PERSONNEL MANAGEMENT AND

ENTREPRENEURSHIP

INTRODUCTION
Personnel administration is that function of any work organization concerned with providing for
its human resources. It involves planning for human resources needs, finding and hiring
employees, training and compensating them, and finally retiring them.

Human resources are an important part of the total resources of work organization. To achieve
the goals of the organization, financial resources, physical resources, idea resources, and human
resources are all necessary. In small enterprises, the manager is responsible for all these
resources. As the enterprise grows, this manager usually develops assistants who specialize in
managing resources: money, things ideas, or people.

The customary goals of work organizations are the efficient and effective production of goods or
provision of services to satisfy the clients of the organization; as well as fulfillment of the
satisfaction and self-development needs of the enterprise's employees.

No organization can succeed without effective management of all its resources. No one can be
paid without adequate funds. The enterprises will fail without useful service and product ideas. It
cannot provide the services or products unless it has the systems to produce them within a
satisfactory workplace. All of these organizational functions require people.
People are a special kind of resources, however. They are less predictable than machinery and
more important to society than money. One of the' life's most difficult and challenging
experiences is analyzing human behaviour. We may think we understand another's behaviour on
some occasions and be unable to comprehend it on others.

The most important resources of any business are its employees. Planning for and recruiting,
selecting, developing, evaluating and rewarding or compensating capable and hardworking
employees is an important plan of managing any business activity. But what is personnel
management, and why is personnel management necessary for entrepreneurship development?

WHAT IS PERSONNEL MANAGEMENT?

Personnel Management is the branch or function of management that is responsible for
identifying workers, attracting and getting such workers to join and stay in an organization,
placing them in suitable position, motivating them, remunerating them, and helping them to work
together and to grow. It is defined by the British Institute of Personnel Management as '"that part
of management that is concerned with people at work and with their relationship within an
enterprise". It seeks to bring such people together and to develop them into an effective
organization.

From the explanation above, it is clear that personnel management is concerned with people in
an employment relation. It is the organizational function which deals with the determination of
personnel requirements as well as the recruitment, selection, placement, training, development,

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utilization, motivation, appraisal, compensation, promotion, advancement, welfare and discharge
of employees. It also deals with the tripartite relation between employee unions, the management
of a company and the government.

THE RELEVANCE OF PERSONNEL FUNCTION TO ENTREPRENEUR

1. The fact that employees are the dynamic and critical elements of organizational life. Personnel
management takes precedent over financial issues or the identification of new technical
developments or the problem of marketing or production because people are the most critical
corporate resource through which an organization can carry out its functions and gain or lose competitive
advantage. For this reason, the need has arisen for well trained personnel specialists to occupy key
organizational positions.
2. The need to minimize recruitment and labour costs. The increasing cost of recruiting and paying
employees has forced many companies to employ professional personnel managers who can use their
knowledge and skills to minimize such costs. Good recruitment does not add to profit but the
recruitment of bad employees’ wastes money and time and disrupts production and lowers output. If a
wrong person is employed and is eventually told to leave the company, serious overhead and re-
advertising costs are involved and these might become critical. The termination of the service of
an unsuitable employee also has the effect of creating a feeling of insecurity in and reducing the morale
and efficiency of the staff that are left behind. Thus, the planning for as well as efficient recruitment and
utilisation of manpower as an important management responsibility with scope for both improved
organizational performance, and cost savings has dictated the need for and raised the role of
personnel management specialists in modern business organization. The view that personnel
management simply involves getting more workers and that it is solely a cost-centre is rapidly
becoming obsolete.
3. The need to motivate workers and to maintain industrial peace. Increased output can only be achieved if
workers are highly motivated in an atmosphere of industrial peace. If workers are to be motivated, their
needs must be identified, anticipated and satisfied. For this reason, it has become important to hire a
specialist who understands human nature, who can identify the needs of workers and can assist
management in formulating and implementing suitable policies and plans to cope with workers" demands.
4. The need for staff training and development. Training is a crucial management function. There has been a
strong call for the transfer of foreign technology to Nigeria. This involves ideas, knowledge, skills, standards,
procedures, and attitude to work. The need to do this effectively and systematically has necessitated the
employment of personnel managers - people who have training in human behaviour and the way to improve
their abilities.
5. The ancillary role of personnel function and the need to service other departments. All departments in an
organization are staffed by workers. This has created the need for a staff manager who can service the
functional departments as well as support and advice line managers about the manpower implications of their
proposed actions and plans, especially in terms of wage bills, canteen facility needs, staff discipline, span of
control, trade union power, office accommodation etc.

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 DUTIES AND RESPONSIBILITIES OF A PERSONNEL MANAGER
The main responsibilities and duties of a personnel manager are as follows:
1. Formulating and implementing personnel policies and plans. This involves:
i. Helping top management in formulating personnel policies and plans:

ii. Interpreting and implementing the firm's personnel and industrial relations policies and plans;

iii. Communicating personnel policies and changes to workers.

2. Staffing the Organisation. This involves:

i. Reviewing and analyzing the organization to determine appropriate work structures, roles, relationships,
responsibilities and levels of authority;

ii. Identifying vacancies and determining the need for new personnel: obtaining staff requisitions from other
departments;

iii. Contacting sources of new suitable employees;

iv. Writing adverts for vacant positions;

v. Arranging and conducting interviews for applicants;

vi. Selecting and appointing staff;

vii. Preparing employee handbooks, house journals, etc.

viii. Handling performance appraisal, promotion, transfers, redundancy, dismissals, etc.

ix. Grading employees and preparing of descriptions and job specifications;

x. Keeping the personnel records and data of employees and dealing with immigration department in respect
of alien staffers.

3. Staff training and development. This involves:

i. Introducing new employee to their jobs;

ii. Identifying training needs;

iii. Arranging and implementation courses for workers;
iv. Liaising with and making training claims from Industrial training Fund (ITF).

4. Industrial relations and Joint Consultation. This involves;

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 i. Establishing and maintaining good relations between management and employees;

ii. Establishing and using joint consultative committees and collective bargaining procedures for the
resolution of conflicts;

iii. Handling claims for trade union recognition;

iv. Conducting disciplinary interviews;

v. Preparing for and attending industrial tribunals;

vi. Dealing with employee grievances;

vii. Maintaining industrial peace and dealing with conflicts, strikes and lock-outs.

5. Employee Services. This includes:

i. Providing safe and good quality working environment;

ii. Arranging for sick leave and pay;

iii. Ensuring that pensions and fringe benefits are paid;

iv. Ensuring compliance with safety rules and factory acts;

v. Supervision of staff clinic, staff canteen and the use of factory premises.

6. Salary Administration. This involves:

i. Evaluating and grading jobs and fixing salary levels;

ii. Determining terms and conditions of services;

iii. Negotiating and disclosing payment systems;

iv. Reviewing salaries and salary budgets;

v. Determining the criteria for promotion and advancement.

7. Employee Welfare and Counseling. This involves:

i. Providing equal opportunity and job security for all employees;

ii. Counseling employees on career ambitions and personal developments;

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iii. Providing staff canteen services;

iv. Ensuring employee participation in management;

v. Introducing, installing and administering suggestion schemes;

vi. Motivating the workforce.

It should be noted that the functions of the personnel manager are the same as the activities of and services provided by
the personnel department to other departments in-modern organizations. Although every line manager is concerned
with staffing and does every bit of this works, the personnel manager is responsible for the task as a whole.

BENEFITS OF HAVING A PERSONNEL DEPARTMENT

The main benefits of having a separate personnel department are as follows:
i. It makes the use of personnel management specialists possible. Industrial disputes are handled with
expertise and dispatch, thus minimizing strikes and lockouts,
ii. It relieves other departments of the burden of personnel management functions.
iii. It makes for uniformity of personnel policy and practices through the centralization of the personnel
function in an organization,
iv. Having a central personnel department saves cost because duplication of human and material
resources is avoided. If each department does its own recruitment, training, etc., this will not be
possible,

AIMS AND CONTENT OF A GOOD PERSONNEL POLICY

Policies are statements or guidelines which are intended to simplify and routinise decision making. They
serve as guideposts for the organization to follow in making decisions.

The aims of a good personnel policy are as follows:

1. To guide managers and ensure uniformity of actions in dealing with workers' problems thus
maintaining consistent and integrated approach.
2. To influence and control workers' behaviour within the organization by specifying the prescribed,
the permitted and the prohibited forms of behaviour.
3. To establish a system of incentive and reward for effort which are designed to motivate employees
to work efficiently, cooperatively and peacefully.
4. To maintain a workforce at each organizational level which is effective and adequate in number to
implement the plans and programmes of the organization effectively.

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A good personnel policy should deal with the following matters:

1. The grading of posts and the basis for remuneration of employees.

2. The criteria to be used for the recruitment and selection of staff.

3. The type of training to provide for employees.

4. The criteria to be used in deciding promotion, e.g. output, experience, length of service,
qualifications, etc.

5. The welfare facilities and fringe benefits to be provided by the company.

6. The basis for declaring an employee redundant, e.g. poor output, deteriorating health, etc.

7. The age at which employees shall normally retire and the retirement benefits to be paid.

8. The method to be used to handle employee grievances and resolve industrial conflicts,

9. The types of conduct that are prohibited and the penalties for their commission.

PERSONAL QUALITIES OF A GOOD PERSONNEL MANAGER

A good personnel manager should possess certain personal qualities in order to be able to perform his duties
effectively.

Some of them are:

a. Tact and diplomacy, i.e. skill and understanding in handling people and situations successfully without
causing offence.
b. Maturity and ability to manage crisis and to suppress personal anger.
c. Ability to negotiate and to deal with objections.
d. Fair and firm disposition to people and matters especially in handling discipline, termination, leave
requests, etc.

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 ENTREPRENEURSHIP AND PRODUCTION MANAGEMENT

PRODUCTION DEFINED
Production is the changing in form of raw material from its original state to the form desired by the society in
order to meet wants. The raw materials are in other words transformed to meet human wants. Originally,
production management was referred to those activities necessary for manufacturing products but in actual fact,
it spans over all the activities involving manufacturing, purchasing, warehousing, transporting, procurement
of raw materials and other activities until the product is ready and available to the buyer. It requires gathering of
ideas that will contribute to the growth of the enterprise and at the same time satisfy the need of the customers.
The elements that are essentially required to achieve this goal include land, labour, capital and managerial ability.

Land is the term used in business to describe investment in all types of real property: for example, leased
property, building, business office, etc. It is a basic requirement in economic venture.

Labour refers to the work force involved in the operation of the business. It embraces everybody working to
achieve the business objective, right from the managing director down to the clerks.

Capital refers to the necessary fund employed in financing the business operation. It is that part of fund which
enables the business to produce further wealth. Capital takes the form of initial investment, profits or loans.
The fund could be re-used for both capital expenditure and recurrent operational expenditure.

Managerial Ability (Entrepreneurship) whether a hired manager of a sole proprietor, the management of an
enterprise determines the degree to which the organizational goal will be met. Business in itself is 'risk' and
ineffective management means double risk for any business

The above factors of production although needed in all industries, the emphasis on each vary among industries.
Each industry tends to have its own mix as desired by the nature of the industry. In all, production
management is concerned with converting raw materials with the aid of people and machinery.

PLANT LOCATION
Plant location is one of the critical decisions a production manager will have to make. It is a major planning of
conversion system. The choice of location usually affects the effectiveness of production operations.

To achieve the goal of effective plant location certain other factors should be considered namely: proximity to raw
materials, availability of labour, transportations, proximity of market,

Proximity to Raw Materials

For purpose of manufacture and production, it is best to locate a plant close to the resource input. That way
transportation cost and other related problems will be eliminated. It also makes available the materials in times of
urgent needs.

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Availability of Labour

Personnel planning should be considered along with facility location and layout especially when skilled labour is
vital to the particular operation. Where unskilled labour is the main requirement, the manufacturer needs very little
to worry about since daily paid workers and helpers are found. in all corners of Nigeria.

In any event, as soon as the facility is ready, workers are employed and assigned to specific duties.

Transportation

Another specific area of interest at the point of production of goods is the question of transportation.
Alternative sources of transportation include roads, airways, waterways, and railways. Availability of these
alternatives will help reduce the cost of transportation.

Proximity to Market

A poor location of industry may pose a reasonable problem in terms of competition. The fundamentals of
planning for good location should be include the provision of fast and convenient service to customers who
buy the final products.

The ultimate decision to establish a plant/factory in certain locality should be the careful evaluation of all the
factors considered above. The management should critically view each factor in relation to its operational policy
and weigh the cost in the line with its individual needs.

PRODUCTION PLANNING

Before a product emerges to be marked, several activities must have been completed. A decision has to be
made to take a particular product after feasibility study. Decision has to be made about location of
production facility and capacity needed. Workers have to be recruited and assembly line designed.

Once the plant has been effectively located and other factors that affect production carefully established the next
line of action is mapping out the programme of operations for the actual conversion of resources inputs into output
of goods and services. Production planning should be directed in a manner to reflect the organizational goals and
policies.

Implementation of production plan includes the purchase of raw materials and inventor)' control. It is during
production planning that the amount of material input and its components are determined, then procedures for
coordinating manpower to operationalise the plan.

In the first instance, the overall goal has to be identified e.g. to produce 200,000 gallons of oil for the year which
is taken as an aggregate goal. The next phase should be to further break down this production job into months or
weeks, down to daily assignments. After this breakdown has been accomplished, the next line of focus will
involve establishing the order in which the job is to be done determining which machine will handle what
aspect of production, the level of raw material input and then the number of workers to handle which
assignment.

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STOCK/INVENTORY MANAGEMENT AND CONTROL

The Conversion Process: Material Conversion

Fig. 16.1 Random Fluctuation

Input Conversion Output of products

* Materials Process stock stock points
* Stock point point
* Land
* Labour
* Capital (other)
* Management
Comparing actual
material level to
planned level

Feed Back

Corrective action:
More or less material
(Stocks)
As we have discussed earlier, the basic concept of production management borders on conversion of
input into output of products and services. The emphasis on input is mainly on materials. This is one reason why
production managers should have basic understanding of inventory management, the costs and benefits
associated with it. Raw materials and other component parts needed in production are often purchased and
stocked until they are needed for use in conversion process. This is called inventory of raw materials. There are
also inventories of supplies, work-in-progress and finished goods. The production manager is expected to
plan the desired level of inventory at any point in time..
Reasons for Carrying Inventory
 Difficulty in establishing the exact amount of inventory at the time it is needed.
 Bulk purchases usually attracts discount
 Price changes
 Reduction of inventory carrying cost
 Fear of labour strikes which may cause shortages of materials.
 Inventory of finished goods is maintained because a firm may not determine the exact time its goods will
be demanded.

Keeping inventory, in general, involves high level of investment. Atypical manufacturing concern has a good
percentage of its current assets in form of inventory (stock) usually 30-40%. This is why it is crucial for the
manager to examine the inventory system with a view to determining need priorities and preventing

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excessive stock. Excessive stock of inventories either at the beginning of production or at the end may lead to
high carrying cost and also may pose risk of obsolescence. Either way spells a loss for the company.

Inventory Carrying Cost

This is the cost directly associated with keeping inventory on hand. These costs include:

a.. The warehouse rental: where the firm rents the space to keep the inventory or in case of a warehouse
owned by the company, it is a loss of revenue which could have been generated from renting out the
property.

b. The insurance cost; materials are usually insured against theft, fire or damages.

c. Maintenance cost: the cost incurred for keeping the inventory in proper condition. These include utility
expense.

d. Cost of capital: this is the cost of having capital tied up in nonproductive use. Fund that could have been
invested in other revenue yielding operations.

e. Interest cost of borrowed fund: if funds used to finance the inventory was borrowed, interest payment on
the fund is a direct extra cost for keeping the inventory.

Inventory procurement cost

While the above mentioned costs are extra cost of keeping/holding inventory on hand, the procurement cost
applies to all inventories whether to be kept in stock or for immediate use. These include:
o Cost of postages and other forms of communication
o Cost preparing orders
o Cost of receiving the orders
o Materials for record keeping
These costs sometimes vary in proportion to the volume of inventory. Shortage of raw materials or delay in its
supply on the other hand result in loss of production and consequently loss of business. Inventory control therefore
represents the efforts of keeping inventory at acceptable balance level. Inventories are important current assets, which
require substantial amount of working capital to maintain. The product/operations manager should apply extra care
to monitor the inventory system. One way could be to keep close record of materials input and product
outflows on monthly or weekly basis if daily record is not convenient. This will help the manager to know the
point to re-order additional stock. A re-order point refers to the accepted level below which inventory is not
allowed to fall before a new order is placed for replenishing.

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It may be ideal for the manager to keep a ledger that shows the following informational analysis:

Date Beginning Order Orders Total Current

Inventory Placed Received Inventory

References should be made to this record on regular basis. This in addition to periodic inventory count will easily
provide a good platform for the manager to help him compare actual performance with planned
performance, make corrective adjustment that will enable him to achieve the desired level of inventory control.

Inventory valuation
As we have discussed earlier, inventory of merchandise is the largest of the current assets of most companies
particularly manufacturing companies. Proper valuation of this important asset is one of the reasons for inventory
management. The value of inventory is required in measuring the gross profit earned during the accounting
period and also in preparation of balance sheet at the end of accounting period. The gross profit is usually
calculated by subtracting the cost of goods that is sold from sales. And the cost of goods sold is arrived at
by the following computation.
+ Beginning Inventory Purchases
Goods available for sale
- Ending Inventory
= Cost of goods sold
Looking at the above computation; an over-valuation of ending inventory for instance, will understate the cost of
goods sold and inflate gross profit. While undervaluation of the same factor will overstate cost of goods sold
and reduce gross profit which will lead to the eventual reduction of net income; It is therefore clear that it is
as important to establish the proper value of inventory as it is to determine the net income. By the same token, a
mis-statement of value of inventory will have a material effect on the balance sheet in determining the total current
assets. It is also pertinent to mention that the ending inventory of one period is the beginning inventory of the
next. In summary, errors in valuation of inventory has ripple effect on accounting statement.

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