HUMAN CAPITAL MANAGEMENT CHAPTER 1

Foundations of HRM; Concept of HRM & HRD; Role of HR Practitioner; Managing the HR Function; Contribution of HR Function to organization success; Evaluating HR Function.

1.1 INTRODUCTION An organization is made up of four resources, namely men, material, money and machinery. Of these, the first one id living one, i.e. human resource and other three are non-living i.e.non human. It is the human/people that make use of non human resources. Hence, people are the most significant resources in an organization. It is man who makes all the difference in organizations. L.F.Urwick had remarked that business houses are made or broken in the long run not by markets or capitals, patents or equipments, but by men. According to Peter F.Drucker, man, of all the resources available to man, can grow and develop. The main objective of this chapter is to present a perspective for human capital management in the Indian context. Accordingly the meaning, objectives, scope and functions become the subject matter of this chapter. Before we define HRM, it seems pertinent to first define the term human resources. In common parlance, human resources means people. OR Personnel means the persons employed. Personnel management is the management of people employed. Organization may be a manufacturing firm, a business concern, an insurance company, a governmental agency, social organizations, hospital, a university and even families. It may be small or large, simple or complex. An Organization is a human grouping in which work is done for the accomplishment of some specific goals, or missions. 1.2 MEANING & DEFINITION OF HUMAN RESOURCE MANAGEMENT 1.2.1 Human Resource Management means: The management of human resources is viewed as a system in which participants seeks to attain both individuals of group goals. If an analysis is made of this definition it will be seen that personnel management involves procedures and practices through which human resources are managed (i.e. organized and directed) towards the attainment of the individual, social and organizational goals. By controlling and effectively using manpower resources, management tries to produce goods and services for the society. 1.2.2 Definitions: 1.2.2a Human Resource Management involves all management decisions and practices that directly affect or influence the people, or human resources, who work for the Organization. An organizations employees enable an Organization to achieve its goals, and the management of these human resources is critical to an organizations success. 1.2.2b According to Process Systems View Human Resource Management means: Human Resource Management is the systematic planning, development, and control of a network of inter related process affecting and involving all members of an Organization. Key Terms used in this definition: Process: Process is an identifiable flow of interrelated events moving towards some goal, consequence and end. An example of the human resource management is the staffing process, a flow of events that results in the continuous filling of positions within the Organization. These events include such activities as recruiting applicants, making hiring decisions, and managing career transitions such as transfers and promotions. Flow: Flow implies movement through time and in the direction of a result; Inter-related: implies interaction within the process and between events; Goal and Consequence (Purpose): suggest a human objective; Events: are activities, happenings or change; End: implies some conclusion or consequence that may not necessarily be sought or planned by man. System: System is a particular set of procedures or devices designed to control a process in a predictable way. For e.g. Staffing System of an Organization. As a process it includes:

 Human Resource Planning; Job and Work Design; Staffing; Training and Development; Performance Appraisal and Review; Compensation and Reward; Employee protection and representation; Organization Improvement. 1.2.2c Human Resource Management is the planning, organizing, directing and controlling of the procurement, development, compensation, integration, maintenance and separation of human resources to the end that individual, organizational and societal objectives are accomplished". Edward Flippo This definition is a comprehensive and covers both the management functions and the operative functions. The purpose of all these functions is to assist in the accomplishment of basic objectives. 1.2.2 d General Definition: Personnel Management is the recruitment, selection, development, utilization of and accommodation to human resources by organizations. The human resources of an organization consists of all individuals regardless of their role, who are engaged in any of the organizations activities. 1.3 Three aspects of Human Resource Management: Welfare Aspect: concerned with working conditions and amenities such as canteens, crches, housing, personal problems of workers, schools and recreations; Labor or Personnel Aspect: concerned with recruitment, placement of employees, remuneration, promotion, incentives, productivity etc.; Industrial Relations Aspect: concerned with trade union negotiations, settlement of industrial disputes, joint consultation and collective bargaining. 1.4 Difference between Personnel Management and Human Resource Management Table :1 Dimensions PM HRM Nature of relations Pluralist Unitarist or neo-unitarist Perception of conflict Conflict is institutionalized Conflict is pathological Contract Emphasis on compliance Beyond contract commitment Role of procedures Rules dominated Culture and values dominated Planning perspective Adhoc, reactive Integrated, proactive Acceptability of unions Acceptable Non desirable Level of trust Low High Key relation Labour management Customer Managements Role Transactional Transformational Basis of job design Division of labour Teams Key people PM/IR specialist Line people and general mangers Skills acquisition Training and Development Learning Organization Reward Management Standardized job evaluation Performance related 1.5Characteristics of Human Resource Management 1. Human Resource Management is concerned with managing people at work. It covers all levels of personnel, including blue collared employees and white collared employees; 2. It is concerned with employees, both as individuals as well as group; 3. Human Resource Management is concerned with helping the employees to develop their potentialities and capacities to the maximum possible extent, so that they may derive great satisfaction from their jobs; 4. It is a major part of the general management function and has roots and branches extending throughout and beyond each Organization; 5. Human Resource Management is of a continuous nature; 6. Human Resource Management attempts at getting the willing co-operation of the people for the attainment of the desired goals.

HRM can be of full value to an Organization only when it is consistently throughout out and applied at all levels and to all management functions; in corporate policies, in the systems, procedures and in employment practices, etc. this integrative aspect of HRM is, therefore, of vital importance.

Employee Employee Relations Relations

Personnel Personnel Administratio Administratio n n Industrial Industrial Relations Relations

Fig, 1

HRM HRM

1.6 Objectives of Human Resource Management Objectives are pre-determined ends or goals at which individual or group activity in an Organization is aimed. Objectives can be divided in to two parts: 1.6.1 Primary Objectives: HRMs main goal is the creation of a workforce with the ability and motivation to accomplish the basic organizational goals; They relate to the satisfaction of the personal objectives of the members of an Organization through monetary and non monetary devices; They relate to the satisfaction of community and social objectives, such as serving the customers honestly, promoting a higher standard of living in the community, bringing comfort and happiness to the society, protecting women and children and providing for aged personnel; To utilize human resource effectively; To establish and maintain a productive and self respecting relationship among all members of an Organization; To establish and maintain an adequate organizational structure; To bring about maximum individual development of the members of an Organization; to maintain a high morale and better human relations inside an Organization by sustaining and improving the conditions which have been established so that employees may stick to their jobs for a longer period; 1.6.2 Secondary Objectives: The secondary objectives aim at achieving the primary objectives economically, efficiently and effectively. 1.7 Functions of Human Resource Management According to different authors HRM functions can be divided in to different categories. Some of the categories are as follows: 1. General and Specific functions; 2. Personnel administration and Industrial relations functions. 3. Managerial and Operative functions 1.7.1 General and Specific functions: General Functions: To conduct personnel research; To assist in the programmes of personnel administration; To develop appraisal plans; To launch education and training programmes; To develop a competent work force; To establish and administer varied personnel services delegated to personnel department. Specific Functions: Employment;

Safety; Wage and salary; Benefit Schemes; Community relations and Advice and counseling the employees. 1.7.2 Personnel Administration and Industrial Relations Functions: Personnel Administration: These functions relate to the function of managing people from the lower to the upper level of the Organization and embraces policy determination as well as implementation of policies by the personnel at the lower levels; Industrial Relations Functions: These functions relate to interactions between the management and the representatives of the unions. Such functions involve all activities of employer employee relationship, such as Organization of the union members, negotiations of contracts, collective bargaining, grievance handling, disciplinary actions, arbitration etc- the purpose of all these being to prevent conflict between two parties. 1.7.3 Managerial and Operative Functions; Managerial Functions: Management is Personnel administration. It is the development of the people and not the direction of the things. Managing people is the heart and essence of being a manager. Thus, a Human Resource Manager is a manager and as such he performs the basic functions of management.

Inputs
Human and Economic Resources interacting with environmental changes

Planning
Determination of short to long range plans to accomplish Organization objectives

Organizing Development of the Orgn. Structure according to predetermined plans

Directing Stimulation and motivation of Organization personnel according to predetermined plans

Controlling Assurance that directed action is taking place according to predetermined plans.

Feedback of significant deviations from planned performance (Managerial Functions)

Fig: 2

Outputs Goods and services needed by the organization customers

Operative Functions: These functions are concerned with the activities specifically dealing with procuring, developing, compensating and maintaining an efficient work force. These functions are also known as service functions. Procurement Function;Development function;Compensating function;

Integrating function;Maintenance function.

Managerial Functions: Planning: Is a predetermined course of action. Planning is a hard job, for it involves the ability to think, to predict, to analyze and to control the actions of its personnel and to cope with a complex, dynamic fluid environment. They bridge the gap from where we are to where we want to go. The two important features of planning are research and forecasting. The task of forecasting personnel needs in relation to changes in production or seasonal variations and the leveling out of differences in the production extremely important, both for employees and for management. Therefore, planning and decision making has to be undertaken much in advance of an action so that unforeseen or anticipated problems and events may be properly handled. This as also stressed by the saying: Good managers make things happen.

 Organizing: An Organization is a means to an end. It is essential to carry out the determined course of action. Complex relationships exist between the specialized departments and the general departments as many top managers are seeking the advice of personnel manager. Thus, Organization establishes relationship among the employees so that they can collectively contribute to the attainment of company goals. Directing: Direction is an important managerial function in building sound industrial relations besides securing employee contributions. Co-ordination deals with the task of blending efforts in order to ensure successful attainment of an objective. The personnel manager has to coordinate various managers at different levels as far as personnel functions are concerned. Personnel management function should also be coordinated with other functions of management like management of money, machine, and material. Controlling: Controlling involves checking, verifying and comparing of the actualize with the standards, identification of deviations if any and correcting of identified deviations. Thus, action and operation are adjusted to predetermined plans and standards through control. Fig. 3: Functions of Personnel Office/ Personnel Management. Functions of Personnel Office Managerial Functions Operative Functions

Planning

Organizing

Directing Compensation

Controlling Human Relations, Placement.

Employment HRD

H R P; Performance- Job Evaluation; Motivation; Recruitment; Appraisal; Wage & Salary Morale; Selection; Training; Quality- Circles. Orgn.Change & Dev. Induction; Mgmt. Dev. Fringe Benefits.

Career Planning

Operative Functions: The operative functions of human Resource Management are related to specific activities of personnel management e.g. employment, development, compensation & Relations. All these functions are interacted by managerial functions. Employment: Employment is concerned with securing and employing the people possessing required kind and level of human resources necessary to achieve the organizational objectives. It covers the functions such as job analysis, human resource planning, recruitment, selection, placement, induction and internal mobility. Human Resource Development: It is the process of improving, molding and changing the skills, knowledge, creative ability, aptitude, attitude, values, commitment etc. based on present and future job and organizational requirements. This function includes Performance Appraisal, Training, Management Development, Career Planning and Development, Internal Mobility (Promotion, Demotion), Organizational Development. Compensation: It is the process of providing adequate, equitable and fair remuneration to the employees. It includes job evaluation, wage and salary administration, incentives, bonus, fringe benefits, social security measures etc. Human Relations: Practicing various human resource policies and programmes Loire employment, development and compensation and interaction among employees create a sense of relationship between the individual worker and management, among workers and trade unions and management. It is the process of interaction among human beings. Human relations is an area of management in integrating people in to work situation in a way that motivates them to work together productively, cooperatively and with economic, psychological and social satisfaction.

1.8 Human Resource Management Environment HR manager cant perform his job in a vacuum as a number of environmental factors affect the HRM. In fact, these factors influence the Organization through human resources. Environment (with special reference to Human Resource Management): means the totality of all factors, which influence both the Organization and HRM sub system. Fig. 4: Environmental Scanning of HRM Technological Marketing Government & Legal Orgn. Politics Political Finance Customers

HRM

Production Trade Unions Orgn. Structure

Economic Social & Religious The environment furnishes the macro context and the Organization is the micro unit. The external environment is comprised of those factors, which affect an organizations human resources from outside the Organization. Important among them are: Economic;Social;Political;Governmental;Legal; Technological;Manpower in the country;Tradition and culture;Customers; Other organizations;Trade Unions in other organizations. 1.8.1 Internal Environment: The internal environment also affects the job of a personnel manager. The internal environmental factors include Organization objectives, policies, organizational structure, and the functional areas of the Organization with which the personnel manager works continuously like finance, marketing and production. Impact of internal environment factors is profound as they frequently and closely interact with HRM function in an Organization. 1.8.2 External Environment: The influence of external environment on HRM is also equally important, though the severity is comparatively less. People are essentially self-managing. In other words, while people manage other resources, themselves manage personnel. People themselves decide about the nature, time, and place of their employment. And people react to the changing conditions and to the techniques of management unlike money, material and machine. The changes includes in the external environment are: Technological obsolescence; Cultural and social changes; Changes in the policies of govt.; Politics and the like. With the result, the work environment changes thereby affecting their productivity level. Considering the complexities and the challenges in the HRM now and in near future management has to develop sophisticated techniques and efficient specialists to among the personnel on sound lines 1.9 Functional Areas/ Scope of Human Resource Management 1. Organizational planning, development and task specification; 2. Staffing and Employment; 3. Training and Development; 4. Compensation, Wage and Salary administration; 5. Motivation and Incentives; 6. Employee services and Benefits; 7. Employee records; 8. Labor and Industrial Relations; 9. Personnel Research and Personnel Audit.

1.10 Role of HR Practitioner The coordination and integration of activities in an organization just not happen, it has to be worked out. People tend to head off in different directions- to go their own sweet way. They will jot necessarily cooperate with one another. Thus, to begin with, the HR manager should have three main objectives in mind: 1. To gain the commitment and cooperation of all the members in his work group; 2. To get the group into action to achieve agreed objectives; 3. To make the best use of the skills, energies and talents of all the members. In the modern era, the personnel manager typically performs a variety of the roles, such as a role of a conscience, of a counselor, a mediator, a company spokesman, a problem solver and a change agent. He performs many roles as per needs of the situation. Such as: I. The conscience role is that of humanitarian who reminds the management of its moral and ethical obligations to its employees; II. The personnel manager plays the role of a counselor to whom the employees frequently go for consultation and with whom they discuss their marital, health, mental, physical and career problems; III. As a mediator, he plays the role of a peacemaker, offering to settle the disputes that may arise among individuals or groups. He acts a liaison and communicating link between an individual and a group and between labour and management; IV. The personnel a manger has always been a frequent spokesman for or representative of the company because he has a better overall picture of his companys operation, since he deals intimately with many key organizational activities and functions; V. The personnel manager also acts as a problem solver with respect to the issues that involves human resources management and overall long range organizational planning; VI. He works as a change agent within the organization because he is best suited to introduce and implement major institutional changes. He takes initiative for installing organizational development programmes and convinces the top management of their need. It is he who alerts the top management regarding managerial obsolescence in his organization; VII. The personnel manager plays many other roles as well. Any matter which need someones attention and which no body wants to deal with is, often handled by the personnel department. Such activities may be peripheral but important and crucial to the efficient and effective operation of an organization. It has been now fully recognized that the basic role of the personnel manager if the management of the manpower resources. Such management is concerned with leadership both ingroup and individual relationship, and labour management relations. It effectively describes the process of planning, and directing the application, development and utilization is now considered as one of the four main functions, viz. finance, production, marketing, and human relations. The ideal personnel manager is not a decision maker but a counselor not collector of responsibilities but an advisor to help the management make more reliable personnel decisions. In any organization it is these line man who determine the personnel climate for the entire organization. If the personnel man can meet the challenge of staff role he would make the effective contribution to industry. Personnel Role Advisory: advising management on effective use of human resources Manpower planning: Recruitment, selection etc. Training and development of line man Welfare Role Research in personnel and organizational problems Managing servicescanteens, transport etc. Group dynamics: group counseling, motivation, leadership, communication etc. Administrative Role Time keeping Salary and administration wage Fire Fighting/Legal Role Grievance handling Settlement of disputes Handling disciplinary actions

Human engineering: man machine relationship

Measurement

and

Collective bargaining

assessment of individual and group behavior -

Table 2

Joint consultation

1.11Evaluating HR Function Organizations can promote human excellence by offering a potential site for the flowering most forms of human excellence. Within an organization, if there is meritocracy, people compete for promotion and other rewards on the basis of good work rather than on the basis of pull. Recognition and rewards for creative ideas, discoveries, inventions, innovations etc. promote creative excellence. The human resource development movement in industry is aimed at facilitating organizationally useful individual growth and development. The more an organization promotes individual or team excellence, the more the organization itself is likely to excel because the work of any organization is dependent on the work of its individual members and employee groups. The human factor across all organizations comprises three basic elements: 1. The people themselves who work in the organization; the skills and capabilities they possess and their attitude towards the company; 2. The management style prevalent in the organization, which usually stems from the top. The style may be aggressive, authoritarian, democratic or laissez faire and each type has a different impact on the way people work as individuals or in groups; 3. The organizational climate i.e. the work atmosphere in the company, as determined by the degree of interpersonal cooperation, the types of conflict resolution, the amount of trustworthiness, the prevalent organizational politics etc.;
The quality of HRM practices prevalent in a particular organization can be rated by scrutinizing the following factors: 1.11.1Organization Climate: 1. Do people feel they are giving enough responsibility? 2. Do people know what is expected of them in the shape of objectives and standards of performance? 3. Do people see themselves being fairly rewarded for their work and feel that promotion policies are fair? 4. Do the employees feel that they belong to a worthwhile company and are valuable members of working teams? 5. Is there adequate feedback to people on their performance, whether it is good, bad or indifferent? 6. Is there sufficient to challenge in their jobs? 7. Are people given enough support by their managers or supervisors in the shape of guidance or help? 1.11.2 Type of Management Style: 1. Does it tend to be Autocratic? 2. Does it tend to be Task centered or people centered? 3. Do managers tend to be distant or cold or approachable and friendly? 4. Do managers tend to be hard or soft on people? Thus, an amalgamation of all the factors throws some light as an indicator of the quality of HRM practiced in an organization. ************************************************************************************* Questions for discussions: 1. What is meant by the term Human Resource? What is meant by Human Resource Management? 2. What is the difference between Human Resource Management and Personnel Management? 3. Elucidate the role and functions of an effective Human Resource Manager? 4. Write a short note on the various HRM Programmes which could be implemented in the organizational set up? 5. Enlist some key organizational indicators, which could highlight the practice of favorable HRM policies in the work set up? 6. Discuss the issues impending on future HR managers. Short Answer Type Questions: 1. Outline the scope of Human Resource Management. 2. Explain the objectives of HRM? 3. Human Resource Management is old wine a new bottle. Explain 4. What do you mean by Managerial functions of Human Resource Management. List all managerial functions. 5. Explain Welfare Role of HR Manager. 6. List out the various qualities, which should be present in HR Manager. 7. Explain Fire Fighting Role of HR Manager.

------------------------------------------------------------------------------