Human Resource Management

Lecture 1

An Overview of Human Resource

Management

Worku Mekonnen (PHD)

 Why study HRM course?
• HR is the most important asset.
– If an organization doesn’t take its HRM
responsibilities seriously, work performance
and goal achievement may suffer.
– The quality of an organization is, to a large
degree, merely the sum of the quality of people
it hires and keeps.
 Definition
• Human resource management (HRM) is a strategic, integrated and
coherent approach to the employment, development and well-being of the
people working in organizations
Human resource management involves all management decisions and
action that affect the nature of the relationship between the organization
and its employees – its human resources. (Beer et al, 1984)

• HRM comprises a set of policies designed to maximize organizational

integration, employee commitment, flexibility and quality of work. (Guest,
1987)
 Definition cont.
HRM is the process of achieving organizational
objectives by acquiring, developing, retaining,
and properly using the HRs in an Organization.
This definition recognizes a process consisting
of four functions. These are:
a) Acquisition/getting employees/
- Demand for and supply of labor – HRP
- Recruiting - Socialization
- Selecting - Placing
b) Development/preparing employees/
 Employee training:
Skill development and changing attitudes among
workers.
Management development:
- Knowledge acquisition
- Enhancement of managers abilities.
Career development:
Effort to match long term individual and
organizational needs
c) Motivation/activating / stimulating employees/
- Job satisfaction
- Linking rewards to performance
- Performance evaluation
- Compensation and benefits
d) Maintenance/Keeping/ retaining employees/
- Working conditions
- Employee relations
 Definition cont.

•
Human Resource Management (HRM) is management functions that help
managers recruit, select, train and develop members for an organization.
HRM is concerned with the people’s dimension in organization.
The scope of HRM is indeed vast. All major activities in the working life
of a worker- from the time of his or her entry into an organization until he
or she leaves-come under the purview of HRM. Specifically, the activities
included are HR planning, job analysis and design, recruitment and
selection, orientation and placement, training and development,
performance appraisal and job evaluation, employee and executive
remuneration, motivation and communication, welfare, safety and health,
industrial relations (IR) and the like.
 Human Resource Management
Functions and Practices
- Analyzing and designing of work
- Determining HR Needs (HR planning)
- Attracting potential employees (recruiting)
- Choosing qualified employees (selecting)
- Teaching employees how to perform their jobs and preparing
them for the future (training and development)
- Rewarding and motivating staff (compensation)
- Evaluating their performance (performance management)
- Creating positive work environment (employee relations)
 Responsibilities and Roles
Department of Human Resources

• HR Department is responsible for analyzing and designing of

work, human resource strategic planning, outplacement,
employment, recruitment and selection, training and
development, evaluating performance, compensation and
benefits, employee services, employee and labor relations,
personnel records, health and safety, labor law compliance and
developing human resource management policies and effective
practices.
 Evolution of HRM
• The role of HRM in the firm has changed from
transactional HR activities to dealing with
complex transformational activities.
• Transactional activities are routine
bookkeeping tasks.
• Transformational activities increase the
strategic importance and visibility of HR
function in the firm.
 Pre-World War II
• In the early 20th century and prior to World
War II, the personnel function was primarily
involved in record keeping of employee
information, in the other words it fulfilled a
“caretaker” function.
• The prevailing management philosophy was
called “Scientific Management” which aimed
to maximize employee productivity.
 Post World War II (1945-1960)
• Managers realized that employee productivity and motivation has a
significant impact on the profitability of the firm.
• The human relation movement realized that employee productivity and
motivation had a significant impact on the profitability of the firm.
• Systematic efforts began to classify workers around occupational category
and ---paved way for devising job descriptions .
• Because of the abusive worker practices prior to the War, employees
started forming trade unions.
 Social Issues Era (1963-1980)
• This period witnessed an unprecedented increase in the
amount of labor legislation that governed various parts of the
employment relationship, such as prohibition of
discriminatory practices, occupational health and safety,
retirement benefits, and tax regulations.
• It was this time that personnel department were beginning to
be called human resource department and the field of human
resource management was born.
 Cost-Effectiveness Era (1980-
1990s)
• Firms increased their focus on cost reduction through
automation and other productivity improvement measures.
• To improve effectiveness and efficiency in service delivery,
through cost reduction and value added services, the HR
departments came under pressure to harness technology that
was becoming cheaper and more powerful.
• There was a growing realization within management that
people costs were very significant part of their budgets.
Technological advancement Era and Emergence
of Strategic HRM (1990 to present

• The economic landscape underwent radical changes throughout the 1990s

with increasing globalization, technological breakthroughs and hyper
comptetion.
• Firms today realize that innovative and creative employees who hold the
key to organizational knowledge provide a sustainable competitive
advantage because unlike other resources, intellectual capital is difficult to
imitate by competitors.
• Strategic HRM (SHRM), has become critically important in management
thinking and practice. SHRM derives from its theoretical significant from
the resource based view of the firm that treats human capital as strategic
asset and competitive advantage in improving organizational performance.
 Theories of HRM
• Theories of HRM, David Guest (1997)

• 1. Strategic theories – the implicit but untested hypothesis is that good

fit (between HR practice and the internal and external context) will be
associated with superior performance. The focus has been more on
classifying types of HR strategy. The hypothesis is that firms that have a fit
between business strategy, structure and HRM policy will have superior
performance.

• 2. Descriptive theories – these either list areas of HR policy and

outcomes (Beer et al, 1984) or adopt a systems approach, describing the
relationships between levels (Kochan et al, 1986). They are largely non-
prescriptive.
• 3. Normative theories – these are normative in
the sense that they establish a norm or standard
pattern in the form of prescribed best practice.
These take a considerable risk in implying
‘one best way’.
• 4. Contingency theory – HRM is influenced by the
organization’s environment and circumstances (Legge, 1978).

• 5. The resource-based view – HRM delivers added value

through the strategic development of the organization’s rare,
hard to imitate and hard to substitute human resources
(Barney, 1991, 1995).

. 6AMO theory – the formula Performance = Ability +

Motivation + Opportunity to Participate provides the basis for
developing HR systems that attend to employees’ interests,
namely their skill requirements, motivations and the quality of
their job (Appelbaum et al, 2000; Bailey et al, 2001; Boxall
and Purcell, 2003).
 MODELS OF HRM

I. The matching model of HRM

One of the first explicit statements of the HRM concept was made by the
Michigan School (Fombrun et al, 1984). They held that HR systems and the
organization structure should be managed in a way that is congruent with
organizational strategy (hence the name ‘matching model’). They further
explained that there is a human resource cycle which consists of
four generic processes or functions that are performed in all organizations.
These are:
1.selection – matching available human resources to jobs;
2.appraisal – performance management;
3. rewards – ‘the reward system is one of the most under-utilized and mishandled
managerial tools for driving organizational performance’; it must reward short
as well as long-term achievements, bearing in mind that ‘business must perform
in the present to succeed in the future’;
4. development – developing high quality employees

Armstrong page 6 model

• The Michigan model is also known as the 'matching model' or
'best-fit' approach to human resource management. In essence,
it requires that human resource strategies have a tight fit to the
overall strategies of the business. As such, it limits the role of
HR to a reactive, organizational function and under-
emphasizes the importance of societal and other external
factors. For example, it is difficult to see how the current
concern for worklife balance could be integrated into this
model.
 The Harvard Model
The other founding fathers of HRM were the Harvard School of Beer et al (1984)
who developed what Boxall (1992) calls the ‘Harvard framework’. This framework is
based on the belief that the problems of historical personnel management can only
be solved: when general managers develop a viewpoint of how they wish to see
employees involved in and developed by the enterprise, and of what HRM policies
and practices may achieve those goals.

•The Harvard school suggested that HRM had two characteristic features: 1) line
managers accept more responsibility for ensuring the alignment of competitive
strategy and HR policies, and 2) HR has the mission of setting policies that govern
how HR activities are developed and implemented in ways that make them more
mutually reinforcing.
• The Harvard interpretation sees employees as resources.
However, they are viewed as being fundamentally different
from other resources - they cannot be managed in the same
way. The stress is on people as human resources. The Harvard
approach recognizes an element of mutuality in all businesses,
a concept with parallels in Japanese people management, as
we observed earlier. Employees are significant stakeholders in
an organization. They have their own needs and concerns
along with other groups such as shareholders and customers.'
 The Harvard Map or model
outlines four HR policy areas:
• 1 Human resource flows - recruitment, selection,
placement, promotion, appraisal and assessment,
promtion, termination, etc.
2 Reward systems - pay systems, motivation, etc.
3 Employee influence - delegated levels of authority,
responsibility, power
4 Work systems - definition/design of work and
alignment of people.
 Which in turn lead to the 'four C's'
or HR policies that have to be
achieved:
• Commitment
• Congruence
• Competence
• Cost effectiveness
 AIMS OF HRM
• Organizational effectiveness
• Human capital management
• Knowledge management
• Reward management
• Employee relations
• Meeting diverse needs
• Bridging the gap between rhetoric and reality
 HRM and Personnel Management
• HRM differs from Personnel Management (PM) both in scope
and orientation. HRM views people as an important source or
asset to be used for the benefit of organizations, employees
and society. It is emerging as a distinct philosophy of
management aiming at policies that promote mutuality-mutual
goals, mutual respect, mutual rewards and mutual
responsibilities. HRM is being integrated into the overall
strategic management of business. Further, HRM represents
the latest term in the evolution of the subject.
• Personnel management has a limited scope and an
inverted orientation. It viewed labour as a tool, the
behavior of which could be manipulated for the
benefit of the organization and replaced when it was
worn-out.
• The personnel department was filled with not-very-
productive employees whose services could be spared
with minimal damage to the organization’s ongoing
operations.
• Personnel function was treated as a routine activity
meant to hire new employees and to maintain
personnel records. Historically PM preceded HRM.
 Differences b/n HRM and PM
HRM

• HRM places more emphasis on strategic business fit and integration

• HRM is based on a management business orientated philosophy
• HRM attaches more importance to the of culture and the achievement of
commitment (mutuality).
• HRM places greater emphasis on the role of line managers as the implementers
of HR policies.
• HRM is a holistic approach concerned with the total interests of the business –
the interests of the members of the organization are recognized but
subordinated to those of the enterprise.
• HR specialists are expected to be business partners rather than personnel
administrators.
• HRM treats employees as assets not costs.
 Personnel Management
PM Focuses on:
• written contract
• importance of devising rules
• Guide to management action
• Norms/customs and practices
• Monitoring
• Labour management
• Transactional
• Job evaluation (fixed grades)
• Collective-bargaining contracts
 Objectives of HRM
• Societal
• Organizational objectives
• Functional objectives
• Personal objectives
 Environment of Human Resource Management

Environment is an important variable in the HRM model. Environment

may be understood as all those forces which have their bearing on the
functioning of the HR department.

External Environment
• The forces are-political and legal, economic, technological, cultural,

Internal Environment
• unions, organizational culture and conflict and professional bodies. The
first four together forms the external environment and the last three factors
constitute the internal environment of the HR department