Human Resource Management (HRM) refers to the systematic management of personnel

within an organization.

Strategic Human Resource Management is the approach to the effective administration of

an organization’s workforce to create a competitive edge. This can be achieved if labor
resources are valuable, rare, inimitable, and organized.

HR creates value by reducing costs or providing extraordinary services e.g., excellent

customer service.
Workers with high skill levels (Technical, Interpersonal, conceptual), extensive
knowledge and spacious abilities are rare hard to find.
Resource inimitability is achieved when the organization effectively taps into the
unexplored talents of Human Capital in ways that are unknown to the competitors.
An organization’s resources when deployed effectively (organized) for e.g. through
strategy maps and balance scorecards can give an organization a competitive edge to
thrive on.

Human Capital, also referred to as intellectual capital, is the capacity, capability, knowledge
and skills of employees that yield high economic value for the organization.

Advantages of Effective HRM:

Relate to higher corporate valuations.

Unlocks workforce potential to the benefit of the organization.
Human Capital is an unlimited and renewable resource of considerable importance in
this de-industrializing era.
It ensures the HR process is aligned with the business plan: expected growth,
direction of company (mission and vision), market expansion etc.

The HRM Process consists of three stages: planning, staffing and evaluating. It ensures
that ‘Human Capital’ is available in right amounts of everything i.e., numbers, skills,
knowledge etc.
Planning consists of demand and supply forecasting of workers to conduct a job analysis
which initiates the staffing process.

Demand Forecasts decide on how many and what types of people are needed for the
organizational requirements. Sales forecasts, budgets, plant capacity etc. are some of
the considerations incorporated into the forecasting process.
Supply Forecasting has two components: internal supply and external supply.
Internal Supply can be estimated based on the data available on employee turnover,
terminations, retirements, promotions etc. External Supply refers to the entire pool
of relevant workers and their skills available nationwide or worldwide. It creates
organizational awareness of suitable resources available elsewhere on the planet. So,
they can attract those that match up their job requirements very closely if not fully, in
the future. Reconciling the future requirements (demand) with the sources of
fulfillment (supply) make workforce planning effective. However, these are general
processes.
Job Analysis is a fairly specific process of HR planning. It identifies job
requirements in terms of occupations: duties, tasks and workload, and knowledge
requirements: skills, qualifications, expertise, experience etc. The first set of
requirements come under a Job Description which explains what the job entails
while the second set comes under a Job Specification which highlights the level of
expertise and must have pre-existing knowledge employees required for the job.

Advantages of Job Analysis

Provides information needed for the entire HR process remaining from recruitment till
reward payments.
Can be referred to in cases of work-related disputes.
Can defend employees or employers in lawsuits.

Staffing process consists of three sub-processes: recruitment, selection, and downsizing.

Recruitment leads to the development of a reservoir of applicants for different jobs

in an organization.
o Internal Recruitment is done mainly through a job-posting system -
advertising the job on the company intranet (newspapers, noticeboard,
 website). When current employees are promoted to new or additional jobs,
both benefit as employees know the organization and the organization has an
existing profile of the employee’s ability, reliability and potential. Others get
motivated as they see subordinates being promoted. However, this can also
cause jealousy, and competition where social relations can get distorted which
can be damaging for both the firms and employees.
o External recruitment can be done through recruitments agencies,
newspapers, specialist magazines, government centers, word-of-mouth
recommendations, college pick-ups etc. External recruitment brings in fresh
talent with diverse and distinct skills. Youth is more flexible and adaptable to
change. However, interviews and tests cost a great deal of time and money.
Furthermore, interviews must be valid and reliable for ‘smart’ recruitment
i.e., employees that closely match up the job description and specification.

Selection builds on recruitment and is the final decision of bringing in the new
candidates of choice after interviews and tests. A number of selection practices are
used by firms:

o Applications and Resumes provide basic profiles and backgrounds of

employees including the employee name, educational progress, work
experiences etc. Useful starting point but not the only assessing criteria.
o Interviews are the most widely used methods. Structured interviews
involve same questions being asked to all applicants (situational -
hypothetical situations, behavioral – exploring past experience).
o Reference checks provided by previous employer or educational institutions
verify basic employment facts like employee punctuality, attitude etc.
o Background checks include social security verifications, educational
verifications, criminal records. These are relevant in some cases and aid in
effective selection process. In other cases, they may simply be repetitive or
unnecessary. Basic background checks are made by browsing the candidate’s
social profiles on the internet media.
o Personality tests judge the candidates nature to be enthusiastic, energetic,
daring, emotional capability (EQ), ego-person or team worker etc.
 o Drug tests are relevant in some cases but may not be in others. A security
force hiring fit individuals may prioritize such tests. These tests are also
common among white collar workers as drug intoxication can affect work
productivity, lead to embarrassing situations like cases of sexual harassment,
violence, drunk driving accidents etc.
o Most common selection tests are the cognitive tests of intellectual abilities
e.g., vocabulary, reading (verbal comprehension), numerical skills
(mathematical aptitude). These pull employers out of the grey area that
selected employees may not perform well. Hence, they are a good indicator of
the candidate’s ability to perform well and learn spaciously.
o Performance tests are usually for administrative and supervisory posts and
include typing tests but can also be for managerial positions such as
assessment centers to test potential managers on a number of skills and
situations.
o Integrity Tests are moral code based and can be subjective. Although
universal rights and wrongs may not exist, an organization may test based on
its own moral code. Therefore, integrity tests can be valuable for
organizations which have integrity on their agenda.
o All sorts of cognitive, performance, background tests and interviews are
effective staffing methods if they are reliable and valid. Reliability is the
consistency of interviews to judge the candidates on the same level also
avoiding bias. To illustrate this, if one candidate is interviewed by two or
more interviewers and the received scores are inconsistent, then the interview
itself is not reliable. Validity is the accuracy of the selection i.e., the extent to
which the test correlates with job performance (criterion related – the
accuracy with which the test predicts future performance, content related –
the degree to which the sample (test) is a representative of the job description
and specification).
Staffing is not entirely hiring new candidates, but also reducing the workforce if need
be. Downsizing is done when the firm identifies a labor surplus i.e., some posts have
multiple employees and work duplication can cause inefficiency, or when the firm
undergoes a structural change such as mergers, acquisitions, relocation etc. and some
posts are no longer needed.
 o Layoffs occur when firms no longer need some jobs and they become
redundant. Layoff can be referred to as downsizing as explained above. In
order to avoid layoffs and demotivation of existing employees, firms should
avoid over hiring in the first place, retain talented people with rare skills,
volunteer redundancies, train people in other jobs etc. Increased productivity
should be the ultimate aim and if that is achieved through alternate ways e.g.,
innovation, procedure changes, open and constant communication for more
ideas etc. then there is no need to downsize.
o If downsizing is absolutely necessary, then the business can offer
outplacement to those who have to leave. Outplacement is when firms help
former employees get a job elsewhere. This also reduces tension among
existing employees and assures them that the employer will have their back in
times of economic downturns and stress.
o Termination is when employees are dismissed or fired because of poor
performance. Although the employment-at-will concept has been put forward,
many courts have strict laws against unfair dismissals which can cost firms
heavily in terms of reputation and monetary expenses. Therefore, the eventual
dismissal should be backed up by gradual warnings, it should be unbiased,
truthful and the immediate superior should be straightforward. It is a common
practice to have a the HR manager in the termination interview to take notes
on the meeting.
o Many governments have rules and regulations regarding HR processes and
firms must comply if they are to avoid lawsuits, fines, and penalties.
Businesses should be particularly careful of not incorporating adverse impact
i.e., when one group is at a considerable disadvantage in a routine and neutral
employment practice e.g., hiring more men than women.

Employees once hired are not left on their own, successful managers regularly appraise and
train their employees to stay at par with environmental changes and competitors. Training
usually starts off with a performance-appraisal or needs assessment giving an insight to
what requires to be developed and improved. Training is sometimes differentiated from
Development. According to proponents, the former is given to lower-level employees while
the latter is for professional employees and managers. There are different types of trainings:
Orientation training involves a general introduction to the organization’s employees,
systems, work units, code of conduct etc. to familiarize the employees to the new
workplace.
o Simple, basic, one-time training.
o Not so costly in terms of time and money.
o Can motivate those with high social need to interact, ego needs of being
respected among peers.
o However, potential output is lost while the employee is being introduced
rather than getting to work for e.g., orientation weeks etc.
On the job training involves workers being trained by their immediate seniors or
sub-ordinates while performing their own jobs. This is usually for non-professional
employees e.g., hairdressers, machine operators.
o At least some work is done by workers
o Often simple and less costly
o However, not necessarily a ‘training’ recognized by other organizations
o The trainer can incorporate bad habits into the new employee such as laziness,
smoking etc.
o Not for professionals
Off the job training involves simulations, role-playing, lectures, apprenticeships etc.
away from the work.
o Employees learn a great deal, far more than what is needed now, making jobs
future-proof (job security) and motivating them (high pay, ego needs, self-
actualization)
o Better adaptability to environmental changes
o Expensive and costly
o Output is lost if trained during work hours (a solution is training in the
evening)
o Employees become more versatile, doing different jobs but can also leave
work as they are now more skilled than ever / retaining them is costly
Team Training can be on the job or off the job. It teaches employees how to work
together as a closely knit group sharing the same ‘brain’ but different body parts
doing different tasks.
Diversity training creates awareness among individuals at all levels to avoid hidden
biased behaviors, correct stereotypical norms etc.
 Management training teaches how to plan, organize, lead and control effectively.
These include abilities to delegate, manage stress, EQ, IQ, communication skills.
Usually involves coaching – personal training from boss or a consultant.

Performance appraisals are to assess an employee’s job performance.

Advantages
o can identify training needs which when provided can enrich jobs for
employees while also boosting productivity for the firm
o helps management decide on the employee’s worth: pay decisions, retaining or
dismissing
o can foster communication as managers can receive or provide feedback
o increases individual, team, and organizational effectiveness
Disadvantages
o Done poorly it can reduce motivation, lower performance and sometimes lead
to lawsuits
Appraisal is based on three basic categories:
o Trait appraisals usually are rank based (1-5) or grade based (A-E) to assess
the extent to which an employee possesses each trait e.g. leadership, attitude,
initiative etc. However, these are highly subjective for e.g., an introvert to
responding openly is not necessarily being ignorant.
o Behavioral appraisals measure more observable aspects of performance e.g.,
quality management, communication effectiveness etc. These can use the
behaviorally anchored rating scale (BARS) differentiating between poor,
average and outstanding performance or critical incident technique by
keeping regular records of employee behavior. This too can be subjective and
can exhibit an aura of distrust among employees that they are being recorded.
o Result appraisal are objective assessments focused on quantifiable
components such as sales volume, output, or profits. The common approach is
management by objectives (MBO) i.e., measuring performance against pre-
decided objectives and targets. SMART objectives lead to SMART appraisals.
it avoids biased behavior as actual performance is measured against
pre-set targets
pre-set targets with employee participation enhance employee
participation and commitment to attainment
 MBO gives employees a certain level of freedom to do the job their
own way
However, too rigid and specified objectives can leave the employee
with insufficient agility to respond when situations change
Un-SMART objectives can frustrate and demotivate employees
Can promote short termism
Guidelines for effective appraisals include
o Base performance standards on job analysis
o Communicate performance standards to employees
o Evaluate employees on specific performance related behaviors rather than on
single global or overall measure
o If possible, use more than one rater (360-degree)
o Document the performance assessment process carefully
o Always take legal considerations into account.
o Have a formal and fair appeal process
Appraisals can be done by managers, supervisors as they best know their employees.
o Subordinate feedback for managers can help transform their management
styles to more appropriate, relevant and effective ones.
o Internal and External customer feedback can be used. Self-appraisals are
another method.
o A 360-degree appraisal uses multiple appraisal methods to obtain a detailed
report regarding the concerned employee.
Provides a comprehensive perspective of one’s performance as one
method reinforces the other
Identifies training needs which are vital to organizational success
Reduce hidden bias, or correct misunderstandings provided by other
methods
However – time consuming
Suitable for higher posts and senior employees
Subjective ones will remain subjective and perhaps unnecessary
All appraisals are not assessing based on a standardized criterion,
‘What’ is appraised is random.
Guidelines for giving feedback to employees at average levels
o Summarize the employee’s performance and be specific.
 o Explain why the employee’s work is important to the organization.
o Thank the employee for doing the job.
o Raise any relevant issues, such as areas for improvement
o Expressed confidence in the employee’s future good performance.
Guidelines for underperforming employees
o Summarize the employee’s performance as specifically as possible.
o Describe the expectations and standards specifically.
o Determine the causes for the low performance and get the employees input.
o Discuss solutions to the problems with the employee playing a major role.
o Agree to a solution.
o Agree to a timetable for improvement.
o Document the meeting.
o Follow-up meetings may be needed.

Designing effective reward systems is a vital HR activity. Reward systems serve the
strategic purpose of motivating, retaining, stimulating employees. All employees work for
some benefit in return. Identifying such rewards which employees seek is an important
component to eventual HR effectiveness. Such rewards act as positive reinforcers and
employees repeat productive behaviors.
Pay decisions
o Pay level - choice of whether to be a low, average or high paying employer in
the market. Different pay levels can be followed based on level of benefits,
environmental changes, competition, relevant term (short term or long term).
o Pay structure – pricing of different jobs within an organization, grouping of
jobs with similar worth into job families. Each job family has a pay grade with
a floor and a ceiling.
o Individual pay based on seniority, skill levels, efficiency within the floor and
ceiling.
Incentive Systems and Variable Pay
o an individual incentive plan makes use of an objective based standard against
which a worker’s performance is compared. Those outperforming earn
monetary reward above basic pay e.g., commission, bonus.
o Group incentive plans stimulate group performance and are based on group
achievements, productivity.
 o Profit sharing is usually based on overall success and paid to all employees.
However, this is not based on individual performance and some units, groups
or individuals may free-ride or loaf on the efforts of others.
Executive Pay and Stock options
o Align the interests of managers with those of original shareholders.
o No cash paid out of the company’s pocket.
o Managers benefit from revenue gain (dividend) and capital gain (higher
corporate valuations) and this motivates them to further improve business
operations as they too are now owners.
o However – pay gap criticism.
Employee benefits
o E.g., Worker’s compensation (financial support during work-related injury or
illness), Social security (support to retirees, disabled), Unemployment
insurance (support for those laid off).
o Cafeteria Benefit Programs offer employees a menu of packages to choose
from and get a benefit package tailored to their own needs.
o Flexible Benefit Programs give employees credits to spend on benefits of
their own choice which fit their needs.
o Accommodation, expense account, free traveling, company car, discounts on
company products, club memberships etc.
Comparable worth is the principal of equal pay for different jobs of equal worth.
This implies that reward systems should be fair and pay the same to employees who
exert similar levels of effort. In reality, this is a difficult measure and discrepancies
continue to exist. It is mainly concerned about paying women the same for performing
different jobs of equal worth as compared to men – equal pay for equal work.
Health and safety equipment can be a reward, but most governments write such law
into the books making it compulsory for firms to provide these e.g. safety equipment,
proper sanitation etc.