Part I: An Overview to Human Resources Management

Chapter 1
An Introduction to Human Resources Management

1.1 A Brief History of Human Resources Management

 The history of HRM can be traced to England, where masons, carpenters, leather
workers, and other craftspeople organized themselves into guilds.
o They used their unity to improve their work conditions.
o These guilds became the forerunners of trade unions

 The field further developed with the arrival of the Industrial Revolution in the latter part
of the 18th century, which laid the basis for a new and complex industrial society. The
Industrial Revolution was characterized by:
o The development of machinery
o The linking of power to machines
o The establishment of factories employing many workers, and
o Extensive specialization of labor – that is, individual workers performing very
narrow tasks was a key feature of the job design in these factories.

 The consequence of grouping workers into shops and factories, and the specialization of
labor, was a gradual emergence of more systematic attention to:
o The design of jobs
o The choice of workers for those jobs (selection)
o The provision of pay and benefits (compensation), and
o The welfare of employees both on and off the job

 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.

The Scientific Management Movement

 The scientific management movement of the late 1800s and early 1900s concentrated
particularly on job design, selection, and compensation. The name most closely
associated with this movement is Frederick W. Taylor. Working in the steel industry in
the late 1870s, Taylor believed the same techniques used by scientists in the laboratory –
experimentation, forming and testing hypotheses, and proposing theories based on
research and testing – could be used by management to increase efficiency in the work
place. And he attempted to discover the “one best way” and the one fastest way to do a
job.
 For Taylor,
 o The science of management included systematic job design that began with
observation, recording, and classification of job activities as they were typically
carried out. Tasks could then be simplified and jobs made more efficient.
o Scientific selection involved choosing workers with the skills and capacities
needed to carry out the now efficiently organized jobs.
o Scientific training and development meant training workers for particular task
and was intended to replace the centuries-old practice of permitting workers to
choose their own work methods and train themselves as best they could.

The Industrial Welfare Movement

 In addition to directing attention to scientific management around the turn of the century,
many firms were beginning to be involved in what has been called the industrial welfare
movement.
 The industrial welfare work consisted of “voluntary efforts on the part of employers to
improve, with the existing industrial system, the conditions of employment in their own
factories.” Actually, the movement extended beyond the work place to some aspects of
the workers’ lives off the job:
o Management made available various facilities such as libraries and other
recreational premises, offered financial assistance for education, home purchase
and improvement, provided medical care and instituted hygienic measures.
 As an outgrowth of this movement, many business firms began to employ staff members
called social secretaries or welfare secretaries. These people were employed to help with
employee finances, housing, health, recreation, education, and other matters.

Early Industrial Psychology

 Applications of psychology to business and industry, or industrial psychology, began to

emerge in the 1890s and early 1900s as psychologists studied selling techniques and
ways of testing job candidates.
 The most notable industrial psychologist was Hugo Munsterberg, whose major
contributions were:
o The analysis of jobs in terms of their physical, mental, and emotional
requirements, and
o The development of testing devises for selecting workers.

The Human Relations Movement

 Another early contributor to HRM was called the human relations movement.
o What came to be called the human relations movement has been a major influence
on modern human resources management.
o This movement is characterized by its focus on group behavior and workers’
feelings as they relate to productivity and morale.
o Some of its beginnings were with a group of researchers in an industrial plant near
Chicago. (Elton Mayo and Fritz Roelthisberger).
o The Hawthorne studies
  In 1924 researchers at the Western Electric Company’s Hawthorne Plant
near Chicago began some experiments to determine how lighting affected
workers and their output.
 In one experiment, production increased when the lighting was improved,
but in another it also increased when lighting was severely reduced.
 After three years of experimentation with such “illogical” results, the
researchers concluded that, in experiments involving people, it was
impossible to change one variable (lighting) without affecting other
variables such as worker interaction or worker-supervisor interaction.
 It became clear that it was human interaction that was affecting morale
and motivation, which, in turn, were affecting production.

o The organization as a social system – further inquiry and experimentation led

researchers to conclude that productivity depended at least in part on the extent to
which the employees became a team and cooperated wholeheartedly and
spontaneously.
 Worker cooperation and enthusiasm seemed to be related to the interest in
the workgroup shown by the supervisor and experimenters, the lack of
coercion or force, and the extent to which workers participated in making
decisions and changes that would affect them.
 In short, the researchers came to view the industrial organization as a
social system.

 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.
o 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.
o Early personnel administrators were called welfare secretaries. Their job was to
bridge the gap between management and the operator (worker); in other words,
they were to speak to workers in their own language and to recommend to
management what had to be done to get the best results from employees.

 The early history of personnel still obscures the importance of the HRM function to
management.
o 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 tenure pins and coordinated the annual company picnic.
Drucker stated that the job of personnel was “partly a file clerk’s job, partly a
house keeping job, partly a social worker’s job, and partly firefighting, heading
off union trouble.”
1.2 Strategic Importance of HRM

 The HRM function today is concerned with much more than filing, housekeeping, and
record keeping.
o When HRM strategies are integrated within the organization, HRM plays a major
role in clarifying the firm’s human resource problems and develop solutions to
them. It is oriented toward action, the individual, worldwide interdependence, and
the future. (More notes on page 5 of Ivancevich)
o Today it would be difficult to imagine any organization achieving and sustaining
effectiveness without efficient HRM programs and activities.
o The strategic and competitive advantage importance of HRM to the survival of an
organization will become clearer as we move deeper into the course.
o For years the HRM function had not been linked to the corporate profit margin or
what is referred to as the bottom line. The role of HRM in the firm’s strategic plan
and overall strategy was couched in fuzzy terms and abstractions. HRM was
merely a tagalong unit with people-oriented plans, not a major part of planning or
strategic thinking.
o Today, because of the recognition of the crucial importance of people, HRM in an
increasing number of organizations has become a major player in developing
strategic plans. Organizational and human resource plans and strategies are
inextricably linked. The HRM strategies must clearly reflect the organization’s
strategy regarding people, profit, and overall effectiveness.
 The increased strategic importance of HRM means that human resource specialists must
show that they contribute to the goals and mission of the firm. The actions, language, and
performance of the HRM function must be measured, precisely communicated, and
evaluated. The new strategic positioning of HRM means that accountability must be
taken seriously.
 The HRM function today is much more integrated and strategically involved. The
importance of recruiting, selection, training, developing, compensating, motivating, and
maintaining the workforce is recognized by managers in every unit and functional area of
an institution. HRM and every other function must work together to achieve the level of
organizational effectiveness required to compete locally and internationally.
 If the HRM function is to be successful, managers in other functions must be
knowledgeable and involved. Managers play a major role in setting the direction, tone,
and effectiveness of the relationship between the employees, the firm, and the work
performed. Managers must understand that carrying out HRM activities and programs is
strategically vital. Without managerial participation, there are likely to be major human
resource problems.

1.3 HRM and Organizational Effectiveness

 HRM activities play a major role in ensuring that an organization will survive and
prosper.
o Organizational effectiveness or ineffectiveness is described here in terms of such
criteria and components as performance, legal compliance, employee satisfaction,
absenteeism, turnover, scrap rates, grievance rates, and accident rates.
 o In order for a firm to survive and prosper and earn a profit, reasonable goals in
each of these components must be achieved. In most firms, effectiveness is
measured by the balance of such complementary characteristics as reaching goals,
employing the skills and abilities of employees efficiently, and ensuring the influx
and retention of well-trained and motivated employees.

 Around the world, managers recognize that human resources deserve attention because
they are a significant factor in top-management strategic decisions that guide the
organization’s future operations.
o Three crucial elements are needed for firms to be effective: (1) mission and
strategy, (2) organizational structure, and (3) HRM.
o However, it is important to remember that people do the work and create the ideas
that allow the organization to survive. Even the most capital-intensive, best-
structured organizations need people to run them.
 People limit or enhance the strengths and weaknesses of an organization. Current changes
in the environment are often related to changes in human resources, such as shifts in the
composition, education, and attitudes of the employees. The HRM function should
provide for or respond to these changes.
o The changes experienced by organizations around the world include growing
global competition; rapidly expanding technologies; increased demand for
individual, team, and organizational competencies; increasing legal compliance
scrutiny; and higher customer expectations.
o These changes combined with the realization that performance of a firm’s human
assets must be managed, led, and coached have resulted in the need for more
strategic planning and modern leadership practices.
o The mechanized or routine-oriented workforce is giving way to a more
knowledge-based, information-rich workforce.

 To sum up, if the objectives of the HRM function are to be accomplished, top managers
will have to treat the human resources of the organization as the key to effectiveness.
o To do this – to accomplish the important objectives of HRM – management must
regard the development of superior human resources as an essential competitive
requirement that needs careful planning, hard work, and evaluation.

1.4 Meaning of HRM

 Human Resources Management is the term increasingly used to refer to the philosophy,
policies, procedures, and practices related to the management of people within an
organization.
o It is a function performed in organizations that facilitates the most effective use of
people (employees) to achieve organizational and individual goals.
o Terms such as personnel, human resources management, industrial relations, and
employee development are used by different people to describe the unit,
department, or group concerned about people. The term human resources
management is now widely used.
 o Changes in terminology reflect the increased significance associated with the
management of people in organizations as well as the broader perspective from
which the field is currently viewed.
o In the past, personnel management had a strong functional focus; that is,
personnel specialists were primarily concerned with the administration of specific
employee-related functions such as hiring, training, wage setting, and disciplinary
action.
o A more modern view is that all personnel functions are interrelated; that is, each
function affects the others. Moreover, how well these functions are managed has a
tremendous effect on organization’s ability to meet its overall objectives.
o It is now generally accepted that human resources management encompasses a
dynamic, organization-wide perspective that is action oriented and based on
theory and research from many disciplines and is necessarily interrelated with
strategic planning. More and more it is recognized that HRM must be an integral
part of the strategic planning of the top executive team of the organization.
o Terminology has gradually shifted to reflect these changes. But terminology is not
as important as what philosophy and policies are being put into operation and
what practices are being established.

1.5 HRM Processes

 The fundamental processes in human resources management are shown in Figure 1.1. All
the processes are linked in the diagram to depict the idea that they interact and are
interdependent. What happens in one process tends to influence events in one or more of
the others.
o For example, offering an unusually high salary in recruiting and hiring efforts
(part of the staffing process) may cause serious problems in the management of
the compensation and reward process. People already in the payroll may complain
bitterly about what they are paid and press for a readjustment.

 The quality of the design and management of the systems used to control and direct
human resources processes is directly related to an organization’s overall effectiveness.
o In some organizations, the human resources systems may be very primitive or
haphazardly designed.
o In others, the systems used in HRM can be so cumbersome that the organization
is strangled by its own bureaucracy. Assume, for example, that you are a
supervisor, you have a budgeted position for a word-processing specialist, and
you desperately need help, but you are required to write and rewrite a job
description three times before your personnel requisition will be accepted for
processing. Then you must wait until the job is advertised within your company
for one month, and only after that can you accept outside applications. In this
situation, you are certainly going to feel that something is wrong with the system.
o Systems in human resources management must be designed to further, not
impede, the attainment of organizational goals.
 Human
Resources
Planning
Organizati Job
on Analysis
Improvem and
ent Design

Staffing
Protection Human
and Resources
Representat Management
ion

Training
Compensa and
tion and Developm
Reward Performan
ent
ce
Appraisal

Figure 1.1. Major processes in human resources management

 A brief description of the fundamental processes in human resources management will

help familiarize you with the scope and challenges of this field.
o Human resources planning is the process of assessing the organization’s human
resources needs in light of organizational goals and changing conditions and
making plans to ensure that a competent, motivated workforce is employed. The
planning process will vary from organization to organization but may include
such activities as assessing the “climate” and the prevailing leadership style in the
organization, analyzing skill levels among employees, assessing the availability of
skills in the external labor market, determining the need for expanding or
reducing the size of various units, and making plans for appropriate action. The
planning process is closely related to the staffing process and, ideally, is a major
aspect of the overall planning of the organization. HRP is the subject of chapter 6.
o Job analysis and design.
 Job Analysis has typically been viewed as the sub-process of investigating
the tasks and behaviors associated with a particular job. Various systems
used in job analysis include observations by experts, questionnaires filled
 out either by job incumbents or expert observers, and/or interviews.
Typically, the information obtained from job analysis is used to write job
descriptions and, in turn, to create job specifications.
 Job design is the process that determines the tasks to be performed by
individuals and groups and establishes the rules, schedules, and working
conditions under which people perform those tasks. While some of the
older techniques for managing this process remain, such as time-and-
motion study and work simplification, newer techniques that make
different assumptions about jobs and people have emerged. Time-and-
motion study and work simplification, for example, have given way to
interest in job enlargement and self-managed teams. Reengineering, an
organization-wide approach to the design of jobs, has only recently come
into vogue.

o Staffing is the process that results in the continuous assignment of workers to all
positions in the organization. This broad process includes the following activities:
attracting qualified people to the organization; selecting from among candidates;
bringing new people aboard and assigning and orienting them to their jobs;
o Training and development. The training and development process is a complex
mixture of activities intended to improve the performance of individuals and
groups within the organization. Some organizations, especially those that carry
out complex and specialized operations and are confronted with rapid changes in
technology, are heavily committed to training and development. Others view the
process as a way to foster the career development of their employees at all levels.
But almost all employees in any organization need some initial training, or
orientation, when they start new jobs. Training and development is discussed in
chapter 9.
o Performance Appraisal and Review. The performance appraisal and review
process is the ongoing evaluation of individual and group contributions to the
organization and the communication of those evaluations to the persons involved.
 Such evaluations are made for a variety of purposes: to provide feedback
about performance, to determine the need for training, to make decisions
about pay increases, to select people for promotion, or to make judgments
about the need for discipline.

o Compensation and Reward. The compensation and reward process is the flow
of events that determines what wages, salaries, and incentives are paid and what
supplemental benefits and non-financial rewards are provided. The presence or
absence of rewards and recognition is important to employee morale and
performance. Compensation and reward are discussed in chapters 12, 13, and 14.
o Protection and Representation. Most organizations have formal or informal
ways to protect employees – to some extent, at least – from arbitrary and
impulsive treatment and physical danger and health hazards. In addition,
individuals and groups may represent the interests of others, again informally or
in an organized, formal fashion. This broad process of protection and
 representation can be divided into three important sub processes: the
accommodation process, the collective bargaining process (found in unionized
organizations), and the health and safety management process.
 The accommodation process refers to the extent to which management
listens and responds to – or accommodates – the needs, wants and
complaints (or grievances) of organization members. People working in
organizations expect to be treated fairly; moreover, they feel they have the
right to be heard and to be respected as individuals. Morale is severely
affected when there is a sense of unfair treatment or when workers
perceive that management does not care about their feelings, complaints,
and suggestions.
 The collective bargaining process refers to those events that establish a
formal agreement between workers and management in the unionized
situation regarding such matters as wages and employee benefits, hours,
working conditions, and grievance procedures. The process includes both
the negotiation and administration of the labor-management contract.
 The health and safety management process includes activities and events
that serve to protect organization members from illness and physical
dangers in the work place and to assist them with their physical and
emotional health. The process also includes protection of the surrounding
community from pollution and toxic substances. For many organizations,
protecting the health and safety of human resources is a prime social
responsibility that is reinforced by the increased awareness among
workers and the general public of health and safety issues.

o Organization Improvement. The organization improvement process is the flow

of events, including the necessary strategies, through which the people in the
organization improve the organization’s effectiveness. In general, the objective of
the strategies and the systems that are used is to increase the level of cooperation,
teamwork, and performance throughout the organization.

1.6 Who Manages Human Resources?

 Every manager in the typical organization has major responsibilities in all of the
processes normally included under human resources management as they relate to all
employees under his/her authority. For example,
o In the area of staffing, the manager usually interviews the few “best” or “finalist”
candidates referred by the human resources department and makes the final
selection.
o In the area of appraisal, the manager conducts, at intervals, formal appraisals of
each subordinate – using procedures developed by the human resources
department in cooperation with top managers and monitored by the department.
o In the area of compensation, the manager makes final decisions about pay
increases; these decisions must be in line with the formal plan establishing rules
of progression (again, with rule compliance monitored by the human resources
department) and with budgetary allocations approved by top management.
  Non-supervisory employees may also contribute to the management of the various human
resources processes. For example,
o Engineers in the design department of an aircraft manufacturing company might
interview college graduates who are candidates for entry-level engineering jobs.
o Production workers who are members of self-managed work teams might
participate in the selection and training of new team members.
o Shop stewards (officers of a union who are also employees of the company) are
likely to be involved processing grievances and grievance hearings.
o All employees may be involved in making suggestions about the organization of
tasks and the flow of work.

 Top executives, including the HR executive, have a dominant role in establishing ethical
standards for managing human resources, as well as for all organizational activities. In
turn, managers and employees at all levels have important roles in influencing and
upholding ethical standards.

Structure of the Human Resources Department

 In organizations large enough to have a human resources or personnel departments, the

personnel director and his/her staff play a key role in the design and monitoring of human
resources systems.
o Even in very small organizations, some person or persons – perhaps the president
or owner or that person’s assistant – will coordinate human resources activities for
the entire enterprise. Regardless of organization size, the fundamental human
resources processes must be managed.
o Larger organizations more likely to employ persons with specialized expertise to
help design and implement human resources systems. A full-time specialist tends
to emerge when organizations have about one hundred employees.

 Figure 1.2 compares the typical human resources department in a small company
employing a few hundred persons with the structure of that department in a corporation
of several thousand employees. Responsibilities assigned to various human resources
positions may be quite different in large and small companies.
Human
Resources
Director

Assistant HR Personnel Administrative

Director Assistant Assistant
 Senior Vice
President, HR

Director, Director, Director, Labor Director, Director,

Recruitment & Compensation Relations Training & Employee
Selection & Benefits Development Relations

Figure 1.2 Structure of the Human Resources department in a small company (top) and in
a large corporation (bottom)

Relationship with Other Departments

 What organizational charts do not show is that human resources managers usually share
responsibility for personnel activities with other managers. For example, human
resources departments typically do not make the final hiring decisions for accounting and
manufacturing departments. Rather controllers or manufacturing directors, respectively,
have the final say.
o But human resources departments typically do have major responsibility for
designing and overseeing major components of the hiring system, including initial
screening and referral.
o Similarly, human resources departments are likely to do much of the human
resources planning, most of the advertising and recruiting, and much of the
interviewing. But these activities are usually performed in cooperation with other
managers throughout the organization.
o The human resources staff typically does not have final decision-making authority
over pay increases but is active in designing pay systems, administering those
systems, and monitoring decisions made about pay to ensure that those decisions
are based on uniform guidelines and are in agreement with the overall
compensation plan.

 In short, human resources departments are typically responsible for the effective
management of the various personnel systems, and their activities are usually conducted
in cooperation with the management group. Most of the key human resources policy
decisions are made jointly by the human resources director and other top managers.
 This sharing of decision making – particularly where the various managers make
decisions relating to one phase of a system and the human resources director makes
decisions relating to another – can strain relationships. For example, to enforce an
agreed-upon policy, the personnel director might inform a department head that a
subordinate’s pay may not be increased beyond the top of the range unless there has been
 an appropriate increase in responsibilities. The department head may not like this
restriction. Also, the personnel director might become too zealous in monitoring policy
and be perceived as setting policies that do not have broad managerial support.
 If there has been broad management participation in establishing human resources
policies, these kinds of tensions are not likely to be very serious or very lasting.
Nevertheless, because some managers may not appreciate the organization-wide
implications of human resources decisions, the human resources director may need to
conduct an ongoing effort to educate other managers and supervisors about the unique
role of the department.