Human Resource Function

Human resource management (HRM)

Human Resource Management is an integrated approach to the management of people in an
organization. It aims to make the most efficient use of a firms human resources. HRM includes
the recruitment, selection, training, motivation, performance management and payment of all
staff within a business. HRM ensures that each department within the company is provided with
human resources that have right skills, qualifications and experience.
HRM is vital for any organization as it actions directly affect the labor force. If an employee is
satisfied, he wont probably be looking for another employment elsewhere. On the other hand,
dissatisfied workers will try to leave the organization and this will increase labor turnover.

Labor productivity
Labor productivity is a way of measuring the output of employees. It can be defined as the
output per worker per period of time.
Labor productivity = Total output/Number of employees per period of time
Productivity is often dependent on the type and quality of capital being used and the degree of
operator skill. When labor productivity is increased it will increase the efficiency hence
reflecting it in a lower unit cost. This would give the competitive edge to the business among its
rivals. There are number of ways that we can increase the labor productivity. They are:

Better education and training

Other factors of production( quantity & quality)
Better management or organization. e.g. division of labor
Better working conditions
Greater fringe benefits (housing allowances, medical care, bonus, meal...)

Workforce Planning (Human Resource Planning)

Effective workforce planning aims to have the right quantity and quality of employees doing the
right things in the right place at the right time and at the right cost to the organization. If the
HRM function can achieve this the following benefits should be obtained:

The workers have the correct skills to carry out the tasks thus ensuring that rejects are
kept to a minimum and quality is guaranteed. This will reduce the cost of re-working
faulty items and refunding dissatisfied consumers.
The business has the correct size of workforce thus ensuring that forecast production
levels are achieved without having excess labor. This will help reduce the unit costs of
the finished product.

The correct recruitment and training of staff should ensure a motivated workforce. This in
turn should lead to a lower labor turnover and higher productivity. Both of this impacts
favorably upon costs.

Flexible Working
This is when an employer allows people to choose the times that they work so that they can do
other things, for example spend time with their children. This is to give employees a certain
degree of flexibility in their jobs.
Advantages include:

Recruitment, retention and motivation

Increases managerial control (e.g. annualized hours)
Cost savings and more productive environment (e.g. home-working)
Reduced absenteeism
Improved employee health and welfare

Disadvantages of flexible working include:

Need to meet raised expectations of employees

Cost of consideration, making adjustments, appeals and legal defenses
More difficult to serve customers quality reduced
Additional recruitment necessary
Dissatisfaction of staff who do not qualify (e.g. non-parents)
More difficult to implement change

Methods of flexible working

Overtime
Overtime is working beyond normal working hours. It allows a firm to increase production
without employing more staff. It is particularly useful for special orders or for firms that have
seasonal demand. Employees are usually rewarded by extra payments for overtime working such
as time and a half or double time when paid hourly.
Flexi-time
A flexible hours scheme, or flexi-time, usually involve working a set of core hours, perhaps 10
a.m. until 3 p.m., with the ability to vary the hours either side of this. Alternatively, there may be
a choice of working patterns that can be chosen (usually a selection of 7 or 8 hour spells between
7 a.m. and 7 p.m. This allows an employer to recruit and retain staff who have other life
commitments or interests, and to schedule work across longer portions of the day, so extending
customer service. It helps to retain skilled and experienced staff at difficult times in their lives
e.g. female workers who have young children.
Shift working

Shift working refers to regular work that takes place during non-standard hours, such as a
morning shift (e.g. 2 a.m. to 8 a.m.) or a night shift (8 p.m. to 2 a.m.). Shift work is essential for
firms that have expensive capital machinery requiring high capacity utilization. Workers can be
rotated around the shifts alternating between morning, afternoon and evening shifts. This allows
production to be continuous while not committing an employee to the same unsociable shift on
a permanent basis.
Tele-working
Tele-working involves working from home, with employees being linked to their employers by
computer, phone and sometimes fax. The benefits include, work around looking after children,
enabling disabled people to work from home, and saving in accommodation costs for the
employers.
Home working
Home working affords individuals the same benefits as teleworking and may include freelance or
self employed workers such as market researchers, graphic artists and editors. Home workers can
also include mobile hair dressers, financial consultants etc.
Job share
Jobs hare allows individuals to, quite literally, share jobs. This is ideal for people who want
responsibility but only want to work half hours. Tasks are shared equally between job holders
and the earnings too.

Recruitment and Selection

Recruitment
Recruitment refers to the process of attracting, screening, and selecting qualified people for a
job. The recruitment process starts with a vacancy arising. Requirement is necessary when either
an existing employee leaves or a new position is created.
Recruitment process
The recruitment process refers to number of steps which has to be taken in order to have a
successful recruitment campaign. In order to have such successful recruitment campaign a firm
needs to follow a logical sequence to ensure that a suitable number of employees with the
appropriate skills are employed in order to meet the manpower requirements of the business.
The process needs to include details about:

The job analysis procedure: Gathering all the facts relating to the tasks, responsibilities
and context of the job. This is the procedure for determining the duties and skill
requirements of a job and the kind of person who should be hired for it.

The job description: Outlining the content of the job. This includes a list of a jobs
duties, responsibilities, reporting relationships, working conditions, supervisory
responsibilities, and the job title.
The person specification: The qualities and qualifications required by the candidates for
the job. This is a list of a jobs human requirements, that is, the requisite education,
skills, personality, and so on.
Communicate your requirements: This is the procedure for advertising the vacancy both
internally and externally.
The selection procedure: This is the initial screening of applications, interviewing and
testing.
This sequence of events should ensure that the applicants fit the job on offer and that the
successful candidate has the necessary skills to do the task.
Recruitment sources
Internal sources
This involves recruiting within the organization. Under this method details can be put on a notice
board, or published by means of a circular.
Advantages

Foreknowledge of candidates strengths and weaknesses

More accurate view of candidates skills
Candidates have a stronger commitment to the company
Increases employee morale
Less training and orientation required
It is cheap as few direct costs are incurred

Disadvantages

Failed applicants become discontented

Time wasted interviewing inside candidates who will not be considered
The number of applicants from internal sources is likely to be limited

External Sources
There are number of external sources which may be used for recruitment.
Advertising
This is the most common form of external recruitment as many posts are filled in response to
advertisements. To be successful, the advertising should be well-worded and placed in an
appropriate medium. Selection of the best medium depends on the positions for which the firm
is recruiting.
Job centers

These are located in High street Shopping centers and they act as an intermediary, introducing
prospective applicants to employers who have notified vacancies to the job centers. The service
is provided free of charge.
Agencies
Private employment agencies may operate on a nationwide or on a local basis and usually work
on a no placement, no fee basis. The service can be quick but expensive. Most agencies
specialize in certain type of vacancies.
Consultants (Headhunters)
This is more expensive and is used for more demanding and high-ranking positions. The services
usually include advertising and making a profile. Small numbers of well matched candidates
after preliminary interviews are offered to the client.
University and colleges
This is to attract qualified candidates from recently graduated students and to determine if the
candidate is worthy of further consideration.
Other forms include career offices, casual enquiries, and recommendations.
Advantages of external recruitment

New blood
Insights from competitors
Cheaper than training

Disadvantages

Orientation time
Morale of internals
May not fit-in

Factors to be considered to select the sources of recruitment

Speed

The method used for attracting candidates

The notice period with the previous employers
The interview procedure
If no suitable candidate is applied, then have to wait further longer.

Costs

Important element in effective recruitment

Word of mouth method cost noting

Using headhunters and agencies will cost a lot
Time is spent on screening, selecting for interview and cost of work which is lost or
productivity which falls due to staff being involved in the selection process and not
having as much time to spend on their usual task.
The HRM always have to make sure that they have selected the right person for the job. In doing
so, quality should not be compromised. Even if they cant find the perfect person for the job,
never employ a person who is unqualified and unsuitable.

The selection process

Employee testing and selection is the use of various tools and techniques to select the best
candidates for the job. These tools cover the selection process, basic testing techniques, and
background and reference checks, ethical and legal questions in testing, types of tests, and work
samples and simulations.
Selection tests
Practical test are common where an easily tested skill is required such as certain secretarial
skills or ability to speak a foreign language. If such tests are being involved in selection process,
candidates could be notified of such tests in advance
Psychological tests are used to assess aspects of candidates such as motivation, personality, and
attitudes. Those involved with the application and interpretation of such tests should be well
trained. Results of such tests must be handled with caution
References
This is very common once a primary selection is done as a way of confirming a choice or doing
final check on candidates. A reference can be:
o
o
o
o
o
Interviews

Biased in favor of candidates due to personal friendship

Biased against the candidate due personal dislike
Biased in favor of candidates as referee wants to get rid of them
Biased against the candidates as referee wants to keep them
Impartial and accurate

Interviews are still the primary method of selection. An interview is a conversation with a
purpose. Interviews are mainly of two forms:
Panel interviews: This involves when team of interviewers meeting the candidate together. It is
less time consuming and more convenient administratively than one to one interview. Each
interviewer may have different areas to be interviewed.
One-to-one interviews: This is when Candidates are interviewed by single interviewer. This
approach is more likely to be thorough and rigorous questioning and should encourage
candidates to relax and talk freely.

Interviews should focus on:

Evidence on the applicants ability to do the job

Evidence on the applicants motivation in applying the job
Provision of information about the organization, the job and the terms and conditions of
employment on which the applicant might be engaged

Employee Induction
Induction is process meant to help the new employee to settle down quickly into the job by
becoming familiar with the people, the surroundings, the job, the firm and the industry. Induction
is an introductory training programme designed to familiarise new recruits with the basic running
of the firm including health and safety, security systems and administration procedures. It is also
an opportunity to meet key personnel.
Induction program could include

Introduction to other employees

Physical layout of the work place
Essential procedures, such as about wages
Important safety provisions such as fire evacuation procedures
Information about the organization: history and development, trading policies, company
projects, HR policies, responsibilities of each department etc

Advantages of induction

Employee retention
Create good impression
It creates good adhesion
It takes less time to familiarize
Less turnover ratio, increase productivity, No chaos and Cost reduction.

Training and Development

Training involves improving the skills, knowledge and attitudes of employees so as to become
more efficient and productive. Training and development is primary concern of HR department.
But, all the managers should be concerned with drawing out the full potentialities of their staffs.

Top managers has responsibility to ensure that it allocates sufficient money and
resources to finance and support development activities
Line managers have responsibility to ensure that they encourage their staffs to develop
themselves and allocation of time for training.
Employees have a responsibility to ensure that they develop their knowledge, skills and
experiences

HRD is responsible for ensuring that all training programs are identified, planned for and
implemented and evaluated in a cost effective way.

Objectives of training

Improve the efficiency of workforce

Make workers multi-skilled and flexible
Introducing a new process or new machinery
Reduce wastage of material and time
Adapt to change

Benefits of Training

Improved customer service and public relations

Staff become more competent at their jobs
Staff become more flexible
Fewer complaints
Better morale and attitudes
Less turnover and absenteeism
More involved and caring employees
Changes become easier to introduce
Reduced waste
The organization's image improves

Costs of Training

Urgency of need
Training time
Costs
Employee turnover
Short-term worker
While the employee is being trained the firm is losing the production that the worker
would have contributed

Training methods
Training methods could be either on-the-job training or off-the-job training
On-the-job training

On-the-job training is instruction at the place of work on how the job should be carried out. It
might consist of observing how an experienced operator carries out the task or being talked
through the job by a supervisor. Whichever method chosen, it is usually cheaper than off-thejob training and more suitable to the company. On-the-job methods include:
Job rotation: Where the trainee is given several jobs in succession, to gain experience of a wide
range of activities (e.g. a graduate management trainee might spend periods in several different
departments)
Attachments or secondments: Trainees spend periods of time in various departments, often as
an assistant to a more senior member of staff, in order to gain knowledge and experience of the
organization and its activities from different perspective.
Action learning: Trainees learn a new job by doing it under the supervision of an experienced
person
Job shadowing (sitting by Neil): Trainees learn the job by watching or working with an
experienced post-holder. There is possible difficulty here, though, in that bad habits can easily be
passed on to an impressionable trainee.
Advantages of on-the-job training

Generally more cost effective

Less disruptive to the business - i.e. employees are not away from work
Training an employee in their own working environment, with equipment they are
familiar with and people they know can help they gain direct experience to a standard
approved by the employer

Disadvantages of on-the-job training

Teaching or coaching is a specialist skill in itself; unless the trainer has the skills and
knowledge to train, this would mean that the training will not be done to a sufficient
standard
The trainer may not be given the time to spend with the employee to teach them properly,
which would mean substandard training has been achieved and learning has only been
half done
The trainer may possess bad habits and pass these on to the trainee

Off-the-job training
Off-the-job training can be defined as all forms of training apart from that at the immediate work
place. Off-the-job training involves employees taking training courses away from their place of
work. This is often also referred to as "formal training". Off the job training courses might be run
by the business' training department or by external providers. Off-the-job training methods
include:

Competency based training: The main role is to fill the gap between existing level of
knowledge and skill and the desired level of knowledge and skills. Organization identifies key
competencies for each level of the organization and develops training programmes to meet the
requirements.
Professional education: The purpose of education should not be confused with that of training.
Education doesnt necessarily make the person better at the job, but it enables them to become
more adaptable and ready to learn. The purpose is to broaden the person and provide a wider
perspective on business issues.
Advantages of off-the-job training

External course is usually delivered by experts who are particularly skilled and
experienced at delivering the subject in a professional and understandable manner.
Employee can focus on the training - and not be distracted by work
Opportunity to mix with employees from other businesses

Disadvantages of off-the-job training

Employee needs to be motivated to learn

May not be directly relevant to the employee's job
Costs (transport, course fees, examination fees, materials, accommodation)
Employees absence from work. While the worker is absent, his or her colleagues have to
take up the work load or the firm has to hire another person for the period of absence,
thus adding to the financial cost e.g. the use of supply teachers.

Labor Turnover
Labor turnover is the rate at which employees are leaving the organization as a proportion of the
total workforce. High turnover might be indicative of poor wages, poor working conditions,
unsympathetic management and low morale.
Labor turnover = number of leavers per year/average number of staff * 100
Reasons for labor turnover

Inadequate wage levels leading to employees moving to competitors

Poor morale and low levels of motivation within the workforce
Recruiting and selecting the wrong employees in the first place, meaning they leave to
seek more suitable employment
A buoyant local labor market offering more (and perhaps more attractive) opportunities to
employees

Costs of labor turnover

Additional recruitment costs

Lost production costs

Increased costs of training replacement employees
Loss of know-how and customer goodwill
Potential loss of sales (e.g. if there is high turnover amongst the sales force)
Damage that may be done to morale and productivity (an intangible cost)

Reducing labor turnover

Training
Delegation
Team working
Improved working conditions
Hiring the right people from the start
Setting the right compensation and benefits
Review compensation and benefits packages at least annually

Why should a business be concerned about an increase in labor turnover?

An increase in labor turnover might indicate that employees are dissatisfied with management,
dissatisfied with working conditions or are unhappy about the rate of pay. Whatever the reason a
firm should be concerned because replacing employees on a regular basis is costly in terms of
time and money. Every replacement results in recruitment costs such as advertising, interviewing
and induction training. Departing employees represent lost skills and lost investment in training
and expertise. These can only be replaced once the new recruits have gained sufficient
experience.

Labor absenteeism
Labor absenteeism is the rate of workforce absence as a proportion of the total number of
employees. Employees can be absent for a variety of reasons such as sickness and industrial
injury. However, it is often used to describe situations where the employees are absent without
good reason.
Labor absenteeism = number of staff absent/staff total * 100
Reasons for labor absenteeism

Genuine sickness, bereavement, bullying, stress

Some employees simply playing the system
Predictable / traditional absenteeism e.g. Monday / Friday, when there is a major
sporting event during the day or at the end of a shift pattern

Reducing labor absenteeism

Understand the causes

Set targets and monitor trends

Have a clear sickness & absence policy
Provide rewards for good attendance
Consider the wider issues of employee motivation

Motivation
Motivation is process or factors that cause people to act or behave in a certain way. This is the
internal and external forces that lead an individual to work toward a goal. Motivation is the
reason behind a specific behavior particularly human behavior. Reasons for motivation may vary
such as basic needs, an object, goal, state of being or ideal. Motivation for behaving in a certain
way could also be due to morality.
Motivation theories
There are number of motivation theories. They are described as follows.
Abraham Maslows Hierarchy of needs
The best-known theory of motivation is Abraham Maslows hierarchy of needs. He hypothesized
that every human being has a hierarchy of five needs. He maintains that a person does not feel a
higher need until the needs of the current level have been satisfied.

Maslow thought that a hierarchy of needs motivated workers. At the lowest level was physical
need in other words sufficient money to meet the individuals basic requirements. Incentive
schemes are used by some organizations in order to increase productivity. Money, however, may

only be a short term form of motivation. Social friendships are also very important as a
motivator. When these motivators have been met Maslow thought that further motivation could
only be achieved by self-realization and self-development. In other words Maslow thought all of
these were motivators of one kind or another.

Herzbergs two factor theory

Herzberg Portrays two different factors hygiene factors and motivator factors as the
primary causes of job dissatisfaction and job satisfaction. Hertzberg identified environmental
factors such as salary, quality of supervision and working conditions as causes of dissatisfaction
if not met and not, as previously thought, as motivators. They could prevent demotivation but not
motivate on their own. In contrast he stressed that status, recognition, achievement, advancement
and personal development were far more important as positive motivators. In other words it is
the job itself that can create satisfaction.
Frederick Taylors scientific approach
He believed that Workers do not naturally enjoy work and so need close supervision and control.
He argued that Man is a rational economic animal concerned with maximizing his economic
gain. He believed that it is money that motivates the individuals work harder. According to his
theory workers would respond to wage system like piece rate. This theory ignores the many
differences between people. There is no guarantee that a "best way" will suit everyone. And
whilst money is an important motivation at work for many people, it isn't for everyone. Taylor
overlooked the fact that people work for reasons other than financial reward such as
responsibility and recognition.
Elton Mayo
Mayo believed that Workers are not just concerned with money but could be better motivated by
having their social needs (non-financial factors) met whilst at work. This theory Focused on
managers taking more of an interest in the workers, treating them as people who have
worthwhile opinions and realizing that workers enjoy interacting together.
Job satisfaction
This is the Satisfaction derived by an employee through the performance of his job.
Dissatisfaction could be caused by monotony, repetition, lack of control and stress. Job design
aims to enhance job satisfaction and performance, methods include job rotation, job enlargement,
job enrichment and empowerment and team working.
Job enrichment

Job enrichment aims to motivate employees by giving workers the opportunity to use a wider
range of abilities. It is based on the work of Herzberg who suggested an enriched job should
contain a range of tasks and challenges, a complete unit of work that would provide greater
satisfaction and direct feedback on employee performance. The range of tasks is extended
vertically, to enrich the quality of the job for the worker.
Job enlargement
Assembly line work is notoriously repetitive which may result in workers becoming bored and
disenchanted with their work. In extreme cases this could result in a regular exodus from the
workforce as employees seek more interesting or demanding work. Job enlargement is
considered to be one of the ways in which staff can be motivated. It consists of increasing the
number of tasks and possibly responsibilities involved in a job. This may succeed but it depends
largely on how different the tasks are and the amount of responsibility given. It could result in
more of the same type of work in which case it will soon become as repetitive and boring as the
original single task. However, it could provide enough variety to maintain the interest of the
employees.
Job rotation
Job rotation is an approach to management development where an individual is moved through a
schedule of assignments designed to give him or her breadth of exposure to the entire operation.
It offers leaning and development opportunities to staffs as skills are gained and passed on to
others as well.
Empowerment
Empowerment is the granting of employees greater control over their working lives. It entails
giving employees more authority to organize their own work and to take decisions without
reference to managers. It has the potential to produce more motivated workers with improved
productivity and lower labor turnover.
Team working
Teamwork involves breaking down production into large units and using groups or teams of
employees to complete these tasks. Teamwork is intended to increase motivation by offering the
employees greater responsibility. The team decides not only who does each job but how the job
itself is done. This adds much greater variety to the work as well as an expectation that the
team will keep improving how the tasks are done.

Remuneration
All companies need some sort of payment policy which will enable to recruit, motivate and
retain staff it needs. Employee compensation refers to all forms of pay or rewards going to
employees and arising from their employment.
Incentives and bonuses

Incentives: Payments linked to the achievement of previously set and agreed targets. They aim at
encouraging better performance and then reward it, usually fixed proportion to the extent to
which target has reached.
Bonuses: Essentially rewarded for success and are paid either at the time the individual or group
achieves something outstanding, or at a given point in the year. This could be optional. The
amount paid out depends upon the recommendations or decisions of the employees boss, the
CEO, BOD and is constrained only by budgetary limits.

There are number of incentives schemes:

Time based wages
Time-based wages is one method of rewarding employees for their labor. It is payment for the
length of time spent working rather than the quantity of output achieved. It is a simple method to
administer as it requires only a record of attendance. This system is often adopted where
remuneration is difficult to relate to output, for example with nurses, teachers or maintenance
workers. The main disadvantage for the employer is that it relies on trust. The employee is
expected to give a fair days work for the agreed remuneration. Some firms prefer to ensure
they get a satisfactory output by employing supervisors to oversee the work of time-based
operatives.
Salary
A salary is a fixed regular payment made by an employer, often monthly, for professional or
office work. It differs from time-based wages in that it is not strictly related to the actual number
of hours worked and any extra hours worked do not normally attract any overtime payment.
Piece work
Output-based wages are directly related to the output each individual or group of workers
produces. Such schemes normally establish an output norm for the average worker for which a
basic wage is paid. Output achieved in excess of this is rewarded by bonus payments.
One advantage of this method is that it should provide an incentive for workers to be productive
and needs less supervision. There is no incentive to waste time or produce items that are likely to
be rejected. Where the bonus is dependent on group targets the method can build team spirit. It
may, however, lead to rushed work, lower quality production and an increase in rejects, which
the operator might not be paid for. The employee often has to depend on other workers to keep
production flowing and so could be adversely affected by slower workers or machine
breakdown. The non-availability of raw materials or components will reduce the earning
potential of the workers.
An employee share ownership scheme

Employee share ownership is a means of obtaining a greater commitment of staff to the welfare
of the company by offering a financial incentive in the form of shares. As the value of the shares
is directly related to the success of the company and its profit level it serves as an incentive for
workers to not only work hard but to reduce costs and to suggest improvements. The main
drawback is that the worker must be committed to the company for a substantial period of time
in order to achieve significant benefits from the share scheme. The financial incentive may not
be enough to overcome the boredom of the job.

Profit sharing
Employees receive cash shares of the firms profits at regular intervals.
Payment by results groups
The group can work towards an agreed target and then distribute it equally among them. This
saves employer monitoring performance of the workers individually. The problem is when they
start complaining about some members not being participate equally but receiving the same
rewards.
Fringe benefits
These are benefits receive in addition to salaries and wages. E.g. company pension scheme,
company car, subsidized medical care, discounts when buying company products, free education
to employees children, provision of leisure facilities and an ESOS.

Apart from higher wages what other steps can a business take to motivate employees to
remain with the company?
The HRM department can motivate employees to remain with the company by recognizing that
they must be treated as separate individuals. Each person will have different needs and desires
from the job they are doing.
These needs must be identified and fulfilled. Training and self-development are important as they
recognize the personal worth of the individual to the company. The development of teamwork is
important, as most workers require a social environment within which to develop their personal
relationships.
Job enrichment is also an effective means of increasing worker motivation, as is job enlargement.
The elimination of boredom and monotony by frequent rotation is a good means of reducing
dissatisfaction.
Finally employees can be motivated by better working conditions. This might include longer
holidays, shorter working hours, improved pension rights or the provision of social and sporting

amenities. The basic rewards in the form of pay and working conditions are also important.
Assuming that the basic wage is sufficient then one or preferably a combination of the factors
above should help to retain and motivate the workforce.