FOUNDATION

OF

HUMAN

RESOURCE

MANAGEMEN
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Naresh P. Shrestha

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HUMAN RESOURCE MANAGEMENT
Before discussing the Human Resource Management, it is essential to understand the
importance or need of human resources in an organization.

Need or Importance of Human Resources in the Organization

Managing Human Resources is much more difficult and complex than managing physical
resources. It is mainly because we humans are very sensitive, very unpredictable, very
precious and heterogeneous, we all have unique personality, we all have thinking and decision
capability, sentiment, feelings, needs, wants, and desires. Every individual is different from
another in these aspects. So it is difficult to understand people and their nature.

Human beings behave in widely differing and complicated ways. Their reactions to promises,
praise, or criticism, for example, can be quite different. It is very difficult to predict their
behaviour, especially in an organization where they work in groups. Their behaviour is neither
consistent nor readily predictable.

Modern employees are better educated, possess greater skills, have more sophisticated
technology available for their use, and enjoy higher standards of living than previous
generations.

How to achieve organizational goals working with or through such complex creatures is
challenge to all the managers including human resource managers. This also signifies the need
or importance of people - human resources in any organization for achieving the goals.

Now let us explore why people - human resources are needed in an organization, through
different scenarios.

Scenario 1Survey of Business Executives in USA.

In a study undertaken in the last decade, following questions were addressed to CEOs of large,
med. size and small American firms:
1. What is the greatest change you have seen in the past few years?
2. What is the greatest challenge in managing you expect to face in the future?
3. What is the most frustrating area of managing?
4. What is the most rewarding area of managing?

(Source: Stephen C. Harper, "The challenges Facing CEOs' Past, Present and Future," Academy
of Management Executives, August 1992, pp. 7-25)

The following are quotations from the respondents:

Greatest Change in Managing

"Our progress in shaping new approaches to managing human resources - employee
involvement and participative management have been the greatest change in managing a
corporation and the people in it." - CEO of one of America's ten largest firms.

Greatest Challenge in Managing

"Making sure the human equation works: that we have enough people with the right training,
attitude and motivation to provide customers with consistently high quality products and
services." - John P. Frazee Jr., CEO of Central Corporation.

Greatest Frustration in Managing

"Getting managers to care, really care about helping their people to improve their skills and to
take risks and make mistakes and succeed and grow through the process" - William Hanley,
CEO of Galileo Electro-Optics Corporation.

Most Rewarding Area of Managing

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"Observing the development and growth of the business through the development and growth
of our people at all levels ...... not just management levels." - CEO of a large New York-based
firm.

Did you notice a common element on all these four answers? Does it surprise you that
working with people are the area of greatest change and are the greatest challenge, the
cause of most frustrations, and the area of most rewards?

Scenario 2Shiv Khera's Experience.

Shiv is a noted Management Expert, consultant and writer with great reputation around the
world. He is US citizen of Indian origin. He travels the world organizing training seminars for
executives. In his best seller book "You Can Win" he had given many examples. In those
seminars he used to ask questions to the executives, one question is:

"Have you ever wondered why some individuals, organizations, or countries are more
successful than others?"

It is not a secret. These people simply think and act more effectively. They have learned how
to do so by investing in the most valuable asset -- people. The success of an individual,
organization or country, depends on the quality of their people.

Another question put to the executives in major corporations all over the world by Mr.
Khera is: "If you had a magic wand and there was one thing you would want changed, that
would give you a cutting edge in the marketplace resulting in increased productivity and
profits, what would that be?"

The answer was unanimous. They all said that "if people had better attitudes, they'd
be better team players, and it'd cut down waste, improve loyalty and in general, make their
company a great place to work."

This scenario also suggests in any organization the most important factor is its people.

Scenario 3
What is Nepal Lever Ltd. or Nepal Bank Ltd. without its employees?
 A big factory/building, expensive equipment, and some impressive bank balance.

Similarly, if you remove the employees from such varied organizations as the Nepal Airlines
Corporation, Nepalese Army, Hotel Soaltee Holiday Inn Crown Plaza, or a small local school,
what would you have left?

Not much.

Why Study Human Resource Management

All above scenarios leads to one conclusion:

An organization is nothing without people -- its human resources.

From the smallest to the largest enterprise, fundamental activities pertaining to all the
employees, or human resources, of an organization must be managed - and managed
effectively.

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Whether in the public or private sector, or in local, national, or international markets, effective
management of human resources is a critical part of any manager's job.

If these human resources are neglected or mismanaged, the organization is unlikely to do well
and, in fact may fail.

From a positive standpoint, it is people -- human resources -- that creates organizations and
make them survive and prosper.

It is their efforts, talents, and skills in using other resources, such as knowledge, materials, and
energy, that result in the creation of useful products and services. It is them who are capable of
deciding, implementing and controlling the activities. Organizations are established not by
gods, but by human beings.

No computer can substitute human brain, no machine can run without human intervention, and
no organization has the mandate to exist if it cannot serve people's needs.

"You can get capital and erect buildings, but it takes people to build the
business."
- Thomas J. Watson (Founder of IBM)

Organizations require many things inorder to be effective: a method of producing a product or

service (i.e., plant & equipment), financial resources, a way of marketing whatever product or
service is created, and human resources.

While all of these are important to organizational effectiveness, the only factor that represents
a potential competitive advantage is human resources and how these resources are
managed.

A competitive advantage exists when the firm is able to deliver the same benefits as
competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of
competing products (differentiation advantage). Thus, a competitive advantage enables the
firm to create superior value for its customers and superior profits for itself. The goal of
much of business strategy is to achieve a sustainable competitive advantage.

The production technology, financing, and customer connections (marketing) can all be copied
easily.

The basics of managing people can also be copied, but the most effective organizations find
unique ways to attract, retain, and motivate employees. It is people who possess skills,
abilities and aptitudes that offer competitive advantage to a firm.

We can therefore say that the difficulty in turning the management of people into a
competitive advantage constitutes the subject matter of Human Resource Management
(HRM). That is why we have to study HRM.

HRM: Scope & Concept

When you think about the millions of organizations that provide us with goods and services,
any one or more of which will probably employ you during your lifetime, how often do you
explicitly consider that these organizations depend on people to make them operate?

It is only under unusual circumstances, such as when the doctors go on strike at a hospital or
the bank clerks go on pen down strike collectively from their offices, that you recognize the
important role that employees play in making organization work.

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But how did these people come to be employees in their organizations?

1. How were they found and selected?

2. Why do they come to work on a regular basis?

3. How do they know what to do on their jobs?

4. How does management know if the employees are performing adequately?

5. If they are not, what can be done about it?

6. Will today's employees be prepared for the work the organization will require of them in
ten, twenty, or thirty years?

These are some of the questions whose answers lie in the subject of human resource
management (HRM).

The preceding quotes from the CEOs provide a vivid illustration of the role that people --
human resources -- play in determining the competitiveness and effectiveness of
organizations in meeting the changes and challenges of the twenty-first century.

From these quotations it is clear that most of the changes and challenges facing organizations
have to do with their employees.

In all kinds of organizations, both large and small, CEOs are seeing the results of employee
involvement, of having the right people to do the job, and of getting managers to care about
their people.

Given the challenges, it is not surprising that seeing the progress of the organization through
the growth and development of its employees is rated the greatest reward.

Human resource management is a fascinating and important subject.

The fascination lies in the fact that it involves people and decisions involving people at work.

It is important because human resources are the organization. Human resources make the
decisions, set the objectives, and design, assemble and sell the products or services.

Experience has shown that human resource is the most valuable asset of any business. It is
more valuable than capital or equipment. Unfortunately, it is also the most wasted. People
can be your biggest assets or your biggest liability.

HRM as it is conceived today represents a system approach to people management. This

approach recognizes the dynamic interaction of personnel functions with each other and with
the objectives of the organization. People management concept has thus made a transition
from a traditional control orientation to a high-involvement management style.

The Human Resource Management is considered to be the part of a business or company

which recruits, develops, utilizes and maintains an organization's personnel in the way which
would benefit the firm's aims and objectives. It creates alignment between an organization's
HRM strategy and the core objectives of a business considered as essential. Primary purpose of
HRM is to improve the productive contribution of people within an organization.

Definitions of Human Resource Management (HRM)

As per time, situation and location, HRM is given different names such as: Personnel
Administration, Personnel Management, Manpower Management, Labor Management, Human

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relations etc. Different authors have given different definitions of HRM. Different definitions
indicate a difference in the author's emphasis and approach.

Some authors define HRM as a function, others conceive it as a matter of policy and
strategy, and yet others view it as mutuality of relations.

However, there is one commonality in their definitions. HRM is the part of the organization that
is concerned with "people" dimension. In other words Human resource management (HRM) is a
general term used to describe a variety of functions aimed at effectively managing an
organization's employees or "human resources."

"Human resource management (HRM) is an approach consisting of four basic functions: (1)
staffing, (2) training and development, (3) motivation, and (4) maintenance of human
resources. In less academic terms, we might say that HRM is made up of four activities: (1)
getting people, (2) preparing them, (3) stimulating them, and (4) keeping them."
- David A. DeCenzo & S.P. Robbins. (Function Approach)
"Human resource management encompasses those activities designed to provide for and
coordinate the human resources of an organization. Human resource management is a modern
term for what has traditionally been referred to as personnel administration or personnel
management."
- Lloyd L Byars and Leslie W. Rue. (Function Approach)
"Personnel/Human resource management is the function performed in organizations that
facilitates the most effective use of people (employees) to achieve organizational and
individual goals."
- John M. Ivancevich & William F. Glueck. (Goal Approach)
"Human Resources Management is the term increasingly used to refer to the philosophy,
policies, procedures and practices related to the management of people within an
organization."
- Wendell French. (Process Approach)

"Human Resource Management (HRM) involves all management decisions and practices that
directly affect or influence the people, or human resources, who work for the organization."
- Fisher/Schoenfeldt/Shaw. (Practice Approach)

"Personnel management (HRM) is the planning, organizing, directing and controlling of the
procurement, development, compensation, integration, maintenance and separation of human
resources to the end that individual, organizational and societal objectives are accomplished."
- Edwin Flippo
Therefore, HRM is seen to involve all management decisions that affect the nature of the
relationship between the organization and employees - its human resources.

Finally, It is proposed that we take human resource management to be that part of management concerned with:

• all the decisions, strategies, factors, principles, operations, practices, functions, activities and methods related
to the management of people as employees in any type of organisation (including small and micro enterprises
and virtual organisations);

• all the dimensions related to people in their employment relationships, and all the dynamics that flow from it
(including in the realisation of the potential of individual employees in terms of their aspirations);

• all aimed at adding value to the delivery of goods and services, as well as to the quality of work life for
employees, and hence helping to ensure continuous organisational success in transformative environments.

Standards Generating Body: Human Resources Management & Practices (SGB:

HRMP) - South Africa.

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Features of HRM
In all these definitions the emphasis is clearly on integration of individual and organizational
objectives so as to attain effectiveness. On the basis of these definitions, some basic facts
about the HRM may be put forward thus:

1. HRM is concerned with employees both as individuals and as group in

attaining goals. It is also concerned with behavior, emotional and social aspects of
personnel.

2. It is concerned with the development of human resources, i.e., knowledge,

capability, skill, potentialities and attaining and achieving employee- goals, including
job satisfaction.

3. HRM pass through the organization. Every person in an organization is involved

with personnel decisions. For instance, all managers in any organization needs to
know to train their employees, appraise their employee's performance, and so forth.
Similarly, non-managerial employees are exposed to performance ratings, selection
interview when hired, and so on. Thus whether or not individuals plan to go into
personal work, they become involved with personnel decisions.

4. It is concerned with managing people at work. It covers all types of personnel.

Personnel work may take different shape and form at each level in the organizational
hierarchy but the basic objective, achieving organizational effectiveness through
effective and efficient utilization of human resources remains the same. It is basically a
method of developing potentialities of employees so that they get maximum
satisfaction of their work and give their best efforts to the organization.

5. Management function. Like any other management discipline but more valuable as
involves planning, implementing, controlling of acquisition, development, utilization and
maintenance of human resources.

6. HRM is a continuous function. It can not be turned on and off like an electrical
switch; it can not be practiced only one hour each day or one day a week. It requires a
constant alertness and awareness of human relations and their importance in everyday
organization.

7. HRM is conscious of its social obligations towards society in general and

employees in particular.

Objectives of HRM
The objectives of HRM are given below:

1. Societal objective: To be socially responsible to the needs and challenges of

society while minimizing the negative impact of such demands upon the
organization. The failure of organizations to use their resources for society's benefit
may result in restrictions. For example, societies may pass laws that limit human
resource decisions.

2. Organizational objective: To recognize that HRM exists to contribute to

organizational effectiveness. HRM is not an end in itself; it is only a means to assist
the organization with its primary objectives. HRM assist the organization to achieve its
primary objectives, whether it is profit making or charity or social agenda.
3. Functional objective: To maintain the department's contribution at a level
appropriate to the organisation's needs. Resources are wasted when HRM is more or

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 less sophisticated than the organisation demands. A department's level of service
must be appropriate for the organisation it serves.

4. Personal objective. To assist employees in achieving their personal goals, at

least insofar as these goals enhance the individual's contribution to the organisation.
Personal objectives of employees must be met if workers are to be maintained,
retained and motivated. Otherwise, employee performance and
satisfaction may decline, and employees may leave the organisation.

5. Goal achievement: To achieve an effective utilization of HR for achievement of

organizational goals.

6. Structure maintenance: To establish and maintain adequate organizational

structure and a desirable working relationship among all members of an
organization by dividing the tasks into functions, positions and jobs.

7. Individual Development: To generate maximum development of individuals and

groups within an organization by providing opportunities for advancement to
employees through training and job education.

8. Goal harmony: HRM creates harmony between organizational goals and the
personal goals of employees

9. To maintain high morale and better human relations inside an organization.

The Rising Interest in HRM

(Importance of Human Resource Management)
Today's human resource issues are enormous and appear to be ever expanding. The human resource
manager faces a multitude of problems ranging from a constantly changing workforce to coping with ever
increasing government rules and regulations. Because of the critical nature of human resource concerns, they
are receiving increased attention from upper levels of management. It used to be rare to see job
advertisements for human resource managers. Now such advertisements are very common and encompass
significant organizational responsibilities. HRM is an important function of management and since 1990s, the
interest in HRM has been rising. Its importance is increasing due to several factors:

1. Competitive Advantage:
Successful corporate leaders recognise that their competitive edge in today’s market place is their people.
Organizations require many things in order to be effective: a method of producing a product or service (i.e.,
plant & equipment), financial resources, a way of marketing whatever product or service is created and
human resources.

While all of these are important to organizational effectiveness, the only factor that represents a potential
competitive advantage is human resources and how these resources are managed.

The production technology, financing, and customer connections (marketing) can all be copied easily.

The basics of managing people can also be copied, but the most effective organizations find unique ways to
attract, retain, and motivate employees. Innovative HRM policies and practices are needed to face the
growing challenges of competition and win.

2. Size & Complexity of Organizations

Modern organizations are increasing in size. With the increase in size complexities of managing them are also
increasing. Competent and committed human resources are needed to cope with the challenges of size and
complexities. This has led to rising interest in HRM.

3. Globalization
The rate of globalization has been phenomenal. It has facilitated trade without borders. Globalization has led
to operations in several countries. The human resources in organizations have also assumed global

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dimensions. HRM policies and practices need to be adapted to varying socio-cultural forces to carryout host
country operations. This has led to rising interest in HRM.

4. Technological Advances
Technology is changing rapidly. Organizations must keep up pace with technological changes and implement
them in the workplace. Human resources in organizations need to acquire new competencies to cope with the
rapid technological change.

5. Management of Change
The future belongs to those who can best manage change. Committed and competent employees are
essential to manage change. Human resource management plays an important role in fostering employee
commitment to change. The interest in HRM is increasing because it enables organizations to better manage
change. Employees need continuous learning.

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