Human Resource Management (HRM)

Human resource management (HRM), or human resource development, entails planning, implementing, and managing recruitment, as well as selection, training, career, and organizational development initiatives within an organization. The goal of HRM is to maximize the productivity of an organization by optimizing the effectiveness of its employees while simultaneously improving the work life of employees and treating employees as valuable resources. Consequently, HRM encompasses efforts to promote personal development, employee satisfaction, and compliance with employment-related laws.
To achieve equilibrium between employer and employee goals and needs, HRM departments focus on these three general functions or activities: planning, implementation, and evaluation. The planning function refers to the development of human resource policies and regulations. Human resource managers attempt to determine future HRM activities and plan for the implementation of HRM procedures to help companies realize their goals.
Implementation of HRM plans involves four primary activities: acquisition, development, compensation, and maintenance. Acquisition entails the hiring of workers most likely to help a company attain its goals. The development function encompasses the training of workers to perform their tasks in accordance with company strategy. This activity also involves company efforts to control and change employee behavior via reviews, appraisals, incentives, and discipline. Compensation covers the payment of employees for their services. Maintenance requires structuring labor relationshe interaction between a company’s management and its unionized employeesnd ensuring compliance with federal and state employment laws. Finally, the evaluation function includes the assessment of a company’s HRM policies to determine whether they are effective.

HISTORY

Key principles and practices associated with HRM date back to the beginning of mankind. Mechanisms were developed for the selection of tribal leaders, for example, and knowledge was recorded and passed on to youth about safety, health, hunting, and gathering. More advanced HRM functions were developed as early as 1000 and 2000 B.C. Employee screening tests have been traced back to 1115 B.C. in China, for instance. And the earliest form of industrial education, the apprentice system, was started in ancient Greek and Babylonian civilizations before gaining prominence during medieval times.
Since the inception of modem management theory, the terminology used to describe the role and function of workers has evolved from “personnel” to “industrial relations” to “employee relations” to “human resources.” While all of these terms remain in use, “human resources” most accurately represents the view of workers by contemporary management theory: as valuable resources managed in the same manner as other valuable resources, according to the authors of Human Resource Management.
The need for an organized form of HRM emerged during the industrial revolution, as the manufacturing process evolved from a cottage system to factory production. As the United States shifted from an agricultural economy to an industrial economy, companies were forced to develop and implement effective ways of recruiting and keeping skilled workers. In addition, industrialization helped spur immigration, as the country opened its borders to fill industrial positions. Filling these jobs with immigrants, however, created an even greater need for adequate management of employees.
Between the 1880s and the 1940s, immigration rose significantly and remained robust until World War II. Advertisements circulated throughout the world depicting the United States as the land of opportunity where good-paying industrial jobs were plentiful. As a result, the country had a steady stream of low-skill, low-cost immigrant workers who occupied manufacturing, construction, and machinery operation positions. Even though these employees performed largely routine tasks, managers faced serious obstacles when trying to manage them since they spoke different languages.
Early human resource management techniques included social welfare approaches aimed at helping immigrants adjust to their jobs and to life in the United States. These programs assisted immigrants in learning English and obtaining housing and medical care. In addition, these techniques promoted supervisory training in order to increase productivity.
While some companies paid attention to the “human” side of employment, however, others did not. Therefore, other factors such as hazardous working conditions and pressure from labor unions also increased the importance of effective management of human resources. Along with the manufacturing efficiencies brought about by industrialization came several shortcomings related to working conditions. These problems included: hazardous tasks, long hours, and unhealthy work environments. The direct cause of employers seeking better HRM programs was not poor working conditions, but rather the protests and pressures generated by workers and organized labor unions. Indeed, labor unions, which had existed as early as 1790 in the United States, became much more powerful during the late 1800s and early 1900s.
There were two other particularly important contributing factors to the origination of modem HRM during that period. The first was the industrial welfare movement, which represented a shift in the way that managers viewed employeesrom nonhuman resources to human beings. That movement resulted in the creation of medical care and educational facilities. The second factor was Frederick W. Taylor’s (1856-1915)Scientific Management, a landmark book that outlined management methods for attaining greater productivity from low-level production workers.
The first corporate employment department designed to address employee concerns was created by the B.F. Goodrich Company in 1900. In 1902 National Cash Register formed a similar department to handle worker grievances, wage administration, record keeping, and many other functions that would later be relegated to HRM departments at most large
U.S. companies. HRM as a professional discipline was especially bolstered by the passage of the Wagner Act in 1935 (also known as the National Labor Relations Act), which remained the basic U.S. labor law through the 1990s. It augmented the power of labor unions and increased the role and importance of personnel managers.
During the 1930s and 1940s the general focus of HRM changed from a focus on worker efficiency and skills to employee satisfaction. That shift became especially pronounced after World War II, when a shortage of skilled labor forced companies to pay more attention to workers’ needs. Employers, influenced by the famous Hawthorne productivity studies and similar research, began to emphasize personal development and improved working conditions as a means of motivating employees.
In the 1960s and 1970s the federal government furthered the HRM movement with a battery of regulations created to enforce fair treatment of workers, such as the Equal Pay Act of 1963, the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974 (ERISA), and the Occupational Safety and Health Act of 1970. Because of these acts, companies began placing greater emphasis on HRM in order to avoid lawsuits for violating this legislation. These regulations created an entirely new legal role for HRM professionals. Furthermore, during the 1970s, HRM gained status as a recognized profession with the advent of human resource programs in colleges.
By the end of the 1970s, virtually all medium-sized and large companies and institutions had some type of HRM program in place to handle recruitment, training, regulatory compliance, dismissal, and other related issues. HRM’s importance continued to grow during the 1980s for several reasons. Changing workforce values, for example, required the skills of HRM professionals to adapt organizational structures to a new generation of workers with different attitudes about authority and conformity. Shifting demographics forced changes in the way workers were hired, fired, and managed. Other factors contributing to the importance of HRM during the 1980s and 1990s were increasing education levels, growth of service and white-collar jobs, corporate restructuring (including reductions in middle management), more women in the workforce, slower domestic market growth, greater international competition, and new federal and state regulations.

THE FOCUS OF HRM

Businesses and organizations rely on three major resources: physical resources, such as materials and equipment; financial resources, including cash, credit, and debt; and human resources or workers. In its broadest sense, HRM refers to the management of all decisions within an organization that are related to people. In practice, however, HRM is a tool used to try to make optimum use of human resources, to foster individual development, and to comply with government mandates. Larger organizations typically have an HRM department and its primary objective is making company goals compatible with employee goals insofar as possible. Hence, for a company to attain its goals, it must have employees who will help it attain them.
Towards this end, R. Wayne Pace, writing in Human Resource Development, identifies seven underlying assumptions that provide a foundation and direction for HRM. First is the acknowledgment of individual worth, suggesting that companies recognize and value individual contributions. Second is that employees are resources who can learn new skills and ideas and can be trained to occupy new positions in the organization. Third is that quality of work life is a legitimate concern, and that employees have a right to safe, clean, and pleasant surroundings. A fourth assumption is the need for continuous learning; talents and skills must be continually refined in the long-term interests of the organization.
A fifth assumption supporting the existence of an organized HRM within a company or institution is that opportunities are constantly changing and companies need methods to facilitate continual worker adaptation. Sixth is employee satisfaction, which implies that humans have a right to be satisfied by their work and that employers have a responsibility and profit motivation to try to match a worker’s skills with his or her job. The seventh and final assumption is that HRM encompasses a much broader scope than technical trainingmployees need to know more than the requirements of a specific task in order to make their maximum contribution.

THE ROLE, POSITION, AND STRUCTURE OF HRM DEPARTMENTS

In Personnel Management, Paul S. Greenlaw and John P. Kohl describe three distinct, interrelated fields of interest addressed by the HRM discipline: human relations, organization theory, and decision areas. Human relations encompass matters such as individual motivation, leadership, and group relationships. Organization theory refers to job design, managerial control, and work flow through the organization. Decision areas encompass interests related to the acquisition, development, compensation, and maintenance of human resources. Although the method and degree to which those areas of interest are handled vary among different HRM departments, a few general rules characterize the responsibilities, positioning, and structure of most HRM divisions.
HRM department responsibilities, other than related legal and clerical duties, can be classified by individual, organizational, and career areas. Individual management entails helping employees identify their strengths and weaknesses, correct their shortcomings, and then 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 focuses on fostering a successful system that maximizes human, and other, resources. 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. The third responsibility, career development, involves matching individuals with the most suitable jobs and career paths.
The positioning of HRM departments is ideally near the theoretic organizational center, with maximum access to all divisions and management levels. In larger organizations the HRM function might be headed by a vice president, while smaller entities will have a middle-level manager as head of HRM. In any case, because the HRM department is charged with managing the productivity and development of workers at all levels, the top HRM manager ideally has access to, and the support of, key decision makers. In addition, the HRM department should be situated in such a way that it has horizontal access, or is able to communicate effectively with all divisions within the company. Horizontal access allows HRM to integrate, educate, and train the workforce, and to facilitate changes that affect one division and indirectly influence other segments of the company or institution.
The structure of HRM departments differs according to the type and size of the organization that they serve. But many large organizations (including governments, institutions, manufacturing companies, and service firms) organize HRM employee development functions around various clusters of workershey 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.

HRM IMPLEMENTATION ACTIVITIES

To fulfill their basic role and achieve their goals, HRM professionals and departments engage in a variety of activities in order to execute their human resource plans. HRM implementation activities fall into four functional groups, each of which includes related legal responsibilities: acquisition, development, compensation, and maintenance.

ACQUISITION.

Acquisition duties consist of human resource planning for employees, which includes activities related to analyzing employment needs, determining the necessary skills for positions, identifying job and industry trends, and forecasting future employment levels and skill requirements. These tasks may be accomplished using such tools and techniques as questionnaires, interviews, statistical analysis, building skill inventories, and designing career path charts. Four specific goals of effective human resource planning are:

1. Sustaining stable workforce levels during ups and downs in output, which can reduce unnecessary employment costs and liabilities and increase employee morale that would otherwise suffer in the event of lay-offs.
2. Preventing a high turnover rate among younger recruits.
3. Reducing problems associated with replacing key decision makers in the event of an unexpected absence.
4. Making it possible for financial resource managers to efficiently plan departmental budgets.

The acquisition function also encompasses activities related to recruiting workers, such as designing evaluation tests and interview methods. Ideally, the chief goal is to hire the most-qualified candidates without encroaching on federal regulations or allowing decision makers to be influenced by unrelated stereotypes. HRM departments at some companies may choose to administer honesty or personality tests, or to test potential candidates for drug use. Recruitment responsibilities also include ensuring that the people in the organization are honest and adhere to strict government regulations pertaining to discrimination and privacy. To that end, human resource managers establish and document detailed recruiting and hiring procedures that protect applicants and diminish the risk of lawsuits.

DEVELOPMENT.

The second major HRM function, human resource development, refers to performance appraisal and training activities. The basic goal of appraisal is to provide feedback to employees concerning their performance. This feedback allows them to evaluate the appropriateness of their behavior in the eyes of their coworkers and managers, correct weaknesses, and improve their contribution. 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.
Training and development activities include the determination, design, execution, and analysis of educational programs. Orientation programs, for example, are usually necessary to acclimate new hires to the company. The HRM training and education role may encompass a wide variety of tasks, depending on the type and extent of different programs. In any case, the HRM professional ideally is aware of the fundamentals of learning and motivation, and must carefully design effective training and development programs that benefit the overall organization as well as the individual. Training initiatives may include apprenticeship, internship, job rotation, mentoring, and new skills programs.

COMPENSATION.

Compensation, the third major HRM function, refers to HRM duties related to paying employees and providing incentives for them. HRM professionals are typically charged with developing wage and salary systems that accomplish specific organizational objectives, such as employee retention, quality, satisfaction, and motivation. Ultimately, their aim is to establish wage and salary levels that maximize the company’s investment in relation to its goals. This is often successfully accomplished with performance based incentives. In particular, HRM managers must learn how to create compensation equity within the organization that doesn’t hamper morale and that provides sufficient financial motivation. Besides financial compensation and fringe benefits, effective HRM managers also design programs that reward employees by meeting their emotional needs, such as recognition for good work.

MAINTENANCE.

The fourth principal HRM function, maintenance of human resources, encompasses HRM activities related to employee benefits, safety and health, and worker-management relations. Employee benefits are non-incentive-oriented compensation, such as health insurance and free parking, and are often used to transfer nontaxed compensation to employees. The three major categories of benefits managed by HRM managers are: employee services, such as purchasing plans, recreational activities, and legal services; vacations, holidays, and other allowed absences; and insurance, retirement, and health benefits. To successfully administer a benefits program, HRM professionals need to understand tax incentives, retirement investment plans, and purchasing power derived from a large base of employees.
Human resource maintenance activities related to safety and health usually entail compliance with federal laws that protect employees from hazards in the workplace. Regulations emanate from the federal Occupational Safety and Health Administration, for instance, and from state workers’ compensation and federal Environmental Protection Agency laws. HRM managers must work to minimize the company’s exposure to risk by implementing preventive safety and training programs. They are also typically charged with designing detailed procedures to document and handle injuries.
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 systems to foster cooperation. Activities in this arena include contract negotiation, developing policies to accept and handle worker grievances, and administering programs to enhance communication and cooperation.

EVALUATION OF HRM METHODS

One of the most critical aspects of HRM is evaluating HRM methods and measuring their results. Even the most carefully planned and executed HRM programs are meaningless without some way to judge their effectiveness and confirm their credibility. The evaluation of HRM methods and programs should include both internal and external assessments. Internal evaluations focus on the costs versus the benefits of HRM methods, whereas external evaluations focus on the overall benefits of HRM methods in achieving company goals. Larger human resource departments often use detailed, advanced data gathering and statistical analysis techniques to test the success of their initiatives. The results can then be used to adjust HRM programs or even to make organizational changes.
The authors of Human Resources Management posit four factors, the “four Cs,” that should be used to determine whether or not an HRM department or individual program is succeeding: commitment, competence, cost-effectiveness, and congruence. In testing commitment, the HRM manager asks to what extent do policies enhance the commitment of people to the organization? Commitment is necessary to cultivate loyalty, improve performance, and optimize cooperation among individuals and groups.
Competence refers to the extent to which HRM policies attract, keep, and develop employees: Do HRM policies result in the right skills needed by the organization being available at the proper time and in the necessary quantity? Likewise, cost-effectiveness, the third factor, measures the fiscal proficiency of given policies in terms of wages, benefits, absenteeism, turnover, and labor/management disputes. Finally, analysis of congruence helps to determine how HRM policies create and maintain cooperation between different groups within and outside the organization, including different departments, employees and their families, and managers and subordinates.
In addition to advanced data gathering and analysis techniques, several simple observations can be made that provide insight into the general effectiveness of a company’s human resources. For example, the ratio of managerial costs to worker costs indicates the efficiency of an organization’s labor force. In general, lower managerial costs indicate a more empowered and effective workforce. Revenues and costs per employee, when compared to related industry norms, can provide insight into HRM effectiveness.
Furthermore, the average speed at which job vacancies are filled is an indicator of whether or not the organization has acquired the necessary talents and competencies. Other measures of HRM success include employee complaint and customer satisfaction statistics, health insurance and workers’ compensation claims, and independent quality ratings. In addition, the number of significant innovations made each year, such as manufacturing or product breakthroughs, suggest HRM’s success at fostering an environment that rewards new ideas and is amenable to change.
Besides evaluating these internal aspects of HRM programs, companies also must assess the effectiveness of HRM programs by their impact on overall business success. In other words, companies must link their evaluation of HRM methods with company performance to determine whether these methods are helping their business by increasing quality, reducing costs, expanding market share, and so forth. Ultimately, companies must make sure that they have the right amount of properly skilled employees performing tasks necessary for the attainment of company goals and that greater revenues and profits result from HRM efforts to increase the workforce and improve worker training and motivation.

LEGAL INFLUENCES

The field of HRM is greatly influenced and shaped by state and federal employment legislation, most of which is designed to protect workers from abuse by their employers. Indeed, one of the most important responsibilities of HRM professionals lies in compliance with regulations aimed at HRM departments. The laws and court rulings can be categorized by their affect on the four primary HRM functional areas: acquisition, development, compensation, and maintenance.
The most important piece 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 achieve, and often document, fairness 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 (EEOC) to enforce the act, and provides for civil penalties in the event of discrimination. Possible penalties include forcing an organization to implement an affirmative action program to actively recruit and promote minorities that are underrepresented in a company’s workforce or management. The net result of the all encompassing civil rights acts is that HRM departments must carefully design and document numerous procedures to ensure compliance, or face potentially significant penalties.
In addition to the civil rights acts, a law affecting acquisition, or resource planning and selection, 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. The important Age Discrimination in Employment Act of 1967, which was strengthened by amendments in the early 1990s, essentially protects workers 40 years of age and older from discrimination. The Fair Credit Reporting Act also affects acquisition activities, as employers who turn down applicants for credit reasons must provide the sources of the information that shaped their decision. Similarly, the Buckley Amendment of 1974 requires certain institutions to make records available to individuals and to receive permission before releasing those records to third parties.
The major laws affecting HRM development, or appraisal, training, and development, are the civil rights act, the equal pay act, and the age discrimination in employment act. All of those laws also affected the third HRM activity, rewards, or salary administration and incentive systems. In addition, however, HRM reward programs must comply with a plethora of detailed legislation. The Davis-Bacon Act of 1931, for instance, requires the payment of minimum wages to nonfederal employees. The Walsh Healy Public Contracts Act of 1936 ensures that employees working as contractors for the federal government will be compensated fairly. Importantly, the Fair Labor Standards Act of 1938 mandates employer compliance with restrictions related to minimum wages, overtime provisions, child labor, and workplace safety. Other major laws affecting rewards include: the Tax Reform Acts of 1969, 1976, and 1986; the Economic Recovery Tax Act of 1981; the Revenue Act of 1978; and the Tax Equity and Fiscal Responsibility Act of 1982.
Perhaps the most regulated realm of the HRM field is maintenance (or benefits), safety and health, and employee/management relations. Chief among regulations in this arena is the Occupational Safety and Health Act of 1970, which established the Occupational Safety and Health Administration. That act was designed to force employers to provide safe and healthy work environments and to make organizations liable for workers’ safety. The sweeping act has ballooned to include thousands of regulations backed by civil and criminal penalties, including jail time and fines for company executives. Also of import are state workers’ compensation laws, which require employers to make provisions to pay for work-related injuries, and forces HRM managers to create and document safety procedures and programs that reduce a company’s liability. The Wagner Act of 1935 is the main piece of legislation governing union/management relations, and is a chief source of regulation for HRM departments. Other important laws related to HRM maintenance include: the Norris-Laguardia Act of 1932, the Social Security Act of 1935, the Taft-Hartley Act of 1947, and the Landrum-Griffin Act of 1959.

FORCES CHANGING HRM

In the 1990s several forces were shaping the broad field of HRM. The first key force, new technologiesarticularly information technologyrought about the decentralization of communications and the shake-up of existing paradigms of human interaction and organizational theory. Satellite communications, computers and networking systems, fax machines, and other devices were facilitating rapid change. Moreover, since these technologies helped blur the lines between work time and personal time by enabling employees to work at home, HRM professionals began adopting “management by objective” approaches to human resources instead of the traditional “management by sight” method.
A second important change affecting HRM was new organizational structures that began to emerge during the 1980s and continued through the 1990s. Because many companies began expanding their operations and diversifying their products and services, the central decision-making system failed to respond quickly enough to managers’ needs and concerns. Therefore, companies started scrapping traditional, hierarchical organizational structures in favor of flatter, decentralized management systems. Consequently, fewer managers were involved in the decision-making process and companies were adopting more of a team approach to management. HRM professionals, as the agents of change, were charged with reorganizing workers and increasing their efficiency. These efforts also resulted in the proliferation of part-time, or contract, employees, which required human resource strategies that contrasted with those applicable to full time workers.
A third change factor was accelerating market globalization, which was increasing competition and demanding greater performance out of workers, often at diminished levels of compensation. To compete abroad, companies were looking to their HRM professionals to augment initiatives related to quality, productivity, and innovation. Other factors changing HRM include: an accelerating rate of change and turbulence, resulting in higher employee turnover and the need for more responsive, open-minded workers; rapidly changing demographics; and increasing income disparity as the demand for highly educated workers increases at the expense of lower-wage employees.

SEE ALSO: Compensation Administration; Employee Motivation; Hiring Practices

[Dave Mote,
updated by Karl Heil]

FURTHER READING:

Beer, Michael, et al. Human Resource Management. New York: Free Press, 1985.
Greenlaw, Paul S., and John P. Kohl. Personnel Management: Managing Human Resources. New York: Harper & Row, 1986.
Minehan, Maureen. “Technology’s Increasing Impact on the Workplace.” HRMagazine, December 1997, 168.
Pace, R. Wayne. Human Resource Development: The Field. Englewood Cliffs, NJ: Prentice Hall, 1991.
Scarpello, Vida G., James Ledvinka, and Thomas J. Bergmann. Human Resource Management. Cincinnati: South-Western, 1995.
Walker, James W. “Are We Using the Right Human Resource Measures?” Human Resource Planning, June 1998, 7.

Source: Encyclopedia of Business, ©2000 Gale Cengage. All Rights Reserved. Full copyright.

Ref: http://www.enotes.com/human-resource-management-reference/human-resource-management-hrm