnaire as tool to review the specific areas identified within the range
of the audit.
Benchmark the findings: To completely review the audit findings, auditors must be
compared with human resource benchmarks. This comparison will offer insight into how the
audit results compare against other similar size of firms. Typical information that might be
internally benchmarked includes the company's ratio of total employees to HR professionals,
general and administrative costs, cost per new employees hired, etc. Benchmarking might
include the number of days to fill a position, average cost of annual employee benefits,
absenteeism rates.
Provide feedback about the results: In this step of the audit process, the audit team must
review the data and give feedback to the company's human resource experts and senior
management team in the form of findings and recommendations. Findings normally are
reduced to a written report with recommendations prioritised based on the risk level assigned
to each item. From this final analysis, framework for action can be developed that will help
determine the order in which to address the issues raised. In addition to a formal report, it is
significantly important to examine the results of the audit with employees in the human
resource department, as well as the senior management team, so everyone is conscious of
needed changes and approvals can be obtained promptly.
Create action plans: In this step, it is crucial actually to analyse the information identified as
a result of an audit. The company must generate action plans for implementing the changes
proposed by the audit, with the findings separated by order of importance: high, medium and
low. It really increases legal risk to conduct an audit and then fail to act on the results.
Foster a climate of continuous improvement: At the end of the audit, it is essential to
constantly observe and improve the company's policies, procedures and practices so that the
organization never stop to keep improving. This will make certain that the company achieves
and retains its competitive advantage. In the process of continuously monitoring human
resource systems, it is to ensure that they are updated with latest information and to have
follow-up mechanisms built into every one of them. Similarly, it is important to keep track of
the audit findings/changes made, turnover, complaints filed, hotline issues, employee survey
results to recognize trends in the company's employment-related issues. Identifying
problematic issues, growth areas or declining problem spots can assist in the decision of
where to allocate time, money and take preventive measures.

Approaches to Human Resource Audit

There are five approaches for the purpose of evaluation of HR in any organization. These
include Comparative approach, Outside authority, Statistical, Compliance approach and
Management By Objectives (MBO).
main steps of the audit is to Define desired HR practices for your organization, Assess current
practices against the criterion that you have established, Analyze the results, and establish
improvement goals and take action.
Comparative approach: In this approach, the auditors identify Competitor Company as the
model. The results of their organization are compared with that Company/ industry.
Outside authority approach: The auditors use standards set by an outside consultant as
benchmark for comparison of own results.
Statistical approach: Statistical measures of performance is developed considering the
company's existing information.
Compliance approach: Auditors review past actions to calculate whether those activities
comply with legal requirements and industry policies and procedures.
Management by objectives (MBO) approach: This approach creates specific goals, against
which performance can be measured, to arrive at final decision about organization's actual
performance with the set objectives.

Benefits of Human Resource Audit

 Human resource audit helps to find out the proper contribution of the HR department
towards the organization.
 It enhances the professional image of the HR department of the organization, reduce
the HR cost, motivate the HR personnel, find out the problems and solve them
smoothly, provides timely legal requirement.
 Human resource audit has effective Performance Appraisal Systems and Systematic
job analysis. It has smooth adoption of the changing business attitude.