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HUMAN RESOURCE MANAGEMENT
III BA (ECONOMICS) SUBJECT CODE - U16EC5C V - SEMESTER Unit I – Human Capital Human Capital is a measure of the skills, education, capacity and attributes of labour which influence their productive capacity and earning potential. According to the OECD, human capital is defined as: “the knowledge, skills, competencies and other attributes embodied in individuals or groups of individuals acquired during their life and used to produce goods, services or ideas in market circumstances”. Individual human capital – the skills and abilities of individual workers Human capital of the economy – The aggregate human capital of an economy, which will be determined by national educational standards. Measuring human capital For statistical purposes, human capital can be measured in monetary terms as the total potential future earnings of the working age population. (However, this only captures part of human capital and is a limited measure) Human Capital at UK ONS The decline in UK human capital reflects the rise in unemployment and fall in real wages during this period. It should be noted relying on potential earnings is a limited view of human capital. Earnings don’t necessarily reflect accurately all aspects of human capital. The OECD consider different ways to measure human capital taking a range of indicators. Factors that determine human capital Skills and qualifications Education levels
Work experience
- A climate of creativity. An education which enables children to think outside the box can increase human capital in a way that ‘rote learning’ and an impressive accumulation of facts may not.
- Infrastructure. The infrastructure of an economy will influence human capital. Good transport, communication, availability of mobile phones and the internet are very important for the development of human capital in developing economies.
- Competitiveness. An economy dominated by state monopolies is likely to curtail individual creativity and entrepreneurs. An environment which encourages self- employment and the creation of business enables greater use of potential human capital in an economy. Importance of human capital Structural unemployment. Individuals whose human capital is inappropriate for modern employers may struggle to gain employment. A major issue in modern economies is that rapid deindustrialisation has left many manual workers, struggling to thrive in a very different labour market. Quality of employment. In the modern economy, there is increasing divergence between low-skilled, low-paid temporary jobs (gig economy). High-skilled and creative workers have increased opportunities for self-employment or good employment contracts. Economic growth and productivity. Long-term economic growth depends increasingly on improvements in human capital. Better educated, innovative and creative workforce can help increase labour productivity and economic growth. Human capital flight. An era of globalisation and greater movement of workers has enabled skilled workers to move from low-income countries to higher income countries. This can have adverse effects for developing economies who lose their best human capital. Limited raw materials. Economic growth in countries with limited natural resources, e.g. Japan, Taiwan and South East Asia. Rely on high-skilled, innovative workforce adding value to raw materials in the manufacturing process. Sustainability ”what we leave to future generations; whether we leave enough resources, of all kinds, to provide them with the opportunities at least as large as the ones we have had ourselves” (UN, 2012) Different views on Human Capital Theodore Schultz “Investment in human capital” (1961) was an early proponent of theory. He stated: “Although it is obvious that people acquire useful skills and knowledge, it is not obvious that these skills and knowledge are a form of capital, that this capital is in substantial part a product of deliberate investment” Gary Becker “Human Capital” (1964) In his view, human capital, is determined by education, training, medical treatment, and is effectively a means of production. Increased human capital explains the differential of income for graduates. Human capital is also important for influencing rates of economic growth.
Howard Gardener – different types of human capital. Gardener emphasised the different types of human capital. One could increase education, but be a poor manager. A successful entrepreneur may have no education. Human capital is not unidimensional. Schultz/Nelson-Phelps – ability to adapt. Human capital should be looked at from the ability to adapt. Can workers adapt to a changing labour market? A labour market which is shifting from full-time manual work in manufacturing to flexible work in the service sector. Spence View – Observable signs of human capital like education are essentially a signalling function. Evaluation of human capital Social upbringing. A sociologist like Pierre Bourdieu argues that human capital is strongly related to social upbringing. This influences cultural, social and symbolic forms of capital. For example, UK society dominated by Old Etonians and Oxbridge graduates who gain confidence and social capital from having the right social networks. Signalling. Related to the social capital of going to the right school, is the idea that what constitutes human capital is often just ‘signalling’. For example, gaining a degree from Oxbridge improves status in the workforce and enables a higher salary for the graduate. However, three years of studying a degree in modern history/PPE may give only a small amount of knowledge directly related to the work environment. Discrimination. Differences in wages and job opportunities are not necessarily due to differences in human capital, but the result of discrimination, labour market imperfections or non-monetary benefits of jobs. Methods of raising human capital.
- Become more marketable. Think about the skills, training, and additional degrees or certifications that will help you attain more success either in your current job or for the job that you want. Make the effort to step out of your comfort zone and learn something new or improve on a development area, such as writing, public speaking, or managing others.
- Volunteer. Contributing your time can be just as valuable as contributing money, and often much easier for younger investors who are looking to make an impact but may be unable to invest significant financial capital towards the causes they care about. Becoming familiar with the work of different charities and organizations can help better direct future money that will be allocated towards value-aligned investing.
- Pursue your hobbies. Your interests outside of work can also help diversify your skill set. Group or team activities can get you in contact with people in different fields, introduce new opportunities, and expand your network.
- Take care of your well-being. Improving your physical, mental, and emotional well- being pays dividends for the future. Setting the right habits early on can promote a healthy lifestyle as you get older, which in turn can increase how long you remain a productive member of the workforce.
- Spend more time with others. Beyond just professional networking, spend time with friends, family, and peers to learn from their experiences without living through their
Once the basics of human development are achieved, they open up opportunities for progress in other aspects of life. Choices: human development is, fundamentally, about more choice. It is about providing people with opportunities, not insisting that they make use of them. No one can guarantee human happiness, and the choices people make are their own concern. The process of development – human development - should at least create an environment for people, individually and collectively, to develop to their full potential and to have a reasonable chance of leading productive and creative lives that they value. The human development approach, developed by the economist Mahbub Ul Haq, is anchored in Amartya Sen’s work on human capabilities, often framed in terms of whether people are able to “be” and “do” desirable things in life iii. Examples include Human Resource Management Human Resource Management is the process of recruiting, selecting, inducting employees, providing orientation, imparting training and development, appraising the performance of employees, deciding compensation and providing benefits, motivating employees, maintaining proper relations with employees and their trade unions, ensuring employees safety, welfare and healthy measures in compliance with labour laws of the land and finally following the Orders / Judgments of the concern High Court and Supreme Court, if any.
Human Resource Management involves management functions like planning, organizing, directing and controlling It involves procurement, development, maintenance of human resource It helps to achieve individual, organizational and social objectives Human Resource Management is a multidisciplinary subject. It includes the study of management, psychology, communication, economics and sociology. It involves team spirit and team work. It is a continuous process. Human resource management as a department in an organisation handles all aspects of employees and has various functions like human resource planning, Conducting Job analysis, recruitment and conducting job interviews, selection of human resources, Orienting , training, compensating, Providing benefits and incentives, appraising, retaining, Career planning, Quality of Work Life, Employee Discipline, black out Sexual Harassments, human resource auditing, maintenance of industrial relationship, looking after welfare of employees and safety issues , communicating with all employees at all levels and maintaining awareness of and compliance with local, state and federal labor laws. The historical rule of thumb for Human Resource staffing requirements is one full-time professional Human Resource person should be hired for every 100 employees. The actual ratio for a business can vary depending upon factors such as the degree of HR centralization, the geographic distribution of the employees served, the sophistication level of the employees, and the relative complexity of the organization. Importance of Human resource Behind production of every product or service there is an human mind, effort and man hours (working hours). No product or service can be produced without help of human being. Human being is fundamental resource for making or construction of anything. Every organisation desire is to have skilled and competent people to make their organisation competent and best. Among the five Ms of management, i.e., men, money, machines, materials, and methods, HRM deals about the first M, which is men. It is believed that in the five Ms, "men" is not so easy to manage. "every man is different from other" and they are totally different from the other Ms in the sense that men possess the power to manipulate the other Ms. Whereas, the other Ms are either lifeless or abstract and as such, do not have the power to think and decide what is good for them.
Orientation and Induction – Making the selected candidate informed about the organization’s background, culture, values, and work ethics. Training and Development – Training is provided to both new and existing employees to improve their performance. Performance Appraisal – Performance check is done of every employee by Human Resource Management. Promotions, transfers, incentives, and salary increments are decided on the basis of employee performance appraisal. Compensation Planning and Remuneration – It is the job of Human Resource Management to plan compensation and remunerate. Motivation – Human Resource Management tries to keep employees motivated so that employees put their maximum efforts in work.
2. Welfare Aspect – Human Resource Management have to follow certain health and safety regulations for the benefit of employees. It deals with working conditions, and amenities like - canteens, creches, rest and lunch rooms, housing, transport, medical assistance, education, health and safety, recreation facilities, etc. 3. Industrial Relation Aspect – HRM works to maintain co-ordinal relation with the union members to avoid strikes or lockouts to ensure smooth functioning of the organization. It also covers - joint consultation, collective bargaining, grievance and disciplinary procedures, and dispute settlement. Human Resource Management Environments 2.1. The External Environment When it comes to human resource management there are several factors that affect day-to-day operations. Adapting in this field is important because at a moment’s notice new legislation can be passed with an immediate effective date or corporate policies are changed where human resources feel the brunt. A well-developed strategy for your human resources department takes into considers external factors that might affect your department. The four external factors that affect human resource management are: 1. Government Regulations – With the introduction of new workplace compliance standards your human resources department is constantly under pressure to stay within the law. These types of regulations influence every process of the HR department, including hiring, training, compensation, termination, and much more. Without adhering to such regulations a company can be fined extensively which if it was bad enough could cause the company to shut down.
- Economic Conditions – One of the biggest external influences is the shape of the current economy. Not only does it affect the talent pool, but it might affect your ability to hire anyone at all. One of the biggest ways to prepare against economic conditions is to not only know what’s happening in the world around you, but also create a plan for when there is an economic downturn. All companies can make due in a bad economy if they have a rainy day fund or plan to combat the harsh environment.
- Technological Advancements – This is considered an external influence because when new technologies are introduced the HR department can start looking at how to downsize and look for ways to save money. A job that used to take 2-4 people could be cut to one done by a single person. Technology is revolutionizing the way we do business and not just from a consumer standpoint, but from an internal cost-savings way.
- Workforce Demographics – As an older generation retires and a new generation enters the workforce the human resources department must look for ways to attract this new set of candidates. They must hire in a different way and offer different types of compensation packages that work for this younger generation. At the same time, they must offer a work environment contusive to how this generation works. Those involved in human resource management does more than hiring and firing, they make sure that every type of external influence is listened to and proper procedures are followed to avoid lawsuits and sanctions. If you’re in HR make sure that you’re paying close attention to external influences because there is a good chance they’re affecting your job and the company you work for. So next time you talk to someone invovled in the human resource management process think twice about the amount of factors that affect their job and how important it is for them to be on top of their game. 2.2. The Internal Environment These are the forces internal to an organization. Internal forces have profound influence on HR functions. The internal environment of HRM consists of unions, organizational culture and conflict, professional bodies, organizational objectives, polices, etc. A brief mention of these follows.
- Unions : Trade unions are formed to safeguard the interest of its members/workers. HR activities like recruitment, selection, training, compensation, industrial relations and separations are carried out in consultation with trade union leaders.
- Organizational Culture and Conflict : As individuals have personality, organizations have cultures. Each organization has its own culture that distinguishes one organization from another. Culture may be understood as sharing of some core values or beliefs by the members of the organization “Value for time” are the culture of Reliance Industries Limited. The culture of Tata conglomerate is “get the best people and set them free”. Human Resource Planning – Meaning: E.W. Vetter viewed human resource planning as “a process by which an organisation 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
HRP is the first step in all HRM functions. So, HRP provides the essential information needed for the other HRM functions like recruitment, selection, training and development, promotion, etc. III. Coping with Change: Changes in the business environment like competition, technology, government guidelines, global market, etc. bring changes in the nature of the job. This means changes in the demand of personnel, content of job, qualification and experience needed. HRP helps the organization in adjusting to new changes. IV. Investment Perspective: As a result of change in the mindset of management, investment in human resources is viewed as a better concept in the long run success of the enterprise. Human assets can increase in value as opposed to physical assets. Thus, HRP is considered important for the proper planning of future employees. V. Expansion and Diversification Plans: During the expansion and diversification drives, more employees at various levels are needed. Through proper HRP, an organization comes to know about the exact requirement of personnel in future plans. VI. Employee Turnover: Every organization suffers from the small turnover of labour, sometime or the other. This is high among young graduates in the private sector. This necessitates again doing manpower planning for further recruiting and hiring. VII. Conformity with Government Guidelines: In order to protect the weaker sections of the society, the Indian Government has prescribed some norms for organizations to follow. For example, reservations for SC/ST, BC, physically handicapped, ex-servicemen, etc. in the jobs. While planning for fresh candidates, HR manager takes into consideration all the Government guidelines. VIII. International Expansion Strategies: International expansion strategies of an organization depend upon HRP. Under International Human Resource Management (IHRM), HRP becomes more challenging. An organization may want to fill the foreign subsidiary’s key positions from its home country employees or from host- country or from a third country. All this demands very effective HRP. IX. Having Highly Talented Manpower Inventory: Due to changing business environment, jobs have become more challenging and there is an increasing need for dynamic and ambitious employees to fill the positions. Efficient HRP is needed for attracting and retaining well qualified, highly skilled and talented employees. Human Resource Planning – Objectives: The main objectives of HRP are: (i) Proper assessment of human resources needs in future. (ii) Anticipation of deficient or surplus manpower and taking the corrective action.
(iii) To create a highly talented workforce in the organization. (iv) To protect the weaker sections of the society. (v) To manage the challenges in the organization due to modernization, restructuring and re- engineering. (vi) To facilitate the realization of the organization’s objectives by providing right number and types of personnel. (vii) To reduce the costs associated with personnel by proper planning. (viii) To determine the future skill requirements of the organization. (ix) To plan careers for individual employee. (x) Providing a better view of HR dimensions to top management. (xi) Determining the training and development needs of employees. Human Resource Planning Process
- Determining the Objectives of Human Resource Planning : The foremost step in every process is the determination of the objectives for which the process is to be carried on. The objective for which the manpower planning is to be done should be defined precisely, so as to ensure that a right number of people for the right kind of job are selected.
- Analyzing Current Manpower Inventory: The next step is to analyze the current manpower supply in the organization through the stored information about the employees in terms of their experience, proficiency, skills, etc. required to perform a particular job.
- Forecasting Demand and Supply of Human Resources: Once the inventory of talented manpower is maintained; the next step is to match the demand for the manpower arising in the future with the supply or available resources with the organization.
- Analyzing the Manpower Gaps: After forecasting the demand and supply, the manpower gaps can be easily evaluated. In case the demand is more than the supply of human resources, that means there is a deficit, and thus, new candidates are to be hired.
4. Numbers’ game: In some companies, human resource planning is used as a numbers game. There is too much focus on the quantitative aspect to ensure the flow of people in and out of the organisation. Such an exclusive focus overtakes the more important dimension, i.e., the quality of human resources. . 5. Employees Resistance: Employees and trade unions feel that due to widespread unemployment, people will be available for jobs as and when required. Moreover they feel that human resource planning increases their workload and regulates them through productivity bargaining. 6. Employers Resistance: Employers may also resist human resource planning feeling that it increases the cost of manpower. 7. Lack of Purpose: Managers and human resource specialists do not fully understand human planning process and lack a strong sense of purpose. 8. Time and Expenses: Manpower planning is a time-consuming and expensive exercise. A good deal of time and cost are involved in data collection and forecasting.
Unit III - Induction and Training Induction in HRM When a new employee reports to duty, he will be new to the organization and to its policies, rules and existing employees also. New employee will be a stranger to the work, place and to the entire environment. Unless he is familiar to the organization, he cannot work with confidence and pleasure. Therefore, there is a necessity of introduction of an employee to the organization which is technically called Induction. Induction means introduction of a new employee to the job and the organization. It is the process of receiving and welcoming an employee when he first joins a company and giving him the basic information he needs to settle down quickly and happily and start work. It is a welcoming process to make him feel at home and generate in him a feeling of belongingness to the organization. In the process of induction the new comer is explained his duties and responsibilities, company rules, policies and regulations so as to make him familiar to the organization. Induction in HRM – 8 Important Characteristics The important characteristics of induction are: (i) Encouraging employees to ask questions. (ii) Including information on both technical and social aspects of the job. (iii) Making the new employee’s manager responsible for the orientation. (iv) Avoiding embarrassment to the new members. (v) Arranging formal and informal interaction with managers and peers. (vi) Providing relocation assistance such as house hunting, information about the local society, and etc. (vii) Giving information about the company’s products, services and customers. (viii) Familiarizing adequately with the culture of the organization such as how work is done, what matters in the organization, which work- related behaviours are acceptable or unacceptable and etc. Induction in HRM – 6 Main Objectives of Induction The main object of induction is to make the new employee feel at home and develop a sense of pride in the organization and commitment to the job. The following are the some of the other important objectives: (i) To help the new employee to develop a close and cordial relation with the existing employees. (ii) To give the new employee necessary information such as – location of the different building, company rules, leave rules, rest periods etc. (iii) To help the new employee overcome his natural shyness and nervousness in meeting the new people in the organization. (iv) To develop a sense of belongingness and loyalty among new employees.
There are two methods through which managers can improve their knowledge and skills. One is through formal training and other is through on the job experiences. On the job training is very important since real learning takes place only when one practices what they have studied. ADVERTISEMENTS: But it is also equally important in gaining knowledge through classroom learning. Learning becomes fruitful only when theory is combined with practice. Therefore on the job methods can be balanced with classroom training methods (off-the-job methods).
1. On-the-job Training (OJT) Methods: This is the most common method of training in which a trainee is placed on a specific job and taught the skills and knowledge necessary to perform it. The advantages of OJT are as follows:
- On the job method is a flexible method.
- It is a less expensive method.
- The trainee is highly motivated and encouraged to learn.
- Much arrangement for the training is not required. **On-the-job training methods are as follows:
- Job rotation:** This training method involves movement of trainee from one job to another gain knowledge and experience from different job assignments. This method helps the trainee understand the problems of other employees. 2. Coaching: Under this method, the trainee is placed under a particular supervisor who functions as a coach in training and provides feedback to the trainee. Sometimes the trainee may not get an opportunity to express his ideas. 3. Job instructions: Also known as step-by-step training in which the trainer explains the way of doing the jobs to the trainee and in case of mistakes, corrects the trainee. 4. Committee assignments: A group of trainees are asked to solve a given organizational problem by discussing the problem. This helps to improve team work. 5. Internship training: Under this method, instructions through theoretical and practical aspects are provided to the trainees. Usually, students from the engineering and commerce colleges receive this type of training for a small stipend. 2. Off-the-job Methods: On the job training methods have their own limitations, and in order to have the overall development of employee’s off-the-job training can also be imparted. The methods of training
which are adopted for the development of employees away from the field of the job are known as off-the-job methods. The following are some of the off-the-job techniques:
1. Case study method: Usually case study deals with any problem confronted by a business which can be solved by an employee. The trainee is given an opportunity to analyse the case and come out with all possible solutions. This method can enhance analytic and critical thinking of an employee. 2. Incident method: Incidents are prepared on the basis of actual situations which happened in different organizations and each employee in the training group is asked to make decisions as if it is a real-life situation. Later on, the entire group discusses the incident and takes decisions related to the incident on the basis of individual and group decisions. 3. Role play: In this case also a problem situation is simulated asking the employee to assume the role of a particular person in the situation. The participant interacts with other participants assuming different roles. The whole play will be recorded and trainee gets an opportunity to examine their own performance. 4. In-basket method: The employees are given information about an imaginary company, its activities and products, HR employed and all data related to the firm. The trainee (employee under training) has to make notes, delegate tasks and prepare schedules within a specified time. This can develop situational judgments and quick decision making skills of employees. 5. Business games: According to this method the trainees are divided into groups and each group has to discuss about various activities and functions of an imaginary organization. They will discuss and decide about various subjects like production, promotion, pricing etc. This gives result in co-operative decision making process. 6. Grid training: It is a continuous and phased programme lasting for six years. It includes phases of planning development, implementation and evaluation. The grid takes into consideration parameters like concern for people and concern for people. 7. Lectures: This will be a suitable method when the numbers of trainees are quite large. Lectures can be very much helpful in explaining the concepts and principles very clearly, and face to face interaction is very much possible. 8. Simulation: Under this method an imaginary situation is created and trainees are asked to act on it. For e.g., assuming the role of a marketing manager solving the marketing problems or creating a new strategy etc.
