The Human Resource Management (H.R.M)
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The Human Resource Management (H.R.M)
Human Resource Management is the management of the people within the business, by recruiting, training and retaining employees with the necessary skills and competencies to perform their jobs effectively. H.R.M. was often referred to as 'Personnel' in the past, and it covers all the following areas:
- Human Resource Planning (H.R.P).
- Recruitment and selection of new employees.
- Training and development.
- Performance appraisal.
- Remuneration packages.
- Disciplinary procedures.
- Grievance procedures.
- Health and Safety issues.
- Looking after the employees' welfare.
- Dealing with the termination of contracts of employment.
The recruitment and selection process commences when the business realises that there is a vacancy in the organisational hierarchy which needs to be filled.
A job description needs to be written, this outlines the job title, as well as the tasks and the responsibilities that will be covered by the successful applicant. Once this is completed, then a job specification needs to be written, this goes beyond a description of the job, and it lists the physical and mental attributes that will be desirable or essential for the successful applicant (such as the level of intelligence, their disposition and their interests).
The H.R.M. department will then need to write an advertisement for the job and to place it in a variety of media (newspapers, job centres, job agencies, the internet, radio, and internal notice-boards), in order to get as many people as possible to apply for the post.
The advertisement will include the hours of work, the pay and fringe benefits, the job title, the relevant experience and qualifications that are required, and a contact name and address.
It is likely that the job will be advertised within the business as well as through external media. The advantages of recruiting from within the existing workforce include the fact that a shorter training and induction period is necessary, as well as far less time and money being spent on the whole process.
The H.R.M. department will then need to send out application forms to, and request Curriculum Vitae (CVs) from, all those people who write to the business expressing a desire to apply for the job.
It is vitally important that the application form is tailored to the specific post that is being advertised, as well as asking questions that are relevant, legal, inoffensive and essential. Once these application forms have been completed and returned to the business (often with a CV and a covering letter) then the short-listing process will ensue, this involves analysing the CVs and the application forms and deciding which applicants appear to be most suitable for the post. Once this is done, then the H.R.M. department will contact the successful applicants and ask them to attend an interview.
The interview process is very time-consuming but is, nevertheless, an essential factor in getting the 'right' person for the 'right' job. A good interviewer will have studied the job description, the job specification and the job advertisement before interviewing the applicants, as well as studying their application forms, CVs and covering letters in order to know as much information as possible about the applicants before the interview commences.
A good interview needs to be well structured, uninterrupted, and conducted in a friendly manner, with the use of open-ended questions which will give the applicants the chance to talk openly about themselves. The interviewer must listen carefully to the applicants' comments and make notes as necessary.
At the end of the interview, the applicants must be given the opportunity to ask questions about the job and about the business, and then the interviewer must inform the applicants when they will be notified of the decision.
It is likely that applicants for a job will be interviewed by a number of people. This can be in sequence (i.e. the applicant will have one interview quickly followed by another) or it can be simultaneous (i.e. the applicant will be interviewed by a panel of people). Whichever method of interviewing is chosen, the purpose remains the same, to select and appoint the 'best' applicant for the job.
It is possible that the business may choose to use a variety of tests to complement the interview process, in order to measure the applicants' intelligence, their performance in certain scenarios, and their personality traits.
Once a business has selected the most suitable applicant for the available post (often involving much discussion between the different interviewers), then he/she will be appointed.
This will involve the new employee being given a Contract of Employment, which is a written statement covering the terms and the conditions of employment (e.g. date employment commences, job title, pay, hours of work, holiday and pension entitlements), as well as the process for disciplinary and grievance procedures.
Once a new employee has been appointed to a business, it is likely that they will receive induction training in order to help them settle into the new job. This induction training covers the basics of the new employee's job, as well as the background details and the history of the business (e.g. number of employees and the range of products).
However, training is not limited to the new employees of a business. Training courses are likely to be targeted at all employees in the business at various stages in their career (e.g. management training courses, training on how to use new machinery and technology).
There are many reasons for the extensive use of training across the workforce of a business:
- Training can improve employee productivity.
- Training can create a multi-skilled, flexible workforce.
- Training can increase the levels of job satisfaction and motivation of the employees.
- Training employees increases the chances of their promotion.
Training can be classified as either 'on-the-job' or 'off-the-job'. 'On-the-job' training involves the employees receiving their training at the place of work (using such techniques as work-shadowing, apprenticeships, and mentoring). 'Off-the job' training involves the employees attending courses away from their workplace (e.g. at local colleges, conference centres and universities).
It is also imperative that all training courses that are attended by employees are evaluated in order to determine if the training course provides value for money for the business. This evaluation is often carried out by asking the employees to complete short questionnaires and provide feedback to the H.R.M. department.
The final role of the H.R.M. department is to make the termination of the employees' contracts of employment as smooth and efficient as possible. There are a number of different ways in which employees can have their contracts of employment terminated, including:
- Redundancy. It will be necessary at certain times (e.g. during a recession, or a decline in the industry) for a business to 'downsize' its workforce (make a certain proportion of them redundant).
This process could be done in several ways,voluntary redundancy (where workers opt for a redundancy package), compulsory redundancy, 'last-in-first-out' (where the most recent appointments are the first to be made redundant), or retention by merit (where the least effective employees are made redundant).
- Retirement. At the end of their working-life, employees will wish to retire and stop offering their services to the business. In return, they will often receive a lump-sum payout, as well as both their state pension and their private pension.
- Transfers and Resignation. This occurs when an employee leaves the business and transfers their services to another business (the employee may apply for a more senior job at another business).
- Dismissal. This is where the employee is deemed to have broken their contract of employment, and told that their services are no longer required by the business. Fair dismissal can be on the grounds of sexual harassment, racial harassment, bad timekeeping, sleeping on the job, and destruction of business property.
However, if an employee feels that they have been unfairly dismissed (e.g. on the grounds of pregnancy, ethnic background, or union membership), they can apply to have the case heard at an industrial tribunal.
This is a small court that deals with claims of unfair dismissal and discrimination from employees against their (former) employers. If the employee is successful in claiming that they have been unfairly dismissed, then they are eligible for re-instatement in their previous job, as well as a financial award (to cover loss of earnings, and pain and suffering).
In all areas of the activities of the business, but especially it seems within Human Resource Management, the business must ensure that it abides by every piece of legislation, regardless of the stakeholder group which the legislation protects (e.g. employees and customers). The main pieces of legislation affecting the successful operations of the Human Resource Management department are:
- The Employment Relations Bill, 1999 (stating that employees who have been in employment with the same business for a period of one year have the right not to be unfairly dismissed).
- The Employment Rights Act, 1996 (covering unfair dismissal, redundancy and maternity).
- The Public Interest Disclosure Act, 1998 (covering employees who disclose confidential information).
- The Health & Safety at Work Act, 1974 (covering working conditions and the provision of safety equipment and hygiene).
- The National Minimum Wage Act, 1999 (making it illegal for employers to pay less than £3.60 per hour to its full-time staff who are aged over 21).
- The Equal Pay Act, 1970 (stating that pay and working conditions must be equal for employees of the opposite sex who are performing the same work).
- The Sex Discrimination Act, 1975 (stating that it is illegal to discriminate against an employee, or an applicant for a job, on the grounds of their sex or their marital status).
- The Race Relations Act, 1976 (stating that it is illegal for an employer to discriminate against an employee, or an applicant for a job, on the grounds of their ethnic background).
- The Disability Discrimination Act, 1995 (stating that it is illegal for a business with 20 or more employees to discriminate against an employee, or an applicant for a job, on the grounds of their disability).
Human Resource Planning (H.R.P) is the process of forecasting the workforce requirements of the business for future years.
It looks at how many employees the business will require in the future, as well as the type of employee that will be required (e.g. graduate trainees, skilled-manual and supervisors). H.R.P. also ensures that the 'right' employee is in the 'right' job, to ensure maximum efficiency and effectiveness of the workforce.
Clearly the process of H.R.P. requires that the business make estimates of the number of workers that it believes it will require at all levels in the business in the future. This can be done in a number of ways:
- Using past data (e.g. if the workforce has grown at 4% per year over the past 3 years, this trend may well continue).
- Analysing the expected levels of customer demand and sales (e.g. more employees will be required if the number of customer orders is estimated to rise significantly).
- Estimating the level of labour turnover. For example, if the number of employees that are expected to leave the business next year is 50 (due to retirement or transfers), then the business will have to recruit many new employees to replace those that are leaving.
- The views of the management (the management are often in the best position to estimate the number of new employees that will be required in their department or division).
- Expected changes in working practices. For example, if a manufacturing business is wishing to change its production technique from labour-intensive to capital-intensive, then it is not likely to require many new employees in the future.
It is possible that a business may decide to meet any requirements for employees at the supervisory and management levels from within the existing workforce. This can be done by promoting those employees who have already demonstrated their potential and effectiveness in their current posts.
These employees have the advantage of already knowing about the systems and the routines of the business, but they would still require the relevant training and development in order to prepare them for their new, more senior positions.
Alternatively, the business may decide to fill these (and more junior) positions from outside the business.
There are a number of factors, however, that will affect the availability of external labour for a business:
- The rate of unemployment in the area.
- The extent of the infrastructure in the area (e.g. price and availability of housing or availability of public transport).
- Government incentives and subsidies (paying the training costs for the business).
- The availability of workers with the necessary skills and qualifications.
- The number of competitors in the area.
However, there are a number of problems associated with Human Resource Planning, including:
- Will the 'new' employees mix effectively with the existing workforce?
- Changes in the external environment (e.g. a recession) could lead to the business having to make redundant several of the recently-appointed employees.
It will always be difficult for a business to accurately forecast the number of new employees that it will require, because both the business-world and the internal requirements of the organisation are very dynamic.
This is the process of measuring the effectiveness of an employee, often using it as the basis for a promotion or a pay rise. After a period of time working for a business, each employee is likely to be appraised in order to measure their strengths, weaknesses, qualities and value of their contributions to the success of the business.
It is common for employees to be appraised annually, although some employees may be appraised every six or even every three months. There are a number of reasons why a business will use systematic and regular appraisals of its employees:
- To identify any barriers which exist to inhibit their effective performance.
- To provide the basis for performance-related pay.
- To provide some constructive criticism of the employee's performance at their job and to suggest some areas in which the employee needs to improve.
- To set objectives for the employee for the next year.
Appraisal generally involves a discussion between the job holder and his appraiser. There are many different ways in which an appraisal can be carried out, but some of the most common are:
- Peer appraisal. This is carried out by an employee on the same level as the employee being appraised, often someone who works closely with him.
- Appraisal by subordinates. This is a less common method, since many subordinates are often unwilling to criticise their superior for fear of recrimination.
- Grading system. This involves each employee being graded (by a letter from A to E) according to their overall effectiveness at their job.
- Rating system. This method of appraisal breaks the job down into many specific areas, and then each area is rated on a scale (from A to E, or from 1 to 5, for example).
- Objective setting. This involves the employee and his appraiser setting objectives for the employee for the next year. Then, at the end of the year, the employee's achievement of these objectives is measured.
- '360 degree' appraisal. This involves the appraiser gathering as much information concerning the employee from as many different groups of stakeholders as possible (e.g. superiors, subordinates, peers, customers, suppliers, etc).
- Self-appraisal. This involves the employee appraising himself, being honest about his strengths and his weaknesses and setting himself realistic improvements which need to be made.
Although a regular and systematic appraisal is vital for the benefit of both the employees and the business, there can be many problems associated with appraisal systems:
- The time and the cost of the appraisal can use up scarce resources which could be used elsewhere within the business.
- Appraisal can be a very subjective process. The appraiser should not let his personal feelings interfere with the objectivity of the process.
- Some appraisers are not trained sufficiently in the appraisal process, leading to poor results.
The appraisal process is a waste of time and resources if it is not followed-up with feedback sessions.
Many businesses spend a significant proportion of their total costs on their workforce (e.g. interviewing costs, training, pay, and fringe benefits). Businesses will, therefore, wish to discover if the money that they have invested in their workforce has been spent effectively and if it has improved the effectiveness of the employees.
There are four main measures that a business can use in order to measure the effectiveness of its employees:
- Labour Turnover. This measures the number of employees who leave a business per year, expressed as a percentage of the total number of people employed. It is calculated using the following formula:
A high labour turnover rate could be a sign that the workforce have low levels of job satisfaction and motivation. This could be due to poor wages, poor management techniques, or better remuneration packages being offered by competitors. This high rate will inevitably lead to the business having to spend a large amount of money on recruitment and training of new employees.
- Absenteeism. This measures the proportion of the workforce who are absent from work in a particular period of time. It is calculated using the following formula:
Ideally, the business would wish the figure to be as low as possible, since a high figure could indicate that the employees have low rates of morale, job satisfaction and motivation.
A high rate will inevitably lead to the business having to spend a large amount of money on training and paying temporary workers who are performing the jobs of the absent employees.
- Labour Productivity. This reflects the efficiency of the workforce, and it is measured by the amount of output per worker. It is calculated using the following formula:
It can be argued that labour productivity is the most important measure of employee effectiveness, since it directly affects the average cost of production and, therefore, the competitiveness of the business.
An increase in labour productivity will benefit the business since it means that more output can be produced for a given amount of inputs, hence the production cost per unit will fall.
- Waste levels. 'Waste' products refers to lost and damaged raw materials, poor quality output which has to be reworked, and output which has to be discarded due to its poor workmanship. It is calculated using the following formula:
If a business has a high percentage of 'waste' products, then this could be due to a poorly trained workforce with low levels of both motivation and job satisfaction. In this case, the business should ensure that the employees are all adequately trained for their specific tasks, and investigate any other reasons for the poor quality of the output.
It is vital that the reasons for this are discovered quickly, since the effect on customer loyalty and reputation could be disastrous if the business supplies poor quality output to its customers.