Human Resource Management
The first Chapter of this book is for presenting an introduction to Human Resource
Management (HRM) which is critical in running organizations smoothly and
improving them further in order to enhance the standard of living of people.
Chapter Objectives
After studying this Chapter successfully, you should be able to:
1. Define what Human Resource Management is.
2. Analyse the generic purpose, strategic goals, objectives, and functions of HRM.
3. Know a model of HRM.
4. Understand who is responsible for the performance of HRM functions.
5. Explain the importance of HRM.
6. Argue that every manager is a human resource manager.
7. Describe HRM viewpoints and their considerations.
8. Classify HRM functions into five fields of HRM.
The ultimate purpose of an economy or a nation is a better standard of living for its
people. Every nation/economy attempts to achieve a better standard of living in the
period of time being considered compared with the past period of time. Generally
standard of living refers to the level of well-being enjoyed by people by fulfilling their
needs (which are legally and morally acceptable). People have a huge number of
various needs including physical needs such as food, drinks, clothes, and shelter. You
are aware that these needs of people are unlimited, various, and complex. Most of the
goods and services which are needed to meet these unlimited and various needs of
people are produced by organizations. There are some individuals who produce
goods and services individually, not organisationally. Examples include a farmer who
produces paddy, a doctor who gives medical treatments, and a teacher who teaches a
subject. However, these goods and services come to the consumers through
organizations. Some goods and services (e.g., a train, an airplane, a graduate, social security, and insurance) cannot be produced by one individual at all and therefore,
organizations will be indispensable for the purpose. The current economy in which we
live is extremely complicated. As an economy, we face various challenges. Our nation
has to face a number of challenges such as increasing population, production, and
distribution of different things including food and drinks, alleviating the gap between
the rich and the poor and eradicating poverty, reducing the unemployment rate,
preventing diseases and recovering patients, controlling inflation, searching new
sources of energy for sources being depreciated, providing safety and security, and
other unknown challenges. A nation faces these challenges through the creation of
organizations. A nation does need organizations that produce goods and services
that are needed by its people to meet their numerous needs.
Organizations
An organization means a formal group of two or more people who function in an
official structure that was set up purposefully to accomplish a certain goal or goal
(common). An organization is defined by Stoner, Freeman, and Gilbert (1995) as two
or more people who work together in a structured way to achieve a specific goal or
set of goals. Wright (1973), Werther, Davis, Schwind, Das, and Miner (1985)
quote that organizations are the most inventive social arrangements of our age and of
civilization, and it is a marvel to know that tens of thousands of people with highly
individualized backgrounds, skills, and interests are coordinated in various enterprises
to pursue common institutionalized goals. Organizations were created and will be
created for the purpose of meeting the needs and challenges of people/nations. Most of
the food people consume, the clothes people wear, the beverages people have, the
vehicles people use, the computers people use, and the books people read are products of
organizations. A person who lives in modern civilization will become a member
of various organizations (e.g. school, temple, workplace, death donations society, etc.)
in order to achieve various purposes throughout his/her life, and also he/she will
have to deal with various organizations (e.g. hospital, police station, railway station,
bank, etc.) in order to meet various needs though he/she is not a member of those
organizations. Modern economy/nation is operated by a group of various
organizations that differ in terms of goals, size, and complexity. What will happen if
the working of this group of organizations ceases, or is destroyed? Modern
sophisticated society will become destitute, confused, uncivilized, and even paralyzed
completely. For example, if organizations engaged in distributing essential food items,
providing electricity, exchanging information, transporting of goods and people,
caring for the health, and providing education stop their activities for several days, the existence/living of everyone will fall into a terrible plight within a short time.
Two Central Economic Challenges
The success of the nation for a certain period of time (acquiring the expected standard of
living for people by utilizing a fair amount of resources with a minimum amount of
wastage) depends on the successful workings of organizations. In other words, the success of
a nation is dependent upon sound organizations. It is possible to achieve the needs of
people through sound organizations. The needs of people will increase constantly in
number and complexity. Hence, the nation expects to achieve the needs of people in a better way in the period of time under consideration compared with the past period
of time. The nation expects to achieve the needs of people in a further better way for the
next period of time. In other words, the progress of success (going beyond the success that is expected for a certain period of time) is expected. At the organizational level
too this state is applicable. Assume an organization engaged in manufacturing packets
of full cream milk powder. The organization expects to produce 5000000 packets
annually to meet the full cream milk powder need of a selected group of people.
Achieving this amount of production is a success. It is forecast that demand for full
cream milk powder in the next year will increase by 10%. The organization will have
to increase the amount of production by 10% to meet the forecast increased demand.
Achieving this amount of production, i.e. 5500000 packets the progress of success.
While success depends on good organizations progress of success depends on
better organizations. Thus, a nation faces two central economic challenges:
1. to function in organizations soundly to achieve expected success. In other
words, how do run organisations smoothly to achieve the expected success?2. to improve organizations and continue to achieve expected progress of
success. In other words, how to improve the organizations achieve progress or success?
How does a nation face these two central economic challenges? They are faced
with a definite process.
Definite Process
A nation that operates rationally faces the two central economic challenges through a
definite process which is called Management. Management refers to Organisational
Management which is generally defined as the process of efficient and effective
utilization of resources in order to achieve the goals of an organization. In this process,
organizations should establish goals that are to be achieved, and utilize efficiently
limited resources to achieve the goals established. How to make organizations good
to achieve success? The answer is through Good Management. How to make
organizations better achieve progress of success? The answer is through Better
Management. Thus, while Good Management is indispensable to running an organization
soundly to achieve success Better Management is indispensable to improve an
organization's continues to achieve progress of success. From the traditional
perspective and modern perspectives as well with regard to Organisational
Management it consists of several functional fields including Production Management
(the new label is Operations Management), Marketing Management, Financial
Management, and Personnel Management (the new popular label is Human Resource
Management). Human Resource Management (HRM) is one of the most
important functional fields of Organisational Management.
Human Resource Management
Today Human Resource Management, which is a very significant functional field of
Organizational Management, has evolved into a very broad and profound management
branch. It is HRM that deals with the management of Human Resources in an organization. It is the human side of Organisational Management or Business
Administration. HRM is also called by alternative names such as Personnel
Management (PM), Manpower Management, People Management, and Staff
Management. Some studies indicate that PM differs from HRM and that is not
discussed here as it is beyond the objectives of this Chapter. Various specialized academics and expert institutes have presented various definitions of what HRM
means. Some of them are presented below.
1. “Personnel is that function of all enterprises which provides for effective
utilization of human resources to achieve both objectives of the enterprise
and the satisfaction and development of the employees.”- Glueck (1979,
p.6)
2. “Personnel Management is a set of activities focusing on the effective use
of human resources in an organization.”- Mathis and Jackson (1988,
p.11)
3. “HRM is the efficient and effective utilization of human resources to achieve
goals of an organization.”
According to the above definition of HRM,
(a) An organization means an economic and social entity composed of a group of
people who interact with each other for the purpose of achieving a common goal.
This organization may be either a profit organization or a non-profit organization.
Also, it may belong to the public sector or private sector, or cooperative sector.
(b) Goals refer to desired targets to be achieved in the future. The basic goal of any
organization should ideally be to serve human society. If not, the existence of the
organization will suffer or vanish after a short period. The basic goal of an organization is
to fulfill human needs and upgrade the standard of living of people. The fulfillment of all
human needs is impossible for an organization. Therefore, what human needs or
needs to be fulfilled should be defined. Thus, by fulfilling certain human need/ needs
the organization activates to enhance the level of well-being enjoyed by people.
Instance: -To upgrade the standard of living of Sri Lankan people through the
production and distribution of high-quality dairy products.
In order to achieve the above-mentioned basic goal, the organization establishes
specific goals. An organization may establish one or several or all of the goals
mentioned below or other ones not mentioned here:
To increase the net assets of owners.
To enhance employee development and satisfaction.
To maximize customer satisfaction.
To achieve cooperate growth.
To increase market share.
To fulfill social responsibility.
To achieve financial stability.
To increase the quality of the product.
(c) Human Resources (HR) are employees who work for the organization being
concerned. It is not an exaggeration that HR is the most significant resource compared with other resources such as financial resources, physical resources, etc.
The overwhelming significance of HR is due to its unique characteristics, which are:
1. It is animate, active, and living.
2. It has the ability to think, feel and react.
3. Its value appreciates with the passage of time (because of experience, training, etc.).
4. It has the ability to influence determining its cost (pay).
5. It has the ability to organize (as unions, teams, etc.).
6. Its behavior is complex and may be unpredictable.
7. It has the ability to creativity and innovation, which cannot be found in any
other resources.
8. It makes decisions in respect of all other resources.
HR With the above-mentioned unique characteristics an organization could be
divided into two groups such as managerial employees and non-managerial
employees. Managerial employees generally make decisions and implement them
through non-managerial employees.
(d) Efficient utilization of HR means optimum use of employees by eradicating (or
minimizing) wastage. It denotes utilizing the right employees in the right number at
the right cost. It involves the fulfillment of activities by minimizing waste of available HR,
as much as possible, in terms of the number of employees, their efforts, and total
employee cost, etc.
(e) Effective utilization refers to the use of HR for organizational effectiveness, which
is the extent to which the goals of the organization have been realized. It involves the utilization of employees so as to accomplish the goals of the organization fully. It is
possible for an organization to achieve efficiency by minimizing employment costs
through the reduction of employees in quantity and quality as much as possible.
However, if the relevant activities and functions are not performed successfully and
organizational goals are not attained such efficiency will be meaningless. Hence
efficiency should be reached so as to attain organizational effectiveness.
The Generic Purpose
The generic purpose of HRM is to generate and retain an appropriate and contented
human/ employee force, which gives the maximum individual contribution to
organizational success. An appropriate employee force includes employees who
possess the knowledge, skills, and attitudes that are necessary for attaining the full goals of
the organization. The term „Appropriate‟ means competent, motivated,
committed, and involved. Contented refers to being satisfied and quite happy
(enjoying a higher level of well-being).
Importance of Human Resource Management
It has been described earlier that human resources are a unique resource as viewed
relative to other resources. Human resources are the most important resource
of all the resources which are used by an organization to accomplish its goals. The ability to accomplish the goals of the organization occurs because of the availability of
other resources such as money, machines, materials, methods, time, and information.
However, the actual accomplishment of the goals occurs only if human resources are
available. All other resources are collected, combined, and used only by human
resources through making decisions. In fact, other resources make things possible
but only human resources make things happen. Happening is more important
than the possibility of doing in the context of the realization of the goals of the organization
(see Figure 1-2). For instance, assume that you have sufficient money, a good vehicle,
time, and a map to go to Dambulla. The possibility of going to Dambulla occurs owing to
other resources. However, until you have the right driver you cannot reach there. The happening of going to Dambulla occurs owing to the right driver. If you drive you are
the human resource. Hence it is needless to say that HRM is a very important
discipline or subject that focuses on the efficient and effective utilization of human
resources.
It is possible to mention that the success of other functional fields of management
(Operation, Marketing, Finance, Management Information Systems [MIS], Research
and Development [R&D], etc.) depends on the success of HRM. Relevant functional
managers make managerial decisions with regard to respective fields. These managers
are to be competent, motivated, contented, committed, and involved. If the
organizations have the right functional managers there will be the right functional decisions
leading to the achievement of functional goals and then overall organizational goals. If
these managers are not right (incompetent, not motivated, discontented, not
committed, and not involved) there will be inefficiencies and ineffectiveness in
functional departments/fields owing to wrong managerial decisions. These managers become competent, motivated, contented, committed, and involved only if sound
HRM exists within the organization. It is not inaccurate to state that the success of other
functional fields significantly depends on successful HRM (see Figure 1-3). Hence it
is not an exaggeration that HRM is one of the most important functional fields of
management.
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