Topic Introduction

LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Explain the concept of human resource management in an organisation;
2. Describe the four functions of human resource management; and
3. Discuss the four internal environmental factors that may influence
human resource management.

INTRODUCTION
Can you imagine an organisation without employees, supervisors, managers or
executives? Isnt it weird? Without humans, an organisation cannot exist. In order
to form an organisation, a group of people must work together toward achieving
common objectives. An efficient and successful organisation is able to combine
the capabilities, knowledge and skills of individuals in the organisation.
All managers can be considered human resource managers as they are involved
in activities such as recruitment, conducting interviews, selections and training
sessions. What does human resource management mean? What are the functions
of human resource management in an organisation?
Topic 1 explains the definition of human resource management, and the functions
of the management of human resources. Subsequently, this topic also outlines the
relationship between the functions. You will also discover how the environment
influences the functions of human resource management.

1.1

DEFINITION OF HUMAN RESOURCE

MANAGEMENT

Human resource describes the human employed in an organisation. Humans are

considered as a valuable resource and at times, difficult to replace owing to the
skills, knowledge and the ability they possess, which may increase the efficiency

TOPIC 1

INTRODUCTION

and effectiveness of the organisation. The management of human resources is a

process of attracting, training and organising a talented and efficient workforce.
Placing managers, designing jobs and teams, creating trained employees, and
offering rewards for an employees successes are important elements in the
management of human resources. A manager carries out his duties through the
capabilities of the employees in an organisation and this requires an effective
management of human resources. As a result, managers from all levels of
employment must understand human resource management.
Human resource management becomes a priority for organisations, more so in
this era of technology. This is crucial as managers realise that technological input
have limitations, despite the advancement of technology. As technological
advancements are available worldwide, being in possession of technology does
not necessarily guarantee the success of an organisation. As a whole, employees
in an organisation are responsible for the success or failure of a business.
At present, employees in an organisation consist of people with different
backgrounds, races, religions, genders and levels of education. To work well with
other individuals, an employee must understand human behaviour. They should
be aware of the existing systems and practices that help to build a trained and
motivated workforce. The task of a manager isnt limited to the recruitment of
employees for a job but he is also responsible in ensuring the job satisfaction of
employees.

SELF-CHECK 1.1
What do you understand about human resource management? Explain
in your own words.

1.2

FUNCTIONS OF HUMAN RESOURCE

MANAGEMENT

There are four primary functions involved in the effective management of human
resources. They are acquisition, development, remuneration, health and safety of
human resources and industrial relations. Figure 1.1 shows these functions. Let
us look at each function.

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INTRODUCTION

Figure 1.1: Functions of human resource management

1.2.1

The Acquisition of Human Resources

The process of acquiring human resources is an important function that can

contribute to the success of an organisation. An organisation must possess
individuals who have the capability, skills and qualifications to carry out a task.
In order to acquire such individuals, human resource planning, recruitment and
selection must be carried out. An organisation must ensure that the workforce is
productive and continues to be productive in a short or long-term period. An
effective selection of human resources determines the success and failure of an
organisation. The acquisition of human resources comprises three important
components and these are the planning, recruitment and selection of human
resources.
(a)

Human Resource Planning

Before an organisation carries out the recruitment and selection processes, it
must conduct the planning for human resources. The planning for human
resources is a process to systematically research the requirements of human
resource, in order to ascertain the required number of skilled employees
and to ensure that the skills required are suitable for the job offered. The
planning for human resources will be discussed in depth in Topic 3. Job
analysis is another useful tool for employers to plan for the supply of
human resources in an organisation. Job analysis is a process to formulate
detailed job procedures with regard to specific tasks related to the job, and
to determine the relationship between a particular job and other jobs. It also
determines the required knowledge, skills and capabilities necessary for an

TOPIC 1

INTRODUCTION

employee to carry out his job well. The topic of job analysis will be
discussed in depth in Topic 2.
(b)

Recruitment
Recruitment is the process of attracting individuals who are qualified and
encouraging individuals to apply for employment in the organisation. Prior
to beginning the search for qualified employees, the organisation must be
aware of the job specifications needed to fill the position. Job specification is
a statement that outlines the knowledge, skills and capabilities that must be
possessed by an individual in order to perform the job. Aside from job
specifications, managers and supervisors also require a job description to
select and match an employee to the job. The job description is an account
that outlines the duties and responsibilities of a job. Recruitment will be
discussed in Topic 4.

(c)

Selection
Selection is a process of choosing a suitable individual from a pool of
applicants to fill a vacancy. Effective selection objectives include matching
the characteristics of an individual capability, experience and academic
qualifications with the requirements of the job. The managements failure
to find a suitable match can affect the future performance and job
satisfaction of the employee. The selection process can be considered most
difficult for a manager and this will be discussed in depth in Topic 5.

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INTRODUCTION

ACTIVITY 1.1
Browse the Internet on any homepage of companies and discuss with
your classmates in the class / myVLE forum about what advantages
do you see in using the Internet to attract job candidates.

1.2.2

The Development of Human Resources

The development of human resources helps an individual and team members to

be more effective. It is a necessity, owing to the constant changes of the human,
technological, job and organisational factors. Therefore, an organisation must
train and develop its employees in order to achieve higher productivity levels.
Human resource development also prepares individuals to take on higher
positions. The primary components of human resource development are
orientation, employee training and development, and performance appraisals as
seen in Figure 1.2. These topics will be discussed in Topic 6 and 7.

Figure 1.2: The primary components of human resource development

(a)

Orientation
Orientation is a formal process aimed at familiarising new employees with
their jobs, regulations and the organisations objectives, and introducing
them to their colleagues. New employees are required to attend the
orientation programme sponsored by an organisation. This is important to
familiarise the employee with the job in the organisation.

(b)

Employee Training and Development

Employees in an organisation need continuous training to maintain
effective performance levels and to adapt to new working practices.

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INTRODUCTION

Employee Training and Development may be defined as a set of activities

that offer employees the opportunity to acquire and improve their work
skills. Through training, the organisation can encourage work practices that
are healthy, productive and conducive to the environment of the
organisation.
(c)

Performance Appraisals
A manager must assess the performances of employees based on the
responsibilities handed to them. The manager may do so via performance
appraisals. For this purpose, a manager uses forms and evaluation systems
designed by the human resource department. Performance appraisals
comprise the process of identifying, measuring and managing the
performance levels of individuals in an organisation. Through performance
appraisals, an employees performance in carrying out the tasks handed to
him can be appraised.

ACTIVITY 1.2
In your opinion, why an employer must train its employees? Search
further information about employees training from the Internet.

1.2.3

Remuneration, Health and Safety of Human

Resources

The remuneration, health and safety of human resources is an important

mechanism that can be used by firms and managers to attract, retain and
motivate competent employees, so that their performance is in accordance with
the organisations objectives. Remuneration represents the reward offered by an
organisation to an employee based on his contributions and service to the
organisation. Examples include gratuities, pensions and retirement benefits. This
is accepted by an employee when he agrees to be employed by the organisation .
Benefits and rewards received may be a combination of any one of the following:
(a)

Wages
Money in the form of Ringgit and Cents received by an individual for
carrying out a task.

(b)

Benefits
A monetary reward apart from the basic salary, such as annual leave, sick
leave and insurance.

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INTRODUCTION

(c)

Incentives
A reward given to motivate employees. For example, sales incentives in the
form of commissions or holiday vouchers that are given for achieving sales
targets. Other types of incentives include performance bonuses, attendance
bonuses and rewards for excellent service.

(d)

The Health and Safety of Employees

The organisation is responsible for the health and safety of its employees.
The organisation must ensure that the job they offer is safe and will not
jeopardise the health of the employee who performs it. Health refers to the
general physical and mental wellbeing of an employee, while safety means
to protect an employee from injuries caused by accidents at the workplace.
An employee who is well protected and healthy will be productive and will
make contributions to the organisation. We will discuss the health and
safety issues of employees in depth in Topic 9.

1.2.4

Industrial Relations

At the beginning of this topic, we were told that an organisation comprises

several individuals whose aim is to achieve the objectives of the organisation.
Sometimes, the needs of an individual conflict with the objectives of the
organisation or the work ethic of an individual may differ from the organisational
system. This may create problems. Industrial relations refers to established
systems and rules that have been agreed upon in the organisational policies
toward creating a specific work environment. There are two components in
industrial relations, namely:
(a)

Employer-employee Relationship
To maintain a satisfactory work environment, an organisation must pay
attention to the relationship between the employer and employees. A
working environment full of conflict between employees or between
employees and employers may affect the productivity and performance of
the organisation.

(b)

Employee Discipline
Industrial relations also include discipline and disciplinary actions against
employees who defy organisational rules and policies.

1.2.5

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INTRODUCTION

The Relationship between Various Functions of

Human Resource Management

All functions of human resource management that were discussed earlier are
interlinked. Managers must be aware that a decision made on one function will
affect other functions directly. For example, an organisation that focuses on
recruiting qualified candidates but does not offer satisfactory remuneration
schemes will result in a waste of the companys time and money. Skilled and
productive employees will lose their motivation if they are not given adequate
training and development opportunities to acquire new skills. In addition,
benefits and rewards alone are not enough; an employee should also be offered a
safe and healthy work environment.

ACTIVITY 1.3
Draw a diagram that shows the relationship between each function of
human resource management. Compare your diagram with your
classmates and discuss it.

1.3

FACTORS THAT INFLUENCE HUMAN

RESOURCE MANAGEMENT

We have discussed the definition of human resource and its various functions.
Now, let us look at how the environment can influence the management of
human resources. There are many factors that influence human resource
management. These factors are categorised as internal and external
environments. Figure 1.3 shows the external environment factors while Figure 1.4
illustrates internal environmental factors that influence human resource
management.

1.3.1

The External Environment

The external environment comprises factors that are shown in Figure 1.3 and
these include factors such as economy, technology, consumers, competition,
shareholders, trade unions, labour markets and statutory requirements. These
factors, either separate or combined, may influence the management of human
resources.

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INTRODUCTION

Figure 1.3: The external environment that influences human resource management

(a)

Economy
A countrys economic condition is an environmental factor that has big
influence on human resource management. Generally, the economic climate
will determine the demand and supply of employees. During economic
depression, more candidates will apply for jobs and therefore organisations
have larger labour market to choose from.
The economic climate also influences the development of the workforce.
During economic depression, organisations will reduce staff training and
development compared to during economic prosperity. For example,
companies that contribute to the Human Resource Development Fund will
be allowed to take out a part of their contributions for staff development.
Another function of human resource management influenced by the
economic factor is benefits and rewards. During economic prosperity,
organisations will offer bonus and increment. On the other hand, during
depression, an organisation may cease the payment of bonus and
increment, or employees may have to face salary cut. Industrial relations
between employees or trade unions and employers may be tense, especially
if the organisation adopts the retrenchment strategy.

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ACTIVITY 1.4
In your opinion, what are the effects of economic depression in 1998
on human resource management of an organisation?

(b)

Technology
Technology changes at such a rapid pace. One of the most challenging
aspects of human resource management is to train and develop employees
so that they can keep up with the steady advancement of technology. With
changes in technology, certain skills will become redundant and in fact,
employees will be required to acquire new abilities like an enhanced
knowledge of computer applications, and an enhanced understanding of
technological information and the communication of the information.
The advancement of technology also allows for the process of employee
recruitment using the Internet. Job vacancies in an organisation may be
advertised through the organisations website or on web pages that have
been specifically designed for the recruitment of employees. There are also
organisations that carry out computer based trainings. One of the primary
uses of technology in human resource management is the organisations
human resource information systems. These human resource information
systems may be used to produce accurate and up-to-the-minute reports, to
aid management in making decisions relating to the requirements of human
resources, the planning of careers and promotions, and for the evaluation of
policies and human resource practices.

(c)

Consumers
Consumers represent those persons who use the products and services of an
organisation which are a part of the organisations external environment.
Because sales are important for the existence of any organisation,
management must ensure that the work practices of employees do not
offend consumers. Consumers will always demand goods and services of
high quality. Consumers who fail to acquire their expected services or
goods will cease dealing with the organisation. Therefore, the organisations
workforce must be able to provide services and goods of high quality. These
circumstances directly correlate with the skills, qualifications and
motivation of employees in an organisation.

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INTRODUCTION

11

(d)

Competition
A firm will face stiff competition in the production and labour markets.
There are always other firms that produce similar goods or services.
Therefore, a firm must have skilled employees if it desires to survive, grow
and succeed. A firm must ensure that it is able to acquire and retain a
sufficient workforce in various fields in order to compete effectively.
Employees have high mobility. Employees may choose to move on to other
firms, especially during an inflated economic climate. To encourage
qualified employees to stay on at an organisation, management must adopt
a suitable human resource policy, a remuneration scheme that is
competitive or better than that of its competitors, a safe and healthy work
environment, and continuing staff development efforts to provide
employees with newer skills.

(e)

Shareholders
Shareholders are the owners of a corporation. They are people who invest in
a firm or corporation. As such, they will often challenge the decisions made
by the management. Management may be required to explain the
effectiveness of a programme and its impact on the organisations expenses,
revenues and profits. Shareholders also have the right to inquire into how
budgeting decisions such as these can increase revenue or reduce costs.
Therefore, management must be prepared to explain the efficacy of a
programme from the perspective of its benefits and economic costs.

(f)

Trade Unions
The types of remuneration, employment benefits, wage levels and
employment environment are jointly decided by trade unions and
management. A trade union is an organisation that attempts to improve the
working conditions of employees. As a rule of thumb, trade unions will
negotiate with the management of organisations that have trade unions.
Trade unions can influence the management of human resources from the
perspective of remuneration and benefits offered to an employee. Usually,
issues that form the main topics of discussion include issues of
remuneration and the working environment.

(g)

Labour Markets
An organisation obtains employees from the labour market. The labour
market is considered an external factor because new employees are hired
from outside the organisation. The labour market is volatile and hence,
constantly changing. These changes will have a direct effect on the use of
labour in an organisation. Organisations possess a workforce that is varied
in relation to gender, race and ethnicity. A varied workforce has a wide
implication on the management of human resources. Managers must amend

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INTRODUCTION

their philosophies from the assumption that each person is similar, to

recognise those differences and hence, avoid any discrimination against
these individuals.
The labour market creates organisations with a varied workforce. A varied
workforce results in the organisation having employees with varying
degrees of expertise. Amendments to the management of human resources
include offering training and work environments that can accommodate
these differences. If these differences are not well managed, it may result in
a high rate of turnover, a difficulty in communicating and interpersonal
conflicts between employees and the organisation.
(h)

Statutory Requirements
The management of human resources is governed by federal, state and local
statutes, and courtroom decisions. For example, benefits such as maternity
leave and the Employee Provident Fund (EPF) are enforced by legislation.
Aside from this, company policies are subjected to acts such as the
Employee Provident Fund Act 1991, Social Security Act 1969, Employee
Safety and Health Act 1994, and others. These acts are formally documented
in the management procedures set down by an organisation. A large
portion of an organisations success in managing human resources depends
on the effective implementation of the law. To operate within the confines
of the law, an organisation must develop an internal system that abides by
the rule of law.
We shall now discuss aspects of the internal environment in the
management of human resources.

1.3.2

The Internal Environment

The internal environment comprises factors that are controlled by the

organisation. This includes organisational strategies, organisational goals,
leadership styles, the corporate culture and the types of jobs. These factors are
used to produce a positive business environment while being a catalyst toward
enhancing productivity. Figure 1.4 illustrates the internal factors that influence
the management of human resources.

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INTRODUCTION

13

Figure 1.4: The internal factors that influence human resource management

(a)

Organisational Strategies
Organisational strategies are important because they represent a plan of
action that sets the organisations course, so that members of the
organisation are aware of where to direct their efforts. Through strategic
planning, an organisations upper management may ascertain the overall
objectives and goals that need to be achieved and how to attain these.
Upper management also expects human resource activities to be in line with
the organisational strategy toward achieving these objectives.

(b)

Organisational Objectives
An organisations objectives may influence managerial decisions. How
much an organisation pays heed to promotions or expenditure allocations
for staff training and development, depends on the organisations
objectives. Therefore, organisational objectives offer a planned indication of
the success or failure of the organisation.

(c)

Upper Management
Upper management generally brings about success and profitability
missions to the organisation and it depends on the cooperation and efforts
of employees. Emphasis is given to human resources and the functions of
human resource management.

(d)

Corporate Culture
Corporate culture is a system of beliefs, assumptions, norms and values that
unite the members in an organisation. Corporate culture determines:
(i)

what does an organisation represent;

(ii)

how resources are distributed;

(iii) the organisational system structures used;

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INTRODUCTION

(iv) the individuals recruited for employment; and

(v)

what is considered a problem and an opportunity.

Human resource management is a key ingredient in shaping an

organisations culture. For example, an organisation that promotes
entrepreneurship among its employees will encourage human resource
policies such as non-formal recruitment, a flexible remuneration package
and a generic work plan.

Human resource management is related to the utilisation of human resources

in an organisation to achieve the organisations objectives.

Human resources are the people employed in an organisation.

The functions of human resource management include the acquisition of

human resources that involves human resource planning, recruitment and the
selection of candidates, staff development, remuneration schemes, employees
health and safety that encompass the financial and beneficial aspects.

It also includes occupational safety and health, and industrial relations that
refer to the interaction of employees (either individually or represented by
trade unions) and management.

Industrial relations also include disciplinary actions and carrying out these
procedures against the employee who has defied the rules of the organisation.
All functions are interlinked.

In this topic, we have discussed the external and internal environmental

factors and how these factors influence the functions of human resource
management.

Aquisition

Industrial relations

Employee training and development

Remuneration

Human resource management

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1.

INTRODUCTION

15

Read each statement carefully. Then, match each statement with the
terminology given below. Write the letters that represent the correct
terminology in the given space.
Answers

Statement
The process of attracting, training and organising a
talented and effective workforce.
The process of attracting qualified individuals and
encourage them to apply for job in the organisation.
The formal process to familiarise new employees with
their responsibilities, the rules, the objectives of an
organisation, and to introduce them to co-workers.
Wages, benefits and incentives received by employees as
they agree to be employed by the organisation.
Activities that give the opportunity to acquire and
improve job skills.
A statement that outlines the responsibilities of a job.

2.

(a)

Remuneration

(b)

Job Description

(c)

Orientation

(d)

Human Resource Management

(e)

Employee Training and Development

(f)

Recruitment

Fill in the blanks for each statement by selecting a suitable answer from
those given in the box below.
Selection

Incentive

The External
Environment

The Internal
Environment

Corporate
Culture

Job Analysis

Benefits

Job Specifications

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INTRODUCTION

(a)

__________________________ is an organisational process that selects

the most qualified individual, from a group of applicants, to fill a job
vacancy.

(b)

__________________________ is a process that creates a detailed

explanation regarding the tasks of a job, determining the relationship
between this job and others. It also determines the knowledge, skills
and abilities required to successfully carry out the job.

(c)

__________________________ is a statement that outlines

knowledge, skills and abilities required to carry out the job.

(d)

__________________________ is a financial reward given to employees

to motivate them.

(e)

__________________________ is an additional monetary reward aside

from basic wages, annual leave, medical leave, and insurance.

(f)

__________________________
comprises
factors
outside
the
organisations parameters that influence the human resources of a
firm. It includes factors such as the economy, technology, consumers,
competition, shareholders, trade unions, labour markets and statutory
requirements.

(g)

__________________________ comprises factors that can be controlled

by an organisation. It includes organisational strategies, organisational
goals, styles of leadership, corporate culture and types of jobs.

(h)

__________________________ is a system of beliefs, assumptions,

norms and values that unites the employees in an organisation.

the