Module I: Introduction to Human Resources

Personal Management and Human Resources Management: Concept, scope, role, evolutions &
functions: Challenges of HRM - Organization of Human Resources Department and its function.

Personnel Management

Personnel management can be defined as obtaining, using and maintaining a satisfied workforce.
It is a significant part of management concerned with employees at work and with their
relationship within the organization.

According to Flippo, “Personnel management is the planning, organizing, compensation,

integration and maintainance of people for the purpose of contributing to organizational,
individual and societal goals.”

According to Brech, “Personnel Management is that part which is primarily concerned with
human resource of organization.”

Nature of Personnel Management

1. Personnel management includes the function of employment, development and
compensation- These functions are performed primarily by the personnel management in
consultation with other departments.
2. Personnel management is an extension to general management. It is concerned with
promoting and stimulating competent work force to make their fullest contribution to the
concern.
3. Personnel management exist to advice and assist the line managers in personnel matters.
Therefore, personnel department is a staff department of an organization.
4. Personnel management lays emphasize on action rather than making lengthy schedules,
plans, work methods. The problems and grievances of people at work can be solved more
effectively through rationale personnel policies.
 5. It is based on human orientation. It tries to help the workers to develop their potential
fully to the concern.
6. It also motivates the employees through it’s effective incentive plans so that the
employees provide fullest co-operation.
7. Personnel management deals with human resources of a concern. In context to human
resources, it manages both individual as well as blue- collar workers.

Role of Personnel Manager

Personnel manager is the head of personnel department. He/She performs both managerial and
operative functions of management. His role can be summarized as :

1. Personnel manager provides assistance to top management- The top management are the
people who decide and frame the primary policies of the concern. All kinds of policies
related to personnel or workforce can be framed out effectively by the personnel
manager.
2. He/She advices the line manager as a staff specialist- Personnel manager acts like a staff
advisor and assists the line managers in dealing with various personnel matters.
3. As a counsellor,- As a counsellor, personnel manager attends problems and grievances of
employees and guides them. He/She tries to solve them in best of his capacity.
4. Personnel manager acts as a mediator- He is a linking pin between management and
workers.
5. He/She acts as a spokesman- Since he is in direct contact with the employees, he is
required to act as representative of organization in committees appointed by government.
He represents company in training programmes.

Functions of Personnel Management

● Manpower Planning
● Recruitment
● Selection
● Training and Development
HUMAN RESOURCE MANAGEMENT (HRM)

Human resource management (HRM) is the process of employing people, training them,
compensating them, developing policies relating to them, and developing strategies to retain
them.
Human resource management is the strategic and coherent approach to the effective and efficient
management of people in a company or organization such that they help their business gain a
competitive advantage. It is designed to maximize employee performance in service of an
employer's strategic objectives.

The Role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform,
which is what makes this information important, despite the career path taken. Most experts
agree on seven main roles that HRM plays in organizations. These are described in the following
sections.

Staffing

You need people to perform tasks and get work done in the organization. Even with the most
sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM
is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary
package. Within the staffing function, there are four main steps:

1. Development of a staffing plan. This plan allows HRM to see how many people they
should hire based on revenue expectations.
2. Development of policies to encourage multiculturalism at work. Multiculturalism in the
workplace is becoming more and more important, as we have many more people from a
variety of backgrounds in the workforce.
3. Recruitment. This involves finding people to fill the open positions.
 4. Selection. In this stage, people will be interviewed and selected, and a proper
compensation package will be negotiated. This step is followed by training, retention, and
motivation.

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of
the jobs of HRM is to develop the verbiage surrounding these policies. In the development of
policies, HRM, management, and executives are involved in the process. For example, the HRM
professional will likely recognize the need for a policy or a change of policy, seek opinions on
the policy, write the policy, and then communicate that policy to employees. It is key to note here
that HR departments do not and cannot work alone. Everything they do needs to involve all other
departments in the organization. Some examples of workplace policies might be the following:

● Discipline process policy

● Vacation time policy
● Dress code
● Ethics policy
● Internet usage policy

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is
high enough to entice people to work for the organization. Compensation includes anything the
employee receives for his or her work. In addition, HRM professionals need to make sure the pay
is comparable to what other people performing similar jobs are being paid. This involves setting
up pay systems that take into consideration the number of years with the organization, years of
experience, education, and similar aspects. Examples of employee compensation include the
following:

● Pay
● Health benefits
● 401(k) (retirement plans)
● Stock purchase plans
● Vacation time
● Sick leave
● Bonuses
● Tuition reimbursement

Retention

Retention involves keeping and motivating employees to stay with the organization.
Compensation is a major factor in employee retention, but there are other factors as well. Ninety
percent of employees leave a company for the following reasons:

1. Issues around the job they are performing

2. Challenges with their manager
3. Poor fit with organizational culture
4. Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010).
As a result, managers often try to change their compensation packages to keep people from
leaving, when compensation isn’t the reason they are leaving at all.

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are
trained to do the job but also continue to grow and develop new skills in their job. This results in
higher productivity for the organization. Training is also a key component in employee
motivation. Employees who feel they are developing their skills tend to be happier in their jobs,
which results in increased employee retention. Examples of training programs might include the
following:

● Job skills training, such as how to run a particular computer program

● Training on communication
● Team-building activities
● Policy and legal training, such as sexual harassment training and ethics training

Dealing with Laws Affecting Employment

Human resource people must be aware of all the laws that affect the workplace. An HRM
professional might work with some of these laws:

● Discrimination laws
● Health-care requirements
● Compensation requirements such as the minimum wage
● Worker safety laws
● Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes
taking place and then communicate those changes to the entire management organization. Rather
than presenting a chapter focused on HRM laws, we will address these laws in each relevant
chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the
goal of setting federal or state standards to ensure worker safety. Unions and union contracts can
also impact the requirements for worker safety in a workplace. It is up to the human resource
manager to be aware of worker protection requirements and ensure the workplace is meeting
both federal and union standards. Worker protection issues might include the following:

● Chemical hazards
● Heating and ventilation requirements
● Use of “no fragrance” zones
● Protection of private employee information

Communication

Besides these major roles, good communication skills and excellent management skills are key to
successful human resource management as well as general management.

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at
play that may affect the organization. Outside forces, or external factors, are those things the
company has no direct control over; however, they may be things that could positively or
negatively impact human resources. External factors might include the following:

1. Globalization and offshoring

2. Changes to employment law
3. Health-care costs
4. Employee expectations
5. Diversity of the workforce
6. Changing demographics of the workforce
7. A more highly educated workforce
8. Layoffs and downsizing
9. Technology used, such as HR databases
10. Increased use of social networking to distribute information to employees
What are the functions of human resource management?
HR functions can vary depending on industry, businesses size and the types of workers
employed. In most cases, the primary objectives are to acquire and cultivate talent and improve
communication and cooperation among workforce members. Other key human resource
management functions include:

Job analysis
Determining the skills and experience necessary to perform a job well may make it easier to hire
the right people, determine appropriate compensation and create training programs.
Workforce operations
Creating health and safety policies, responding to employee grievances, working with labor
unions, etc., can help support regulatory compliance.
Performance measurement
Evaluating performance is important because it not only fosters employee growth through
constructive feedback, but also serves as a guide for raises, promotions and dismissals.
Incentive programs
Recognizing achievements and rewarding high performers with bonuses and other perks is a
proven way of motivating employees to take ownership of business objectives.
Professional development
From orientation to advanced educational programs, employee training serves to improve
productivity, reduce turnover and minimize supervisory needs.

What are the responsibilities of human resource management?

HR professionals generally are tasked with creating and administering programs that improve
workplace efficiency and employer-employee relationships. Within this broad assignment are
several different, but critical responsibilities, such as:

Staffing
Staffing a business or an individual department requires a number of key steps. Hiring managers
must first determine how many new employees the budget can support, then find and interview
qualified candidates, and finally, make selections and negotiate compensation.
Developing workplace policies
If it’s determined that a new or revised policy is needed, HR professionals typically consult with
executives and other managers, write the supporting documentation and communicate it to
employees. Policies may cover vacations, dress codes, disciplinary actions and other types of
workplace protocol.
Administering pay and benefits
In order to attract and retain talent, compensation must meet industry standards and be
comparable to what other employees in similar roles are being paid. Creating such a fair pay
system requires careful consideration of an employee’s years of service with the business,
experience level, education and skills.
Retaining talent
Compensation isn’t the only thing that retains talented employees. HR managers may need to
proactively address issues with workplace environments, organizational culture and relationships
between employees and supervisors.
Training employees
When employees develop new skills, they tend to be more productive and satisfied with their
job. Some of the training programs typically run by HR departments include team-building
activities, policy and ethics education, and on-the-job instruction and skills, e.g. how to run a
machine or computer program.
Complying with regulations
Laws that affect the workplace – whether they’re related to discrimination, health care or wages
and hours – are constantly evolving. HR professionals are required to keep up with these changes
and notify the rest of the organization in support of compliance.
Maintaining safety
Safety in the workplace means protecting not just the physical health of employees, but also their
private information. To minimize workers’ compensation claims and data breaches, HR must
implement security measures and ensure that all federal, state and union standards are met.

Human Resource Management: Scope

The scope of HRM is very wide:

Personnel aspect-This is concerned with manpower planning, recruitment, selection, placement,

transfer, promotion, training and development, layoff and retrenchment, remuneration,
incentives, productivity etc.
Welfare aspect-It deals with working conditions and amenities such as canteens, cr?ches, rest
and lunch rooms, housing, transport, medical assistance, education, health and safety, recreation
facilities, etc.
Industrial relations aspect-This covers union-management relations, joint consultation,
collective bargaining, grievance and disciplinary procedures, settlement of disputes, etc.
Human resources planning :-
Human resource planning or Human Resource Planning refers to a process by which the
company to identify the number of jobs vacant, whether the company has excess staff or shortage
of staff and to deal with this excess or shortage.

Job analysis design :-

Another important area of Human Resource Management is job analysis. Job analysis gives a
detailed explanation about each and every job in the company.

Recruitment and selection :-

Based on information collected from job analysis the company prepares advertisements and
publishes them in the newspapers. This is recruitment. A number of applications are received
after the advertisement is published, interviews are conducted and the right employee is selected
thus recruitment and selection are yet another important area of Human Resource Management.

Orientation and induction :-

Once the employees have been selected an induction or orientation program is conducted. This is
another important area of Human Resource Management. The employees are informed about the
background of the company, explain about the organizational culture and values and work ethics
and introduce to the other employees.

Training and development :-

Every employee goes under training program which helps him to put up a better performance on
the job. Training program is also conducted for existing staff that have a lot of experience. This
is called refresher training. Training and development is one area where the company spends a
huge amount.

Performance appraisal :-
Once the employee has put in around 1 year of service, performance appraisal is conducted that
is the Human Resource department checks the performance of the employee. Based on these
appraisal future promotions, incentives, increments in salary are decided.
Compensation planning and remuneration :-
There are various rules regarding compensation and other benefits. It is the job of the Human
Resource department to look into remuneration and compensation planning.

Motivation, welfare, health and safety :-

Motivation becomes important to sustain the number of employees in the company. It is the job
of the Human Resource department to look into the different methods of motivation. Apart from
this certain health and safety regulations have to be followed for the benefits of the employees.
This is also handled by the HR department.

Industrial relations :-
Another important area of Human Resource Management is maintaining co-ordinal relations
with the union members. This will help the organization to prevent strikes lockouts and ensure
smooth working in the company.

Evolution of Human Resource Management –

Historical Perspective of Human Resource Management

The term “human resource management” is of recent origin. In its modern connotation, it came
to be used mainly from the 1980s onwards. During ancient times and for a long period in the
medieval era, production of goods was done mainly by skilled artisans and craftsmen. They
themselves owned the tools and instruments, produced articles and sold these in the market.

1. Managing Slaves:

Slaves comprised an important source of manpower in almost all ancient civilisations. They
could be sold and purchased like commodities. Their main purchasers were the wealthy rulers,
landlords, tribal chiefs and effluent businessmen. The purchasers of slaves had a rather complete
control over their slaves.
The masters of the slaves took a variety of arduous work from them such as carrying heavy
loads, rowing ships and boats, construction of buildings and forts, digging canals, cattle-rearing
and tillage of soil. The remuneration or compensation for their efforts comprised mainly food,
shelter and clothing. The slaves were dealt with iron hands.
They were subjected to strict supervision, and non-compliance of the orders of their masters or
supervisors was generally punishable with physical tortures, and occasionally with mutilation of
their limbs and even death sentence for grave offences.

2. Managing Serfs:

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. In many cases, a paltry sum of money was advanced to them in order that they could
remain attached to their masters.
In lieu of these facilities, the serfs and their family members were required to serve their masters.
The work assigned to serfs mainly comprised – tillage of soil, cattle-rearing, domestic work and
similar other activities. Many landlords would also give them a meagre amount as wages,
whether in cash or in kind. Usually, serfs could become free after returning to their masters the
habitat, the piece of land and advances with interest. They could also be transferred to some
other landlord on payment.
Under serfdom, some measure of personal relationship existed between the landlords and the
serfs. Many landlords often tried to solve their genuine grievances and extended some help to
those who were in distress. The feudal lords also occasionally gave some economic inducements
to their serfs in the form of additional supply of food-grains and some money for their increased
productivity and good behaviour.
Although the management of serfs was based on the principle of authoritarianism, the element of
human treatment was often found in their relationship. With the abolition of the feudal system,
serfdom also came to an end. However, some remnants of the past can still be found even today,
especially in rural areas. The bonded labour system in India is comparable to the system of
serfdom prevalent in European countries during the medieval period.
3. Managing Indentured Labour:

The system of indentured labour emerged primarily with the flourishing of mercantilism and
advent of industrial revolution. The discovery of new lands through sea and land routes led to a
substantial increase in the demand of European goods abroad, and at the same time, gave a fillip
to the establishment of industries in the continent.
As a consequence, trade flourished leaps and bounds, and the mercantilists, taking advantage of
the expanding markets, tried to accumulate as much wealth as possible. In their quest for
maximising wealth, the mercantilists would offer attractive inducements to the artisans and
skilled craftsmen for accelerating production of goods in demand. The artisans and craftsmen
responded and they started engaging an increasing number of apprentices and hired labourers to
cope with the demand of the products.

Advent of Industrial Revolution and its Aftermath:

The advent of industrial revolution proved a boon to the mercantilists. The industrial revolution
resulted in a rapid growth of factories, large-scale production, improvement in technology and
reduction in time involved in producing goods. The mercantilists increasingly became owners of
factories and other establishments.
These developments resulted in an unprecedented demand for various categories of labour both
within the country and abroad. Although a major portion of the demand for labour was met by
the large-scale migration of people from rural areas to industrial centres and towns, the supply
proved inadequate to meet the increasing demand for various categories of labour.
In view of insufficiency of normal supply of labour, the employers resorted to the practice of
advancing a lucrative amount of money to the workers and of entering into agreements with
them to the effect that they would work with their employers for a stipulated period of time and
on terms agreed upon, and after completion of the period and complying with agreed terms, they
would be set free.
The European employers engaged indentured labourers on a large scale. During the British rule
in India, the British employers contracted agreements with a large number on indentured
labourers and sent many of them in their colonies abroad such as South Africa, Mauritius and
South-east Asian countries.

Management of Indentured Labour:

Management of indentured labour was substantially different from that of slaves and serfs. So
long as these indentured labourers remained with their employers, they had to abide by the terms
and conditions mutually agreed upon, and also those unilaterally laid down by their employers.
Breaking of the contract was a punishable offence under law. The indentured labourers and also
their free counterparts had to face numerous problems such as those related to low wages,
excessive hours of work, insanitary and hazardous physical working conditions and job
insecurity.
As no relief was forthcoming either from their employers or from the state, they started
organising for exerting concerted pressure on both for improving their conditions. However, their
combinations were declared unlawful by the courts of law and under common law and special
statutes.
Some of the notable features of management of indentured labour comprised – strict supervision,
ensuring compliance with the orders of employer and supervisors, harsh disciplinary action for
misconduct, provision of some amenities at the workplace, some inducements to increase
productivity and adopting steps to redress genuine grievances of workers.
The major responsibility for managing indentured labourers vested in the local managers and
supervisors. The employer generally took broad policy decisions and directed the local managers
to ensure their proper compliance. Thus, the main element in the management of indentured
labourers rested primarily on the principle of dominance and subordination.
The employers were, however, aware that after the completion of the period of contract, the
indentured labourers would be set free. Foreseeing the difficulties which might have to be faced
in procuring new hands with requisite skills, they started giving additional inducements to
competent indentured labourers in the forms of higher emoluments, promise of promotion and
enhanced facilities, so that they could stay on their jobs.
Emergence of Modern Industrial Labour and Improvement of Status:

Even during the periods when slavery and serfdom were rampant, there were various categories
of workers who enjoyed a certain amount of freedom in the relationships with their employers.
They were mainly skilled craftsmen and artisans and experienced apprentices. However, the
composition of free workers materially changed with the spread of industrialisation and
establishment of factories and other kinds of industrial and business establishments.
Industrialisation led to the congregation of a large number of workers at the same establishment
owned by an individual employer or a company. The employers were generally interested in
maximising their profits, and callously disregarded human aspects in managing the affairs of
their enterprises.
The state also remained a mute spectator to the miseries and sufferings of the toiling masses of
workers, primarily because of the widespread prevalence of the doctrine of individualism and
laissez faire. These situations led to further deterioration in the conditions of industrial workers
who had to face numerous problems in their employment.
Notable among these problems were low wages, excessive hours of work, hazardous and
strenuous physical working conditions, instability of employment, and arbitrary treatment by
supervisors and managers.
The industrial workers, sooner or later, came to realise that individually they might be
dispensable to the employer, but collectively, they were indispensable as the running of the
enterprise was in the interests of both. This realisation induced them to organise and pressurise
the employers and the state to take positive steps to improve their conditions.
However, these early combinations received severe blows from the courts of law either under
common law or under special statutes such as Combination Acts, 1799 and 1800 of England.
The conditions, however, changed during the course of time. Certain notable developments
relevant to the management of human resources included spread of democratic ideals and
principles, growth of socialist ideas, emergence of the concept of welfare state, strengthening of
workers’ organisations, efforts of social reformers, and changes in the size and composition of
the labour force.
These developments led to substantial changes in the attitude of the employers towards workers
and the role of the state in regard to labour matters.
The state started enacting labour laws with a view to ameliorating physical working conditions at
the place of work, laying down minimum standards in specified areas of terms and conditions of
employment, making available to workers certain welfare amenities, adopting social security
measures against certain contingencies such as disablement and death resulting from
work-injuries, sickness and maternity and establishing workers’ right to form trade union and
bargain collectively with the employer.
The employers increasingly came to realise that their prerogatives of “hiring and firing” workers
at their will and unilaterally laying down the terms and conditions of employment had been
enormously encroached upon by union pressures and state intervention, and it would be difficult
for them to manage their enterprises if they did not give due attention to human aspects in
dealing with their workers.
These conditions have come to exist even today, but in a greatly modified form. Some of the
more notable developments relating to human resources in modern perspective comprise – (i)
substantial change in the composition of labour force with the entry of a large number of
educated and highly skilled workers with specialisation, (ii) greatly improved status of all
categories of employees, (iii) extensive state intervention in the domain of human resources, (iv)
development of liberal attitude of employers towards employees with major attention on human
aspects, (v) enhancement of strength and status of unions, and (vi) growing international
deliberations and exchanges in human resources matters.

Human Resource Management Challenges

1. Change Management
Since this is generally not a focal point for HR professional training and development, change
management represents a particular challenge for personnel management. The WFPMA finds
that “This may also be the reason why it is cited as the foremost issue as HR continues to attempt
to help businesses move forward. An intensified focus on training may be needed to develop
added competencies to deal with change management.”
2. Leadership Development
As the second of the biggest challenges for human resource management, leadership
development needs to be a critical strategic initiative. HR professionals are faced with being
expected to provide the essential structures, processes, tools, and points of view to make the best
selection and develop the future leaders of the organization. The WFPMA reports that “Across
the globe leadership development has been identified as a critical strategic initiative in ensuring
that the right employees are retained, that the culture of the organization supports performance
from within to gain market position, and that managers are equipped to take on leadership roles
of the future so that the organization is viable in the long term.”

3. HR Effectiveness Measurement
How can improvement happen without the right tools to measure HR effectiveness? As with
many other areas of business, this profession also needs to be able to measure results in terms of
transaction management, as well as in terms of the positive influence on business. “Utilizing
metrics to determine effectiveness is the beginning of a shift from perceiving HR’s role as purely
an administrative function to viewing the HR team as a true strategic partner within the
organization,” the WFPMA says. “In fact, the next section reports that survey participants
believe a critical future issue for HR will be organizational effectiveness – again supporting HR’s
critical role as a strategic partner to management.”
This world federation also notes that “Where HR departments have traditionally focused on
measuring their own effectiveness, there is an evolving recognition that they can provide
organizational value by measuring the effectiveness of the entire business organization. The shift
is significant as it represents movement from simply counting the numbers hired to determining
the ROI of collective and individual hires on a long-term basis. Going beyond measuring
turnover, this new approach considers ‘bad’ turnover and ‘good’ turnover along with the overall
cost of replacement hires.”

1. Globalization:
Many companies are seeking business opportunities in global markets to grow and prosper as
domestic markets are shrinking. Globalization is the trend towards opening up foreign markets to
international business and investment. The impact of globalization on business and HRM is
enormous.

Impact of Globalization on HRM:

i. HR managers have to balance a complicated set of issues related to different geographies,

cultures, employment laws and business practices.:

ii. HR managers find it difficult to gauge the knowledge and skills of foreign worker and how to
train them.

iii. The different languages and cultures of foreigners make things more complicated.

iv. It is a real challenge to relocate managers and workers.

v. Training managers on foreign cultures and procedures before they take up foreign assignments
is time-consuming.

vi. There must be adjustment of compensation plans to ensure equity among the employees who
are posted to different parts of the world.

vii. The most different task is retaining the employees in the face of culture shock faced by the
employees and their families.

Challenge # 2. Ever Changing Technology:

The effect of advancements in information is so dramatic that organizations are changing the
way they do business. Use of internet to do business is so pervasive in both large and small
organizations that e-commerce is rapidly becoming a challenge.

As computer-mediated work style is resulting in ‘virtual’ office in which people can work from
home or any outstation spots, the implication for HRM are mind-boggling.
Impact of Technology on HRM:

i. Advanced technology tends to reduce the number of jobs which require less skill and to
increase jobs requiring high skills.

ii. The shift from ‘touch labour’ to ‘knowledge workers’ has resulted in retraining of employees
on higher responsibilities.

iii. Knowledge based training has become very important.

iv. HRIS has become a potent weapon to lower administrative costs increase productivity, speed
up response times and improve decision making and customer service.

v. Information technology has resulted in automating routine activities, alleviating administrative

burdens, reducing cost and improving productivity in the HR department.

vi. As HR managers are able to access the employee records themselves, delay and wastage of
stationery are reduced.

vii. Apart from the routine activities software’s are being used to recruit, screen and pretest
applications online.

viii. Setting up of goals and measuring of performance are also done through online.

ix. As routine HR activities are done quickly and efficiently through computerization, HR
managers can concentrate more effectively on the firm’s strategic direction such as forecasting
personnel needs, planning for career and promotion and evaluating impact of firm’s policies.

x. HR managers, by sharing information online with production department, are able to make
production managers to come up with better production practices and cost control solutions.

Challenge # 3. Change Management:

The major forces driving changes in organizations as well as HRM are globalization and
technology. In the present business scenario business success mostly depends on how changes
are managed. Companies are successful as they develop a culture that keeps moving all the time.
In highly competitive business environment, change management is the core competency of
organizations.

Changes could be reactive, proactive or both. Reactive change is one where change occurs after
external forces have already affected performance. In the case of proactive change, change is
initiated to take advantage of environmental opportunities. The main thrust of change
management program is to involve employees in establishing continuous innovation and
excellent customer service.

Role of HR in Change Management:

i. Most of the companies report at least one change initiative occurring in the HRM.

ii. HR managers have to concentrate on responsibilities, job assignments and work process
whenever change occurs.

iii. HR managers play a vital role in overcoming resistance to change through effective
communication and counseling.

iv. They have higher responsibilities to envision the future, communicate the vision to
employees, set clear expectations for performance and develop capability to execute by
reorganizing people and other resources.

Challenge # 4. Managing Human Capital:

Human capital is the knowledge, skill and capabilities of individuals that have economic value to
the organization. As human capital is intangible and elusive, it cannot be managed the way jobs,
products or technologies are managed. This is because human capital is owned by the employees
themselves and not by organizations.
Managing human capital is highly crucial because if valued employees leave an organization,
they take their human capital with them and any investment made in training and development is
lost. Hence, success increasingly depends on an organization’s ability to retain and manage
human capital.

Role of HRM in Retaining and Managing Human Capital:

Managers must continue to develop superior knowledge, skills and experience within their
workforce to build human capital.

i. Staffing programs should focus on identifying, recruiting and hiring the best and brightest
talent available.

ii. There must be effective training skill enhancement and opportunities for development on the
job.

iii. Managers must provide development assignments and ensure their job duties and
requirements are flexible enough to allow for growth and learning as highly valued intelligence
tends to be associated with competences and capabilities learned from experience.

iv. Talent should not be left unused. There must be efforts to empower employees and encourage
their participation to fully utilize the available human capital.

v. In many companies, managers are evaluated on their progress towards meeting development
goals that focus on skill development and gaining new competencies and capabilities. In many
cases pay is attached to additional knowledge or skill acquired.

vi. HR programmes and assignments are the means through which knowledge is transferred
among employees.

vii. HR managers and line managers each play an important role in creating organization that
understands the value of knowledge.
viii. Documenting the skills and capabilities available to the organization, and

ix. Identifying the ways of utilizing the knowledge to benefit the firm.

Challenge # 5. Responding to Market Forces:

In the present scenario of business competition is inevitable. Managers are required to take care
of the customers’ needs of quality, innovation, variety and responsiveness. Total quality
management (including six sigma) and process reengineering are two important approaches to
respond to customers.

I. TQM, Six Sigma and HRM:

Total Quality Management (TQM) is a set of principles and practices which include
understanding of customer needs and striving for continuous improvement from the start. Many
TQM programmes, initially thought to be a cure-all for every problem, failed to respond to
customer needs and to improve quality.

This was attributed to little changes in organizational philosophies and HR programmes. Later,
many companies start adopting a more systematic approach to quality known as Six Sigma.

Six Sigma is a statistical process used to translate customer needs into a set of optimal tasks that
are performed in concert with one another. Six Sigma includes many major changes in
management philosophy and HR programs. Six Sigma process is able to find out the mistakes
before they happen. In a true Six Sigma environment variations from standard is only 3.4 defects
per million.

HR and Six Sigma:

i. The importance of HR to Six Sigma begins with the formation of teams and extends to
training, performance management, communication, culture and rewards.

ii. Through Six Sigma training individuals progress from ‘green belt’ to eventually ‘black belt’
status.
iii. In some companies HR positions are reserved for black-belt certified professionals.

iv. In six sigma process, the stress is on motivation, change in corporate culture and employee
education.

v. HR programs are essential to help balance to opposing process viz. the need for order and
control and the need for growth and creativity.

II. HR and Reengineering:

Reengineering is fundamental rethinking and radical redesign of business processes to achieve

dramatic improvements in cost, quality service and speed. In reengineering managers start over
from scratch in rethinking.

a. How work should be done?

b. How technology and people should interact? and

c. How the organization be structured?

In the above decisions in reengineering, HR issues play an important role:

i. Managers create an environment for change.

ii. Reengineering efforts depend on effective leadership and communication processes. It

requires the administrative systems reviewed and modified.

iii. All the essential components of HRM viz., selection, job description, training, career
planning, performance appraisal, compensation and industrial relations require changes to
complement and support reengineering efforts.

Challenge # 6. Containing Costs:

Managers are increasingly under pressure to lower cost and improve productivity to maximize
efficiency. Similar to other functional departments, HR department also is required to show
financial results. HR department is in a dilemma to contain costs related to people.

i. Labour costs are one of the larger expenditure of any organization, particularly, in service-and
knowledge-intensive firms.

ii. Healthcare costs pose a much bigger burden to the firms.

To contain operational costs, firms are resorting to many activities such as downsizing,
outsourcing, offshoring and employee leasing, which all have a big impact on HR policies and
practices.

a. Downsizing or Rightsizing:

It is the planned elimination of jobs. It is also called ‘smart cost reductions’. Instead of
terminating employees some firms resort to early retirement, voluntary separation programs and
sabbaticals for continuing education.

Downsizing is not a short-term answer. Now, it is being increasingly used to adjust to changes in
technology, globalization and the firm’s business direction. However, while some firms improve
efficiency and lower costs, many others fail to reap any benefits by downsizing.

Downsizing, instead of reducing costs, may backfire through the following hidden costs:

i. Severance and rehiring costs.

ii. Accumulated vacation and sick-day payments.

iii. Lumpsumpension benefits.

iv. Loss of trust in the management resulting in reduced business.

v. Unavailability of skilled workers when the firm comes back to form.

vi. Potential lawsuits from terminated workers.

vii. Reduced productivity as the remaining workers are likely to be demotivated.

It is hard to get dedicated and productive workers when the company is known for terminating
employees whenever there is a problem. Downsizing signals that employees are expendable.
There are companies which consider employees as assets/intellectual capital, make special
efforts to reassign and retrain employees to new positions when their jobs are eliminated.

b. Outsourcing:

It means hiring someone outside the company to perform tasks that could be done internally.

Nowadays, it is common to find hiring of:

i. Accounting firms to take care of financial services of firms,

ii. Advertising agencies to handle product/service promotions,

iii. Software companies to develop data processing systems, and

iv. Law-firms to handle legal issues.

In many companies, maintenance, security, catering and payroll are being outsourced to increase
the organization’s flexibility and lower its overhead costs. Outsourcing is gaining momentum as
the executives feel that they could concentrate on their core activities rather than wasting their
time and energy on peripheral activities. Increasingly outsourcing is changing the way HR
departments operate. But, whether outsourcing has resulted in reduced cost or not is a moot
question to answer.

c. Offshoring:
It is almost similar to outsourcing, the main difference being that the jobs are done by people of
other countries. It is also called ‘global sourcing’. Cost reduction is the overwhelming motivator
of off shoring. Companies in developed countries are able to save a substantial amount in
offshoring jobs to developing countries where the highly educated workers can perform the same
as workers of developed countries.

But there are problems to face such as finding the right foreign vendors, productivity loss during
transition, domestic lay off costs, language inadequacy, offshore countries’ regulations and
political/economic instability.

HR managers will be able to help the management in offshoring by addressing issues such as
skill and language requirements, labour costs, alternative talent pools, workforce training,
retraining and change management.

d. Employee Leasing:

It is the process of terminating employees who are then hired by a leasing company and
contracting with the leasing company to lease back the employees. Generally, smaller companies
opt for employee leasing. The leasing company takes over management of smaller company’s
HR functions and becomes a co-employer to its employees.

The value of employee leasing lies in the fact that an organization can essentially maintain its
working relationships with its employees and shift some of the costs to the leasing firm for a fee.
The impact of employees leasing on HRM department is that it paves the way for getting rid of
the department.

Downsizing, outsourcing, off shoring and leasing may appear to reduce costs. But in reality these
activities may lower the productivity because of unwillingness to work, demotivation and hostile
work environment.
Lower productivity leads to higher inputs and lower outputs. Hence, HR specialists suggest that
increasing investments in employees (raising labour costs) many result in greater returns due to
increased productivity.

Challenge # 7. Demographic and Employee Concerns:

HR managers need to be concerned about the changes taking place among the workforce and
their expectations in addition to the competitive changes. Demographic changes and cultural
changes cause considerable impact on HRM.

Demographic Changes:

Diversity (employee back­ground), age, gender and education levels are the major components in
demographic changes.

i. Diversity:

Consequent to globalization the workforce in developed as well as developing countries have,

increasingly become heterogeneous – people from various races, regions, language, culture, IQ
etc. The impact of heterogeneity of workforce on HRM is mind boggling. HR managers go in for
special training to manage diversity in workforce.

ii. Age Distribution:

Imbalance in the age distribution of workforce has significant implications:

a. When many employees near retirement managers are concerned that the expertise of older
employees is likely to be lost too rapidly.

b. Some companies try to retain the retiring employees. Good health and longer life expectancies
play the major role in extended work lives. Some retirees take up jobs for economic reasons.
c. Recruiting older employee may result in higher healthcare costs. But as older workers have
fewer dependents there will be other cost savings.

d. When older workers are reemployed there is savings is training costs, transition costs and
recruitment costs.

e. If the age variation is wide, the problems normally encountered with ‘generation gap’ will
always exist.

It is left to the ingenuity of the managers to develop career path for various age groups to smooth
out gaps in the numbers and kinds of employees.

iii. Gender Distribution:

Of late, the workforce in developed as well as developing economies has considerably more
women workers in all levels. There are many mothers with school-going children continuing in
various capacities. One of the reasons for more women taking employment is that their
educational level is increasing relative to men.

a. Organizations which want to attract the talent of women workforce are taking measures to
ensure that women are treated on par with men is terms of advancement opportunities and
compensation.

b. Organizations interested in engaging women talents must be prepared for parental leaves, part
time employment, flexible work schedule, job sharing, telecommuting and child/elder care
assistance.

c. Though no big difference has been observed between women and men workers, managements
have to take a little extra care to manage women-related problems such as sexual harassment,
maltreatment in men-dominated groups, etc.

iv. Rising Level of Education:

The educational level of workers in the developing countries has increased considerably over the
years. There are industries like IT which require higher levels of education. The earnings from
education in the happening industries are quite attractive.

Inspite of higher educational level, industries are facing many problems:

a. While the complexity of jobs is increasing significantly, the skill gap is huge and widening.

b. A majority of degree-holders have only limited reading and writing abilities.

c. Organizations have to spend huge amount on basic skills training of the employees.

d. Companies are experiencing difficulties to find trained and certified workers such as fitters,
electricians, plumbers, mechanics, etc.

e. Organizations have to offer higher compensations package to attract talented candidates.

f. HR personnel have the onerous duty of identifying the required- talents among the educated
applicants.

Cultural Changes:

The attitudes, beliefs, values and customs of people are an integral part of any culture. Culture
influences the behavior of people towards the job and environment with respect to work
assignments, leadership style, performance appraisal, compensation and reward system. As in the
case of other components of environment, culture is also undergoing continual change affecting
HR policies and practices.

i. Employee Rights:

Due to continued collective bargaining employees have acquired many rights such as right to
equal employment opportunity, union representation, a safe and healthy work environment
pension plans, social security plans, etc. Employees have the right to sue the organizations in the
event of violation of any rules.

ii. Concern for Privacy:

As employees are more concerned about leaking of their personal details, many companies have
developed comprehensive privacy policies. Some companies lock up employee files, conduct
background checks on employees who have access to others’ files, educate employees in fraud
prevention and control with outside firms specializing is identify theft. HR department has the
greatest responsibility is protecting privacy of employees.

iii. Changing Attitude towards Work:

a. Today employees at the higher end are not much concerned about success in terms of financial
benefits. They aspire for more than just monetary gains.

b. Personal fulfillment, self-expression and balance of life between work and family form the key
factors of job attitudes.

c. People tend to be focused on finding interesting jobs and multiple careers rather than just
continuing in well-paid jobs.

d. Only for a few people the priority is moving up the ladder.

e. People look out for meaningful but less complicated ways of living.

As the lifestyles and job attitudes of employees are changing, HR managers are required to
change the ways of motivation and managing people. HRM has become more complex than it
was when employees were concerned primarily with economic gains.

iv. Balancing Work and Family:

There is economic as well psychological blending between work and family. Organizations are
required to find out options to manage ‘two-wage-earner’ and ‘single-parent family’ situations.
‘Family-friendly’ firms go in for flexi time, daycare, part-time work, job sharing, maternity
leave, parental leave, telecommuting, and executive transfer to desired locations, spouse
involvement is career planning, assistance to family problems through counseling etc.

To attract and retain talent, HR managers have to play many an unconventional role in
‘family-friendly’ organizations which are likely to be challenging in the face of striking a
balance between employee satisfaction and employee productivity.

Challenge # 8. Managing Diversity:

Managing diversity means being adequately aware of characteristics common to employees and
at the same time managing these employees as individuals. The most important aspect of
diversity management is valuing diversity in the work place followed by developing appropriate
culture, arranging needed opportunity and providing effective leadership.

Developing Appropriate Culture:

i. Fostering mutual respect and a sense of belonging,

ii. Accepting differences,

iii. Providing diversity-training programs,

iv. Maintaining equity in performance expectations, pay and rewards, and

v. Promoting multicultural employees.

Arranging Needed Opportunity:

i. To develop new skills,

ii. To help climb the ladder to reach top positions,

iii. To encourage differently-abled and minority people, and

iv. To motivate affirmative action.

Providing Effective Leadership:

i. Taking all employees seriously,

ii. Recognizing the capabilities of all employees,

iii. Supporting all employees without any discrimination,

iv. Respecting the cultural beliefs and need of all employees, and

v. Accepting people who speak different languages.

Organization of Human Resources Department

Human resources organization chart: large business

Number of employees: 1,000+

A large organization would maintain most of the roles in a midsized business but would likely
alter the structure and assign fewer functions to each HR employee.

Additional HR roles in a larger organization may include:

● Chief human resources officer (CHRO),

● Chief diversity officer
● HR business partner (HRBP)
● Human resource information specialist (HRIS)
● Training/L&D director
● Trainer
1. Recruitment:
Recruitment is a vital task for HR department because it determines what kind of people will
work for the company – whether they have the right knowledge and skills, and whether they are
suitable for the position or not. To accomplish this mission, they HR department need to develop
and execute quality recruitment strategies to ensure that recruitment meets all affirmative action
commitments.

2. Compensation and Benefits:

HR manager needs to establish strategic compensation plans, ensuring wages and reward
programs are administrated equally throughout the workforce. They need to provide employees
with benefit options, including health insurance, retirement planning, life insurance, etc. What’s
more, they are responsible for authorizing salary changes, position changing an election.

3. Employee Relations
HR department is also responsible for investigating and solving employee complaints, conflicts
and concerns. Many possible issues might arise in a company. For example, an employee is not
satisfied with his performance assessment result and seeks for revision. If this kind of
circumstance happens, the HR department needs to research on this issue, and solve the problem
by negotiating with his superior.

4. Training and Development

Through effective training, employees could enhance their knowledge, skills and work abilities,
so that they can improve their job performance. Human resource department conduct needs
analysis to decide what training is necessary to improve performance and productivity.

5. Workforce Safety
HR department needs to ensure every staff working in a safe environment. It’s their obligation to
research and develop safety policies for the company that is in compliance with state and federal
laws and regulation. They need to identify unsafe conditions and make clear notice on potential
dangerous matters such as dangerous equipment, chemical drugs, radioactive substances, etc.