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Introduction

Human Resource Management, or HRM for short, is one of the most important factors in running a successful business, although it isn’t always handled with the time and focus that it deserves. To fully understand what HRM is and its influence on the success or failing of a company, we first must know what it means. The following is a good definition:

The function of Human Resource Management is to recruit, develop and utilise the staff within an enterprise in the manner in which is most suitable to achieving the aims and objectives of the enterprise.

This effectively translates to “using people in the business in the best way possible” though that would be an over-simplified assertion that doesn’t echo the true nature and scope of HRM. HRM describes all of the strategies and processes that are involved in making sure that all members of staff within a business are pulling in the same direction, and more significantly, in the right direction.

At its core, HRM brings together three major elements that are essential to the productive output of the workforce. These factors include motivation, management and leadership, and organisational structures. Consequently, HRM can be applied to all levels of management within your business, not just the shop floor personnel, and it can even be used to modify the structure of those levels of management as well.

Why is it Necessary?

Quite simply, companies don’t run without workers. As a result, some level of human resource management is required for any business to operate at all, let alone in an efficient and profitable manner.

Human Resource Management has an impact on every level of your business activities with various degrees of visibility. The most obvious HRM tasks involve the hiring and firing of employees as well as financial systems such as payroll. It can also impact on motivation and communication within your company, which are far more intangible factors but are crucial nonetheless. Inadequate HRM practice in these less visible arenas can have a negative impact on your organisation but go unnoticed for long intervals.

It also goes without saying that every business is different and will have a specific set of issues to face and opportunities to take advantage of. HRM can work as a versatile tool that converts workforce potential into financial gains and can adapt to fully utilise the talents of your firm. Without it, your competitors may well be afforded the chance to succeed where you missed out.

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Impact on Business

While this all sounds very interesting and significant, how does it actually influence the daily functions of your company, and more importantly, how will it help to improve the performance and success of your company? The effect of HRM can be broken down into the following areas.

Recruitment & Training

This is probably the area of a business that is most associated with human resources – recruitment. Nearly every company in the world, and especially businesses that are expanding, have to recruit people to work for them. Either existing employees have left, or new possibilities have arisen which mean there are roles that must be filled. HRM can make sure your recruitment process gets the appropriate people into the right roles at an affordable price.

It is also important to keep your staff training procedures up to date to make certain that your workforce is fully capable of doing the job they are there to do. Regardless of whether it is a fresh piece of legislation or a new bit of technology that changes the market, there is an on-going requirement to keep your company up-to-date and prepared to take advantage of any opportunity.

You may also find that the costly practice of external recruitment can be avoided if your organisation has adequate training facilities in place. It is far easier to teach an existing worker to a higher level and then use external recruitment to fill the gap remaining at the lower level than it is to recruit directly to a higher level. This approach can be used at almost every grade of management within your organisation.

Employee Relations

Once you have the suitable men and women working for you it is necessary to keep them doing work for you, and to make certain they are doing a good job. This can be accomplished via good employee relations. The most obvious employee relations practice is the art of motivation – a broad topic by itself – but other worker relations issues can include disciplinary and grievance management.

Finances

You can’t keep employees at your company by good motivational methods only. They will want to be paid a fair amount and on time. Payroll should be one of the very first systems that is developed when you start a company, but they still need to be maintained and updated when staff join, leave or switch pay grade.

Industrial Relations

Many companies will have to work with trade union or other workers rights establishments which can be very forceful when protecting the interests of their members. When interacting with such bodies it is beneficial to have people within your company who can communicate comfortably with them whilst keeping the interests of your own organisation in mind at the same time. The need for good industrial relations is far more prevalent in public sector firms.

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Workforce Planning

We have seen the effect that human resource management can have on a company and overall it looks like good HRM will have a positive effect on any business. As a rule, this is the case, but effective HRM doesn’t just occur overnight.

One way to implement HRM ideas to your business is through workforce planning – a system that has the aim of making sure your workforce can finish the upcoming tasks required for your company to be successful.

Definition

Workforce planning is the method of anticipating ahead of time the human resource requirements of any enterprise, both in terms of the quantity of employees required and the proper skill mix. Recruitment and training policies are designed with a long term emphasis in order to make sure that the company is able to function without being limited by a shortage of appropriate labour. Workforce planning can be broken down into four main areas; requirements, recruitment, selection, and training and development.

Requirements

Evaluating your workforce requirements is vital to the proper planning of your staff in the short-term and long-term future. If your company is subject to seasonal changes in demand, for example in the tourism industry, or suffers from seasonal fluctuations in staff levels then your workforce planning must take these factors into consideration. Also bear in mind any upcoming retirements or intervals of maternity/paternity leave or you could suffer from a shortage of qualified workers.

Recruitment

Whether you are recruiting externally or from inside your existing workforce you still need to find the correct individual to fill the role. As part of your workforce planning you should draw up a job description that details the role that will be carried out as well as a person specification which will give an indication of the kind of individual that would be a good fit for the job and your business.

Selection

The selection procedure can be as involved or as simple as you deem necessary. Beyond regular job selection interviews there are several ways you can learn about candidates for your jobs, including aptitude tests, group interviews and even psychometric testing.

Training & Development

The main goal of staff training and development is to develop a much better standard of worker in your company. Workforce planning can use training to plug upcoming gaps in the skill set of your staff and is generally quicker and more cost effective than external recruitment. Training and development may also go some way toward motivating your staff.

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Workforce Motivation

It practically goes without saying that well motivated employees are going to deliver a better standard of output and have a higher quantity of output than unhappy workers. This improved working rate will undoubtedly lead to an increase in the profitability of a company. Yet motivation remains a bit of taboo topic among some managers.

Essentially, all motivational practices can be separated into two models that are often referred to as the “carrot and stick” approach to motivation. The analogy relates to the two approaches to make a donkey carry your belongings, either by tempting it with a carrot, or threatening it with a strike from a stick! It is a fairly dated idea but the principle is still relevant to businesses today.

Whether you use the carrot strategy or the stick approach will largely depend on your own management style, as well as the industry you work in and the type of individuals that you employ. Regardless of your method, motivational factors can be separated into a further two groupings; financial and non-financial motivators.

Financial

The most common financial motivators are payment schemes. You can pay staff in numerous different ways, either a set amount for a fixed service, by an hourly or daily fee, or a rate related to production, such as a commission scheme. Whichever method is used, the workforce is motivated to work because they will get money for doing so.

Another financial motivation technique involves what are called incentive schemes, where additional financial rewards are handed out for good overall performance. This may include commission beyond a fixed salary, performance-related pay grades or even providing a share of company profits. Again, the motivating factor here is the money alone.

Non-financial

Many human resource advocates have their own ideas about the other factors that motivate people to do the job, although these are often seen as a bonus to an employee. It is widely acknowledged that income is the key motivational factor for the vast majority of people.

The Changing Face of HRM

As previously stated, HRM is a versatile tool that is there to match up the features of your workforce to the objectives of your business. As such, it has had to keep changing to a corporate climate that is constantly changing for one reason or another. Furthermore, it is a good idea to constantly evaluate your own HRM procedures and not to rest on your laurels.

Maybe there is a new piece of government legislation that may have an effect of how your company can carry out its trading, or maybe a new manufacturing technology will come along that will revolutionise your industry. Either way, if you want to make certain that your staff is performing to its optimum level then your HRM strategy should be adaptive enough to cope with an ever-changing economy.