Management of Human Resources
The management of human resources has undergone much transformation over the past decades, due to changes in markets, industry, technology, costs, workforce, and employer-employee relationships. The management of human resources is no longer restricted to a single department: it is now a shared responsibility across organizations. In today's era of heightened competition, firms are turning to innovative human resource practices for competitive advantage, and human resource policies and practice are increasingly integrated with business strategy, both domestically and internationally.
Keywords Competitive Advantage; Human Resource Management; Human Resource Planning; Human Resource Strategy; International human resource management; Management of Human Resources; Personnel Administration; Personnel Management
Management: Management of Human Resources
People are the most important asset of every organization. This is especially true in today's challenging business environment, where human resources are seen as an indispensable input for organizational effectiveness. Since there is a strong relationship between the quality of human resources and the performance and success of an organization, organizations the world over are now striving for effective management of their human resource base.
The management of human resources has evolved in several phases over the twentieth and into the twenty-first century. As an occupation or a department within an organization, this area first came to light between the first and second world wars, under the term 'human relations.' Subsequently, as trade unions became increasingly powerful in the middle of the century, the term 'industrial relations' became popular. The terms 'personnel administration' and 'personnel management,' together with the less popular 'employee relations' and 'manpower management' emerged in the late 1960s and 1970s, due to the growing complexity of employment law, and ongoing concern about trade unions.
At the time, the management of people in organizations was seen to be the responsibility of the personnel function. As the personnel function grew in scope and importance, monopolizing the management of people, those in managerial and supervisory positions were left with little to do when it came to such activities as the acquisition, development and compensation of human resources; the design of work systems; and labor relations. At the same time, because personnel specialists were increasingly concerned with rules and regulations and were mainly seen as preoccupied with problem-solving, they were often left out of the strategic thinking of their firms.
The 1980s presented new challenges for business organizations. In an era of increasing competition, as the global playing field became far more competitive and volatile than ever before, firms had to strive to gain competitive advantage whenever and wherever possible. Business was also changing at a much faster rate and this was accompanied by high uncertainty.
As a result of rising costs and increasing competitive pressures on profit margins, firms also realized the need to be more cost-effective. Trade union power declined, and the 'me' generation emerged, with its emphasis on individualism. There were also changes in organization structure, as firms decentralized responsibility to business units built around products and markets to get closer to their customers. Organizations became flatter, leaner, and more flexible.
The technological revolution also posed great challenges for businesses, with innovations such as the introduction of information technology and computer-integrated manufacturing, which led to issues that had to be managed 'across' the organization and which themselves called for a more integrated view of the organization. The accelerated pace of new product development also meant that people in different functions such as design, marketing, production and finance had to work much more closely together than before. Rapid technological change also led to increased demands for new skills through sourcing, educating, and retraining.
In addition, workforce values were changing: the higher proportion of better-educated "knowledge workers" were increasingly likely to demand self actualization, causing greater attention to be paid to such issues as communications, participation and motivation. Firms in countries with aging populations faced the extra challenge of limited availability of labor, amid a shrinking workforce. Thus, a premium was placed on the recruitment and retention of high quality employees.
In general, the firms that survived or came on the scene after these changes, have been more complex in terms of products, location(s), technologies, business functions, customers and markets. These changes led to a change in the image and role of the personnel function, leading to another change in name to 'Human Resource Management.' At the same time, the management of human resources moved from a department function, to a shared responsibility among managers and non-managers, personnel or human resource directors, and line managers. In the highly competitive, internationalized business structure that emerged in the twenty-first century, human resource management became essential to gaining or retaining an edge on rivals (Anca-Ioana, 2013; Brauns, 2013).
With the changes in image, role and name of the human resource management function, came a quest for a new kind of innovation, as firms recognized that the traditional sources and means of competitive advantage, such as capital, technology or location, had become less significant. Innovative human resource practices have now become one of the bases for competitive advantage — no longer as a matter of trend, but rather of survival.
Categories of Human Resource Practice
Agarwala (2003) has identified fourteen categories of human resource practice, highlighting examples of innovative practices for each:
1. Employee Acquisition
Employee acquisition refers to internal and external selection and recruitment of employees to jobs. It includes the hiring of temporary work assistance and the use of external consultants (Grønhaug and Nordhaug, 1992). Pre-acquisition tasks include planning and forecasting, job analysis, job evaluation, job design and work system design. The latter relates to how tasks and responsibilities in the firm are distributed among job incumbents and the degree to which sharp borderlines exist between jobs (Grønhaug and Nordhaug, 1992).
Employee acquisition tasks are best performed in the context of an organization's culture. All things being equal, selection should favor those candidates who appear to 'fit in' with the prevailing organizational culture, be it a culture of empowerment, participation, equal opportunity, and/or any one of the many other facets of culture.
Innovative employee acquisition strategies include (Agarwala, 2003):
- greater importance attached to the fit between person and company culture
- emphasis on 'career,' not 'job'
- selling company image to attract potential employees
- referral bonuses
- sign-on bonuses for new employees
- psychological testing
- developing industry-academia interface
2. Employee Retention Strategies
Employee retention refers to the measures put in place to keep employees in an organization, thus reducing the labor turnover rate.
Innovative employee retention strategies include (Agarwala, 2003):
- evolving a pleasant work environment
- deferred compensation
- competitive salaries
- faster promotions
- greater work autonomy
3. Compensation and Incentives
Compensation includes the whole range of rewards and incentives that are applied in relation to employees. Intrinsic rewards are those that are internal to a person, such as job satisfaction and self esteem; extrinsic rewards are more tangible, and range from wages to employee stock ownership plans (Grønhaug and Nordhaug, 1992). Compensation must be managed, along with employee attitudes towards compensation. Incentives are those offerings that have a tendency to motivate employees to will or to act as the organization desires.
Innovative compensation and incentive strategies include (Agarwala, 2003):
- increasing the component of variable pay
- stock options
- combining individual and team incentives
- performance-linked incentives
- customization of perks to individual needs
- offering a variety of allowances
- conducting compensation surveys
4. Benefits and Services
Similar to compensation and incentives, benefits and services may form part of an employee's remuneration package, and may include medical care, loans, travel, accommodation, catering, and so on. Many employers, for instance, offer Employee Assistance Programs, which are employee benefit programs typically offered in conjunction with a health insurance plan. Such Employee Assistance Programs aim to help employees handle personal problems so that they do not negatively impact their work ability, health, or well-being. These programs usually include assessment, short-term counseling and referral services for employees and their household members.
Innovative benefits and services strategies include (Agarwala, 2003):
- a focus on long-term benefits for employees through alternative insurance and health management schemes
- giving benefits directed at employees' families
- flexible employee benefits or the cafeteria approach, where employees choose from a menu of benefits
- child and elder care programs
- Improvements in retirement benefits
5. Rewards and Recognition
Rewards and recognition are used to encourage and motivate an organization's employees, and effective reward management will promote consistency of practice in this area.
Innovative rewards and recognition strategies include (Agarwala, 2003):
- performance-linked rewards
- flexible rewards
- cash rewards for extraordinary performance
- rewarding team performance...
(The entire section is 4630 words.)