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 treated with the time and emphasis that it deserves. To fully understand what HRM is and its impact on the success or failing of a business, we first need to know what it means.

The function of Human Resource Management is to recruit, develop and use the personnel within an enterprise in the manner in which is most suitable to achieving the aims and objectives of the enterprise.

This effectively translates to “using individuals in the business in the best way possible” although that would be an over-simplified assertion that does not reflect the true nature and range of HRM. HRM describes all of the methods and procedures that are involved in ensuring that all members of staff in a business are pulling in the same direction, and more significantly, in the right direction.

At its core, HRM brings together three major elements that are essential to the productive output of the workforce. These factors include motivation, management and leadership, and organisational structures. Consequently, HRM can be employed on all levels of management in your organisation, not just the shop floor staff, and it may even be used to adjust the structure of those levels of management at the same time.

Why is it Necessary?

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

Human Resource Management has an effect on every level of your business activities with varying degrees of visibility. The most apparent HRM tasks include the hiring and firing of staff as well as monetary systems such as payroll. It may also impact on motivation and communication inside your company, which are much more intangible factors but are important nonetheless.

It also goes without saying that every company is different and will have a specific set of issues to face and opportunities to take advantage of. HRM can act as a flexible tool that translates workforce potential into financial profits and can adjust to fully utilise the strengths of your company. Without it, your rivals may be afforded the chance to succeed where you missed out.

The correct supervision of human resources is crucial for firms delivering services with very specific terms such as setting up company because client service is of high significance.

Impact on Business

Whilst this all sounds very interesting and important, how does it actually influence the daily functions of your business, and more importantly, how will it help to enhance 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 business that is most associated with human resources – recruitment. Almost every business in the world, and especially companies that are expanding, need to recruit people to work for them. Either existing employees have left, or new opportunities have arisen which mean there are jobs that need to be filled.

It is 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 industry, there is an on-going requirement to keep your company up-to-date and ready to take advantage of any opportunity. There is an expression that states that “if you are not moving forward you are going backwards” which can be applied to business.

You may also find that the expensive process of external recruitment can be averted if your company has adequate training facilities in place. It is far easier to teach an existing employee to a higher level and then use outside recruitment to fill the gap remaining at the lower level than it is to hire straight to a higher level.

Employee Relations

When you have the suitable men and women working for you it is important to keep them doing work for you, and to be sure they are doing a good job. This can be achieved via good employee relations. The most obvious employee relations exercise is the art of motivation – a broad topic by itself – but other employee relations issues can include disciplinary and grievance management. All of these factors are an important part of the overall HRM picture.

Finances

You can’t keep employees at your organisation by good motivational techniques only. They’ll want to be paid a fair amount and on time. Payroll should be one of the primary systems that is developed when you launch a company, but they still need to be taken care of and updated when staff join, leave or switch pay grade. Poor management of your payroll system can rapidly lead to disaster in terms of your staff.

Industrial Relations

Numerous companies will have to work with trade union or other workers rights establishments which can be incredibly forceful when defending the interests of their own members. When interacting with such bodies it is beneficial to have people within your organisation who can communicate effectively with them whilst keeping the interests of your own company in mind as well. The demand for good industrial relations is significantly more prevalent in public sector firms.

It ought to be obvious that any company international business cannot run successfully without having motivated and capable workers.

Workforce Planning

We have seen the impact that human resource management can have on a business and overall it looks like good HRM will have a beneficial effect on any business. As a rule, this is the case, but good HRM does not just occur overnight. It should be designed according to the targets of the company and then carried out thoroughly.

One way to apply HRM concepts to your company is via workforce planning – a process that has the goal of making sure your workforce can complete the upcoming tasks needed for your business to be successful.

Definition

Workforce planning is the process of anticipating ahead of time the human resource requirements of any organisation, both in terms of the quantity of employees needed and the appropriate skill mix. Recruitment and training policies are devised with a long term focus in order to ensure that the company is able to function without being limited by a lack of appropriate labour. It is a bit of a balancing act, but when done properly can bring about many benefits.

Requirements

Evaluating your workforce requirements is vital to the proper planning of your workforce in the short-term and long-term future. If your company is subject to seasonal shifts in demand, such as in the tourism industry, or suffers from seasonal fluctuations in staff levels then your workforce planning must take these variables into consideration.

Recruitment

Whether you are hiring people externally or from within your existing workforce you still want to find the right person to fill the role. As part of your workforce planning you should draw up a job description that details the role that will be carried out as well as a person specification which will give an indication of the kind of individual that would be a good fit for the job and your business.

Selection

The selection procedure can be as involved or as simple as you deem necessary. Beyond standard job interviews there are numerous ways you can learn about applicants for your jobs, including aptitude tests, group interviews and even psychometric testing. These advanced techniques might not be applicable to all workforce planning projects but are an option to organisations.

Training & Development

The main goal of staff training and development is to produce a much better standard of worker in your organisation. Workforce planning can use training to fill upcoming gaps in the skill set of your workforce and is commonly quicker and more economical than external recruitment.

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Workforce Motivation

It practically goes without saying that well motivated workers are going to produce a better standard of work and have a greater quantity of output than unsatisfied workers. This improved work rate will undoubtedly lead to an increase in the profitability of a business. Yet motivation is still a bit of taboo topic among some managers.

Essentially, all motivational tactics can be separated into two sets that are often referred to as the “carrot and stick” approach to motivation. The analogy relates to the two ways to make a donkey carry your belongings, either by tempting it with a carrot, or threatening it with a strike from a stick! It is a fairly dated idea but the basic principle remains relevant to companies today.

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

Financial

The most common financial motivators are payment plans. You can pay workers in numerous different ways, either a fixed amount for a fixed service, by an hourly or daily fee, or a rate related to production, such as a commission structure. Whatever method is used, the workforce is motivated to work because they will get money for doing so.

Another financial motivation method involves what are known as incentive schemes, where additional financial rewards are given out for good performance. This may include commission above a fixed salary, performance-related pay grades or even offering a share of company profits. Once again, the motivating factor here is the money alone.

Non-financial

Many human resource advocates have their own ideas about the other elements that motivate people to work, although these are often seen as an added bonus to an employee. It is broadly acknowledged that money is the key motivational factor for the great majority of people.

The Changing Face of HRM

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

Perhaps there is a new piece of government legislation that may have an effect of how your business can carry out its trading, or maybe a new manufacturing technology will come along that will revolutionise your industry. Either way, if you want to ensure that your workforce is performing to its optimum level then your HRM strategy should be flexible enough to cope with an ever-changing world. After all, what might seem like a danger to many will often appear as an opportunity to a good entrepreneur.