CHAPTER 1: THE WORLD OF HUMAN RESOURCES MANAGEMENT
4 September 2013
Human Resources Management (HRM) is the process of managing human talent to achieve an
organization’s objectives. It involves analyzing a company’s competitive environment and designing jobs
so that a firm’s strategy can be successfully implemented to beat the competition. It requires identifying,
developing competitive compensation policies to retain them; and grooming them to lead the
organization in the future. People are important to organizations.
Human Capital is the knowledge, skills, and capabilities of individuals that have economic value to an
organization. Employees, not the organization, own their own human capital. If valued employees leave
a company, they take their human capital with them, and any investment the company has made in
training and developing these people is lost. A strategic advantage is high quality HRM systems as
selection and training can develop replacements for these people.
To build human capital, managers must develop superior knowledge, skills, and experience within their
workforces and retain and promote top performers. Organizations must also find ways to better utilize
the knowledge of their workers as too often employees have knowledge that goes unused.
“Learning capability is g times g – a business’s ability to generate new ideasmultiplied by its adeptness at
generalizing them throughout the company.” – Dave Ulrich
Although “competing through people” is a major theme of HRM, on a day-to-day basis, managers still
have to carry out specific activities for a company to effectively do so:
The most pressing competitive issues facing firms:
Challenge 1: Responding Strategically to Changes in the Marketplace
Being able to adapt is key to capturing opportunities, overcoming obstacles, and the survival of
organizations, “no change means no chance.”
HR professionals can help them improve not only a company’s bottom line by streamlining employment
costs but also the top line by forecasting labor trends, designing new ways to acquire and utilize
employees, measuring their effectiveness, and helping managers enter new markets. Total quality improvement, reengineering, downsizing, and outsourcing are ways organizations use to
modify the way they operate to be more successful.
Six Sigma is a set of principles and practices whose core ideas include understanding customer needs,
doing things right the first time, and striving for continuous improvement.
Reengineering is the fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements in cost, quality, service, and speed.
Downsizing planned elimination of jobs.
Outsourcing is contracting out work that was formerly done by employees.
Change management is a systematic way of bringing about and managing both organizational changes
and changes on the individual level.
Managing change is the biggest challenge as people often resist because it requires them to modify or
abandon ways of working that have been successful or familiar. To manage change, executives and
managers must communicate the vision to employees, set clear expectations or performance, and
develop the capability to execute by reorganizing people and reallocating assets. Organizations that have
been successful in engineering change:
Link the change to the business strategy
Show how the change creates quantifiable benefits
Engage key employees, customers, and their suppliers early when making a change
Make an investment in implementing and sustaining change
Reactive Changes are change that occur after external forces have already affected performance.
Proactive Changes are changes initiated to take advantage of targeted opportunities.
Challenge 2: Competing, Recruiting, and Staffing Globally
Globalization is the trend to opening up foreign markets to international trade and investment.
Companies can globalize through delivery (IE: Coca Cola), gathering parts from other countries (IE:
Canadian cars only 10% made), and partnerships and mergers (IE: Coca Cola with largest juice maker in
Free trade agreements have forged to quicken the pace of globalization. General Agreement on Tariffs
and Trade (GATT) established rules and guidelines for global commerce between nations and groups of
nations. It paved the way for other trade agreements and institutions including: European Union (EU),
North American Free Trade Agreement (NAFTA), and World Trade Organization (WTO).
When companies decide to go global they must consider different cultures, employment laws, and
Challenge 3: Setting and Achieving Corporate Social Responsibility and Sustainability Goals
Corporate Social Responsibility is the responsibility of the firm to act in the best interests of the people
and communities affected by its activities. This was to counteract developing countries being exploited, useofsweatshops,andriskylendingtactics.Beingsociallyresponsiblecanimproveearnings,encouraging
more donations and employee volunteers.
Sustainability is a company’s ability to produce a good or service without damaging the environment or
depleting a resource. Complete sustainability is nearly impossible to achieve but companies are striving
to reduce their “carbon footprints.”
Challenge 4: Advancing HRM with Technology
Collaborative Software allows workers anywhere and anytime to interface and share information with
one another electronically (IE: Wikis, Google Docs, online chat).
Social media networking has become the new way to find employees and check them out to see if they
are acceptable candidates.
Knowledge Workers are workers whose responsibilities extend beyond the physical execution of work to
including planning, decision making, and problem solving. Advanced technology tends to reduce the
number of jobs that require little skill and to increase the number of jobs that require considerable skill,
which is the shift from “touch labor” to knowledge workers.
“Just-in-time” learning delivered via the Internet to employees’ desktops when and where they need
training has become commonplace. “Virtual” learning is building training facilities, offices, and meeting
rooms inside an online reality.
Human Resources Information System (HRIS) is a computerized system that provides current and
accurate data for purposes of control and decision making. It lowers administrative costs, increasing
Automating routine activities like payroll processes,employee records,administering benefitsprograms).
HRM also connectspeoplewith eachotherandwith HR datathey need (IE: Scanning resumesandmaking
information accessible to managers so they can search through a system). HRIS also changes the way HR
processes are designed and executed (IE: Employees looking online to see goals and mark their progress).
When an effective HRIS is implemented, the biggest advantage gained is that HR personnel can
concentrate more effectively on the firm’s strategic direction instead of routine tasks (IE: Forecasting
Challenge 5: Containing Costs While Retaining Top Talent and Maximizing Productivity
Downsizing is the company’s solution to reduce costs and eliminate jobs (IE: L.L. Bean started early
retirement and sweetened voluntary separation programs instead of simply laying off people, these
efforts combined with better employee communication softened the blow of layoffs). It is no longer
regarded as a short term fix but a tool continually used by companies to adjust changes in technology,
globalization, and the firm’s business direction.
Advocates of a no layoff policy often note that layoffs may backfire taking into account hidden costs of:
Severance and rehiring costs
Accrued vacation and sick day payouts
Pension and benefits payoffs
Potential lawsuits from aggrieved workers
Loss of institutional memory and trust in management Lack of staffers when the economy rebounds
Survivors who are risk averse, paranoid, and political
Companies that avoid downsizing say they get some important benefits from such policies:
Fiercely loyal, more productive workforce
Higher customer satisfaction
Readiness to snap back w