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  1. 1. Prepared by Asfaw Wassie HUMAN RESOURCE MANAGEMENT: Chapter- 4
  2. 2. Prepared by Asfaw Wassie  Introduction  Meaning & Definition of HRM  Scope of HRM  HRM-Functions and Objectives  HRM Roles  Differences between PM & HRM
  3. 3. Prepared by Asfaw Wassie “It takes knowledgeable, people to run a business”
  4. 4. Prepared by Asfaw Wassie “It takes conscientious, People to run a business”
  5. 5. Prepared by Asfaw Wassie “It takes motivated people to run a business”
  6. 6. Prepared by Asfaw Wassie It takes knowledgeable, conscientious, and motivated people to run a business successfully
  7. 7. Prepared by Asfaw Wassie HRM makes all this possible!!!
  8. 8. Prepared by Asfaw Wassie Why is HR critical to firm success?  Service industry is expanding  Low quality HR leads to low quality customer service.  In the 21st century effective knowledge management translates into competitive advantage and profits.  Knowledge comes from a firm’s people.
  9. 9. Prepared by Asfaw Wassie “The War for Talent”  “In the new economy, competition is global, capital is abundant, ideas are developed quickly and cheaply, and people are willing to change jobs often. In that kind of environment… all that matters is talent… superior talent will be tomorrow’s prime source of competitive advantage.” Chambers, E. et al. (1998) “The War for Talent.” McKinsey Quarterly, 2-15
  10. 10. Prepared by Asfaw Wassie Extraordinary People, Ordinary Performance? ? Performance Extraordinary Ordinary Extraordinary Ordinary Quality of People
  11. 11. Prepared by Asfaw Wassie Ordinary People, Extraordinary Performance?  Performance Extraordinary Ordinary Extraordinary Ordinary Quality of People
  12. 12. Prepared by Asfaw Wassie Two Mysteries  How have some companies achieved extraordinary performance with people who are no different from those employed by the competition?  If what they are doing is so understandable, why haven’t their competitors simply replicated them and achieved similar competitive advantages?
  13. 13. Prepared by Asfaw Wassie Competitive Advantage through People  A worldwide study of the automobile industry showed that people- centered practices were associated with almost twice the productivity and quality as conventional mass production.  Similar studies in steel, apparel, semiconductors, and oil refining industries reveal similar positive effects for people-centered practices.  A study of IPOs among 136 firms showed that people-centered practices were associated with a 42% higher survival rate.
  14. 14. Prepared by Asfaw Wassie Top Performing Stocks: 1972-1992 Company Percent Increase  Southwest Airlines 21,775%  Wal-Mart 19,807%  Tyson Foods 18,118%  Circuit City 16,410%  Plenum Publishing 15,689% Money, October, 1992
  15. 15. Prepared by Asfaw Wassie  “I’ve tried to create a culture of caring for people in the totality of their lives, not just at work. There’s no magic formula. It’s like building a giant mosaic--it takes thousands of little pieces…The intangibles are more important than the tangibles. Someone can go out and buy airplanes from Boeing and ticket counters, but they can’t buy our culture, our esprit de corps.” Herb Kelleher CEO Southwest WSJ8/31/99
  16. 16. HR and Performance Prepared by Asfaw Wassie
  17. 17. Prepared by Asfaw Wassie What is HRM? •HRM is concerned with the people’s dimension in the organization •Facilitating the competencies and retention of skilled force • Developing management systems that promote commitment • Developing practices that foster team work • Making employees feel valued and rewarded.
  18. 18. Prepared by Asfaw Wassie Definitions  HRM refers to acquisition, retention, motivation and maintenance of Human Resources in an organization. David. A. Decenzo & Stephen P.Robbins  HRM is the planning, organising, directing & controlling of the procurement, development, compensation, integration, maintenance and separation of human resources to the end that individual, organizational and social objectives are accomplished. Edward Flippo  “… a strategic approach to managing employment relations which emphasises that leveraging people’s capabilities is critical to achieving sustained competitive advantage, this being achieved through a distinctive set of integrated employment policies, programmes and practices”. Bratton and Gold
  19. 19. Prepared by Asfaw Wassie Scope of HRM  Very Vast  Covers all major activities in the working life of a worker -from time an individual enters into an organization until he or she leaves comes under the purview of HRM Prospects of HRM HRM Nature of HRM Industrial Relations Employee Maintenance Employee Hiring Employee & Executive Remunera tion Employee Motivation
  20. 20. Prepared by Asfaw Wassie Functions of HR MANAGERIAL FUNCTIONS Planning Organizing Directing Controlling OPERATIVE FUNCTIONS Staffing Development Compensation Motivation Maintenance Integration Emerging Issues
  21. 21. Prepared by Asfaw Wassie Operative functions of HR STAFFING Job analysis, HRP, Recruitment, Selection, Placement, Induction, Internal Mobility DEVELOPMENT Competency profiling, Training and development, Performance & potential management, Career management, … COMPENSATION & MOTIVATION Job design, Work scheduling, Job evaluation, Compensation administration, Incentives and benefits
  22. 22. Prepared by Asfaw Wassie Operative functions of HR (contd.) MAINTENANCE Health, Safety, Welfare, Social security INTEGRATION Employment relations, Grievance, Discipline, Trade unions, Participation, Collective bargaining EMERGING ISSUES HRIS, HR audit, International HRM, Workforce Diversity
  23. 23. Prepared by Asfaw Wassie Source: HR Department Benchmarks and Analysis Survey 2004 (Washington, DC: Bureau of National Affairs, 2004), 21. To purchase this publication and find out more about other BNA HR solutions visit or call 800-372-1033. Used with permission. HR Activities
  24. 24. Prepared by Asfaw Wassie Management of Human Capital In Organizations  Physical, Financial, Intangible and  Human Capital  The collective value of the capabilities, knowledge, skills, life experiences, and motivation of an organizational workforce.  Also known as intellectual capital.  Core Competency  A unique capability that creates high value and differentiates an organization from its competition.  HR competencies: a source of competitive advantage.
  25. 25. Prepared by Asfaw Wassie Human Capital in Organizations Human Capital The collective value of the capabilities, knowledge, skills, life experiences, and motivation of an organizational workforce. Core Competency A unique capability that creates high value and differentiates an organization from its competition.
  26. 26. Prepared by Asfaw Wassie HR Management Roles  Administrative Role  Clerical and administrative support operations (e.g., payroll and benefits work)  Technology is transforming how HR services are delivered.  Outsourcing HR services to reduce HR staffing costs  Operational and Employee Advocate Role  “Champion” for employee concerns  Employee crisis management  Responding to employee complaints
  27. 27. Prepared by Asfaw Wassie Changing Roles of HR Management Note: Example percentages are based on various surveys.
  28. 28. Prepared by Asfaw Wassie Strategic Role for HR  Strategic Role  “Contributing at the Table” to organizational results  HR becomes a strategic business partner by:  Focusing on developing HR programs that enhance organizational performance.  Involving HR in strategic planning at the onset.  Participating in decision making on mergers, acquisitions, and downsizing.  Redesigning organizations and work processes  Accounting and documenting the financial results of HR activities.  Some HR people get this, some don’t…CEOs want those that do and oust those that don’t
  29. 29. Prepared by Asfaw Wassie Operational to Strategic Transformation of HR
  30. 30. Prepared by Asfaw Wassie HR Technology  Human Resource Management System (HRMS)  An integrated system providing information used by HR management in decision making.  Purposes (Benefits) of HRMS  Administrative and operational efficiency in compiling HR data  Availability of data for effective HR strategic planning  Uses of HRMS  Automation of payroll and benefit activities  EEO/affirmative action tracking  HR Workflow: increased access to HR information
  31. 31. Prepared by Asfaw Wassie Uses of an HRMS  HRMS  Bulletin boards  What information will be available and what is information needed?  Data access  To what uses will the information be put?  Employee self-service  Who will be allowed to access to what information?  Extended linkage  When, where, and how often will the information be needed?
  32. 32. Prepared by Asfaw Wassie JOB ANALYSIS and HR PLANNING ________________________ Chapter Three
  33. 33. Prepared by Asfaw Wassie What is a job?  Job  Group of related activities and duties  Made up of tasks  Tasks  Basic elements of jobs  “what gets done”
  34. 34. Prepared by Asfaw Wassie JOB ANALYSIS INFORMATION HIERARCHY TASK DUTY POSITION ELEMENT JOB JOB FAMILY OCCUPATION CAREER Smallest unit into which work can be divided Distinct work activity Number of tasks
  35. 35. Prepared by Asfaw Wassie What is Job Analysis?  Job analysis (JA) systematically collects, evaluates, and organizes information about jobs  JA identifies behaviors, knowledge, skills, and abilities (KSAs) that are critical to a job
  36. 36. Prepared by Asfaw Wassie What is the purpose of JA?  JA lays the foundation for HRM systems:  Selection  Selection system developed to assess key KSAs  Ensures that it is job-related  Training  Gaps in KSAs of new hires represent training needs  Performance Appraisal  Job analysis establishes performance standards
  37. 37. Prepared by Asfaw Wassie What is the purpose of JA?  Compensation  Relative worth of jobs measured via job evaluation  JA helps you to select the right ee, evaluate the ee fairly, compensate, and train the appropriate skills to the appropriate ees  JA also ensures your system is legally defensible and perceived as fair (procedural justice)
  38. 38. Prepared by Asfaw Wassie Steps in Job Analysis Process  Phase 1: Preparation for job analysis 1. Familiarization with the organization and its jobs 2. Determine the uses of the JA information (selection, training?) 3. Identify what jobs need to be analyzed • Critical to success of the organization • Difficult to learn • New technology
  39. 39. Prepared by Asfaw Wassie Steps in Job Analysis Process Phase 2: Collection of JA information 1. Source of Job Data  Job incumbents, supervisors, subordinates, customers  Existing job descriptions  Manuals, publications  National Occupational Classification
  40. 40. Prepared by Asfaw Wassie Steps in Job Analysis Process 2. Data collection instrument design  Gather information systematically  Often involves questionnaire, checklist  Use same questionnaire for similar jobs  Different jobs may require different instrument  Information gathered:  Status, key duties/tasks, KSAs, working conditions, performance standards
  41. 41. Prepared by Asfaw Wassie Steps in Job Analysis Process 3. Data collection method  Job performance  Observation  Face-to-face interviews  Questionnaires  Employee log/diary  Combination of above  No “best” approach  Trade-offs are: accuracy, time, and cost
  42. 42. Prepared by Asfaw Wassie Existing JA Methods  Position Analysis Questionnaire (PAQ)  Functional Job Analysis (FJA)  Critical Incident Technique (CIT)
  43. 43. Prepared by Asfaw Wassie Position Analysis Questionnaire (PAQ): McCormick (1972)  Developed because of criticism that JA relied on observation – not quantifiable  Detailed questionnaire (tasks)  Determines extent to which each task is applicable to target job  Using a 5-point scale
  44. 44. Prepared by Asfaw Wassie Functional Job Analysis (FJA)  Fine & Wiley (1971)  Focuses on task statements  Task statements include:  What? - What gets done (the action/behaviour)  To whom or what? - The object of the action  Why? - Purpose of the action  How? - What facilitates the action?
  45. 45. Prepared by Asfaw Wassie Functional Job Analysis  Tasks are rated on scales reflecting varying degrees of involvement with Things, Data, and People as well as math, language, etc. requirements  Each scale is arranged hierarchically  E.g., People scale ranges from “taking instructions” to “leadership”
  46. 46. Prepared by Asfaw Wassie Critical Incident Technique  Flanagan (1949)  Identifies behaviors that indicate success or failure on the job  Effective vs ineffective behaviors  Critical Incidents include:  Context - in which the incident occurred  Behaviour - exactly what the individual did that was effective or ineffective  Consequences - of the behaviour and whether or not consequences were in the employee’s control
  47. 47. Prepared by Asfaw Wassie Developing Critical Incidents  Interview with people familiar with the job  E.g., supervisors, subordinates, customers  Ask them to describe specific incidents of effective / ineffective behaviour by incumbents of target job  Incident context – What led up to the incident (background)? What was the situation?  Behaviour – What exactly did the person do that was effective / ineffective?  Consequence - What was the outcome of the behaviour?
  48. 48. Prepared by Asfaw Wassie Using Critical Incidents  Critical incidents are collected  Critical incidents that are similar in context are grouped into a behavioral item  2 critical incidents 1. Rewarding employees for good performance 2. Publicly praising for good performance  Could be grouped into a behavioral item “Praise/reward subordinates for effective performance”
  49. 49. Prepared by Asfaw Wassie Using Critical Incidents  Similar behavioral items are grouped into a meaningful behavioral criterion  2 behavioral items 1. “Praise/reward employees…” 2. “Counseling, giving advice to subordinates”  Combine to form the behavioral criterion “Interactions with subordinates”  These form basis of selection system (e.g., interview), performance appraisal instrument, etc.
  50. 50. Prepared by Asfaw Wassie Steps in Job Analysis Process Phase 3: Uses of JA information 1. Job descriptions—Task requirements  Statement that explains duties working conditions, etc. of a job 2. Job specifications—Person requirements  Statement of what a job demands of the incumbent  E.g., knowledge, skills, abilities (KSAs) and other characteristics required to perform job
  51. 51. Prepared by Asfaw Wassie Steps in Job Analysis Process Phase 3: Uses of JA information 3. Performance standards  What is expected of workers  JA may provide performance standards for job where performance is readily quantified, measurable, etc.  All of these uses form foundation for various HRM systems
  52. 52. Prepared by Asfaw Wassie Human Resource Planning (HRP)
  53. 53. Prepared by Asfaw Wassie TOPICS TO BE COVERED  Definition of HRP  Importance of HRP  Steps of HRP  Job Analysis  HRP Process -Organizational objectives -HRP needs forecasting -HRP Supply forecasting -HR Programming -HR Plan Implementation -Control & Evaluation
  54. 54. Prepared by Asfaw Wassie Definition : process by which an organization ensures that it has the right number & kind of people at the right place and at the right time, capable of effectively and efficiently completing those tasks that help the organization achieve its overall objectives.
  55. 55. Prepared by Asfaw Wassie Importance Each Organization needs personnel with necessary qualifications, skills, knowledge, experience & aptitude .  Need for Replacement of Personnel - Replacing old, retired or disabled personnel.  Meet manpower shortages due to labor turnover -  Meet needs of expansion / downsizing programs - As a result of expansion of IT companies the demand for IT professionals are increasing.
  56. 56. Prepared by Asfaw Wassie  Cater to Future Personnel Needs - Avoid surplus or deficiency of labor.  Nature of present workforce in relation with Changing Environment - helps to cope with changes in competitive forces, markets, technology, products and government regulations.
  57. 57. Prepared by Asfaw Wassie Steps of HRP 1. Interfacing with strategic planning and scanning the environment 2. Taking an inventory of the company’s current human resources 3. Forecasting the demand for human resources 4. Forecasting the supply of human resources both from within the organization and in the external labor market 5. Comparing forecasts of demand and supply 6. Planning the actions needed to deal with anticipated shortages or overages 7. Feeding back such information into the strategic planning process
  58. 58. Prepared by Asfaw Wassie THE STRATEGIC ROLE OF HUMAN RESOURCE PLANNING  Developmental Planning for Strategic Leadership  there is currently more interest in succession planning today than there has been during the past 30 years.  Because of the rapidly changing environments in which companies must compete, there is concern that there will be a shortage of individuals with the requisite skills and talents who can lead companies in the twenty-first century.  Succession planning, as well as other forms of human resource planning, is becoming more critical to the successful formulation and implementation of strategies.
  59. 59. Prepared by Asfaw Wassie  Assessment of Strategic Alternatives:  information regarding critical employee knowledge bases provides important input for strategy formulation.  given a particular strategic alternative, it is useful for human resource executives, as well as other executives, to be able to forecast the human resources necessary to carry out various strategies.
  60. 60. Prepared by Asfaw Wassie  Adding Value:  Despite some positive research results, it is typically difficult to quantify value added in human resource management.  The results of some human resource programs and policies undoubtedly have major impacts on morale and motivation, although they are not easily translated into dollars and cents.
  61. 61. Prepared by Asfaw Wassie MANAGERIAL ISSUES IN PLANNING  Personal Implications  the planning process will have normally required the human resource manager to communicate with other managers, senior executives, and staff members about the future human resource environment and the associated staffing issues.  Also, senior managers will have greater confidence that the manager has thought through the implications of potential demand and supply relationships and there is less chance that the company will be unprepared in the future.
  62. 62. Prepared by Asfaw Wassie  Changing Receptivity Toward Planning  The turbulent business environment in which companies currently operate is obviously a difficult time in which to plan.  However, there is substantive evidence that companies have increased their emphasis on human resource planning, but with some trend shifts.
  63. 63. Prepared by Asfaw Wassie  Growing restrictions on Lay off:  growing restrictions on employers’ abilities to lay off employees also will serve as an additional incentive for human resource planning.
  64. 64. Prepared by Asfaw Wassie HRP Process - Determination of Quality of Personnel Job Analysis  process of collecting and studying information relating to the operations and responsibilities of a specific job.  determination of tasks which comprise the job and of skills, knowledge, abilities and responsibilities required of the worker for a successful performance and which differentiates one job from all others.  products of Job Analysis are Job Description & Job Specification
  65. 65. Prepared by Asfaw Wassie HRP Process - Determination of Quantity of Personnel Organizational Objectives HR Programming HR Needs Forecast HR Supply Forecast HRP Implementation Control & Evaluation Surplus - Restricted Hiring, Lay Off, Reduced Hours Shortage - Recruitment & Selection
  66. 66. Prepared by Asfaw Wassie Organizational Objectives & Policies  Downsizing / Expansion  Acquisition / Merger / Sell-out  Technology upgradation / Automation  New Markets & New Products  External Vs Internal hiring  Training & Re-training
  67. 67. Prepared by Asfaw Wassie HR Demand Forecast process of estimating future quantity and quality of manpower required for an organisation.  External factors - competition, laws & regulation, economic climate, changes in technology and social factors  Internal factors - budget constraints, production levels, new products & services, organizational structure & employee separations
  68. 68. Prepared by Asfaw Wassie Some techniques  Rules of Thumb, and the Delphi Technique  Rules of thumb are simple guidelines that are used to predict demand for human resources.  “bottom-up” approach in which unit managers estimate their specific human resource needs for the next period.  The Delphi technique, an iterative judgment refinement technique based on the collection of expert opinion, is sometimes categorized as a qualitative demand forecasting technique.
  69. 69. Prepared by Asfaw Wassie  Operations Research and Management Science Techniques:  Linear programming, integer programming, and network optimization techniques can be used to determine optimal personnel flows through organizations.  The use of such planning techniques runs counter to the trend toward more reliance on less sophisticated approaches.
  70. 70. Prepared by Asfaw Wassie  Regression Analysis:  Regression analysis is a robust statistical technique having applicability to forecasting demand for human resources.  Multiple regression analysis allows the forecaster to control for several potential influences on the number of employees needed in a particular specialty.
  71. 71. Prepared by Asfaw Wassie HR Supply Forecast process of estimating future quantity and quality of manpower available internally & externally to an organisation. Supply Analysis  Existing Human Resources  Internal Sources of Supply  External Sources of Supply
  72. 72. Prepared by Asfaw Wassie Existing Human Resources Capability / Skills Inventory using HR Information System General Information - Name: Present Address: Department: Sex: Designation: DOB: DOJ: Marital Salary: Status: Permanent Address: Grade: Qualification - Degree/Diploma Institution Class Year of Pass Experience/Skills - Job Title/ Organisation Brief Skill/ Appointment Responsibilities Specialisation Outstanding Achievement / Additional Information - Awards Performance Disciplinary Action Promotions Merit Rating Absenteeism Achievements Career Plans:
  73. 73. Prepared by Asfaw Wassie Some techniques  Replacement Charts:  describe a company’s organizational structure in terms of individuals occupying various managerial and professional positions.
  74. 74. Prepared by Asfaw Wassie
  75. 75. Prepared by Asfaw Wassie  Succession Planning:  Succession planning tends to be directed toward a longer-range time horizon and is more focused on development. It is also more concerned with the development of pools of potential replacements, as opposed to individuals.  involves more elaborate planning for skill development of potential replacements, is more systematic in the assessment of potential replacements and their developmental needs
  76. 76. Prepared by Asfaw Wassie  Markov Analysis:  Provides a practical and versatile technique for forecasting internal supply. As such, the techniques can serve the strategic purpose of evaluating the availability of human resources required for different strategies.
  77. 77. Prepared by Asfaw Wassie
  78. 78. Prepared by Asfaw Wassie  Renewal Models:  These models reflect the movement or flow of employees through companies as they are “pulled” upward to fill vacancies in higher-level job categories  Age cohorts or job category can be the focus of analysis.
  79. 79. Prepared by Asfaw Wassie  Computer Simulations:  Simulations have the advantage of allowing the forecaster to create a number of different future scenarios by altering the values of the simulation’s parameters.  Through this process, the forecaster can determine variations in forecasted values according to different formulations of future conditions and can plan alternative courses of actions to reduce uncertainty and manage risk.
  80. 80. Prepared by Asfaw Wassie SELECTING FORECASTING TECHNIQUES  Purpose of Planning  Organizational Characteristics  Industry Characteristics  Environmental Turbulence: companies with moderate levels of workforce volatility are more inclined to engage in human resource planning.  Other Considerations: cost, time horizon, level of sophistication, availability of appropriate data, availability of detailed data,….
  81. 81. Prepared by Asfaw Wassie HR Programming Balancing Demand and Supply  Vacancies filled in by the right employee at the right time
  82. 82. Prepared by Asfaw Wassie HR Plan Implementation  Recruitment, Selection & Placement  Training & Development  Retraining & Redeployment  Retention Plan  Downsizing Plan
  83. 83. Prepared by Asfaw Wassie Control & Evaluation Are Budgets, Targets & Standards met? Responsibilities for Implementation & Control Reports for Monitoring HR Plan
  84. 84. Prepared by Asfaw Wassie HRM Project Students are required to visit a business organization and conduct the following assessment: 1. Assess how HR is viewed by the top management and the attention given to HR Department 2. Assess the HR practices and functions of the organization in detail 3. Assess how HR functions and practices are coherent and integrated. 4. Assess the link between the business strategies and HR strategies.