The Impact Of HRM On Business
Introduction
Human Resource Management, or HRM for short, is one of the most critical elements in running a successful company, though it isn’t always treated with the time and emphasis that it deserves. To completely understand what HRM is and its influence on the success or failing of a business, we first must know what it means.
The function of Human Resource Management is to recruit, develop and use the staff within an organisation in the manner in which is most suitable to accomplishing the aims and objectives of the organisation.
This essentially translates to “using people in the company in the best way possible” though that would be an over-simplified assertion that doesn’t reflect the true nature and range of HRM. HRM describes all of the strategies and procedures that are involved in making sure that all members of staff in a business are pulling in the same direction, and much more significantly, in the right direction.
At its core, HRM brings together three primary elements that are fundamental to the productive output of the workforce. These factors include motivation, management and leadership, and organisational structures. Consequently, HRM can be employed on all levels of management in your organisation, not just the shop floor staff, and it could even be used to alter the framework of those levels of management as well.
Why is it Necessary?
Put simply, companies don’t operate without employees. As such, some level of human resource management is necessary for any business to operate at all, let alone in an effective and profitable manner.
Human Resource Management has an effect on every level of your corporate activities with various degrees of visibility. The most apparent HRM tasks involve the hiring and firing of staff as well as financial systems such as payroll. It may also impact on motivation and communication inside your company, which are much more intangible variables but are crucial nonetheless.
It also goes without saying that every organisation is unique and will have a different set of challenges to face and opportunities to take advantage of. HRM can act as a flexible tool that translates workforce potential into financial gains and can adapt to fully utilise the talents of your company. Without it, your competitors may be afforded the chance to succeed where you missed out.
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Impact on Business
Whilst this all sounds very interesting and significant, how does it actually impact on the daily operations of your business, and more importantly, how will it help to enhance the performance and profitability of your company? The impact of HRM can be broken down into the following areas.
Recruitment & Training
This is probably the part of a company that is most associated with human resources – recruitment. Almost every company in the world, and particularly companies that are growing, need to recruit people to work for them. Either current employees have left, or new opportunities have arisen which mean there are roles that need to be filled.
It is also important to keep your staff training procedures up-to-date to make sure that your workforce is fully capable of doing the job they are there to do. Regardless of whether it is a fresh piece of legislation or a new piece of technology that changes the marketplace, there is an on-going requirement to keep your organisation up-to-date and ready to make use of any opportunity.
You may also find that the expensive process of external recruitment can be averted if your company has adequate training facilities in place. It is much easier to teach an existing staff member to a higher level and then use outside recruitment to fill the gap left at the lower level than it is to hire directly to a higher level. This approach can be applied at almost every single grade of management within your business.
Employee Relations
When you have the right men and women working for you it is important to keep them doing work for you, and to be sure they are doing a decent job. This can be accomplished through good employee relations. The most evident employee relations exercise is the art of motivation – a wide topic itself – but other employee relations issues can include disciplinary and grievance management.
Finances
You cannot keep employees at your company by good motivational methods only. They’ll want to be paid a fair amount and on time. Payroll must be one of the primary systems that is created when you start a company, but they still need to be taken care of and updated when personnel join, leave or switch pay grade. Incorrect management of your payroll program can quickly lead to disaster in terms of your staff.
Industrial Relations
Several firms will have to deal with trade union or other workers rights organisations which can be incredibly forceful when defending the interests of their own members. When interacting with such bodies it is beneficial to have people within your organisation who can connect effectively with them whilst keeping the interests of your own company in mind at the same time. The need for good industrial relations is far more prevalent in public sector firms.
Regardless of the sector they trade within, whenever a bvi company looks to grow they must use recruitment to expand its existing workforce.
Workforce Planning
We have seen the influence that human resource management can have on a business and on the whole it seems like good HRM will have a beneficial effect on any organisation. As a rule, this is the case, but effective HRM does not just happen overnight. It should be planned according to the objectives of the company and then performed thoroughly.
One way to implement HRM concepts to your business is through workforce planning – a process that has the aim of making sure your staff can complete the upcoming tasks needed for your company to be successful.
Definition
Workforce planning is the process of anticipating ahead of time the human resource needs of any organisation, both in terms of the number of employees required and the proper skill mix. Recruitment and training procedures are devised with a long term emphasis in order to ensure that the company is able to operate without being limited by a lack of appropriate labour. It is a bit of a balancing act, but when done properly can produce many benefits.Workforce planning can be split into four main parts; requirements, recruitment, selection, and training and development.
Requirements
Evaluating your workforce demands is essential to the proper planning of your staff in the short-term and long-term future. If your business is subject to seasonal changes in demand, for example in the tourism industry, or is prone to seasonal fluctuations in workforce then your workforce planning needs to take these variables into consideration. Also bear in mind any approaching retirements or times of maternity/paternity leave or you could experience a shortage of qualified personnel.
Recruitment
Whether you are recruiting externally or from within your existing workforce you still want to find the right person to fill the position. As part of your workforce planning you should draw up a job description that describes the role that will be undertaken as well as a person specification which will give an indication of the type of person that would be a good fit for the job and your company.
Selection
The selection process can be as involved or as easy as you deem necessary. Over and above standard job selection interviews there are a number of ways you can learn about about applicants for your jobs, including aptitude tests, group interviews and even psychometric testing. These sophisticated techniques might not be relevant to all workforce planning projects but are an option to organisations.
Training & Development
The primary goal of staff training and development is to produce a much better quality of worker within your company. Workforce planning can use training to fill upcoming gaps in the skill set of your staff and is generally faster and more economical than external recruitment. Training and development may also go some way towards motivating your employees.
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Workforce Motivation
It almost goes without saying that properly motivated workers are going to produce a better standard of work and have a greater quantity of production than unsatisfied workers. This improved work rate will undoubtedly lead to an increase in the profitability of a company.
Essentially, all motivational tactics can be separated into two sets that are often called the “carrot and stick” approach to motivation. The analogy relates to the two ways to make a donkey carry your possessions, either by tempting it with a carrot, or threatening it with a strike from a stick! It is a fairly dated idea but the principle remains relevant to companies today.
Whether you use the carrot approach or the stick strategy will generally depend on your own management style, as well as the industry you work in and the type of individuals that you employ.
Financial
The most typical financial motivators are payment plans. You can pay staff in a number of different ways, either a fixed amount for a fixed service, by an hourly or daily fee, or a rate related to production, such as a commission scheme.
Another financial motivation technique involves what are called incentive schemes, where additional financial rewards are given out for good overall performance. This may include commission above a fixed salary, performance-related pay levels or even offering a share of company profits. Again, the motivating aspect here is the money alone.
Non-financial
Several human resource theorists have their own ideas about the other elements that motivate people to work, although these are often seen as an added bonus to a worker. It is widely acknowledged that money is the critical motivational factor for the great majority of people.
The Changing Face of HRM
As previously stated, HRM is a versatile application that is there to match up the features of your staff to the goals of your business. As a result, it has had to keep changing to a corporate climate that is constantly changing for one reason or another.
Perhaps there is a new piece of government law that will have an impact of how your business can carry out its trading, or maybe a fresh manufacturing technology will come along that will revolutionise your industry. Either way, if you want to make certain that your workforce is performing to its optimum level then your HRM strategy should be flexible enough to cope with an ever-changing world.
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