Human resource management (HRM) is the strategic approach to the effective management of people so that the business achieves its objectives. People are an asset to be developed, not only a cost to be controlled.
2.1 Human resource management (HRM)
The role of HRM
HR managers deal with workforce planning, recruitment and selection, training and development, appraisal, pay and rewards, employee relations and meeting employment law.
Workforce planning
Workforce planning compares the number and skills of staff needed in future with the staff available, then plans recruitment, training, redeployment or redundancy to fill the gaps. It depends on forecast demand, staff turnover, retirement and the skills needed.
High turnover raises recruitment and training costs and loses experience, but a little turnover brings fresh ideas.
Recruitment and selection
| Stage | What happens |
|---|---|
| Job analysis | what the job involves |
| Job description | duties, title, responsibilities, reporting lines |
| Person specification | the skills, qualifications and experience needed |
| Advertising | internal (promotion, cheaper, known staff, but fewer ideas) or external (wider choice, fresh ideas, costlier) |
| Selection | application forms and CVs, interviews, tests and references |
Internal recruitment motivates existing staff and is faster and cheaper. External recruitment brings new skills and ideas but takes longer and costs more. Interviews let the business judge personality but can be subjective; tests are more objective.
Training and development
| Type | Meaning |
|---|---|
| Induction | introduces new staff to the business and its procedures |
| On-the-job | learning while working (shadowing, mentoring): cheap, relevant, but may pass on bad habits |
| Off-the-job | away from work (courses, college): specialist and up-to-date, but costly and staff are absent |
Multi-skilling trains employees to do several different jobs, so the business can move staff to where they are needed, cover absence and respond to change (flexibility); it also raises motivation through variety. Staff development can also encourage intrapreneurship.
Benefits: higher productivity, quality and flexibility, motivation and retention. Costs: fees, lost output during training and the risk that trained staff leave for competitors.
Employment contracts and the law
A contract of employment sets out pay, hours, duties and notice. Law covers health and safety, minimum wages, discrimination, working hours and dismissal. Dismissal is for a fair reason (misconduct, capability); redundancy is when the job is no longer needed.
Employment contracts and flexible working can be full-time, part-time, temporary or zero-hours. Flexible labour cuts cost and meets changing demand but can lower loyalty and security.
Morale, welfare, diversity and work-life balance
Morale is the mood and confidence of the workforce; welfare covers staff health, safety and wellbeing. Good HRM improves both, for example through flexible hours, support services and fair treatment. Work-life balance (flexible or part-time work, home working) reduces stress and absence. Diversity (a workforce of different ages, genders, ethnic groups and abilities) and equality of opportunity bring wider skills and ideas and a better understanding of customers, but need management and training to work well.
Employee relations
Trade unions represent workers in collective bargaining over pay and conditions. Good communication and consultation improve morale; poor relations lead to strikes and low productivity.
Recruitment and selection methods
Recruitment methods include job advertisements (newspapers, websites, social media), employment agencies (they find and screen candidates for a fee), online recruitment (job boards, the company website) and recruitment by recommendation. Selection methods include the curriculum vitae (CV) or résumé and application form (to shortlist), interviews, references, tests (skills, aptitude or personality) and assessment centres (a series of tasks, presentations and group exercises over a day, giving a fuller picture but at high cost).
2.2 Motivation
Motivation is the desire and commitment to do a job well. Motivated staff are more productive, absent less and leave less.
Theories
| Theorist | Main idea | Use by business |
|---|---|---|
| Taylor (scientific management) | workers are motivated by money; use piece rate, close supervision and simple tasks | pay incentives for output; can de-skill work |
| Mayo (human relations) | social needs and attention motivate (Hawthorne experiment) | team working and showing interest in staff |
| Maslow | a hierarchy of needs: physiological, safety, social, esteem, self-actualisation; a higher need matters once a lower one is met | give security, belonging, recognition, then development |
| McClelland | people are driven by three needs: achievement, affiliation (belonging) and power; each person has a dominant one | give achievers challenging targets and feedback, affiliation types team work and power types leadership roles |
| Herzberg (two-factor) | hygiene factors (pay, conditions, security) prevent dissatisfaction; motivators (achievement, responsibility, recognition, the work itself) create satisfaction | job enrichment, responsibility |
Vroom's expectancy theory is a process theory: it explains how people decide whether to put in effort. Motivation depends on three beliefs:
- Expectancy: that effort will lead to good performance.
- Instrumentality: that good performance will lead to a reward.
- Valence: how much the person values the reward.
If any one is low (the task seems impossible, the reward is not guaranteed or the reward does not matter to the person), motivation falls. Managers therefore give training, make the link between performance and reward clear and offer rewards that staff actually value.
Financial rewards
| Method | Comment |
|---|---|
| Time rate (wage or salary) | simple; does not reward effort |
| Piece rate | paid per unit; encourages output, may harm quality |
| Commission | a % of sales; motivates sales staff, insecure income |
| Bonus / performance-related pay | rewards results; may encourage short-termism |
| Profit sharing | a share of profits; links staff to business success |
| Fringe benefits | company car, pension, health care |
Non-financial methods
Job enlargement (more tasks), job rotation (varied tasks), job enrichment (more responsibility and challenge), empowerment, team working, recognition, training and promotion opportunities.
Employee participation
Employees can take part in managing and controlling the business through works councils, quality circles, suggestion schemes, employee representatives or directors, team briefings and employee share ownership. Participation improves motivation and ideas and helps with change, but can slow decisions and raise conflicts over authority.
2.3 Management
Management and leadership
Management is planning, organising, co-ordinating, commanding and controlling (Fayol). Leadership is inspiring and directing people towards goals. A manager manages resources; a leader influences people.
Leadership styles
| Style | Features | Suitable when |
|---|---|---|
| Autocratic | the leader decides alone and tells staff | emergencies, unskilled workers; can demotivate |
| Paternalistic | decides alone but explains and cares about staff welfare | staff want guidance |
| Democratic | consults staff, shares decisions | skilled staff; slower but motivating |
| Laissez-faire | leaves staff to decide for themselves | highly skilled, creative teams |
The best style depends on the task, staff skills, urgency and the manager's own personality (a contingency approach).
Mintzberg's managerial roles
Mintzberg found that managers play ten roles in three groups:
| Group | Roles |
|---|---|
| Interpersonal | figurehead, leader, liaison (building contacts) |
| Informational | monitor (seeking information), disseminator (passing it on), spokesperson (representing the firm) |
| Decisional | entrepreneur (starting change), disturbance handler, resource allocator, negotiator |
Managers contribute to performance by combining these roles effectively, unlike Fayol's list of functions.
McGregor's Theory X and Theory Y
| Theory X manager | Theory Y manager | |
|---|---|---|
| Belief about workers | dislike work, avoid responsibility and need close control | want to do a good job, accept responsibility and are self-motivated |
| Management style | autocratic, close supervision, threats and rewards | democratic, delegation, participation |
Delegation and spans of control
Delegation is passing authority (with responsibility) down to subordinates. It frees managers' time and motivates staff but risks poor decisions. Greater trust and training help.
Practise this chapter
Every past-paper question on these topics, with the mark scheme.
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