CHAPTER 10- HRM
HRM: Definition and Central Purpose
HRM stands for Human Resource Management.
Definition: the strategic approach to the effective management of an organization's workers so that they help the business gain a competitive advantage.
Central purpose: recruit, train & use the workers of an organization in the most productive manner to assist the organization in achieving its objectives.
Quotation: "Our assets walk out of the door each evening. We have to make sure that they come back the next morning." — N. R. Narayana Murthy
Syllabus and Key Concepts
Purpose of Human Resource Managers
Importance of Recruitment and Selection
Methods of Recruitment
Features of Employee Contract
Importance of Training and Development
Importance of Employee Morale and Welfare
Scope of Human Resource Management
Scope block 1:
Work force planning – determine number of employees and the skills required in the future.
Recruitment and Selection
Training and Appraisal
Preparing Employment Contracts
Dismissal and Redundancy of Employees
Scope block 2:
Responsibility for management and workforce relations
Monitoring and improving employee morale
Managing pay and incentives
Measuring and maintaining employee performance
Workforce Planning: Why and What
Reasons for workforce planning:
HR departments must forecast future employment needs; failing to do so can lead to too few workers with the right skills or too many with the wrong skills.
Workforce planning is about thinking ahead to establish the number of employees and the skills required in the future to meet planned objectives.
Process overview:
Forecast demand for the product (driven by market, external conditions, seasonal factors, competitors' actions, trends in consumer tastes, etc.).
Conduct a workforce audit to check existing skills and qualifications.
Assess how many additional employees and which skills are needed.
Consider other inputs like productivity, business objectives, legal changes, turnover, and absenteeism.
Forecasting Demand and Supply for Labor
Forecast demand for the product influences labour needs via:
Market conditions, seasonality, competitors, consumer tastes, etc.
May require recruitment for temporary or part-time staff to cover peaks.
Productivity level:
If productivity (output per worker) is forecast to increase due to better machinery or processes, fewer workers may be needed for the same output.
Business objectives:
Expansion plans require more employees; focus on higher customer service levels may require more staff.
Changes in law:
Shorter maximum working week or minimum wage can significantly impact workforce planning.
Labour turnover and absenteeism:
Higher turnover increases the need to recruit replacements; high absenteeism also raises required staffing levels.
Skills and Flexibility in the Workforce
Skills required depend on:
Pace of technological change in the industry (production methods, machinery complexity).
Need for flexible or multi-skilled workers (recruit multi-skilled employees to enhance flexibility and job enrichment).
Labour Turnover: Measurement and Implications
Labour turnover formula (the rate at which employees leave):
\text{Labour turnover} = \frac{\text{Number of employees leaving in a year}}{\text{Average number of employees}}Additional formulation:
\text{Labour turnover rate} = \frac{N{leaving}}{N{avg}} \times 100\%Costs of high labour turnover:
Costs of recruiting, selecting, and training new staff.
Poor output and customer service due to vacancies.
Difficulty in maintaining customer loyalty and team spirit.
Potential benefits of high turnover:
Replacing low-skilled workers with better performers; bringing in fresh ideas; enabling planned reductions in headcount.
High turnover tends to be higher in:
Areas with low unemployment and many better-paid jobs; some industries have inherently higher turnover; some organizations have very low turnover (e.g., law, scientific research).
Recruitment and Selection
Recruitment: process of identifying the need for a new employee, defining the job and person, and attracting suitable candidates.
Selection: series of steps (interviews, tests, screenings) to choose the most suitable candidate.
Recruitment agency: a business that recruits applicants for vacant posts.
Recruitment and selection needs arise when:
The business is expanding and needs more workers.
Employees leave and need to be replaced.
Job Description and Job Design
Job description: a detailed list of key points about the job, including:
Job title
Tasks and responsibilities
Position in the organizational hierarchy
Working conditions
How the job will be assessed/performance measured
Advantages of a job description:
Helps attract the right candidates by clarifying duties and expectations.
Employment Contract and Related Concepts
Employment contract: a legal document outlining terms and conditions of the job; should be fair and comply with laws; can be verbal in some jurisdictions.
Contents typically include:
Responsibilities and main tasks
Permanent or temporary status
Working hours and flexibility (part-time/full-time; weekends)
Pay method and level
Holiday entitlement and other benefits (pensions)
Notice period for leaving or redundancy
Natural Wastage, Redundancy, and Dismissal
Natural wastage: employees leaving due to retirement or moving to other jobs; not forced by employer.
Redundancy: job no longer required; employer not at fault; reasons include automation, cost-cutting, falling demand, closure, relocation, mergers/turchases.
Dismissal: employee is let go due to incompetence or misconduct; fault lies with the employee.
Unfair vs fair dismissal:
Unfair dismissal occurs when the law regards the dismissal as unfair; possible legal action and compensation.
Fair dismissal can occur due to inability to do the job after training, continuous negative attitude, health/safety violations, destruction of employer property, or bullying other employees.
Employee Morale and Welfare
Employee morale: overall outlook, attitude, and satisfaction at work.
Employee welfare: services/benefits provided for well-being (working conditions, hygiene, safety).
High morale tends to increase productivity and reduce turnover.
Work-life balance: allocation of time between work and personal life; influenced by expectations for after-hours availability.
Mechanisms to improve work-life balance include:
Flexible working
Teleworking (working from home)
Job sharing
Sabbaticals (up to 12 months; job kept open for return)
Equality and Diversity
Equality policy: practices to ensure fair treatment without prejudice with equal opportunity.
Diversity policy: practices to create a mixed workforce and value diversity.
Impacts of equality/diversity:
Higher morale and motivation, better reputation, broader talent pool, merit-based selection, creativity from diverse perspectives, better understanding of foreign markets, and multilingual capabilities for international business.
Intrapreneurship and Employee Development
Intrapreneur: an employee who develops innovative ideas/projects within a company; gains access to organizational resources but bears lower risk than an external entrepreneur.
Key takeaways:
Intrapreneurs work inside a company to develop ideas with potential large impact; often gain autonomy.
Some intrapreneurs may become independent entrepreneurs later.
Intrapreneurs tend to be highly motivated with leadership and innovative vision.
Employee development to encourage intrapreneurship:
Encourage independent thinking and collaboration across departments.
Empower with resources and accept some failures as part of innovation.
Start with small ideas before tackling larger issues.
Training and Development
Training: work-related education to increase skills and efficiency.
Induction training: introductory program to familiarise new recruits with systems and site layout; health and safety basics.
On-the-job training: instruction at the workplace; often led by HR or departmental trainers; cheaper; content controlled by business.
Off-the-job training: away from the workplace; may be in-house or external; can bring new ideas but can be costly.
External training: training provided by outside bodies; can be essential for specialized skills.
Impact of training:
Can be expensive; may lead to attrition after employees gain qualifications elsewhere; workers may be less productive during training.
Impact of not training:
Lower productivity, less adaptability, poorer customer service, higher accident risk due to lack of safety training.
Terms associated with training:
Poaching: taking trained staff from other businesses.
Multiskilling: training employees in multiple skills to increase flexibility.
Employee development framework includes:
Additional training, promotion, and job enrichment as pathways to growth.
Employee appraisal:
Process of assessing performance against predefined objectives; usually annual; informs future development and alignment with business goals.
Cooperation, Trade Unions, and Collective Bargaining
Cooperation between management and workforce can yield:
Fewer industrial actions; easier change implementation; recognition of workforce contributions; improved competitiveness; better decision-making with practical input from workers.
Trade unions:
Join for power in solidarity; collective bargaining can yield better outcomes than individual negotiation; unions provide legal support for unfair dismissal and safety concerns; they pressure employers to meet legal requirements.
Collective bargaining benefits:
Efficiency: one negotiation with a union rather than many individuals; better communication channels; potential for disciplined action and productivity gains.
Disputes between unions and management:
Negotiations, possibly aided by independent arbitrators; various forms of industrial action exist (continue working at contract pace, work-to-rule, overtime bans, strike action).
Industrial Disputes and Resolution Methods
Forms of industrial action:
Continue with minimum pace (work to rule)
Overtime bans
Strike action (complete withdrawal of labour) during a dispute
Employer resolution tools:
Negotiations to reach compromise
Public relations campaigns to influence public opinion and pressure unions
Threats of redundancies to push for settlement
Contract changes: overtime requirements, flexibility agreements, or agreements not to strike
Lock-outs: temporary closure to prevent work during disputes
Closure of the business, leading to redundancy (extreme)
Recruitment: Internal vs External
Internal recruitment: filling vacancies from within existing staff.
External recruitment: filling vacancies with applicants from outside the organization.
Advantages of internal recruitment:
Applicants may already be known; faster apprenticeship and onboarding; organizational culture familiarity; quicker and cheaper; internal promotion supports career progression; minimizes induction for senior roles.
Advantages of external recruitment:
Brings new ideas and practices; broader pool of applicants; avoids internal resentment if someone is promoted; higher potential standard of applicants for certain roles.
Job Advertisements, Applications, CVs, and Selection Methods
Job advertisement: should reflect job requirements and person specification; places include within premises, government job centers, recruitment agencies, newspapers, and the internet.
Applications: most common method is an application form designed to gather essential information; online systems are common.
CV vs résumé: CV is more detailed; résumé is a concise summary focused on relevance to the job.
References: comments from a trusted source about the applicant’s past performance or character.
Assessment centre: a setting with multiple tests to judge potential ability for a role.
Shortlisting: based on CV/ résumé, references, and online screening; all processes can be conducted online.
Selection components:
Psychometric tests: assess character, attitude, personality; role-playing, problem-solving, situational questions; assess intellect, skills, interests, personal manner, and circumstances.
Aptitude tests: assess ability to perform specific tasks.
Interview: structured around skills, experiences, achievements, intelligence, and suitability.
Types of Recruitment in Detail
Internal recruitment: from within the organization; advantages include familiarity, quicker induction, lower cost, and career progression.
External recruitment: from outside the organization; advantages include bringing fresh ideas, wider candidate pool, and avoiding internal resentment; potential for higher quality candidates.
Employment Contracts and Legality
Employment contracts are legal documents outlining terms and conditions; must be fair and comply with laws; could be verbal in some contexts.
Typical contract details include responsibilities, status (permanent/temporary), working hours, pay, benefits, and notice periods.
Work-Life Balance and Employee Welfare in Practice
Work-life balance considerations include flexible working arrangements, teleworking, job sharing, and sabbaticals.
Equality and diversity policies support fair treatment and inclusion across the workforce.
Diversity in the workplace fosters broader market reach, creativity, and improved problem-solving.
Intrapreneurship and Development Programs
Companies may implement training and development programs to foster intrapreneurship—employees who drive innovation within the organization.
Key elements for success:
Encourage independent thinking and cross-department collaboration.
Provide resources and tolerate some failures as part of experimentation.
Start with small initiatives to build confidence and momentum.
Training, Development, and Appraisals: A Summary
Training types recap:
Induction: introduction to the company, structure, and safety.
On-the-job: training at work, often cheaper and within control of the organization.
Off-the-job: training away from the workplace; may bring external expertise and new ideas.
External training: specialized courses from outside providers.
Impact of training:
Can be expensive; may lead to turnover after qualification; trainees may be less productive during training.
Employee appraisal:
A formal process to assess performance against targets; used to determine development needs and future objectives.
Key Concepts: Ethics, Strategy, and Real-World Relevance
HRM links to corporate strategy: people are a core asset contributing to competitive advantage.
Ethical considerations include fair treatment, non-discrimination in advertisements and recruitment, and legal compliance in contracts and dismissals.
Real-world relevance: workforce planning and development are essential in adapting to automation, globalization, and changing labor markets.
Quick Reference Formulas and Definitions
Labour turnover:
\text{Labour turnover} = \frac{\text{Number of employees leaving in a year}}{\text{Average number of employees}}
Optional rate form: \text{Labour turnover rate} = \frac{N{leaving}}{N{avg}} \times 100\%.Notation notes:
Induction training, On-the-job training, Off-the-job training defined above.
Intrapreneurship involves innovation within the company with comparatively lower risk than entrepreneurship.
Connections to Foundational Principles and Real-World Relevance
HRM aligns with the strategic management principle of aligning human capital with organizational goals.
Ethical and legal considerations in recruitment, dismissal, and equal opportunity reflect foundational principles of fairness and social responsibility in business.
Work-life balance, welfare, and diversity contribute to sustainable productivity and long-term organizational health.
Final Takeaways
HRM is a strategic function central to attracting, developing, and retaining talent while ensuring legal compliance and ethical practice.
Effective workforce planning anticipates demand and supply, balancing productivity, growth, and costs.
Recruitment, selection, and training are interconnected processes that shape organizational capability and competitiveness.
Management of morale, welfare, and diversity enhances performance and resilience in a changing business environment.
Disputes require structured resolution strategies combining negotiation, communication, and, when necessary, formal actions, all while safeguarding legal and ethical standards.