Personnel management vs human resource management

People in an organization carry out the entire task, from setting strategies and goals to allocating financial resources and from producing goods and services to marketing them. Therefore, the human beings are considered to be ‘human resource’ or ‘human capital’ in an organization (Bratton and Gold, 2001). And managing this resource is crucial and the idea and practice of managing have come through several changes. The ever rising intense competition in the global business and spreading responsibilities brought dramatic changes in the way approaches were made towards people management. The time business crossed the national boundaries and spread throughout different continents and different time zones it faced new challenges and difficulties in meeting the demands from the people of different cultures. Idea sharing and participation in decision making, therefore, became important as these can give the organizations competitive edge in the changed environment. As a consequence the traits like aptitudes; commitment, ability to learn and tacit knowledge have become obligatory in order to have continuous development (Bratton and Gold, 2001). Thus, the demands of the specialists as well as the formation of new strategies to fit to the changed environment increased along with the growth of business boundary.

Human Resource Management:

‘Human resource management is a distinctive approach to employment management which seeksto obtain competitive advantage through the strategic deployment ofa highly committed and skilled workforce, using an array of cultural, structural and personnel techniques.’ (Storey, 1995).

Thus, HRM is mainly a set of policies that are created aiming to obtain the organizational goal through the successful implementation of corporate strategy considering the human resource of the company as the driving force that can make the difference or in other words give the company its most needed competitive advantage. Company needs to balance the aspirations of its people as well as its strategic demands towards making HRM policies.

There have been many models to explain the concept Human Resource Management. One of the important models is Harvard model. The Harvard Framework preferred to see the whole process of HRM from the General Managers point of view (Armstrong, 2003). How they want to see the consequences of every step recognizing the importance of trade-offs between owners, employees and various interest groups (Armstrong, 2003). Here, the HR gets some outcomes as the direct affect of its policy choices and those outcomes brings the consequences that meet the stakeholder’s interests. It suggests that the general managers should develop a viewpoint, as they provide the strategic vision, of how they wish to see the employee involvement in achieving the goals.

Another important model is Warwick model. As Harvard model is developed in the American context it reflects the American style and way of managing HR but Warwick model reflects the European style (Loosemore et al., 2003). Unlike Harvard model it focuses on external and internal both context and explores how both the internal and external environment influence the HR decisions (Bratton and Gold, 1999).

From Personnel to HRM:

The concept of HRM started getting shape in the early stage of industrial revolution (Bratton and Gold, 2001). Emerging concern of employee rights and the growth of trade union, changing reactions of the workforce and employers towards the public policy, implementation of strict health and safety regulations, increased demands of specialised personnel in the work force along with the technological innovations, scientific and sophisticated approach to managing employees and the ever ending competition in the market played vital role in the emergence of the concept Human Resource Management (Bratton and Gold, 2001). Though the concept is old but the title HRM was given to it only couple of decades back. Before that it was known as Personnel Management. Some scholars say that there is no actual difference between Personnel Management and HRM except the two different names (Storey, 2007; Armstrong, 2003; Torrington et al., 2008).

Along with the emergence of the new economic order in 80s and 90s of last century the approach towards people management changed and the preference of treating personnel moved to individual rather then collective in order to ensure that the highly skilled and loyal employees will give the organization a competitive advantage (Bratton and Gold, 2001). Thus, changing the title is also an approach to give the people management a new image to fit to the changing environment. Torrington and Hall (1991, cited in Armstrong, 2003) sees the distinction as, Personnel Management is ‘workforce centred’ and therefore directs itself to employees, on the other hand HRM is ‘resource centred’ concerns itself with the overall human resource needs of the organization.

Storey (2007) shows the detailed differences between Personal Management and HRM in his twenty seven points of differences where he categorized the elements into four-part basic outlines. These are; Beliefs and assumptions, Strategic Aspects, Line Management and Key levers (Storey, 2007). Miller (1998) integrated Storey’s twenty seven points into six main points that focuses on the major points of distinction between Personnel Management and Human Resource Management.

Table: Personnel Management vs Human Resource Management (Miller, 1998)

So, the distinction between personnel and HR is clear. The biggest change probably is focus. The focus has now shifted from overall performance to individuals. Employee involvement through personal development is now not only highly encouraged but also to ensure it the companies are undertaking different training and development programmes. An early example of this change was set by Ford when it announced its change initiatives that contain statement like ‘employee involvement is our way of life’ (Storey, 2007).

The Characteristics of HRM:

The attempt of HRM is to manage the people, the most valuable asset of a company, to achieve its goals and objectives. Thus, the typical characteristics of HRM include both the welfare of the company and the welfare of its employee. Armstrong (2003) pointed out some characteristics of HRM, these are;

• It integrates the HR and business strategies and emphasizes the need for all strategic fit.
• It is commitment oriented as it emphasizes on gaining the committed goals and mission of the organisation.
• It attaches diversified cultures and values together and brings harmony in the workplace.
• It identifies the potentials of the employee and appoints the task accordingly to ensure the maximum benefits.
• It manages and harnesses the potentials of the personnel and brings the best out of them.
• It ensures both the happiness of the personnel and happiness of the stakeholders.

The Functions HRM:

The basic HR functions according to Armstrong (2003) and Torrington et al (1991) are:

Human Resource Planning

The management determines the types and the number of human resources it needs to accomplish a task or reach the goal. In this case the management has to consider the financial support available to it.

Recruitment and selection;

Proper recruitment and selection procedure needs to be followed in order to meet the demand of required skills. In this case the necessary skills can be tested through written or oral test or a combination of both.

Reward systems;

Reward systems are structured and measured by the company to keep the employee motivated. It may include direct, indirect or psychological reward.

Employment legislation;

Terms and conditions, policies and opportunities for both parties should be open and written in order to avoid confusion. The HR department has to clearly mention the company policies in the employment contract.

Management of diversity;

As the business is now global the companies need to ensure an environment where employees from different cultural, religious and ethnic groups are treated equal. Again, Ford’s early realisation prompted them apply policies such as ‘our doors are open to men and women alike without discrimination and without regard to ethnic origin or personal beliefs (Storey, 2007).

Training and development;

To make the employees more efficient and prepare them for higher level of responsibilities the HRM department needs to have a continuous training and development process. Along with the routine process the companies also train their employees during a sudden demand such as an addition of new software or hardware.

Grievance and discipline;

To ensure time keeping, good employee relations, proper behaviour and professional attitudes the HR department formulate company procedures.

Termination of employment relation;

As part of disciplinary action, end of the contract, the part of an employment cut or the relocation of the employee the HRM takes all the necessary actions.

Strategic HRM:

Human resource management is no more limited to managing people, recruiting, selecting, training and all other conventional administrative duties. As the people are the core competitive advantage in today’s business, they are evaluated as the brainpower of the company rather than manpower. The way of business competition has become knowledge based (storey et al, 2009). Thus, the human resource department plays a more strategic role today. Apart from all the administrative works Strategic HR participates on planning corporate strategy. It plans out the necessary skills and required effort needed for a particular task to be carried out in future. SHRM also indicates a planned HR policy that integrates the business goal and may encompasses a number of HR strategies to improve the individual, thus business, performance to make the reward system more effective (CIPD , 2010).

Miller (1998) says if a company be able to establish an appropriate fit between strategy and HRM it can be considered as practising strategic HRM.

The business strategy and the strategic human resource management run in parallel, both are informative and communicative. Information available to SHRM about how people are motivated deployed and the availability of skills and knowledge might determine the business strategy, on the other hand when business strategy requires the improvement of customer service this will probably shape the training plans and performance improvement plans (CIPD, 2010).

Approaches to SHRM:

Strategic HRM is mainly a resource based philosophy and this encompasses three possible approaches (Armstrong, 2003). These are explained bellow:

Resource based SHRM: Resource based HRM strategy focuses on the performance of the employee and compare the productivity of its people with the competitors. In this approach learning is highly encouraged and the intellectual capital is developed and nurtured.

High-performance management approach: By developing the skills of the employees and improving the self management capacity and team performance the HR department can actually enhance the overall productivity and ensure customer satisfaction. Here, the quality leadership, vision, benchmarking and decentralization are suggested in order to have greater success (Stevens, 1998; cited in Armstrong, 2003).

High performance approach also require to have a rigorous recruitment and selection procedure, a proper learning and development process and merit pay and profit sharing to encourage high performance (Armstrong, 2003).

High involvement management: This approach says employees are to be treated as partners, their interests should be respected and their equal involvement in decision making should be encouraged. A very good communication between the managers and the employees that gives clear understanding of organizational vision, values and the expectation of both parties can achieve the organization its expected productivity.

Characteristics of SHRM:

There are some characteristics of SHRM can be drawn from the writing of Salaman et al (2005) and Armstrong (2003). These are discussed below:

-It connects the whole process to the business strategy and plays a proactive role rather than reactive. Instead of waiting for the instruction and complaints strategic HR managers take proactive steps and plans out the future outcome.

-SHRM is output driven. It takes all strategic steps to improve the performance of the employees and achieve the overall competitive advantage.

-It is more preventive than corrective and thus it value employees who are multi-skilled, cross-functional and team players. It expects people to do the things write the first attempt.

-It provides the guidance to other sections of the organization on what to measure, how to measure and how to report the outcomes of the measurement CIPD (2010)

Dave Ulrich (1997) suggested four strategic roles in order to be able to create real value to the business. These are:

1. Strategic partner: Here, the HR manger help the company turn the strategy into result. He will evaluate the existing strategy and figure out whether there is any strategic change needed.
2. Change agent: HRM helps the change happen and it happens faster. Also make sure human resource understand and cope up with the change.
3. Employee champion: managing and evaluating talents or the intellectual capital and
4. Administrative expert: Ensuring the all the human resource related jobs are done and they are done in a way that helps the business.

Effect of Globalization:

Globalization is shortening the trade barriers, making the market more open and thus more competitive. It is a very influencing source that fuelling the changes faster. Toyota, one of the largest car producers in the world, was the hundredth Japanese company when it decided to locate their first UK based manufacturing facility in Derby (Storey, 2007). But it took fifteen years, from 1972-87, for the first fifty Japanese companies to arrive in UK and the next fifty companies arrived in following two years time (Storey, 1992, p. 12). The challenges that globalization has brought to Human Resource Management and the they should be faced are:

Restructuring: Business is expanding in one way or other. Either two or more firms of same industry are merging together or one is acquiring the other. As a direct result of this the company eliminate layers of managers, closes facilities and cut jobs. HR managers are facing challenges in managing people who worked in different company cultures and some whom withdraw their loyalty. Even sometimes when the companies from different countries of different time zones merge than language and cultures become the main concern (CIPD, 2011).

-In this regard the HR professionals need work in co-operation with other organizational sections. Need to understand different organizational management policy and take the professional through smooth transition process.

Management of diversity: As an effect of globalisation people from different cultures, ethnic groups and religion come in one place and work together and they require a mutual understanding that make the way to productivity smooth.

-Here, the HR department needs to ensure a working environment that offers equal opportunity and respect to the people from all background (CIPD, 2010). They need to understand different cultural and religious values.

Technological innovation: Continuous innovation of new technology put pressure on HR department of the company to ensure a continuous training and development programme. Also, the technologies are reducing HR tasks that create the chance of HR job cuts.

-HR professionals need to make themselves equipped with latest technological knowledge. They need to diversify themselves and be useful in participating other organizational tasks.

Outsourcing: Outsourcing concept has come up along with the globalization. Organizations are now outsourcing some of their task to other companies that may be located some other part of the world. Thus, some of the HR functions now to be done by the line managers (Kumar, 2011).

-Along with other qualifications the line managers need to have the proper understanding of Human Resource Management. On the other hand the HR managers need to outline and monitor the HR task of the line managers.

Economic and political change: Economic changes such as global recession, change in government policy as a result of the shift in political power force the companies to close facilities and decrease production cost. As a direct result of this organizations decrease the size of HR body and put pressure on the remaining to be more productive (Kumar, 2011).

-Through the effective training and development process the HR managers need to ensure top level productivity of the human capital that will reduce production cost and make the organization more sustainable.

Conclusion:

Human Resource Management has come through different changes and challenges over the recent years. Though, the innovation of technologies is reducing some of the HR tasks but these affecting the HR roles very less. Also, outsourcing is also happening in a number of cases thus it is not affecting HR roles significantly (CIPD, 2006). Yet outsourcing may reduce the HR task of an organization but it is shifting those tasks to some other companies. The cost of running a HR department may go up and down but at the end it repay with the improved productivity it brings to the human resource of the company. The human resource still remains the competitive advantage factor and it will remain so in the future. Different market boundaries are falling apart and forming one single global market. In this marketplace different companies of an industry are experimenting all possible and available resources to achieve the competitive advantage. But it is human resource that can offer additional features to a business through a continuous development process. Thus, the task of people management is not limiting rather its expanding. A dynamic human resource management body can attract the best bunches of talent by designing and offering exceptional reward and career opportunity package and at the same time it can improve the productivity of its existing resource to the highest level by planning, developing and implementing an effective training and development programme. For instance, Microsoft and Google both have search engines. The number of users using a search engine determines its business success. Now, people will use the search engine that consists of highest number of resources and that offer additional features that carry the better value then the others. The human resources are bringing all the features and widening business opportunities in these both cases. And it is the HRM department that recruits those professionals through an effective selection and recruitment process, offering them their dream package of reward and compensation, and later on it brings those professionals to this level through a proper training and development. Thus, the Human Resource Management is crucial for organizational survival in today’s marketplace.