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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. Functions of Human Resource Management Department

B. Environmental Factors influencing HRM operations

Human Resource Functions in Small Businesses

Some aspects of the human resource function may actually be more significant in smaller firms than in

larger ones.

Human Resource Management Functions in Medium-Sized Firms

As firms grow and become more complex, the human resource function becomes more complex, and its

function achieves greater importance. The basic purpose of human resource management remains the same,

but the approach followed in accomplishing its objectives changes.

As a firm grows, a separate staff function may be required to coordinate human resource activities. In a

larger firm, the person chosen to do so will be expected to handle most of the human resource activities.

For a medium-sized firm, there is little specialization.

Traditional Human Resource Functions in a Large Firm

When the firm’s human resource function becomes too complex for one person, separate sections are often

created and placed under a human resource manager. These sections will typically perform tasks involving

training and development, compensation and benefits, employment, safety and health, and labor relations.


The HR organizational structure of large-sized firms changes as firms outsource, use company service

centers, and evolve in other ways to make HR more strategic. Regardless of an organization’s design, the

five functional areas must still be accomplished. The organizational mission and corporate culture have a

major impact in determining an appropriate HR organization.

A. Functions of HRM department:

a. Staffing

An organization must have qualified individuals, in specific jobs at specific places and times, in order to

accomplish its goals. Obtaining such people involves

job analysis, human resource planning, recruitment,

and selection. Job analysis is the systematic process of

determining the skills, duties, and knowledge required

for performing specific jobs in an organization. Human

resource planning (HRP) is the process of systematically

reviewing human resource requirements to ensure that

the required numbers of employees, with the required

skills, are available when needed. Recruitment is the

process of attracting such individuals in sufficient

numbers and encouraging them to apply for jobs with

the organization. Selection is the process through which

the organization chooses, from a group of applicants,

those individuals best suited both for open positions

and for the company.

b. Human Resource Development

A major HRM function that consists not only of training and development but also individual career

planning and development activities and performance appraisal, an activity that emphasizes T&D needs.

Training is designed to provide learners with the knowledge and skills needed for their present jobs.


Development involves learning that goes beyond today’s job; it has a more long-term focus. Human resource

development (HRD) helps individuals, groups, and the entire organization become more effective. It is

essential because people, technology, jobs, and organizations are always changing.

Career planning is an ongoing process whereby an individual sets career goals and identifies the means to

achieve them. Career development is a formal approach used by the organization to ensure that people with

the proper qualifications and experiences are available when needed. Through performance appraisal,

employees and teams are evaluated to determine how well they are performing their assigned tasks.

c. Compensation and Benefits

The term compensation includes all rewards that individuals receive as a result of their employment. The

reward may be one or a combination of the following:

􀂄 Pay: The money that a person receives for performing a job.

􀂄 Benefits: Additional financial rewards other than base pay include paid vacations, sick leave, holidays,

and medical insurance.

􀂄 Non financial rewards: Non monetary rewards, such as enjoyment of the work performed or a

pleasant working environment.

d. Safety And Health

Safety involves protecting employees from injuries caused by work-related accidents. Health refers to the

employees’ freedom from illness and their general physical and mental well-being. These aspects of the job

are important because employees who work in a safe environment and enjoy good health are more likely to

be productive and yield long-term benefits to the organization.

e. Employee And Labor Relations

Since 1983, union membership has fallen approximately 8 percent, to only 13.9 percent of the workforce,

the lowest level since the Great Depression. Subtracting government employees, unions represent only 9.5

percent of the private industry workforce. Even so, a business firm is required by law to recognize a union

and bargain with it in good faith if the firm’s employees want the union to represent them. In the past, this

relationship was an accepted way of life for many employers. But most firms today would like to have a

union-free environment.

f. Human Resource Research

Although human resource research is not listed as a separate function, it pervades all HRM functional areas,

and the researcher’s laboratory is the entire work environment.

g. Interrelationships of HRM Functions

All HRM functional areas are highly interrelated. Management must recognize that decisions in one area will

affect other areas. The interrelationships among the five HRM functional areas will become more obvious

as we address each topic throughout the book.

B. The Dynamic Human Resource Management Environment

Many interrelated factors affect

human resource management.

Such factors are part of either

the firm’s external

environment or its internal

environment. The firm often

has little, if any, control over

how the external environment

affects management of its

human resources. In addition,

there are certain

interrelationships that

complicate the management of

human resources.

I. External Environmental Factors

External Environmental factors Comprised of those factors that affect a firm’s human resources from

outside the organization’s boundaries.

a. The Labor Force

The labor force is a pool of individuals external to the firm from which the organization obtains its workers.

The capability of a firm’s employees determines to a large extent how well an organization can perform its


b. Legal Considerations

Another significant external force affecting human resource management relates to federal, state, and local

legislation and the many court decisions interpreting this legislation. In addition, many presidential executive

orders have had a major impact on human resource management.

c. Society

Society may also exert pressure on human resource management. If a firm is to remain acceptable to the

general public, it must be capable of accomplishing its purpose in line with societal norms. Social

responsibility is an implied, enforced, or felt obligation of managers, acting in their official capacities, to

serve or protect the interests of groups other than themselves.

d. Unions

Union is a group of employees who have joined together for the purpose of dealing collectively with their

employer. Although unions remain a powerful force, union membership as a percentage of the

nonagricultural workforce slipped from 33 percent in 1955 to 9.5 percent today.

e. Shareholders

The owners of a corporation are concerned about shareholders. Because shareholders have invested money

in a firm, they may at times challenge programs considered by management to be beneficial to the


f. Competition

For a firm to succeed, grow, and prosper, it must be able to maintain a supply of competent employees.

Other organizations are also striving toward that objective.



g. Customers

Because sales are critical to the firm’s survival, management has the task of ensuring that its employment

practices do not antagonize the members of the market it serves.

h. Technology

As technological changes occur, certain skills are no longer required. This necessitates some retraining of

the current workforce. The trend toward a service economy also affects the type and amount of technology


i. The Economy

The economy of the nation—on the whole—and of its various segments is a major environmental factor

affecting human resource management. As a generalization, when the economy is booming, it is often more

difficult to recruit qualified workers. On the other hand, when a downturn is experienced, more applicants

are typically available.


Managers approach changes in the external environment proactively or reactively.

a. Proactive Response

Proactive responsiveness involves taking action in anticipation of environmental changes.

b. Reactive Response

Reactive response involves simply reacting to environmental changes after they occur. Organizations exhibit

varying degrees of proactive and reactive behavior.

II. The Internal Environment

Factors that affect a firm’s human resources from inside its boundaries are termed as internal environmental

factors. The primary internal factors include the firm’s mission, policies, corporate culture, management

style of upper managers, employees, the informal organization, other units of the organization, and unions.

a. Mission

the organization’s continuing purpose or reason for being. Each management level should operate with a

clear understanding of the firm’s mission. In fact, each organizational unit (division, plant, and department)

should clearly understand objectives that coincide with that mission.

b. Policies

A predetermined guide established to provide direction in decision making. As guides, rather than as hardand-

fast rules, policies are somewhat flexible, requiring interpretation and judgment in their use. They can

exert significant influence on how managers accomplish their jobs.

c. Corporate Culture

The system of shared values, beliefs, and habits within an organization that interacts with the formal

structure to produce behavioral norms.

d. Management Style of Upper Managers

Closely related to corporate culture is the way in which the attitudes and preferences of one’s superiors

affect how a job is done. This situation deserves special emphasis here because of the problems that can

result if the managerial style of upper-level managers differs from that of lower-level managers.

e. Employees

Employees differ in many ways including their capabilities, attitudes, personal goals, and personalities. As a

result, behavior that a manager finds effective with one worker may not be effective with another.

f. Informal Organization

the informal organization is the set of evolving relationships and patterns of human interaction within an



organization that are not officially prescribed. Such informal relationships are quite powerful.

g. Other Units of the Organization

Managers must be keenly aware of interrelationships that exist among divisions or departments and should

use such relationships to their best advantage.

h. Labor-Management Agreement

Upper management typically negotiates labor-management agreements, but managers throughout the

organization must implement the terms of the agreements. In most instances, agreements place restrictions

on the manager’s actions.


Any perceived difference among people: age, functional specialty, profession, sexual orientation, geographic

origin, life style, tenure with the organization, or position.

a. Single Parents and Working Mothers

The number of nontraditional, single-parent households in the United States is growing. Because more than

half of all marriages today end in divorce, this trend is expected to continue. Often, one or more children

are involved. Of course, there are always widows and widowers who have children as well, and there are

some men and women who choose to raise children outside of wedlock.

b. Women In Business

The number of women in entry and midlevel managerial positions has risen from 34 percent in 1983 to 46

percent in 1998, meaning many more women are in the pipeline to executive spots. Today, there are more

than 9 million women-owned businesses, up from 400,000 in 1972.

c. Dual-Career Families

The increasing number of dual-career families presents both challenges and opportunities for organizations.

As a result of this trend, some firms have revised their policies against nepotism to allow both partners to

work for the same company. Other firms have developed polices to assist the spouse of an employee who is

transferred. When a firm wishes to transfer an employee to another location, the employee’s spouse may be

unwilling to give up a good position or may be unable to find an equivalent position in the new location.

Some companies are offering assistance in finding a position for the spouse of a transferred employee.

d. Workers Of Color

Workers of color often experience stereotypes about their group (Hispanics, African Americans, Asians,

etc.). At times, they encounter misunderstandings and expectations based on ethnic or cultural differences.

e. Older Workers

The world population is growing older, a trend that is expected to continue through the year 2000. In

addition, the trend toward earlier retirement appears to be reversing itself.

f. Persons With Disabilities

A handicap, or disability, limits the amount or kind of work a person can do or makes achievement

unusually difficult.

g. Young Persons With Limited Education Or Skills

Each year thousands of young, unskilled workers are hired, especially during peak periods, such as holiday

buying seasons. In general, they have limited education—high school or less. More jobs can be de-skilled,

making it possible for lower-skilled workers to do them.

h. Educational Level Of Employees

Another form of diversity that is now found in the workplace is that of the educational level of employees.

The United States is becoming a bipolar country with regard to education, with a growing number of very

educated people on one side and an alarming increase in the illiteracy rate on the other.



i. Corporate Culture

Corporate Culture is the system of shared values, beliefs, and habits within an organization that interacts

with the formal structure to produce behavioral norms. It is the pattern of basic assumptions, values,

norms, and artifacts shared by organizational members.

Key Terms

Corporate Culture The system of shared values, beliefs, and habits within an organization that interacts

with the formal structure to produce behavioral norms

Mission: The organization’s continuing purpose or reason for being.

Policies: A predetermined guide established to provide direction in decision-making

The Labor Force: The labor force is a pool of individuals external to the firm from which the organization

obtains its workers

Unions: Union is a group of employees who have joined together for the purpose of dealing collectively

with their employer.

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