Chapter one

Introduction
Concepts of Human Resource
Management

HRM, 2021 compiled by Dr Habtamu

Reflection
 What is Resource?
 What is Human Resource?
 What is Management?
 What is Human Resource
Management?

HRM, 2021 compiled by Dr Habtamu

 Resource is something you need to produce certain
output. E.g material, money, information, work
procedure, energy, equipment, time----
 Human Resource is something special. It is the part of
the organization that deals with people.
 What Kind of people? Children, customer, students--?
No.
It deals with People inside the company or organization,
we call it employees.

HRM, 2021 compiled by Dr Habtamu

What is Management?
 In organizational context management is the
process of reaching organizational goals by working
with and through people and other resources.
 Organization is composed of human, financial,
physical and information resources. From this we
deal with human resources.

HRM, 2021 compiled by Dr Habtamu

So what is Human Resource
Management?
 All planned and controlled activities of an
organization to build and maintain the relation
between employees and the organization in order
to meet both business objectives and employee
expectations.
 Business objectives: provide qualified employees,
maximize employee effectiveness)
 Employee expectation: satisfy individual employee
needs

HRM, 2021 compiled by Dr Habtamu

Human Resource Management is
:- the process of planning, organizing, directing
(motivating), and controlling the procurement,
development, compensation, integration,
maintenance, and separation of organizational
human resources to the end that organizational,
individual, and societal needs are satisfied.

HRM, 2021 compiled by Dr Habtamu

 Human Resource management involves all
management decisions and action that affect the
nature of the relationship between the organization
and its employees- its human resource (Beer et al,
1987)
HRM is the function performed in organizations that
facilitates the most effective use of people to achieve
organizational and individual goals

HRM, 2021 compiled by Dr Habtamu

Nature of HRM
 Simply HRM is a management function that helps
managers recruit, select, train and develop members of an
organization (Dessler,2008). concerned with the people’s
dimension in organizations.

 The following constitute the core of

 Obviously, HRM focuses on and HRM:
 1. Organizations are not mere structural entities, but
social units comprising not just bricks, building, and
machineries but they are people. It is the people who staff
and manage organization. HR is the key for organization
success.
HRM, 2021 compiled by Dr Habtamu
 … Concerned with the people dimension to
management.
 Since every organization comprises people, acquiring
their services, developing their skills, motivating them
to higher levels of performance and ensuring that they
continue at the same level of commitment to the
organisation are essential to achieving organizational
goal. This is true, regardless of the type of
organisation: viz. government, business, education,
health, recreation, or social action. (Decenzo &
Robbins, 1989).

HRM, 2021 compiled by Dr Habtamu

 2. HRM Involves the Application of Management
Functions and Principles. The functions and
principles are applied to acquiring, developing,
maintaining and providing remuneration to
employees in organizations.
 … the planning, organizing directing and
controlling of the procurement, development,
compensation, integration, and maintenance of
human resource to the end those individual,
organizational, and social objectives are accomplished.
(Flippo, 1984).

HRM, 2021 compiled by Dr Habtamu

Acquiring/Attracting a quality workforce
 Human resource planning, recruitment, and selection
Developing a quality workforce
 Employee orientation, training and development, and
performance appraisal.
Maintaining a quality workforce
 Career development, work-life balance, compensation
and benefits, employee retention and turnover, and
labor-management relations

HRM, 2021 compiled by Dr Habtamu

 3. …..a series of integrated decisions that govern
employer-employee relations. Decision Relating to
Employees must be Integrated. Decisions on different
aspects of employees must be consistent with other
human resource (HR) decisions.
 Their quality contributes to the ability of organizations
and employees to achieve their objectives

HRM, 2021 compiled by Dr Habtamu

 4. Decisions Made must Influence the Effectiveness of
an Organization. Effectiveness of an organization will
result in betterment of services to customers in the
form of high quality products supplied at reasonable
costs.
 5. HRM Functions are not Confined to Business
Establishments only but applicable to non business
organizations such as education, health care,
recreation and like.

HRM, 2021 compiled by Dr Habtamu

 Objectives of Human Resource
Management
Student Reflection
Why we study HRM?

HRM, 2021 compiled by Dr Habtamu

For Me
 1. To teach you the important functions and
concepts of HRM
 2. To develop your ability to apply the HRM
functions and concepts through critical
thinking
 3. To develop your HRM skills in your
Personal and professional lives

HRM, 2021 compiled by Dr Habtamu

 For Student Reflection
 How do you compare HRM department with other
departments such as marketing, production, IT,
Finance in an organization?
 Does HR department create any value to organization?
 Do HR make a difference in a business?
 Do they have respect when we compare to other
departments?

HRM, 2021 compiled by Dr Habtamu

The objectives of HRM
 The over all objectives of human resource
management is to ensure that the organization is
able to achieve success through people.
 HRM aims to increase organizational effectiveness and
capability- the capacity of an organization to achieve
its goal by making the best use of the resource
available to it.

HRM, 2021 compiled by Dr Habtamu

Objectives of Human Resource Management

HRM, 2021 compiled by Dr Habtamu

So what are Objectives of HRM:
 The main objective of HRM is to ensure the availability of
willing and competent force to an organization. The overall
purpose of HRM is to ensure that the organization is able to
achieve success through people.
 HRM aims to increase organizational effectiveness and
capability- the capacity of an organization to achieve its goal by
making the best use of the resource available to it.
 These objectives can be summarized under four heading:
 Societal objectives
 Organizational objectives
 Functional objectives
 Personal objectives

HRM, 2020 compiled by Dr Habtamu

Objectives of HRM -Cont
1. The societal objectives of HRM seek
- to be ethically and socially responsible to the needs
and challenges of the society while Minimizing negative
impact of societal demands upon organizations. The
failure of the organizations to use their resources for the
society’s benefit in ethical ways may lead to restrictions.
 For example: laws forces organizations to be ethical
in recruitment, to minimize the discrimination
against hiring based on ethnicity, race, and religion
etc.

HRM, 2020 compiled by Dr Habtamu

2. The organizational objectives recognize the role of
HRM in bringing about organizational effectiveness.
HRM is not a standalone department or an end in it self,
but rather a means to assist the organization reach its
primary objective.
 The HR department exists to serve the rest of the
organization.

HRM, 2020 compiled by Dr Habtamu

3. Functional Objectives: is to maintain the
department’s contribution at a level appropriate to the
organization’s needs. Human resource are to be adjusted
to suit the organization’s demands. The department’s
value should not become too expensive at the cost of the
organization’ it serves.
 Resources are wasted when human resource is either
in excess or too scarce. The department function is to
gain ‘organizational fit’ with respect to human
resource requirements.

HRM, 2020 compiled by Dr Habtamu

4. The Personal Objective assist employees in
achieving their personal goals at least as far as these
goals enhance the individual contribution to the
organization.
 Personal objectives are achieved when employees are
satisfied, motivated and retained. Otherwise
employee performance and satisfaction may decline
giving rise to employee turnover.
 Satisfied employees excellent services, excellent
organizational performance

HRM, 2020 compiled by Dr Habtamu

Management Process

HRM, 2021 compiled by Dr Habtamu

Human Resource Management
Process

HRM, 2021 compiled by Dr Habtamu

HRM, 2021 compiled by Dr Habtamu
HRM, 2021 compiled by Dr Habtamu
HRM, 2021 compiled by Dr Habtamu
HRM, 2021 compiled by Dr Habtamu
Scope/Activities of HRM
HRM is concerned with all aspects of how people
are employed and managed in organization.
It includes all activities used to attract & retain
employees and to ensure they perform at a high
level in meeting organizational goals.

HRM, 2021 compiled by Dr Habtamu

Scope of HRM
It covers activities such as:-
 Human resource planning;
 Recruitment and selection
 Training and development
 Performance management
 Compensation and Rewarding
 Labour Relation

HRM, 2021 compiled by Dr Habtamu

The characteristics of HRM
 1. It is an art as well as a science:
 2. It is pervasive: covers employee at all level and categories, applied in
all types of organization (profit, non profit)
 3. It is a continuous process: from planning to performance appraisal
 4. HRM is a service function: it serve other departments
 5. HRM must be regulation-friendly: equal opportunity equal pay
 6. Interdisciplinary and fast changing:
 7. Focus on results: performance oriented
 8. People- centred: about people and people related functions
 9. Human relations philosophy: employee are human being and
managers to be successful must posses social skill to manage people
 10. An integrated concept: about people, social welfare, industrial
relation

HRM, 2021 compiled by Dr Habtamu

Strategic Human Resource Management
Concept of Strategy
 A critical factor that affects Firm Performance
 A factor that contributes to Competitive Advantage
in markets
 Having a long-term focus
 Plans that involve the top executives and/or board of
directors of the firm
 A general framework that provides a perspective for
selecting specific policies and procedures

The determination of the long-term goals and objectives

of an enterprise, and the adoption of courses of action
and the allocation of resources necessary for carrying
out those goals.

HRM, 2021 compiled by Dr Habtamu

 The conceptual basis of strategic HRM
 Strategic Management is a process for analyzing a
company's competitive situation, developing the company's
strategic goals, and devising a plan of action and allocation
of resources that will help a company achieve its goals.
 Strategic HRM is the interface between HRM
and strategic management. It takes the notion
of HRM as a strategic, integrated and coherent
approach and develops that in line with the
concept of strategic management

HRM, 2021 compiled by Dr Habtamu

Strategic HRM defined:
 Strategic Human Resource Management is an
approach that defines how the organization’s
goals will be achieved through people by
means of HR strategies and integrated HR
policies and practices. What is essential is that
these programs, policies and practices need to be
aligned with organizational strategies.

 Strategic human resource management can be

defined as the linking of human
resources with strategic goals and objectives in
order to improve business performance and
develop organizational culture that foster
innovation, flexibility and competitive advantage
HRM, 2021 compiled by Dr Habtamu
Aim of Strategic HRM
The fundamental aim of strategic HRM is to generate
organizational capability by ensuring that the organization
has the skilled, engaged, committed and well-motivated
employees it needs to reach result/achieve sustained
competitive advantage.
. It has two main objectives:
 First to achieve integration between HR strategies with
business strategies.
 The second objective is to provide a sense of direction so
that the business needs of the organization and the
individual and collective needs of its employees can be met
by the development and implementation of coherent and
practical HR policies and programs
HRM, 2021 compiled by Dr Habtamu
 Organizations are increasingly looking at human
resource as a unique asset that can provide
sustained competitive advantage.
 The change in business environment Such as
increasing globalization, changing
demographics of work force, increased focus
on profitability, technological change,
intellectual capital and never ending change
led to increase importance of Human resource
management.
 If HRM lacks strategic integration will fail to
provide competitive advantage.
HRM, 2021 compiled by Dr Habtamu
But
How are company strategy and
HR strategy related?

Student Reflection

HRM, 2021 compiled by Dr Habtamu

What is the highest priority for a
company
Company are not best in all approaches. So they will
focus on one thing
Examples:
 Innovation:
 Brand:
 Price Reduction
 Quality service

HRM, 2021 compiled by Dr Habtamu

Business Strategy type
 From business perspectives there are two ways to gain
competitive advantage (Porter, 1985):
- Cost reductions (Cost Leadership)
- Product differentiation
- Focus Strategy

HRM, 2021 compiled by Dr Habtamu

HR need and strategy type
 The cost reduction strategy involves producing a
similar quality product or service at a lower cost than
competitors; there fore provided they can command a
similar price they will have a higher profit margin than
competitors. (Here Efficient employees needed,
people must be friendly, respond fast)
 Product differentiation strategy : producing a
differentiated product to competitors, having high
value to customers. Being unique offer greater price
and high profit margin. (Here innovative
employees needed, research )

HRM, 2021 compiled by Dr Habtamu

Human Capital Management

HRM, 2021 compiled by Dr Habtamu

HRM & HCM
 Mostly they mentioned together, interchangeably as
they are similar concepts
 And still other consider they are different concepts

YES they are not one and the same

HRM, 2021 compiled by Dr Habtamu

SHRM and HCM
 HRM and HCM seems similar, and indeed the concept of
HRM matches that of the broader definition of HCM.
 This arguments has been based on the fact that both HRM
and HCM rest on the assumptions that:
- Both focuses on the importance of integrating/bridging
between Human resource and business strategy.
 HCM from HRM is the emphasis on the value of people
and what they produce ,rather than a focus on the HR
function itself.
 HCM, unlike HRM, is about assessing the impact of
people management practices and the contribution of
people to bottom-line performance.
HRM, 2021 compiled by Dr Habtamu
If we consider the Term Resource and Capital
 Resources are the total means available or an
available supply that can be drawn on when needed.
Resources, quite simply, can be drawn on until
exhausted.
 Capital refers to already produced durable goods
which further contribute to the production of goods
and services. In simpler words, capital refers to any
produced good/service which enables an
individual/organization to deliver high quality output.
Capital acts as a catalyst to increase productivity in
organizations

HRM, 2021 compiled by Dr Habtamu

  It Seems HCM as A Bridge Between HRM and
Business strategy
HCM
 HRM Business Strategy

 Defining the link between HR and business strategy is an

important issue to understand the HCM
 A human capital approach implies that a realistic
business strategy must be informed by human capital
data.
 how can a business pursue a strategy that doesn’t take
account of the capacity of all the resources available,
including the human ones?
 Human capital can be seen as a bridging concept
between HR and business strategy.
HRM, 2021 compiled by Dr Habtamu
So what is Human Capital
 HC looks employees as asset
 Investing on employees will increase their productivity
 Concerned for improving the individual intellect,
knowledge, experience, competence, and commitment
for achievement of organizational vision and goals.
 Human capital represents the human factor in the
organization; the combined intelligence, skills and
expertise that gives the organization its distinctive
character.
 Concerned with how people management create value
HRM, 2021 compiled by Dr Habtamu
Human capital
 The term Human Capital has now become common in
HR language to describe people and their collective
skills, abilities, experience and potential
 Human Capital is the provision of guidance on
effective people management by the systematic
analysis, measurement and evaluation of how people
policies and practices create value
 Human capital management (HCM) is concerned
with obtaining, analyzing and reporting on data that
informs the direction of value-adding people
management and strategic investment.

HRM, 2021 compiled by Dr Habtamu

 Human capital is not solely the people in
organizations— it is what those people bring and
contribute to organizational success.
 Human capital is the collective value of the
capabilities, knowledge, skills, life experiences,
and motivation of an organizational workforce.
 Knowledge and the ability to invent and innovate
are considered the key determinants of economic
development. This productive resource, which is
embodied in people, is often referred to as human
capital.

HRM, 2021 compiled by Dr Habtamu

 The constituents of Human Capital

 The term Human Capital become now common to

describe people and their collective knowledge,
skills, ability, experience and performance.
 Individuals generate, retain and use knowledge and
skill intellectual capital.


HRM, 2021 compiled by Dr Habtamu

The significance of human capital
theory
 Human capital theory regards people as assets and
stresses that investment by organizations in people
will generate worthwhile returns.
 By keeping that asset strong organization become
successful
 HCM involves systematic analysis, measurement,
and evaluation of how people, policies and
practices create value.

HRM, 2021 compiled by Dr Habtamu

 The significance of human capital theory
Questions on people management raised by human
capital theory
 What are the key performance drivers that create
value?
 What skills do we have?
 What skills do we need now and in the future to meet
our strategic aims?

HRM, 2021 compiled by Dr Habtamu

 How are we going to attract, develop and retain these
skills?
 How can we develop a culture and environment in
which organizational and individual learning takes
place that meets both our needs and the needs of our
employees?
 How can we provide for both the explicit and tacit
knowledge created in our organization to be captured,
recorded and used effectively?

HRM, 2021 compiled by Dr Habtamu

The development of human capital might develop as
follows:
assessing the effectiveness of HR
evaluating the impact and effectiveness of people
management processes
using human capital data
developing measures to calculate the return on
investment in people
HCM, which includes strategically-focused areas
HCM reporting.

 As organizations evolve their human

capital evaluation and reporting, they increasingly
adopt a more sophisticated approach to their
measurement techniques.
HRM, 2021 compiled by Dr Habtamu
HRM, 2021 compiled by Dr Habtamu