CHAPTER 1

Introduction to Human Resource Management

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

1. Understand the meaning of human resources
2. Define the objectives, scope and functions of human resource management (HRM)
3. Differentiate between HRM and personnel management
4. Enumerate the qualities of HR managers
5. Discuss the future role of HRM

Infosys Technologies has been adjudged the best employer of the year by a number of leading human resource (HR) surveys for its outstanding HR practices. It is one of the few companies that succeeded in greatly influencing the attitude and behaviour of the employees and the performance of the organization through creative HR practices.

The HR policies of Infosys include: (i) focusing on the learnability of candidates in recruitment; (ii) emphasizing continuous learning through employee training. For this reason, it has developed a world-class training centre called the Global Education Center at Mysore to train fresh recruits and an Infosys Leadership Institute to develop future leaders of the companies; (iii) evaluating the performance of employees in a scientific manner through a competency-mapping system and (iv) using a variable compensation structure, which considers the collective performance of the individual, the team and the organization as a whole for fixing the employee-compensation packages. To sum up, its HR philosophy, policy, practices and management have played a pivotal role in making Infosys a $2billion company today.

The success story of Infosys is a proof that HR management (HRM) can be a definite competitive advantage for a firm and can make a real difference not only to the fortune of the organizations but also to the individuals as well. Keeping this success story in mind, let us first learn the basics of HRM in this chapter.

Introduction

Every organization is essentially a combination of physical and human resources (HR). Physical resources refer to materials, money and machines pre-arranged by the organization for production or trade. human resources, on the other hand, refer to the knowledge, education, skills, training and proficiency of the members of the organization. All organizational resources are important for achieving the objectives of an organization. In fact, the effectiveness of an organization lies in the judicious blending of the two resources to achieve optimum competency.

However, for a long time, it was felt that the efficient utilization of physical resources was primary for developing an organization. This was so because the acquisition of physical resources resulted in a huge outflow of funds and those assets carried a definite value. On the contrary, it was felt that hiring employees never cost anything substantial for a firm and it was also quite easy to replace them. This made human resources less important for employers. But, in the past decade, employers have realized that intellectual capital is critical to business success. The main reasons for this change are due to the understanding that

1. Product innovation and marketing strategy, which are crucial for market survival and growth in a competitive environment, are possible only when a good and creative workforce is present.
2. The challenge, opportunities and even disputes of creating and managing organizations arise mostly from people-centred problems.
3. People are not alike and they cannot be treated identically. They differ physically and psychologically. These differences require individual attention in order to achieve the optimum productivity.

Indian organizations are no exception to this change in understanding. They realize that technology by itself cannot triumph in the market and that technology coupled with a workforce is essential for the success of an organization. The growing importance of HR in Indian organizations is best reflected in their mission statements. The mission statements of a few Indian organizations, which emphasize the significance of human resources, are presented in Table 1.1.

Meaning of Human Resources

Organizations are managed by people and through people. Without people, organizations can never exist. Indeed, people who make up the human resources of a company are unique and they can make or break an organization, depending upon their level of commitment, contribution and cooperation. Hence, it is relevant to know the intricacies of the term human resources first, before we discuss HR management (HRM) in detail. Different people have defined human resources differently. Box 1.1 showcases the various definitions of human resources.

 

We would define human resources as the collection of people and their characteristics at work. These are distinct and unique to an organization in several ways.

Uniqueness of Human Resources

The distinct features of human resources are:

1. Human resources are the only assets that appreciate over a period while physical resources just depreciate with years.
2. Further, human resources alone can produce an output larger than the input. This is possible due to the creative skills of humans. Creative thinking is the process of predicting, envisioning and then inventing an idea, concept or insight along innovative and alternative lines. People in the organization are the only basis for such creativity and there is no obvious limit to their imagination.
3. Organizations require human resources of different types to operate all physical resources. Thus, they provide utility value to each one of the physical assets. In fact, the real worth of a physical asset depends on the quality and calibre of the people working with it. An incompetent workforce will spoil the physical resources available to it.
4. There is a growing realization that the flexibility of an organization depends more on people than on any technical factors. Modern equipment may ensure quality and cost-competitiveness but the operational flexibility, which is core to product modification and innovation, is provided only by the employees. This is so since humans alone could grasp the situation adequately and respond suitably.

The effective utilization of human resources is a complex task. It requires greater foresight and strategic consideration on the part of the management. For instance, attracting the most qualified employees, matching them to the jobs for which they are best suited and retaining them within the organization are significant for the success of an organization. But this calls for closer coordination and better understanding between the employers and the employees. However, many enterprises are too large to permit close contact between the top management and the employees. This is where HR managers act as a crucial link between the management and the employees.

HRM, as a field of study, makes a sincere effort to provide knowledge, skills and ability for managing human resources more effectively. The basic task of HRM is the selection of the right person for the right job at the right time to carry out the activities of an organization in the most efficient way. It also aims to enhance the satisfaction, morale and productivity of employees, control labour turnover, and help organizations increase their performance by providing the necessary training and development opportunities, suitable working conditions and appropriate career growth to employees.

Though different authors have defined HRM differently, they have all emphasized the effective utilization of the workforce for accomplishing the organizational and individual goals and objectives. Some of these definitions of HRM are mentioned in Box 1.2.

To sum up, we can say that HRM is concerned with policies and practices that ensure the best use of the human resources for fulfilling the organizational and individual goals.

Objectives of HRM

The primary objective of HRM is to take care of the work life of the employees from the time they join the organization to the time they leave it, while ensuring their best possible cooperation in achieving the organizational goals and objectives. This broad objective of HRM can be classified into the following specific ones:

1. To act as a liaison between the top management and the employees
2. To arrange and maintain adequate manpower inventory, which, in turn, ensures the smooth working of the organization
3. To offer training as a way of developing skills, enhancing productivity and, most importantly, increasing individual and organizational performance to achieve the desired results
4. To devise employee benefit schemes for improving employee motivation and group morale and enhancing employer–employee cooperation
5. To ensure and enhance the quality of work life, which refers to the employees’ perception of their physical and psychological well-being at work
6. To help keep up ethical values and behaviour amongst employees both within and outside the organization

Box 1.3 describes the HR objectives of the Tata group.

Scope of HRM

The scope of HRM is extensive and exhaustive. An understanding of HRM is important to anyone who is employed in an organization. HR issues become important wherever there is a group of workers. Staffing is performed by all the managers as a managerial function, either directly or indirectly through the HR department. All managers are, in this way, HR managers since they get involved in HR activities like choosing, training, inducting, compensating and motivating the employees along with industrial relations activities. Thus, they must understand the scope and application of the personnel policies of their organization in order to ensure that their everyday personnel actions are consistent with those policies as any violation of such policies may get them into confrontations with their subordinates.

Further, knowledge of the basics of HRM is important even to non-managerial employees as they may be keen to know the impact of the personnel policies of their organization on their own compensation, training and career growth aspects. Thus, the personnel aspects of management run through the entire organization.

The Institute of Personnel Management (IPM)⁷ has mentioned the scope of HRM as follows:

Personnel or Labour Aspect The first aspect deals with manpower planning, recruitment, selection, placement, transfer, promotion, training and development, lay-offs and retrenchment, remuneration, incentives and productivity.

Welfare Aspect This aspect is concerned with the working conditions and with amenities such as canteen, crèches, rest- and lunch-rooms, housing, transport, medical assistance, education, health and safety, and recreation facilities.

Industrial Relations Aspect This aspect pertains to union–management relations, joint consultations, collective bargaining, grievance and disciplinary actions, and settlement of disputes.

In the last decade, there has been a realization amongst managers that good plans, effective organizational structures, impressive plants and modern technologies may not guarantee the success of the organization unless they hire the right persons, train them suitably, appraise them properly, and constantly motivate them to get the desired results. This new understanding showed the way for further research in the field of HR aspects, resulting in the development of new techniques and styles of HR management. This has further widened the scope of HRM.

Functions of HRM

HRM functions (also called processes) are carried out by the HR managers to fulfil the goals and objectives of the organization. As illustrated in Figure 1.1, they perform two sets of functions, namely managerial functions and operative functions. The managerial functions are the basic functions performed by the HR managers in their capacity as managers or heads of their own departments. In fact, all managers, irrespective of their departments, perform these functions. The operative functions, on the other hand, are specialized activities performed exclusively by the HR managers, usually for all the departments. We shall first discuss the managerial functions.

Managerial Functions

Functions like planning, organizing, staffing, directing and controlling constitute the core managerial functions of an organization. The specific activities performed under each of these functions are explained as follows:

Planning It is an effective tool to deal with the future. It involves the process of predetermining the personnel programmes that are necessary to attain the organizational goals. In this context, accurate forecasting is vital to the success of any plan. Planning is such a crucial function for an organization that it is the key to all other managerial functions. The steps involved in planning are

• Establishing goals and objectives to be achieved
• Developing rules and procedures
• Determining plans and forecasting techniques

Organizing Once the plans are formulated, the next step is to organize the men and material in order to accomplish those plans. Organizing is a process through which the firm establishes its structure and determines the authority, responsibility and accountability of each member in relation to the job. Thus, organizing involves

• Giving each member a specific tasks
• Establishing departments and divisions
• Delegating authority to the members
• Establishing channels of authority and communication
• Creating a system to coordinate the works of the members

Staffing This function deals with the creation and maintenance of human resources through employment, compensation, benefits, training and development, and industrial relations measures. It aims to put in place HR policies in order to deal with wage fixation, working conditions, and promotional opportunities for prospective employees. The steps involved in the staff function are

• Determining the type of people to be hired
• Recruiting prospective employees and selecting the best ones from them
• Compensating the employees
• Training and developing the employees
• Setting performance standards and evaluating the employees’ performance
• Counselling the employees

Directing Directing is the sum of several activities like communication, leadership and motivation. Directing, as a function, aims at securing willing cooperation from the individuals and the groups to achieve the predetermined goals. It includes the following activities:

• Getting work done through subordinates
• Ensuring effective two-way communication for the exchange of information with the subordinates
• Motivating subordinates to strive for better performance
• Maintaining the group morale

Controlling Controlling is the process of checking the efficiency of the individuals and the groups in fulfilling the plans and goals through follow-up measures. It is essential for continuous improvement in the managerial activities. The processes involved in controlling are

• Establishment of standard performance
• Measurement of actual performance
• Comparison of actual performance with the standard one to find the deviation
• Initiation of corrective actions, if there are any deviations

Next, let us look at the operative functions.

Operative Functions

Staffing is one of the managerial functions. But this function is normally performed by the HR managers for all the departments of the firm. In most organizations, the HR department establishes personnel policies and coordinates the HR functions of all the departments. This function is also called the operative function or HRM function. It includes, amongst others, the processes of hiring, training, compensating, appraising and retaining employees, and attending to their labour relations, health and safety, and equality concerns (see Fig. 1.2). Andrews⁸ has carried out a detailed study on the functions of HRM and commented:

 

In most organizations, the personnel or HR department establishes policies and coordinates functions such as job analysis, personnel planning, the recruitment and selection of employees, training and development, performance appraisal, compensation and employee benefits, labour relations, employee discipline and control, and occupational health and safety.

We shall now discuss the operative functions of HRM.

Procurement Procurement refers to a series of activities undertaken by the HR managers for filling the present and future vacancies of the organization. The activities include job analysis and designing, HR planning, recruitment and, finally, the selection of suitable employees. Here, job analysis refers to both the determination of specific tasks and responsibilities connected to a job and identifying the skills, knowledge and abilities required for the job holder. HR planning involves choosing and placing the right person at the right job and at the right time. Recruitment involves gathering a pool of applicants from which suitable employees may be selected. Lastly, selection involves screening, testing, interviewing and hiring the most suitable employees for the organization.

Development Development here refers to both employees’ training and management development. HR managers are responsible for conducting and supervising training and development programmes for employees. The purpose of a training and development programme is to increase the employees’ competencies in their job by improving their knowledge, skills and abilities. Training and development is widely accepted as a method for enhancing the employee skills, increasing the individual and organizational performance, improving the employee morale, and achieving the business growth and success.

Compensation Compensation refers to the determination of the pay scale and other benefits for the employees. Establishing and maintaining the pay system of an organization is one of the principal jobs of the HR managers. They must devise ways to ensure fair and equitable pay rates. In addition, HR managers should regularly manage the performance evaluation system of the organization, and continuously design reward systems such as performancelinked incentive plans and bonus and flexible work schedules. Box 1.4 outlines the flexible schedules offered by companies like IBM.

Maintenance The maintenance function aims at retaining efficient and experienced employees in the organization. This calls for creative HR practices. In this regard, HR managers are responsible for offering a wide range of HR programmes covering occupational safety, health promotion and physical fitness, canteen facilities, recreation activities, transportation programmes, employee suggestion schemes, career counselling and growth for creating a positive work environment. Box 1.5 highlights one of the HR policies of Infosys.

Integration It consists mainly of industrial relations and aims at ensuring good relations between the management and the employees. HR managers have to implement industrial relations programmes that would ensure ethical and fair treatment in disciplinary action, grievance redressal, and career management processes. They should also counsel the employees and the management to prevent and, when necessary, resolve disputes over labour agreements or other labour relation issues.

It is to be understood here that the functions of HRM can vary widely from one organization to another, depending upon its nature, size, and objectives. For instance, a smaller organization may follow a shorter HRM process with a greater emphasis on functions like procurement and compensation and little or no priority for activities like training and development and industrial relations maintenance. On the contrary, large organizations may pursue a longer and more comprehensive HRM process to meet the requirements of both the management and the workforce. Box 1.6 shows the HR statements of select companies.

HRM and Personnel Management (PM)

The difference between HRM and PM is a subject of discussion amongst HRM experts. They do not hold identical views about the similarities and dissimilarities between HRM and PM. According to Lowry,⁹ for example, PM and HRM are the successive stages of the same concept without any difference in the concept. In his words, “Human Resource Management is just the continuing process of personnel management – it is not different.”

But another HR expert differed with this contention and identified major differences between HRM and PM in the areas of management’s responsibility, skill acquisition, reward management, planning perspective, conflict perception, and so on.¹⁰ Let us look at the similarities first.

Similarities between HRM and PM

The basic elements common to HRM and PM are as follows:

Business Strategy Both form the basis for the evolution of HR and PM strategy.

Matching People Choosing the right people for the right job and developing them to achieve their maximum level of competence remain the priority of both HRM and PM.

Prominence of Line Authority HRM, similar to PM, recognizes that the primary responsibility for managing people stays with line managers.

Identical Core Elements Techniques like selection, training, development, compensation and performance management are common to both HRM and PM.

Emphasis on Communication and Participation HRM and PM provide equal importance to the communication process and workers’ participation in decision making.

We shall now discuss the differences between these two concepts.

Differences between HRM and PM

The differences between HRM and PM have been given in detail in Table 1.2.

HRM as a Profession

Not long ago, personnel managers were often assigned the “people functions” in an organization because they did not have the talents to work in production, finance, marketing or other important areas.¹¹ The ability to get along with people was considered as the major qualification for appointing a person as a personnel executive. Companies often staffed the HR department with managers who did not have professional training or college education.

However, HRM functions now occupy a much more important position in most organizations. Many universities, colleges and business schools offer a variety of HRM courses. Slowly but surely, HRM is emerging as a profession. Let us now discuss how HRM fares as a profession in fulfilling the following criteria.

An Organized Body of Knowledge

HRM now has well-defined principles, concepts, theories and practices. There has been a tremendous increase in the knowledge about HRM in recent years. An HR manager cannot perform his job effectively without proficiency in these concepts and principles.

Formal Education and Training

Several schools of thought and institutes of management have emerged to provide formalized education and training to the aspirants in HRM. For instance, the National Institute of Personnel Management (NIPM) at Kolkata is one such institute with several regional councils and a large number of members. It endeavours to promote professionalism amongst its members.

 

Existence of Association

The Medical Council of India acts as a regulatory body for medical professionals. Similarly, the NIPM prescribes a code of conduct for personnel managers. The Government of India has established a separate ministry to regulate the activities of HRM institutions.

Existence of an Ethical Code

Every member of a profession should observe a code of ethics prescribed by his regulatory authority. As far as HRM is concerned, the NIPM sets a code of conduct for its members. The code lays down the duties, ethical norms, dos and don’ts for the members.

Charging of Fees

The main obligation of a professional is to serve the community. He must not think in terms of personal gain. He must not accept or offer any improper gratification in any form or manner. HR managers are also expected to uphold the honour, integrity and dignity of the profession.

Though these developments clearly bring the HRM close to be called a profession, it cannot qualify as one in the full-fledged sense of the term. For, unlike chartered accountants and medical practitioners, an HR professional does not require any definite academic qualification to become one. Further, there is no statutory professional body available to regulate the entry of people into the profession. The NIPM has no formal authority to regulate the entry of its members. In the words of Guest and Horwood:

 

It is tempting but wrong to view personnel managers as homogeneous. Their different backgrounds and fields of operation raise doubts about the value of a professional model and of any attempt to view personnel problems as amenable to solution through a primary focus on professionalism.¹²

Still, more and more people are taking an interest in HRM and viewing this as a career. Given this scenario, let us look at the qualities of an HR manager.

Qualities of an HR Manager

HR managers have to perform several roles to discharge their duties and responsibilities. For instance, they have to act as recruiters, placement specialists, training and development specialists, employee welfare experts, employee benefits’ specialists, compensation and job analysis specialists, labour relations experts and human resources information system specialists, apart from being good counsellors. For instance, Armstrong¹³ points out that HR practitioners have to play the roles of business partners, strategists, interventionists, innovators, internal consultants, monitors and volunteers (proactive role).

The successful performance of the diverse HR tasks would require a multi-disciplinary knowledge for the HR managers. It would be good for them to have a working knowledge in the fields of business administration, law, behavioural sciences, industrial psychology, sociology, political science, economics, statistics, engineering, finance and computers. Apart from these, they would require the following personal and job-related qualities and skills to become effective performers.

Knowledge

Knowledge helps one gain respect. The HR manager must be an expert in his own field to gain the confidence and respect of his subordinates. He must have a comprehensive knowledge of concepts, principles and theories relating to HRM and other related fields. But, mere possession of this knowledge is inadequate; the HR manager must have practical exposure to these concepts and principles in real-life situations.

Intelligence

Intelligence means the mental ability to properly understand the nature of the problem existing in a situation or event which may require a solution. The HR manager should be able to understand the situation quickly and to act decisively before it becomes unmanageable. He should also be able to properly examine the situation to distinguish the real problems from the ones that are merely made to appear important.

Communication Skills

The role of any manager is to get work done through others. An HR manager is no exception to this. He must have good communication skills to share his ideas effectively with the employees and to persuade them to work towards the organizational goals successfully. Thus, it is essential for the HR manager to have good communication skills to achieve better cooperation and unity. It is also desirable for him to have a functional knowledge of the languages of the employees to effectively communicate with them.

Objectivity and Fairness

The HR profession is unique. The HR manager has to serve the interest of both the management and the employees. Hence, he should observe strict impartiality and honesty in all his transactions. He is required to act only on the basis of relevant facts and information. Moreover, he has a moral responsibility to protect the rights and privileges of the relatively weak workforce.

Leadership and Motivational Qualities

To lead is to influence. The HR manager should possess the ability to influence the employees towards the achievement of goals and targets. He should also be a good motivator. He must have the necessary skills to constantly motivate the employees to strive for better performance.

Emotional Maturity

It is often difficult to predict the responses of human beings. They usually behave differently in different situations. Hence, it is essential for the HR manager to have emotional maturity and tolerance in dealing with the employees. He must show parental care in attending to their needs. He should not have any ill-feelings towards any employee on the basis of his past behaviour. He should always be rational and not emotional in his approach.

Empathy

Empathy pertains to looking at events or situations from the others’ point of view. The HR manager should learn to view the issues affecting the employees from their perspective too. He should not only rely on his formal authority in dealing with the employees’ grievances but use his informal relationship as well in settling them. He should honour others’ opinions, sentiments, rights, beliefs and values.

In addition to these qualities, the HR manager should have a good character, personality, physical strength, and stamina for effectively discharging his duties. Having seen the notable qualities of the HR managers, we shall now discuss the differences in their duties and responsibilities as line authorities and staff advisors.

Line Versus Staff Authority of HRM

Staffing, which is one of the managerial functions, is generally performed by all managers. This is because the managers are normally involved in the process of acquiring, training and assessing the employees of their own department. In fact, line managers handle all aspects of HR activities in small organizations, while in large organizations, the top management normally establishes an exclusive HR department to develop and manage HR programmes and policies. The line managers in these firms seek the advice of the HR department in handling labour-related matters. Gary Dessler classified the line managers’ responsibilities for effective HRM under the following general headings:¹⁴

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

When an organization has separate functional HR departments, the HR managers have to perform the task of line managers for their own department and act as staff advisors for line managers of other departments. We shall first see the meaning of the important terms concerned with line versus staff authority before discussing the role of HR managers in these capacities.

Authority The term refers to the right to influence the activities of the subordinates or take decisions concerning them and to issue instructions or orders pertaining to their work.

Line Manager Line managers are those who are empowered to direct the work of the people assigned to them. Further, line managers are directly responsible for accomplishing the departmental goals and corporate objectives. Examples of line managers are production manager, purchase manager and sales manager.

Staff Advisor Staff advisors are those who play an important role in advising and assisting the line managers in accomplishing the basic goals. Theoretically, the suggestions given by the staff advisor to the line managers may or may not be accepted by the latter.

Figure 1.3 shows the line and staff responsibilities of the HR managers.

The Role of the HR Manager as a Line Authority

The HR managers apply their line authority within the HR departments. In other words, the HR managers direct the activities of the people in their own department towards the accomplishment of specified goals. These managers cannot exert line authority outside their department.

The Role of the HR Manager as a Staff Advisor

In their capacity as staff advisors, the HR managers counsel the line managers on matters concerning labour issues in their respective departments. They assist line authorities in hiring, training, appraising, awarding, counselling and terminating the employees. Whenever industrial relations are affected by disputes, grievances and indiscipline, HR managers are called in to play an important role in handling those grievances and in harmonizing the labour relations.

HR managers assist in HR-strategy design and execution by helping the top management take a closer look at the personnel aspects of the organizational activities. The HR department is also responsible for various incentive schemes and benefit programmes. Further, the HR managers educate the line managers about the right ways to treat the employees, including listening to their problems and understanding them, settling their grievances, and making them feel important in the organization.

The Future Role of HRM

HRM has been expanding in its area of activities ever since the days when management began to include welfare and personnel departments in the organizational structure. Today, the responsibilities of the HR department have grown to be broader and increasingly pragmatic.

Moreover, the advent of economic reforms in the form of globalization, liberalization and privatization in our country has changed the very profile of organizations. Today, HR managers have to think beyond traditional activities like personnel planning, welfare measures, and industrial relations. The HR managers of tomorrow need to be familiar with the operational aspects of the organizations such as strategic planning, competitive pressures, return on investment, and cost of production, to name a few, besides their own field. In brief, they must be prepared to function from the higher levels of the management in close coordination with the top management in designing and implementing the HR plans and strategies. We shall now discuss the future role and challenges of HR managers.

Change in the Nature of Work

Technological developments are changing the very nature of work. Due to technological advancements, even traditional jobs have become technologically challenging. These changes require the employment of more educated and more skilled workers in these jobs. Further, the service sector, which is fast emerging as the major provider of employment in our country, requires the use of knowledge workers. For HR managers, these developments indicate an increasing importance of human capital and knowledge workers. These new breeds of better-informed employees will expect unconventional and world-class HR practices and systems. HR managers must have plans and strategies to meet the changing expectations of these new-generation employees. They should also be prepared to handle the emerging work culture, which keeps employees more focused on their individual career prospects.

Similarly, due to rapid social transformation, an enhanced access to education and increased labour mobility, the workforce profile of the country has changed dramatically and organizations now represent several heterogeneous groups. For instance, the proportion of women, religious minorities, physically challenged and socially backward people in the workforce has increased dramatically. This is a direct challenge for the HR managers as they now have to deal with culturally and racially diverse work groups. Many firms are now compelled to initiate new gender-specific and target-based HR policies to serve the interests of different sections of the employees. Box 1.7 outlines the diversity at IBM.

Widening Scope of HR Activities

Human resources activities are getting integrated at the global level. Globalization and deregulations have deeply affected the functioning of traditional HRM. Organizations, in their pursuit of new markets and greater cost-effectiveness, extend their sales, production facilities, and supporting services to new destinations in several countries around the world. HR managers must have adequate dynamism and action plans to help these organizations successfully integrate their global HR operations. They must also ensure effective coordination amongst and control over the labour forces working in different countries.

Greater Emphasis on HRIS

The organizations of the future will be large due to world-wide mergers and acquisitions. The sheer size of an organization may compel the HR department to computerize its HR operations like recruitment, training, appraising and pay-roll preparations. Thus, large companies may require an integrated Human Resource Information System (HRIS) for effectively coordinating their different HR operations. HRIS actually means “interrelated components working together to collect, process, store and disseminate information to support decision making, coordination, control, analysis and visualization of an organization’s HRM activities.”¹⁵ Future managers should be familiar with HRIS operations. HRIS can help an organization in several ways. For instance, HRIS can relieve HR managers from routine activities as the system takes over the task of updating the employee information. It can also help the HR department produce a variety of reports in a short span.

Change in Labour Market Conditions

The increased industrialization of the country has thrown up many challenges for HR managers. Uneven economic development has resulted in the large-scale unemployment of unskilled and under-skilled persons on one side and a severe shortage of competent people on the other. This dichotomy in labour may compel HR managers to reduce their focus on the short-term needs of the organization and to concentrate more on fulfilling the long-term capability requirements such as skill development and knowledge formation amongst its existing workforce. Box 1.8 shows the skill development efforts at Infosys.

Increasing Importance of High Performance Work Systems (HPWS)

Globalization is bringing about a tremendous change in the size, structure, composition, and style of functioning of organizations so as to meet an intensified global competition. In fact, more globalization means more competition for a firm. This in turn puts increased pressure on an organization to improve its employees’ productivity. This calls for the adoption of effective HR practices by HR managers. In this regard, the HR management needs to focus on evolving an integrated set of effective HR policies and practices that produces superior employee performance. Thus, HR managers, with the help of dynamic HR policies, should develop HPWS that maximizes the competencies, commitment and abilities of the firm’s employees.¹⁶ Box 1.9 outlines the elements of HPWS.

Growing Need for Measurement Tools to Evaluate HR Programmes

The inherent weakness of HRM is the absence of reliable and effective yardsticks for measuring the performance of HR programmes. The top management expects HR managers to express their plans and performance in measurable terms. Thus, there is an urgent need for HR managers to provide concrete and quantified evidence that their department is contributing in a significant and constructive way to the accomplishment of organizational goals and objectives. HR managers’ focus in the future will be on the development and introduction of reliable and accurate HR tools to measure the efficiency of HR functions.

A prudent understanding and efficient management of these challenges are pre-requisites if HRM is to add considerable value, show business results, enact professionalism, and reveal fresh competencies in the future.

Summary

1. Human resources refer to the knowledge, education, skills, training and proficiency of the members of an organization.
2. HRM is concerned with the policies and practices that ensure the best use of the human resources to fulfil the organizational and individual goals.
3. The primary objective of HRM is to take care of the work life of employees even while ensuring their best possible co-operation for achieving the organizational goals and objectives.
4. The personnel aspects of management run through the entire organization. All managers are, in a way, HR managers as they get involved in HR activities such as choosing, training, inducting and compensating employees.
5. The functions of HRM are classified into two categories. These are managerial functions consisting of planning, organizing, staffing, directing and controlling; and operative functions consisting of procurement, development, compensation, maintenance and integration.
6. PM, an employee-centred activity, is mainly reactive in nature whereas HRM, a resource-centred activity, is proactive.
7. Although HRM is close to be called a profession, it cannot qualify as a full-fledged profession.
8. HR managers perform the task of line managers for their own department and act as staff advisors for line managers of other departments.
9. HR managers need to be familiar with strategic planning, competitive pressures, international HR activities, HRIS, changing characteristics of the labour market, HPWS and workforce diversity.

Review Questions

Essay-type questions

1. Classify and explain the managerial functions of HRM.
2. Evaluate the operative functions of HRM with examples.
3. “HRM is a staff function but a line responsibility.” Comment.
4. “HRM is a basic responsibility of every manager.” Elucidate.
5. “HRM seeks to achieve personal and social goals.” Outline the major functions of HRM.
6. “HR function plays a vital role in the whole scheme of management of an industrial organization.” Discuss.
7. Evaluate the future role of HRM in India.
8. “HRM involves all management decisions and practices that directly affect or influence the people who work for the organization.” Discuss.
9. Discuss the importance of HRM in the contemporary business environment with special reference to India.
10. Briefly discuss the implications of change in the profile of people, technology and environment on managing people in organizations. Suggest measures to make HR management in India more effective.
11. “HRM is a professional work.” Do you agree?
12. State the qualities required to be a successful HR manager.
13. Explain the importance of the HRM function. Can it be outsourced?
14. “As a result of globalization and liberalization, HRM has acquired strategic importance in organizations.” Discuss.
15. What are the recent trends in management of human resources? Also explain the status of HRM in Indian industry with examples.
16. In the changing corporate scenario, what place is accorded to HRM as a function? How does it affect the effectiveness of function as such? Analyse.

Skill-development Exercise

Objective – The objective of this exercise is to show you how to design and apply modern HR concepts more effectively in a specific situation to improve employee satisfaction, cooperation and performance.

Procedure Note – The class is divided into groups. Each group has: (1) an HR manager, (2) two HR team members, (3) two union representatives, and (4) two observers of the meetings. The role of the observer is to observe and report on the various aspects of the role-playing sessions.

Situation

Mukesh joins as the HR manager of Spike Tyres and Tubes Limited. When he interacts with the employees of the company as part of the familiarization process, he finds out to his dismay that almost all the employees have one grievance against the organization or another. His subordinates in the department also inform him that the employees are never satisfied with the benefits offered to them. Peculiarly, when some benefits are given to one group of employees, the other groups become restive and demand benefits. For instance, when educational allowances are provided to the younger employees to pursue higher studies, the older ones get upset. The situation turns the other way round when retirement benefits are significantly increased. Further, the women, who have joined the company in large numbers in recent years, have a grudge that the company has no women-specific welfare measures like child-care centre and maternity benefits. However, when Mukesh scrutinizes the HR policies of the company, he realizes that the HR polices are the major source of troubles as they are old-fashioned and do not suit the diversified and well-informed workforce of today. Thus, he decides to conduct meetings to discuss the alterations and improvements required to be made in the HR policies and procedures in tune with the changing nature of the workforce.

Steps in the exercise

There are three steps in the exercise:

Step 1: The HR manager meets the union representatives (or select workers in a non-unionized firm) to ascertain their views on the proposed changes to the existing HR policies.

Step 2: The HR manager convenes a meeting attended by two HR team members to finalize the changes to be incorporated in the HR policies. The updated HR policy will subsequently be sent to the top management for approval.

Step 3: Observers analyse and provide feedback on the performance of the members in the role-playing session.

Case Study

Plight of an Intelligent Management Trainee

X-Look Company is a fast-growing textile company with an annual turnover of Rs 1,200 million and has a strong workforce of 950 employees. The HR policy of the organization provided clear guidelines to the HR department regarding how different HR functions are to be performed. As regards the recruitment of managerial people, the policy recommended direct recruitment for entry-level categories like junior managerial positions preferably through campus interviews while the suggested course for filling the senior managerial positions was through internal promotions.

Mr Malhotra, a topper in the production engineering discipline, was chosen as a management trainee by the company in one of its campus interview programmes. As per the terms and conditions of his employment, Malhotra was to undergo on-the-job training for a probationary period of one year. His eventual appointment as an assistant manager in any one of the engineering departments would be decided on the basis of the performance evaluation to be conducted at the end of the probationary period. He was posted to the Research and Development (R&D) department and was reporting to Mr Ravi Shankar, the head of R&D. Malhotra was keen to excel in the job and worked with zeal and vigour. Obviously, his behaviour and performance was widely appreciated by many in the firm including his own peers in the training programme. Mr Ravi Shankar was also impressed by Malhotra’s smartness, commitment and contribution. Thus, Ravi Shankar was willing to recommend Malhotra’s name for any of the important assignments of the company befitting his knowledge and sincerity after he completed his training period. Quite unexpectedly, the post of design manager in the firm suddenly fell vacant due to the untimely demise of its incumbent. Mr Ravi Shankar strongly believed that Malhotra would excel in this post given his knowledge, skill and creativity despite his lack of experience and thus, strongly favoured him for the post. In this regard, he sought an exemption from the existing HR policy which stipulated that the trainees ought to be considered only for assistant manager cadre after they complete their training programme successfully. Further, he also requested the management to instruct the HR department to conduct an immediate evaluation of the training performance of Malhotra to make him available for the vacant position on time.

The management obliged Ravi Shankar and instructed the HR department to conduct the post-training evaluation for Malhotra and send a report in this regard to it at the earliest. The HR department promptly conducted the evaluation and forwarded its report. As the report was very positive, management moved in quickly to appoint Malhotra as the design manager by treating his case as an exceptional one.

However, the decision of the management did not go down well with other employees including management trainees as they began to feel that Malhotra was unduly favoured. Even those people who earlier appreciated Malhotra’s performance and behaviour soon changed their mood and turned against him. Consequently, they began to express their dissatisfaction in all possible forms and forums. Management could clearly discern the general mood of the employees and became anxious over the negative fall out of its decision. It has also witnessed a perceptible decline in the team spirit, interest and commitment of the employees, in general, and the management trainees in particular.

With the mounting criticism of its action, the management began to think that it has no choice other than back-tracking on its own decision. After dilly-dallying for some time, the management finally decided to shift Malhotra to a lower cadre and keep him there for some time before being elevated again to some higher position. However, the news of his imminent removal from his new position completely demoralized the young and energetic Malhotra and he began to wonder how his removal would be viewed and interpreted by other trainees. To avoid his unceremonious exit from the present post, Malhotra resigned his job voluntarily and quit the firm abruptly.

Malhotra, a brilliant engineering graduate, who joined the organization with high hopes and proved himself an excellent employee during the training, now finds his career in shambles. Sadly, the management of X-Look also lost an efficient and enterprising employee. Looking back at the whole episode, the company realized that it had not properly considered the human element involved in all its decisions concerning Malhotra and was merely guided by the mechanical elements.

Discussion Questions

1. According to you, what is the root cause of the problem in the Malhotra episode and who is to be blamed for his present troubles?
2. If you had been Malhotra, what would have been your response to these developments?
3. What steps should the management take to avert the recurrence of such situation in the future?

Notes

1. Michael J. Jucius, Personnel Management (Homewood, IL: Irwin Professional Publishing, 1980), p. 40.
2. Leon C. Megginson, Personnel and Human Resources Administration (Homewood, IL: Irwin, 1982), p. 6.
3. Edwin B. Flippo, Personnel Management (New York: McGraw-Hill, 1984), p. 5.
4. Institute of Personnel Management, Personnel Management in India (Bombay: Asia Publishing House, 1973), pp. 29–30.
5. David A. Decenzo and Stephen P. Robbins, Personnel Human Resource Management, 3rd ed. (New Delhi: Prentice Hall of India Learning, 1973), p. 3.
6. George T. Milkovich and John W. Boudreau, Human Resource Management (Homewood, IL: Irwin, 1998), p. 6.
7. Institute of Personnel Management, Personnel Management in India (Bombay: Asia Publishing House, 1973), pp. 29–30.
8. Janet R. Andrews, “Where Doubts About the Personnel Role Begin,” Personnel Journal (June 1987): 84.
9. Pat Lowry, “Personnel Management,” Plus (December 1990): 8.
10. D. E. Guest, “Human Resource Management and Industrial Relations,” Journal of Management Studies, 24 (1987): 503–522.
11. Terry L. Leap and Michael D. Crino, Personnel and Human Resource Management (New York: Maxwell Macmillan International Editions, 1990), p. 18.
12. David E. Guest and Robert Horwood, “Characteristics of Successful Personnel Managers,” Personnel Management (May 1981): 18–23.
13. Michael Armstrong, A Handbook of Human Resource Management Practice, 8th ed. (London: Kogan Page Limited), pp. 92–96.
14. Gary Dessler, Human Resource Management (Delhi: Pearson Education, 2005), p. 6.
15. Anthony Hendrickson, “Human Resource Information System: Backbone Technology of Contemporary Human Resources,” Journal of Labour Research, 24(3) (Summer 2003): 381–395.
16. Gary Dessler, Human Resource Management (Delhi: Pearson Education, 2005), p. 84.