Human Resource Management and the Environment 1 Human Resource Management and the Environment McGraw-Hill/Irwin Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Objectives Define the term human resource management. Describe the strategic importance of human resource management (HRM) activities. Explain what career opportunities are available in the HRM field. Discuss the role that specialists and operating managers play in performing HRM activities. List the main objectives pursued by HRM units.

Introduction Human resource management (HRM) is the effective management of people at work The goal: make workers more satisfied and productive When an organization is concerned about people, its total philosophy, culture, and orientation reflect it Every manager must be concerned with people, whether or not there is a human resources department

Introduction HRM consists of numerous activities: Equal employment opportunity (EEO) compliance Job analysis Human resource planning Recruitment, selection, motivation, and orientation Performance evaluation and compensation Training and development Labor relations Safety, health, and wellness

Introduction The HRM unit is oriented toward: Action People Global enterprise The future

A Brief History of HRM HRM can be traced to England, where craftspeople organized guilds They used unity to improve working conditions The Industrial Revolution in the 18th century laid the basis for a new, complex industrial society Changing work conditions, social patterns, and labor created a gap between workers and owners During the world wars era, scientific management, welfare work, and industrial psychology merged

A Brief History of HRM Frederick W. Taylor, the father of scientific management, summarized scientific management as: Science Harmony Cooperation Maximum output Industrial psychology, initiated in 1913, focused on: The worker Individual differences The maximum well being of the worker

A Brief History of HRM Personnel departments were created to deal with: Drastic changes in technology Organizational growth The rise of unions Government intervention concerning working people Around the 1920s, more organizations noticed and acted on employee-management conflict

A Brief History of HRM The Hawthorne studies (1924 to 1933): Were to determine the effects of illumination on workers and their output Rather, it pointed out the importance of social interaction on output and satisfaction Until the 1960s, the personnel function was concerned only with blue-collar employees File clerk, house-keeper, social worker, firefighter, and union trouble defuser

Strategic Importance of HRM Today, HRM plays a major role in: Clarifying the firm’s human resource problems Developing solutions for them It is oriented toward: Action The individual Worldwide interdependence The future

Strategic Importance of HRM Strategic HRM differs significantly from traditional HRM In traditional arrangements, responsibility for managing human resources lies with different specialists in each department or division In a strategic approach, people management rests with an individual who is in direct contact with workers or line managers

Strategic Importance of HRM Investment in human assets Cost centers Accountability Developing people Following the rules Major emphasis Open, participative, empowerment Bureaucratic, top-down, centralization Culture Flexible, based on human resources Rules, policies, position power Control Short, intermediate, long term Short-term results Time focus Lead, inspire, understand Respond to needs Role of HRM area Improved understanding and use of human assets Better performance Objective Line managers Specialists Responsibility for human resources Strategic HRM Traditional HRM Item

Strategic Importance of HRM For years, the HRM function was not linked to corporate profit Organizations focused only on current performance HR managers did not have a strategic perspective Executives categorized HRM in a traditional manner It was difficult to develop metrics for HRM activities Recognition of the importance of people made HRM a major player in developing strategic plans HRM strategies must reflect the organization’s strategy regarding people, profit, and effectiveness

Strategic Importance of HRM Key concepts that must be applied: Analyze and solve problems from a profit-oriented point of view Assess and interpret costs and benefits of HRM issues Planning models must include realistic, challenging, specific, and meaningful goals Prepare reports on HRM solutions to problems encountered by the firm

Strategic Importance of HRM Key concepts that must be applied (continued): Train the human resources staff Emphasize the strategic importance of HRM Show managers that they contribute to the goals/mission of the firm The actions, language, and performance of the HRM function must be: Measured Precisely communicated Evaluated

Strategic Importance of HRM The era of HRM accountability resulted from: Concerns about productivity Organizational downsizing and redesign An increasingly diverse workforce The need to effectively use all organizational resources to compete in an increasingly complex and competitive world

Strategic Importance of HRM For the HRM function to be successful, managers in other functions must be knowledgeable and involved Managers play a major role in setting the direction, tone, and effectiveness of the relationship between: The employees The firm The work performed Without managerial participation, there are likely to be major human resource problems

HRM and Organizational Effectiveness For a firm to survive and prosper, reasonable goals must be achieved in: Performance Legal compliance Employee satisfaction Absenteeism Turnover Training effectiveness and ROI Grievance rates Accident rates

HRM and Organizational Effectiveness Effectiveness is measured by the balance of such complimentary characteristics as: Reaching goals Employing the skills/abilities of employees efficiently Ensuring the influx and retention of well-trained, motivated employees Three elements needed for firms to be effective: Mission and strategy Organizational structure HRM

HRM and Organizational Effectiveness It is important to remember that the people who do the work and create the ideas allow the organization to survive

HRM and Organizational Effectiveness Changes experienced by organizations: Growing global competition Rapidly expanding technologies Increased demand for individual, team, and organizational competencies Faster cycle times Increasing legal and compliance scrutiny Higher customer expectations The mechanized, routine-oriented workforce is giving way to a knowledge-based workforce

HRM and Organizational Effectiveness Top management has trouble making strategic planning decisions regarding people All other resources are evaluated in terms of money Implementing high performance management practices results in: Profitability gains Stock price increases Higher company survival rates

Objectives of the HRM Function HRM contributions to organizational effectiveness: Helping the organization reach its goals Employing workforce skills and abilities efficiently Increasing job satisfaction, self-actualization, and quality of work life

Objectives of the HRM Function HRM contributions to organizational effectiveness (continued): Communicating HRM policies to all employees Maintaining ethical policies and socially responsible behavior Managing change to the mutual advantage of individuals, groups, the enterprise, and the public

Objectives of the HRM Function Increasing employees’ job satisfaction and self- actualization Employees must feel that the job is right for their abilities and that they are being treated equitably Satisfied employees are not automatically more productive However, unsatisfied employees tend to be absent and quit more often and produce lower-quality work Both satisfied and dissatisfied employees can perform equally in quantitative terms

Objectives of the HRM Function Quality of work life (QWL) is a general concept that refers to several aspects of the job, including: Management and supervisory style Freedom and autonomy to make decisions on the job Satisfactory physical surroundings Job safety Satisfactory working hours Meaningful tasks The job and work environment should be structured to meet as many workers’ needs as possible

Objectives of the HRM Function Communicating HRM policies to all employees: HRM policies, programs, and procedures must be communicated fully and effectively They must be represented to outsiders Top-level managers must understand what HRM can offer

Objectives of the HRM Function Maintaining ethical policies and socially responsible behavior: HRM managers must show by example that HRM activities are fair, truthful, and honorable People must not be discriminated against Their basic rights must be protected These principles should apply to all activities in the HRM area

Objectives of the HRM Function Trends that strain employer-employee relationships: Telecommuting Outsourcing HRM Family medical leave Child care Spouse-relocation assistance Pay for skills Benefit cost-sharing Union-management negotiation These changes are due to the emergence of new lifestyles and an aging population

Objectives of the HRM Function Managing increased urgency and faster cycle times: Firms are placing a growing emphasis on: Increasing customer service Developing new products and services Training and educating technicians, managers, and decision makers

Objectives of the HRM Function Shorter cycle times mean less time to: Train, educate, and assign managers Solve sexual harassment complaints Recruit and select talented people Improve the firm’s image Learning provides a framework for decreasing cycle time

Objectives of the HRM Function Faster, more urgent management behaviors have been caused by: Foreign and domestic competition Technological changes The emergence of new opportunities Pressure to increase learning and reduce cycle time, while also reducing cost, is a competitive reality HRM activities must be in sync with the firm’s environment

Who Performs HRM Activities Two groups normally perform HRM activities: HR manager-specialists Operating managers The effectiveness of the human resource declines more quickly than all other resources An investment in people effects organizational effectiveness more than money, materials, or equipment

Who Performs HRM Activities A large part of an operating manager’s day is spent: In scheduled and unscheduled meetings In telephone conversations Solving problems that have a direct impact on people In smaller organizations, the operating manager has such HRM responsibilities as: Scheduling work Recruitment and selection Compensating people

Who Performs HRM Activities As the organization grows, the operating manager’s HR work may be shifted to HRM specialists HR specialists are found in organizations with 100 to 150 employees A HR department is typically created when the number of employees reaches 200 to 500

Outsourcing Outsourcing HRM activities is growing in popularity because of: Downsizing Rapid growth or decline of business Globalization Increased competition Restructuring

Outsourcing Some executives assume that outsourcing can: Reduce costs Improve flexibility Permit the hiring of specialized expertise The choice to outsource HRM activities is being made with little empirical support

Interaction of Operating & HR Managers With both operating managers and HR specialists making HRM decisions, there can be conflict They have different orientations and objectives Conflict is worse if joint decisions must be made on: Discipline Physical working conditions Termination Transfer Promotion Employment planning

Interaction of Operating & HR Managers Operating managers and HR specialists can also differ on: How much authority employees have over job design Labor relations Organizational planning Rewards, such as bonuses and promotions

Interaction of Operating & HR Managers The roles of HRM and operating managers have been impacted by: Sweeping changes in business Globalization Technology Demography People don’t leave companies, they leave managers HRM can help managers do a better job

Interaction of Operating & HR Managers HRM is often seen as a company policeman It is also seen as inflexible and over-attentive to detail HRM specialists are encouraged to: Analyze every activity and prove its added value Understand the business Become a strategic partner with line managers Seek out operating managers Help managers avoid problems Be flexible and open to the ideas of others

Necessary HRM Competencies Record keeping Training/development Accounting/finance Employment law Benefit design Recruiting/staffing Compensation design Leadership Forecasting Problem solving Technology Communication

HRM’s Place in Management The HR department must be a proactive, integral part of management and strategic planning Ascertain specific organizational needs for the use of its competence Evaluate the use and satisfaction among other departments Educate management and employees about the availability and use of HRM services HRM strategic plans must build on the firm's strengths

HRM’s Place in Management To develop a competitive advantage over other firms: Organizations must create value in a way that is rare and difficult for competitors to imitate These things must become so important and effective that every unit in the firm knows they are needed for success: The compensation system Training opportunities Diversity management programs

HRM’s Place in Management HR executives must educate other departments about the human resource implications of decisions This requires being familiar with other aspects of the organization, including: Investments Advertising Marketing Production control Computer utilization Research and development

HR Department Operations Most organizations keep HR units small About 150 people maximum The number of HR specialists to operating employees (personnel ratio) varies by industry: The national average is 1 specialist to 100 employees Construction, agriculture, retail, wholesale, and services have fewer specialists than average Public utilities, durable goods manufacturing, banking, insurance, and government have an above-average ratio

HRM Strategy A firm's HRM strategy integrates major objectives, policies, and procedures into a cohesive whole A well-formulated HRM strategy aggregates and allocates a firm's resources on the basis of: The organization’s internal strengths and weaknesses Changes in the environment The anticipated actions of competitors

Clarifying Meaningful HRM Objectives The objectives of an organization or department are the goals it seeks to achieve Most objectives are stated in very general terms, from which more specific statements are developed These plans are called policies and procedures or rules

Clarifying Meaningful HRM Objectives Strategy: The plan that integrates major objectives More specific Objectives: Goals that are specific and measurable More specific Policies: Guides to decision making More specific Procedures/Rules: Specific directions for decision making

HRM Policy A policy is a general guide that expresses limits within which action should occur Policies arise from past or potential problems They free managers from making certain decisions They ensure some consistency in behavior They allow managers to concentrate on decisions in which they have the most experience and knowledge For some organizations, the next step is to develop procedures and rules

HRM Procedures Procedures (rules) are a specific direction to action In large organizations, procedures are collected and put into manuals called standard operating procedures (SOPs) Organizations must ensure that consistent decision making flows from a well-developed, but not excessive, set of policies and procedures Procedures should be developed for only the most vital areas

Organization of an HR Department In most organizations, the chief HR executive reports to the top manager In medium- and small-sized organizations, HRM and another function may be in a single department In nonprofit organizations, HRM is typically a unit in the business office HR specialists are usually located at the headquarters of an organization