After studying this chapter,

you should be able to understand:

1. Concept & Characteristic of Human Resource Management
2. Objectives and Component
Component of
of HRM
HRM
3. HRM and Personal Management
4. HRM Environment
5. Contemporary HR issues, challenges and responsibility of
HR manager

1–1
1–1
The Manager’s Human Resource
Management Jobs
 Management process
– The five basic functions of planning, organizing,
staffing, leading, and controlling.
 Human resource management (HRM)
– The policies and practices involved in carrying out
the “people” or human resource aspects of a
management position, including recruiting,
screening, training, rewarding, and appraising.

1–2
Personnel Aspects Of A Manager’s Job
 Conducting job analyses (determining the nature of each
employee’s job)
 Planning labor needs and recruiting job candidates
 Selecting job candidates
 Orienting and training new employees
 Managing wages and salaries (compensating employees)
 Providing incentives and benefits
 Appraising performance
 Communicating (interviewing, counseling, disciplining)
 Training and developing managers
 Building employee commitment

1–3
Why is HR Management is important to
all managers?
Because we don’t want to
 Hire the wrong person for the job
 Experience high turnover
 Have your people not doing their best
 Waste time with useless interviews
 Have your company in court because of discriminatory actions
 Have some employees think their salaries are unfair and
inequitable relative to others in the organization
 Allow a lack of training to undermine your department’s
effectiveness
 Commit any unfair labor practices

1–4
Why is HR management is important to
all managers
Saying by one of the president of company
For many years it has been said that capital is the
bottleneck for a developing industry. I don’t think this
any longer holds true. I think it’s the work force and
the company’s inability to recruit and maintain a good
work force that does constitute the bottleneck for
production. I don’t know of any major project backed
by good ideas, vigor, and enthusiasm that has been
stopped by a shortage of cash I do know of industries
whose growth has been partly stopped or hampered
because they can’t maintain an efficient and
enthusiastic labor force, and I think this will hold true
even more in future

1–5
Characteristics
 It is an art and a science:
The art and science of HRM is indeed very complex.
HRM is both the art of managing people by creative
and innovative approaches; it is a science as well
because of the accurate and rigorous application of
theory that is required.
 It is pervasive:
Development of HRM covers all levels and all
categories of people, and management and
operational staff. All those who are managers have to
perform HRM. It is pervasive because it is required in
every department of the organization. All kinds of
organizations, profit or non-­profit making, have to
follow HRM. 1–6
Characteristics
 It is a Continuous Process:
 HRM is a service function:
HRM is not a profit centre. It serves all other functional
departments. But the basic responsibility always lies with
the line managers. HRM is a staff function – a facilitator.
The HR Manager has line authority only within his own
department, but has staff authority as far as other
departments are concerned.
 HRM must be regulation-friendly:
The HRM function has to be discharged in a manner that
legal dictates are not violated. Equal opportunity and
equal pay for all, inclusion of communities in employment,
inclusion of tribal’s and farmers in the benefits and non-
violation of human rights must be taken care of by the
HRM
1–7
Characteristics
 Multi disciplinary and fast changing:
It is multi- disciplinary activity utilizing knowledge and
inputs from psychology, sociology, economics, etc. It is
changing itself in accordance with the changing
environment. It has travelled from exploitation of
workers to treating them as equal partners in the task.
 Focus on results:
HRM is performance oriented. It has its focus on
results, rather than on rules. It encourages people to
give their 100%. It tries to secure the best from people
by winning the whole hearted cooperation. It is a
process of bringing people and organization together so
that the goals of each are met. It is commitment
oriented.
1–8
Characteristics
 People-centered:
HRM is about people at work both as individuals and
a group. It tries to help employees to develop their
potential fully. It comprises people-related functions
like hiring, training and development, performance
appraisal, working environment, etc.
HRM has the responsibility of building human capital.
People are vital for achieving organizational goals.
Organizational performance depends on the quality
of people and employees.

1–9
Characteristics
 Human relations philosophy:
HRM is a philosophy and the basic assumption is that
employees are human beings and not a factor of
production like land, labor or capital. HRM recognizes
individuality and individual differences. Every
manager to be successful must possess social skills
to manage people with differing needs.

1–10
Objectives

 To help the organization to attain its goals

effectively and efficiently by providing
competent and motivated employees.
 To utilize the available human resources
effectively.
 To increase to the fullest the employee’s job
satisfaction and self-actualization.
 To develop and maintain the quality of work
life (QWL) which makes employment in the
organization a desirable personal and social
situation. 1–11
Objectives

 To help maintain ethical policies and behavior

inside and outside the organization.
 To establish and maintain cordial relations
between employees and management.
 To reconcile individual/group goals with
organizational goals.
.

1–12
Objectives

 Werther and Davis have classified the

objectives of HRM in four categories
• Societal Objectives
• Organizational Objectives
• Functional Objectives
• Personal Objectives
.

1–13
Components/Process/Function
Acquisition
• Human Resource Planning
• Recruitment
• Selection and Socialization

Development
• Employee Training
• Management Development
• Career Development

Motivation
• Job Design
• Performance Evaluation
• Reward
• Job Evaluation
• Discipline 1–14
Components/Process/Function
Maintenance
• Safety and Health
• Employee/Labor Relation

1–15
Personal Management Vs HRM
 Personnel management is a traditional
approach of managing people in the
organization. Human resource management
is a modern approach of managing people
and their strengths in the organization
 Personnel management focuses on
personnel administration, employee welfare
and labor relation. Human resource
management focuses on acquisition,
development, motivation and maintenance of
human resources in the organization.
1–16
Personal Management Vs HRM
 Personnel management assumes people as a
input for achieving desired output. Human
resource management assumes people as an
important and valuable resource for achieving
desired output
 Under personnel management, job design is
done on the basis of division of labor. Under
human resource management, job design
function is done on the basis of group
work/team work.

1–17
Personal Management Vs HRM
 Under personnel management, employees
are provided with less training and
development opportunities. Under human
resource management, employees are
provided with more training and development
opportunities.
 In personnel management, decisions are
made by the top management as per the
rules and regulation of the organization. In
human resource management, decisions are
made collectively after considering
employee's participation, authority,
decentralization, competitive environment
etc.  1–18
Personal Management Vs HRM

 Personnel management focuses on

increased production and satisfied
employees. Human resource management
focuses on effectiveness, culture, productivity
and employee's participation.
 Personnel management is concerned with
personnel manager. Human resource
management is concerned with all level of
managers from top to bottom.

1–19
Contemporary Issues and Challenges

 Globalization
 Technological Advancement
 Nature of work
 Workforce Diversity
 Contingent workforce
 Legal Environment

1–20
HRM Environment

 Environment comprises all those forces which

have their bearing on the functioning of
various activities including human resource
activities.
 Environment scanning helps HR manger
become proactive to the environment which is
characterized by change and intense
competition.
 Human resource management is performed
in two types of environments- internal and
external
1–21
HRM Environment (Internal Environment)

Internal Environment
 The internal environment of HRM consists of
unions, organizational culture and conflict,
professional bodies, organizational
objectives, polices, etc.

1–22
HRM Environment (Internal Environment)

Internal Environment
Union
Trade unions are formed to safeguard the
interest of its members/workers. HR activities
like recruitment, selection, training,
compensation, industrial relations and
separations are carried out in consultation
with trade union leaders.

1–23
HRM Environment (Internal Environment)

Organizational Culture and Conflict:

 As individuals have personality, organizations
have cultures.
 Each organization has its own culture that
distinguishes one organization from another.
 Culture may be understood as sharing of
some core values or beliefs by the members
of the organization “Value for time” are the
culture of Reliance Industries Limited.

1–24
HRM Environment (Internal Environment)

Organizational Culture and Conflict:

 The culture of Tata conglomerate is “get the best
people and set them free”.
 HR practices need to be implemented that best fit the
organization's culture.
 There is often conflict between organizational culture
and employee’s attitude.
 Conflict usually surfaces because of dualities such as
personal goal vs. organisational goal, discipline vs.
autonomy, rights vs. duties, etc. Such conflicts have
their bearings on HR activities in an organisation.

1–25
HRM Environment (External)

External Environment:
 External environment includes forces like
economic, political, technological,
demographic etc. these exert considerable
influence on HRM. Each of these external
forces is examined here.

1–26
HRM Environment (External)
Economic:
 Economic forces include growth rate and
strategy, industrial production, national and
per capita incomes, money and capital
markets, competitions, industrial labour and
globalization.
 All these forces have significant influence on
wage and salary levels. Growing
unemployment and reservation in
employment also affect the choice for
recruitment and selection of employees in
organisations
1–27
HRM Environment (External)
Political:
 Political environment covers the impact of
political institutions on HRM practices. For
example, democratic political system
increases the expectations of workers for
their well being.

1–28
HRM Environment (External)
The total political environment is composed
of three institutions:
Legislature:
 This is called Parliament at the central level
and Assembly at the state level A plethora of
labor laws are enacted by the legislature to
regulate working conditions and employment
relations.
Executive:
 It is the Government that implements the law.
In other words, the legislature decides and
the executive acts. 1–29
HRM Environment (External)
Judiciary:
 This is like a watchdog above the two. It
ensures that both the legislature and the
executive work within the confines of the
constitution and also in the overall interest of
the people. These affect, in one way or the
other, all HR activities from planning to
placement to training to retention and
maintenance.

1–30
HRM Environment (External)
Technological:
 Technology is a systematic application of
organized knowledge to practical tasks.
 Technological advances affect the HR
functions in more than one way:
 First; technology makes the job more
intellectual or upgraded.
 Second, it renders workers dislocated if they
do not equip themselves to the job.

1–31
HRM Environment (External)
 Third, job becomes challenging for the
employees who cope with the requirements of
technology Fourth, technology reduces
human interaction at the work place. Finally
job-holders become highly professionalized
and knowledgeable in the job they perform.

1–32
HRM Environment (External)
Demographic:
 Demographic variables include sex, age,
literacy, mobility, etc. Modem work force is
characterized by literate, women and
scheduled caste and scheduled tides workers
 Modem work force is characterized by
literate, women and scheduled caste and
scheduled tides workers.

1–33
Class Assignment
 Working in a group, develop a list showing
how the trend like workforce diversity,
technological trend, globalization and
changes in the nature of work have
affected the college you are attending now
?

1–34
Basic HR Concepts
Getting results
– The bottom line of managing

 HR creates value by engaging

in activities that produce
the employee behaviors
the company needs to
achieve its strategic
goals.

1–35
Line and Staff Aspects of HRM
 Line manager
– A manager who is authorized to direct the work of
subordinates and is responsible for accomplishing
the organization’s tasks.
 Staff manager
– A manager who assists and advises line managers.

1–36
Line Managers’ HRM Responsibilities
1. Placing the right person on the right job
2. Starting new employees in the organization (orientation)
3. Training employees for jobs new to them
4. Improving the job performance of each person
5. Gaining creative cooperation and developing smooth working
relationships
6. Interpreting the firm’s policies and procedures
7. Controlling labor costs
8. Developing the abilities of each person
9. Creating and maintaining department morale
10. Protecting employees’ health and physical condition

1–37
Functions of the HR Manager
 A line function
– The HR manager directs the activities of the
people in his or her own department and in
related service areas (like the plant cafeteria).
 A coordinative function
– HR managers also coordinate personnel activities,
a duty often referred to as functional control.
 Staff (assist and advise) functions
– Assisting and advising line managers is the heart
of the HR manager’s job.

1–38
HR and Authority
 Authority
– The right to make decisions, direct others’ work,
and give orders.
 Implied authority
– The authority exerted by an HR manager by virtue
of others’ knowledge that he or she has access to
top management.
 Line authority
– The authority exerted by an HR manager by
directing the activities of the people in his or her
own department and in service areas.

1–39
 Employee Advocacy
 HR must take responsibility for:
– Clearly defining how management should be
treating employees.
– Making sure employees have the mechanisms
required to contest unfair practices.
– Represent the interests of employees within the
framework of its primary obligation to senior
management.

© 2005 Prentice Hall Inc. All rights reserved. 1–40

 Examples of HR Job Duties
 Recruiters
– Search for qualified job applicants.
 Equal employment opportunity (EEO)
coordinators
– Investigate and resolve EEO grievances, examine
organizational practices for potential violations,
and compile and submit EEO reports.
 Job analysts
– Collect and examine information about jobs to
prepare job descriptions.

© 2005 Prentice Hall Inc. All rights reserved. 1–41

 Examples of HR Job Duties (cont’d)
 Compensation managers
– Develop compensation plans and handle the
employee benefits program.
 Training specialists
– Plan, organize, and direct training activities.
 Labor relations specialists
– Advise management on all aspects of union–
management relations.

© 2005 Prentice Hall Inc. All rights reserved. 1–42

 HR Department Organizational Chart (Large Company)

Figure 1–1
Source: Adapted from BNA Bulletin to Management, June 29, 2000.
© 2005 Prentice Hall Inc. All rights reserved. 1–43
 Cooperative Line and Staff HR
Management
1. The line manager’s responsibility is to specify the
qualifications employees need to fill specific
positions.
2. HR staff then develops sources of qualified
applicants and conduct initial screening interviews
3. HR administers the appropriate tests and refers the
best applicants to the supervisor (line manager),
who interviews and selects the ones he or she
wants.

© 2005 Prentice Hall Inc. All rights reserved. 1–44

 HR Organizational Chart (Small Company)

Figure 1–2
© 2005 Prentice Hall Inc. All rights reserved. 1–45
 Employment and Recruiting—Who Handles It?
(percentage of all employers)

Note: length of bars represents prevalence of activity among all surveyed employers.
Figure 1–3
Source: HR Department Benchmarks and Analysis,” BNA/Society for Human Resource Management, 2002.
© 2005 Prentice Hall Inc. All rights reserved. 1–46
 The Changing Environment Of
HR Management
 HR’s changing role:
“ Personnel departments”
– Took over hiring and firing from supervisors,
payroll, and benefit plans administration.
– In the 1930s added “protecting the firm in its
interaction with unions” responsibilities (labor
relations).
– Assumed organizational responsibilities for equal
employment and affirmative action.

© 2005 Prentice Hall Inc. All rights reserved. 1–47

 A Changing HR Environment
 Globalization
 Technological Advances
 Exporting Jobs
 The Nature of Work
 Workforce Demographics

© 2005 Prentice Hall Inc. All rights reserved. 1–48

 Employment Exodus:
Projected Loss of Jobs and Wages

Source: Michael Shroeder, “States Fight Exodus of Jobs,” Wall Street Journal, June 3, 2003, p.
Figure 1–4
84.
© 2005 Prentice Hall Inc. All rights reserved. 1–49
 Measuring HR’s Contribution
 Strategy
– The company’s long-term plan for how it will
balance its internal strengths and weaknesses
with its external opportunities and threats to
maintain a competitive advantage.
• HR managers today are more involved in partnering with
their top managers in both designing and implementing
their companies’ strategies.
– Top management wants to see, precisely, how the
HR manager’s plans will make the company more
valuable.

© 2005 Prentice Hall Inc. All rights reserved. 1–50

 HR Metrics
 Absence Rate
[(Number of days absent in month) ÷ (Average number of
employees during mo.) × (number of workdays)] × 100
 Cost per Hire
(Advertising + Agency Fees + Employee Referrals + Travel
cost of applicants and staff + Relocation costs + Recruiter
pay and benefits) ÷ Number of Hires
 Health Care Costs per Employee
Total cost of health care ÷ Total Employees
 HR Expense Factor
HR expense ÷ Total operating expense

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T.
Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–
20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using
Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning,
Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey; www.shrm.org. Figure 1–5
© 2005 Prentice Hall Inc. All rights reserved. 1–51
 HR Metrics (cont’d)
 Human Capital ROI
Revenue − (Operating Expense − [Compensation cost +
Benefit cost]) ÷ (Compensation cost + Benefit cost)
 Human Capital Value Added
Revenue − (Operating Expense − ([Compensation cost +
Benefit Cost]) ÷ Total Number of FTE
 Revenue Factor
Revenue ÷ Total Number of FTE
 Time to fill
Total days elapsed to fill requisitions ÷ Number hired

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey,
and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review,
January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to
Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39,
no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA
Figure 1–5 (cont’d)
2000 Cost Per Hire and Staffing Metrics Survey; www.shrm.org.
© 2005 Prentice Hall Inc. All rights reserved. 1–52
 HR Metrics (cont’d)
 Training Investment Factor
Total training cost ÷ Headcount
 Turnover Costs
Cost to terminate + Cost per hire + Vacancy Cost + Learning
curve loss
 Turnover Rate
[Number of separations during month ÷ Average number of
employees during month] × 100
 Workers’ Compensation Cost per Employee
Total WC cost for Year ÷ Average number of employees

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey,
and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review,
January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to
Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39,
no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA
Figure 1–5 (cont’d)
2000 Cost Per Hire and Staffing Metrics Survey; www.shrm.org.
© 2005 Prentice Hall Inc. All rights reserved. 1–53
 Measuring HR’s Contribution
 The HR Scorecard
– Shows the quantitative standards,
or “metrics” the firm uses to
measure HR activities.
– Measures the employee behaviors
resulting from these activities.
– Measures the strategically relevant
organizational outcomes of those
employee behaviors.

© 2005 Prentice Hall Inc. All rights reserved. 1–54

 Benefits of a High Performance Work
System (HPWS)
 Generate more job applicants
 Screen candidates more effectively
 Provide more and better training
 Link pay more explicitly to performance
 Provide a safer work environment
 Produce more qualified applicants per position
 More employees are hired based on validated
selection tests
 Provide more hours of training for new employees
 Higher percentages of employees receiving regular
performance appraisals.
© 2005 Prentice Hall Inc. All rights reserved. 1–55
 The New HR Manager
 New Proficiencies
– HR proficiencies
– Business proficiencies
– Leadership proficiencies
– Learning proficiencies

© 2005 Prentice Hall Inc. All rights reserved. 1–56

 The New HR Manager (cont’d)
 The Need to “Know Your Employment Law”
– Equal employment laws
– Occupational safety and health laws
– Labor laws

© 2005 Prentice Hall Inc. All rights reserved. 1–57

 Effects CFOs Believe Human Capital
Has on Business Outcomes

Source: Steven H. Bates, “Business Partners,” HR Magazine, September 2003, p. 49

Figure 1–6
© 2005 Prentice Hall Inc. All rights reserved. 1–58
 The New HR Manager
 Ethics and HR
– Ethical lapses (e.g., Enron, Martha Stewart)
 Sarbanes-Oxley Act in 2003
– Intended to curb erroneous corporate financial
reporting:
• Requires CEOs and CFOs to certify their companies’
periodic financial reports.
• Prohibits personal loans to executive officers and
directors.
• Requires CEOs and CFOs to reimburse their firms for
bonuses and stock option profits if corporate financial
statements subsequently require restating.

© 2005 Prentice Hall Inc. All rights reserved. 1–59

 HR Professional Certification
 HR is becoming more professionalized.
 Society for Human Resource
Management (SHRM)
– SHRM’s Human Resource Certification
Institute (HRCI)
• SPHR (senior professional in HR)
• PHR (professional in HR)
certificate

© 2005 Prentice Hall Inc. All rights reserved. 1–60

 HR and Technology
 Benefits of technological applications for HR
– Intranet-based employee portals through which
employees can self-service HR transactions.
– The availability of centralized call centers staffed
with HR specialists.
– Increased efficiency of HR operations.
– The development of data warehouses of HR-
related information.
– The ability to outsource HR activities to specialist
service providers.

© 2005 Prentice Hall Inc. All rights reserved. 1–61

 The Plan of This Book: Basic Themes
 HR management is the responsibility of every
manager—not just those in the HR department.
 HR managers must always stand ready to defend
their plans and contributions in measurable terms.
 An HR department’s performance is measured
relative to achieving the company’s strategic aims.
 HR managers increasingly rely on IT to help support
the company’s strategic aims.
 Virtually every HR-related decision managers make
has legal implications.
 Globalization and diversity are important HR issues
today.
© 2005 Prentice Hall Inc. All rights reserved. 1–62
 Strategy and the Basic HR Process

Figure 1–8
© 2005 Prentice Hall Inc. All rights reserved. 1–63
 KEY TERMS

management process employee advocacy

human resource globalization
management (HRM) nontraditional workers
authority human capital
line manager strategy
staff manager
metrics
line authority
HR Scorecard
implied authority outsourcing
functional control

© 2005 Prentice Hall Inc. All rights reserved. 1–64