Reading: Lesson 1 - Human Resources in Business

12.1.A - Human Resources in Business

1. THE NEED FOR HUMAN RESOURCES

1. Of all the resources used by a business, probably the most important to its success is people. People are responsible for the effective use of all other resources in the business. People make decisions, operate equipment, maintain records, and deal with customers. Because of their value to the business, managing people is a critical function. All managers work with people. However, human resources management (HRM) consists of all activities involved with acquiring, developing, and compensating the people who do the company’s work. HRM is sometimes called personnel management. Employees’ pay, training, benefits, work environment, and many other factors contribute to their productivity, performance quality, and satisfaction with the company. The people who work in human resources management perform the tasks that help the business keep the skilled and productive employees it needs to accomplish its goals. To begin human resources planning, companies must determine the number of people they will need to perform all tasks as well as the skills those people will need. Then they must recruit, hire, and train those employees. Once on the job, the employees will need equipment and other resources to accomplish their jobs. Directions provided through descriptions of job duties, policies, and procedures help the organization operate effectively. Human resources employees take part in all of these activities.
   
2. Businesses must be sure that employees are satisfied with their jobs and motivated to perform well. They need to be concerned about employee safety and health, working conditions, wages, and benefits. Employees who are doing a good job need to be recognized and rewarded, and those who are not must be given training and support to improve their performance. In some cases, employees must be removed from their jobs if their performance does not improve or if there are major changes in company operations. As you can see, working with people involves many responsibilities. Most companies have a department that is responsible for human resources management. Large companies may have several specialized divisions within the department, each of which deals with a specific area in human resources. Some human resources activities may be performed in other departments across the organization but are planned and coordinated through the human resources department, sometimes called the HR department or just HR. Most managers regularly use the services of the human resources department as they work with their employees. Employees also receive a variety of services from the people who work in human resources.
   

2. HUMAN RESOURCES ACTIVITIES

1. Human resources activities support the overall goals of the organization. Although the size of the business, the number of employees, and other factors may influence how human resources activities are carried out, a number of activities are completed in all organizations. The important human resources activities common to many businesses are listed in the Figure below. 
   

   
   

2. Employment is the one area most people associate with human resources management. The employment function of human resources involves all activities required to maintain an adequate number of qualified employees in the company. Employment activities include determining the need to hire employees, recruiting applicants, determining the qualifications of applicants, and hiring the most qualified applicants to fill the available jobs. In addition, transfers, promotions, retirements, dismissals, and other job changes are part of the employment function.
   

3. The amount a company pays employees directly and spends to provide employee benefits such as insurance and vacation time is a major part of its operating budget. The level of wages and benefits, especially when compared to that of competitors, helps to determine who will apply for job openings and whether they are likely to make a long-term commitment to the company or will be looking for higher-paying jobs. When performing the wages-and-benefits function, human resources employees plan and manage the financial and non-financial rewards available to employees. Wages and benefits must be carefully controlled. Employee productivity (the amount of work accomplished) compared to the pay and benefits will determine whether the company can be profitable. It is important that employees view the system for determining pay as fair and that there is a reasonable relationship between the amount paid to an employee and the value of that employee’s work to the company. Human resources is typically responsible for developing a pay system that classifies jobs according to levels and pay ranges. When a person is hired, promoted, or given a pay increase, human resources manages the procedures to ensure that the employee gets paid the correct amount.
   

4. Companies offer benefits to their employees in addition to wages. Some benefits, such as Social Security and Medicare, are required by law. Others, such as insurance, may not be required unless the business is of a certain size. Vacations are not legally required, but many companies provide them. Often benefit plans are different for full-time than for part-time employees or are based on the length of time the employee has worked for the company. People who work in human resources study what benefits can be offered, determine the current and future costs of each type of benefit, and help management develop the benefits plan. They also provide information to employees about each type of benefit and make sure that employees recognize the value of the benefits to them. Some companies offer employees choices of benefits, so helping employees make the best decisions and keeping track of each person’s choices can be quite complicated. Once employees make their decisions, human resources personnel help them complete the necessary paperwork or enter the data into the company’s computer system. Each benefit program must be monitored to control costs and to make sure employees receive the benefits to which they are entitled.
   

5. Companies cannot continue to compete effectively if employees’ skills are the same today as they were the day they were hired. Employees must improve their skills and learn new ones on the job. The role of human resources in performance improvement involves training and educating employees to ensure high quality and efficient work. Often the human resources department plans and manages performance improvement programs in cooperation with managers and employees. Most businesses conduct several types of training and education programs. Once hired, employees receive an orientation to the company and initial training to make sure they are successful in the new job. Then, as equipment or procedures change, the company must prepare employees for those changes. Finally, if evaluations indicate that an employee is not performing as well as expected, the company provides support to improve the employee’s performance so that it does not result in poor quality products or customer service. Employees may be promoted or transferred to a new job in the company. Part of the process of preparing employees for possible promotions or moving current employees to new jobs is a continuing education and training program. Many companies also allow employees to participate in education programs for their own personal development, believing that such programs increase employee motivation and productivity. Companies sometimes reimburse employees for some or all of the costs of education as an employee benefit.
   

6. Finally, if the company cuts back on the number of employees, eliminates a department, or undergoes a major change in its business activities, it may help the employees who will be terminated prepare for new jobs. Some of those jobs may be in other parts of the company that are adding employees, but the education and training may be for jobs in other companies. It may seem strange that companies would spend money to educate employees to work for other companies. However, progressive employers view these programs as a responsibility to employees who have contributed to the company’s past success. They also believe that people are more likely to work for a company that demonstrates this level of commitment to its employees.
   

7. Human resources plays a major role in employee relations by ensuring effective communication and cooperation between management and employees. If a labor union is organized within a company, a very formal set of relationships exists between employees and management. The human resources personnel responsible for employee relations assist in negotiating labor contracts with the union and deal with employee activities and issues that relate to the contract. If employees are not represented by a union, human resources still performs the same types of activities, but will follow company policies and procedures rather than a negotiated labor contract. The flattened organizations of today mean fewer managers. Businesses expect employees to take more responsibility for their own work. Work teams made up of employees and managers take responsibility for many decisions once made only by managers. These decisions may include hiring, determining how work will be performed, and improving work procedures. Human resources personnel help to prepare people for their new responsibilities and develop supporting materials, training, and computerized forms and procedures to help the teams successfully perform their new tasks. Another important area of employee relations is assuring that the company complies with all laws related to equal employment and affirmative action. In addition, human resources personnel work with employees and managers to prepare people for future job openings and promotions, as well as help them work cooperatively. Companies are most successful when all employees have access to any job for which they are qualified and when there is no discrimination in employment decisions or in any part of the work environment.
   

8. Employee illnesses and injuries are expensive. When employees are unhealthy or injured, they may not be able to work. Other employees will have to complete their co-workers’ assignments, or the company must hire temporary employees. The cost of insurance and health care rises as the number of employee illnesses and injuries increases. The company and its employees usually share those increasing costs. Substance abuse leads to a number of job problems. Workers under the influence of illegal drugs or alcohol have reduced dexterity and impaired judgment. As a result, they may ignore safety procedures or be unable to perform their work properly. Substance abuse also lowers worker productivity and increases absenteeism. Along with company managers, the human resources department is responsible for establishing and monitoring safe work procedures and maintaining safe work areas. They are also responsible for enforcing laws and regulations related to safety and health. Most human resources departments plan and provide regular safety training, place posters and materials in the workplace to remind workers to follow safety procedures, and monitor work to identify and correct possible safety problems. They also collect and report data on work related injuries and illnesses to meet legal requirements and to be sure the company and employees are well informed about the level of safety in the company and in each department. Companies often reward work units that operate for a specific amount of time without a job-related injury. Companies promote good health by maintaining a smoke-free environment and offering help for employees to stop smoking through education programs, support groups, and even financial bonuses. To reduce employee absences and control insurance costs, companies organize wellness and fitness programs, build and staff fitness centers, and encourage employees to enroll in health education classes.
   

9. Managers regularly evaluate their employees’ performance. They identify employees’ strengths and reward them for superior performance. If they discover performance problems, they provide advice and training to help the employee improve. Individual managers are responsible for evaluating the employees they supervise and using the results of the evaluation to improve performance. The role of human resources in performance management is to develop the evaluation system and materials and to educate managers and employees on the proper methods for evaluating and improving performance. Human resources personnel work with managers and experienced employees to design the performance management system and then prepare the forms and materials needed. They then train the managers to evaluate employees objectively, complete the evaluation forms, and conduct follow-up evaluation conferences with the employees. They also help employees understand their role in the evaluation process. The human resources department usually maintains the results of the evaluations in each employee’s personnel file. A newer method of performance evaluation, 360-degree feedback, uses performance feedback gathered from a broad range of people with whom the employee works. Supervisors, coworkers, and subordinates all contribute performance feedback. For example, a manager receives feedback from his or her boss, from other managers who work at the same level, and from the employees the manager supervises; employees receive feedback from their manager and from coworkers. Sometimes even suppliers and customers are asked for feedback on the performance of a person with whom they have a working relationship. In the 360-degree feedback system, people completing the reviews fill out a detailed questionnaire about the person’s performance. The responses are anonymous, so the person evaluated does not know who specifically provided the information. The information is summarized, a report is prepared, and a performance improvement conference is held with an evaluation expert to ensure that the employee and the manager interpret the information correctly and know how to use it to improve performance.
   

10. Today, businesses recognize that employees have many important responsibilities in addition to their jobs. Personal and family concerns may interfere with an employee’s work. Issues ranging from financial problems to family matters to alcohol or drug abuse are increasingly common among employees. Employee assistance programs provide confidential, personal problem solving, counseling, and support services for employees. For the most part, participating in the services is voluntary, and employees can choose to receive assistance whenever they need the help and support. For serious problems that are interfering with work, managers can refer employees to specific assistance services, but, again, employee participation is confidential. For these types of employee assistance programs, the company hires specialists such as counselors, psychologists, and medical personnel to provide the services. Some employee assistance programs have expanded to provide services needed by single-parent or two working parent families, or by employees in transition because of job changes or a move to a new location. Even special financial services such as short-term loans or financial assistance for education may be offered. Human resources personnel involved in employee assistance programs may arrange day care for children or elderly parents, help with short-term housing needs, plan carpooling or other transportation services, and facilitate many other activities that help employees balance their work and personal lives.
    

11. You can see from the human resources services described above that maintaining an effective workforce is very complex. Companies change rapidly, but it may take weeks and months to hire new people, design training programs, or complete performance reviews. Federal and state employment laws as well as company policies and procedures require a great deal of information about each employee to be collected and maintained. A major human resources function involves researching and maintaining the information that managers must have to determine personnel needs and manage the workforce. The people working in this area of human resources gather data, use computer programs to analyze that information, and maintain and review employee records as well as company and competitive employment information. They then distribute this information to managers to alert them to problems, the need for changes, and ways to improve employee productivity.