HR Management - Simply Put!

Introduction

In the Marstan Guide Introduction to Business Management, we said that successful organisations do more than administer the terms and conditions of staff; they help to develop their people to fulfil their potential.

What is HR?

HR stands for “Human Resources”. In economic terms the resources used in business are:

• People (Human Resources)
• Manmade Materials (Process Resources)
• Utilities (Natural Resources)

For many decades the most common term used for the department dealing with people matters in a business was “Personnel Department”.

There are other terms such as “Human Capital”, which look at the value people bring to a business; but for the time being, we will refer to Human Resource Management (HRM) throughout this paper.

What is HRM?

HRM comprises all management processes in a Company in relation to people.

HRM includes:

• Planning what people are needed within the Company
• Recruiting people
• Defining what each person will do
• Setting employment policies, including pay and conditions
• Ensuring that employees are managed and that their statutory and contractual rights are protected and balanced with the needs of the Company
• Ensuring that the performance of people is managed, thereby ensuring that the Company is successful

Is it necessary to have an HR Department?

For some Companies – NO. In the UK economy, 95% of businesses are Small & Medium Enterprises (SMEs) and they account for approximately half of the economy. This is mirrored fairly consistently in other developed economies.

SMEs vary considerably in scale. They range from “one man bands” to Companies of 250 people. What works at one end of this spectrum is totally inappropriate for the other end although the earlier a growing company can get the basics right, the more equipped it will be as it grows and recruits more people.

Clearly, a Company of six people would not need an HR Department, or even one person dedicated to HRM, as it would be overkill and unaffordable. In these cases it is more likely that an owner manager would spend part of his or her time on the administration and management of people, such as dealing with recruitment and payroll. Often, this is supported by advice from an accountant, bank or the part-time assistance of an HR consultant.

This is a perfectly good way of running a small Company. What it lacks in sophistication it gains by virtue of the fact that there is effectively a “hot-line” between the owner of the Company and each employee. It does not, for example, need a complex communications plan.

When does HR become a full-time requirement?

This depends on the complexity of the Company, but as a “rule of thumb” any Company with 50 people or more should have a full-time presence in HR; either in-house or through consultancy support, often known as an “HR Partner”.

A good indicator as to when a more formalised approach to HR is required is when the owner manager starts to believe that customers, suppliers and other interactions are not receiving the same level of service they would if he or she were directly influencing how transactions were being dealt with.

Growing Companies often start with a single HR generalist and then add more people with different specialities, if required, as they grow. Very large companies invariably have a department with specialists in various topics.

What are the functions of HR Management?

HR should be integral to the strategy and management of a business, because without the motivation and performance of the people within the business, success will be limited.

Theoretically, the smaller the business, the easier it is to integrate the HR functions with the management of the whole business. Owner Managers have more time to “sell” their concepts and ideas personally to their employees to gain their “buy-in”. The larger the business, the more difficult it is for everybody to understand all aspects of the Company and HR management needs to be more proactive in effectively sharing vision and strategy to a wider audience.

Regardless of the size of the business, there are eight prime functions of HR Management:

1. Vision – Ensuring that the Company defines where it is heading, what it wants to achieve and has a good understanding of where it is now. This needs to be communicated to everybody in the Company in a way which enhances their understanding, increases “buy-in” and motivates them.
2. Strategy – Ensuring that the company defines a strategy for achieving its Vision and understands the obstacles that it faces and the impact which this will have on their people.
3. Planning & Organisation Structure – Once the Company knows where it is and where it aims to be in the future, it is essential to plan the “headcount” and the manner in which it is to be organised.
4. Recruitment – When the organisation has been planned, recruitment becomes an essential HR function to secure the best people to do the job at the right market rate.
5. HR Policies – It is essential that the Company has a set of policies to ensure that it complies with the laws of employment and defines the relationship between the Company and its employees. For small companies the policies will be simple and in larger companies they might be very complex; describing benefits or incentive schemes in great detail.
6. HR processes – This includes everything from how everybody is paid to how they claim for expenses or time off.
7. Performance Management – It is essential that the Company and its employees have a process for managing performance. The more effectively this is done then the greater the benefit to the Company, which in turn can improve the pay and conditions for its people. Although there might be formal appraisals from time to time; effective companies ensure that there is regular dialogue.
8. Communication – People working in a Company have a need and desire to be kept informed of the direction, activities and performance of the Company. They spend a lot of their time in the business and their livelihood depends on it. One of the most important functions of HR is to keep everybody well informed.