UNIT – I

HRM

Introduction:

HRM is concerned with the human beings in an organization. “The management of man”
is a very important and challenging job because of the dynamic nature of the people. No two
people are similar in mental abilities, tacticians, sentiments, and behaviors; they differ widely
also as a group and are subject to many varied influences. People are responsive, they feel, think
and act therefore they cannot be operated like a machine or shifted and altered like template in a
room layout. They therefore need a tactful handing by management personnel.”

Human Resource Management (HRM) is an operation in companies designed to

maximize employee performance in order to meet the employer's strategic goals and objectives.
More precisely, HRM focuses on management of people within companies, emphasizing on
policies and systems. In short, HRM is the process of recruiting, selecting employees, providing
proper orientation and induction, imparting proper training and developing skills.

Definitions of HRM

“It is the process of managing people in organizations in a structured and thorough manner.”

Human resource management is management function that helps manager to recruit, select, train
and develop organization members. Or HRM is a process of making the efficient and effective
use of human resources so that the set goals are achieved.

Dunn and Stephens: “The HRM is the process of attracting, holding and motivating all manager
line and staff.”

SIGNIFICANCE OF HRM

Human resources are the valuable assets of the corporate bodies. They are their strength.
To face the new challenges on the fronts of knowledge, technology and changing trends in global
economy needs effective human resource management. Significance of HRM can be seen in
three contexts: organizational, social and professional.

Organization Significance:
HRM is of vital importance to the individual organization as a means for achieving their
objectives.
It contributes to the achievement of organizational objectives in the following ways:
1. Good human resource practice can help in attracting and retaining the best people in the
organization.
2. Developing the necessary skills and right attitudes among the employees through training,
development, performance appraisal, etc.
3. Securing willing cooperation of employees through motivation, participation, grievance
handling, etc.
4. Effective utilization of available human resources.
5. Ensuring that enterprise will have in future a team of competent and dedicated employees.

Social Significance:
Social significance of HRM lies in the need satisfaction of personnel in the organization.
Since these personnel are drawn from the society, their effectiveness contributes to the welfare of
the society. Society, as a whole, is the major beneficiary of good human resource practice.

i. Employment opportunities multiply.

ii. Eliminating waste of human resources through conservation of physical and mental health.
iii. Scare talents are put to best use. Companies that pay and treat people well always race ahead
of others and deliver excellent results.

Professional Significance:
Professional significance of HRM lies in developing people and providing healthy
environment for effective utilization of their capabilities.

This can be done by:

1. Developing people on continuous basis to meet challenge of their job.

2. Promoting team-work and team-spirit among employees.
3. Offering excellent growth opportunities to people who have the potential to rise.
4. Providing environment and incentives for developing and utilizing creativity.

The objectives of HRM may be summarized as follows:

(i) To provide, create, utilize and motivate employees to accomplish organizational goals.
(ii) To secure integration of individual and groups in securing organizational effectiveness.
(iii) To create opportunities, to provide facilities, necessary motivation to individual and group
for their growth with the growth of the organization by training and development, compensation
etc.
(iv) To employ the skills and ability of the workforce efficiently, i.e., to utilize human resources
effectively.
(v) To increase to the fullest the employee’s job satisfaction and self-actualization; it tries to
prompt and stimulate every employee to realize his potential.
(vi) To create a sense and feeling of belongingness team-spirit and encourage suggestions from
employees.
(vii) To help maintain ethical policies and behaviour inside and outside the organization.
(viii) To maintain high moral and good human relation within the organization.
(ix) To manage change to the mutual advantage of individuals, groups, the organization and the
society.
(x) To ensure that, there is no threat of unemployment, inequalities, adopting a policy
recognizing merit and employee contribution, and condition for stability of employment.

EVOLUTION AND DEVELOPMENTS OF HRM

The history of development of HR management in India is comparatively of recent

origin. But Kautilya had dealt with some of the important aspects of human resources
management in his “Arthasastra,” written in 400 B.C. Government in those days adapted the
techniques of HRM as suggested by Kautilya. In its modem sense, it has developed only since
independence. Though the importance of labour officers was recognized as early as 1929, the
appointment of officers to solve labour and welfare problems gained momentum only after the
enactment of the Factories Act of 1948. Section 49 of the Act required the appointment of
Welfare Officers in companies employing more than 500 workers. At the beginning,
Government was concerned only with limited aspects of labour welfare. The earliest labour
legislation in India dealt with certain aspects of Indian labourers (Regulation of Recruitment,
Forwarding and Employment) sent to various British colonies in 1830.

Period Development Outlook Emphasis Status

Status
1920s1930s Beginning Pragmatism of Statutory, welfar Clerical
capitalists
1940s - 1960s Struggling for Technical, Introduction of Administrative
recognition legalistic Techniques
1970s Achieving Professional Regulatory, Managerial
conforming,
imposition
1980s Sophistication Legalistic, Standards on Executive
impersonal other functions
1990s Promising Philosophical Human values, Executive
productivity
through people

FUNCTIONS OF HRM

☆ Operative Functions

1. Recruitment: This is the most challenging task for any HR manager. A lot of attention and
resources are required to draw, employ and hold the prospective employees. A lot of
elements go into this function of recruitment, like developing a job description, publishing
 the job posting, sourcing the prospective candidates, interviewing, salary negotiations and
making the job offer.

2. Training and Development: On the job training is the responsibility of the HR department.
Fresher training may also be provided by some companies for both new hires and existing
employees. This Fresher training is mainly done to make the employees up to date in their
respective areas as required by the company. This function makes the employees understand
the process and makes it easy for them to get on their jobs with much ease. During the
process of the training and development, the results are monitored and measured to find out if
the employees require any new skills in addition to what he/she has.

3. Professional Development: This is a very important function of Human Resource

Management. This function helps the employees with opportunity for growth, education, and
management training. The organization undertakes to sponsor their employees for various
seminars, trade shows, and corporal responsibilities. This, in turn, makes the employees feel
that they have been taken care by their superiors and also the organization.

4. Compensation and Benefits: A company can attain its goals and objectives if it can
acclimatize to new ways of providing benefits to the employees. Some of the benefits given
by companies are listed below for our understanding:

1. Working hour flexibility

2. Extended vacation
3. Dental/Medical Insurance
4. Maternal/Paternal Leave
5. Education Reimbursement for children

5. Performance Appraisal: The employees of any organization will be evaluated by the HR

department as per the performance. This function of Human Resource Management is to help
the organization in finding out if the employee they have hired is moving towards the goals
and objectives of the organization. On the other hand, it also helps the company to evaluate
whether the employees needs improvement in other areas. It also helps the HR team in
drawing certain development plans for those employees who have not met the minimal
requirements of the job.

6. Ensuring Legal Compliance: To protect the organization this function plays a crucial role.
The HR department of every organization should be aware of all the laws and policies that
relate to employment, working conditions, working hours, overtime, minimum wage, tax
allowances etc. Compliance with such laws is very much required for the existence of an
organization.

☆ Managerial Functions
1. Planning: This function is very vital to set goals and objectives of an organization. The
policies and procedures are laid down to achieve these goals. When it comes to planning the
first thing is to foresee vacancies, set the job requirements and decide the recruitment
sources. For every job group, a demand and supply forecast is to be made, this requires an
HR manager to be aware of both job market and strategic goals of the company. Shortage
versus the excess of employees for that given job category is determined for a given period.
In the end, a plan is ascertained to eliminate this shortage of employees.

2. Organizing: The next major managerial function is to develop and design the structure of the
organization. It fundamentally includes the following:

1. Employees are grouped into positions or activities they will be performing.

2. Allocate different functions to different persons.

3. Delegate authority as per the tasks and responsibilities that are assigned.

3. Directing: This function is preordained to inspire and direct the employees to achieve the
goals. This can be attained by having in place a proper planning of career of employees,
various motivational methods and having friendly relations with the manpower. This is a
great challenge to any HR manager of an organization; he/she should have the capability of
finding employee needs and ways to satisfy them. Motivation will be a continuous process
here as new needs may come forward as the old ones get fulfilled.

4. Controlling: This is concerned with the apprehension of activities as per plans, which was
formulated on the basis of goals of the company. The controlling function ends the cycle and
again prompts for planning. Here the HR Manager makes an examination of outcome
achieved with the standards that were set in the planning stage to see if there are any
deviations from the set standards. Hence any deviation can be corrected on the next cycle.

☆ Advisory Functions

1. Top Management Advice: HR Manager is a specialist in Human Resource Management

functions. She/he can advise the top management in formulating policies and procedures.
He/she can also recommend the top management for the appraisal of manpower which they
feel apt. This function also involves advice regarding maintaining high-quality human
relations and far above the ground employee morale.

2. Departmental Head advice: Under this function, he/she advises the heads of various
departments on policies related to job design, job description, recruitment, selection,
appraisals.

PRINCIPLES OF HRM
1. Principle of individual development – to offer full and equal opportunities to every employee
to realize his/her full potential.
2. Principle of scientific selection – to select the right person for the right job.
3. Principle of free flow of communication- to keep all channels of communication open &
encourage upward, downward, horizontal, formal & informal communication.
4. Principle of participation – to associate employee representatives at every level of decision
making.
5. Principle of fair remuneration- to pay fair & equitable wages & salaries commiserating with
jobs.
6. Principle of incentive – to recognize and reward good performance.
7. Principle of dignity of labour – to treat every job holder with dignity and respect.
8. Principle of labour management co-operation – to promote cordial industrial relations.
9. Principle of team spirit – to promote co-operation & team spirit among employees.
10. Principle of contribution to national prosperity – to provide a higher purpose of work to all
employees and to contribute to national prosperity.

ETHICAL ASPECTS OF HRM

Human Resource Management is the systematic and effective management of people to
achieve the desired objectives. To gain a strategic edge, it is very important to manage the
‘people’ resources productively. This will help to attain the strategic goals as well as the
satisfaction of the individual employee needs. All the Human Resource practices are based on
ethical foundation. It is the responsibility of the employers to maintain health and safety of their
employers in the workplace.

Ethics and HRM

According to Winstanley, Woodall and Heery (1996), ‘Ethics is a special branch of
philosophy that focuses on the questions related to morality, that is concepts such as good and
bad, right and wrong ; fairness and righteousness’. Business ethics deals with the degree and
extent of morality to be used in business (George & Zoe, 2010). Morals, standards, values and
ethics have becoming more complex in the present modern society and the concept of absolutes
is taken away by ambiguity.

The ethical issues

 Safety and health: Much of the work in the industries and companies is hazardous. All this is
because of the use of heavy technology. Nowadays there is much use of machineries and
high temperature based production processes. In addition, there is more dependence on
 chemical compounds. All these aspects increase injuries, illnesses and accidents in the
workplace. New sources of accidents and illnesses are increasing day by day. Risk is present
in every job but its frequency differs from job to job.
 Face to face ethics: These types of ethics arise due to human element in the activities in the
workplace. No work is possible without employees.
 Corporate policy ethics: The use of more technology in the workplace has replaced the labor
in the workplace. This has made hundreds of persons jobless. The managers are responsible
for making policies and their successful implementation. The ethical content of these policies
has massive impact throughout the company. It should be such that it can be able to send
right signals to every person in the company.
 Employee Relations: It’s the duty of the HR manager to maintain objectivity in hiring,
discipline, promotion, training, retention, termination and compensation (Ken & Joanne,
2010). All this lies at the core of human resources. HR should make it sure that the company
policies should follow anti-discrimination legislature and polices of the integrity of
performance reviews to make sure that the evaluation process remains fair with all the jobs.
 Communication: Another duty of the HR Department is to keep informed everyone in the
organization on relating to the various legal and ethical issues. HR prepares various
communication vehicles to advise employees of the company’s code of ethics and no-
tolerance policies such as documents, seminars, and informal meetings. Increase in
competition, locally or globally, need that organizations should be more adaptable, flexible,
agile, and customer focused to succeed. A And with this change in the environment the
human resource professional needs to be a strategic partner, an employee sponsor or advocate
and moreover, a change mentor within the organization.
 Insecurity and risk: Another ethical issue that is depicted in the case is insecurity and risk
present in the job. This has arisen because of the changes in the macro-economic
environment and mass un-employment. All this happens because of business restructuring
and stripping out of the costs due to redundancy, outsourcing, contingent contracts and
systems of rewards in the employment.
 Surveillance and control: It is major ethical concern these days. The right of the employing
agency to enter into the subjectivity of the worker to control and manipulate, is taken for
guaranteed (Pitt, 2007). Whether the use of psychometric tests for selection or promotion of
employees, culture change programs that seek to challenge assumptions on the job or
competence-based HRM, which seeks to promote compliance. Â with attitudes and behavior,
the assumption is that it is lawful for the employer to trespass on worker’s autonomy.

HR POLICIES

What are HR policies, procedures and practices?

HR policies, procedures and practices establish a framework to help to manage people.

They cover everything from how the business recruits its staff through to ensuring employees are
clear about procedures, expectations and rules, are how managers can go about resolving issues
if they arise.

Why are HR policies, procedures and practices important?

 They help develop your company culture.
 They help employees to understand what is expected of them.
 They reflect your business standards.
 They provide guidance and tools for managers to assist with the management of
employees.
 They provide rules surrounding fairness, consistency and clarity.
 They ensure you’re meeting your legal obligations in regards to employees.
 They help to integrate new staff members and bring them up to speed in the shortest
amount of time.

Human Resource Policies

We’ll help you craft an employee handbook of policies that everyone in your organization can
understand and follow consistently.

 Regulatory policies: We’ll guide you through regulations for policies including (but not
limited to) equal opportunity employment, employment at will, overtime pay, pay and
time record keeping, and sexual harassment policies.
 Paid time off policies: We’ll help you determine and communicate how your
organization handles paid time off practices like holidays, vacation, and sick time.
 Leaves of absence policies: While you may not know when an employee will need to
take a leave, it’s much easier to have one outlined in advance that answers all the
questions.
 Flexible work schedule policies: We’ll help you determine what kind of flexible
schedules you can accommodate.
 Acceptable use policies: We’ll assist in creating use policies for company property,
including phones, computers, cars, etc.
 Business and travel reimbursement: Create clear policies around what employees do
and do not get paid back for when traveling.

Human Resource Practices

Beyond the employee handbook, we’ll help your organization develop HR practices that support
your culture and encourage growth.
 Effective interviewing tips and developing an interview process.
 Pre-employment background check practices, including drug screening and criminal
checks.
 New hire orientations and employee integration strategies—creating the plans your
organization needs in order to effectively assimilate a new hire.
  Compensation planning approaches—how your organization reviews pay rates for
employees systematically, reviewing market data to ensure you’re paying within range,
adjusting annually for inflation, and creating strategies for performance-based/merit
increases.
 Best practices for regular employee surveys that take your employees’ pulse on whatever
you want to measure and then incorporating that feedback into your organization.

PM VS HRM

Key Difference between HRM vs Personnel Management

The following are the major differences between Personnel Management and Human Resource
Management:
1. The part of management that deals with the workforce within the enterprise is known as
Personnel Management. The branch of management, which focuses on the best possible
use of the enterprise’s manpower is known as Human Resource Management.
2. Personnel Management treats workers as tools or machines whereas Human Resource
Management treats it as an important asset of the organization.
3. Human Resource Management is the advanced version of Personnel Management.
4. Decision Making is slow in Personnel Management, but the same is comparatively fast in
Human Resource Management.
5. In Personnel Management there is a piecemeal distribution of initiatives. However,
integrated distribution of initiatives is there in Human Resource Management.
6. In Personnel Management, the basis of job design is the division of work while, in the
case of Human Resource Management, employees are divided into groups or teams for
performing any task.
7. In PM, the negotiations are based on collective bargaining with the union leader.
Conversely, in HRM, there is no need for collective bargaining as individual contracts
exist with each employee.
8. In PM, the pay is based on job evaluation. Unlike HRM, where the basis of pay is
performance evaluation.
9. Personnel management primarily focuses on ordinary activities, such as employee hiring,
remunerating, training, and harmony. On the contrary, human resource management
focuses on treating employees as valued assets, which are to be valued, used and
preserved.

HRM AT GLOBAL PERSPECTIVE

Categorization of countries in the concept of IHRM

In the concept international human resource management, the countries having headquarters and
subsidiaries are categorized as follows.
 Home country: Where the headquarters is located
 Host country: Where the subsidiary is located
  Third/other countries: These are the sources of finance and human resources

Types of employees in IHRM

The name international human resource management itself indicates that human
resources are recruited from various countries. Here nationals of various countries contribute
their skills and efficiently for the growth of the organization. They are mainly three types, parent
or home country nationals, host country nationals, and third country nationals. These three types
are differentiated on the basis of citizens of headquarters of the company, citizens of the
subsidiaries of the company, and citizens of various countries.
 Home country or Parent Country Nationals (PCNs): Home country nationals are the
employees of the organization and these are the citizens of the country where the head
quarter is located.
 Host Country Nationals (HCNs): Host country nationals are the citizens of the country
where the subsidiary is located or when any organization recruits the nationals of the
country where the subsidiary is located.
 Third-country Nationals (TCNs): Third country nationals are the citizens of the other
countries, and they are neither the citizens of the country where the headquarters is
located nor the citizens of the country where the subsidiary located.

Drivers of globalization:
 Huge markets: rapidly developing economies have huge markets. For companies, mostly
in developed countries, which have been operating below capacities, the emerging
markets offer immense opportunities to increase their sales and profits.
 Low cost of production: many multinational companies are locating their subsidiaries in
low wage and low cost countries to reduce their cost of production.
 Changing demographics: this also add to increasing globalization. Demographic changes
are more visible in India; the country has the largest number of young people in the world
today. These young people will join the employable workforce in the next few years, thus
creating a huge surge of productivity, incomes and savings. Richer countries will face a
shortage of employability people while India will have a surplus of them.
 Regional trading blocks: this also is adding to the pace of globalization. WTO (World
Trade Organization), EU (European Union), NAFTA (North American Free Trade
Agreement), and FTAA (Free Trade Area of the Americas) are a few of the major
alliances among countries trading blocks seek to promote international business by
minimizing trade and investment barriers. Integrating among countries results in efficient
allocation of resources throughout the trading area, promoting the growth of some
businesses and the decline of others, the development of new technology and products
and the elimination of old.
 The declining of trade and investment barriers: the early period of the twentieth century
witnessed high levels of barriers on trade and investment. The aim of such restriction was
to protect domestic industries from foreign competition. Underlying the argument for
protection of domestic industries is the infant industry reasoning. Traffic protection
against the imported commodity is needed.
 Technology: the most powerful instrument that triggered globalization is technology.
Revolution is probably the right word which can best describe the pace at which
technology has changed in the recent past and is continuous to change. Significant
 developments have been witnessed in communication, transportation and information
processing, including the emergence of the internet.
CHALLENGES OF GLOBALISATION

Globalization poses four major challenges that will have to be addressed by governments, civil
society, and other policy actors.
 One is to ensure that the benefits of globalization extend to all countries. That will certainly
not happen automatically.
 The second is to deal with the fear that globalization leads to instability, which is
particularly marked in the developing world.
 The third challenge is to address the very real fear in the industrial world that increased
global competition will lead inexorably to a race to the bottom in wages, labor rights,
employment practices, and the environment.
 And finally, globalization and all of the complicated problems related to it must not be used
as excuses to avoid searching for new ways to cooperate in the overall interest of countries
and people.

As MNCs do business in new global markets, they may encounter several

significant challenges:

 Ethical Business Practices: Arguably the most substantial of the challenges faced by MNCs,
ethical business practices in areas such as labor, product safety, environmental stewardship,
corruption, and regulatory compliance have historically played a dramatic role in the success
or failure of global players. For example, Nike’s brand image was hugely damaged by reports
that it utilized sweatshops and low-wage workers in developing countries. In some nations,
particularly those without a strong rule of law, bribing public officials (e.g., paying them off
with gifts or money) is relatively common by those seeking favorable business terms.
Although national and international laws exist to crack down on bribery and corruption, some
businesspeople and organizations are pressured to go along with locally accepted practices.
Maintaining the highest ethical standards while operating in any nation is an important
consideration for all MNCs.
 Organizational Structure: Another significant hurdle is the ability to efficiently and
effectively incorporate new regions within the value chain and corporate structure.
International expansion requires enormous capital investments in many cases, along with the
development of a specific strategic business unit (SBU) in order to manage these accounts
and operations. Finding a way to capture value despite this fixed organizational investment is
an important initiative for global corporations.

 Public Relations: Public image and branding are critical components of most businesses.
Building this public relations potential in a new geographic region is an enormous challenge,
both in effectively localizing the message and in the capital expenditures necessary to create
momentum.
 Leadership: It can be difficult for businesses to find effective organizational leadership with
the appropriate knowledge and skills to approach a given geographic market successfully.
For every geography worldwide, unique sets of strategies and approaches apply to language,
culture, business networks, management style, and so forth. Attracting talented managers
with high intercultural competence is a critical step in developing an effective global
strategy.
 Legal and Regulatory Structure: Every nation has unique laws and regulations governing
business. MNCs need access to legal expertise to help them understand in-country laws and
comply with applicable regulations. It is important for businesses to understand the legal and
regulatory climate for their industry and type of organization before entering a new market,
so that this information can be factored into the business case and strategic decisions about
where and how to expand globally, as well as strategic and operational planning to ensure
profitability.

Additional challenges can arise, particularly in the following areas:

 Infrastructure: Infrastructure includes the basic physical and organizational structures

needed for a society to operate and for an economy to function. It can be generally defined as
the set of interconnected structural elements that provide a framework supporting an entire
structure of development, such as roads, bridges, water supply, sewers, electrical grids,
telecommunications, and so forth. It also includes organizational structures such as a stable
government, property rights, judicial system, banking and financial systems, and basic social
services such as schools and hospitals. A country’s infrastructure will help determine the ease
of doing business within that nation. For example, a country with poor road conditions and
intense traffic may not be the best place to conduct business that requires goods to be
transported from city to city by land. Poor infrastructure makes it difficult for businesses to
operate effectively because they have to shoulder additional cost and risk to make up for
what the country’s society does not provide.

 Technology: The level of technological development of a nation affects the attractiveness of

doing business there, as well as the type of operations that are possible. Companies may
encounter a variety of technological challenges doing business in foreign countries, such as
training workers on unfamiliar equipment; poor transportation systems that increase
production and distribution costs; poor communication facilities and infrastructure;
challenges with technology literacy; lack of reliable access to broad-band Internet and
related technologies that facilitate business planning, implementation, and control.