Human resource management


23rd November, 2021

Human resource management (HRM): How to build your team

All the basics on human resource management, including how to revamp your HRM strategy for a growing business.

As a business or organisation you rely on three key resources — physical, financial and human. Your physical resources include your equipment and materials. Your financial resources are cash and credit. And your human resources are your people.

Just as you couldn’t run your business without funds or equipment, you also can’t run your business without people. Every part of your business comes down to people, in one way or another. Which means that human resource management (HRM) is just as important as your bookkeeping and supply chain management.

Having a strong HRM strategy in place can define your success as an organisation. It will make you more profitable, help you lead more effectively, build brand loyalty and cohesion amongst your teams and help you do better work.

In this article we will uncover:

  1. What is human resource management?
  2. What are the functions of human resource management?
  3. What value does human resource management offer?
  4. How to develop an human resource management strategy.

What is human resource management?

In its broadest sense, human resource management is all the decisions made within an organisation that relate to people employed by it.

HRM is sometimes thought of as the activities relating to the hiring and firing of employees. But today’s most successful organisations know that it encompasses much more than that.

The Harvard Framework for Human Resource Management describes it as a strategic approach to the employment, development and wellbeing of the people in an organisation. It includes all the management decisions, actions and processes that affect the relationship between the employees and the organisation.

Under the HRM system, the organisation looks to capture and enhance the performance of its employees for the benefit of the organisation in the most effective manner. At the same time, they are working to balance the needs and satisfaction of the employees against the overarching drive for profitability.

From a practical point of view, HRM can cover (and generally does) a swathe of different aspects: recruiting, onboarding, training, employee relationships, payroll, benefits, compensations, safety, legal, communication, engagement and even long-term strategy.

This can certainly be a complex area to understand. But in practice, HRM generally comes down to organisations working to do the following:

  • Optimise the performance of its people
  • Foster the development of its people
  • Align company goals with employee goals
  • Comply with all government regulations

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What are the key functions of HRM?

The functions of a HRM team are generally of three types: managerial, operative and advisory.

1. Managerial functions

The first part of the managerial functions is the organisational function, which involves the development of an organisational structure that will accomplish the goals of the organisation. This is followed by the planning function, which is understanding people’s needs within the organisation.

This function also includes analysing current human resource supply and forecasting future demand, while balancing those with the needs and goals of the organisation.

In its managerial functions, the HRM team is also responsible for directing employees to help optimise their ability to contribute to the organisation as a whole, and evaluating the employees’ performance.

If an employee’s performance is lacking, it’s the HRM team’s responsibility to ensure that there are measures in place to remedy this.

2. Operative functions

The operative functions of the HRM team can encompass a wide range of duties. This includes employment related functions, such as creating personnel policies, securing and employing appropriate employees, job analyses, inductions and internal mobility procedures. It also embraces the development of employees.

The HRM team also needs to be able to manage the avenues for employees to improve, change skills, grow knowledge, aptitude or creative ability, receive performance appraisal and career planning, promotion and demotion and internal transfer or mobility.

Of course compensation is one of the most important operative functions of HRM. Part of this is determining the pay scale and other rewards for employees (ensuring they’re impartial), establishing and maintaining the payroll system, regularly managing the performance system of the employees and designing reward schemes.

Operative functions also include implementing occupational health and safety requirements and managing any industrial relations issues.

3. Advisory functions

One of the most important aspects of MRH in forward-looking organisations is the advisory function.

The HRM team is a vital part of formulating policies and procedures when it comes to the people within an organisation. They will be expected to provide management with advice on people’s performance, on how to maintain high-quality employee-employer relations and how to improve employee satisfaction and wellbeing.

READ THIS NEXT: How to improve employee management (2023 edition)

What value does HRM offer?

Human resource management delivers a high level of value to organisations — when it’s done well. Some of the value and benefits are:

1. Increased employee recognition and satisfaction

HRM helps employees to feel recognised and valued. Studies show that employees that feel recognised by their employers are five times more likely to stay with an organisation.

2. Fresh ideas

Good HRM helps people to bring new skills, ideas and perspectives into the organisation. These in turn help the business to flexibly grow into the future.

3. Resource adaptation

People are the most important resource of an organisation. HRM helps organisations to see the opportunities to better use this vital resource, while helping employees to adapt and upskill when needed.

4. High quality of work

Ensuring that employees have safe, clean and pleasant surroundings and feel fulfilled with their work is an important benefit of HRM. This is especially true since studies show that only 15 percent of employees worldwide feel fulfilled at work.

5. Healthy organisational culture

Human resource management ensures that an organisation’s culture is supportive, effective and well adapted to the needs of the organisation, and that it can flexibly grow and change as needed. This is a very valuable function since 73 percent of employers believe a great corporate culture gives their organisations a competitive edge.

READ: How to create a positive workplace culture

6. Support the organisation’s strategy, mission, values, vision and goals

HRM is designed to help facilitate the understanding and organisation-wide belief in the organisation’s strategy, mission, values, vision and goals. HRM helps employees see where they fit in an organisation and defines those roles.

How to develop a human resource management strategy

Developing a thorough human resource management strategy involves understanding your organisation, your business, your goals and your desired business outcomes.

It’s important to get this right because when an HRM strategy is done well it can help your organisation align their organisational goals with their capabilities for optimal results.

1. What are your future human resource needs?

Think of the nature of your work, how large your organisation, the systems and processes needed, the skills required and the risks associated with your proposed strategy.

2. What are your current HR capabilities?

Consider how you’re tracking against set benchmarks, your strengths and weaknesses, your risks, what you’re doing well now, and what you aren’t.

3. Where are the gaps?

There will likely be some difference between your future HR needs and your current needs, including policies and procedures, capabilities and resource allocation. Identifying these will allow you to be more specific and practical in your strategy planning.

4. What strategies can be implemented to close the gaps

This might include training, development, performance management, compensation and rewards or other factors of strategic importance.

5. Implement your plan

This is the process of expanding your workforce while developing your current workers to position your organisation for the future.

6. Share and monitor the plan

The more your team understands your plan, the more empowered they’ll be to help achieve its goals.

Review the plan on at least an annual basis, but ideally much more frequently, and make any adjustments as needed.

Bringing enterprise resource planning and payroll together makes managing a growing business easy. If you’re based in Australia, you can find out more about MYOB’s bigger business solutions here. New Zealand-based operators can click here.