Introduction

Human Resource Management, or HRM for short, is one of the most important factors in running a successful company, although it is not always handled with the time and focus that it deserves. To fully understand what HRM is and its impact on the success or failure of a business, we first need to know what it means. The following is a satisfactory definition:

The purpose of Human Resource Management is to recruit, develop and utilise the staff within an organisation in the manner in which is most suitable to accomplishing the aims and objectives of the enterprise.

This essentially translates to “using individuals in the business in the best way possible” though that would be an over-simplified statement that does not reflect the true nature and scope of HRM. HRM describes all of the techniques and processes that are involved in ensuring that all members of staff in a business are pulling in the same direction, and more importantly, in the right direction.

At its center, HRM brings together three major elements that are essential to the productive output of the workforce. These elements include motivation, management and leadership, and organisational structures. As a result, HRM can be employed on all levels of management within your company, not just the shop floor staff, and it may even be used to modify the structure of those levels of management at the same time.

Why is it Necessary?

Put simply, companies don’t operate without employees. As a result, some level of human resource management is necessary for any organisation to operate at all, let alone in an efficient and profitable manner.

Human Resource Management has an impact on every level of your corporate activities with varying degrees of visibility. The most evident HRM tasks involve the hiring and firing of employees as well as financial systems such as payroll. It can also impact on motivation and communication inside your company, which are far more intangible variables but are crucial nonetheless.

It also goes without saying that each company is different and will have a different set of challenges to face and opportunities to take advantage of. HRM can act as a flexible tool that converts workforce potential into financial gains and can adjust to fully utilise the talents of your company. Without it, your rivals may be afforded the chance to prosper where you missed out.

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Impact on Business

Whilst this all appears very interesting and important, how does it actually influence the daily operations of your company, and more importantly, how will it help to enhance the performance and profitability of your firm?

Recruitment & Training

This is probably the area of a company that is most associated with human resources – recruitment. Almost every business in the world, and especially businesses that are growing, must recruit people to work for them. Either existing employees have left, or new possibilities have arisen which mean there are jobs that have to be filled.

It’s also important to keep your staff training procedures up-to-date to make sure that your workforce is fully capable of doing the job they are there to do. Whether it is a new piece of legislation or a new piece of technology that alters the marketplace, there is an on-going need to keep your business up-to-date and prepared to take advantage of any opportunity.

You may also discover that the costly practice of external recruitment can be averted if your company has adequate training facilities in place. It is much easier to train an existing staff member to a higher level and then use external recruitment to fill the gap left at the lower level than it is to recruit directly to a higher level. This approach can be used at almost every level of management within your company.

Employee Relations

When you have the right men and women working for you it is important to keep them working for you, and to make certain they are doing a good job. This can be achieved by means of good employee relations. The most obvious employee relations exercise is the art of motivation – a broad topic itself – but other worker relations issues can include disciplinary and grievance management. All of these factors are an essential part of the overall HRM picture.

Finances

You can’t keep employees at your organisation by good motivational techniques only. They’ll want to be paid a fair sum and on time. Payroll must be one of the first systems that is developed when you launch a company, but they still need to be taken care of and updated when personnel join, leave or switch pay grade. Incorrect management of your payroll system can rapidly lead to disaster in terms of your staff.

Industrial Relations

Many firms will have to deal with trade union or other workers rights establishments which can be very forceful when protecting the interests of their members. When dealing with such bodies it is advantageous to have people within your organisation who can communicate comfortably with them whilst keeping the interests of your own organisation in mind at the same time. The need for good industrial relations is far more prevalent in public sector companies.

Human resource management is required by each forming company no matter how big or small your workforce might be.

Workforce Planning

We have seen the effect that human resource management can have on a company and overall it looks like good HRM will have a good effect on any company. As a rule, this is the case, but effective HRM does not just occur overnight.

One way to implement HRM concepts to your business is via workforce planning – a system that has the goal of making sure your staff can complete the upcoming tasks required for your business to be successful. It can be defined as:

Definition

Workforce planning is the process of anticipating in advance the human resource needs of any organisation, both in terms of the number of employees necessary and the appropriate skill mix. Recruitment and training policies are designed with a long term focus in order to ensure that the company is able to function without being limited by a shortage of appropriate labour.

Requirements

Evaluating your workforce requirements is essential to the proper planning of your workforce in the short-term and long-term future. If your business is subject to seasonal changes in demand, for example in the tourism industry, or is prone to seasonal fluctuations in staff levels then your workforce planning must take these variables into consideration.

Recruitment

Whether you are hiring people externally or from within your existing workforce you still want to find the right person to fill the position. As part of your workforce planning you should draw up a job description that details the job that will be undertaken as well as a person specification which will give an indication of the type of individual that would be a perfect fit for the job and your organisation. By combining and prioritising the elements of these two documents you will be able to identify the ideal job applicant.

Selection

The selection procedure can be as involved or as easy as you deem necessary. Outside of regular job interviews there are a number of ways you can learn about candidates for your jobs, including aptitude tests, group interviews and even psychometric testing.

Training & Development

The primary goal of staff training and development is to produce a much better standard of worker within your company. Workforce planning can use training to fill upcoming gaps in the skill set of your staff and is commonly faster and more cost effective than external recruitment. Training and development may also go some way towards motivating your staff.

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Workforce Motivation

It almost goes without saying that well motivated workers are going to deliver a better standard of work and have a greater quantity of production than unhappy workers. This improved work rate will undoubtedly lead to a rise in the profitability of a business.

Essentially, all motivational practices can be separated into two sets that are often referred to as the “carrot and stick” approach to motivation. The analogy refers to the two ways to make a donkey carry your possessions, either by tempting it with a carrot, or threatening it with a hit from a stick! It is a fairly old idea but the principle remains relevant to businesses today.

Whether you use the carrot strategy or the stick strategy will largely depend on your own management approach, as well as the industry you work in and the type of people that you employ. Irrespective of your approach, motivational factors can be separated into a further two sets; financial and non-financial motivators.

Financial

The most typical financial motivators are payment plans. You can pay staff in many different ways, either a set amount for a set service, by an hourly or daily rate, or a rate related to production, such as a commission scheme. Whatever method is used, the workforce is motivated to work because they will get money for doing so.

Another financial motivation technique involves what are known as incentive schemes, where additional financial rewards are given out for good overall performance. This may include commission above a fixed salary, performance-related pay grades or even providing a share of company profits. Again, the motivating aspect here is the money alone.

Non-financial

Many human resource theorists have their own ideas about the other elements that motivate people to work, although these are often seen as an added bonus to a worker. It is widely acknowledged that income is the key motivational factor for the majority of people.

The Changing Face of HRM

As previously mentioned, HRM is a flexible application that is there to match the characteristics of your workforce to the goals of your business. As a result, it has had to keep adapting to a corporate climate that is continuously changing for one reason or another. Furthermore, it is a good idea to constantly evaluate your own HRM policies and not to rest on your laurels.

Perhaps there is a new piece of government legislation that may have an effect of how your business can carry out its trading, or maybe a fresh manufacturing technology will come along that will revolutionise your industry. Either way, if you want to make sure that your staff is performing to its optimum level then your HRM system should be adaptive enough to cope with an ever-changing economy.