Human Resources Management

Human Resources (HR)

Learning Objective

  • Upon completion of this topic, students should be able to:

    • Identify the main roles and responsibilities of the HR function.

    • Understand how finance business partnering supports organisational performance.

Introduction

  • The human resources function focuses on the human capital of an organization.

    • Main goal: Ensure the organization has the right people with the right skills doing the right tasks to achieve organizational objectives.

Approaches to Human Resource Management

  • Hard HR Management

    • View employees as business resources like buildings or machinery.

    • Management style is impersonal and functional.

    • Emphasizes instruction instead of empowerment.

  • Soft HR Management

    • Values employee contributions and welfare.

    • Treats employees as key assets, fostering upward and downward communication.

    • Engenders high employee buy-in.

    • Current trend is towards softer management styles recognizing that motivated employees are more productive.

Human Resource Function

  • The HR function is concerned with the following core areas:

    1. Recruitment.

    2. Training and Development.

    3. Remuneration and Reward.

    4. Performance Management and Appraisal.

    5. Morale and Motivation.

    6. Regulatory Matters.

Recruitment

  • Recruitment involves multiple steps:

    1. Identifying recruitment needs.

    2. Creating job descriptions.

    3. Advertising positions.

    4. Reviewing applications.

    5. Pre-screening candidates.

    6. Coordinating hiring with responsible managers.

  • Use of Agencies: Agencies may help recruit permanent or temporary staff.

  • Psychometric Testing: Considered to match candidates' skills with job requirements efficiently.

Training and Development

  • New employees often require training to:

    1. Develop job-specific skills.

    2. Understand organizational culture and working norms.

  • Existing employees may need further development to:

    • Enhance their skills for current roles or prepare them for promotions.

  • Policies and Budget Influence: Type of training offered depends on organizational policies and budget.

  • Tuition Reimbursement Programs: Support employees in furthering their education in programs beneficial to the organization.

  • Examples of programs that may be funded include the CGMA Financial Leadership Program and MBA programs.

Remuneration and Reward

  • HR’s role includes:

    1. Setting competitive pay rates and establishing remuneration structures.

    2. Deciding on bonuses and additional compensation (e.g., insurance, pensions, perks).

Performance Management and Appraisal

  • Crucial for achieving strategic objectives.

  • HR assesses individual and organizational performance, aligning it with business goals.

  • Goal Alignment: Company objectives must cascade down through the ranks:

    • Use of SMART objectives (Specific, Measurable, Achievable, Relevant, Time-bound).

  • Corrective Actions: Includes managing underperformance carefully to avoid demotivation.

Morale and Motivation

  • HR focuses on shaping corporate culture to optimize employee productivity and satisfaction.

  • Organizational differences:

    • Creative agencies may encourage lively environments, while more hazardous industries may prioritize controlled atmospheres.

  • Achieving staff satisfaction results in reduced turnover and absenteeism, leading to higher productivity.

Regulatory Matters

  • Key HR responsibilities include:

    • Health and Safety: Ensure workplace safety and compliance with regulations.

    • Legal and Compliance: Understand relevant laws governing HR practices.

    • Diversity and Inclusion: Promote a diverse workplace and comply with anti-discrimination laws.

Modern Working Styles

  • Adapting to changes in HR functions reflecting new operational needs:

    • Virtual Organizations: Dynamic structures, often allowing global hiring but posing challenges in communication and training.

    • Flexible Workforces and Contractors: Enhances organizational flexibility but may reduce loyalty and engagement among temporary staff.

Key Performance Indicators (KPIs)

  • Importance of customizing KPIs based on organizational goals:

    1. Headcount Management: Targeted versus actual employee numbers (e.g., Absan Co.’s accounting department).

    2. Staff Turnover: Percentage calculation:
      ext{Staff Turnover} = rac{ ext{Total Leavers}}{ ext{Average Number of Employees}} imes 100

    3. Staff Retention Rate:
      ext{Retention Rate} = rac{ ext{Staff Retained}}{ ext{Staff at Start of Period}} imes 100

    4. Average Salary: Measure at department/organization level:
      ext{Average Salary} = rac{ ext{Total Wage Expense}}{ ext{Number of Employees}}

    5. Payroll-to-Revenue Ratio: Indicates value provided by staff in terms of revenue generation:
      ext{Payroll Ratio} = rac{ ext{Total Staff Costs}}{ ext{Total Revenue}}

    6. Training Budget: Set training investment target (e.g., training hours per employee) and monitor results.

    7. Accident Rate: Monitor health and safety incidents for compliance and improvement.

    8. Absenteeism Rate:
      ext{Absenteeism Rate} = rac{ ext{Number of Days of Absenteeism}}{ ext{Total Days Worked}} imes 100

Finance Function Business Partnering

  • Integration of HR with finance is vital for optimal functioning:

    • Support in setting the right KPIs for evaluating HR performance.

    • Assisting in budget preparations and bonus modeling.

    • Compliance with labor laws and health regulations affecting workforce administration.

    • Analyzing workflows to enhance efficiency in HR operations.

Recommendations from CGMA Report

  • Embed human capital strategy within the overall business strategy.

  • Develop human capital metrics aligned with strategic goals.

  • Translate human capital data into actionable insights for decisions.

  • Structure organizations to encourage collaboration between HR and finance for comprehensive metrics.

Case Study: Printz

  • Background: An organization known for innovative document solutions.

    • Transition to digital and virtual offerings while maintaining competitiveness.

  • HR Practices:

    • Implementing psychometric testing for job applications.

    • Investing heavily in employee training and development programs.

    • Operating a 360-degree performance appraisal system.

Knowledge Checks

  • Identification of HR Approaches: Printz operates a soft HR approach.

  • Evaluation of Training Applications: Selection based on relevance to workplace skills.

Conclusion

  • Summarizes the responsibilities of HR:

    • Executing recruitment.

    • Training and competence development.

    • Setting remuneration and reward structures.

    • Managing performance to enhance workforce efficacy.

    • Influencing corporate culture, morale, and motivation.

    • Ensuring compliance with regulations.

  • Emphasizes the collaborative role of finance professionals in HR operations to optimize human capital investment and organizational effectiveness.