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CHAPTER 1
HUMAN RESOURCE MANAGEMENT: AN OVERVIEW
LEARNING OBJECTIVES
1.1 Define human resource management (HRM) and the importance of studying it
1.2 Describe who performs HRM
1.3 Explain how the HRM function serves as a strategic business partner and the
elements of the dynamic HRM environment
1.4 Discuss the role of HRM in building corporate culture and employer branding
1.5 Summarize HRM issues for small businesses
1.6 Identify ways that country culture influences global business
1.7 Explore essential skills for developing your career in HR or any other career path
KEY TERMS
Human resource management (HRM): The utilization of individuals to achieve
organizational objectives.
Staffing: Process through which an organization ensures that it always has the proper
number of employees with the appropriate skills in the right jobs, at the right time, to
achieve organizational objectives.
Performance management (PM): Goal-oriented process directed toward ensuring that
organizational processes are in place to maximize the productivity of employees, teams,
and ultimately, the organization.
Human resource development (HRD): Major HRM function consisting not only of
training and development, but also of individual career planning and development
activities, organization development, and performance management and appraisal.
Direct financial compensation (monetary compensation): Pay that a person receives in
the form of wages, salary, commissions, and bonuses.
Indirect financial compensation (benefits): All financial rewards that are not included
in direct financial compensation.
Nonfinancial compensation: Satisfaction that person receives from the job itself or from
the psychological and/or physical environment in which the person works.
Safety: Protection of employees from injuries caused by work-related accidents.
Health: Employees’ freedom from physical or emotional illness.
Human resource management professional: An individual who normally acts in an
advisory or staff capacity, working with other managers to help them address human
resource matters.
Line managers: Individuals directly involved in accomplishing the primary purpose of
the organization.
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HR outsourcing (HRO): Process of hiring external HR professionals to do the HR work
that was previously done internally.
Shared service center (SSC): A center that takes routine, transaction-based activities
dispersed throughout the organization and consolidates them in one place.
Professional employer organization (PEO): A company that leases employees to other
businesses.
Executive: Top-level manager who reports directly to a corporation’s chief executive
officer or to the head of a major division.
Generalist: Person who may be an executive and performs tasks in a variety of HR-
related areas.
Specialist: Individual who may be an HR executive, a human resource manager, or a
nonmanager, and who is typically concerned with only one of the six functional areas of
human resource management.
Profession: Vocation characterized by the existence of a common body of knowledge
and a procedure for certifying members.
Human capital: As defined by economists, human capital refers to sets of collective
skills, knowledge, and ability that employees can apply to create economic value for their
employers.
Union: Comprised of employees who have joined together for the purpose of dealing
with their employer.
Shareholders: Owners of a corporation.
Human resource information system (HRIS): Any organized approach for obtaining
relevant and timely information on which to base human resource decisions.
Corporate culture: System of shared values, beliefs, and habits within an organization
that interacts with the formal structure to produce behavioral norms.
Employer branding: Firm’s corporate image or culture focused on attracting the type of
employees the firm is seeking.
Country’s culture: Set of values, symbols, beliefs, language, and norms that guide
human behavior within the country.
LECTURE OUTLINE
HUMAN RESOURCE MANAGEMENT
Human resource management (HRM) can be defined as the optimal utilization of
individuals to achieve organizational objectives.
HUMAN RESOURCE MANAGEMENT FUNCTIONS
Six functional areas are associated with effective human resource management: staffing,
human resource development, performance management, compensation, safety and
health, and employee and labor relations.
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● STAFFING—Process through which an organization ensures that it always has
the proper number of employees with the appropriate skills in the right jobs, at the
right time, to achieve organizational objectives.
● Job analysis: Systematic process of determining the skills, duties, and
knowledge required for performing specific jobs in an organization.
● Human resource planning: Systematic process of matching the internal
and external supply of people with job openings anticipated in the
organization over a specified period of time.
● Recruitment: Process of attracting qualified individuals and encouraging
them to apply for work with the organization.
● Selection: Process through which the organization chooses, from a group
of applicants, those individuals best suited both for open positions and the
company.
● PERFORMANCE MANAGEMENT—A goal-oriented activity to ensure
organizational processes are in place to maximize the productivity of employees,
teams, and ultimately, the organization.
● Performance appraisal: A formal system to review and evaluate
individual or team performance.
● HUMAN RESOURCE DEVELOPMENT—A major HRM function consisting
not only of training and development, but also of career planning and
development activities, organization development, performance management, and
appraisal.
● Training: Activities designed to provide learners with the knowledge and
skills needed for their present jobs.
● Organization development (OD): A planned and systematic attempt to
change the organization to a more behavioral environment.
● Career planning: Ongoing process whereby an individual sets career
goals and identifies the means to achieve them.
● Career development: Formal approach used by the organization to ensure
that people with the proper qualifications and experiences are available
when needed.
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● COMPENSATION—All rewards that individuals receive as a result of their
employment.
● Direct Financial Compensation: Pay that a person receives in the form
of wages, salaries, bonuses, and commissions.
● Indirect Financial Compensation (Benefits): All financial rewards that
are not included in direct compensation such as paid vacations, sick leave,
holidays, and medical insurance.
● Nonfinancial Compensation: Satisfaction that a person receives from the
job itself or from the psychological and/or physical environment in which
the person works.
● EMPLOYEE AND LABOR RELATIONS—Businesses are required by law to
recognize a union and bargain with it in good faith if the firm’s employees want
the union to represent them. Internal employee relations comprise the human
resource management activities associated with the movement of employees
within the organization such as promotions, demotion, termination, and
resignation.
● SAFETY AND HEALTH—Employees who work in a safe environment and
enjoy good health are more likely to be productive and yield long-term benefits to
the organization.
● Safety: Activities involved in protecting employees from injuries caused
by work-related accidents.
● Health: Activities involved in securing the employees’ freedom from
illness and their general physical and mental well-being.
● HUMAN RESOURCE DATA ANALYTICS—Pervades all HRM functional
areas and the researcher’s laboratory is the entire work environment. Human
resource research is key to developing the most productive and satisfied
workforce possible. Data analytics go a long way towards establishing the HRM
function as a strategic business partner.
● INTERRELATIONSHIPS OF HRM FUNCTIONS—All HRM functional
areas are highly interrelated.
WHO PERFORMS THE HUMAN RESOURCE MANAGEMENT ACTIVITIES?
The person or units who perform human resource management tasks has changed
dramatically in recent years.
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● HUMAN RESOURCE MANAGEMENT PROFESSIONAL—An individual
who normally acts in an advisory (or staff) capacity when working with other
(line) managers regarding human resource matters.
● LINE MANAGERS—Individuals directly involved in accomplishing the
primary purpose of the organization. As the traditional work of HR managers
diminishes, line managers are stepping up and performing some duties typically
done by human resource professionals.
● HR OUTSOURCING—Process of hiring an external provider to do the work
that was previously done internally.
● Discrete services outsourcing: Involves one element of a business
process or a single set of high-volume repetitive functions such as
benefits.
● Business process outsourcing (BPO): The transfer of the majority of HR
services to a third party.
● HR SHARED SERVICE CENTERS—Take routine, transaction-based
activities that are dispersed throughout the organization and consolidate them in
one place.
● PROFESSIONAL EMPLOYER ORGANIZATION (PEO)—Company that
leases employees to other businesses. When a decision is made to use a
professional employer organization, the company releases its employees who
are then hired by the PEO.
HUMAN RESOURCE MANAGEMENT PROFESSION
There are various designations in the human resource management profession.
● EXECUTIVE—A top-level manager who reports directly to a corporation’s chief
executive officer or to the head of a major division is called an executive.
● GENERALIST—A person who may be an executive and performs tasks in a
variety of HR-related areas is called a Generalist.
● SPECIALIST—An individual who may be an HR executive, a human resource
manager, or a non-manager, and who is typically concerned with only one of the
five functional areas of human resource management.
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● PROFESSION: Vocation characterized by the existence of a common body of
knowledge and a procedure for certifying members. Professions have
representative organizations. In HR these include the Society for Human
Resource Management, the Human Resource Certification Institute, the
Association for Talent Development, and WorldatWork. Opportunities and
compensation in this profession are growing.
HUMAN RESOURCES AS A STRATEGIC BUSINESS PARTNER IN A
DYNAMIC ENVIRONMENT
Today’s HR professional must be a strategic business partner with upper management.
HR must thoroughly understand all aspects of the businesses they support. Working as a
strategic partner requires a deeper and broader understanding of business issues. The HR
professional must inform executives of the key role employees play in achieving
organizational goals. Doing so requires HR professionals to understand the role of capital
in value creation.
● CAPITAL: The factors that enable companies to generate income, increase
company stock prices, economic value, strong brand identity, and reputation.
● HUMAN CAPITAL: As defined by economists, refers to sets of collective skills,
knowledge, and ability that employees can apply to create economic value for
their employers.
DYNAMIC HUMAN RESOURCE MANAGEMENT ENVIRONMENT
Many interrelated factors affect the five HRM functions. Factors outside an
organization’s boundaries that affect a firm’s human resources make up the external
environment.
● LEGAL CONSIDERATIONS—Federal, state, and local legislation, and the
many court decisions interpreting this legislation, in addition to many presidential
executive orders, have had a major impact on human resource management.
● LABOR MARKET—Potential employees located within the geographic area
from which employees are normally recruited.
● SOCIETY—Society may also exert pressure on human resource management.
● Ethics: Discipline dealing with what is good and bad, or right and wrong,
or with moral duty and obligation.
● Corporate social responsibility: Implied, enforced, or felt obligation of
managers, acting in their official capacity, to serve or protect the interests
of groups other than themselves.
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● POLITICAL PARTIES—There are two major political parties in the United
States. These parties often have differing opinions on human resource topics.
● UNIONS—Employees who have come together for the purpose of dealing
collectively with their employer are collectively called a union. A union is treated
as an environmental factor because they become a third party when dealing with
the company.
● SHAREHOLDERS—Owners of a corporation are called shareholders. Because
shareholders have invested money in a firm, they may at times challenge
programs considered by management to be beneficial to the organization.
● COMPETITION—Firms may face intense competition in both their product or
service and labor markets.
● CUSTOMERS—People who actually use a firm’s goods and services.
Management has the task of ensuring that its employment practices do not
antagonize the members of the market it serves.
● HR TECHNOLOGY—The world has never before seen the rapid rate of
technological change that is occurring today. The development of technology has
created new roles for HR professionals but also places additional pressures on
them to keep abreast of the technology.
With the increased sophistication of technology has come the ability to design
more useful human resource information systems (HRIS). An HRIS is any
organized approach for obtaining relevant and timely information on which to
base human resource decisions.
Cloud computing, which is a means of providing software and data via the
Internet, and the use of mobile devices are changing the way that HR work is
performed. Social media is also an important HR tool, in particular for use in
recruiting.
● ECONOMY—As a generalization, when the economy is booming, it is often
more difficult to recruit qualified workers.
● UNANTICIPATED EVENTS—Many of the human resource functions require
modification when unanticipated events such as major weather incidents occur.
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THE ROLE OF HRM IN BUILDING CORPORATE CULTURE AND
EMPLOYER BRANDING
As an internal environmental factor affecting human resource management, corporate
culture refers to the firm’s social and psychological climate.
● CORPORATE CULTURE: The system of shared values, beliefs, and habits
within an organization that interacts with the formal structure to produce
behavioral norms. An infinite variety of cultures could exist, so one should view
them as a continuum.
● EMPLOYER BRANDING: The firm’s corporate image or culture created to
attract and retain the type of employees the firm is seeking
● Diversity management: Pursuing an inclusive corporate culture which
makes everyone feel welcome.
● Organizational fit: Management’s perception of the degree to which an
individual fits with the culture.
● New hire orientation: The corporate culture by showing how things are
done
● Talent management: The strategic endeavor to optimize the use of
employees to drive short and long-term organizational results.
● Organizational development: A means to achieving change in corporate
culture.
● Country’s culture: The set of values, symbols, beliefs, languages, and
norms that guide human behavior within the country. It is learned behavior
that develops as individuals grow from childhood to adulthood.
EMPLOYER BRANDING
Employer branding is the firm’s corporate image or culture focused on attracting the
type of employees the firm is seeking. Through employer branding, people get to know
what the company stands for, the people it hires, the fit between jobs and people, and the
results it recognizes and rewards.
HUMAN RESOURCE MANAGEMENT IN SMALL BUSINESSES
Typically the same HR functions previously identified must be accomplished by small
business, but the manner in which they are accomplished may be altered. Small
businesses often do not have a formal HR unit or HRM specialists, rather, line managers
handle the HR functions. The focus of their activities is generally on hiring and retaining
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capable employees. Some aspects of HR functions may actually be more significant in
smaller firms than in larger ones.
COUNTRY CULTURE AND GLOBAL BUSINESS
A country’s culture is the set of values, symbols, beliefs, languages, and norms that guide
human behavior within the country. Cultural differences between countries are a major
factor influencing global business. This borderless world adds dramatically to the
difficulty of managing employees. Cultural differences reveal themselves in everything
from the workplace environments to differences in the concept of time, space, and social
interaction. Cultural misunderstandings are common, but they can be hazards to
executives managing global workforces, creating significant challenges in managing a
firm’s human resources.
DEVELOPING SKILLS FOR YOUR CAREER
You will have the opportunity to develop many of the skills that employers have
identified as critical to success in the workplace.
● Communication: The effective use of oral, written, and nonverbal skills for
multiple purposes, effective listening, and teamwork.
● Critical thinking: The purposeful and goal-directed thinking used to define and
solve problems.
● Collaboration: Individuals actively work together on a task and construct
meaning and knowledge as a group through dialogue and negotiation.
● Knowledge applicator and analysis: The ability to learn a concept and then
appropriately apply that knowledge in another setting to achieve a higher level of
understanding.
● Business ethics and social responsibility: Business ethics are sets of guiding
principles that influence the way individuals and organizations behave within the
society that they operate.
● Corporate social responsibility is the implied, enforced, or felt obligation
of managers to serve or protect the interests of groups other than
themselves.
● Corporate sustainability focuses on the possible future impact of an
organization on society, including social welfare, the economy, and the
environment.
● Information technology application and computing skills: The ability to select
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and use appropriate technology to accomplish a given task.
● Data literacy: The ability to access, assess, interpret, manipulate, summarize, and
communicate data.
ANSWERS TO CHAPTER 1 QUESTIONS FOR REVIEW
1-1. Define human resource management. What HRM functions must be performed
regardless of the organization’s size?
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Employee and labor relations: Even with the projected decline in union
membership, a business firm is required by law to recognize a union, and bargain
with it in good faith, if the firm’s employees want the union to represent them.
1-2. Define profession. Do you believe that the field of human resource management is
a profession? Explain your answer.
1-3. What are the environmental factors that affect HRM? Describe each one.
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Copyright © 2019 Pearson Education, Inc.
● Customers: Because sales are critical to the firm’s survival, management has the
task of ensuring that its employment practices do not antagonize members of the
market it serves.
● HR technology: The development of technology has created new roles for HR
professionals but also places additional pressures on them to keep abreast of the
technology. With the increased sophistication of technology has come the ability
to design more useful human resource information systems (HRIS).
● Economy: The economy of the nation—on the whole—and of its various
segments is a major environmental factor affecting human resource management.
As a generalization, when the economy is booming, it is often more difficult to
recruit qualified workers. On the other hand, when a downturn is experienced,
more applicants are typically available.
● Unanticipated events: Occurrences in the external environment that could not be
foreseen such as a significant weather event.
1-4. How might HR technology affect the various HR functions?
1-5. Define corporate culture. Explain why corporate culture is a major internal
environment factor.
Corporate culture is defined as the system of shared values, beliefs, and habits within an
1-6. This chapter describes HR’s changing role in business. Describe each component
that is involved in HRM.
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1-7. How does HRM become more complex as a company’s workforce reaches 25
employees?
1-8. What are the various designations associated with the HRM profession?
1-9. What has been the evolution of HRM?
1-10. Explain how the seven employability skills matte regardless of your career
aspirations.
Communication is defined as effective use of oral, written, and nonverbal skills for
multiple purposes. You will gain insight into your and your group member’s strengths
and weaknesses pertaining to communication and collaboration skills.
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Knowledge application and analysis is the ability to learn a concept and then
appropriately apply that knowledge in another setting to achieve a higher level of
understanding. This allows you to think through opportunities and solutions to specific
problems and apply these processes to other situations you will likely encounter in the
future.
DISCUSSION OF CHAPTER 1 INCIDENTS
HRM Incident 1: HR after a Disaster
After Hurricane Rita struck Lake Charles in southwest Louisiana, many businesses
wondered if they would ever return to their former selves. Lake Charles, known for its
large and beautiful oak and pine trees, now had the job of removing those downed trees
conditions such as these, accidents were numerous. Often police did not have the
resources to ticket every fender bender, so unless there were injuries, insurance cards
were exchanged and the police went on to the next accident.
Months after Hurricane Rita struck, large and small businesses were still frantically
trying to find workers so they could start up again. It appeared that every business in the
premium rate plus tips. Restaurants that remained open often had a much younger staff
and it was evident that the managers and assistant managers were working overtime to
train these new workers. Restaurant patrons had to learn patience because there would be
mistakes by these eager, but largely untrained workers.
QUESTIONS
1-18. Which environmental factor(s) did Hurricane Rita affect? Discuss.
1-19. How were the HR functions affected by Hurricane Rita?
1-20. Do you believe that the HR situation described regarding Hurricane Rita would
be typical in a disaster? Explain.
1-21. How do these changes at Yahoo influence the company’s employment branding?
1-22. As an HR professional, what would you have done after Mayer chose not to take
more time allowed under Yahoo’s parental leave policy?