In order to ensure the sustainable growth and profitable development the workforce of an organisation has to perform adequately. Therefore, managing the workforce can control the entire organisational operation and work performance. Eventually this workforce management can lead to optimum profitability and efficiency. Human Resource Management of an organisation emphasises the workforce control and management system, which is valuable and can be a unique source for competitive advantage.
In this paper, the contribution of Human Resource Management will be examined with relevant examples in order to identify the major attributes of involvement of HRM with the business performance, business planning, and information. Initially, the traditional and modern business performance indicators will be described followed by the HR key roles in planning and change management. After that, the different sources of business contextual data will be examined considering their essentiality in business operation and organisational performance control.
Indicators:
Measuring and managing the business performance is a complex job and it involves the contribution of the academics, business managers, consulting firms and other experts. There is always a conflict regarding the usage of the modern indicator or the traditional indicator for the purpose of measuring the business performance. However, measuring the business performance depends upon the value management (Morgan 2012). The traditional approaches that are used to measure the business performance are entirely based on the primary goal of the company. One of the prime goals of a company is to maximize its profit margin and to express this large number of indicators is used. However, it is important to note that a large number of the traditional indicators are not always compatible with each other. The traditional financial indicators can show the overall results, while they are not able to show the area a company needs to be better to accomplish its goals (Janji?, Todorovi? and Jovanovi? 2015). The modern approach deals with value-based management and it links the activities of the company with the people. In the modern approach, economic profit is included within the indicators and it takes into account costs of capital (Svobodová 2015).
Traditional indicators- in order to analyse the business performance, the traditional indicators that are used are the profitability indicators, indicators of cash flow, an absolute value of earnings. The most common is the indicators of earnings and it is expressed in terms of the depreciation, taxes, earnings before interests, and net income. The indicators of cash flow provide information related to expenses and cash income. Such as free cash flow or operating cash flow and total cash flow. Profitability indicator is the final group of the indicator and it shows the earnings per share, invested capital, assets, return on sales and profit. Traditional data have their own share of disadvantages and because it is based on the accounting data and the data on earnings. However, alternative cost, time value of money, risk and inflation are not taken into account (Vimrová 2015).
Modern indicators- the modern indicators came forth due to the various disadvantages that are being experienced by the traditional indicators. The criticism of the traditional indicator is based on performance evaluation by the accounting data and valuation of the company by the market data. The highest goal of a company is to value the capital owners and it is one of the modern indicators. Criteria and requirements for the measuring the business performance led to the formation of the different types of the indicators and concepts. The modern indicators include the cash flow return on investment, shareholder value added, economic value added, total shareholder return, excess return, market value added, discounted cash flow. Economic profit is included within the indicators and it takes into account the costs of capital. Alternative costs depict the opportunities that the business owners have missed (Momani 2016).
In order to develop an effective business strategy, it is highly crucial for the management to incorporate human resources during business planning. The following are the major contributions of HR associated with the business planning of an organization;
Selection of the efficient employees
Once the goals of an organization get determined, employees play a major role to fulfil the goals. Hence, in order to achieve the goal, it is highly crucial to have right person in right place. Specially, in case of new hiring, recruiting skilled candidates who are appropriate for the job profile will help the organization to reach the goal effectively (Armstrong and Taylor 2014). Moreover, incorporating the HR during business planning will enable the same in developing the policies and procedures keeping in mind the goal of the organization. This in the long run will help the organization to prevent conflict between what a company wants and what is truly realistic in HR terms.
Training and development
According to researchers, 20 percent of the skills of the workforce will be required ten years from now (Kerzner and Kerzner 2017). That means training and development are guaranteed to be needed at some point of the strategic growth process. By incorporating Human recourse development employees during business planning, it will be easier for the mentioned department to address any issues and provide input that will help the employees to achieve its goal faster
Considering the fact that change management involves a good number of issues associated with it, the HR department of an organization plays a major role in mitigating the issues. The chief contribution of HR in change management is as follows;
Overcoming resistance:
HR helps the management of an organization to overcome the resistance of the employees to wads the organizational changes by clearly and consistently communicating about the changes in advance of its implementation. The HR department also helps the employees to understand why the changes have been done and the potential ways by which the changes may affect them (Uhl and Gollenia 2016).
Engaging the employees
The HR ensure high employee engagement during organizational change. The mentioned department develops a team approach, which includes the perspective of the employees from a variety of departments as well as levels (Goetsch and Davis 2014). HRD also assign as well as clarify the role as well as responsibilities of each employee. It also includes resistance leaders in the change process to help overcome pushback from other employees
Implementation of change in phases
Organizations with major change initiatives, prefers phased approach to ensure smooth and transition to the new system Hr helps the organization to prepare, manage and reinforces the change by developing change management team, collecting analyzing and implementing corrective action where needed respectively.
The business contextual data and information can be assessed and used for planning, management and development purpose in every part of the business including the HR operation (Collings Wood and Szamosi 2018). The business contextual data can be subdivided into two major sections, namely Internal information and external information.
Internal information of any business operation refers the workforce, work process, structure and scope related information that define the strength and weakness of any business organisation. In the following section, the different part of internal information are described.
Organisational structure:
The organisational structure implies the hierarchy and distribution of the employees of the organisation as per their designations, roles and responsibilities. The organisational structure is a major part of the HR management and planning which provide the outline of the organisational workflow structure (Bailey et al. 2018). The staffing needs, training, development and other employment procedures are closely related with the organisational structure. The organisational structure also helps to distribute the work procedure and roles among the employees depending on their position.
Financial management, capital requirement, asset management and cost estimation are the core part of the budget and cost management procedure. The effectiveness of budget planning defines the feasibility of any organisational plan and optimisation. In human resource functionality, employee payroll, compensation, recognition and award system are the major parts of budget estimation. Apart from that, the cost analysis for training and development are also essential. An accurate budget plan can increase the profitability of the business by balancing the investment and market return.
The Human Resource Metrics is a measurement procedure used for determination of value, effectiveness, turnover rate, training, return on human capital, cost of labor and expenses per employee. In strategic human resource management, HR matrix is a major part through which the HR management can support and improve the decision-making system of any organisation (Jackson, Schuler and Jiang 2014). Many metrics are helpful to those accountable to administer an HR process since they provide insight view into procedure improvement scopes.
As a company grows, it has an additional operational requirement that cannot be accomplished by work process and organisational purpose. The skill level and productivity assessment allows the company to gauge the potential improvement and profitability. In this context, the KPI or key performance indicator is a crucial tool that measures the work efficiency of labour by utilising scorecard system (Taylor, Doherty and McGraw 2015). Direct and indirect monitoring help the organisation to measure the employee performance with more accuracy. Annual reviews, a wellness program, morale-building activities, employee newsletter and frequent communications are the key activities for company’s successes.
Work culture is a concept that deals with the vision, work ethics, employee-employer relationship, leadership approach, management consideration, ideologies and principals of the organisation. These factors work as the business philosophy that helps to maintain healthy and sustainable relationship within the workforce (Brewster 2017). The healthy and friendly work environment can reduce the employee turnover, performance issues, employee complaint, regulation violation and other discrepancies. During the organisational change management and developmental planning workplace culture, ethics and employee relationship work as the key success factor.
External information of any business operation refers the external regulators, legal obligations, political impact, trade relationship and compliance related information that define the opportunities and potential threats of any business organisation. In the following section, the different parts of External information have been described.
HR trends:
Hr trends refers the current trends of employment, increment, compensation policies of the industry. As an example, if most companies are following a third party employment policy, an organisation should also consider that trends and related consequences. HR manager should effectively analyse and predict the needs of changes in the existing employment and other HR related polices (Kramar 2014). The adaptation capability of any human resource operation can indicate the potential sustainability of the workforce and their performance.
Labour Pool:
The term Labor Pool emphasise the labour market from which an organisation can recruit new employees. The availability of employees in labour pool regulates the selection and recruitment procedure of any organisation (Bratton and Gold 2017). The Human resource department has to keep updated information about the labour market and the availability of the potential workforce to develop their internal recruitment and promotion procedure as well. Apart from that, the Human Resource Management should maintain good relationship with the labour market to select the most appropriate candidate for them.
Government regulations:
Government regulations such as minimum wages low, maximum work hours regulation, health and safety compliance, employee compensation are the major external factors that have huge influence of organisational HR operation (Sikora, and Ferris 2014). The Human Resource Department of any organisation should ensure that their current HR related policies are completely following the rules and regulations of state and national level government.
From the gained knowledge, the learner can develop a HR system that helps the management of an organization to overcome the resistance of the employees towards the organizational changes by clearly and consistently communicating about the changes in advance of its implementation. After gaining the knowledge and skill learner can incorporate the HR activities during business planning, which will enable the same in developing the policies and procedures keeping in mind the goal of the organization. In the long run this will help the organization as well as the learner to prevent conflict between what a company wants and what is truly realistic in HR terms. Apart from that, the strategic human resource management allows the learner to improve the HR work efficiency to further level in professional environment. In working practice, the learner can develop a Human resource team to provide strong and effective support for the changing environment, ensuring that the managers are provided with effective training as well as information so that they can solve the issues faced by the employees.
Conclusion:
From the above discussion, it can be concluded that Human Resource Management of an organisation emphasises the workforce control and management system, which is valuable and can be a unique source for competitive advantage. Apart from that, it is important to note that a large number of the traditional indicators are not always compatible with each other. The highest goal of a company is to value the capital owners and it is one of the modern indicators.
The staffing needs, training, development and other employment procedures are closely related with the organisational structure. The effectiveness of budget planning defines the feasibility of any organisational plan and optimisation. In strategic human resource management, HR matrix is a major part through which the HR management can support and improve the decision making system of any organisation. External information of any business operation refers the external regulators, legal obligations, political impact, trade relationship and compliance related information that define the opportunities and potential threats of any business organisation.
References:
Armstrong, M. and Taylor, S., 2014. Armstrong’s handbook of human resource management practice. Kogan Page Publishers.
Bailey, C., Mankin, D., Kelliher, C. and Garavan, T., 2018. Strategic human resource management. Oxford University Press.
Bratton, J. and Gold, J., 2017. Human resource management: theory and practice. Palgrave.
Brewster, C., 2017. The integration of human resource management and corporate strategy. In Policy and practice in European human resource management (pp. 22-35). Routledge.
Collings, D.G., Wood, G.T. and Szamosi, L.T., 2018. Human resource management: A critical approach. In Human Resource Management (pp. 1-23). Routledge.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.
Jackson, S.E., Schuler, R.S. and Jiang, K., 2014. An aspirational framework for strategic human resource management. The Academy of Management Annals, 8(1), pp.1-56.
Janji?, V., Todorovi?, M. and Jovanovi?, D., 2015. A Comparative Analysis of Modern Performance Measurement and Management Models of Companies. Economic Themes, 53(2), pp.298-313.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Kramar, R., 2014. Beyond strategic human resource management: is sustainable human resource management the next approach?. The International Journal of Human Resource Management, 25(8), pp.1069-1089.
Momani, M.A., 2016. The Ability of Traditional and Modern Performance Indicators in Interpreting the Phenomenon of Earnings Management: Evidence Manufacturing Firms in Amman Stock Exchange. Asian Journal of Finance & Accounting, 8(1), pp.77-99.
Morgan, N.A., 2012. Marketing and business performance. Journal of the Academy of Marketing Science, 40(1), pp.102-119.
Sikora, D.M. and Ferris, G.R., 2014. Strategic human resource practice implementation: The critical role of line management. Human Resource Management Review, 24(3), pp.271-281.
Svobodová, L., 2015. Modern indicators of financial performance of the company. Ekonomika a Management, 2015(2).
Taylor, T., Doherty, A. and McGraw, P., 2015. Managing people in sport organizations: A strategic human resource management perspective. Routledge.
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Vimrová, H., 2015. Financial Analysis Tools, from Traditional Indicators through Contemporary Instruments to Complex Performance Measurement and Management Systems in the Czech Business Practice. Procedia Economics and Finance, 25, pp.166-175.
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