Human Resource Management Defined

Human Resource Management Defined

Human Resource Management

The terms ‘human resource management’ (HRM) and ‘human resources’ (HR) have largely replaced the term ‘personnel management’ as a description of the processes involved in managing people in organizations. The concept of HRM underpins all the activities described in this book, and the aim of this chapter is to provide a framework for what follows by defining the concepts of HRM and an HR system, describing the various models of HRM and discussing its aims and characteristics. The chapter continues with a review of reservations about HRM and the relationship between HRM and personnel management and concludes with a discussion of the impact HRM can make on organizational performance.

Human resource management is defined as a strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of its objectives. Storey (1989) believes that HRM can be regarded as a ‘set of interrelated policies with an ideological and philosophical underpinning’. He suggests four aspects that constitute the meaningful version of HRM:

1. A particular constellation of beliefs and assumptions.
2. A strategic thrust informing decisions about people management.
3. The central involvement of line managers.
4. Reliance upon a set of ‘levers’ to shape the employment relationship.

Human resource management operates through human resource systems that bring together in a coherent way:

1. HR philosophies describing the overarching values and guiding principles adopted in managing people.
2. HR strategies defining the direction in which HRM intends to go.
3. HR policies, which are the guidelines defining how these values, principles and the strategies should be applied and implemented in specific areas of HRM.
4. HR processes consisting of the formal procedures and methods used to put HR strategic plans and policies into effect.
5. HR practices comprising the informal approaches used in managing people.
6. HR programmes, which enable HR strategies, policies and practices to be implemented according to plan.

The overall purpose of human resource management is to ensure that the organization is able to achieve success through people. As Ulrich and Lake (1990) remark: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities.’ Specifically, HRM is concerned with achieving objectives in the areas summarized below.

Organizational Effectiveness

‘Distinctive human resource practices shape the core competencies that determine how firms compete’ (Cappelli and Crocker-Hefter, 1996). Extensive research has shown that such practices can make a significant impact on firm performance. HRM strategies aim to support programmes for improving organizational effectiveness by developing policies in such areas as knowledge management, talent management and generally creating ‘a great place to work’. This is the ‘big idea’ as described by Purcell et al (2003), which consists of a ‘clear vision and a set of integrated values’. More specifically, HR strategies can be concerned with the development of continuous improvement and customer relations policies.

Human Capital Management

The human capital of an organization consists of the people who work there and on whom the success of the business depends. Human capital has been defined by Bontis et al (1999) as follows:

Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that give the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating, and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization.

Human capital can be regarded as the prime asset of an organization and businesses need to invest in that asset to ensure their survival and growth. HRM aims to ensure that the organization obtains and retains the skilled, committed, and well-motivated workforce it needs. This means taking steps to assess and satisfy future people needs and to enhance and develop the inherent capacities of people – their contributions, potential and employability – by providing learning and continuous development opportunities. It involves the operation of ‘rigorous recruitment and selection procedures, performance-contingent incentive compensation systems, and management development and training activities linked to the needs of the business’ (Becker et al, 1997). It also means engaging in talent management – the process of acquiring and nurturing talent, wherever it is and wherever it is needed, by using several interdependent HRM policies and practices in the fields of resourcing, learning and development, performance management and succession planning. The process of human capital management (HCM) as described in the next chapter is closely associated with human resource management. However, the focus of HCM is more on the use of metrics (measurements of HR and people performance) as a means of providing guidance on people management strategy and practice.