Human Resource Management

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Human Resource Management

Human Resource Management (HRM) is the term used to describe formal systems devised for the management of people within an organization. The responsibilities of a human resource manager fall into three major areas: staffing, employee compensation and benefits, and defining/designing work. Essentially, the purpose of HRM is to maximize the productivity of an organization by optimizing the effectiveness of its employees. This mandate is unlikely to change in any fundamental way, despite the ever-increasing pace of change in the business world. As Edward L. Gubman observed in the Journal of Business Strategy, "the basic mission of human resources will always be to acquire, develop, and retain talent; align the workforce with the business; and be an excellent contributor to the business. Those three challenges will never change."

Until fairly recently, an organization's human resources department was often consigned to lower rungs of the corporate hierarchy, despite the fact that its mandate is to replenish and nourish what is often citedlegitimatelyas an organization's greatest resource, it's work force. But in recent years recognition of the importance of human resources management to a company's overall health has grown dramatically. This recognition of the importance of HRM extends to small businesses, for while they do not generally have the same volume of human resources requirements as do larger organizations, they too face personnel management issues that can have a decisive impact on business health. As Irving Burstiner commented in The Small Business Handbook, "Hiring the right peopleand training them wellcan often mean the difference between scratching out the barest of livelihoods and steady business growth. Personnel problems do not discriminate between small and big business. You find them in all businesses, regardless of size."


Business consultants note that modern human resource management is guided by several overriding principles. Perhaps the paramount principle is a simple recognition that human resources are the most important assets of an organization; a business cannot be successful without effectively managing this resource. Another important principle, articulated by Michael Armstrong in his book A Handbook of Human Resource Management, is that business success "is most likely to be achieved if the personnel policies and procedures of the enterprise are closely linked with, and make a major contribution to, the achievement of corporate objectives and strategic plans." A third guiding principle, similar in scope, holds that it is the HR's responsibility to find, secure, guide, and develop employees whose talents and desires are compatible with the operating needs and future goals of the company. Other HRM factors that shape corporate culturewhether by encouraging integration and cooperation across the company, instituting quantitative performance measurements, or taking some other actionare also commonly cited as key components in business success. HRM, summarized Armstrong, "is a strategic approach to the acquisition, motivation, development and management of the organization's human resources. It is devoted to shaping an appropriate corporate culture, and introducing programs which reflect and support the core values of the enterprise and ensure its success."


Human resource department responsibilities can be subdivided into three areas: individual, organizational, and career. Individual management entails helping employees identify their strengths and weaknesses; correct their shortcomings; and make their best contribution to the enterprise. These duties are carried out through a variety of activities such as performance reviews, training, and testing. Organizational development, meanwhile, focuses on fostering a successful system that maximizes human (and other) resources as part of larger business strategies. This important duty also includes the creation and maintenance of a change program, which allows the organization to respond to evolving outside and internal influences. Finally, there is the responsibility of managing career development. This entails matching individuals with the most suitable jobs and career paths within the organization.

Human resource management functions are ideally positioned near the theoretic center of the organization, with access to all areas of the business. Since the HRM department or manager is charged with managing the productivity and development of workers at all levels, human resource personnel should have access toand the support ofkey decision makers. In addition, the HRM department should be situated in such a way that it is able to communicate effectively with all areas of the company.

HRM structures vary widely from business to business, shaped by the type, size, and governing philosophies of the organization that they serve. But most organizations organize HRM functions around the clusters of people to be helpedthey conduct recruiting, administrative, and other duties in a central location. Different employee development groups for each department are necessary to train and develop employees in specialized areas, such as sales, engineering, marketing, or executive education. In contrast, some HRM departments are completely independent and are organized purely by function. The same training department, for example, serves all divisions of the organization.

In recent years, however, observers have cited a decided trend toward fundamental reassessments of human resources structures and positions. "A cascade of changing business conditions, changing organizational structures, and changing leadership has been forcing human resource departments to alter their perspectives on their role and function almost overnight," wrote John Johnston in Business Quarterly. "Previously, companies structured themselves on a centralized and compartmentalized basishead office, marketing, manufacturing, shipping, etc. They now seek to decentralize and to integrate their operations, developing cross-functional teams. Today, senior management expects HR to move beyond its traditional, compartmentalized 'bunker' approach to a more integrated, decentralized support function." Given this change in expectations, Johnston noted that "an increasingly common trend in human resources is to decentralize the HR function and make it accountable to specific line management. This increases the likelihood that HR is viewed and included as an integral part of the business process, similar to its marketing, finance, and operations counterparts. However, HR will retain a centralized functional relationship in areas where specialized expertise is truly required," such as compensation and recruitment responsibilities.


Human resource management is concerned with the development of both individuals and the organization in which they operate. HRM, then, is engaged not only in securing and developing the talents of individual workers, but also in implementing programs that enhance communication and cooperation between those individual workers in order to nurture organizational development.

The primary responsibilities associated with human resource management include: job analysis and staffing, organization and utilization of work force, measurement and appraisal of work force performance, implementation of reward systems for employees, professional development of workers, and maintenance of work force.

Job analysis consists of determiningoften with the help of other company areasthe nature and responsibilities of various employment positions. This can encompass determination of the skills and experiences necessary to adequately perform in a position, identification of job and industry trends, and anticipation of future employment levels and skill requirements. "Job analysis is the cornerstone of HRM practice because it provides valid information about jobs that is used to hire and promote people, establish wages, determine training needs, and make other important HRM decisions," stated Thomas S. Bateman and Carl P. Zeithaml in Management: Function and Strategy. Staffing, meanwhile, is the actual process of managing the flow of personnel into, within (through transfers and promotions), and out of an organization. Once the recruiting part of the staffing process has been completed, selection is accomplished through job postings, interviews, reference checks, testing, and other tools.

Organization, utilization, and maintenance of a company's work force is another key function of HRM. This involves designing an organizational framework that makes maximum use of an enterprise's human resources and establishing systems of communication that help the organization operate in a unified manner. Other responsibilities in this area include safety and health and worker-management relations. Human resource maintenance activities related to safety and health usually entail compliance with federal laws that protect employees from hazards in the workplace. These regulations are handed down from several federal agencies, including the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA), and various state agencies, which implement laws in the realms of worker's compensation, employee protection, and other areas. Maintenance tasks related to worker-management relations primarily entail: working with labor unions; handling grievances related to misconduct, such as theft or sexual harassment; and devising communication systems to foster cooperation and a shared sense of mission among employees.

Performance appraisal is the practice of assessing employee job performance and providing feedback to those employees about both positive and negative aspects of their performance. Performance measurements are very important both for the organization and the individual, for they are the primary data used in determining salary increases, promotions, and, in the case of workers who perform unsatisfactorily, dismissal.

Reward systems are typically managed by HR areas as well. This aspect of human resource management is very important, for it is the mechanism by which organizations provide their workers with rewards for past achievements and incentives for high performance in the future. It is also the mechanism by which organizations address problems within their work force, through institution of disciplinary measures. Aligning the work force with company goals, stated Gubman, "requires offering workers an employment relationship that motivates them to take ownership of the business plan."

Employee development and training is another vital responsibility of HR personnel. HR is responsible for researching an organization's training needs, and for initiating and evaluating employee development programs designed to address those needs. These training programs can range from orientation programs, which are designed to acclimate new hires to the company, to ambitious education programs intended to familiarize workers with a new software system.

"After getting the right talent into the organization," wrote Gubman, "the second traditional challenge to human resources is to align the workforce with the businessto constantly build the capacity of the workforce to execute the business plan." This is done through performance appraisals, training, and other activities. In the realm of performance appraisal, HRM professionals must devise uniform appraisal standards, develop review techniques, train managers to administer the appraisals, and then evaluate and follow up on the effectiveness of performance reviews. They must also tie the appraisal process into compensation and incentive strategies, and work to ensure that federal regulations are observed.

Responsibilities associated with training and development activities, meanwhile, include the determination, design, execution, and analysis of educational programs. The HRM professional should be aware of the fundamentals of learning and motivation, and must carefully design and monitor training and development programs that benefit the overall organization as well as the individual. The importance of this aspect of a business's operation can hardly be overstated. As Roberts, Seldon, and Roberts indicated in Human Resources Management, "the quality of employees and their development through training and education are major factors in determining long-term profitability of a small business. Research has shown specific benefits that a small business receives from training and developing its workers, including: increased productivity; reduced employee turnover; increased efficiency resulting in financial gains; [and] decreased need for supervision."

Meaningful contributions to business processes are increasingly recognized as within the purview of active human resource management practices. Of course, human resource managers have always contributed to overall business processes in certain respectsby disseminating guidelines for and monitoring employee behavior, for instance, or ensuring that the organization is obeying worker-related regulatory guidelines. Now, increasing numbers of businesses are incorporating human resource managers into other business processes as well. In the past, human resource managers were cast in a support role in which their thoughts on cost/benefit justifications and other operational aspects of the business were rarely solicited. But as Johnston noted, the changing character of business structures and the marketplace are making it increasingly necessary for business owners and executives to pay greater attention to the human resource aspects of operation: "Tasks that were once neatly slotted into well-defined and narrow job descriptions have given way to broad job descriptions or role definitions. In some cases, completely new work relationships have developed; telecommuting, permanent part-time roles and outsourcing major non-strategic functions are becoming more frequent." All of these changes, which human resource managers are heavily involved in, are important factors in shaping business performance.


In recent years, several business trends have had a significant impact on the broad field of HRM. Chief among them was new technologies. These new technologies, particularly in the areas of electronic communication and information dissemination and retrieval, have dramatically altered the business landscape. Satellite communications, computers and networking systems, fax machines, and other devices have all facilitated change in the ways in which businesses interact with each other and their workers. Telecommuting, for instance, has become a very popular option for many workers, and HRM professionals have had to develop new guidelines for this emerging subset of employees.

Changes in organizational structure have also influenced the changing face of human resource management. Continued erosion in manufacturing industries in the United States and other nations, coupled with the rise in service industries in those countries, have changed the workplace, as has the decline in union representation in many industries (these two trends, in fact, are commonly viewed as interrelated). In addition, organizational philosophies have undergone change. Many companies have scrapped or adjusted their traditional, hierarchical organizational structures in favor of flatter management structures. HRM experts note that this shift in responsibility brought with it a need to reassess job descriptions, appraisal systems, and other elements of personnel management.

A third change factor has been accelerating market globalization. This phenomenon has served to increase competition for both customers and jobs. The latter development enabled some businesses to demand higher performances from their employees while holding the line on compensation. Other factors that have changed the nature of HRM in recent years include new management and operational theories like Total Quality Management (TQM), rapidly changing demographics, and changes in health insurance and federal and state employment legislation.


A small business's human resource management needs are not of the same size or complexity of those of a large firm. Nonetheless, even a business that carries only two or three employees faces important personnel management issues. Indeed, the stakes are very high in the world of small business when it comes to employee recruitment and management. No business wants an employee who is lazy or incompetent or dishonest. But a small business with a work force of half a dozen people will be hurt far more by such an employee than will a company with a work force that numbers in the hundreds (or thousands). Nonetheless, "most small business employers have no formal training in how to make hiring decisions," noted Jill A. Rossiter in Human Resources: Mastering Your Small Business. "Most have no real sense of the time it takes nor the costs involved. All they know is that they need help in the form of a 'good' sales manager, a 'good' secretary, a 'good' welder, and so on. And they know they need someone they can work with, who is willing to put in the time to learn the business and do the job. It sounds simple, but it isn't."

Before hiring a new employee, the small business owner should weigh several considerations. The first step the small business owner should take when pondering an expansion of employee payroll is to honestly assess the status of the organization itself. Are current employees being utilized appropriately? Are current production methods effective? Can the needs of the business be met through an arrangement with an outside contractor or some other means? Are you, as the owner, spending your time appropriately? As Rossiter noted, "any personnel change should be considered an opportunity for rethinking your organizational structure."

Small businesses also need to match the talents of prospective employees with the company's needs. Efforts to manage this can be accomplished in a much more effective fashion if the small business owner devotes energy to defining the job and actively taking part in the recruitment process. But the human resource management task does not end with the creation of a detailed job description and the selection of a suitable employee. Indeed, the hiring process marks the beginning of HRM for the small business owner.

Small business consultants strongly urge even the most modest of business enterprises to implement and document policies regarding human resource issues. "Few small enterprises can afford even a fledgling personnel department during the first few years of business operation," acknowledged Burstiner. "Nevertheless, a large mass of personnel forms and data generally accumulates rather rapidly from the very beginning. To hold problems to a minimum, specific personnel policies should be established as early as possible. These become useful guides in all areas: recruitment and selection, compensation plan and employee benefits, training, promotions and terminations, and the like." Depending on the nature of the business enterprise (and the owner's own comfort zone), the owner can even involve his employees in this endeavor. In any case, a carefully considered employee handbook or personnel manual can be an invaluable tool in ensuring that the small business owner and his or her employees are on the same page. Moreover, a written record can lend a small business some protection in the event that its management or operating procedures are questioned in the legal arena.

Some small business owners also need to consider training and other development needs in managing their enterprise's employees. The need for such educational supplements can range dramatically. A bakery owner, for instance, may not need to devote much of his resources to employee training, but a firm that provides electrical wiring services to commercial clients may need to implement a system of continuing education for its workers in order to remain viable.

Finally, the small business owner needs to establish and maintain a productive working atmosphere for his or her work force. Employees are far more likely to be productive assets to your company if they feel that they are treated fairly. The small business owner who clearly communicates personal expectations and company goals, provides adequate compensation, offers meaningful opportunities for career advancement, anticipates work force training and developmental needs, and provides meaningful feedback to his or her employees is far more likely to be successful than the owner who is neglectful in any of these areas.

see also Employee Benefits; Employee Compensation; Employee Manual


Armstrong, Michael. A Handbook of Human Resource Management Practice. Kogan Page Limited, 1999.

Burstiner, Irving. The Small Business Handbook. Prentice Hall, 1988.

Green, Paul C. Building Robust Competencies: Linking Human Resource Systems to Organizational Strategies. Jossey-Bass, 1999.

Gubman, Edward L. "The Gauntlet is Down." Journal of Business Strategy. November-December 1996.

Phillip, Harris. Managing the Knowledge Culture. Human Resource Development Press, March 2005.

Johnston, John. "Time to Rebuild Human Resources." Business Quarterly. Winter 1996.

Mathis, Robert L., and John H. Jackson. Human Resource Management. Thomson South-Western, 2005.

Rossiter, Jill A. Human Resources: Mastering Your Small Business. Upstart Publishing, 1996.

Solomon, Charlene Marmer. "Working Smarter: How HR Can Help." Personnel Journal. June 1993.

Ulrich, Dave. Delivering Results: A New Mandate for HR Professionals. Harvard Business School Press, 1998.

U.S. Small Business Administration. Roberts, Gary, Gary Seldon, and Carlotta Roberts. "Human Resources Management." n.d.

                              Hillstrom, Northern Lights

                              #x00A0;   updated by Magee, ECDI

Human Resource Information Systems

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Human Resource Information Systems


Human Resource Information Systems (HRIS) have become one of the most important tools for many businesses. Even the small, twenty-person office needs to realize the benefits of using HRIS to be more efficient. Many firms do not realize how much time and money they are wasting on manual human resource management (HRM) tasks until they sit down and inventory their time. HRIS is advancing to become its own information technology (IT) field. It allows companies to cut costs and offer more information to employees in a faster and more efficient way. Especially in difficult economic times, it is critical for companies to become more efficient in every sector of their business; human resources (HR) is no exception.

In his 2008 book, The New Human Capital Strategy, Bradley Hall defines human resources management as watching over and growing human capital, one of the greatest aids businesses have in gaining competitive advantage. The modern human resource concept is based on four integrated parts: skills, structure, systems, and shared values. Skills are the abilities and knowledge that people bring to an organization. Structure refers to the communication channels within the human resource department, who manages and who is accountable. Systems are the tools used to make human resource decisions, the reviews and measures HR managers control. Shared values are the less tangible beliefs and cultural strengths an organization possesses. This four-part concept has been used since the 1960s and still functions as a basic understanding of human resources in the business world.

Although the basic components of the modern human resource system have stayed relatively unchanged since their inception, HR operations are still subject to flaws. According to a study cited by Hall, 75 percent of

studied companies attempt to bend prefabricated HR plans to their particular needs without considering a more integrated, top-down strategy. In many cases, lower-level managers were involved neither in creating the HR processes nor in implementing them. Others chose to focus more on assumed HR positions such as compensation director and staffing director, rather than overall business strategy. Few implemented third-party regular reports and accountability standards. There are, then, many opportunities available for companies to improve their existing HR systems.


Ethical considerations are becoming increasingly important to HR departments in American industries. A tension often exists between a company's financial goals and strategies to improve profits, and ethical considerations with right-behavior concerns. Since human resources departments are often most focused on employees and employee behavior, it falls to them to define ethical behavior, communicate specialized ethical codes, and update or elaborate on existing right-behavior expectations. Human resource management systems are expected to communicate ethical values and so improve company performance.

In the absence of a fully separate ethics department, HR departments can struggle with this ethical burden. A 2008 study done by SHRM, the Society for Human Resource Management, showed that over 50 percent of employers did not make ethical considerations part of their employee evaluations. About half of employees did not think they had means to find ethical advice within their company, and even 19 percent of human resources professionals felt pressure to compromise their ethical standards, coming from multiple directions within their companies, though the HR department was the primary resource for ethical information in 80 percent of studied companies.

One of the ways the HR department can support ethics management for their company is through the maintenance of a code of ethics. Briefly, an ethical code for a business should help employees build trust with each other and their company, while clarifying any uncertain or gray areas that may exist in the company's ethical considerations. Instead of only supporting existing ethical standards, a proper code of ethics should seek to raise the standard and improve employee behavior. The code should show members of the company how to make judgment decisions and encourage such proper decision making, while at the same time providing enforcement protocols to prevent misconduct. When writing the code of ethics, an HR department should be sure to do the following:

  • Create clear objectives for the code and other ethical endeavors to accomplish within the organization.
  • Bring all levels of the organization into the process of creating the code, gaining support throughout the company.
  • Check on all the latest legislation, both national and state, that may affect the company's ethical processes, expectations, and requirements, so that the ethical code can be as current as possible.
  • Use the clearest language possible, making the code accessible and simple to understand.
  • Willingly answer realistic problems and address real-life scenarios so that employees will have clear answers to their questions.
  • List several resources for employees to seek continuing ethical education, from other reports by the HR department to helpful Web sites that can provide guidance.
  • Keep in mind that the code of ethics is meant to be used, making sure that it is communicated to all levels of the organization and readily available to any employee who may need aid making judgment calls.

A code of ethics is only one part of the entire ethical system in an organization. The HR department should also make use of several other ethical tools to ensure employees are practicing right-behaviors and fully understand their ethical requirements.


Whenever there is merger activity, the HR department often has a large responsibility to make sure that employee transitions go smoothly. When companies merge, some of the most significant changes occur in number and treatment of employees. If human resources can successfully deal with these important issues, they can have enormous impact on the success of the transition.

First, the HR department should ascertain the precise number of companies and company subsidiaries involved in the merger. This will give a clear idea of how many employees will be involved in the transition. Some of these employees may work in different businesses or on different products than the HR department has previous experience in, requiring new protocols. Employees across all companies involved will have a variety of reactions to the merger, raising both ethical and temperamental issues for the HR department to solve. To prepare for these issues, HR should pinpoint the managers involved in the

company integration, and gain their assistance throughout the merging of the business lines.

In certain mergers there will be an excess of employees, requiring multiple layoffs. The HR department should ascertain how many excess positions there are and how they will communicate the layoff information to employees and managers alike. Legal issues should also be dealt with; a legal consult with someone who has experience in mergers can be an excellent asset. If employees will be terminated in the merger, it is also up to HR to find out how severance pay and extended benefits will be distributed. Will the company provide assistance for employees seeking new jobs? The HR department will be in charge of such out-placement assistance, and the protocols for who gets such assistance and what qualities (experience, position, etc.) extended benefits will be based on.

While layoff deadlines are being established and employee benefits managed, the HR department should also perform a careful internal audit. The companies merging will have differing employee handbooks offering two sets of employee instructions regarding training and expected behavior. Most will also have different instructions for managers and their treatment of personnel, including chains of communication and conflict resolution. The HR department should be sure to review these separate manuals and create one unifying handbook for the merged procedures. Other plans requiring combination by HR include compensation plans, employee benefits, and ethical standards.


One of the most important functions of HRM is to oversee smooth and successful employee separations and turnover. There is always a certain amount of employee turnover at any company, with people voluntarily quitting their jobs for a host of different reasons. These employee separations differ from normal personnel losses resulting from acquisitions, in which employees are laid off and not replaced. For every separation, HR must use recruitment strategies to find a new employee and make sure that the company workforce does not suffer through less skilled workers or workers who are more likely to quit.

There are three types of external employee movement that concern HR departments. The first consists of pure growth, or acquisitions where the company only gains employees without having an excess to lay off, usually involving the annexation of a department or production line. The second type is pure reduction, or movement that only loses employees, such as a series of layoffs to cut costs. Third is all the possible combinations of the first two.

When HR needs to manage such employee separation (and the collective efforts to replace them with other talented workers), separation is divided into three different components, from which policies toward the change can be formed. The first component is quantity: how many employees are leaving the company? These leaving employees, once quantified, are sometimes separated further into categories based on company branches or position. The second component is the quality of employees leaving the organizations. This can refer to the positions they held, the particular talents they possessed (which may be hard to replace), and how they fit into the company's strategies. The third component consists of the costs to the company (costs involved in losing employees, recruiting new ones, and/or training those acquired during a merger).

Succession Planning. Succession planning is another vital part of the HR planning process. It refers to the way in which a company forms policies for replacing key members of its organization, shifting transfer of authority and responsibility carefully from a leaving member to a new member. Often, this means making sure that an arriving employee has the necessary training and experience to fulfill their functions.


Another major concern of the HR department are employee personnel records. These records are filed, maintained, and updated through HRM processes. A good HRM system will allow access to files both by the employee they belong to and the managers who require them. Among the informational data kept in employee files, HR should make sure the files include names, addresses, telephone numbers, marital status, dependents, and beneficiaries.

Most HRM strategies have policies established regarding treatment of personnel information. Companies usually collect information that is required only for legal reasons, or reasons necessary to that business. Employees are given chances to read and correct their files, and files are kept strictly by the company, with rules in place for viewing, maintenance, and outside transfer.

Certain pieces of legislation passed affect the storage and retrieval of personnel records. The Sarbanes-Oxley Act requires that every company has some confidential system in place for the communication of fraud-related activities and malfeasance. The Securities and Exchange Commission (SEC) has recently begun to penalize brokers who do not keep complete and detailed records of all their transactions, and the Health Insurance Portability and Accountability Act (HIPAA) requires that all

electronic records concerning patients be put into an easy-transfer format.


HR departments also manage background checks for potential employees, an increasingly important job as the risk of hiring a misrepresenting employee rises. USA Fact, a provider of screening services for recruiting departments, recently conducted a survey of over 300,000 background checks, and found that among the potential employees, 5 percent had criminal histories, more than a third had motor vehicle violations, 18 percent had employment histories that could not be verified, and approximately 11 percent had been falsifying their education experience. By catching fraudulent records such as these, human resources departments can significantly reduce employee theft, turnover, and even workplace violence.

The sorts of background checks companies can perform include criminal background reviews, Social Security number verification, employment history and education verifications, professional license verification, credit history reviews, and motor vehicle record checks.

There are several guidelines that can be used when HR departments form policies on conducting background checks. First, all inquiries should be strictly related to the position HR is trying to fulfill. Second, all background checks should first be agreed upon by the employeeformal consent in writing is the best way. This gives employees a chance to rethink their applications, especially if they realize a background check would disqualify them for the position. Third, employers should be reasonable. If background checks become over-extensive, they could cost the company too much money and the organization could risk invasion of privacy charges.


HR planning attempts to connect employees to the vision, needs, and strategic plans of the company, including management of all aspects of human resources. Essentially, good HR planning will ensure that the best possible employees (with the right talents, ambitions, and personalities) will find the best possible positions within the organization. HR planning can be done in both the short and long term, although long-term strategies are the most common for HR planning purposes.

When HR planning, the company should tie in all of its HR processes to the company's goal and objectives. If HR planning does not exist to further specific objectives of the country, it is not fulfilling its purpose. This can lead to very wide parameters in HR planning, which can include most activities involving connections between employees and the structure of the business itself. There

Exhibit 1
HR Trend Analysis for a Manufacturing Firm
Projected sales
(thousands of dollars)
Number of employees240200165215?

are many types of analysis HR planning can use, including the following:

  • Workforce analysis judges the future trends of specific jobs in the company and how they will change, such as technological trends, expected surpluses or layoffs, and needed skill sets.
  • Internal scans are used to identify key movements and patterns within the organization which may affect HR operations.
  • External scans look at outside factors which affect employment, such as economic conditions and the need for certain skills.
  • Gap analysis is used to plot where the HR policies currently are, where they will need to be to meet future goals, and how a company can move ahead in its human resources strategy.
  • Priority setting allows HR managers to set HR priorities and form strategies for reaching them, based on information previously gathered through other scans.

Demand Forecasting. Demand forecasting is the process of judging future trends in the employment market so that good HR recruitment decisions can be made. It involves analysis of such factors as competition, international movements, legislation, and changes in both technology and society. With proper demand forecasting, employers will be able to tell what skill sets their new employees will need and what positions will become more necessary to business. They will also be able to accurately budget for recruitment endeavors.

There are many different techniques used in demand forecasting, including those listed here:

  • Managerial judgment is a type of brainstorming that involves a meeting of managers who gather to diagnose and predict the future job market. These can generally be either top-down or bottom-up, with either the executives forming their plans and trend analysis for discussion, or the mid-level managers bringing their forecasts to the meeting. The best

    types of managerial judgment will combine forecasts from many sources, including HRM.
  • Ratio-trend analysis involves researching past trends in organizational employment, with an eye on current changes the organization is going through, to come up with reliable projections concerning future activity. This usually involves ratios, such as that between the number of workers and the revenue of the company. An example of a trend analysis is illustrated in Exhibit 1, which depicts the relationship between a business factor (namely, sales volume) and workforce size. As one can see from the exhibit, if the company expects its 2010 sales to be $10 million, it will need to increase its workforce to a size of nearly 240, which is the number of employees it had in 2006 when sales were $10.2 million.
  • Regression analysis is a more advanced version of ratio-trend analysis, involving the plotting of past relationships so that regression lines can be drawn and trends planned out. An example of how regression analysis can be used to project HR demand is shown in Exhibit 2. In this example, the figures used in the trend analysis (Exhibit 1) are now depicted in the form of a scatter diagram. The line running through the center of the points plotted on the scatter diagram is the regression line. To determine the number of employees needed when the sales volume is $10 million, one would follow the path indicated by the dashed line. One would start at the point on the X axis reading 10,000 and then move up vertically until reaching the regression line. The value on the Y axis corresponding to that point (i.e., 230) reflects the needed workforce size.
  • The Delphi technique involves recruiting experts on employees and employee trends, and gathering their various forecasts concerning job markets. The resulting statistics are then combined and recombined until the final result is a usable forecast.
  • Structured analogies are similar to regression analyses, but they are more creative-oriented, comparing past scenarios involving employment trends and looking at examples from similar situations in the past.
  • Judgmental decomposition tries to break a forecasting situation down into smaller parts, which are then separately analyzed and recombined to form a complete view.

These are just some of the techniques used in demand forecastingwhat other techniques a company decides to use are based on its HRM strategy.

Judgmental Approaches. Judgmental approaches to demand forecasting involve the use of human judgment, rather than a manipulation of numbers. Two of the most commonly used judgmental techniques are group brainstorming and sales force estimates. The group brainstorming technique of demand forecasting uses a panel of experts (i.e., people within the organization who collectively understand the market, the industry, and the technological developments bearing on HRM needs). These experts are asked to generate a forecast through the process of brainstorming. A variety of brainstorming techniques exist. Most involve a face-to-face discussion among group members, who are asked to reach a consensus.

When using a group brainstorming technique to forecast human resources demand, participants must make certain assumptions regarding the future. That is, they must examine the firm's strategic plans for developing new products or services, expanding to new markets, and so forth, and then try to predict such things as:

  • Future marketplace demands for the organization's products and services
  • The percentage of the market that the organization will serve
  • The availability and nature of new technologies that may affect the amounts and types of products or services that can be offered

The accuracy of the forecasts depends on the correctness of these assumptions. Of course, the future is very difficult to predict because it is subject to many uncertainties. Therefore, the organization must continually monitor its demand forecasts in light of any unexpected

changes. HRMS packages facilitate the calculation and monitoring of demand forecasts.

The use of sales force estimates represents another judgmental approach for forecasting HR demand. This approach is most appropriately used when the need for additional employees arises from the introduction of new products. When a new product is launched, sales personnel are asked to estimate the demand for the product (i.e., expected sales volume) based on their knowledge of customer needs and interests. The organization then uses this information to estimate how many employees will be needed to meet this demand. One drawback of this approach is the possibility of bias. Some sales personnel may purposely underestimate product demands so they will look good when their own sales exceed the forecasts. Others may overestimate demand because they are overly optimistic about their sales potential.


Once a demand forecast has been made, an organization has a relatively good idea of the number and nature of positions it will need to carry out its work at a particular point in time. It then estimates which of these positions will be filled at that time by individuals who already are employed by the company. The process used to make this estimation is called supply forecasting.

Supply forecasting is a two-step process. HRMS packages provide the employer with the means to automate much of these two steps. In the first step, the organization groups its positions by title, function, and responsibility level. These groupings should reflect levels of positions across which employees may be expected to advance. For instance, the HRM group might include the job titles of HR assistant, HR manager, and HR director. The secretarial group might include secretarial clerk, principal secretary, senior secretary, and administrative assistant.

The second step of supply forecasting is to estimate, within each job group, how many current employees will remain in their positions during the planning period, how many will move to another position (e.g., through transfer, promotion, or demotion), and how many will leave the organization. These predictions are partially based on past mobility trends (e.g., turnover and promotion rates). The organization also should consider any plans for mergers, acquisitions, unit or division divestitures, layoffs, retrenchments and downsizing, and even hostile takeovers. When making its supply forecast, the organization also should look at specific individuals. Some may have already announced, for instance, that they are retiring at the end of the year, returning to school in the fall, or getting married and planning on moving to a different part of the country.

Computerized statistical packages are available to help estimate the flow of employees through an organization. The estimates generated by these packages can be fairly accurate in stable environments. When the environment is unstable, of course, these estimates are suspect. For instance, an organization may base its estimates on past turnover rates, which have been about 10 percent during each of the past five years. If the turnover rate were to change drastically because of factors such as job dissatisfaction or downsizing, the organization would severely underestimate its future staffing needs.


When the HR planning process is completed, a firm must establish and implement HRM practices in order to meet its human resource needs. Following is a brief overview of how HRM practices can help organizations deal with anticipated oversupplies and undersupplies of personnel.

The trend toward organizational restructuring usually results in a smaller workforce. Therefore, when an organization's strategic plan calls for restructuring, the HRM response usually is one of downsizing. Downsizing usually results in layoffs. Because of the negative outcomes that are often associated with layoffs, employers are encouraged to seek alternatives, such as hiring freezes, early retirements, restricted overtime, job sharing, and pay reductions.

When the results of demand and supply forecasting project an undersupply of personnel at some future point in time, the organization must decide how to resolve this problem. The solution may involve hiring additional staff, but there are other options. When HR plans indicate an undersupply of employees, firms can recruit personnel to staff jobs with anticipated vacancies. HRMS packages provide employers with capabilities to carry out recruitment in all of its steps. The first step is to conduct a job analysis to determine the qualifications needed for each vacant job.

The next step is to determine where and how to recruit the needed individuals. For instance, a company must decide whether to fill its vacancies externally (i.e., from the external labor market) or internally (i.e., from its own current workforce). When recruiting externally, an organization should first assess its attractiveness in the eyes of potential applicants; unattractive employers may have trouble generating a sufficiently large applicant pool. Such employers should attempt to increase the number of people who are attracted to the organization and thus interested in applying for a job there. This may be accomplished by increasing starting pay levels and/or improving benefit packages. Another option is to target certain protected groups whose members may be

underemployed in the local labor market, such as older, disabled, or foreign-born individuals.

Internal recruitment efforts can be improved through the use of career development programs. When designing such a program, the organization should collect work history and skill-level information on each of its employees. Such information would include age, education level, training, special skills (e.g., foreign language spoken), and promotion record, and should be stored on a computer. This employee information allows the organization to identify current employees who are qualified to assume jobs with greater responsibility levels. For instance, in departments where skilled managers are in short supply, a management replacement chart can be prepared that lists present managers, proposes likely replacements, and gives an estimate of when the replacement candidate will be trained and available to fill an open position.

Instead of hiring new workers to meet increasing demands, an organization may decide to improve the productivity of the existing workforce through additional training. Other options include the use of overtime, additional shifts, job reassignments, and temporary workers. Another option is to improve retention rates. When this aim is met, firms will have fewer job vacancies to fill.

Retention rates can be improved at the outset of the employer/employee relationship, when applicants are first recruited. Retention rates are likely to improve when applicants are given a realistic preview of what their jobs would actually be like (warts and all), rather than an overly glowing one.

Workers want to feel valued and needed by their organization. In a climate characterized by mergers, acquisitions, and layoffs, many workers feel very insecure about their jobs. Employees with such feelings often begin shopping around for other jobs. These fears can be eased by implementing HR plans for training and cross-training. Such plans allow workers to perform a variety of functions, thus ensuring that they have the necessary skills to continue making contributions to the firm. Management training also is crucial in this regard. Organizations must train managers to be good supervisors. Poor people management is a primary cause of voluntary turnover. Managers at all levels should know what is expected of them, in terms of managing people instead of just managing budgets.


Several major software companies provide HRMS packages. SAP, PeopleSoft, Oracle, and ADP are the largest. Depending on the company's needs and size, package options may include some or all of the following services:

  • Employee career cycle management
  • 24/7 data access to authorized managers
  • Customized levels of access to confidential data
  • Pre-populated forms and templates
  • Access to real-time datawith instantaneous updates
  • Employee administration
  • Benefits administration
  • Compliance
  • Recruitment
  • Performance and development
  • Safety and health
  • Succession planning
  • Time-off management
  • Organization management
  • Payroll
  • Training
  • 401(k) plan administration

The opportunities to add more services are endless and continue to improve.

For most companies, the hardware and software needed to run these programs are fairly standard. Hardware and software is dependent on the complexity of the HRMS package; more complex HRMS packages require more hardware (e.g., server space and speed).

Another benefit of HRMS includes allowing HR to transition from an administrative department to a strategic management department. The strategic value aspect of the HRMS investment focuses on managing human capital by supporting functions such as recruitment, performance/competency management, employee development, and employee customer service. By executing well in these areas, companies can reduce employee turnover, reduce hiring costs, and improve individual performance.

Another HRMS trend is the use of online surveys. This allows companies to get fast information on their employees, policies, procedures, competition, and anything else they decide to survey. This also gives employees a sense of belonging and contributing to their company. Online employee surveys usually have an 80 percent return ratio, which is much higher than paper surveys.

Employees are becoming more self sufficient in the workplace because of HRMS and the growth of technology. They are able to answer questions, download forms, enroll in benefits, change payroll options, and complete training on their own. This saves both time and money. An employee does not have to make several phone calls in order to speak with the one person who knows the answer

to their questions. Answers are readily available, usually on the company intranet. This also frees up HR to focus on more profitable activities for the company, such as recruiting and employee development.

Another growing trend includes improved methods for monitoring and managing employees' use of the Internet. This helps management to improve productivity, reduce legal liabilities, and control IT costs. Companies are blocking e-mail that may be offensive in order to reduce legal liabilities. They also are blocking Web sites that are inappropriate for workplace viewing. This has improved productivity by reducing nonproductive activities.

HRMS providers have products for companies of all sizes. These providers profit by maximizing the services they offer. Therefore, they are going to target large companies that need more support. However, providers are still interested in small companies, and those that will need more support as they grow.


There are many software programs designed to help in HRIS process. The following are only a few of the companies currently providing HRIS software:

  • Ascentis offers payroll and HRM programs for small- to mid-level organizations, software that tracks many traditional employee benefits and several nontraditional such as paid parking and club memberships.
  • Apex Business Software offers HR programs to meet company objectives and manage many facets of the HR process, including employee leave and benefit tracking. They also offer instant access to employee attendance information that can be made available even to customers, thereby enforcing accountability.
  • People Trak has a wide variety of HR software, including personnel, compensation, safety, applicant, and position management. They also have programs for COBRA and benefit administration, for both simple tasks and strategic planning of HRM.
  • ManagerAssistant offers software with many different modules developed to assist HR employees in each stage of HR analysis.
  • Atlas Business Solutions creates programs that allow easy filing and retrieval of employee information, including vacation accruals and performance evaluations, in their software package called Staff Files.

As the need for corporate cost-cutting, efficiency, and productivity becomes more important, the HRMS industry is going to continue to have strong growth potential. Not only can HRMS help with employee administration from recruiting to benefits, it can save companies thousands of dollars by lowering workforce and employee turnover levels. By 2005, the corporate world had only seen the beginning potential of HRMS.

SEE ALSO Human Resource Management


Aswathappa, K. Human Resource and Personnel Management: Text and Cases. Tata McGraw-Hill, 2005.

Cascio, Wayne F., and John W. Boudreau. Investing in People: Financial Impact of Human Resource Initiatives. FT Press, 2008.

Code of Ethics Toolkit. Ethics Resource Center, 2001. Available from:

Cook, Mary F. The Complete Do-It-Yourself Human Resources Department, 2007 Edition. Aspen Publishers Online, 2006.

Deckop, John Raymond. Human Resource Management Ethics. IAP, 2006.

Dessler, Gary. Human Resource Management. 10th ed. Englewood Cliffs, NJ: Pearson/Prentice-Hall, 2004.

Gueutal, Hal G., and Dianna L. Stone, eds. The Brave New World of eHR: Human Resources Management in the Digital Age. San Francisco: Jossey-Bass, 2005.

Hamerman, Paul. HR and Administrative B2E: Maturing and Expanding., 2005. Available from:

Hall, Bradley W. The New Human Capital. AMACOM Div Management Assn, 2008.

. Justifying IT Investments: Human Resources Management Systems. Giga Information Group. Available from:

HR Resources.

Human Resource Information Systems (HRIS) Outsourcing. Available from:

Human Resource Management. Accel Team., 2008.

Human Resources Solutions. Strategic HR., 2008.

Losey, Mike, Sue Meisinger, and Dave Ulrich, eds. The Future of Human Resource Management: 64 Thought Leaders Explore the Critical HR Issues of Today and Tomorrow. New York: John Wiley & Sons, 2005.

Mattis, Michael. Where Ethics and HR Collide. Bnet., 2008.

Oracle Corp. Products and Industries. Available from:

Running Background Checks on Job Applicants. Nolo., 2008.

Human Resource Management

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Human Resource Management


Human resource management (HRM), also called personnel management, consists of all the activities undertaken by an enterprise to ensure the effective utilization of

employees toward the attainment of individual, group, and organizational goals. An organization's HRM function focuses on the people side of management. It consists of practices that help the organization to deal effectively with its people during the various phases of the employment cycle, including pre-hire, staffing, and post-hire. The pre-hire phase involves planning practices. The organization must decide what types of job openings will exist in the upcoming period and determine the necessary qualifications for performing these jobs. During the hire phase, the organization selects its employees. Selection practices include recruiting applicants, assessing their qualifications, and ultimately selecting those who are deemed to be the most qualified.

In the post-hire phase, the organization develops HRM practices for effectively managing people once they have come through the door. These practices are designed to maximize the performance and satisfaction levels of employees by providing them with the necessary knowledge and skills to perform their jobs and by creating conditions that will energize, direct, and facilitate employees' efforts toward meeting the organization's objectives.


While most firms have a human resources or personnel department that develops and implements HRM practices, the ultimate responsibility lies with both HR professionals and line managers. The interplay between managers and HR professionals leads to effective HRM practices. For example, consider performance appraisals. The success of a firm's performance appraisal system depends on the ability of both parties to do their jobs correctly. HR professionals develop the system, while managers provide the actual performance evaluations.

The nature of these roles varies from company to company, depending primarily on the size of the organization. This discussion assumes a large company with a sizable HRM department. However, in smaller companies without large HRM departments, line managers must assume an even larger role in effective HRM practices.

HR professionals typically assume the following four areas of responsibility: establishing HRM policies and procedures, developing/choosing HRM methods, monitoring/evaluating HRM practices, and advising/assisting managers on HRM-related matters. HR professionals typically decide (subject to upper-management approval) what procedures to follow when implementing an HRM practice. For example, HR professionals may decide that the selection process should include having all candidates (1) complete an application, (2) take an employment test, and then (3) be interviewed by an HR professional and line manager.

Usually the HR professionals develop or choose specific methods to implement a firm's HRM practices. For instance, in selection the HR professional may construct the application blank, develop a structured interview guide, or choose an employment test. HR professionals also must ensure that the firm's HRM practices are properly implemented. This responsibility involves both evaluating and monitoring. For example, HR professionals may evaluate the usefulness of employment tests, the success of training programs, and the cost effectiveness of HRM outcomes such as selection, turnover, and recruiting. They also may monitor records to ensure that performance appraisals have been properly completed.

HR professionals also consult with management on an array of HRM-related topics. They may assist by providing managers with formal training programs on topics like selection and the law, how to conduct an employment interview, how to appraise employee job performance, or how to effectively and appropriately discipline employees. HR professionals also provide assistance by giving line managers advice about specific HRM-related concerns, such as how to deal with problem employees.

Line managers direct employees' day-to-day tasks. From an HRM perspective, line managers are mainly responsible for implementing HRM practices and providing HR professionals with necessary input for developing effective practices. Managers carry out many procedures and methods devised by HR professionals. For instance, line managers are responsible for the following activities:

  • Interview job applicants.
  • Provide orientation, coaching, and on-the-job training.
  • Provide and communicate job performance ratings.
  • Recommend salary increases.
  • Carry out disciplinary procedures.
  • Investigate accidents.
  • Settle grievance issues.

The development of HRM procedures and methods often requires input from line managers. For example, when conducting a job analysis, HR professionals often seek job information from managers and ask managers to review the final written product. Additionally, when HR professionals determine an organization's training needs, managers often suggest what types of training are needed and who, in particular, needs the training.


Table 1 identifies some of the major milestones in the historical development of HRM. Frederick Taylor, known as the father of scientific management, played a significant role in the development of the personnel function in the early 1900s. In his book, Shop Management, Taylor advocated the scientific selection and training of workers. He also pioneered incentive systems that rewarded workers for meeting and/or exceeding performance standards. Although Taylor's focus primarily was on optimizing efficiency in manufacturing environments, his principles laid the groundwork for future HRM development. As Taylor was developing his ideas about scientific management, other pioneers were working on applying the principles of psychology to the recruitment, selection, and training of workers. The development of the field of industrial psychology and its application to the workplace came to fruition during World War I, as early vocational and employment-related testing was used to assign military recruits to appropriate functions.

The Hawthorne Studies, which were conducted in the 1920s and 1930s at Western Electric, sparked an increased emphasis on the social and informal aspects of the workplace. Interpretations of the studies emphasized human relations and the link between worker satisfaction and productivity. The passage of the Wagner Act in 1935 contributed to a major increase in the number of unionized workers. In the 1940s and 1950s, collective bargaining led to a tremendous increase in benefits offered to workers. The personnel function evolved to cope with labor relations, collective bargaining, and a more complex compensation and benefits environment. The human relations philosophy and labor relations were the dominant concerns of HRM in the 1940s and 1950s.

HRM was revolutionized in the 1960s by passage of Title VII of the Civil Rights Act and other anti-discrimination legislationas well as presidential executive orders that required many organizations to undertake affirmative action in order to remedy past discriminatory practices. Equal employment opportunity and affirmative action mandates greatly complicated the HRM function, but also enhanced its importance in modern organizations. As discussed more fully in a later section, these responsibilities continue to comprise a major part of the HRM job. Finally, changes in labor force demographics, technology, and globalization since the 1980s have had a major impact on the HRM function. These factors also are discussed in more detail in a later section.


Pre-hire phase. The major HRM activities in the pre-hire phase are human resource planning and job analysis.

Table 1
Milestones in the Development of Human Resource Management
18901910Frederick Taylor develops his ideas on scientific management. Taylor advocates scientific selection of workers based on qualifications and also argues for incentive-based compensation systems to motivate employees.
19101930Many companies establish departments devoted to maintaining the welfare of workers. The discipline of industrial psychology begins to develop. Industrial psychology, along with the advent of World War I, leads to advancements in employment testing and selection.
19301945The interpretation of the Hawthorne Studies begins to have an impact on management thought and practice. Greater emphasis is placed on the social and informal aspects of the workplace affecting worker productivity. Increasing the job satisfaction of workers is cited as a means to increase their productivity.
19451965In the U.S., a tremendous surge in union membership between 1935 and 1950 leads to a greater emphasis on collective bargaining and labor relations within personnel management. Compensation and benefits administration also increase in importance as unions negotiate paid vacations, paid holidays, and insurance coverage.
19651985The Civil Rights movement in the U.S. reaches its apex with passage of the Civil Rights Act of 1964. The personnel function is dramatically affected by Title VII of the CRA, which prohibits discrimination on the basis of race, color, sex, religion, and national origin. In the years following the passage of the CRA, equal employment opportunity and affirmative action become key human resource management responsibilities.
1985-presentThree trends dramatically impact HRM. The first is the increasing diversity of the labor force, in terms of age, gender, race, and ethnicity. HRM concerns evolve from EEO and affirmative action to managing diversity. A second trend is the globalization of business and the accompanying technological revolution. These factors have led to dramatic changes in transportation, communication, and labor markets. The third trend, which is related to the first two, is the focus on HRM as a strategic function. HRM concerns and concepts must be integrated into the overall strategic planning of the firm in order to cope with rapid change, intense competition, and pressure for increased efficiency.

These activities form the cornerstone upon which other HRM practices are built. Human resource planning helps managers to anticipate and meet changing needs related to the acquisition, deployment, and utilization of employees. The organization first maps out an overall plan called a strategic plan. Then, through demand and supply forecasting it estimates the number and types of employees needed to successfully carry out its overall plan. Such information enables a firm to plan its recruitment, selection, and training strategies. For example, assume that a firm's HR plan estimates that fifteen additional engineers will be needed during the next year. The firm typically hires recent engineering graduates to fill such positions. Because these majors are in high demand, the firm decides to begin its campus recruiting early in the academic

year, before other companies can snatch away the best candidates.

Job analysis is the systematic process used for gathering, analyzing, and documenting information about particular jobs. The analysis specifies what each worker does, the work conditions, and the worker qualifications necessary to perform the job successfully. The job analysis information is used to plan and coordinate nearly all HRM practices, including:

  • Determining job qualifications for recruitment purposes
  • Choosing the most appropriate selection techniques
  • Developing training programs
  • Developing performance appraisal rating forms
  • Helping to determine pay rates
  • Setting performance standards for productivity improvement programs

For example, an organization may decide to use a mechanical aptitude test to screen applicants because a job analysis indicated that mechanical aptitude is an important job skill for a specific position. Or, a firm may raise the pay of one of its employees because a job analysis indicated that the nature of the work recently changed and is now more demanding or requires further education.

Hiring Phase. The hiring phase of human resource management is also called staffing. Staffing involves policies and procedures used by organizations to recruit and select employees. Organizations use recruitment to locate and attract job applicants for particular positions. They may recruit candidates internally (i.e., recruit current employees seeking to advance or change jobs) or externally. The aim of recruitment practices is to identify a suitable pool of applicants quickly, cost-efficiently, and legally. Selection involves assessing and choosing among job candidates. To be effective, selection processes must be both legal and technically sound, accurately matching people's skills and experience with available positions.

Post-Hiring Phase. Training and development are planned learning experiences that teach workers how to effectively perform their current or future jobs. Training focuses on present jobs, while development prepares employees for possible future jobs. Training and development practices are designed to improve organizational performance by enhancing the knowledge and skill levels of employees. A firm must first determine its training needs and then select/develop training programs to meet these needs. It also must take steps to ensure that workers apply what they have learned on the job. Many companies will pay for refresher courses for long-term employees or offer a tuition reimbursement program for courses an employee takes that enhance his or her on-the-job ability.

Through the performance appraisal process, organizations measure the adequacy of their employees' job performances and communicate these evaluations to them. One aim of appraisal systems is to motivate employees to continue appropriate behaviors and correct inappropriate ones. Management also may use performance appraisals as tools for making HRM-related decisions, such as promotions, demotions, discharges, and pay raises.

Compensation entails pay and benefits. Pay refers to the wage or salary employees earn, while benefits are a form of compensation provided to employees in addition to their pay, such as health insurance or employee discounts. The aim of compensation practices is to help the organization establish and maintain a competent and loyal workforce at an affordable cost.

Productivity improvement programs tie job behavior to rewards. Rewards may be financial (e.g., bonuses and pay raises) or nonfinancial (e.g., improved job satisfaction). Such programs are used to motivate employees to engage in appropriate job behaviors, namely those that help the organization meet its goals.


HRM departments within organizations, just as the organizations themselves, do not exist in a vacuum. Events outside of work environments have far-reaching effects on HRM practices. The following paragraphs describe some of these events and indicate how they influence HRM practices.

As mentioned previously, the enactment of federal, state, and local laws regulating workplace behavior has changed nearly all HRM practices. Consider, for instance, the impact of anti-discrimination laws on hiring practices. Prior to the passage of these laws, many firms hired people based on reasons that were not job-related. Today, such practices could result in charges of discrimination. To protect themselves from such charges, employers must conduct their selection practices to satisfy objective standards established by legislation and fine-tuned by the courts. This means they should carefully determine needed job qualifications and choose selection methods that accurately measure those qualifications.

Social, economic, and technological events also strongly influence HRM practices. These events include:

  • An expanding cultural diversity at the workplace
  • The emergence of work and family issues
  • The growing use of part-time, seasonal, contracted, and temporary employees
  • An increased emphasis on quality and teamwork
  • The occurrence of mergers and takeovers
  • The occurrence of downsizing and layoffs
  • The rapid advancement of technology
  • An emphasis on continuous quality improvement
  • A high rate of workforce illiteracy

These events influence HRM practices in numerous ways. For example:

  • Some firms are attempting to accommodate the needs of families by offering benefit options like maternity leave, child care, flextime, telecommuting, and job sharing.
  • Some firms are attempting to accommodate the needs of older workers through skill upgrading and training designed to facilitate the acceptance of new techniques.
  • Some firms are educating their employees in basic reading, writing, and mathematical skills so that they can keep up with rapidly advancing technologies.

Unions often influence a firm's HRM practices. Unionized companies must adhere to written contracts negotiated between each company and its union. Union contracts regulate many HRM practices, such as discipline, promotion, grievance procedures, and overtime allocations. HRM practices in non-unionized companies may be influenced by the threat of unions. For example, some companies have made their HRM practices more equitable (i.e., they treat their employees more fairly) simply to minimize the likelihood that employees would seek union representation.

Legal, social, and political pressures on organizations to ensure the health and safety of their employees have had great impacts on HRM practices. Organizations respond to these pressures by instituting accident prevention programs and programs designed to ensure the health and mental well-being of their employees, such as wellness and employee assistance programs.

Today's global economy also influences some aspects of HRM. Many firms realize that they must enter foreign markets in order to compete as part of a globally interconnected set of business markets. From an HRM perspective, such organizations must foster the development of more globally-oriented managers: individuals who understand foreign languages and cultures, as well as the dynamics of foreign market places. These firms also must deal with issues related to expatriation, such as relocation costs, selection, compensation, and training.


Someone wishing to enter the HRM field may choose one of two routes: generalist or specialist. Entry-level HRM

Exhibit 1a HRM Specialty Areas

Traditional Specialty Areas


Conducts training needs analysis; designs/conducts/evaluates training programs; develops/implements succession planning programs.


Develops job descriptions; facilitates job evaluation processes; conducts/interprets salary surveys; develops pay structure; designs pay-for-performance and/or performance improvement programs; administers benefits program.

Employee/Industrial Relations

Helps resolve employee relations problems; develops union avoidance strategies; assists in collective bargaining negotiations; oversees grievance procedures.


Assists in the HR planning process; develops/purchases HR information systems; develops/updates job descriptions; oversees recruiting function; develops and administers job posting system; conducts employment interviews, reference checks, and employment tests; validates selection procedures; approves employment decisions.


Develops accident prevention strategies; develops legal safety and health policies; implements/promotes EAP and wellness programs; develops AIDS and substance abuse policies.

EEO/Affirmative Action

Develops and administers affirmative action programs; helps resolve EEO disputes; monitors organizational practices with regard to EEO compliance; develops policies for ensuring EEO compliance, such as sexual harassment policies.

HRM Research

Conducts research studies, such as cost-benefit analysis, test validation, program evaluation, and feasibility studies.

(cont. Exhibit 1b)

generalist positions are most often found in small or mid-sized organizations that employ few HR professionalsone or two people who must perform all functions. Because of their many responsibilities, HRM generalists have neither time nor resources to conduct in-depth studies or projects. They usually hire outside consultants who specialize in these kinds of services. For example, consultants might help the organization to revamp its compensation system, validate its selection practices, or analyze its training needs.

In larger organizations, each HR professional's area tends to be more focused, zeroing in on particular HRM tasks. Individuals holding these positions are called HRM specialists. Exhibits 1a and 1b describe some traditional and newer HRM specialty areas.

In most professions a direct path leads to entering the field. For instance, someone aspiring to be a lawyer, physician, accountant, or psychologist enrolls in appropriate educational programs and enters the field upon receiving a degree or license. HRM is atypical in this

Exhibit 1b HRM Specialty Areas (cont.)

New HRM Specialty Areas

Work and Family Programs

Develops and administers work and family programs including flextime, alternative work scheduling, dependent-care assistance, telecommuting, and other programs designed to accommodate employee needs; identifies and screens child- or elder-care providers; administers employer's private dependent-care facility; promotes work and family programs to employees.

Cross-Cultural Training

Translates the manners, mores, and business practices of other nations and cultures for American business people. Other cross-cultural trainers work with relocated employees' families, helping them adjust to their new environment.


As a company's health-care costs continue to escalate, employers are embracing managed-care systems, which require employees to assume some of the costs. Employers hire managed-care managers to negotiate the best options for employees.

Managing Diversity

Develops policies and practices to recruit, promote, and appropriately treat workers of various ages, races, sexes, and physical abilities.

regard; people may enter the profession in a variety of ways. For instance, most of today's HR professionals enter the field through self-directed career changes. Approximately one-third of these individuals entered HRM by transferring from another part of the company; the remainder entered from other fields such as education, social services, accounting, sales, and administrative secretarial positions.

HR professionals entering the field directly out of college (about one-third of all HR professionals) traditionally come from a variety of academic backgrounds, including business, psychology, and liberal arts. More recently, however, HRM new hires have earned degrees in some area of business, such as HRM, management, or general business. For instance, when it hires recent graduates for entry-level HRM positions, Bell Atlantic considers business school graduates with concentrations in business administration, finance and commerce, management, or industrial relations. A survey of HR professionals revealed the following college majors: HRM (17 percent), business administration (23 percent), management (13 percent), psychology (12 percent), and labor/industrial relations (10 percent).

As one might expect, large organizations provide the greatest opportunities for HRM career growth. Most senior-level HR professionals take one of two paths up the corporate ladder. Some begin their careers as specialists and eventually become managers of their specialty units. To advance beyond this level, they must broaden their skills and become HRM generalists. The other path to securing a senior-level HRM position is to begin as an assistant HRM generalist at a small plant or unit within the organization and advance into an HRM managerial role at successively larger plants or units. An HRM career in manufacturing might progress as follows:

  1. The individual is hired as an HRM assistant at a manufacturing plant.
  2. Within five or six years, the individual advances to the HRM manager's post at the plant.
  3. Between six and ten years, the HR professional becomes the HRM manager at a larger plant.
  4. During the eleven- to fifteen-year range, the person reaches a senior-level HRM position at the divisional level and has several HRM generalists and/or specialists reporting to him or her.
  5. Between fifteen and twenty years, the person reaches a senior-level executive position, such as vice president of human resources.


HR professionals primarily are responsible for developing HRM practices that enhance a firm's competitive advantage. HR professionals also have the responsibility to ensure that employees are treated ethically. Almost all HRM decisions have ethical consequences. Despite the abundance of laws designed to ensure fair treatment at the workplace, employees often are treated in an unethical manner. In some instances, employers skirt the law; in others, the law is followed meticulously, but employees are nonetheless treated unfairly by management or by other employees. One survey revealed that the most serious ethical problems involve managerial decisions regarding employment, promotion, pay, and discipline that are based on favoritism, rather than ability or job performance.

HR professionals play three roles in the area of work-place ethics. One role is monitoring: they must observe the actions of organizational members to ensure that all individuals are treated fairly and legally. Second, HR professionals investigate complaints bearing on ethical issues, such as sexual harassment or violations of employees' privacy rights. Third, HR professionals serve as company spokespeople by defending the company's actions when confronted by a regulatory agency or the media.

HR professionals should act ethically themselves. When faced with ethical dilemmas, HR professionals must be willing to take a strong stand, even if it means putting their jobs at risk. If they choose not to recognize a situation that needs their attention, they become part of the problem and thus must assume some of the blame.

HR professionals should be guided by the Society for Human Resource Management Code of Ethics, which dictates that HR professionals should always:

  • Maintain the highest standards of professional and personal conduct
  • Encourage employers to make fair and equitable treatment of all employees a primary concern
  • Maintain loyalty to employers and pursue company objectives in ways consistent with the public interest
  • Uphold all laws and regulations relating to employer activities
  • Maintain the confidentiality of privileged information

The future of HRM includes a strong concentration in managing the people side of a multinational, globally positioned firm. In other words, those in the HRM field will need to know how to manage employees from many cultures and countries as well as those who work from home and those who work in other countries and regions. With the U.S. economy depending heavily on China and India for workforces and for products and services, HRM will have to evolve into a comprehensive study of global sociology in order to understand the needs of the ever changing workforce.

SEE ALSO Human Resource Information Systems


Dessler, Gary. Human Resource Management. 10th ed. Englewood Cliffs, NJ: Pearson/Prentice-Hall, 2004.

Dowling, Peter J., Marion Festing, and Allen Engle. International Human Resource Management. 5th ed. London, England: Thomson Learning, 2008.

Kleiman, Lawrence S. Human Resource Management: A Managerial Tool for Competitive Advantage. Cincinnati: South-Western College Publishing, 2000.

Lado, A.A., and M.C. Wilson. Human Resource Systems and Sustained Competitive Advantage: A Competency-Based Perspective. Academy of Management Review 19, no. 4 (1994): 699727.

Noe, Raymond A., et al. Human Resource Management: Gaining a Competitive Advantage. 5th ed. Boston: McGraw-Hill, 2006.

SHRM Online. Society for Human Resource Management. Available from:

Human Resources Management and the Law

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Human Resources Management and the Law

The field of human resources management is greatly influenced and shaped by the state and federal laws governing employment issues. Indeed, regulations and laws govern all aspects of human resource managementrecruitment, placement, development, and compensation.

One of the most important pieces of HRM legislation, which affects all of the functional areas, is Title VII of the Civil Rights Act of 1964 and subsequent amendments, including the Civil Rights Act of 1991. These acts made illegal the discrimination against employees or potential recruits for reasons of race, color, religion, sex, and national origin. It forces employers to followand often documentfairness practices related to hiring, training, pay, benefits, and virtually all other activities and responsibilities related to HRM. The 1964 act established the Equal Employment Opportunity Commission to enforce the act, and provides for civil penalties in the event of discrimination. The net result of the all-encompassing civil rights acts is that businesses must carefully design and document numerous procedures to ensure compliance, or face potentially significant penalties. Another important piece of legislation that complements the civil rights laws discussed above is the Equal Pay Act of 1963. This act forbids wage or salary discrimination based on sex, and mandates equal pay for equal work with few exceptions. Subsequent court rulings augmented the act by promoting the concept of comparable worth, or equal pay for unequal jobs of equal value or worth.

Other important laws that govern significant aspects of labor relations and human resource management include the following:

  • Davis-Bacon Act of 1931This law requires the payment of minimum wages to nonfederal employees.
  • The Norris-Laguardia Act of 1932This law protects the rights of unions to organize, and prohibits employers from forcing job applicants to promise not to join a union in exchange for employment.
  • The Wagner Act of 1935This law, also known as the National Labor Relations Act, is the main piece of legislation governing union/management relations, and is a chief source of regulation for HRM departments.
  • Social Security Act of 1935This law was enacted in order to protect the general welfare by establishing a variety of systems to assist the aging, the disabled, and children.
  • The Walsh-Healy Public Contracts Act of 1936This law was designed to ensure that employees working as contractors for the federal government would be compensated fairly.
  • Fair Labor Standards Act of 1938this important law mandated employer compliance with restrictions related to minimum wages, overtime provisions, child labor, and workplace safety.
  • Taft-Hartley Act of 1947This law created provisions that severely restrict the activities and power of labor unions in the United States.
  • Landrum-Griffin Act of 1959Also known as the Labor-Management Reporting and Disclosure Act (LMRDA), the Landrum-Griffin Act deals primarily with the relationship between a union and its members. This law grants certain rights to union members and protects their interests by promoting democratic procedures within labor organizations.
  • Age Discrimination in Employment Act of 1967This legislation, which was strengthened by amendments in the early 1990s, essentially protects workers 40 years of age and older from discrimination.
  • Occupational Safety and Health Act of 1970This act, which established the Occupational Safety and Health Administration, was designed to force employers to provide safe and healthy work environments and to make organizations liable for workers' safety. Today, thousands of regulations, backed by civil and criminal penalties, have been implemented in various industries to help ensure that employees are not subjected to unnecessarily hazardous working conditions.
  • Family and Medical Leave Act of 1993This law was passed to provide employees who qualify with up to 12 work weeks of unpaid, job-protected leave in a 12-month period for specified family and medical reasons. It also requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. The Act became effective on August 5, 1993 and applies to companies who employ 50 or more people.

The network of state and federal laws that exist to regulate employment and labor relations is extensive. In many cases, rules only apply to firms with a specified minimum number of employees and thus do not regulate small companies. But, other regulations apply to all employee/employer relationships, regardless of enterprise size. So, companies of all sizes must make an effort to stay abreast of legislative and regulatory developments in this area. Trade associations are a good source of news on new regulations as is the Society of Human Resource Managers (SHRM). The SHRM tracks developments at the state and federal level regarding human resource matters and makes much of this available on its Web site, located at

see also Employee Manual; Employment Contracts; Employment Practices Liability Insurance


Armstrong, Michael. Handbook of Human Resource Management Practice. Kogan Page, 1999.

Mathis, Robert L., and John H. Jackson. Human Resource Management. Thomson South-Western, 2005.

Rossiter, Jill A. Human Resources: Mastering Your Small Business. Upstart Publishing, 1996.

Society of Human Resource Managers. "Federal Government Information." Available from Retrieved on 22 March 2006.

U.S. Small Business Administration. Roberts, Gary, Gary Seldon, and Carlotta Roberts. "Human Resources Management." n.d..

U.S. Social Security Administration. "Legislative History." Available from Retrieved on 15 March 2006.

                              Hillstrom, Northern Lights

                              #x00A0; updated by Magee, ECDI

Human Resource Policies

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Human Resource Policies

Human resource policies are the formal rules and guidelines that businesses put in place to hire, train, assess, and reward the members of their workforce. These policies, when organized and disseminated in an easily used form, can serve to preempt many misunderstandings between employees and employers about their rights and obligations in the business place. It is tempting, as a new small business owner, to focus on the concerns of the business at hand, and put off the task of writing up a human resource policy. All business analysts and employment lawyers will advise a new business owner to get a policy down on paper, even if it is a simple one drafted from a boilerplate model. Having policies written is important so that it is clear to all what the policies are and that they are applied consistently and fairly across the organization. Moreover, when issues concerning employee rights and company policies come before federal and state courts, it is standard practice to assume that the company's human resource policies, whether written or verbal, are a part of an employment contract between the employee and the company. Without clearly written policies, the company is at a disadvantage.

Small businessesand especially business startupscan not afford to fritter away valuable time and resources on drawn-out policy disputes or potentially expensive lawsuits. Having a human resource policy in place from the start can help to avoid this situation. The business owner who takes the time to establish sound, comprehensive human resource policies will be far better equipped to succeed over the long run than the business owner who deals with each policy decision as it erupts. The latter ad hoc style is much more likely to produce inconsistent, uninformed, and legally questionable decisions that may cripple an otherwise prosperous business. For as many small business consultants state, human resource policies that are inconsistently applied or based on faulty or incomplete data will almost inevitably result in declines in worker morale, deterioration in employee loyalty, and increased vulnerability to legal penalties. To help ensure that personnel management policies are applied fairly, business owners and consultants alike recommend that small business enterprises produce and maintain a written record of its HR policies and of instances in which those policies came into play.


Small business owners should make sure that they address the following basic human resource issues when putting together their personnel policies:

  • Equal Employment Opportunity policies
  • Employee classifications
  • Workdays, paydays, and pay advances
  • Overtime compensation
  • Meal periods and break periods
  • Payroll deductions
  • Vacation policies
  • Holidays
  • Sick days and personal leave (for bereavement, jury duty, voting, etc.)
  • Performance evaluations and salary increases
  • Performance improvement
  • Termination policies

Templates that may be used to create a first human resource policy document are available from many sources. Two such sources that are reputable and offer information of a full range of employment issues are the National Human Resource Association and the Society for Human Resource Managers. Each maintains a Web site with information on the services it provides and pointers to other reputable service providers. Those Web sites are, respectively, and

A broad spectrum of issues can be addressed in human resource policies, depending on the nature of the business in question. Examples of such issues include promotion policies; medical/dental benefits provided to employees; use of company equipment/resources (access to Internet, personal use of fax machines and telephones, etc.); continuity of policies; sexual harassment; substance abuse and/or drug testing; smoking; flextime and telecommuting policies; pension, profit-sharing, and retirement plans; reimbursement of employee expenses (for traveling expenses and other expenses associated with conducting company business); child or elder care; educational assistance; grievance procedures; employee privacy; dress codes; parking; mail and shipping; and sponsorship of recreational activities.


Small business owners who have prepared and updated good personnel management policies have cited several important ways in which they contribute to the success of business enterprises. Many observers have pointed out that even the best policies will falter if the business owners or managers who are charged with administering those policies are careless or incompetent in doing so. But for those businesses that are able to administer their HR policies in an intelligent and consistent manner, benefits can accrue in several areas:

Communication with employees. A well written and thoughtfully presented human resource policy manual can establish the tone that a new business person wishes to maintain within his or her business. Such a policy also serves to disseminating information about what employees may expect from the company as well as what the employer expects from the employees regarding work performance and behavior while on the job.

Communication with managers and supervisors. Formal policies can be helpful to managers and other supervisory personnel faced with hiring, promotion, and reward decisions concerning people who work under them.

Time Savings. Prudent and comprehensive human resource management policies can save companies significant amounts of management time that can then be spent on other business activities, such as new product development, competitive analysis, marketing campaigns, etc.

Curbing litigation. Members of the legal and business communities agree that organizations can do a lot to cut off legal threats from disgruntled current or ex-employees simply by creatingand applyinga fair and comprehensive set of personnel policies.


Companies typically have to make revisions to established HR policies on a regular basis, as the company grows and as the regulatory and business environments in which it operates evolve. When confronted with the challenge of updating HR policies, however, it is important for small businesses to proceed cautiously. For example, if an employee asks the owner of a small business if he might telecommute from his home one day a week, the owner may view the request as a reasonable, relatively innocuous one. But even minor variations in personnel policy can have repercussions that extend far beyond the initially visible parameters of the request. If the employee is granted permission to work from home one day a week, will other employees ask for the same benefit? Does the employee expect the business to foot the bill for any aspect of the telecommuting endeavorpurchase of computer, modem, etc.? Do customers or vendors rely on the employee (or employees) to be in the office five days a week? Do other employees need that worker to be in the office to answer questions? Is the nature of the employee's workload such that he can take meaningful work home? Can you implement the telecommuting variation on a probationary basis?

Small business owners need to recognize that changes in HR policy have the potential to impact, in one way or another, every person in the company, including the owner. Proposed changes should be examined carefully and in consultation with others in the organization who may recognize potential pitfalls that other managers, or the business owner herself, may have failed to detect. Once a change in policy is made, it should be disseminated widely and effectively so that everyone within the business is working from the same human resource policy at all times.


Armstrong, Michael. Handbook of Human Resource Management Practice. Kogan Page, 1999.

"How to Develop Essential HR Policies and Procedures." HRMagazine. February 2005.

Green, Paul C. Building Robust Competencies: Linking Human Resource Systems to Organizational Strategies. Jossey-Bass, 1999.

Johnston, John. "Time to Rebuild Human Resources." Business Quarterly. Winter 1996.

Koch, Marianne J., and Rita Gunther McGrath. "Improving Labor Productivity: Human Resource Management Policies Do Matter." Strategic Management Journal. May 1996.

Mathis, Robert L., and John H. Jackson. Human Resource Management. Thomson South-Western, 2005.

Rossiter, Jill A. Human Resources: Mastering Your Small Business. Upstart Publishing, 1996.

Ulrich, Dave. Delivering Results: A New Mandate for Human Resource Professionals. Harvard Business School Press, 1998.

U.S. Small Business Administration. Roberts, Gary, Gary Seldon, and Carlotta Roberts. "Human Resources Management." n.d..

                              Hillstrom, Northern Lights

                              #x00A0; updated by Magee, ECDI

Human Resource Management

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Humans are an organization's greatest assets; without them, everyday business functions such as managing cash flow, making business transactions, communicating through all forms of media, and dealing with customers could not be completed. Humans and the potential they possess drive an organization. Organizations are continuously changing. Organizational change impacts not only the business but also its employees. In order to maximize organizational effectiveness, human potentialindividuals' capabilities, time, and talentsmust be managed. Human resource management works to ensure that employees are able to meet the organization's goals.

"Human resource management is responsible for how people are treated in organizations. It is responsible for bringing people into the organization, helping them perform their work, compensating them for their labors, and solving problems that arise" (Cherrington, 1995, p. 5). There are seven management functions of a human resources (HR) department that will be specifically addressed: staffing, performance appraisals, compensation and benefits, training and development, employee and labor relations, safety and health, and human resource research.

Generally, in small organizations with fewer than a hundred employees there may not be an HR department, and so a line manager will be responsible for the functions of HR management (HRM). In large organizations with a hundred employees or more, a human resources manager will coordinate the HRM duties and report directly to the chief executive officer (CEO). HRM staff in larger organizations may include human resource generalists and human resource specialists. As the name implies, an HR generalist is routinely involved with all seven HRM functions, while the HR specialist focuses attention on only one of the seven responsibilities.

An understanding of the job analysis is necessary to understand the seven functions. An essential component of any HR unit, no matter the size, is the job analysis, which is completed to determine activities, skills, and knowledge required of an employee for a specific job. Job analyses are "performed on three occasions: (1) when the organization is first started, (2) when a new job is created, and (3) when a job is changed as a result of new methods, new procedures, or new technology" (Cherrington, 1995).

Jobs can be analyzed through the use of questionnaires, observations, interviews, employee recordings, or a combination of any of these methods. Two important tools used in defining the job are (1) a job description, which identifies the job, provides a list of responsibilities and duties unique to the job, gives performance standards, and specifies necessary machines and equipment; and (2) the job specification, which states the minimum amount of education and experience needed for performing the job (Mondy, Noe, and Gowan, 2005).


Both the job description and the job specification are useful tools for the staffing process, the first of the seven HR functions to be discussed. Someone (e.g., a department manager) or some event (e.g., an employee's leaving) within the organization usually determines a need to hire a new employee. In large organizations, an employee requisition must be submitted to the HR department that specifies the job title, the department, and the date the employee is needed. From there, the job description can be referenced for specific job-related qualifications to provide more detail when advertising the positioneither internally, externally, or both (Mondy, Noe, and Gowan, 2005).

Not only must the HR department attract qualified applicants through job postings or other forms of advertising, but it also assists in screening candidates' resumes and bringing those with the proper qualifications in for an interview. The final say in selecting the candidate will probably be the line manager's, assuming all Equal Employment Opportunity Commission (EEOC) requirements are met. Other ongoing staffing responsibilities involve planning for new or changing positions and reviewing current job analyses and job descriptions to make sure they accurately reflect the current position.


Once a talented individual is brought into an organization, another function of HRM comes into playcreating an environment that will motivate and reward exemplary performance. One way to assess performance is through a formal review on a periodic basis, generally annually, known as a performance appraisal or performance evaluation. Because line managers are in daily contact with the employees and can best measure performance, they are usually the ones who conduct the appraisals. Other evaluators of the employee's performance can include subordinates, peers, group, and self, or a combination of one or more (Mondy, Noe, and Gowan, 2005).

Just as there can be different performance evaluators, depending on the job, several appraisal systems can be used. Some of the popular appraisal methods include (1) ranking of all employees in a group; (2) using rating scales to define above-average, average, and below-average performance; (3) recording favorable and unfavorable performance, known as critical incidents; and (4) managing by objectives, or MBO (Mondy, Noe, and Gowan, 2005).

Cherrington (1995) illustrates how performance appraisals serve several purposes, including: (1) guiding human resource actions such as hiring, firing, and promoting; (2) rewarding employees through bonuses, promotions, and so on; (3) providing feedback and noting areas of improvement; (4) identifying training and development needs in order to improve the individual's performance on the job; and (5) providing job-related data useful in human resource planning.


Compensation (payment in the form of hourly wages or annual salaries) and benefits (insurance, pensions, vacation, modified workweek, sick days, stock options, etc.) can be a catch-22 because an employee's performance can be influenced by compensation and benefits, and vice versa. In the ideal situation, employees feel they are paid what they are worth, are rewarded with sufficient benefits, and receive some intrinsic satisfaction (good work environment, interesting work, etc.). Compensation should be legal and ethical, adequate, motivating, fair and equitable, cost-effective, and able to provide employment security (Cherrington, 1995).


Performance appraisals not only assist in determining compensation and benefits, but they are also instrumental in identifying ways to help individuals improve their current positions and prepare for future opportunities. As the structure of organizations continues to change through downsizing or expansion, the need for training and development programs continues to grow. Improving or obtaining new skills is part of another area of HRM, known as training and development.

"Training focuses on learning the skills, knowledge, and attitudes required to initially perform a job or task or to improve upon the performance of a current job or task, while development activities are not job related, but concentrate on broadening the employee's horizons" (Nadler and Wiggs, 1986, p. 5). Education, which focuses on learning new skills, knowledge, and attitudes to be used in future work, also deserves mention (Nadler and Wiggs, 1986).

Because the focus is on the current job, only training and development will be discussed. Training can be used in a variety of ways, including (1) orienting and informing employees, (2) developing desired skills, (3) preventing accidents through safety training, (4) supplying professional and technical education, and (5) providing supervisory training and executive education (Cherrington, 1995).

Each of these training methods has benefits to the individual as well as to the organization. Some of the benefits are reducing the learning time for new hires, teaching employees how to use new or updated technology, decreasing the number and cost of accidents because employees know how to operate a machine properly, providing better customer service, improving quality and quantity of productivity, and obtaining management involvement in the training process (Cherrington, 1995). When managers go through the training, they are showing others that they are taking the goals of training seriously and are committed to the importance of human resource development.

The type of training depends on the material to be learned, the length of time learners have, and the financial resources available. One type is instructor-led training, which generally allows participants to see a demonstration and to work with the product first-hand. On-the-job training and apprenticeships let participants acquire new skills as they continue to perform various aspects of the job. Computer-based training (CBT) provides learners at various geographic locations access to material to be learned at convenient times and locations. Simulation exercises give participants a chance to learn outcomes of choices in a nonthreatening environment before applying the concept to real situations.

Training focuses on the current job, while development concentrates on providing activities to help employees expand their current knowledge and to allow for growth. Types of development opportunities include mentoring, career counseling, management and supervisory development, and job training (Cherrington, 1995).


Just as human resource developers make sure employees have proper training, there are groups of employees organized as unions to address and resolve employment-related issues. Unions have been around since the time of the American Revolution (Mondy, Noe, and Gowan, 2005). Those who join unions usually do so for one or both of two reasonsto increase wages and/or to eliminate unfair conditions. Some of the outcomes of union involvement include better medical plans, extended vacation time, and increased wages (Cherrington, 1995).

In the early twenty-first century, unions remain a controversial topic. Under the provisions of the Taft-Hartley Act, the closed-shop arrangement states employees (outside the construction industry) are not required to join a union when they are hired. Union-shop arrangements permit employers to hire nonunion workers contingent upon their joining the union once they are hired. The Taft-Hartley Act gives employers the right to file unfair labor practice complaints against the union and to express their views concerning unions (Cherrington, 1995).

Not only do HR managers deal with union organizations, but they are also responsible for resolving collective bargaining issuesnamely, the contract. The contract defines employment-related issues such as compensation and benefits, working conditions, job security, discipline procedures, individuals' rights, management's rights, and contract length. Collective bargaining involves management and the union trying to resolve any issues peace-fullybefore the union finds it necessary to strike or picket and/or management decides to institute a lockout (Cherrington, 1995).


Not only must an organization see to it that employees' rights are not violated, but it must also provide a safe and healthy working environment. Mondy, Noe, and Gowan (2005) define safety as "protecting employees from injuries caused by work-related accidents" and health as keeping "employees free from physical or emotional illness" (p. 432). In order to prevent injury or illness, the Occupational Safety and Health Administration (OSHA) was created in 1970. Through workplace inspections, citations and penalties, and on-site consultations, OSHA seeks to enhance safety and health and to decrease accidents, which lead to decreased productivity and increased operating costs (Cherrington, 1995).

Health problems recognized in the workplace can include the effects of smoking, alcohol and drug/substance abuse, AIDS, stress, and burnout. Through employee assistance programs (EAPs), employees with emotional difficulties are given "the same consideration and assistance" as those employees with physical illnesses (Mondy, Noe, and Gowan, 2005, p. 455).


In addition to recognizing workplace hazards, organizations are responsible for tracking safety- and health-related issues and reporting those statistics to the appropriate sources. The human resources department seems to be the storehouse for maintaining the history of the organizationeverything from studying a department's high turnover or knowing the number of people presently employed, to generating statistics on the percentages of women, minorities, and other demographic characteristics. Data for the research can be gathered from a number of sources, including surveys/questionnaires, observations, interviews, and case studies (Cherrington, 1995). This research better enables organizations to predict cyclical trends and to properly recruit and select employees.


Research is part of all the other six functions of human resource management. With the number of organizations participating in some form of international business, the need for HRM research will only continue to grow. Therefore, it is important for human resource professionals to be up to date on the latest trends in staffing, performance appraisals, compensation and benefits, training and development, employee and labor relations, and safety and health issues, both in the United States and in the global market.

One professional organization that provides statistics to human resource managers is the Society for Human Resource Management (SHRM), the largest professional organization for human resource management professionals. Much of the research conducted within organizations is sent to SHRM to be used for compiling international statistics.

see also Management


Cherrington, David J. (1995). The Management of Human Resources. Englewood Cliffs, NJ: Prentice-Hall.

Mondy, R. Wayne, Noe, Robert M., and Gowan, Mary (2005). Human Resource Management. Upper Saddle River, NJ: Prentice-Hall.

Nadler, Leonard, and Wiggs, Garland D. (1986). Managing Human Resource Development. San Francisco: Jossey-Bass.

Christine Jahn

Human Resources

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Human Resources

What It Means

In economics the term human resources has two distinct but interrelated meanings. In the most basic sense human resources are employees, or workers. An economist might refer to human resources in relation to a certain company, to a particular industry or field, or to a specific segment of a population. In the context of a company human resources are sometimes referred to as personnel.

In the business world the term human resources also refers to the individual or department that is responsible for overseeing the hiring, management, and payment of a company’s employees. All companies have established procedures for dealing with human resource matters. In smaller companies, where there is a relatively small number of employees to manage, the person responsible for handling human resource issues generally performs other work-related tasks, such as bookkeeping or general administration (for example, answering phones, filing documents, and other duties related to maintaining an office); in some small businesses the owner will take direct responsibility for human resource decisions. Larger companies generally have an entire human resource department or division, typically referred to as human resources, or HR. Human resource departments are responsible for managing a company’s employees and for determining and maintaining company policy. Traditionally this department has also been known as personnel, although this term became less common toward the end of the twentieth century.

In corporate America human resources are widely regarded to be a company’s most important asset. All companies must draw from a diverse range of resources to conduct business effectively. For example, some of the resources used by an automobile manufacturer will include the parts (such as axles, fenders, and tires) that go into a car’s construction, the machinery (conveyor belts, welding equipment, and other tools) required to put the cars together, and the fuel and other energy resources (gas, oil, electricity) needed to run the factory. In addition the auto manufacturer will employ many of the same resources common to all companies, such as financial resources (money used to buy equipment and materials), office equipment (including phones and computers), and so on. While all of these resources are vital to the automaker’s existence, their effectiveness depends on the human resources (the workers operating the machinery, the business personnel who oversee the company’s accounts, the managers responsible for placing orders and tracking shipments, and so on) that the company employs. For this reason human resources represent the most critical aspect of a company’s overall performance.

When Did It Begin

The modern concept of human resources traces its origins to the Efficiency Movement of the late nineteenth and early twentieth centuries. The Efficiency Movement was an American intellectual movement concerned with identifying, and subsequently eliminating, wasteful or inefficient aspects of economic production. One of the leading figures in the Efficiency Movement was Frederick Winslow Taylor (1856–1915), an American engineer. Taylor was particularly interested in discovering ways that managers and employees could work together to maximize productivity. Taylor’s 1911 work The Principles of Scientific Management outlines a number of innovative approaches to the question of employee efficiency, with an emphasis on specialized training, highly detailed planning, and efficient and clear communication between management and the general labor force.

In the 1920s Australian sociologist George Elton Mayo (1880–1949) began to consider the question of worker productivity from a psychological perspective. Based on a series of experiments conducted during the 1920s and 1930s (commonly known as the Hawthorne Studies), Mayo argued that social factors (namely the quality of the interactions between managers and employees or between employees and other employees) played a key role in determining employee attitudes and behavior. According to Mayo’s findings employees performed most effectively when they felt they had a personal investment in the company for which they worked. In order to cultivate this sense of personal investment, Mayo concluded, companies were best served by instilling feelings of trust, loyalty, and camaraderie in their workers.

Mayo’s ideas soon took firm root in American corporate culture. Hiring and maintaining a workforce no longer was considered to be a simple matter of assigning tasks and distributing paychecks but rather was a question of meeting the personal and professional needs of employees in order to increase productivity. As a result the human resource department, which was designed to address the increasing complexity of employee management in the workplace, became a fixture in most American companies by the mid-twentieth century.

More Detailed Information

In a corporate setting a human resource department assumes responsibility for a range of tasks relating to the management of a company’s employees. One of the primary responsibilities of the human resource director involves the hiring of employees. In hiring employees human resource directors often place job listings in newspapers or other print publications, at government employment centers (bureaus responsible for helping unemployed members of a community find work), and on Internet job boards (for example, Monster, an extensive online employment database, or craigslist, a popular online classifieds directory). Employment listings will generally include information about the job title, skills the prospective employee should have to apply for the job, and the application process. This aspect of human resources is typically known as recruiting. In most companies potential employees will be asked to submit a résumé (a piece of paper offering a detailed outline of a person’s past work experience and qualifications, also known as a curriculum vitae, or C.V.).

In addition to managing the hiring process, a company’s human resource department also takes responsibility for employee compensation. The most important element of employee compensation is the payroll (the amount of money paid to a company’s employees during a given pay period). Human resource directors must ensure that all employees receive their paychecks on the specified pay date (commonly known as payday). In addition to an employee’s pay human resource departments must also manage other forms of employee compensation, such as health insurance (money that goes toward covering employee medical expenses) and stock options (the right to purchase shares in the company).

Human resource directors are also responsible for evaluating employee performance. In determining the level of quality in an employee’s job performance, human resource directors will address such issues as whether an employee performs the tasks he or she was hired to do, whether the employee arrives at work on time, whether the employee has positive personal relationships with other employees, and so on. Human resource directors also make certain key decisions related to an employee’s continued role with a company. If an employee has an excellent performance record and makes a consistently positive contribution to the company, then the human resource director may decide to offer this employee a raise (an increase in pay) or a promotion (an elevation to a more prestigious position with the company, typically accompanied by a raise and additional responsibility). If an employee’s performance has a significantly negative impact (if, for example, he or she is chronically late for work or exhibits a bad attitude toward his or her responsibilities) then a human resource director will take responsibility for discussing the problem with the employee. A human resource director is also responsible for firing employees in certain extreme cases.

Recent Trends

Questions of employee motivation and morale are central to evaluating levels of satisfaction in a workplace. Over the years human resource specialists have developed a number of innovative ways of fostering and improving the overall happiness of employees. One approach to employee motivation that began to gain popularity in the early twenty-first century was the concept of team building. Team building is a practice by which human resource directors attempt to improve qualities of cooperation, loyalty, and trust among a company’s employees. Team building often involves having employees participate in organized activities. In some cases these activities are designed to help employees become more familiar with each other’s personalities and work styles, through seminars, creative exercises, or other group projects. Often team-building exercises are designed to provide employees with the opportunity to have fun and get to know each other in a relaxed environment, away from the stressful demands of work. Cookouts, camping retreats, and interdepartmental softball games are only a few of the activities a company uses to create a sense of enjoyment, as well as solidarity, among its workers.

human resources

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hu·man re·sourc·es • pl. n. the personnel of a business or organization, esp. when regarded as a significant asset. ∎  the department of a business or organization that deals with the administration, management, and training of personnel: director of human resources at the company.

Human Resources

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HUMAN RESOURCES. SeeIndustrial Relations .

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