1.1 What Is Human Resources?

LEARNING OBJECTIVES

Explain the role of HRM in organizations.

Define and discuss some of the major HRM activities.

Every organization, large or small, uses a variety of capital to make the business work. Capital includes
cash, valuables, or goods used to generate income for a business. For example, a retail store uses
registers and inventory, while a consulting firm may have proprietary software or buildings. No matter
the industry, all companies have one thing in common: they must have people to make their capital work
for them. This will be our focus throughout the text: generation of revenue through the use of people’s
skills and abilities.

What Is HRM?

Human resource management (HRM) is the process of employing people, training them, compensating
them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has
undergone many changes over the last twenty years, giving it an even more important role in today’s
organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging
company outings, and making sure forms were filled out correctly—in other words, more of an
administrative role rather than a strategic role crucial to the success of the organization. Jack Welch,
former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the
parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in
hard times.”Kristen B. Frasch, David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Human
Resource Executive Online, June 30, 2009, accessed September 24, 2010,
http://www.hreonline.com/HRE/story.jsp?storyId=227738167.

It’s necessary to point out here, at the very beginning of this text, that every manager has some role
relating to human resource management. Just because we do not have the title of HR manager doesn’t
mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with
compensation, motivation, and retention of employees—making these aspects not only part of HRM but
also part of management. As a result, this book is equally important to someone who wants to be an HR
manager and to someone who will manage a business.

Human Resource Recall

Have you ever had to work with a human resource department at your job? What was the interaction
like? What was the department’s role in that specific organization?
The Role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform, which is
what makes this information important, despite the career path taken. Most experts agree on seven
main roles that HRM plays in organizations. These are described in the following sections.

Staffing

You need people to perform tasks and get work done in the organization. Even with the most
sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is
staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package.
Within the staffing function, there are four main steps:

Development of a staffing plan. This plan allows HRM to see how many people they should hire based on
revenue expectations.

Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is

Recruitment. This involves finding people to fill the open positions.

Selection. In this stage, people will be interviewed and selected, and a proper compensation package will
be negotiated. This step is followed by training, retention, and motivation.

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of the jobs
of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM,
management, and executives are involved in the process. For example, the HRM professional will likely
recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and
then communicate that policy to employees. It is key to note here that HR departments do not and
cannot work alone. Everything they do needs to involve all other departments in the organization. Some
examples of workplace policies might be the following:

Discipline process policy

Vacation time policy

Ethics policy

Internet usage policy

These topics are addressed further in Chapter 6 "Compensation and Benefits", Chapter 7 "Retention and
Motivation", Chapter 8 "Training and Development", and Chapter 9 "Successful Employee
Communication".

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high
enough to entice people to work for the organization. Compensation includes anything the employee
receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to
what other people performing similar jobs are being paid. This involves setting up pay systems that take
into consideration the number of years with the organization, years of experience, education, and similar
aspects. Examples of employee compensation include the following:

Pay

Health benefits

401(k) (retirement plans)

Stock purchase plans

Vacation time

Sick leave

Bonuses

Tuition reimbursement

Since this is not an exhaustive list, compensation is discussed further in Chapter 6 "Compensation and
Benefits".

Retention
Retention involves keeping and motivating employees to stay with the organization. Compensation is a
major factor in employee retention, but there are other factors as well. Ninety percent of employees
leave a company for the following reasons:

Issues around the job they are performing

Challenges with their manager

Poor fit with organizational culture

Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay.Leigh Rivenbark, “The 7
Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10, 2010,
http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406. As a result, managers often try to
change their compensation packages to keep people from leaving, when compensation isn’t the reason
they are leaving at all. Chapter 7 "Retention and Motivation" and Chapter 11 "Employee Assessment"
discuss some strategies to retain the best employees based on these four factors.

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to
do the job but also continue to grow and develop new skills in their job. This results in higher
productivity for the organization. Training is also a key component in employee motivation. Employees
who feel they are developing their skills tend to be happier in their jobs, which results in increased
employee retention. Examples of training programs might include the following:

Job skills training, such as how to run a particular computer program

Training on communication

Team-building activities

Policy and legal training, such as sexual harassment training and ethics training

We address each of these types of training and more in detail in Chapter 8 "Training and Development".

Dealing with Laws Affecting Employment

Discrimination laws

Health-care requirements

Compensation requirements such as the minimum wage

Worker safety laws

Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place
and then communicate those changes to the entire management organization. Rather than presenting a
chapter focused on HRM laws, we will address these laws in each relevant chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of
setting federal or state standards to ensure worker safety. Unions and union contracts can also impact
the requirements for worker safety in a workplace. It is up to the human resource manager to be aware
of worker protection requirements and ensure the workplace is meeting both federal and union
standards. Worker protection issues might include the following:

Chemical hazards

Heating and ventilation requirements

Use of “no fragrance” zones

Protection of private employee information

We take a closer look at these issues in Chapter 12 "Working with Labor Unions" and Chapter 13 "Safety
and Health at Work".

Communication
Besides these major roles, good communication skills and excellent management skills are key to
successful human resource management as well as general management. We discuss these issues in
Chapter 9 "Successful Employee Communication".

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at play
that may affect the organization. Outside forces, or external factors, are those things the company has no
direct control over; however, they may be things that could positively or negatively impact human
resources. External factors might include the following:

Globalization and offshoring

Changes to employment law

Health-care costs

Employee expectations

Diversity of the workforce

Changing demographics of the workforce

A more highly educated workforce

Layoffs and downsizing

Technology used, such as HR databases

Increased use of social networking to distribute information to employees

For example, the recent trend in flexible work schedules (allowing employees to set their own schedules)
and telecommuting (allowing employees to work from home or a remote location for a specified period
of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of
these outside issues, so they can develop policies that meet not only the needs of the company but also
the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed
into law in 2010. Compliance with this bill has huge implications for HR. For example, a company with
more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated
that 60 percent of employers offer health-care insurance to their employees.Peter Cappelli, “HR
Implications of Healthcare Reform,” Human Resource Executive Online, March 29, 2010, accessed August
18, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509. Because health-care insurance
will be mandatory, cost concerns as well as using health benefits as a recruitment strategy are big
external challenges. Any manager operating without considering outside forces will likely alienate
employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also
mean breaking the law, which has a concerning set of implications as well.

Figure 1.2

An understanding of key external factors is important to the successful HR professional. This allows him
or her to be able to make strategic decisions based on changes in the external environment. To develop
this understanding, reading various publications is necessary.

One way managers can be aware of the outside forces is to attend conferences and read various articles
on the web. For example, the website of the Society for Human Resource Management, SHRM
Online,Society for Human Resource Management, accessed August 18, 2011,
http://www.shrm.org/Pages/default.aspx. not only has job postings in the field but discusses many
contemporary human resource issues that may help the manager make better decisions when it comes
to people management. In Section 1.3 "Today’s HRM Challenges", we go into more depth about some
recent external issues that are affecting human resource management roles. In Section 1.1.2 "The Role of
HRM", we discuss some of the skills needed to be successful in HRM.

Figure 1.3

Most professionals agree that there are seven main tasks HRM professionals perform. All these need to
be considered in relation to external and outside forces.