HRM practice a must in an organization

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HRM practice a must in an organization


We often hear the term Human Resource Management, Employee Relations and Personnel Management used in the popular press as well as by Industry experts. Whenever we hear these terms, we conjure images of efficient managers busily going about their work in glitzy offices. In this article, we look at the question “what is HRM?”. Though as with all popular perceptions, the above imagery has some validity, the fact remains that there is much more to the field of HRM and despite popular depictions of the same, the “art and science” of HRM is indeed complex. We have chosen the term “art and science” as HRM is both the art of managing people by recourse to creative and innovative approaches; it is a science as well because of the precision and rigorous application of theory that is required.

As outlined above, the process of defining HRM leads us to two different definitions. The first definition of HRM is that it is the process of managing people in organizations in a structured and thorough manner. This covers the fields of staffing (hiring people), retention of people, pay and perks setting and management, performance management, change management and taking care of exits from the company to round off the activities. This is the traditional definition of HRM which leads some experts to define it as a modern version of the Personnel Management function that was used earlier.

The second definition of HRM encompasses the management of people in organizations from a macro perspective i.e. managing people in the form of a collective relationship between management and employees. This approach focuses on the objectives and outcomes of the HRM function. What this means is that the HR function in contemporary organizations is concerned with the notions of people enabling, people development and a focus on making the “employment relationship” fulfilling for both the management and employees.

Necessity of HRM for Organizational Success

The Evolving Business Paradigm

One of the factors behind organizations giving a lot of attention to their people is the nature of the firms in the current business environment. Given the fact that there has been a steady movement towards an economy based on services, it becomes important for firms engaged in the service sector to keep their employees motivated and productive. Even in the manufacturing and the traditional sectors, the need to remain competitive has meant that firms in these sectors deploy strategies that make effective use of their resources. This changed business landscape has come about as a result of a paradigm shift in the way businesses and firms view their employees as more than just resources and instead adopt a “people first” approach.

Strategic Management and HRM

On modern day HRM practices, there is a need to align organizational goals with that of the HR strategy to ensure that there is alignment of the people policies with that of the management objectives. This means that the HR department can no longer be viewed as an appendage of the firm but instead is a vital organ in ensuring organizational success. The aims of strategic management are to provide the organization with a sense of direction and a feeling of purpose. The days when the HR manager was concerned with administrative duties is over and the current HRM practices in many industries are taken as seriously as say, the marketing and production functions.

Importance of HRM for Organizational Success

The practice of HRM must be viewed through the prism of overall strategic goals for the organization instead of a standalone tint that takes a unit based or a micro approach. The idea here is to adopt a holistic perspective towards HRM that ensures that there are no piecemeal strategies and the HRM policy enmeshes itself fully with those of the organizational goals. For instance, if the training needs of the employees are simply met with perfunctory trainings on omnibus topics, the firm stands to lose not only from the time that the employees spend in training but also a loss of direction. Hence, the organization that takes its HRM policies seriously will ensure that training is based on focused and topical methods.

In conclusion, the practice of HRM needs to be integrated with the overall strategy to ensure effective use of people and provide better returns to the organizations in terms of ROI (Return on Investment) for every rupee or dollar spent on them. Unless the HRM practice is designed in this way, the firms stand to lose from not utilizing people fully. And this does not bode well for the success of the organization.

Processes in Human Resource Management

Each organization works towards the realization of one vision. The same is achieved by formulation of certain strategies and execution of the same, which is done by the HR department. At the base of this strategy formulation lie various processes and the effectiveness of the former lies in the meticulous design of these processes. But what exactly are and entails these processes

The following are the various HR processes:

1. Human resource planning (Recruitment, Selecting, Hiring, Training, Induction, Orientation, Evaluation, Promotion and Layoff).

2. Employee remuneration and Benefits Administration

3. Performance Management.

4. Employee Relations.

The efficient designing of these processes apart from other things depends upon the degree of correspondence of each of these. This means that each process is subservient to other. You start from Human resource Planning and there is a continual value addition at each step. To exemplify, the PMS (performance Management System) of an organization like Infosys would different from an organization like Wal-Mart. Lets study each process separately.

Human Resource Planning: Generally, we consider Human Resource Planning as the process of people forecasting. Right but incomplete! It also involves the processes of Evaluation, Promotion and Layoff.

Recruitment: It aims at attracting applicants that match a certain Job criteria.

Selection: The next level of filtration. Aims at short listing candidates who are the nearest match in terms qualifications, expertise and potential for a certain job.

Hiring: Deciding upon the final candidate who gets the job.

Training and Development: Those processes that work on an employee onboard for his skills and abilities up gradation.

Employee Remuneration and Benefits Administration: The process involves deciding upon salaries and wages, Incentives, Fringe Benefits and Perquisites etc. Money is the prime motivator in any job and therefore the importance of this process. Performing employees seek raises, better salaries and bonuses.

Performance Management: It is meant to help the organization train, motivate and reward workers. It is also meant to ensure that the organizational goals are met with efficiency. The process not only includes the employees but can also be for a department, product, service or customer process; all towards enhancing or adding value to them.

Nowadays there is an automated performance management system (PMS) that carries all the information to help managers evaluate the performance of the employees and assess them accordingly on their training and development needs.

Employee Relations: Employee retention is a nuisance with organizations especially in industries that are hugely competitive in nature. Though there are myriad factors that motivate an individual to stick to or leave an organization, but certainly few are under our control.

Employee relations include Labor Law and Relations, Working Environment, Employee heath and safety, Employee- Employee conflict management, Employee- Employee Conflict Management, Quality of Work Life, Workers Compensation, Employee Wellness and assistance programs, Counseling for occupational stress. All these are critical to employee retention apart from the money which is only a hygiene factor.

All processes are integral to the survival and success of HR strategies and no single process can work in isolation; there has to be a high level of conformity and cohesiveness between the same.

Performance Management as a HR Management concept

The very mention of appraisals, reviews and ratings is enough to make seasoned professionals cringe and rejoice alike. For some, these are occasions when they would come out smiling out of the review whereas for others, there is nothing memorable about the whole process. So, what is it that is so important about performance management? For starters, performance management is the process of reviewing an employee’s performance during the preceding year or cycle and deciding where he or she stands as far as their peers in the same band are concerned. The process of reviewing results, arriving at a rating and then deciding upon the bonus or salary hike is what performance management is all about. Before we look at the topic sentence, it is important to understand what goes into the decision making process and who is involved in the same. Typically, the process of performance management starts a month or two before the appraisal cycle ends. The appraisal cycle can be half-yearly or yearly depending upon the policies of the organization. Further, the appraisal cycle can be based on the calendar year or the financial year i.e. it can run from April to March of the following year or January to December of the same year. In the same vein, it can be half-yearly as well.

There are different rounds to the appraisal process.

1. In the first round, the people who participate in an employee’s appraisal are the employee and his or her manager. In this round, the manager gives a frank assessment of the employee’s performance after giving a chance to the employee to self-assess.

2. The second round consists of the manager and the manager’s manager. This round is mostly about deciding the band in which the employee falls post the rating and in comparison with his or her peers. This process of rationalizing the employee’s performance with others is called “normalization”. In some organizations, this takes place in the third round where the HR manager is involved as well. In any case, the ratings cannot be decided without the HR manager’s assent to the same. Once these rounds are over, the bonus level or the salary hike are decided.

What we have described in the above paragraphs is the way the system “ought” to work. However, as any HR professional or Industry magazines would tell you, the performance management process as it exists in many organizations leaves a lot to be desired. In fact, surveys and studies have found that the majority of employee’s who quit organizations do so because of differences over their ratings. In other words, attrition is in many cases a direct consequence of the way in which the performance management process is managed.

The question as to why this happens can be best understood if we understand the dynamics inherent in the process. For instance, despite exhortations from HR professionals and experts about letting personal biases and prejudices affect the process, in many cases, if the manager and the employee do not see eye to eye on many issues, the appraisal and the ratings are the place where this difference of opinion comes out into the open. Further, the organizations are themselves to blame in some cases as the process of “normalization” means a “winner takes all” approach which leaves the moderate performers bracketed with the poor performers. The point here is not to belittle the competitive environment that is the reason for this. On the other contrary, what is needed is a more holistic approach towards performance management that takes into account the varying needs of employee’s and a broader appreciation of differing working styles and motivations.

Strategic Human Resource Management

Strategic Human Resource Management is the practice of aligning business strategy with that of HR practices to achieve the strategic goals of the organization. The aim of SHRM (Strategic Human Resource Management) is to ensure that HR strategy is not a means but an end in itself as far as business objectives are concerned. The idea behind SHRM is that companies must “fit” their HR strategy within the framework of overall Business objectives and hence ensure that there is alignment between the HR practices and the strategic objectives of the organization.

Evolution of SHRM

With the advent of new economy industries like IT and the mushrooming of the service sector, organizations all over the world realized that human resources must be viewed as a source of competitive advantage as opposed to treating it much the same way in access to technology or capital is concerned. What this means is that the practice of HRM is being viewed as something that promotes the business objectives of the firms and not merely another factor in the way the firm is managed.

How does SHRM fit in with Strategy?

With the advent of today’s economy where services account for a major share of the GDP and the fact that the service sector is essentially people centric, it is imperative that the people first approach be embraced by the organizations for sustainable business strategy. The practice of SHRM demands a proactive and hands on approach by the management as well as the HR department with regards to the entire gamut of activities ranging from staffing and training and development to mentoring and pay and performance management.

The Way SHRM works

If we take real world examples, many organizations in recent times have dedicated “people managers” whose sole function is to look after the enabling and fulfilling needs of the resources. This is a marked change from treating people as just resources to treating people as assets. For instance, Infosys states that people are its assets and the famous statement by Mr. Narayana Murthy, one of the founders of the company that the capital of Infosys walks in every morning and walks out every evening has to be taken in this context.

Elaborating on this point, one finds that organizations tend to leverage upon the capabilities of the people employed there and ensuring that the “human capital” is nourished and nurtured as a source of competitive advantage. This translates into a dedicated HR department and people managers in every group dealing exclusively with employee issues as opposed to treating this as a line management function.

Difference between Personnel Management & HRM

Many students of management and laypeople often hear the term HRM or Human Resource Management and wonder about the difference between HRM and the traditional term Personnel Management. In earlier times, the Personnel Manager of a factory or firm was the person in charge of ensuring employee welfare and interceding between the management and the employees. In recent times, the term has been replaced with HR manager. This article looks at the differences in usage and scope of functions as well as the underlying theory behind these nomenclatures. In the section on introducing HRM, we briefly looked at the main differences. We shall look into them in more detail here.

Personnel Management

Traditionally the term personnel management was used to refer to the set of activities concerning the workforce which included staffing, payroll, contractual obligations and other administrative tasks. In this respect, personnel management encompasses the range of activities that are to do with managing the workforce rather than resources. Personnel Management is more administrative in nature and the Personnel Manager’s main job is to ensure that the needs of the workforce as they pertain to their immediate concerns are taken care of. Further, personnel managers typically played the role of mediators between the management and the employees and hence there was always the feeling that personnel management was not in tune with the objectives of the management.

Human Resource Management

With the advent of resource centric organizations in recent decades, it has become imperative to put “people first” as well as secure management objectives of maximizing the ROI (Return on Investment) on the resources. This has led to the development of the modern HRM function which is primarily concerned with ensuring the fulfillment of management objectives and at the same time ensuring that the needs of the resources are taken care of. In this way, HRM differs from personnel management not only in its broader scope but also in the way in which its mission is defined. HRM goes beyond the administrative tasks of personnel management and encompasses a broad vision of how management would like the resources to contribute to the success of the organization.

Personnel Management and HRM: A Paradigm Shift ?

Cynics might point to the fact that whatever term we use, it is finally “about managing people”. The answer to this would be that the way in which people are managed says a lot about the approach that the firm is taking. For instance, traditional manufacturing units had personnel managers whereas the services firms have HR managers. While it is tempting to view Personnel Management as archaic and HRM as modern, we have to recognize the fact that each serves or served the purpose for which they were instituted. Personnel Management was effective in the “smokestack” era and HRM is effective in the 21st century and this definitely reflects a paradigm shift in the practice of managing people.

It is clear from the above paragraphs that HRM denotes a shift in focus and strategy and is in tune with the needs of the modern organization. HRM concentrates on the planning, monitoring and control aspects of resources whereas Personnel Management was largely about mediating between the management and employees. Many experts view Personnel Management as being workforce centered whereas HRM is resource centered. In conclusion, the differences between these two terms have to be viewed through the prism of people management through the times and in context of the industry that is being studied.

Managing Employee Performance

Managing employee performance is one of the key drivers for organizational success in the present context of firms trying to adopt a resource centered view of the organizational. We have seen elsewhere that integrating HRM practices with those of organizational goals and strategy increases the competitive advantages for the firm. Similarly, managing employee performance within the larger framework of organizational goals is critical for organizations that count people among their key assets. As we have been mentioning throughout, firms in the service sector that lay a lot of emphasis on people need to ensure that employee performance is managed in a holistic manner.

A Two Way Street

When we talk about employee performance, we need to remember that it is a two way process that tie in the manager and the employee with the HR manager playing the role of a mediator. For instance, any discussion about employee performance has to include the manager and the employee or the manager and

the managed. Hence, it is imperative that both parties to this transaction realize their responsibilities and work together to ensure that the process is smoothened. In the succeeding sections, we discuss the role of the manager and the employee and how organizational focus on managing employee performance can play a role as well.

The Role of the Manager

The manager has a duty to ensure that his or her management of the employees is free of biases and prejudices. It’s been the case across industries and verticals where the employees feel discriminated against leading to attrition, lower employee morale and in the extreme cases, lawsuits against the company. Hence, the manager has to “walk the talk” and not simply pay lip service to the company’s policies on employee performance. During the course of working together as a team, there are bound to be instances where friction between the manager and the team and within the team manifests itself. It is incumbent upon the manager to ensure that this does not morph into a corrosive effect that threatens the very existence of the team.

The Role of the Employee

The above section looked at the role of the manager. The manager has a duty to manage the team effectively and so does the employee have corresponding responsibilities as well. Absenteeism, Shirking Work, A negative attitude and a blasé approach to work are some things that the employee must avoid. It is helpful to the employee to know that once he or she is categorized as having an attitude problem, then it would be difficult for the employee to break the perception and perform effectively. This does not mean that the employee has to take whatever comes his or her way. The point here is that the employee must use the channels available for redressal instead of sulking at work if he or she has grievances about the manager.

Organizational Focus

Though the role of the HR manager and the organization seems to be relatively small, it is a fact that organizational goals and culture play a very important part in ensuring that employee performance is managed to the benefit of the organization. Most of us have read about or heard the benefits of working for MNC’s (Multinational Companies) in India. The reason why they are highly talked about is the perception among potential and aspiring employees that these companies treat their people well. Though the point here is not to belittle Indian companies, the objective of this section is to highlight the ways in which organizations can shape the treatment of people in theory and practice.

Performance Appraisal Process

For many employees working in the organized sector, the term appraisal process conjures images of hope and fear simultaneously. Hope for a better grade and fear about potential downgrading or a bad rating. The weeks leading up to the appraisal are filled with hectic activity when the employees get down to evaluating themselves and prepare to market their achievements during the time for which the appraisal is being conducted. Before launching into the details of the appraisal process and the theory and practice of the same, it is pertinent to understand what the term appraisal process refers to and why it is important for the firm as well as the employees.

What constitutes the Performance Appraisal process?

The performance appraisal process, simply put, is the time of the year when the employees are evaluated on their performance during the last six months or one year depending upon the timeframe that is set for the same. The performance appraisal process is conducted between the employee and his or her manager for the first round and subsequently between the manager and the manager’s manager before going into the third round which involves the above people

excluding the employee but involving the HR manager as well. The various rounds that comprise the appraisal cycle correspond to the different stages of the process culminating in the final grading of the employee.

Appraise and Appraiser

The most important round is the appraisal interview itself (we will discuss more about this in a separate article) between the employee and his or her manager. The employee who is being evaluated is called the appraise and the person (usually the manager) who is doing the evaluation is called the appraiser. The appraiser and appraise prepare themselves for this round by doing a self evaluation (by the appraise) and an objective evaluation (by the appraiser). This is the round in which the most important achievements as well as glaring failures on the part of the appraise are discussed threadbare and usually the employee’s role in the process is limited to this round.

What is the outcome of the Appraisal Process?

As outlined above, the outcome of the appraisal process is the grade that is decided for the employee as well as the salary hike or the bonus potential that is awarded to the employee. Typically, organizations divide the year in which the employee’s performance is evaluated into two cycles, one for deciding the salary hike and the other for deciding how much bonus he or she gets for the cycle. In this way, organizations ensure that there is no overlap in grading the employee and a fair and balanced evaluation is the desired outcome though this does not always happen in reality.

Shortcomings of the Appraisal Process

The successful completion of the appraisal process hinges on all the participants approaching the same with an intention to contribute positively instead of bringing personal biases and prejudices to the table. Management experts usually prescribe a set of do’s and don’ts to the participants in order to have an harmonious process. However, as has been pointed out above, the process itself is not without its shortcomings and the expecting the participants to be rational and objective at all times is indeed difficult. Further, since most organizations decide the grades in a way similar to the b-school equivalent of Relative Grading instead of absolute ratings, an element of competitive rivalry creeps into the process making some employees unhappy.

Managing Employee Relations

Establishing and maintaining harmonious relationships with employees, managers need to develop skills that focus on interpersonal communication and conflict management. In addition to this, they need to define and establish such policies and procedures that go well with the diversity of workforce. It is evident that maintaining diverse workforce and understand their psychology has been emerged as one of the biggest challenges for managers. The impact of globalization can be seen on every organization and in every part of the world.

In today’s times, it is really the toughest business for managers to deal efficiently with employees. Failing to do so can result in high attrition rate. To retain and get the maximum output from them, managers need to improve their skills such as active listening, effective communication, acceptability, adaptability, decision-making and conflict management. These are the core skills that supervisors and managers can use tactfully to resolve conflicts among employees or between employees and organization.

However developing or improving above mentioned skills does not guarantee a smooth and conflict-free working environment because conflict is the hard core truth that can not avoided fully. It is but natural to have conflicts and clashes where different people from different backgrounds and cultures come together and work. Still, we can focus on developing these skills in order to manage employee relations to the extent possible:

Interpersonal Skills: Effective communication is an art as well science to mend spoiled relationships among employees as well as between employee and employer. This is the foundation for all the actions taken by a manager to establish and manage human relations in an organization. Working with diverse workforce, understanding their psychologies, needs and requirements requires tremendous amount of effort as well as interaction. It is the first step to break the ice and move ahead in a positive direction. It helps managers create a peaceful working environment in the organization.

Conflict Management: Learning to manage conflicts can help managers resolve employee relations issues quickly and effectively. Listening patiently both the sides and arriving upon a decision that can satisfy both parties can help greatly. A manager should avoid jumping straight to the conclusion, making hasty decisions and boosting the ego of one party. This can lead to bigger or never ending conflict. Effective communication, efforts to reach to the truth and making right decisions are some of the qualities that a manager needs to possess to resolve the conflicts among employees forever.

Employees are the most important assets of any organization-big or small. Managing employee relations effectively can help organizations achieve their goals faster.

Employee Rewards and Recognition

Employee rewards and recognition system is not just a positive thing to do with people but communicating it effectively is an efficient tool in encouraging them to create and bring business for you. Treating your employees like your assets and maintaining harmonious relationships with them doesn’t only yield business in present but also an effective strategy for future. Employers and management need to be pro-active to develop a talented and dedicated workforce that can take you to your goals.

Fulfilling employees’ needs, recognizing their efforts and presenting them with monetary and non-monetary rewards help you create a right workforce for your organization that can be your partner in success. Recognition of their efforts and boosting their morale results in increased productivity and decreased attrition rate. It is a proven fact that the motivated and dedicated workforce can change the fate of a company. After all, human effort is the biggest contributing factor in success of any organization. It is just next to impossible to achieve organizational goals only by the efforts of top management. It’s the workforce who executes their plans and helps them achieve their financial as well as non-financial aims.

Establishing and implementing a reward system needs careful analysis of the company policies and procedures. Deciding how to recognize employees’ efforts and what to provide them requires thorough analysis of responsibilities and risks involved in a particular job. Reward system of an organization should also be in alignment with its goals, mission and vision. Depending upon the job profile, both monetary and non-monetary rewards can encourage employees to contribute more to the organization.

Monetary Rewards: A raise in salary, incentives, movie tickets, vacation trips, monetary allowances on special occasions, redeemable coupons, cash bonuses, gift certificates, stock awards, free or discounted health check-ups for the entire family and school/tuition fees for employees’ children fall in this category. While designing company policies for monetary rewards, management should make sure that benefits should be as broad-based as possible. It requires sound planning and effective implementation.

Non-monetary Rewards: Non-monetary rewards may include trophies, certificates, letters of appreciation, dinner with boss, redecoration of employee cabin, membership of recreation clubs, perks, use of company facilities, suggestion awards, tie-pins, brooches, diaries, promotion, say in management, etc.

HR Challenges – How to cope with them efficiently

To remain in business, human resource managers need to efficiently address following human resource challenges:

Handling Multicultural / Diverse Workforce: Dealing with people from different age, gender, race, ethnicity, educational background, location, income, parental status, religious beliefs, marital status and ancestry and work experience can be a challenging task for HR managers. With this, managing people with different set of ideologies, views, lifestyles and psychology can be very risky. Effective communication, adaptability, agility and positive attitude of HR managers can bind the diverse workforce and retain talents in the organization.

Managing Change: Who wants to change their ideology or way of working? Neither you nor I. How can we expect others to change then? Bringing change in organizational processes and procedures, implementing it and then managing it is one of the biggest concerns of HR managers. Business environment is so volatile. Technology keeps changing every now and then. All thanks to globalization. Upgrading the existing technology and training people for them is a real headache for HR department. The success rate of technology change depends how well HRD can handle the change and manage people issues in the process.

Retaining the Talents: Globalization has given freedom to working professionals to work anywhere in the world. Now that they have endless lucrative opportunities to work, hiring and retaining the best industry talent is no joke. Maintaining harmonious relations with them, providing excellent work environment and offering more remuneration and perks than your competitors can retain and motivate them.

Conflict Management: HR managers should know how to handle employee-employer and employee-employee conflicts without hurting their feelings. Although it is almost impossible to avoid conflicts among people still handling them tactfully can help HR managers to resolve the issues. They should be able to listen to each party, decide and communicate to them in a convincing manner in order to avoid future conflicts.

HR professional must be proactive with all strategies and action plans in order to meet the changing needs of the organization. They must be thorough with the basic functions of HR including planning, organizing, leading and controlling human resources.


Now a day, Human Resource Management is very much important part to manage the organizational success. Employee recruitment policy, compensation, relation among employer and employee, reward system and many more managerial strategy played by the HR department of an organization. So the productivity and development of an organization is very much dependent on effective Human Resource Management.


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