Human Resources Management and Organizational Strategy

Posted on Mar 21, 2025 in Business Administration and Management (BAM)

Definition of Human Resources Management (HRM)

Human Resources Management (HRM) is the strategic approach to the management of an organization’s most valued assets: its people.

HRM Mark 1: The Generic Term

The role of human resource functions is explained by identifying four key objectives:

1. Staffing Objectives

  • Ensuring that the business is adequately staffed and able to meet its HR needs.
  • Designing organization structures, identifying types of contracts for different groups of employees.
  • Recruiting, selecting, and developing the right people, with the right skills to provide services when needed, and generating ideas to compete with competitors.

2. Performance Objectives

  • Managing employee performance by identifying high-performing individuals and rewarding them, ensuring that employees are well-motivated and committed to maximizing their performance, and focusing attention on performance targets.
  • Training and development play a key role, as does effectively disciplining employees.
  • Welfare functions and employee involvement initiatives.

3. Change-Management Objectives

  • Effectively managing any changes that the organization faces to enable it to perform well, achieve its goals, and generate innovation.
  • Change comes in different forms: structural (reorganization of activities or introduction of new people to roles) and cultural (altering attitudes or norms).
  • Recruitment and/or development of people with the needed leadership skills to drive the change process.

4. Administration Objectives

Related to normal paperwork.

  • Maintaining accurate and comprehensive data on individual employees, including a record of their achievements, completed courses, and personal details.
  • Complying with legal requirements and authorities in the country, such as the government.
  • Facilitating the organization’s smooth running.
  • Administering pay, sickness, taxation, leave, and everything related to employee compensation.

HRM Mark 2: A Distinctive Approach to People Management

HRM is resource-centered. It is directed mainly at management’s needs for human resources, not the employees themselves. Demand, rather than supply, is the focus of the activity. It is relatively more distant (than Mark 1) from the workforce as a whole.

The difference between the two terms is that Personnel Management (Mark 1) is workforce-centered, while HRM (Mark 2) is resource-centered.

When a company is new, the most important step is addressing staffing objectives and how management selects them.

Five Types of Relationship Between HR Strategy and Organizational Strategy

  1. Separation Model: There is no relationship between the HR strategy and the organizational strategy. They are not linked. This means that HR does not affect the organization, and each is a separate entity. (Typical picture of 20 years ago, but still exists today). Example: In a small organization, there may be no need for employee training or planning.
  2. Fit Model: The HR strategy is included in the organizational strategy and is part of it. They are linked. This represents the importance of people in achieving the organizational strategy, and the HR strategy is designed to fit with this. Example: N/A
  3. Dialogue Model: Recognizes the need for two-way communication between the HR strategy and the organizational strategy. In the dialogue model, the HR manager influences decisions that come from higher management; higher management cannot decide anything related to the business without communicating with HR. They are linked, and the second link is called feedback. Example: Cascade, which allowed for a dialogue between the planned organizational strategy and the response of each function.
  4. Holistic Model: HR strategy and organizational strategy are unified, creating one strategy for the organization. The organization’s people are the key to competitive advantage rather than just being a way of implementing organizational strategy; if they are developed and well-trained, the organization will reach a competitive advantage. They work together. Example: The customer brand and the employer brand are aligned or synonymous.
  5. HR-Driven: The HR strategy is the main driver for organizational strategy, placing it in a prime position. HR strategy affects the organizational strategy, so without a good HR strategy, a good organizational strategy cannot be created. If people are the key to competitive advantage, then we need to build on their strengths. It gives increasing attention to human capital. Example: N/A

*A company should choose one of these models to work with.*

Employer Branding

The proactive approach to recruitment has created significant interest in employer branding. The brand image refers to how the market as a whole sees a company or product. Many organizations position themselves as employers of choice, seeking to attract stronger applications from potential employees.

By creating a good reputation, recruitment costs will decrease because they receive more unsolicited applications. Example: Starbucks, whose name has become famous worldwide for making hot and cold drinks.

Advantages of E-Recruitment

  1. Reduced cost (meetings).
  2. Easy to use for both employer and candidate.
  3. Speed; people can respond quickly.
  4. Shortlisting can be undertaken quickly.

Disadvantages of E-Recruitment

  1. Handling the volume of applications.
  2. Unreliability of online tests.
  3. Fears about security and confidentiality.
  4. Poor standards of ethicality by cyber-agencies.

Internal Recruitment

Internal recruitment means assessing an employer’s current staff to fill required job vacancies. Many organizations prefer to invite applications from internal candidates before looking to the external labor market for new staff.

Disadvantages of Internal Recruitment

  1. Can be difficult to manage employee expectations if not selected.
  2. Can limit the pool of candidates.
  3. Difficult for management to carry out effectively.

Advantages of Internal Recruitment

  1. Much less expensive, with no need for job advertisements or recruitment agencies.
  2. Provides motivation for existing staff.
  3. Shows that existing employees are valued by the organization.

Performance Management System

A performance management system establishes a shared workforce understanding of the organization’s objectives and aligns organizational objectives with employees’ agreed-upon measures, skills, competency requirements, development plans, and the delivery of results.

Defining Business Mission, Values, Objectives, and Competencies

Organizations need to identify the performance needed for the organization as a whole before planning and managing individual performance. This involves:

  1. Mission Statement: Example: Body Shop’s mission is to produce natural products.
  2. Core Values of the Business: Example: Google focuses on the user, and all else will follow.
  3. Identify Business Objectives that align with the organization’s mission statement. Example: Increase profit.
  4. Key Competencies Needed: Example: Design and technology at Apple. Organizations can use a top-down direction.

Staff Retention

Staff retention refers to how organizations can ensure they have the best chance of retaining (keeping) the people they employ.

How Best to Retain Staff

  1. Pay: Raising pay levels reduces staff turnover, improves job satisfaction, and enhances employee engagement. Employers who offer attractive rewards have lower turnover rates. An organization can also make itself more attractive in recruitment terms, which limits staff retention. However, wage costs will increase.
  2. Managing Expectations: Employers benefit from ensuring that potential employees gain a ‘realistic job preview’ before they accept a job offer. Failing to meet expectations can have de-motivational effects. Solution: Provide periods of work experience for students before they graduate.
  3. Induction: Induction is the process of introducing new candidates to the organization and their particular role.
    1. It helps new starters adjust emotionally to the new workplace.
    2. It provides a forum to include basic information about the organization.
    3. It is used to convey messages about what the organization expects and what employees can expect in return.
    4. It prepares new employees to work as effectively as possible in their new job.
  4. Family-Friendly HR Practices: Employers must provide many conditions as minimum rights to reduce employee turnover. Providing flexible working opportunities and a friendly work environment is also a good way of retaining and engaging staff. Example: Childcare center.
  5. Training and Development: Training provides commitment to an employer, making individuals less likely to leave voluntarily. However, training also makes people more employable and more likely to leave to develop their careers. Spending money on training can be wasteful because it benefits other employers.
  6. Improving the Quality of Line Management: Turnover sometimes happens because employees are dissatisfied with their supervisors. The solution is to take actions to improve the effectiveness of supervisors, such as:
    1. Selecting people for line management according to their supervisory capabilities.
    2. Improving the performance of line managers so individuals will be more engaged with their work.
    3. Ensuring that all line managers are trained and regularly appraised on their supervisory skills.

Assessment Centers

Assessment centers include multiple selection techniques. They are used to assess, in-depth, a group of broadly similar applicants, using a set of competencies needed for the position on offer and a series of behavioral statements that show how these competencies are demonstrated in practice.

Selection Methods: The Classic Trio

  1. Application Forms: Used as a straightforward way of providing a standardized summary of the applicant’s history. They speed up the shortlisting of candidates and guide interviewers. They are also used to collect bio-data, which includes personal information about a candidate.
  2. Telephone Interviewing: Can be used if speed is important or if geographical distance is an issue. An interview with candidates can be conducted immediately. The problems include a lack of non-verbal information and difficulties getting hold of the applicant.
  3. References: Candidates provide the names of previous employers or others, and then prospective employers request them to provide information. There are two types:
    1. The Factual Check: A confirmation of facts that the candidate has presented. It follows the employment interview and decision to offer a job, confirming that the facts are accurate.
    2. The Character Reference: The prospective employer asks for an opinion about the candidate before the interview so that the information gained can be used in the decision-making phases. It depends on the writers of references being excellent judges of working performance, faultless communicators, and, most difficult of all, honest.

Accounting and Finance

Accounting

Accounting is concerned with collecting, analyzing, and communicating financial information. The aim is to help users of this information make more informed decisions.

Managers need such information in order to decide:

  1. New product development.
  2. Increasing or decreasing the price or quantity of existing products.
  3. Borrowing money or helping finance the business.
  4. Increasing or decreasing the operating capacity of the business.

Finance

Finance, like accounting, helps with decision-making, but it is concerned with the ways in which funds for a business are raised and invested. Businesses exist to raise funds from investors (owners and lenders) and then use those funds to make investments (equipment, inventories, etc.). Investments will create a worthwhile return or wealth.

An understanding of finance should help in identifying:

  1. The main forms of finance available.
  2. The costs, benefits, and risks of each form of finance.
  3. The risks linked with each form of finance.
  4. The role of financial markets in supplying finance.

Uses and Usefulness of the Balance Sheet

  1. It provides insight into how the business is financed and how its funds are deployed.
  2. It can provide a basis for assessing the value of the business.
  3. Relationships between assets and claims can be assessed (how much wealth is being carried in current assets and how much is owed in the short term).
  4. Performance can be assessed: the effectiveness of a business in generating profit can be assessed against the amount of investment that was involved.

The Income Statement

The main purpose of the income statement, or profit and loss account, is to measure and report how much profit a business has generated over a period. It also helps users gain some impression of how that profit was made.

A simple format for an income statement is: Profit = Revenue – Expenses

Profit: The measurement of profit requires that the total revenue of the business generated during a particular period be identified. This is shown in the income statement.

Depreciation: Most non-current assets have limited lives; they are used up in the process of generating revenue for the business.

Uses and Usefulness of the Income Statement

The income statement may help in providing information on:

  1. How effective the business has been in generating wealth: Profit generation is the main reason for most businesses, so it is important to assess how much profit has been created. The income statement reports the profit for the period. Gross profit and operating profit are also useful measures of wealth creation.
  2. How profit was derived: The income statement reveals the level of sales revenue and the nature of expenses incurred. This will help in understanding how profit was derived.