38

Chapter II

Human Resource Management: An Overview

Introduction

The time is changing and so is business environment. The ongoing

process of linearization, privatization and globalization has made business

environment highly competitive and complex. As a result of these changes

human resource environment is also changing, which in turn have changed

human behavior in organizations. Therefore, the changing environment has

necessitated a perspicuous and through study of its impact on human resource

management practices. Of late, the human resource management has become

important function of management. It is human dimension which has emerged

as a means of accelerating growth having relationship with all sorts of

organizations. This chapter will focus on the concepts, the significance, nature,

need, trends and scope etc of human resource management. An examination of

the challenges and opportunities available for organizations with the help of

people will also be made in this chapter.

Competitive Advantage through People

While people have always been central to organizations, today they have

taken on an even more central role in building firm’s competitive advantage.

Particularly in knowledge based industries such as software, information

technology and many others. Success increasingly depends on ‘people

39

embodied know how’. This includes the knowledge, skills and abilities

imbedded in an organization’s members. In fact a growing number of experts

now argue that the key to a firm’s success is based on establishing a set of core

competencies, integrated knowledge sets within an organization that

distinguish it from the competitors and deliver value to customers. McDonalds

for example, has developed core competencies in management efficiency and

training. Federal Express has core competencies in package routing, delivery

and employee relations. Canon Corporation has core competencies in precision

mechanics, fine optics and microelectronics. British Petroleum has core

competencies in oil exploration. Core technology innovation tends to be limited

in numbers, but they provide a long term basis for technology innovation,

product development and service delivery. Organizations can achieve sustained

advantage through people if they are able to meet the following criteria: 1

a) The resources must be of value: people are a source of competitive

advantage when they improve the efficiency or effectiveness of the

company. Value is increased when employees find ways to decrease

costs, provide something unique to customers or some combination of

the two. Empowerment programs, total quality initiatives and

continuous improvement efforts at companies such as Marriott and

Schreiber Food are intentionally designed to increase the value that

employees represent on the bottom line.

b) The resources must be rare: people are source of competitive advantage

when their skills, knowledge and abilities are not equally available to

competitors. Companies such as Microsoft, McKinsey and Four Seasons

Hotels invest a great deal to hire and train the best and brightest

employees in order to gain advantage over their competitors.

40

c) The resources must be difficult to imitate: people are a source of

competitive advantage when employees’ capabilities and contributions

cannot be copied by others. Disney, Southwest Airlines and Mirage

Resorts are each known for creating that get the most from employees

through teamwork and are difficult to imitate.

d) The resources must be organized: People are a source of competitive

advantage when their talents can be combined and deployed to work on

new assignments at a moment’s notice. Companies such as Spyglass Inc

a software company and AT&T have invested in information technology

to help allocate and track employee assignments to temporary projects.

Teamwork and cooperation are two other pervasive methods for

ensuring an organized workforce.2

The above facts highlight the importance of people and show the

closeness of human resource management to strategic management. In a recent

survey by USA Today and Deloitte & Touche, nearly 80% of corporate

executives said the importance of human resource management in their firms

has grown substantially over the past ten years, and two thirds said human

resource expenditures are now viewed as a strategic investment rather than

simply a cost to be minimized 2 Because employees’ skills, knowledge and

abilities are among the most distinctive and renewable sources upon which a

company can draw their strategic management is more important than ever.

Genesis of Human Resource Management

Human Resource Management, a relatively new term, emerged

during the 1970s. Many people continue to refer to the discipline by its

41

order, more traditional titles, such as personal management or personal

administration.

Coming to the evolution of human resource management as a

subject, it may be stated that concern for the welfare of workers in the

management of business enterprises has been in existence since ages.

Kautily’s Arthashastra states that there existed a sound base for

systematic management of resources during as early as the 4th

century

BC3. The government then took an active interest in the operation of

public and private sector enterprise and provided systematic procedures

for regulating employer- employee relationships.

Elsewhere, human resources in organizations received the

management attention much earlier. As early as in 1800 BC itself,

‘minimum wages rate’ and ‘incentive wage plan’ were included in the

Babylonian Code of Hammurabi.4

Experts of HRM in our country have tried to chronicle the growth

of the subjects only since the 1920s. This was the period what state

intervention to protect the interests of workers was felt necessary

because of the difficult conditions which followed the First World War,

and the emergence of trade unions. The Royal commissions (1931)

recommended the appointment of labour- welfare officers to deal with

the selection of workers and to settle their grievances. The Factories

Act, 1948, made appointment of welfare officers compulsory in

industrial establishment employing 500 or more workers each.5

In course of time, two professional bodies, the Indian Institute of

Personal Management (IIPM) and the National Institute of Labour

Management (NILM), were set up, IIPM had its headquarters at Kolkota

42

and NILM at Mumbai. These two places were the premier centers of

traditional industry (Jute and cotton respectively) in pre- independence

India.

The aftermath result of the Second World War and the country’s

political independence increased awareness and expectations of workers.

During the 1990s, the personnel functions began to expand beyond the

welfare aspect, with labour welfare, industrial relations and personnel

administration integrating into the emerging profession called personal

management (PM). Simultaneously, the massive thrust given to the

heavy industry in the context of planned economic development,

particularly since the second Five-Year Plan and the accelerated growth

of the pubic sector in the national economy resulted in a shift towards

professionalisation of management.

By the 1970s, a shift in professional values was discernible. It

shifted from a concern for welfare to a focus of efficiency. In 1980s,

professionals began to talk about new technologies, human resource

management challenges and human resource development. The two

professional bodies, IIPM and NILM, merged in 1980 to from the

National Institute of Personal Management (NIPM).

In the 1990s the emphasis shifted to human values and

productivity through people. Reflecting this trend, the American Society

for Personal Administration (ASPA) was renamed as the society for

Human Resource Management (SHRM). Thus, beginning, in the 1920s,

the subjects of human resource management has grown into a matured

profession. Table 2.1 shows the evolution of human resource

management.

43

Table 2.1 Shows Evolution of HRM in India

Period Development Status Outlook Emphasis Status

1920s –

1930s

Beginning Pragmatism of

Capitalists

Statutory, welfare,

paternalism

Clerical

1940s-

1960s

Struggling for

recognition

Technical,

legalistic

Introduction of

techniques

Administrative

1970s-

1980s

Achieving

sophistication

Professional,

legalistic

Regulatory,

conforming,

imposition of

standards on other

functions

Managerial

1990s Promising Philosophical Human values.

Productivity through

people

Executive

Sources: C.V. Venkataratnam and B.K. Srivastava, Personnel Management and Human

Resources P.5 Vision Books New Delhi 1984

Concept of Human Resource Management

Simply put, Human Resource Management (HRM) is a management

function that helps managers recruit, select, train ad develop members for an

organization. Obviously, HRM is concerned with the people’s dimension in

organizations. But before quoting the definitions, it is useful to point out the

essentials which must find their place in any definition. The core points are:

1. Organization is not mere bricks, mortar, machineries or

inventories. They are people. It is the people who staff and

manage organizations.

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2. Human Resource Management involves the applications of

management functions and principles. The functions and

principles are applied to acquisitioning, developing, maintaining,

and remunerating employees in organizations.

3. Decisions relating to employees must be integrated. Decisions on

different aspects of employees must be consistent with other

human resource (HR) decisions.

4. Decisions made must influence the effectiveness of an

organization. Effectiveness of an organization must result in

betterment of services to customers in the form of high quality

products supply at reasonable costs.

5. Human Resource Management functions are not confirmed to

business establishments only. They are applicable to non-

business organizations, too such as education, health care,

recreation, and the like. 6

The following definitions collectively cover all the core points:

1. A series of integrated decisions that form the employment

relationship: their quality contributes to the ability of the

organizations and the employees to achieve their objectives.

2. Is concerned with the people dimensions in management. Since

every organization is made of people, acquiring their services,

developing their skills, motivating them to higher levels of

performance and ensuring that they continue to maintain their

commitment to the organization are essential to achieving

organizational objectives. This is true, regardless of the type of

45

organization-government, business, education, health, recreation,

or social action.

3. Management is the planning , organizing, directing and

controlling of the procurement, development compensation,

integrations maintenance and separation of human resources to

the end that individual, organizational, and social objectives are

accomplished’.

Therefore, human resource management refers to a set of

programmes, functions and activities designed and carried out in order

to maximize both employees as well as organizational effectiveness .

Human Resources Management may be described as that activity

in an enterprise which strives to mould the human resource into the

effective organization provides opportunity for maximum individual

contributions under healthy working conditions promotes individual

development and encourage mutual confidence and understand between

the employees and the employees between the employees themselves . It

is responsible for maintaining good human relations in the organization.

It is also concerned with development of individuals and achieving

integration of goals of the organization and those of the individuals.

Human Resource Management aims at achieving maximum contribution

of individuals and groups working in the organization for the effective

achievement of organizational goals.

Milkovich and Bourdreau7 have defined Human Resource

Management as a series of integrated decisions that form the

employment relationship; their quality contributes to the ability of the

organization and the employees to achieve their ob jectives.” John Storey

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has specified fours elements of Human Resource Management (HRM) as

follows:

(i) A set of beliefs and assumptions.

(ii) A strategic thrust embodying decisions about people management.

(iii) Dependence upon a set of levers to determine the employment

relationships.

(iv) The central involvement of the management.

Human Resource Management is the reincarnation of Personal

Management. This is why many people don’t make any distinction

between the two terms and use them interchangeably. However, there is

not doubt about the fact that managing human resources or personnel in

an integral part of job of any manager.

Nature of Human Resource Management

The essential features of Human Resource Management are

discussed below:

1. Concerned Human Element. Human resource management deals

with people at work. It includes organization, motivation,

guidance, and leading of people for the accomplishment of goals

of the organization. Its main object is to maintain better human

relations in the organization by the development, application, and

evaluation of policies, procedures and programmes relating to

individuals in the organization to optimize their contribution

towards the realization of organizational objectives.

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2. Integral Part of Management. Human Resource Management is

inherent in managing. It is an integral part of the job of a

manager. Every manager is concerned with the performance of

personnel functions such as training, communication, appraisal,

and guidance. If a manager is weak in dealing with people, he

cannot achieve the goals of the organization. Thus, every manager

must possess human relation skills to get maximum cooperation of

the workers.

3. Wide Range of Activities. Human Resource Management

involves several functions concerned with the management of

people at work. It includes manpower planning, employment,

placement, training, appraisal and compensation of employees.

For the performance of these activities efficiently, a separate

department known as personnel Department is created in most of

the organizations.

4. Motivation of Human Resource. Human Resource Management

is concerned with the motivation of human resource in the

organization. The human beings can’t be dealt with like physical

factors of production. Every person has different needs,

perception and expectations. The managers should give due

attention to these factors to motivate people at work. They also

require skills in training, performance appraisal, and counseling

of subordinates.

5. Development of Human Resource. Human Resource

Management is concerned with developing potential of employees

so that maximum satisfaction from their work and give their best

48

efforts to the organization. It takes into account the personality,

interests, opportunities and capacities of employees for this

purpose. It seeks to help the employees in realizing their full

potential.

6. Pervasive Function. Human Resource Management is pervasive

in nature. Since people are necessary element in any organization,

personnel management is inherent in all enterprises. Also, since

management means getting effective results with people at work,

personnel management is a basic management function

permeating all levels of management in any organization.

7. Continuous Function. Personnel Management is of a continuous

nature. Every manager has to perform this function continuously.

It cannot be turned on and off like water from faucet. Personnel

management requires constant alertness and awareness of human

relations and their importance in everyday operations.

8. Multidisciplinary Approach. Human Resource Management is

multidisciplinary in nature. Effective management of human

resources involves application of knowledge drawn from several

disciplines like sociology, anthropology, psychology, economics

etc.

9. Service or Staff Function. Human Resource Management is a

staff function that is responsible for offering advice on personnel

matters to the operating or line departments. It also offers services

like recruitment, training and rating of staff to the operating

departments.8

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Functions of Human Resource Management

For the convenience study, the functions performed by the human

resource management can be broadly classified into two categories9.

1. Managerial Functions

2. Operative Functions

1. Managerial Functions

Planning : Planning is predetermined course of action. It is a

process of determining the organizational goals and formulation of

policies and programmes for achieving them. Thus, planning is future

oriented concerned with clearly charting out the desired direction of

business activities in future. Forecasting is one of the important

elements in the planning process. Other functions of managers depend

on planning function.

Organizing : Is a process by which the structure and allocation of

jobs are determined. Thus, organizing involves each subordinate a

specific task, establishing departments, delegating authority to

subordinates, establishing channels of authority and communication,

coordinating the work of subordinates and so on.

Staffing : This is a process by which managers select, train, promote

and retire their subordinates. This involves deciding what type of people

should be hired, recruiting prospective employees, selecting employees,

setting performance standards, compensating employees, evaluating

performance, counseling employees, training and developing employees.

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Directing/Leading :This is the process of activating group efforts

to achieve the desired goals. It includes activities like getting

subordinates to get to the to job done, maintaining morale, motivating

subordinates etc, for achieving the goals of the organization

Controlling : It the process of setting standards for performance,

checking to see how actual performance compares with these set

standards, taking corrective actions as needed.

2. Operative Functions : The operative functions are those which

are relevant to specific department. These functions vary from

department to department depending on the nature of the department.

Viewed from this standpoint, the operative functions of human resource

management relate to ensuring right people for right jobs at right times.

These functions include procurement, development, compensation, and

maintenance functions of human resource management. A brief

description of these follows:

Procurement : It involves procuring the right kind of people in

appropriate number to be placed in the organization. It consists of

activities such as manpower planning, recruitment, selection, placement

and induction of new employees.

Development : This function involves activities meant to improve

the knowledge, skills, aptitudes and values of employees so as to enable

them to perform their jobs in a better manner in future. These functions

may comprise training tom employees, executing training to develop

managers, organization development to strike a better fit between

organizational climate/culture and employees.

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Compensation : This function involves determination of wages

and salaries matching with contribution made by employees to

organizational goals. In other words, this function ensures equitable an d

fair remuneration for employees in the organization. It consists of

activities such as job evaluation, wage and salary administration, bonus,

incentives, etc.

Maintenance : It is concerned with protecting and promoting

employees while at work. For this purpose, various benefits such as

housing, medical, educational transport facilities, etc. are provided to

the employees. Several social security measures such provident fund,

pension, gratuity, group insurance, etc. are also arranged.

It is important to note that the managerial and operative

functions of Human Resource Management are performed in

conjunction with each other in an organization, be large or small.

Objectives of Human Resource Management

According to the American Management Association10

, “The

purpose of a business enterprise is the profitable productions of goods

and services to fulfill economic needs in such a way as to provide

satisfactory returns to both economic and social suppliers, owners and

members of the organization, under conditions which provide for the

maximum conservation of human and material resources over a

continuing period.”

Objective determines the character of an organization and serves

as the basis of coordination among employees. Objective also provides

the benchmarks or standards of evaluating performance. The objectives

52

of human resource management are derived from the basic objectives of

the organization. In order to achieve organizational objectives

integration on interest of both the organization and the employees is

necessary. According to the Indian Institute of Personal Management,

“Personal management seeks to bring together and develop into an

effective organization the men and women who make up an enterprise,

enabling each to make his or her own best contribution to its success

both as an individual and as a working group. It seeks to provide fair

terms and conditions of employing and satisfying work for those

employed”.

The general objectives of human resource management include

procurement and development of competent people to help in the

attainment of organizational objectives. However, the specific objectives

of human resource management or personnel management may be listed

as follows:

(i) To help the organization attains its goals by providing well -

trained and well – motivated employees.

(ii) To employ the skills and knowledge of employees efficiently

and effectively, i.e. to utilize human resource effectively.

(iii) To achieve and maintain good human relationships within the

organization.

(iv) To enable each person to make his maximum personal

contribution t o the effective working of the organization.

(v) To ensure maximum individual development of personnel.

53

(vi) To ensure satisfaction of various needs of individuals for by

providing adequate wages, fringe benefits, incentive, forms,

social security. etc.

(vii) To secure integration of all the individuals and groups with the

organization by reconciling individual/ groups goals with those

of the organization.

(viii) To develop and maintain quality of work life (QWL) in the

organization.

(ix) To provide facilities and conditions of work and creation of

favorable atmosphere for maintaining the stability of

employment.

(x) To maintain ethical personnel policies in the organization.

(xi) To ensure respect for human personality and the well- being of

each individual.

Scope of Human Resource Management

The terms ‘Personnel Management’ ‘human management’ ‘labour

management’ ‘manpower management’ are used interchangeably to

describe management of people in organizations. The other terms used

frequently in discussions of personal problems and techniques are

‘Labour relations” and “Industrial Relation” sometimes, these are used

interchangeably with “personnel administration”. But it is useful to

distinguish between them. The term “labour relations” refers primarily to

the relations between management and unionized labour. The subject –

matter of labour relations includes the negotiation of contracts with

unions’ day to day relations with union leaders in the handling of

54

differences arising to-day contracts, arbitration and government

regulation of the terms and conditions of employment.11

The popularity of behavioral approach since the 1950s led to the

application of behavioral science to the problems of individual and group

behaviour at work, motivation, leaderships, group dynamics,

organizational climate, organizational conflict, etc. became popular

concepts. Employees began to be considered as valuable assets of the

organization. Efforts were made to integrate employees with the

organization so that organizational goals and employees' aspirations could

be achieved simultaneously: Focus has shifted towards management

practices like two-way communication by objectives, employee-centered

leadership, quality circles, etc. These developments paved the way of

transformation of Person:-.e. Management to Human Resource

Management.

The Human Resources Management Model developed by the

American. Society for Training and Development (ASTD) integrates the

nine areas sub-systems of human resource management. These areas

include the following: 11

(i) Training and Development.

(ii) Organization Development.

(iii) Organization/Job Design.

(iv) Human Resource Planning

(v) Selection and Staffing.

(vi) Personnel Research and Information System.

55

(vii) Compensation/Benefits.

(viii) Employee Assistance.

(ix) Union/Labour Relations.

The above have been termed spokes of the wheel. Each area

contributes to the human resource outputs: (1) quality of work (2)

productivity and (3) readiness for change. As a matter of fact, these are

the three fundamental objectives which every manager must keep in mind

while managing the human resources.

Quality of work life (QWL) is a multifaceted concept which

implies a work environment where an employee's activities become more

important. I: involves implementing policies and procedures that make

the work more rewarding for the employee. These include autonomy,

recognition, and belonging. Development, external rewards, etc.

Productivity relates to the quantity or volume of the product or

service that an organization produces. It is the amount of work that is

being done in the organization in terms of how much and how well.

Higher productivity is what makes an organization thrive. Accordingly,

productivity improvement programs are becoming more popular with

organizations.

Change is a law of life in both our private and work lives. At the

work place, we must be aware that changes will occur. The change might

be subtle, such as getting a new boss. Or it might be a major endeavor,

such as an organization installing a computer system for the first time for

automating manual operations. Change rarely comes easily; in some

cases, it is resisted because of some fears. To reduce the fears associated

56

with change, training can also playa big role. In fact, it is training that can

make people ready for change and provide a competitive advantage to the

organization operating in a global environment.

Need of Human Resources Management

Why has this fast-growing field emerged? Organization is designed

to accomplish some purpose or function and to continue doing so for as

long as possible. As a result, organization is not necessarily intended to

change.

The need to change can affect all types of organization from giants

like IBM to the smallest business. No one can escape. As M.I.T.

Professor Richard Beckhard notes, “Corporations are so hard up for

answers these days that I‘d say there’s a $3 billion or $4 billion market

for transformational (HRM) consulting out there.” There are number of

reasons why HRM is becoming more important.12

Changing Employee Needs

Employees are demanding that organizations become more

responsive to their personal needs by developing such programs as

flextime work schedules parental leave, child care, sabbaticals, elderly-

care assistance, and job sharing. The human resource is manager is

responsible for developing and implementing policies designed to reduce

possible between organizational demands and family responsibilities.

They must also be aware of the effect that downsizing and restructuring

have on the loyalty of employees·

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Increased Complexity

Management in the 1990s has become increasingly complex for

many reasons include emerging foreign competition, changing

technology, expanding scientific innovation and an accelerating rate of

change. As a result, organizations need human resource managers to be

involved in making strategic decisions and in developing the distinctive

competencies of the organization's human resources. Top executives

depend upon the expertise of human resource management in recruitment,

productivity. Performance evaluation, quality, compensation, and other

human resource activities.

Increasing Legal Complexity

The enactment of new state and federal laws is contributing to the

importance of human resource managers. The added reporting

requirements of these new laws are so extensive compliance requires

increasing human resource expertise. The activities most influenced by

Gove mental legislation include equal employment, compensation safety

and labor relations. If an organization fails to comply with these laws, it

runs the risk of costly legal actions and possibly severe financial

penalties.

Developing Human Resource Policies

Human resource policies are designed to create consistency and

equity within an organization. These policies are particularly important in

hiring, compensation, promotion and termination decisions. At Walt

Disney, for example, all employees go through an initial orientation

program, everyone starts with a common base, and it should not be

58

surprising that a majority of promotions come from within. Compensation

guidelines need to be made within the human resources framework, so

that the salary structure is completely fair and equitable. Promotion

procedures also need to be developed and coordinated by human resource

managers to insure equity throughout the organisation. In the 1990s, with

organizations increasing in size and complexity, with new laws

prescribing even greater equality in the rights of employees, the human

resource manager’s role in developing and implementing changing

policies is becoming increasingly important

Human Resource Information Systems

In the high-tech world of the 1990s, more Human Resource

activities will be requiring specialized expertise. As an example, many

organizations are developing computerized expert systems for making

employee-selection decisions. These systems integrate interviews data,

test scores, and application-blank information. Similarly, many

organizations are developing compensation systems with elaborate

cafeteria-style benefit packages to replace simple hourly pay or piece-rate

incentive systems. Many organizations are developing sophisticated

databases to centralize all human resource information to provide real-

time information for strategic manpower planning and other reporting

activities

Human Resource Cost-Effectiveness

Human Resource activities have become increasingly important

because of high investment in human resources and the costs associated

with employee problems. The largest single cost in most organizations is

59

labor. Labor costs are often too high as a result of problems involving

absenteeism, tardiness, turnover, slow-downs, sabotage, or drug

dependencies. Having the right person in the wrong job also means

unnecessary costs. Good HRM is good management.

Other Trends of Human Resource Management

Other HRM trends include changing the corporate culture, helping

employees become more adaptive to change, increasing organizational

competitiveness, productivity achieving Total Quality Management, and

employee involvement. At IBM, for example changing conditions are

forcing the firm to become more effective in order to remain competitiveness

In the coming decades, changes in the external environment will be

occurring so rapidly that organizations will need HRM techniques just to

keep pace with the accelerated rate of innovation. 13

60

Conclusion

The forgoing analysis of human resource management reflects that

human resource management has assumed great significance these days as

it helps in creating productive environment for the development of

modern business enterprises or says commerce. Good human resource

practices helps in attracting and retaining the best talent in the

organizations. Moreover, overall productivity and profitability of the

organizations depends upon the sound human resource policies. In this

context the next chapter is providing the results of various enterprises by

giving a brief profile of various enterprises that are working under the

flagship company of Reliance Industries Ltd and Anil Dhirubhai Ambani

Group with special emphasis on Reliance Communication which is one of

the fastest growing telecom companies of the country.

61

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