CHAPTER 1
The Nature of Human Resource Management
Learning Objectives
After studying this chapter, the student should be able to:
1. Describe contemporary human resource perspectives.
Chapter Outline
Opening Case: Putting People First
At first glance Starbucks, American Express, and FedEx might appear to have little in common.
Introduction
All organizations strive to achieve their goals by combining various resources into goods and
services that are of value to customers. Managers are beginning to view less tangible resources as
the most critical for gaining a competitive advantage. For example, successful organizations need
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Chapter 1: The Nature of Human Resource Management
I. Contemporary Human Resource Management Perspectives
The passage of Title VII of the Civil Rights Act of 1964 (and various court decisions that
followed it) made it clear that organizations had to find ways to hire, reward, and manage people
effectively within the limits of the law. As a result, the human resource management function
came to require dedicated professionals who could balance legal and ethical concerns with the
need of organizations to survive and be profitable.
Many aspects of the modern HRM function actually date back to the 1980s and 1990s. Some of
these firms went out of business, and employees lost their jobs. Some firms were acquired by
other, more successful companies. As knowledge became more critical in gaining competitive
advantage, HR managers helped define strategies to acquire or develop knowledge resources.
HR in the 21st Century: What Goes Around Comes Around
During challenging economic times like in the last few years, the press routinely reports large
job cuts and high unemployment. But at the same time, in many sectors U.S. businesses are
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Chapter 1: The Nature of Human Resource Management
II. Evolution of the Human Resource Function
The Industrial Revolution of the eighteenth century, sparked a greater interest in business growth
and expansion, and large-scale business operations began to emerge throughout Europe and the
A. Origins of the Human Resource Function
As businesses such as General Motors (started in 1908), Bethlehem Steel (1899), Ford Motor
Company (1903), Boeing (1916), and other industrial giants launched during this era
Darwin’s work was used by some theorists to popularize the idea that individuals differed
from each other in important ways. In France, the work of Alfred Binet and Theophile Simon
led to the development of the first intelligence tests. By 1923, books such as Personnel
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Chapter 1: The Nature of Human Resource Management
in organizations and that human behavior at work was something managers really needed to
understand more fully.
B. Personnel Management
Growing organizations began to create specialized units to cope with their increasing hiring
needs, deal with government regulations, and provide a mechanism for better dealing with
During this period, personnel management was concerned almost exclusively with hiring
first-line employees. The manager who ran the personnel department was soon called the
personnel manager. Personnel management evolved further during World War II.
Although other managers accepted personnel as a necessary vehicle for hiring new operating
employees, personnel management was also seen primarily as a routine clerical and
C. Human Resource Management in the Electronic Age
One of the most dramatic changes in people’s lives over the past 10 years or so has been the
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Chapter 1: The Nature of Human Resource Management
As organizations introduced new technologies for manufacturing, communication, and human
resource management, they also increased their need for more specialized employees.
Knowledge workers are employees whose jobs are to acquire and apply knowledge, and they
contribute to the organization by the nature of what they know and how well they can apply
what they know.
D. Emerging Human Resource Challenges
The financial crisis that swept the world in 2008–2009 created havoc in most businesses.
Many firms—including several large organizations—went out of business or came close to it.
III. Goals of Human Resource Management
Figure 1.1 illustrates the four basic goals of human resource management functions in most
organizations today.
A. Facilitating Organizational Competitiveness
All organizations have a general set of goals and objectives that they try to accomplish.
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Chapter 1: The Nature of Human Resource Management
B. Enhancing Productivity and Quality
Productivity is an economic measure of efficiency that summarizes and reflects the value of
outputs created by an individual, organization, industry, or economic system relative to the
C. Complying with Legal and Social Obligations
A third fundamental goal of the human resource management function today is to ensure that
the organization is complying with and meeting its legal and social obligations. The passage
D. Promoting Individual Growth and Development
A fourth goal for human resource management in most contemporary organizations is
promoting the personal growth and development of its employees. This goal usually includes
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Chapter 1: The Nature of Human Resource Management
IV. The Setting for Human Resource Management
Traditionally, all HR activities resided in a separate department, but this model is becoming rare.
Instead, HR activities are carried out by both line and staff managers.
A. Human Resource Management as a Staff Versus Line Function
Line managers were those directly responsible for creating goods and services; that is, their
contributions to the organization were generally assessed in terms of their actual contributions
In some organizations, the HRM function is structured in a completely different way. In these
firms, the human resource management department is structured around “centers of
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Chapter 1: The Nature of Human Resource Management
B. The Human Resource Department in Smaller Versus Larger Organizations
Responsibilities for carrying out HR functions may reside in a separate HR department, but
many smaller organizations do not have such departments and must deliver the required
services in different ways. Most small organizations require line managers to handle their
basic HR functions.
C. The Human Resource Management System
A human resource management system is an integrated and interrelated approach to
managing human resources that fully recognizes the interdependence among the various tasks
and functions that must be performed. This viewpoint is illustrated in Figure 1.3. By viewing
Utility analysis is the attempt to measure, in more objective terms, the impact and
V. Human Resource Managers
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Chapter 1: The Nature of Human Resource Management
A. Professionalism and Human Resource Management
Accompanying the shifts and changes in human resource functions and importance is a
greater emphasis on professionalism, which is reflected by a clear and recognized knowledge
base and a generally understood way of doing business. HR managers are no longer regarded
as second-class corporate citizens, and more and more organizations are including a stint in
B. Careers in Human Resource Management
One way to enter this profession is to get a degree in human resource management (or a
related field) and then seek entry-level employment as an HR manager. Alternative job
Closing Case: Low Prices, High Pay
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Chapter 1: The Nature of Human Resource Management
Case Summary
Most major retailers follow a simple path—low prices made possible in part by low wages and
minimal benefits for their employees. However, in recent years another set of retailers has started
to thrive, often using a different business model—paying employees more and treating them
Case Questions
1. Compare your shopping experiences at retailers like Costco, Nordstrom, or Whole Foods
with experiences you may have had at Walmart, Sears, or Kroger.
2. Under what circumstances might Costco have to start paying its workers less?
3. Costco has a policy of not hiring business school graduates because it wants employees to
start at the bottom and work their way up. What are the advantages and disadvantages of
this approach?
Students’ answers will vary. Some of them may say that a disadvantage of not hiring
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Chapter 1: The Nature of Human Resource Management
The following items appear on the in-text Instructor Prep Cards. These notes and
suggested talking points should help the instructor conduct these exercises with the
students.
Discussion Questions
1. Identify five examples of human resources in your college or university.
Students will identify a variety of activities. Examples may include recruiting or hiring
2. Summarize the evolution of the human resource function in organizations.
The industrial revolution in the eighteenth century sparked business growth and expansion,
3. Summarize the basic ideas underlying the human resource management system concept.
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Chapter 1: The Nature of Human Resource Management
Human resource activities are not self-contained, but instead are highly interrelated and
4. What are the goals of human resource management?
The four goals given in Chapter 1 are facilitating organizational competitiveness,
5. Who is responsible for human resource management?
In contemporary organizations, human resource management responsibilities are shared.
Human resource managers and staff within the human resource department may carry out
6. Do you think human resource management would have become more important even if
laws such as the 1964 Civil Rights Act had never been passed? Why or why not?
Students’ answers will vary. However, it is likely that human resource management would
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Chapter 1: The Nature of Human Resource Management
7. What are some of the challenges that will face human resource managers as a result of the
recent Supreme Court decisions regarding same-sex marriage?
Students’ answers will vary. Some of them may take the instance of the Supreme Court
8. Identify several consequences of an organization’s failure to recognize that its human
resource management practices make up an interrelated system.
Students’ examples will vary. A compensation system may be redesigned, encouraging
9. Do you think some human resource management goals are more important than others?
Why or why not? What implications might be drawn if a particular manager felt that
certain goals were indeed more important than others?
According to the text, the four goals of human resource management are: facilitating
organizational competitiveness, enhancing productivity and quality, complying with legal
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Chapter 1: The Nature of Human Resource Management
10. Do you think it might be possible for a large company today to function without a human
resources department?
It is possible, but not likely. As human resource issues become increasingly important and
Ethical Dilemmas in HR Management
Scenario Summary
As a top human resource executive in a large, privately held company, students are responsible
for compensation and benefits. The firm’s owners are satisfied with financial performance. The
students’ boss takes little interest in specific human resource issues, as long as things are going
well. The high quality of management in your firm is recognized. The student have been
researching outsourcing opportunities and have found that the company could achieve modest
savings by outsourcing compensation and benefits. Students would feel an obligation to consider
this action, although fifteen employees may lose their jobs and their position would be
diminished in importance as a result of the action. What do they do?
Questions
1. What are the ethical issues in this situation?
The students could discuss the following—what is one’s responsibility to self versus one’s
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Chapter 1: The Nature of Human Resource Management
2. What are the basic arguments for and against outsourcing in this situation?
Arguments for outsourcing are as follows:
3. What do you think most managers would do? What would you do?
Some students may say that most managers would keep quiet so that their jobs would not
be diminished but would retain their importance. If the owners are satisfied with the firm’s
Assignment
This is an excellent exercise to get students thinking about the relationship of human resource
management to their chosen majors and subsequent career paths. Many students will not have
considered human resource management as a career option. Students should be encouraged to
Step 1 (5 minutes): The instructor should divide the class into groups of four to five members.
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Chapter 1: The Nature of Human Resource Management
Members should introduce themselves to one another if necessary.
1. How does HRM affect each academic major and set of career objectives represented in the
group?
Human resource management affects each student’s academic major and set of career
2. How would group members feel about starting their careers in an HR department?
Students’ answers will vary. Students may find human resource management very
3. How would group members feel about taking a position in human resources later in their
careers?
Students’ answers will vary. Students may cite the increasing importance and strategic role
4. What specific skills and abilities do group members believe are most important for
someone who wants to work in human resources?
Students’ answers will vary. Students may cite skills and abilities such as a degree in
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Chapter 1: The Nature of Human Resource Management
5. What will group members expect from the HR department at the organizations where they
begin their careers?
Students’ answers will vary. Students may expect fair and ethical treatment, responsible
Step 4 (15 to 30 minutes): Each group will select a representative to summarize the group’s
responses either verbally or in writing. If responses are shared verbally, the instructor should