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Human Resource Management

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After studying this chapter, students should be able to understand the following concepts:

A. The Personnel Management

B. History of Personnel Management

C. Shifting from Personnel Management to HRM


This lecture provides meaning about the basic concept of personnel management, historical perspective of

the development of HRM department in organization and the factors that played important role in

conversion of personnel management department to Human Resource management Department.

A. The Concept of Personnel Management

The term personnel Management and Human Resource management refer to the same processes. Human

resource management is a modern term that emerged during the 1970s and won final acceptance in 1989.

Both terms, however referred to the same thing; the personnel who work for a company represent that

company’s human resources.

Although Human Resource Management department as we know them did not generally exist until the

1940s, the activities performed by these departments were not all brand new; in fact, many of the Human

Resource practices and programs that we see today ace roots in the earlier times.

Human Resource Management (HRM) historically known as personal management, deals with formal

system for the management of the people within the organization. As many well-known companies report

that they are trying to transform their workforce into a source of completive advantage.

HR mangers have many concerns regarding their workers. These concerns include how to mange layoffs,

address reduced employee loyalty, create a well trained highly motivated work force that can deliver higher

quality and productivity. Mange and increase diverse workforce and contain health care cost.

HRM has been undergoing transformation. In 1970s, the job of the HR manger was to keep their

companies out of court and in compliance with the increasing number of regulations governing the work

place. In the 1980s HR mangers had to address staffing costs related to mergers and acquisitions and

downsizing. The economic issues related to an increasingly global and completive workplace characterize

the 1990s. Beside these concerns Firms are also facing some other challenges regarding workforce before

we take up the HR challenges that face managers, we need to define manager and say a word about where

human resources fit into the organization. Managers are people who are in charge of others and are

responsible for the timely and correct execution of actions that promote their units' successful performance.

B. History of Personnel Management

A group of people becomes an organization when they cooperate with each other to achieve common

goals. Communication among them is therefore important. But people have individual motivations, which

often differ, from the corporate goals. An effective organization is one which succeeds in getting people to

accept that cooperating to achieve organizational goals also helps them to achieve their own goals provided

they are adequately rewarded through extrinsic and intrinsic rewards. This is achieved primarily through

leadership and motivation.

Employers therefore increasingly view human resource management from a strategic perspective, and as an

appropriate means through which the chasm between organizational and individual goals can be narrowed.

As it has been aptly observed:

"Part of the problem is that we have split off human resource management from the general management

problem, as if there were some other kind of management other than human resource management. As long

as organizations are based upon the coordinated action of two or more people, management is by definition

human resource management.

Despite the proliferation of writings and studies on HRM, there is a wide gap between the rhetoric and the

reality, though the gap has been narrowing in the 1990s. There is as yet inadequate research to ascertain the

extent to which practice matches corporate policy statements, and the impact of HRM policies and practices



on employee behavior and morale. To have a major impact on enterprises, HRM has to be diffused across

an economy, rather than remain islands of excellence. Nevertheless, promoting excellent models of HRM

stimulates interest in better people management.

HRM has three basic goals, which contribute to achieving management objectives. The first is integration of

HRM in two senses: integrating HRM into an organization's corporate strategy, and ensuring an HRM view

in the decisions and actions of line managers. Integration in the first sense involves selecting the HRM

options consistent with (and which promote) the particular corporate strategy. The option is determined by

the type of employee behavior expected (e.g. innovation) needed to further the corporate strategy. For

instance, the HRM policies in relation to recruitment, appraisal, compensation, training, etc. differ according

to whether the business strategy is one of innovation, quality enhancement or cost reduction. A strategy of

innovation may require a pay system less influenced by market rates but which rewards creativity, and the

pay rates would even be low so long as there are ways of making up the earnings package. A cost reduction

strategy may lead to pay rates being strongly influenced by market levels. Similarly, training and

development would receive less emphasis in a cost reduction strategy than in one where the objective is

innovation or quality. But such integration is difficult without securing the inclusion of a HRM view in the

decisions and practices of line managers. This requires that HRM should not be a centralized function.

A second goal of HRM is securing commitment through building strong cultures. This involves promoting

organizational goals by uniting employees through a shared set of values (quality, service, innovation, etc.)

based on a convergence of employee and enterprise interests, which the larger Japanese enterprises have

been particularly adept at.

A third goal of HRM is to achieve flexibility and adaptability to manage change and innovation in response

to rapid changes consequent upon globalization. Relevant to HRM policies in this regard are training and

multi-skilling, re-organization of work and removal of narrow job classifications. Appropriate HRM policies

are designed, for instance, to recruit, develop and retain quality staff, to formulate and implement agreed

performance goals and measures, and to build a unified organizational culture.

C. Shifting from Personnel Management to HRM

The increasingly important role of HRM is reflected in the transformation of the personnel management

function from one of concentrating on employee welfare to one of managing people in a way, which

matches organizational and individual goals and providing employees with intrinsic and extrinsic rewards.

Therefore, today Human Resource Management (HRM), historically known as personal management, deals

with formal system for the management of the people within the organization. Many well-known companies

report that they are trying to transform their workforce into a source of completive advantage.

Stages of shifting of Personnel Management to HRM:

First, HRM earlier reacted piece-meal to problems as they arose. Effective HRM seeks to link HRM issues

to the overall strategy of the organization, with the most effective HRM policies and practices integrated

into such corporate policies and strategies to reinforce or change an organization's culture. Integration is

needed in two senses - integrating HRM issues in an organization's strategic plans and securing the

acceptance and inclusion of a HRM view in the decisions of line managers. The HRM policies in respect of

the various functions (e.g. recruitment, training, etc.) should be internally consistent. They must also be

consistent with the business strategies and should reflect the organization's core values. The problem of

integrating HRM view business strategy arises, for example, in a diversified enterprise with different

products and markets. In such cases it is difficult to match HRM policies with strategies that could vary

among different business activities, each of which may call for different HRM policies.

Second, building strong cultures is a way of promoting particular organizational goals, in that "a 'strong

culture' is aimed at uniting employees through a shared set of managerially sanctioned values ('quality',

'service', 'innovation' etc.) that assume an identification of employee and employer interests.

However, there can be tension between a strong organizational culture and the need to adapt to changed



circumstances and to be flexible, particularly in the highly competitive and rapidly changing environment in

which employers have to operate today. Rapid change demanded by the market is sometimes difficult in an

organization with a strong culture. IBM has been cited as a case in point. Its firmly-held beliefs about

products and services made it difficult for it to effect changes in time, i.e. when the market required a radical

change in product and service (from mainframe, customized systems, salesmen as management consultants

to customer-as-end-user, seeking quality of product and service) to personal computers (standardized

product, cost competition, dealer as customer). Nevertheless, in the long term a strong organizational

culture is preferable to a weak one.

Third, the attitude that people are a variable cost is, in effective HRM, replaced by the view that people are

a resource and that as social capital can be developed and can contribute to competitive advantage.

Increasingly, it is accepted that competitive advantage is gained through well-educated and trained,

motivated and committed employees at all levels. This recognition is now almost universal, and accounts for

the plausible argument that training and development are, or will be, the central pillar of HRM.

Fourth, the view that the interests of employees and management or shareholders are divergent and

confliction - though substantially true in the past - is giving way to the view that this need not necessarily be

so. As organization, which practices, effective HRM seeks to identify and promote a commonality of

interests. Significant examples are training which enhances employment security and higher earning capacity

for employees while at the same time increasing the employee's value to the enterprise's goals of better

productivity and performance; pay systems which increase earnings without significant labor cost increases,

and which at the same time promote higher performance levels; goal-setting through two-way

communication which establishes unified goals and objectives and which provides intrinsic rewards to the

employee through a participatory process.

Fifth, top-down communication coupled with controlled information flow to keep power within the

control of management giving way to a sharing of information and knowledge. This change facilitates the

creation of trust and commitment and makes knowledge more productive. Control from the top is in

effective HRM being replaced by increasing employee participation and policies, which foster commitment

and flexibility that help organizations to change when necessary. The ways in which the larger Japanese

enterprises have installed participatory schemes and introduced information-sharing and two-way

communication systems are instructive in this regard.

In enterprises that tend to have corporate philosophies or missions, and where there are underlying values

that shape their corporate culture, HRM becomes a part of the strategy to achieve their objectives. In some

types of enterprises such as ones in which continuous technological change takes place, the goal of

successfully managing change at short intervals often requires employee cooperation through emphasis on

communication and involvement. As this type of unit grows, "If there is strategic thinking in human

resource management these units are likely to wish to develop employee-relations policies based on high

individualism paying above market rates to recruit and retain the best labor, careful selection and

recruitment systems to ensure high quality and skill potential, emphasis on internal training schemes to

develop potential for further growth, payment system designed to reward individual performance and

cooperation, performance and appraisal reviews, and strong emphasis on team work and communication ...

In short, technical and capital investment is matched by human resource investments, at times reaching near

the ideals of human resource management.

Shift of personnel management to HRM took place in three stages:

Records and

1. Records and Administration

2. Accountability Regulations

3. Competitive Advantage

1. Records and Administration

In first stage the primary activities, which were carried out by personnel department, were, Planning

Company picnics Scheduling vacations, Enrolling workers for health-are coverage, Planning retirement

parties These concerns include how to mange layoffs, address reduced employee loyalty, create a well



trained highly motivated work force that can deliver higher quality and productivity, mange and increase

diverse workforce and contain health care cost.

2. Accountability Regulations

During this stage primary framework of rules and regulations started emerging tin the organization. In

1970s, the job of the HR manger was to keep their companies out of court and in compliance with the

increasing number of regulations governing the work place. In the 1980s HR mangers had to address

staffing costs related to mergers and acquisitions and downsizing. The economic issues related to an

increasingly global and completive workplace characterize the 1990s. Beside these concerns

3. Competitive Advantage

The aim of this shift stage is from merely securing compliance to the more ambitious one of winning

commitment. The employee resource, therefore, becomes worth investing in, and training and development

thus assume a higher profile. These initiatives are associated with, and maybe are even predicated upon, a

tendency to shift from a collective orientation to the management of the workforce to an individualistic

one. Accordingly management looks for 'flexibility' and seeks to reward differential performance in a

differential way. Communication of managerial objectives and aspirations takes on a whole new importance.

What separates or distinguishes HRM from the traditional personnel function is the integration of HRM

into strategic management and the pre-occupation of HRM with utilizing the human resource to achieve

strategic management objectives. HRM "seeks to eliminate the mediation role and adopts a generally unitary

perspective. It emphasizes strategy and planning rather than problem solving and mediation, so that

employee cooperation is delivered by programme of corporate culture, remuneration packaging, and team

building and management development for core employees, while peripheral employees are kept at arm's


HRM strategies may be influenced by the decisions taken on strategy (the nature of the business currently

and in the future) and by the structure of the enterprise (the manner in which the enterprise is structured or

organized to meet is objectives). In an enterprise with effective HRM polices and practices, the decisions on

HRM are also strategic decisions influenced by strategy and structure, and by external factors such as trade

unions, the labor market situation and the legal system. In reality most firms do not have such a well

thought out sequential HRM model. But we are considering here is also effective HRM, and thus a model

where HRM decisions are as strategic as the decisions on the type of business and structure.

At a conceptual level the interpretations of HRM indicate different emphases, which lead to concentration

on different contents of the discipline. The various distinctions or interpretations indicate that HRM "Can

be used in a restricted sense so reserving it as a label only for that approach to labor management which

treats labor as a valued asset rather than a variable cost and which accordingly counsels investment in the

labor resource through training and development and through measures designed to attract and retain a

committed workforce. Alternatively it is sometimes used in an extended way so as to refer to a whole array

of recent managerial initiatives including measures to increase the flexible utilization of the labor resource

and other measures, which are largely directed at the individual employee. But another distinction can also

be drawn. This directs attention to the 'hard' and 'soft' versions of HRM. The 'hard' one emphasizes the

quantitative, calculative and business-strategic aspects of managing the headcounts resource in as 'rational' a

way as for any other economic factor. By contrast, the 'soft' version traces its roots to the human-relations

school; it emphasizes communication, motivation, and leadership. There are several ways in which HRM

has changed earlier attitudes and assumptions of personnel management about managing people. The new

model of HRM includes many elements vital to the basic management goal of achieving and maintaining

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