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

38
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.

39
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
2
simply a cost to be minimized 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

40
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 4 th century
BC 3 . 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

41
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.

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 Table 2.1 Shows Evolution of HRM in India
Period Development Status Outlook Emphasis Status

1920s – Beginning Pragmatism of Statutory, welfare, Clerical

1930s Capitalists paternalism

1940s- Struggling for Technical, Introduction of Administrative

1960s recognition legalistic techniques

1970s- Achieving Professional, Regulatory, Managerial

1980s sophistication legalistic conforming,
imposition of
standards on other
functions
1990s Promising Philosophical Human values. Executive
Productivity through
people

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.

43
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

44
 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 in dividual
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 Bourdreau 7 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 objectives.” John Storey

45
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.

46
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

47
 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

48
Functions of Human Resource Management

For the convenience study, the functions performed by the human

resource management can be broadly classified into two categories 9 .

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.

49
 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.

50
 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 providen t 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 Association 10 , “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

51
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.

52
(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

53
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
11
include the following:

(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.

54
(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 fo r
automating manual operations. Change rarely comes easily; in some
cases, it is resisted because of some fears. To reduce the fears associated

55
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·

56
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

57
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

58
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
13
keep pace with the accelerated rate of innovation.

59
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.

60
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