Introduction
Human Resource Management, or HRM for short, is one of the most critical factors in running a successful company, though it isn’t always handled with the time and emphasis that it deserves. To completely understand what HRM is and its influence on the success or failure of a business, we first need to 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 suitable to achieving the aims and objectives of the enterprise.
This effectively translates to “using individuals in the business in the best way possible” although that would be an over-simplified assertion that does not reflect the real nature and range of HRM. HRM describes all of the methods and processes that are involved in ensuring that all members of staff within a business are pulling in the same direction, and much more significantly, in the right direction. Without good human resource management a business will be spending effort on jobs that it may not directly benefit from.
At its center, HRM brings together three primary elements that are fundamental to the productive output of the workforce. These factors 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 personnel, and it may even be used to adjust the structure of those levels of management as well. It is a broad subject that is explained in more detail in this article.
Why is it Necessary?
Put simply, companies don’t operate without employees. As such, some level of human resource management is needed for any organisation to operate at all, let alone in an effective and profitable manner.
Human Resource Management has an impact on every level of your business activities with various degrees of visibility. The most apparent 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 much more intangible variables but are crucial nonetheless. Poor HRM practice in these less visible domains can have a damaging impact on your organisation but go unnoticed for long periods of time.
It also goes without saying that every company is unique and will have a specific set of challenges to face and opportunities to take advantage of. HRM can act as a versatile tool that converts workforce power into financial profits and can adapt to fully utilise the talents of your firm. Without it, your competitors may be afforded the chance to succeed where you missed out.
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Impact on Business
While this all appears very interesting and significant, how does it actually impact on the daily functions of your company, and more importantly, how will it help to improve the performance and success of your firm? The effect of HRM can be broken down into the following areas.
Recruitment & Training
This is most likely the part of a company that is most affiliated with human resources - recruitment. Almost every company in the world, and particularly businesses that are expanding, need to recruit people to work for them. Either current employees have left, or new possibilities have arisen which mean there are jobs that have to be filled. HRM can make sure your recruitment process gets the right people into the right jobs at a cost-effective price.
It is also important to keep your staff training procedures up to date to make certain 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 marketplace, there is an on-going need to keep your organisation up-to-date and ready to take advantage of any opportunity.
You may also discover that the costly practice of external recruitment can be avoided if your organisation has sufficient training facilities in place. It is much easier to teach an existing staff member to a higher level and then use outside recruitment to fill the gap left at the lower level than it is to recruit directly to a higher level.
Employee Relations
When you have the right men and women 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 accomplished through good employee relations. The most evident employee relations exercise is the art of motivation - a wide topic by itself - but other worker relations issues can include disciplinary and grievance management.
Finances
You cannot keep employees at your organisation by good motivational methods only. They’ll want to be paid a fair amount and on time. Payroll should be one of the first systems that is developed when you start a business, but they still need to be maintained and updated when staff join, leave or change pay grade. Poor management of your payroll program can rapidly lead to disaster in terms of your staff.
Industrial Relations
Numerous companies will have to deal with trade union or other workers rights establishments which can be very forceful when defending the interests of their 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 organisation in mind as well. The need for good industrial relations is far more prevalent in public sector organisations.
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Workforce Planning
We have seen the impact that human resource management can have on a business and overall it seems like good HRM will have a good effect on any organisation. As a rule, this is the case, but good HRM doesn’t just occur overnight. It should be designed according to the goals of the organisation and then carried out thoroughly.
One way to implement HRM concepts to your business is via workforce planning - a process that has the aim of making sure your staff can finish the upcoming tasks needed for your business to be successful. It can be defined as:
Definition
Workforce planning is the process of anticipating in advance the human resource requirements of any organisation, both in terms of the number of employees necessary and the proper skill mix. Recruitment and training procedures are devised with a long term emphasis in order to ensure that the company is able to operate without being limited by a shortage of appropriate labour. It is a bit of a balancing act, but when done properly can produce many benefits.
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, for example in the tourism industry, or suffers from seasonal fluctuations in workforce then your workforce planning must take these variables into consideration. Also bear in mind any approaching retirements or intervals of maternity/paternity leave or you could suffer from a shortage of qualified workers.
Recruitment
Whether you are recruiting externally or from within your existing workforce you still need 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 function that will be carried out as well as a person specification which will give an indication of the kind of person 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 recognise the ideal job candidate.
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 about applicants for your jobs, including aptitude tests, group interviews or even psychometric testing. These sophisticated techniques might not be relevant to all workforce planning projects but are an alternative to employers.
Training & Development
The principal goal of staff training and development is to develop a better standard of worker within your organisation. Workforce planning can use training to plug upcoming gaps in the skill set of your workforce which is commonly quicker and more cost effective than external recruitment. Training and development may also go some way towards motivating your employees.
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Workforce Motivation
It practically goes without saying that well motivated workers are going to produce a better standard of output and have a higher quantity of production than unsatisfied workers. This improved work rate will undoubtedly lead to an increase in the profitability of a business.
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 refers to the two ways to make a donkey carry your possessions, either by tempting it with a carrot, or threatening it with a strike from a stick!
Whether you use the carrot strategy or the stick approach will largely depend on your own management style, as well as the industry you work in and the type of people that you employ. Regardless 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 a number of different ways, either a fixed amount for a fixed service, by an hourly or daily fee, or a rate linked to production, such as a commission scheme.
Another financial motivation method involves what are called incentive schemes, where by additional financial rewards are handed out for good performance. This may include commission above a fixed salary, performance-related pay grades or even offering a share of company profits.
Non-financial
Many human resource advocates have their own thoughts about the different elements 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 critical motivational factor for the vast majority of people.
The Changing Face of HRM
As previously stated, HRM is a versatile application that is there to match up the characteristics of your staff to the goals of your business. As a result, it has had to keep changing to a corporate climate that is constantly changing for one reason or another. Furthermore, it is a good idea to constantly review your own HRM procedures and not to rest on your laurels.
Maybe there is a new piece of government law that will have an effect of how your company can carry out its operations, or maybe a fresh manufacturing technology will come along that can revolutionise your industry. Either way, if you want to make sure that your workforce is performing to its maximum level then your HRM strategy should be adaptive enough to cope with an ever-changing economy.