IMPORTANCE OF HUMAN RESOURCE MANAGEMENT IN

DEVELOPMENT OF BUSINESS AND MANAGEMENT

Minakshi Nag1, Dr. Ehtesham Ahmad2, Ankit Srivastava3

ABSTRACT
In the following paper, the importance of Human Resource Management has been
discussed and it is being described that how HRM can be helpful in growth of Business
Organizations and also how organization can enhance their working capability. In today’s
era, the way management is spread in every particle of our business world. Similarly, HRM
has got same importance in the business world. So, if it is called the backbone of business
world, it will not be an exaggeration. Today, by adopting Human Resource Management,
business organization have greatly improved both the quality and work capacity of the
employees of their organization. So HRM is an area through which any improvements in
both, i.e; human knowledge and efficiency have been made possible for organizations. Hence
it can be said that HRM is an intrinsic part of the Quality management, it is a unique process
to achieve both the business goals of its employees & organizational goals. HRM has also
made human being as an valuable asset of the institution, the sole goal of which is to made
the achievement of institutional goals easier by increasing the efficiency of its employees, so
that strategic efforts of the organization are successful & proper development of the
institution is possible. HRM plays vital role in building better image in business world.
However, its success & failure depends on the attitude of the employees towards the
organization and also what process of recruitment, selection & training of employees are
being adopted because today every organization is facing stiff competition in business. Every
institution is facing many problems in the field of technological process, lack of resources &
power etc. In such a situation, if the institutions adopt them, not only institutions can develop
themselves but will be also able to face stiff competition.
In this way if every organization makes a reasonable effort in relation to the welfare
scheme of its employees, every institution can have established its existence easily in today’s
competitive era because only a healthy and satisfied employee can take the organization to
the pinnacle of success. As a result, the institute will not be only able to achieve its business
goals but also, its profitability, efficiency & fully development can be made possible.

Keywords: Quality improvement, Manpower Planning, Performance, Compensation &

Rewards, Organization Development technology etc.
INTRODUCTION
Human Resource Management is a very broad term which is included as a very large
and vital part in any business or its management. Any organization or its management
without HRM can put themselves in condition where they may face serious problems while
not being able to manage its regular activities effectively. HRM is related with the human
beings in organization, so it is necessary to explain Human resource first before we discuss

1
Research Scholar, Department of Commerce, Khawaja Moinuddin Chishti Urdu Arbi
Farsi University, Lucknow, U.P., E-mail: [email protected].
2
Associate Professor (HOD), Department of Commerce, Khawaja Moinuddin Chishti Urdu
Arbi Farsi University, Lucknow, U.P.
3
Corresponding Author, Assistant Professor, Department of Commerce, Maharishi
University, Lucknow, U.P. Email: [email protected], Contact No. 8840909102.
for the meaning of HRM. Human Resources are the people who are working in the
organization and who prove to be pillars of any organization without whom organization can
be like Vessel with liquid.
As per Michael J. Jucius, “A whole consisting of inter related, inter-dependent and
interacting physiological, psychological, sociological and ethical components.” HRM is a
broader term including job analyses, planning personnel needs, recruiting the right people for
the job, orienting and training, managing wages and salaries, providing benefits and
incentives, evaluating performance, resolving disputes and communicating with all
employees. According to Flippo, “Personnel management, or say, human resource
management is the planning, organizing, directing and controlling of the procurement
development compensation integration, 4intenance, and separation of human resources to the
end that individual, organizational and social objectives are accomplished. In general terms,
HRM is concerned with the people dimension in management, as every organization is made up of
people, acquiring their services, developing their skills, motivating them to high level of performance
and ensuring that they continue to maintain their commitment to the organization are essential for
achieving organizational objectives too.

The following aspects constitute the core of HRM:

1. HRM Involves the Application of Management Functions and Principles. The
functions and principles are applied for acquiring, developing, maintaining and
providing remuneration to employees in organization.
2. Decision Relating to Employees must be integrated. Decisions on different aspects of
employees must be consistent with other human resource (HR) decisions.
3. Decisions Made 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.
4. HRM Functions are not confined to Business Establishments Only but applicable to
non-business organizations such as education, health care, recreation and like.

OBJECTIVE OF THE STUDY

1. To analyze critically the importance of Human Resource Management
2. To study the functions of Human Resource Management

RESEARCH METHODOLOGY
This study mainly relies on secondary data. The sources of data include Books, General &
Company Magazines, Research Articles, News Papers, Conference Proceedings, Research
Journals etc.

REVIEW OF LITERATURE
Review of literature focused on various essential HRM practices inside any organization, i.e;
it is large, medium or small organization, namely; recruitment and selection, training and
development, performance appraisal, career planning, Job definition, compensation and
reward, and employee participation. Recruitment and selection primarily aims at attracting
maximum number of highly talented applicants and selecting the best to achieve
competitiveness. Training and development generate tangible outcome (improved
productivity, quality of products and services, and resource optimization), and intangible
results in terms of enhanced self-esteem, high morale, and satisfaction of employees due to
acquisition of additional knowledge, skills, and abilities. Blair & Sisakhti (2007) found that
expenditures on training and development yield enormous benefits. Researchers have
concluded that investment in training yields strategic advantage to the organizations (Bitner
& Zeithmal, 2001). Performance appraisal is based on demonstrated achievement of
performance objectives established pertaining to a specified job within a given time period.
This process plays a vital role in influencing the perception of employees about self and
about their contribution toward organizational goals.
Compensation & reward system helps in boosting the morale and increasing efficiency of the
employees working directly or indirectly in the organisation. As per Milkovich & Newman,
A comprehensive compensation mix augmented by an effective system of disbursement plays
an effective role in attracting the best candidates, shaping employees, behaviour and
performance outcome, and facilitates retention of talents. Employee participation is also very
vital part for any organization as discussed and referred above too by the definition of human
resources it can be understood that employees in any organisation are like water in the pipe
whose presence will only ensure other activities and organizational objectives being
effectively achieved.

BACKGROUND OF HRM AS A SUBJECT

In 1890-1910, Frederick Taylor develops his ideas on scientific management. Taylor

advocates scientific selection of workers based on qualifications and also argues for
incentive-based compensation systems to motivate employees.
In 1910-1930, Many companies establish departments devoted to maintaining the welfare of
workers. The discipline of industrial psychology begins to develop. Industrial psychology,
along with the advent of World War I, leads to advancements in employment testing and
selection.
In 1930-1945, The interpretation of the Hawthorne Studies' begins to have an impact on
management thought and practice. Greater emphasis is placed on the social and informal
aspects of the workplace affecting worker productivity. Increasing the job satisfaction of
workers is cited as a means to increase their productivity.
In 1945-1965, A tremendous surge in union membership between 1935 and 1950 leads to a
greater emphasis on collective bargaining and labor relations within personnel management.
Compensation and benefits administration also increase in importance as unions negotiate
paid vacations, paid holidays, and insurance coverage.
In 1965-1985, The Civil Rights movement in the U.S. reaches its apex with passage of the
Civil Rights Act of 1964. The personnel function is dramatically affected by Title VII of the
CRA, which prohibits discrimination on the basis of race, color, sex, religion, and national
origin. In the years following the passage of the CRA, equal employment opportunity and
affirmative action become key human resource management responsibilities.
From 1985-to present, three trends dramatically impact HRM. The first is the increasing
diversity of the labor force, in terms of age, gender, race, and ethnicity. " A second trend is
the globalization of business and the accompanying technological revolution. These factors
have led to dramatic changes in transportation, communication, and labor markets. The third
trend, which is related to the first two, is the focus on HRM as a "strategic" function. HRM
concerns and concepts must be integrated into the overall strategic planning of the firm in
order to cope with rapid change, intense competition, and pressure for increased efficiency.

Functions of HRM:
HRM functions are not only responsive to staffing needs, but can be helpful in reshaping
organizational objectives. All the functions of HRM are correlated with the core objectives of
HRM. For example personal objectives are sought to be realized through functions like
remuneration, assessment etc.
 Internal as well as external forces significantly affect how HR functions are designed,
managed, and changed.
Some of the internal forces which may affect can be - organizational structure, working
culture & environment, type of workforce, composition of workforce, availability of financial
& other resources, level of management, organisation’s mission and vision, etc.
Some of the external forces which may affect can be - legal, economic, technological, global,
environmental, cultural/geographic, political, and social.
Some of the functions being based on the role being performed by management under HRM
system can be enlisted as below:
 Managerial Functions
 Operative Functions

A. Managerial Function Includes:

a) Planning: One of the primary function where number & type of employees needed to
accomplish organizational goals are determined. Research forms core HRM planning
which also helps management to collect, analyze and identify current plus future needs
within the organization.
b) Organizing: Organization of the task is another important step. Task is allocated to every
member as per their skills and activities are integrated towards a common goal.
c) Directing: This includes activating employees at different levels and making them
contribute maximum towards organizational goal. Tapping maximum potentialities of an
employee via constant motivation and command is a prime focus.
d) Controlling: Post planning, organizing and directing, performance of an employee is
checked, verified and compared with goals. If actual performance is found deviated from
the plan, control measures are taken.
B. Operative Function Includes:
a) Recruitment/Hiring: Hiring is a process which brings pool of prospective candidates who
can help organization achieve their goals and allows managements to select right
candidates from the given pool.
b) Job Analysis & Design: Describing nature of the job like qualification, skill, work
experience required for specific job position is another important operative task. Whereas,
job design includes outlining tasks, duties and responsibilities into a single work unit to
achieve certain goal.
c) Performance Appraisal: Checking and analyzing employee performance is another
important function that human resource management has to perform.
d) Training & Development: This function allows employees to acquire new skills and
knowledge to perform their job effectively. Training and development also prepares
employees for higher level responsibilities.
e) Cost Administration: Human Resource Department also determines pays for different job
types and incudes compensations, incentives, bonus, benefits etc. related with a job
function.
f) Employee Welfare: This function takes care of numerous services, benefits and facilities
provided to an employee for their well-being.
g) Maintenance: Minimizing employee turnover and sustaining best performing employees
within the organization is the key. Minimizing ROI within HR department is also a key
goal for Human resource management team.
h) Labor Relations: Labor relation is regards to the workforce who work within a trade
union. Employees in such domain form a union/group to voice their decisions affectively
to the higher management.
i) Personnel Research: Research is a vital part of human resource management. It is
performed to keep a check on employee opinion about wages, promotions, work condition,
welfare activities, leadership, employee satisfaction and other key issues.
j) Personnel Record: This function involves recording, maintaining and retrieving
employee related information including employment history, work hours, earning history
etc.

IMPORTANCE OF HRM
HRM is engaged not only in securing and developing the talents of individual workers, but
also in implementing programs that enhance communication, coordination & cooperation in
the organization in order to nurture organizational development. The essence of HRM can be
easily understood from the two different definitions being given, The first definition of HRM
is that “It is the process of managing people in organizations in a structured & thorough
manner.” This covers the fields of staffing (hiring people), retention of people, pay & perks
setting and management, performance management, change management and taking care of
exits from the company leading to less retrenchments. This 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 says that “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
HRM. It means that the HR function in organization is related with the notions of people
enabling, people development and a focus on making Employee-Employer relationship
fulfilling for both the management and employees.

Further different importance can be enlisted as below:

1. Human Resource Planning: E.W. Vetter defined human resource planning with
reference to HRM as, “a process by which an organization should move from its current
manpower position to its desired manpower position. Through planning, management
strives to have the right number and right kind of people at the right places at the right
time, doing things which result in both the organization and the individual receiving
maximum long-run benefit.” Hence, human resource planning under human resource
management as a very vital function helps by foreseeing the human resource
requirements of an organization and the future supply of human resources and a) making
necessary adjustments between these two and organizational plans; & b) foreseeing the
possibility of developing the supply of human resources in order to match with it
requirements by introducing necessary changes in the function of human resources
management.
2. Personnel Research & Information System: HRM helps in developing system where
management can get insight into knowledge on behavioral science and industrial
psychology throws better insight into the workers’ expectations, aspirations and
behavior. Advancement of technology of product & production methods have created
working environment which are much different from the past. In present, organization
can maintain themselves updated regarding present market situations related with the
personnel requirements as well as for other too either from different sources or
developing in-house research & development system which proves to be effective
information system to be utilized for efficient organization.
3. Human Resource Value: For businesses these days human capital is critical because so
many of them perform cross-functional duties, i.e; if one person quits from job or his/her
job role, it leaves the company with a huge gap to fill and a potential threat to company
 efficient workings. So, now a days, management in organization takes care of it and
makes policy such that it is win-win situation for both of them, i.e; organization as well
as employees who if want to turn-up for their company again, they don’t hesitate and
can support once again with their fullest efficiency and learning they have brought from
working in outside market.
4. Employee-employer relationship: In the 21st century, there is also a change in the
relationship between employee and employer. Organization work without centralization
and operate in the flexible environment. Employees work under friendly environment. In
the global competitive environment, employees are loyal to organizations and work with
full interest. They easily communicate with the top management about new strategies
and trends of global market. Through exchange of ideas, they come to end with new
innovative thing which are really helpful for achieving organizational goal.
5. Reward & compensation system: Earlier, employees worked under centralized
environment. Top management was responsible for decision making and no one was
involved in it. Employees worked under the instructions of managers and there was no
proper compensation system for employees. Organization paid them daily on the number
of units produced. Now there is proper compensation system for employees and
organization also give them rewards for their efforts in completing task assigned to them.
Monthly bonuses are also given to them. Through reward system, employees work with
full interest and are helpful in achieving the organizational goal.Wages and
compensations are fixed scientifically to meet fairness and equity criteria. In addition
labour welfare measures are involved which include benefits and services.
6. Conflict Resolution: In organizations & their management, workplace conflict is
inevitable, given the diversity of personalities, work styles, backgrounds and levels of
experience among employees. An effective HRM system & human resources manager or
a staff person is specially trained to handle employee relations matters and resolve
conflict between two employees or a manager and employee and restore positive
working relationships. This doesn’t only helps in reducing conflicts only, however it
leads to better coordination and cooperation within the organization between the
different persons working at same or different level. This can prove to bring better
working conditions with harmony.
7. Training and Development: Human resources development system involves needs
assessments for the organization's current workforce to determine the type of skills
training and employee development necessary for improving skills and qualifications.
Companies in the beginning or growth phases can benefit from identifying training needs
for existing staff. It's much less expensive than the cost to hire additional staff or more
qualified candidates. In addition, it's a strategy that also can reduce turnover and improve
employee retention. This involves an organized attempt to find out training needs of
individuals to meet the knowledge and skill which is needed not only to perform current
job but also to fulfill the future needs of the organization.
8. Budget Control: Human resources curbs excessive spending through developing
methods for trimming workforce management costs, which includes negotiating better
rates for benefits such as health care coverage. In addition, human resources ensures
competitive and realistic wage-setting based on studying the labour market, employment
trends and salary analysis based on job functions. As some businesses have budget
constraints, this human resources management function is especially helpful.
9. Cost Savings: The cost to hire new or replacement workers, including training and
ramp-up time, can be exorbitant for employers, especially small businesses. With a well-
constructed recruitment and selection process, the human resources function can
minimize expenses regarding advertising job postings, training new employees and
 enrolling new employees in benefits plans. HRM system provides flexibility in
environment which is helpful for maintaining the cost, chances of error in the process are
also reduced.
10. Individual Satisfaction: Human resources specialists usually are supposed to perform
the responsibility of determining the level of employee satisfaction -- often an
ambiguous measurement at best. With carefully designed employee surveys, focus
groups and an exit interview strategy, human resources determines what underlies
employee dissatisfaction and addresses those issues to motivate employees, sometimes
this proves beneficial at such extent that employee changes his/her mind to exit from the
company, however if still not, takes out positive image of the organization.
11. Performance Improvement: Human resources develop proper performance
management systems, without a human resources staff person to construct a plan that
measures performance, employees can wind in jobs that aren't suitable for their skills and
expertise. Additionally, employees whose performance falls below the employer's
expectations can continue on the payroll, thereby creating wasted money on low-
performing employees and providing them fair chance to improve too.
12. Sustaining Business: Through succession planning that human resources develops, the
company identifies employees with the promise and requisite capabilities to eventually
transition into leadership roles with the company. This is an important function as it can
guarantee the organization's stability and future success, and also can bring sustainable
development in the business.
13. Reliability: Human resources ensures that workforce embraces the company's
philosophy and business principles. From the perspective of a small business, creating a
cohesive work environment is imperative. The first opportunity human resources has to
accomplish this is through wise hiring decisions that identify desirable professional
traits, as well as orientation and on-boarding programs. Through the system management
can bring sense of reliability in respect of working techniques, different plans and
policies.
14. Union-Labour Relations: This is one of the important areas being covered under HRM.
Healthy Industrial and Labour relations are very important for enhancing peace and
productivity in an organization. An effective HRM system ensures that there is less
conflicts by taking care of individual interest in hand with the general interest, i.e;
keeping in mind one of the Henry Fayal’s principles of management – Subordination of
Individual Interest to General Interest.
15. Corporate Image: Businesses want to be known as the employer of choice. Employers
of choice are the companies that receive recognition for the way they treat employees;
they are the companies for whom people want to work. Becoming an employer of choice
means human resources balances recruiting the most qualified applicants, selecting the
most suitable candidates and retaining the most talented employees. And there is no
doubt in this that without effective HRM system being developed at management level
in business it can be made possible Also, effective system of HRM ensures that
company’s image is maintained positive in the market as compared with their
competitor’s business.
16. Enhancement in creativity & innovation: The well-known organizations focus on the
skills of workforce and their synergistic power to compete with the dynamic
environment. For eg., Google and other companies locate their research labs all around
the world to identify the market changes and preferences. By identifying changes, they
create new and innovative product.
17. Gaining maximum market share: Due to diversity, there is need to focus on the
market place and market knowledge to know the customers’ needs and wants and to
 manufacture products to gain maximum market share. Human Resource management
system through drawing experiences, team work and team skills have become more
valuable for quick response to the opportunities within new market place.
18. Counseling: Modern HRM system also involves counseling which is basically the
interaction between two individuals. According to Patterson “counseling is the process
involving interpersonal relationships between two persons and the counselor helping the
other person called client for supporting in difficult work.” In 21st century counseling
practice is the useful option for organizations for training their employees.
19. Organizational Learning: Organisational learning has emerged as one of the most
important practice of HRM in 21st century. Argyris (1977) defines organizational
learning as the process of "detection and correction of errors." Organizations’ learning
process consists of four major steps which are knowledge acquisition that is first step
towards acquiring organizational learning. It focuses on futuristic or novel information
used for the betterment of organization. The second step is knowledge sharing that is the
process through which employees share information amongst each other. The third step
is about knowledge interpretation of organizational learning in which clear information
is shared by the employee. The last is memorizing the knowledge of organization for
future use.
20. Developing Knowledge- based economy: In today’s modern era, there is need to
diversify the HRM strategies due to the knowledge-based economy and to compete with
the today’s competitors and achieve competitive advantage. Now, the trend is shifted
from industry-based economy to knowledge based economy for providing value to the
customers as well as to the employees at the same time. In industry-based economy,
manager focuses on the efficiency of work only but now in knowledge-based economy,
the manager’s focus is on both the effectiveness and efficiency. In this Era, there is
demand of expertise, innovation, entrepreneurial skills and need of diverse workforce.
21. Developing Public Relations: The responsibility of establishing good public relations
lies with the HRM to a great extent. They organize business meetings, seminars and
various official gatherings on behalf of the company in order to build up relationships
with other business sectors. Sometimes, the HR department plays an active role in
preparing the business and marketing plans for the organization too.

Additional Modern Challenges to be considered in the field of HRM:

Modern business world and global economy have reshaped the whole strategies of HRM and
compose those into new form. Due to the dynamic environment, the relationship of
employee-employer is also being reshaped and it made the organization change the way how
to manage and motivate the employees.
1. Demographic shift: Demographic category includes gender, race, nationality, age,
religion and physical disability. Like, the percentage of female employees have
increased significantly in some years, organizations hire employees from different
countries having different languages and cultures.
2. Work arrangements: Work arrangement is another reason for change in workforce.
Due to the latest technology including high speed internet and mobile communication,
there is great variety that how and where employees do work. Now a number of
employees work in outskirts. For example: Many IT employees get their projects
through online linkage and complete their work at home instead of going to offices.
Work preferences are also another amazing factor for the diversity in workforce.
3. Adapting to Innovation: Technology is constantly changing and businesses must be
quick to adapt risk. Like, the small business have challenges in getting employees
embracing innovation & learn new technology.
 4. Dynamic Personnel Policies & Programes: HRM is not merely going to be an
exclusive job of the HR manager, but every executive in the organization would be
made responsible for the effective management of people in his unit.
5. Outsourcing HRM Functions: Now-a-days many organisations are outsourcing
routine HRM functions so as to focus on strategic HR issues that affect corporate
performance and organization’s value. HRM functions which can be outsourced
easily are recruitement, selection, compensation, job evaluation, training, etc.

CONCLUSION
HRM is a broader concept; personnel management (PM) and Human resource
development (HRD) are the parts of HRM. The role of HRM is to plan, develop and
administer policies and programs designed to make optimum use of an organizations human
resources. It is that part of management which is concerned with the people at work and with
their relationship within enterprises. HRM is a total matching process between the three Hard
S (Strategy, Structure and Systems) and the four Soft S (Style, Staff, Skills and Super-
ordinate Goals). Any organization will have proper human resource management
 to improve the capabilities of an individual;
 to develop team spirit of an individual and the department; and
 to obtain necessarily co - operation from the employees to promote organizational
effectiveness.

Hence, the emergence of HRM in 21st century has got the priority for developing
positive employment relations. It will successfully improve productivity and performance of
HR and will also play role in successful interpersonal relationships. Competitive advantage is
achieved by organizations when they truly work on HRM practices. These practices include
recruitment, selection and encouraging suitable employees for endorsing diversity of
workplace for managing knowledge and innovation whilst putting more focus on employee
development and engagement. By focusing HR factors that influence on human resource in
21st century, solutions can be provided. Through the attentive and thoughtful approach being
used in management of HR, competitive advantage can be attained and organizational
productivity can be enhanced resultantly. Managing the diverse relations, behaviours,
cultures, and values has become a severe challenge for firms and they need to take prudent
decisions to sort-out such problems. In the world of business, firms must focus on the up
skilling of their employees to cope with complexity and to be “IN” in the race. It is said that
employees are the “ASSETS” of firms, and firms fail without workforce, so firms should not
solely rely on technologies but they also need an effective workforce to run their business
successfully. Today employees are very productive than before because they understand the
firm’s demand and the changing trends of business world, so employees know that they will
have to be responsive and multi-skilled if they want to continue their jobs. Effective
management is required to manage the multi-talent and skills as firms retain their multi-
talented employees who play very vital role for success of business. HR department also
conducts job analysis to get right people at the right place. Hence by concluding we can say
that Human Resource Management helps in achieving the following-
1. Provide, create, utilize and motivate employees to accomplish organizational goals.
2. Creating opportunities, providing facilities, necessary motivation to individual and
group for their growth with the growth of the organization by training and
development, compensation etc.
3. Employ the skills and ability of the workforce efficiently, i.e., to utilize human
resources effectively
 4. Creating a sense and feeling of belongingness team-spirit and encourage suggestions
from employees.
5. Help in maintaining ethical policies and behavior inside and outside the organization.
6. Maintaining high moral and good human relation within the organization.
7. Secure integration of individual and groups in securing organizational effectiveness
8. Manage change to the mutual advantage of individuals, groups, the organization and
the society.
9. Ensure that, adopting a policy recognizing merit and employee contribution, and
condition for stability of employment.
10. Increase to the fullest the employee ‘s job satisfaction and self-actualization.

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