21MB204T – Human Resource Management

UNIT I
PERSPECTIVES IN HUMAN RESOURCE MANAGEMENT

1. Evolution of Human Resource Management

A Brief Overview
 “Personnel management” is not new. Ancient armies and organized efforts always
required attracting, selecting, training, and motivating workers.
 But personnel tasks like these were mostly just part of every manager’s job,
something that lasted in most countries until the late 1800s.
 At that time, labor problems began arising in many of the post–industrial revolution’s
new factories. Soon employers were setting up “ welfare offices” and “welfare
secretaries” to manage activities like factory washrooms, and “safety bureaus” to
oversee plant safety.
 By 1900, employers set up the first “hiring offices,” training programs, and factory
schools. Personnel management had begun.
 In these early firms, personnel managers took over hiring and firing from supervisors,
ran the payroll departments, and administered benefits plans.
 As expertise in testing emerged, personnel departments played a greater role in
employee selection and training,
 New union laws in the 1930s added “Helping the employer deal with unions” to
personnel’s tasks. New equal employment laws in the 1960s made employers more
reliant on personnel management to avoid discrimination claims.
 By the 1970s globalization made gaining a competitive edge through engaged
employees— and therefore personnel management—increasingly important.
 Today economic and demographic trends (recall the diminishing workforce
participation rate and aging population, for instance) make finding, hiring, and
motivating employees more challenging, while more high tech and service jobs means
employers must excel at managing employees’ knowledge, skills, and expertise
(human capital) through aptly renamed human resource management departments.
 Furthermore, as we’ve seen, technological trends including mobile and social media
are changing how employers recruit, select, train, appraise, and motivate employees.
 In a sense, a new human resource management is emerging.

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Timeline of evolution of HRM
 The history of HRM can be traced to England, where masons, carpenters, leather
workers, and other craftspeople organized themselves into guilds.
 They used their unity to improve their work conditions. 3 The field further developed
with the arrival of the Industrial Revolution in the latter part of the 18 th century,
which laid the basis for a new and complex industrial society.
 In simple terms, the Industrial Revolution began with the substitution of steam power
and machinery for time-consuming hand labour. Working conditions, social patterns,
and the division of labour were significantly altered.
 A new kind of employee—a boss, who wasn’t necessarily the owner, as had usually
been the case in the past—became a power broker in the new factory system. With
these changes also came a widening gap between workers and owners.
 Scientific management and welfare work represent two concurrent approaches that
began in the 19th century and, along with industrial psychology, merged during the
era of the world wars.
 Scientific management represented an effort to deal with inefficiencies in labor and
management primarily through work methods, time and motion study, and
specialization
 Industrial psychology represented the application of psychological principles toward
increasing the ability of workers to perform efficiently and effectively.
 The renowned father of scientific management was Frederick W. Taylor. An engineer
at Midvale Steel Works in Philadelphia from 1878 to 1890, he studied worker
efficiency and attempted to discover the “one best way” and the one fastest way to do
a job.
 He summarized scientific management as (1) sc i ence, not rules of thumb; (2)
harmony, not discord; (3) cooperation, not individualism; and (4) maximum output,
not restricted output.
 Whereas scientific management focused on the job and efficiencies, industrial
psychology focused on the worker and individual differences.

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 The maximum well-being of the worker was the focus of industrial psychology. Hugo
Munsterberg and his book Psychology and Industrial Efficiency initiated in 1913 the
field of industrial psychology.

 The book served as a stimulus and model for the development of the field in the
United States and Europe.
 The drastic changes in technology, the growth of organizations, the rise of unions, and
government concern and intervention concerning working people resulted in the
development of personnel departments.
 There is no specific date assigned to the appearance of the first personnel department,
but around the 1920s more and more organizations seemed to take note of and do
something about the conflict between employees and management. 7 Early personnel
administrators were called welfare secretaries.
 Their job was to bridge the gap between management and operator (worker); in other
words, they were to speak to workers in their own language and then recommend to
management what had to be done to get the best results from employees.
 Another early contributor to HRM was called the human relations movement. Two
Harvard researchers, Elton Mayo and Fritz Roelthisberger , incorporated human
factors into work.
 This movement began as a result of a series of studies conducted at the Hawthorne
facility of Western Electric in Chicago between 1924 and 1933. The purpose of the
studies was to determine the effects of illumination on workers and their output.
 The studies pointed out the importance of the social interaction and work group on
output and satisfaction. The human relations movement eventually, around the mid-
1960s, became a branch of and a contributor to the field of organizational behavior
 The early history of personnel still obscures the importance of the HRM function to
management.
 Until the 1960s, the personnel function was considered to be concerned only with
blue-collar or operating employees.
 It was viewed as a record-keeping unit that handed out 25-year service pins and
coordinated the annual company picnic. Peter Drucker, a respected management

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 scholar and consultant, made a statement about personnel management that reflected
its blue-collar orientation.
 Drucker stated that the job of personnel was “partly a file clerk’s job, partly a
housekeeping job, partly a social worker’s job, and partly firefighting and heading off
union trouble.

2. Inclusive Growth and Affirmative Action Plan

Set of activities involved in integrating non – traditional employees into workforce and using
their diversity to gain firm’s competitive advantage is called “Inclusive Growth”

Inclusiveness -> Making all employees to feel that they are an integral part of organization &
they share common desire to make the firm succeed regardless of their gender, race, age & so
on.

Creating an Inclusive Organizational Culture

Top Management Commitment in valuing diversity

 Only if CEO & Personnel reporting to CEO are committed to diversity it will be easy
for other Managerial Personnel to inculcuate diversity.
 All CEO’s need to put their ideals of commitment towards diversity into practise
 Avon- An Amercian British Multinational Cosmetics company has an “Multi Cultural
Participation Council” has announced Managing Diversity as their priority.

Appraising and Rewarding Managers for Diversity Practices

 Companies should explicitly provide or withdraw incentives to managers for

promoting “Diversity Management”
 Sodexo Links 25% of Managerial Compensation to diversity goals.
 E&Y uses diversity management as a parameter during performance management
process.
 Wells Fargo has diversity has one of the four core managerial competencies during the
performance appraisal.

Diversity Training Programs

 Supervisors needs to learn new skills that will enable them to manage and motivate
diversified workforce.

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  HP, Wellsfargo & Microsoft have developed an “Intensive inhouse diversity program”

Support Groups

 Some employees feel corporate life as insecured & insensitive to their culture. To
counteract this feel many organizations have developed support groups.
 These support groups play key roleU in nurturing employees.

Accommodation of Family Needs

 Establishing day care for women employees to take care of their children and having
an alternative workforce pattern for women staffs enables accommodation of family
needs and thereby promotes inclusiveness in an organization.

Senior Mentoring Programs

 Senior managers identify promising women and minority employees & play an
important role in nurturing career progress through “Senior Mentoring Program”

Communication Standards

 Establishing an uniform communication standards for the entire organization is one

key aspects to promote inclusiveness in an organization. There are some phrases,
jargons, and terminologies which may offend any particular section of society.
 Avoiding the usage of these words will thereby thrive inclusiveness in an
organization.

Diversity Audits

 Conducting diversity audits periodically enables inclusiveness in an organization.

 Unfortunately many organizations do not conduct this audit, even if it is
conducted there are instances of non-compliance reported.

Avoiding promotion of Stereotypes

Cultural Determinism: Tagging an individual behavior based on cultural, interest & values
to the groups he belongs to is called as Cultural Determinism

 Organization should promote steps to eradicate cultural deteriminism and steretyping

and promote steps to encourage inclusiveness

What is Glass ceiling

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Invisible barrier that prevents women and minorities from attaining leadership and executive
positions in organizations is called as glass cieling

Affirmative Action Plan

Fair employment by hiring certain group of people who were denied opportunity in the past
due to

 Race
 Sex
 Religion
 National Origin
 Color
 Age
 Disability

Some common action plans in Indian & Global context include

1. Reservation and Quotas in Employment

2. Executive orders: Orders of President / Parliament to promote employment of
protected class members. It is applicable in US and India.
3. Providing Vocational training to differently abled and thereby promoting
employment.
4. Enforcement of Laws and executive orders to uphold affirmative action.

Three Steps in developing affirmative action plan

 Step 1: Utilization Analysis

 Step 2: Goals and Timetable
 Step 3: Action Plan

Utilization Analysis

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Identifying the protected classes by

a) Local Population
b) Local Unemployed Workers
c) Local Labour Force
d) Qualified Workers in Local Labour Market
e) Current Employees who might be promoted into job classification
f) Qualified Labour in the labour market from where you recruit
g) Graduate Local Training Program
h) Participation in training programs sponsored by the employer.

Step 2: Goals and Timetable

 Goals and time table for correcting underutilization

 Size of under utilization
 How fast the work force turnover is
 Is the work force growing or contracting.

Step 3: Action Plan

 Recruiting Protected class members

 Redesigning jobs to under represented workers and provide adequate training to the
work force
 Removing un necessary barriers to un employment.

Human Resources Policies

Why Policies

Company Strategic Goals

Employee Competencies and behaviour to attain strategic goals

Guidelines set up organizations to achieve strategic goals.

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How HRM Policies are framed?

 Developed from past problems/ areas of potential problems

 In case the manager possess less competencies in some areas, then they first refer to
company policy and then act.

Strategic Goals

Objectives

Policies

Procedures and Rules

Most commonly used HR policies in areas of

 Job Evaluation, wages and incentives policies

 Labour welfare policy
 Recruitment policy
 Training and Development policy.

Steps in designing HR Policies

 Policies should be clear and specific

 Compliance with laws and regulations
 Identify the purpose and the objectives the organization wishes to attain
 Implementation of policies through effective means
 Communication and frequent audit of policy
 Continious re valuation and revision of policy.
 Analysis existing policies

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  Identify new areas in which policy can be framed & implemented
 Check with managers, preferably starting at the top about their views on policies
 The policy should cover overall functions of HRM

Computer Applications in HRM

Human resources information system (HRIS) is used to collect, record, store, analyze &
retrieve data concerning Human resources in an organization.

HRIS applications (computerized applications) are used in this regard. Highly developed
HRIS increases HRM functional efficiency.

PEOPLESOFT, ORACLE, HRMS, SAPHR, HRSOFT are such examples. Application

tracking system is the commonly used HRIS.

The areas in which HRIS used is grouped as

Application Tracking

 Basic Employee Information

 Benefits Administration
 Bonus & Incentive Management
 Career Development
 Compensation Budgeting
 EEO Compliance
 Employment History.

Flexible Benefits Enrolment System

 Goal Setting
 Health & Safety
 Health Insurance & Utilization
 Hiring Procedure
 HR Planning & Forecasting
 Job Evaluation
 Job Posting

Payroll

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 Pension and Retirement
 Performance Management
 Short & Long Term Disability
 Skill Inventory
 Succession Planning
 Time Management

How Various HRIS are used by organization

Employee Information Program

Database that provides basic employee information.

Application Tracking Program

Automation of recruiting job applicants such as scheduling interviews, updating personal

status of job applicants, generating correspondence etc.,

Skills Inventory

Supply of Job Skills in employer workforce matches between skill supply and demand.

Payroll Application Program

To calculate taxes and statutory benefits

Benefit Application Program

Automation of benefits record keeping, administer various benefits programs, provide advice
about benefits and choices.

Employee Time Management Program

Tracks the way in which employee uses time.

Human Resources Audit & Accounting

To counter check the gap between expectation and reality in HR functions.

Areas of HR audit

 Roles and Head Count

 Legislative Compliance

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 Recruitment & Selection
 Compensation
 Employee Relations
 Mandated Benefits
 Group Benefits
 Payroll
 Documentation & Record Keeping
 Training & Development
 Employee Communication
 Termination & Transition Policies

Typically, a HR Audit includes the following

 Labour / Employer Turnover

 Diversity Management
 Are managers provided with adequate training
 Does HRM policies helps in achieving Goals?

Human Resources Accounting

“Process of identifying, measuring, communicating information about human resources to

facilitate effective management.

Objectives of Human Resources Accounting

 HR Manager can take relevant decisions based on the monetary value of employees
 Any change in organizational structure could be planned based on HR Accounting
Decision
 Provides statistical & numerical value for each employee.
 Remedial Measures
 Decides increments and perquisites suitable as per performance
 Quantification of HR Data
 Strategic optimum level of workforce to be maintained & desired level of cost
efficiency ratios
 Removing unproductive workforce & deploying skilled workforce.

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Methods of HR Accounting

Cost Approach

This includes

 Acquisition cost
 Replacement cost

Value Approach

 Present Value
 Value to organization
 Expense Model Method

Cost Approach

Cost of acquiring human resources is called as “Cost Approach”. All costs are associated
with recruitment, hiring, training and development, socialization associated with employee
are capitalized and written off.

Generally costs are categorized into

 Direct costs
 Indirect costs

i) Acquisition Cost Method : In the acquisition cost method, organizations capitalize on all
costs related to human resources (like training, welfare, and another cost) of the organization
and amortize it in the profit and loss account throughout from appointment till retirement.

ii) Replacement Cost Approach: This method is used to determine whether to keep working
or replace the worker. It considers the cost of replacing the human resource or employee.
This method also helps in determining whether the appointment of employees is beneficial to
the organization or not.

Models of HR Accounting

The Lev and Schwartz Model: In Lev and Schwartz model the present value of future
benefits to employees is determined on the following assumption –

 Employees are classified into age, skill, and experience

 Average annual earnings of each age group are determined
 Then earnings till the retirement of each group are determined

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  Later value arrived of each group is to be discounted with the rate of the cost of
capital
 This method only considers the salary and wages of employees and no other benefits
 This method ignores the possibility of employees leaving or other possibilities

The Eric Flamholtz Model : This model is similar to the Present value model but considers
the fact of employees leaving earlier, Voluntary Retirement or Retrenchment or death of the
employee, etc.

Assumptions/ Facts –

 Determine the period of working of the employee for the organization.

 Identify the period after which an employee may leave the organization.
 Estimating the value of employees for organization and benefits from it to the
organization;
 Applying the present value method and considering the above facts.

Morse Model : Under this model, the gross value of services to be rendered by employees to
the organization is determined. This method includes all benefits to the employees like
retirement benefits, gratuity, leave encashment, etc. on proper assumptions and then
discounted to know the present value and benefits to the organization.

Linkert Model: This model considers the non-monetary benefits to the employees by the
organization like job satisfaction, productivity, and other non-monetary benefits.

Organ’s Model: Under this model, net benefits from each employee are calculated and then
multiplied with its certain period of working with the organization.

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