Human Resource Management (HRM) Explained – Everything you Need to Know

People are essential to the success of any organization. HR professionals play a pivotal role in how successful an organization is. And good Human Resource Management is essential for businesses of all sizes.

Hi, I'm Erik from AIHR, and in this video you'll learn what Human Resource Management or HRM is, how it originated during the two world wars, its key activities, how successful HR professionals make an impact on their business, and some trends that we're seeing right now. However, before we start, smash that like button and make sure to subscribe so you don't miss out on any valuable HR insights. *MUSIC* Before we get into HRM activities, let's start with a definition.

Human Resource Management is the management of people to help them perform to the best of their abilities and, as a result, achieve better performance for the organization. This is summarized in a great quote by Stephen Covey: "An empowered organization is one in which individuals have knowledge, skills, desires, and opportunities to personally succeed in a way that leads to collective organizational success. " A human resource is an individual employee, and human resources is what we call the set of people who make up the workforce in an organization.

Another common term you might hear is human capital. This refers to the economic value of an employee's experience and skills. Human capital was introduced into the mainstream in 1928 when the English economist Arthur Cecil Pigou wrote that "Organizations can invest in material capital, which are buildings, tools, and machines, as well as in human capital.

" We now know that investing in human capital pays off. Organizations with employees who have relevant knowledge, skills, and experiences are more successful than organizations that don't. Organizations are also more successful if they're able to hire the right people, successfully onboard them, fairly reward them, and continuously optimize their performance.

The realization that human capital increases the success of organizations led to the creation of the modern HR department, which in turn is in charge of Human Resource Management. How did HRM get to where it is now? Let's take a look at a brief history so you can get a better idea of why we do what we do in HRM today.

HRM started as personnel management, which became relevant during the two World Wars. The wars had a tremendous impact on the way we worked. Since most young men were drafted into the army, women started to participate in work serving in the armed forces or working in factory jobs.

Because some men were afraid that this would cause women to lose their femininity, some factories gave female employees lessons in how to apply makeup. I bet you didn't think that that was ever part of an HR job description. During the World Wars, organizations also introduced assessments like IQ testing to predict performance, and implemented an increasing number of social policies.

Personnel management during and after the war was focused on compliance and creating work efficiency. In the decades that followed, personnel management became increasingly important and became involved in everything related to staffing: from hiring and firing to administrating benefits, collective bargaining, and determining salaries. In the mid-80s, the term Human Resource Management was introduced as a way for the organization to implement policies that would make the organization more successful.

While personnel management focused on creating efficiencies, HRM promised to go beyond that and actually make an impact on the business. This move was reinforced by a growing amount of research that found that investments in HRM practices, like proper training and competitive compensation for employees, would increase the organization's financial performance. The consequence of this was that HRM became less administrative, and instead worked alongside line managers.

Day-to-day people management became part of the manager's role, while HR started to integrate with the business and focus on strategic people issues like talent acquisition, compensation, and retention. Leading organizations would implement HR policies that were collaborative and that were aligned with the organization's goals. Citibank appointed the HR director to the corporate board, and in other companies like Hewlett Packard and WH Smith, the group HR director became fully involved in formulating corporate strategy.

This integration of HRM with business strategy was called strategic Human Resource Management. That brings us to today, where HRM has evolved into one of the cornerstones of the modern organization. Good people practices can make an organization many times more successful than its competitors, meaning that HRM occupies a strategic spot in an organization's business model.

And just as a reminder, if you're enjoying this video so far, you know what to do. So what exactly is involved in Human Resource Management? HRM actually encompasses a long list of activities.

I won't give you the whole list, but let's dive into seven of the most important HRM activities, before I explain what some of them have to do with hygiene. The first HRM activity is recruitment and selection. These are the most visible elements of HR.

I think we all clearly remember our first job interview. The goal here is to recruit new employees and select the best ones to come and work for the organization. You might be quite familiar with the most common selection methods like interviews, assessments, reference checks, and work tests.

Performance management is another key activity. The goal here is to help boost people's performance so that the organization can reach its goals. This happens through feedback and performance reviews.

Another key aspect of managing performance is succession planning. The goal here is to build a talent pipeline so that when strategic roles open up, there is talent waiting to take them on. Then there is culture management.

HR has a responsibility to build a culture that helps the organization reach its goals. A governmental organization that's over a century old may have a very different company culture compared to a technology startup. Different organizational cultures attract different people, and cultivating an organization's culture is a way to build a competitive advantage.

Another important HR activity is learning and development. Its purpose is to help an employee build skills that are needed to perform today and in the future. Many organizations have a dedicated l&d budget.

This budget can be used for training courses, coaching, attending conferences, and other development activities. A difficult challenge for HRM is to distribute a limited learning budget to all employees. This requires tough choices.

The HRM activity that makes employees perk up is compensation and benefits. Comp & ben is about rewarding employees fairly through direct pay and benefits. Benefits include health care, pension, holidays, daycare for children, a company car, a laptop, and other equipment, and so on.

Creating an enticing package for employees will help keep them motivated and keep them with the organization. Where comp & ben is about keeping individuals happy, employee relations management is about keeping employee groups happy. Employees and employee representation groups are key constituents of the organization, and so they need to be effectively managed.

This includes engaging in collective bargaining and interacting with labor unions and work councils. On the more technical side of HRM is information and analytics, which involves managing HR technology, and people data. Most HR data is stored in a human resource information system or HRIS.

I'm sure you're familiar with yours if you work in HR, and I'm very sure you have a love-hate relationship with it. These systems often include an applicant tracking system to track applicants, a learning management system, a performance management system, as well as tools for automation, and dashboard functionalities that provide insights into HR data and KPIs. HR data management involves gathering high-quality data that can be accessed by HR professionals using HR dashboards.

This helps them to become more data-driven and create more strategic impact. There are many other tasks and activities that HR does. Let me know in the comments down below which ones I didn't mention.

One of the difficulties of Human Resource Management is that it is often seen as administrative and nonstrategic work, the way it was in the 60s, 70s, and 80s. This leads to a major challenge: HR professionals are not included in strategic decision-making. In other words, HR lacks a seat at the boardroom table.

This means that the people aspect of business decisions is not always fully considered when companies make big company-wide decisions. One of the reasons this is happening is that HR professionals spend too much time on non-strategic activities. Let me explain this.

HRM activities are categorized into two groups. These are hygiene factors and strategic differentiators. Hygiene factors are maintenance factors that should be performed at a minimum level.

Just like personal hygiene, people will notice when you smell fresh and have brushed your teeth, but they will notice when you forgot to take a shower. Many HR activities follow a similar rule. If HR doesn't know how many people are working in the organization today, how many people left the organization last year, or fails to keep a labor union happy, people will notice.

However, if HR does all of these tasks properly and on time, it is not really noticeable, but it keeps people satisfied. Traditionally, HR has focused on a lot of these hygiene factors, pigeonholing itself into an administrative role rather than a strategic one. Strategic differentiators, on the other hand, are factors that help HR build a competitive advantage for the organization.

For example, an organizational culture that is optimized for performance, a selection process that helps to select only the best of the best, or an onboarding process that makes sure that people are up to speed as soon as possible. They are always for HR to differentiate itself and make a strategic impact on the organization. A mostly administrative HR departments focus on hygiene factors.

However, a strategic HR department is able to both take care of these hygiene factors, while also creating a number of strategic differentiators that help boost organizational performance. HR organizations that are able to do this help their organization be more successful. The field of Human Resource Management has never changed at a faster pace.

Today, some of the challenges we're seeing include an aging workforce that characterizes many Western nations. This brings challenges such as sustainable employability, but there's also a need to upskill or re-skill part of the workforce whose skill set was more relevant 10 years ago. At the same time, globalization is opening up local labor markets and enabling companies to tap into a global market.

They don't need to limit themselves to the talent within their city or their country. Ever since the pandemic, these global workers can work fully remotely as well, gradually making the physical workspace a thing of the past. The types of contracts companies offer have also changed with the increase in gig work.

This has disrupted the traditional employment contract and enables organizations to become more flexible. Another major future trend is due to the increase in the impact of data and analytics. HR professionals are now required to build skills they traditionally weren't very good at.

Not many HR professionals needed to access dashboards or have a deep understanding of HR technology a few years ago. Automation is also driving digital transformation and is threatening to partially automate many of the more administrative HR jobs. Not only does this mean that the external environment is changing, but so are the skills required for the HR professional.

All of this creates an exciting environment in which HR can be reinvented and become a more strategic and impactful business function. A final trend is the emergence of task and industry-specific human capital. Until now I've presented human capital as something static with a fixed value.

However, not all knowledge, skills, and experiences are equal. If someone has a lot of experience working in the automotive industry, for example, they will be able to contribute more in a job in a similar industry. The same goes for task-based skills that they have developed.

HR can help the organization differentiate by matching assignments to people with prior relevant experiences, as they will perform better. This is another way in which Human Resource Management can help the organization deploy its people in an even smarter way to create business impact. I hope you enjoyed this video on the basics of Human Resource Management.

You have learned what HRM is, some of its history, some of its key activities, and some of the trends that will impact the future of HRM. What HRM trends Do you see coming up in the future? Let me know your thoughts in the comments down below.

If you found this video helpful, don't forget to give it a thumbs up and make sure to subscribe so you don't miss out on any HR insights. And if I sparked your curiosity, check out the courses at the Academy to innovate HR, the link is in the description. I hope you have an absolutely brilliant day.

Bye bye.