Introduction

Human Resource Management, or HRM for short, is one of the most important factors in running a prosperous business, though it isn’t always handled with the time and focus that it deserves. To completely understand what HRM is and its influence on the success or failing of a business, we first need to know what it means.

The purpose of Human Resource Management is to recruit, develop and utilise the personnel within an organisation in the manner in which is most appropriate to achieving the aims and objectives of the organisation.

This basically translates to “using people in the company in the best way possible” though that would be an over-simplified statement that doesn’t echo the real nature and range of HRM. HRM describes all of the methods and processes that are involved in making sure that all members of staff in a company are pulling in the same direction, and much more significantly, in the right direction.

At its center, HRM brings together three major elements that are essential to the productive output of the workforce. These elements include motivation, management and leadership, and organisational structures. Consequently, HRM can be applied to all levels of management within your organisation, not just the shop floor personnel, and it could even be used to adjust the framework of those levels of management at the same time. It is a wide-ranging subject that is explained in more detail in this article.

Why is it Necessary?

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

Human Resource Management has an impact on every level of your business activities with varying degrees of visibility. The most evident HRM tasks involve the hiring and firing of staff as well as financial systems such as payroll. It may also impact on motivation and communication inside your business, which are much more intangible aspects but are critical nonetheless. Poor HRM practice in these less visible arenas can have a damaging impact on your organisation but go unnoticed for long intervals.

It also goes without saying that every organisation is different and will have a different set of issues to face and opportunities to take advantage of. HRM can act as a versatile tool that converts workforce power into financial profits and can adapt to fully utilise the talents of your company.

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Impact on Business

Whilst this all appears very interesting and significant, how does it actually impact on the daily operations of your company, and more importantly, how will it help to improve the performance and success of your firm? The impact of HRM can be broken down into the following areas.

Recruitment & Training

This is most likely the part of a company that is most affiliated with human resources – recruitment. Almost every business in the world, and particularly companies that are growing, have to recruit people to work for them. Either current employees have left, or new opportunities have arisen which mean there are jobs that must be filled.

It’s also important to keep your staff training procedures up-to-date to make certain that your staff is fully capable of doing the job they are there to do. Whether it is a fresh piece of legislation or a new bit of technology that alters the marketplace, there is an on-going need to keep your business up-to-date and prepared to make use of any opportunity.

You may also find that the expensive practice of external recruitment can be averted if your company has sufficient training facilities in place. It is far easier to teach an existing staff member to a higher level and then use outside recruitment to fill the gap left at the lower level than it is to hire directly to a higher level. This technique can be applied at almost every single grade of management inside your business.

Employee Relations

When you have the suitable people working for you it is important to keep them working for you, and to make sure they are doing a good job. This can be achieved via good employee relations. The most obvious employee relations practice is the art of motivation – a wide 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 techniques alone. They’ll want to be paid a fair sum and on time. Payroll ought to be one of the very first systems that is developed when you start a business, but they still need to be maintained and updated when personnel join, leave or change pay grade.

Industrial Relations

Numerous companies will have to deal with trade union or other workers rights organisations which can be incredibly 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.

Among the simplest ways to tell that Ltd companies feature excellent employee relations is to ask existing staff if they are happy in their jobs.

Workforce Planning

We have seen the influence that human resource management may have on a company and generally it looks like good HRM will have a beneficial effect on any company. As a rule, this is the case, but effective HRM does not just happen overnight.

One way to apply HRM concepts to your company is via workforce planning – a system that has the goal of making sure your workforce can finish the upcoming tasks needed 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 needed and the appropriate skill mix. Recruitment and training procedures are devised with a long term emphasis in order to make sure that the company is able to operate without being limited by a lack of appropriate labour. Workforce planning can be broken down into four main areas; requirements, recruitment, selection, and training and development.

Requirements

Evaluating your workforce demands is vital to the proper planning of your staff in the short-term and long-term future. If your business is subject to seasonal shifts in demand, for example in the tourism industry, or is prone to seasonal fluctuations in staff levels then your workforce planning has to take these variables into consideration. Also bear in mind any upcoming retirements or periods of maternity/paternity leave or you could experience a shortage of qualified employees.

Recruitment

Whether you are recruiting externally or from inside your existing workforce you still need to find the correct person to fill the position. As part of your workforce planning you ought to draw up a job description that details the function that will be undertaken as well as a person specification which will give an indication of the type of individual that would be a perfect fit for the job and your company.

Selection

The selection procedure can be as involved or as easy as you deem necessary. Outside of regular job interviews there are a number of ways you can learn about applicants for your jobs, including aptitude tests, group interviews or even psychometric testing. These sophisticated techniques may not be relevant to all workforce planning assignments but are an alternative to employers.

Training & Development

The primary goal of staff training and development is to produce a better quality of worker within your company. Workforce planning can use training to fill upcoming gaps in the skill set of your workforce and is usually quicker and more cost effective than external recruitment.

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Workforce Motivation

It almost goes without saying that properly motivated employees are going to deliver a better standard of work and have a greater quantity of output than unhappy workers. This improved work rate will undoubtedly lead to a rise in the profitability of a company.

Essentially, all motivational practices can be separated into two models that are often called the “carrot and stick” approach to motivation. The analogy refers to the two ways to make a donkey carry your belongings, either by tempting it with a carrot, or threatening it with a hit from a stick! It is a relatively old idea but the basic principle is still relevant to companies today.

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

Financial

The most typical financial motivators are payment schemes. You can pay workers in a number of different ways, either a fixed amount for a set service, by an hourly or daily rate, or a rate linked to production, such as a commission structure. Whichever method is used, the workforce is motivated to work because they will receive money for doing so.

Another financial motivation method involves what are known as incentive schemes, where by additional financial rewards are given out for good performance. This may include commission beyond a fixed salary, performance-related pay grades or even offering a share of company profits.

Non-financial

Several human resource advocates have their own ideas about the different elements that motivate people to work, although these are often seen as an added bonus to a worker. It is widely acknowledged that income is the key motivational factor for the vast majority of people.

The Changing Face of HRM

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

Maybe there is a new piece of government law that will have an impact of how your company can carry out its trading, or maybe a fresh manufacturing technology will come along that can revolutionise your industry. Either way, if you want to make sure that your staff is performing to its maximum level then your HRM system should be adaptive enough to cope with an ever-changing economy. After all, what might seem like a threat to most will often appear as an opportunity to a good entrepreneur.