Human Resources Management

Tamagn Woyesa (PhD.)

CHAPTER ONE

Nature and Scope of Human Resource Management

Introduction

People are at the core of every organization. Without staff organizations

cannot exist.

An organization consists of people with formally assigned roles who work

together to achieve the organization’s goals.

Human Resource: people with their experience, skills, knowledge and personal
qualities

The management of work and people towards desired ends, is a fundamental

activity in any organization

A Manager is the person responsible for accomplishing the organization’s

goals, who does so by managing the efforts of the organization’s people

Managing involves five functions: planning, organizing, staffing, leading, and

controlling

Planning: Establishing goals and standards; developing rules and procedures;

developing plans and forecasting
Organizing: Giving each subordinate a specific task; establishing departments;
delegating authority to subordinates; establishing channels of authority and
communication; coordinating subordinates work

Staffing. Determining what type of people you should hire; recruiting

prospective employees; selecting employees; training and developing
employees; setting performance standards; evaluating performance;
counseling employees; compensating employees.

Leading: Getting others to get the job done; maintaining morale; motivating
employee influencing their behavior to achieve organizational objectives.

Controlling: Setting standards such as sales quotas, quality standards, or

production levels; checking to see how actual performance compares with
these standards; taking corrective action, as needed…….

We are going to focus on one of these functions- the staffing, personnel

management, or human resource management (HRM) function

Organizations must manage four types of assets:

Physical: Buildings, land, furniture, computers, vehicles, equipment, etc.

Financial: Cash, financial resources, stocks, financial securities, etc.

Intangible: Specialized research capabilities, patents, information systems,

designs, operating processes, etc.

Human: Individuals with talents, capabilities, experience, professional

expertise, relationships, etc

Human Capital and HR; the human assets are the “glue” that holds all the
other assets together and guides their use to achieve result
Human capital is not solely the people in organizations— it is what those
people bring and contribute to organizational success.

It is the collective value of the capabilities, knowledge, skills, life experiences,

and motivation of an organizational workforce it is called intellectual capital to
reflect the thinking, knowledge, creativity, and decision making that people in
organizations contribute Studies show that hiring the right people, supporting
their creative thinking and productivity, and levering it all with the right
technology seems to build superior business performance and shareholder
value

Studies also have documented that HR practices help create competitive

advantages. So what is HRM ?

Human resource management is the process of acquiring, training, appraising,

and compensating employees, and of attending to their labor relations, health
and safety, and fairness concerns.

HRM is “strategic and coherent approach to the management of an

organization’s most valued assets – the people working there who individually
and collectively contribute to the achievement of its objectives”

HRM is the performance of all managerial functions involving planning,

recruiting, selecting, developing, utilizing, rewarding and maximizing the
potential of the HR to the best achievement of the organizations objective.

HRM Vs Personnel Management

Both differ in scope and orientation. HRM is the modern way of calling
Personnel Management.
HRM is wider in scope and views employee as an important asset or resource
in an organization.  It promotes mutuality in terms of goals, responsibility,
reward etc.

That will help in enhancing the economic performance and high level of human
resource development.

Personnel Management is narrow in scope and views HR as a tool for the

achievement of the goal of the organization

PM viewed employees from the owners perspective whereas; HRM views and
treats employees as an asset.

HRM is more strategic in nature, more integrated with the rest of the sub
systems of the organization.

HRM is primarily concerned with management of people, individuals or groups

at work., as also their inter-relationship.

It is not the sole responsibility of personnel specialists. Indeed line managers

are equally and directly responsible for managing human resources working
with them.

1.2. HRM functions and objectives

OBJECTIVES of HRM

The objectives of HRM is to provide with efficient and effective work force that
is to provide the right people with the right talent, knowledge and experience
that are able to contribute towards the achievement of objectives. The
objective includes:

Owners’ objectives: It require that the organizational objectives fulfilled

Owners require their employees to contribute to the profitability of their
organization through the satisfaction of customers.

Employee’s objective: Employees require the HRM to assist them in achieving

personnel goals such as

 Adequate income
 Security
 Pleasant working condition
 Room for growth and development , and
 Better quality of work life

Legal objectives: Governments require HRM to comply with government laws

and regulations such as:

 Avoid discrimination based on sex, age, disability etc.

 Allow equal employment opportunities
 Minimum pay
 Affirmative action
 Fair working conditions ,
 Avoid negligent hiring claim
 Avoid Sexual harassment etc.

Social objective: It is the responsibility of HR to ensure that ethical and social

issues are suitably dealt.

Contribute to minimization of social problems such as unemployment

problems, more opportunities for women etc.

Aim in creating healthy work relations in the organization and to work towards
corporate social responsibility (CSR)
 1.3. Historical Development of HRM

Human resource management (HRM) goes back to the dawn of human history

The generic practice of HRM does not require a formal human resource
department or any specialized personnel

The visible roots of the HRM function as practiced in modern business

organizations in the late 19th century more or less contemporaneously in
England, France, Germany, and the United States

The modern HRM department grew out of two earlier developments. The first
was the emergence of industrial welfare work.

  1. Age of Slavery: Slaves could be sold and purchased like commodities under
a complete control of their masters. Compensation for their efforts comprised
mainly food, shelter and clothing

They were subjected to strict supervision, and non-compliance of the orders of

their masters or supervisors was generally punishable with physical tortures

2. Age of Serfdom: Serfdom was widely prevalent in the feudal societies of the
pre-and early medieval era.

Serfs were engaged by landlords mainly in agricultural operations and allied

activities.

The landlords would usually give them a piece of land for their habitat and
often, some land for their own cultivation. 

The work– tillage of soil, cattle-rearing, domestic work….etc

3. Indentured Labor: It emerged primarily with the flourishing of mercantilism

and advent of industrial revolution.
The discovery of new lands and routes led to a substantial increase in the
demand of European goods abroad the mercantilists would offer attractive
stimuli to the artisans and skilled craftsmen for accelerating production of
goods in demand.

Indentured labor were recruited to work on sugar, cotton and tea plantations,
and rail construction projects

The conditions at work were harsh, with long working hours and low wages

Children were expected to work alongside their parents from the time they
were 5 years old

Ex. Many workers who built the Kenya-Uganda Railways died during their
contract

workers tried to escape their harsh life but were recaptured, and imprisoned.

Sometimes their initial five year contract was doubled to ten years for
attempted desertion

New developments since the 19th century

The systematic development of HRM started with industrial revolution(IR) that

started during 1850s in Western Europe and USA.

The industrial revolution consisted, essentially, the development of machinery,

the use of mechanical energy in production processes, and consequently the
emergence of the concept of factory with large number of workforce working
together, migration of workers from their place of origin… etc.
In order to manage people in the factory system of industrial revolution, three
systems of HRM were developed- recruitment of workers, training for workers,
and control of workers.

However, the basic philosophy of managing workers revolved around master-

servant relationship.

 Age of Trade Union Movement workers started to organize them based

on their common interests to form workers’ associations, trade
unions. To safeguard interest of their members concerning employment
of child labor, long hours of work, and poor working conditions, etc.
These trade unions started such weapons as strikes, slowdowns,
walkouts, boycotts, etc., for the acceptance of their demands. These
activities of the trade unions forced owners and managers to adopt
employee grievance handling systems: expansion of employee benefit
programs, holiday and vacation time, clear definition of job duties. It was
in this age modern HRM took shape when Robert Owen, wrote a book,
“A New View of Society” in 1813, in which defended the need for better
industrial relations and improvements in the service conditions.

His attitude towards workers paternalistic.

He got good houses constructed for his workers by the side of his factory. He
eliminated child labor and provided healthy working conditions.
2. The age of Social Responsibility; In the first decade of 20th century, some
factory owners started adopting a more humanistic and paternalistic approach
towards workers.

Starting in the1890s, a number of companies started to provide a variety of

workplace and family amenities for their employees, such as lunch rooms,
medical care, recreational programs, libraries, company magazines, and
company-provided housing Those industrialists offered a number of
concessions and facilities to labor force like reduced number of work hours,
improved facilities at workplace, model villages to workers, etc.
3.The age of Scientific Management It is also called the age of Efficiency and
Productivity Movement(1902-920) The major emphasis on improving the
efficiency of each individual in the organization. It uses scientific methods to
analyze the most efficient production process in order to increase
productivity. 

Frederick Taylor’s four principles of Scientific Management are:

 Develop a science for each element of work

 Scientifically Select, Train, Teach, and Develop the worker
 Cooperate with the Worker
 Divide the Work and Responsibility
The main contribution of these age was an introduction of scientific thinking
into concerning job analysis, selection and training of workers
4. The age of Human Relations (1930-1950)

Management people started to focus on human factor at work and the

variables that affected people’s behavior since 1920.

This age was also termed as the ‘Industrial Psychology’.

Hugo Munsterberg work on ‘Psychology and Industrial Efficiency’ was critical in

applying psychology in the field of personnel testing, interviewing, attitude
measurement, learning, etc.

Elton Mayo and friends, conducted researches on the human aspects of work
and working conditions at Hawthorne plant of Western Electric Company, 1924
to 1932.

They concluded that productivity of workers depended on-

 social factors at the workplace,

 group formation and group influence,
 -nature of leadership and supervision
 communication
o In order to have better productivity, management should take care of
human relations besides the physical conditions at the workplace.

As a result, the concepts of social system, informal organization, group

influence entered the field of management.
A worker must be treated as a human being. The social, psychological and
moral instincts should be fully recognized by the management.

commodity concept of labor changed to social concept

The decade of 1940-1950 was very important for the development of Human
Resource Management, many new techniques were developed for the
selection, training and induction of workers

5. The age of Behavioral Science the behavioral scientists consider

understanding of human behavior to be the major means to that end.

 Scientific research from organizational psychology, behavioral

economics, how people tend to behave at work and why, what really
motivates them, and what allows them to perform at their best.
 It has expanded a useful way of thinking about the role of the manager,
the nature of organizations, and the behavior of individuals within
organizations.
 These contributions of behavioral science became backbone of human
resource management an understanding of behavioral science can help
develop HR management, reward systems, and effective organization
performance.

1950 onward, a modern Age for HRM Human Resource Management is widely
accepted as an independent discipline.

Especially after 1960 the HRM is realized as a behavioral science which

centered completely on human elements with the study of organizational
behavior.

6. The age of Systems and Contingency Approach

The systems theory focuses on the internal dynamics of an organization’s
structure and behavior.

The contingency organizational theory focuses on the external determinants of

the organization’s behavior and structure.

The contingency organizational theory seeks to emphasize the multivariate

nature of an organization.

Further, it tries to understand how an organization operates under varying

conditions in specific circumstances.

It is an integrated approach which considers management of human resources

in its totality based on empirical data.

The basic idea of this approach is that analysis of any object must rely on a
method of analysis involving simultaneous variations of mutually-dependent
variables. 

This happens when systems approach is applied in managing human resources.

1.4. Theories of HRM

A. Contingency theory organization and leadership should be approached

according to the needs of the individual situation. There is no single best
method of leadership, because different leadership styles and organizational
methods will work better in different situations.

Leaders must determine the best management method for the individual
situation.

Contingency is a group of tasks required by a subunit which is affected by tasks

of another subunit.
When a subunit has control over more activities or contingencies, its power
increases in the organization

This theory connects the centrality, uncertainty, and substitutability 

In uncertainties where organizations can develop competitive advantage and

subunits that can face and provide solutions to these uncertainties become
powerful in the organization

The power effect will be less if more alternatives are available by other
subunits.

So power source must be non-substitutable emphasizes the importance of

both the leader's personality and the situation in which that leader operates
B. System theory organizations are made up of numerous component
subsystems that must work together in harmony for the larger system

 Employee Relations, Interdependence, Synergy

Closed system: fixed, hermetically sealed entities operating in complete

independence of their surroundings with little or no influence from the outside
world

Efficient: because there are clear procedures that are not affected by outside
influences interactions only happen within that closed system because
everything the system requires to function properly is contained within the
system itself

Research and Development Division

Trade Secrets

Documentation Systems
Open systems: exchange of materials, ideas, with the environment a
continuous process of adaptation, constant environmental monitoring and
internal adjustment

HRM should not be viewed as a one-off structural intervention, but as an

ongoing process concerned with balancing emerging contradictions of the
employment relationship

System and Entropy

o Entropy as a measure of disorder or randomness in a closed system as a

system becomes more disordered, its energy becomes more evenly
distributed and less able to do work, leading to inefficiency.
o Business organizations are either organic or bureaucratic in nature.
o Organic organizations are open because they invite innovation and
creativity while seeking continuous exchange with the environment in
order to survive.
o Bureaucratic organizations operate in a mechanistic and closed style that
is subject to entropy.
o Entropy occurs in organizations when the mechanical works of the
bureaucracy break down as a result of specialization, apathy,
carelessness and lack of pride Employees learn to do only what is
expected of them and no more.
o closed organizational systems have a tendency to become entropic
because they have a tendency to deteriorate and become run down
System

C. Human capital theory The theory was proposed by Schultz in 1961 and later
developed by Becker (1964) It suggests that education or training increases the
productivity of workers by imparting useful knowledge and skills, and
profitability of the firm

HC is the economic value of a worker's experience and skills includes

education, training, intelligence, skills, health, and other things employers
value such as loyalty and punctuality investment in employees increases the
chances of productivity and success and development finds a positive
relationship between individual performance and firm performance

An organization is often said to be as good as its staff

The HRM directives include workforce planning and strategy, recruitment,

employee training and development, and reporting and analytics
D. Agency theory

To understand situations in which an individual delegates responsibility to

other, contract .

The principal vs the agent

Conflicts of interest between principals and agents.

The assumption that people act as economically rational, self-interested, and

opportunistic utility maximisers( Goal incongruence )allows us to predict both
how organizational contracts will influence management behavior and how the
choice of contract will be affected by different exogenous variables

It prescribes the nature of the use of performance incentives for agents (a

firm’s employees) depending upon the principal’s (the owner’s) ability to
observe their fundamental goal of organizations is to minimize costs and
maximize efficiency
E. AMO theory: ability, motivation and opportunity
AMO suggests that work place performance is a function of ability (training
and selection), motivation (incentives and feedback), and opportunity
(environment)

Two streams of psychological theorists lay the foundations for the AMO model.

First, industrial psychologists who viewed performance as a result of the

selection of employees and the training

Second, social psychologists that place great importance on motivation.

Victor Vroom draw these two elements of performance together, suggested

that performance is a function of ability × motivation

If any one of the three characteristics is missing, performance is likely to be

inhibited, but if all three are present, then performance is likely to be
enhanced.
F. Motivation hygiene theory

Herzberg’s Two Factor Theory:

1. Motivators: Intrinsic conditions of the job itself.., such as recognition,

achievement, personal growth, responsibility, decision making, sense of
importance to an organization.

These factors motivate the employees for better performance or lead

to positive satisfaction, however, the absence of these factors does not
necessarily lead to negative satisfaction.

The work itself: Job characteristics related to what an individual does 

Thus, satisfaction and dissatisfaction are not on a continuum with one

increasing as the other diminishes, but are independent phenomena.
2. Hygiene factors : are extrinsic to the work, its existence does not necessarily
lead to positive satisfaction, but the absence of these factors will definitely
result in negative satisfaction.

It can be said that these factors are Physiological and Safety needs 

Hygiene factors: Include company policies, supervisory practices, relationship,

work conditions, Status, Security

The Four States of an Organization as per Two Factor Theory

1. High Hygiene and High Motivation

This is the ideal situation and the HRM want to be, where employees are
motivated to do their best and have little or no grievances.

2. High Hygiene and Low Motivation

In this situation, employees have few grievances but they are not highly
motivated employees have their basic needs fulfilled and they are little or no
grievances with respect to pay or working conditions.

However, the work isn’t very interesting for the employees and they are just
coming to work for their salary

3. Low Hygiene and High Motivation

Employees are highly motivated to come to work but they have a lot of
unfulfilled grievances. A typical example is where employees are working on
some very interesting technologies, but the pay is less compared to
competitors or not in line with industry standards

4. Low Hygiene and Low Motivation

This is the most undesirable situation for any organization .

This is where employees are underpaid and the work is also uninteresting.

employees start to leave the organization if the situations persist

G. Participative decision making theory; Participative decision making (PDM) is

the opportunity for an employee to provide input into the decision-making
process related to work or organizational issues.

Employee participation can be evaluated in terms of degree, form, level, and

scope. The degree indicates the extent to which employees can influence
decisions Form represents whether participation is promoted by company
initiatives(direct) or workers’ union representation(indirect participation).

Level implies whether participation takes place at the individual, group, or

department level.

The scope: operational concerns or strategic matters

1.5. HRM and Environment scanning

Environmental scanning is the process of studying the environment of an

organization to figure out opportunities and threats to decide the future path.

Internal analysis of the environment This includes employee interaction with

other employees, interaction with management, and management interaction
with shareholders, organizational structure, main staff, operational potential,
etc.

The internal environment of HRM: unions, organizational culture and conflict,

organizational objectives, polices, etc.
  Analysis of internal environment helps in identifying strengths and
weaknesses of an organization Data Source, reviewing publications,
focus groups, interviewing leaders inside and outside the organization,
and survey
External environment Analysis of external environment is essential to
identify competitors’ moves and actions. Includes immediate / industry
environment, national environment broader socio-economic / macro-
environment
As far as HRM is concerned, organization to compete for a sufficient
supply of human resources with the appropriate capabilities:
government influences; economic, geographic competitive conditions
workforce composition and work patterns Technology Labor supply

. 1. Government influences legal requirements of various government

regulations. Elimination or expansion of tax benefits, tax law changes.

2. Economic conditions The effect of recessions and booms on HR planning

interest rates, inflation, and economic growth help determine the availability
of workers.

Decisions on wages, overtime, and hiring or laying off workers.

qualified applicants in a 3% unemployment and in a 7% unemployment

market.

3. Geographic and competitive concerns

 Net migration into the area

 Other employers in the area
  Employee resistance to geographic relocation
 Direct competitors in the area
  Impact of international competition on the area

4. Workforce composition and work patterns

Demographic shifts have resulted in greater workforce diversity.

alternative work schedules; the 4-day, 40-hour week; 32-hour week; the 3-day
week; and flexible scheduling alternative work schedules allow organizations
to make better use of workers by matching work demands to work hours

Workers also are better able to balance their work and family responsibilities.

Flextime: is an arrangement that allows employees work a set number of hours

per day but vary starting and ending times

Flextime has resulted in higher employee morale and reduced absenteeism

and employee turnover.

Compressed workweek = Workweek in which a full week’s work is

accomplished in fewer than five days.

It alters the number of hours per day, usually resulting in longer working times
each day and a decreased number of days worked per week

Work at home

Here are some of the specific questions:

What is the unemployment rate?

What laws are changing that will affect business?

what trends are you seeing that will impact the organization?

Where does your organization fit when competing for talent? How scarce is
talent right now?
Are there technological trends that will impact your HR needs?

What skills does your organization need to be competitive?

Do your employees currently have these skills or what training (or hiring) will
be needed?

What changes will you have to make to remain competitive when it comes to
attracting and retaining talent?

Who are direct competitors? How are they changing?

How does your compensation and benefit structure compare to those

organizations with whom you’re competing for talent?

What changes might be needed to continue to attract and retain talent?

From a company perspective?

What are the company’s strengths and weaknesses?

What can HR management do to address the weaknesses or capitalize on the

strengths?

What trends are you seeing that will impact HR in the next year, next 5 years,
and next 10 years?

1.6. HR ACTIVITIES

HR management can be thought of as seven interlinked activities taking place

within organizations

1. Strategic HR Management: a future-oriented process of developing and

implementing HR programs that address and solve business problems and
directly contribute to major long-term business objectives.
2. Equal Employment Opportunity: refers to practices that are designed so that
all applicants and employees are treated equality regardless of race and sex.
Compliance, Diversity, and affirmative action

3. Staffing: The aim of staffing is to provide a sufficient supply of qualified

individuals to fill jobs in an organization Job analysis, Recruiting and Selection.

4. Talent Management and Development:Beginning with the orientation of

new employees and different types of training.

HR development of employees and managers is necessary to prepare for

future challenges.

Career planning identifies paths and activities for individual employees as they
move within the organization. Assessing how well employees perform their
jobs is the focus of performance management.

5. Total Rewards: Compensation in the form of pay, incentives, and benefits

rewards people for performing organizational work.

6. Risk Management and Worker Protection: Employers need to address an

increasing number of workplace risks to ensure worker protection. Health and
wellness, Safety, Security, Disaster and recovery planning

7. Employee and Labor Relations: The relationship between managers and

their employees must be handled effectively. Employee right, and privacy
issues, HR policies and procedures, management relations,