HOW HR ADDS VALUE TO THE FIRM

For companies that consider employees their most valuable assets, human resources have extreme value. In the most general sense, HR serves to motivate employees to top performance and maintain an organizational culture of high morale. In the early 21st century, strategic HR has emerged as a prominent view of the role this functional area plays in building and developing a strong organization.

People and Performance In a March 2011 McKinsey Quarterly article, Nora Gardner, Devin Mc Granahan and William Wolf explained that more companies are finally coming around to the commonsense understanding that HR manages a key link to company success -- people and performance. The long-term success and financial performance of a company is usually directly correlated to the talents, motivation and accomplishments of its people. People make and sell products, work with customers and collaborate on decisions. A primary way HR adds value to a company is by promoting this link and persuading company leaders to train and develop employees and reward strong performance.

Talent Acquisition and Retention Hiring and retaining top talent is a foundation of high-performing companies. HR is largely responsible for building and managing the systems that recruit, attract, hire, train, motivate and retain a company's best employees. This includes establishing strong job designs and hiring the right employees to match. It also involves building strong interviewing and screening processes, planning orientation and training, developing successful employee evaluation tools and constructing motivating compensation programs. Legal Protection One of the less-heralded ways HR adds value to a business is through legal protection from discrimination and wrongful termination lawsuits. HR professionals must be continually up to speed on employee laws and educate company executives and managers. They must also design hiring and promotional systems that promote fairness and equality. Interview questions that align specifically to a job, for instance, minimize risks of a discrimination claim. This element of HR becomes increasingly valuable as workplaces become more diverse.

Planning As proactive HR strategies have overtaken reactive responses to employment conditions, HR professionals play a stronger role in planning. HR directors commonly serve on company management teams and participate in strategic planning. This includes assessments of company strengths and weaknesses and projections of opportunities and threats. HR participants contribute the current view and future expectations of people and resource needs, discussion of compensation and training changes and research on emerging opportunities and threats. As always, if a service is not worth to the customer what it costs to provide, then either costs need to be reduced to make them less than the value produced, or the service needs to be dropped until a less costly or more valuable approach can be developed. The key is to pick a strategy and take action to measure HRs value, whether in the form of a claim, a return on investment, a redesigned HR function, or a complete transformation to a value adding function.

Human Resource Departments add value to a business:Lets start with the basics and damage limitation

Legal costs Be aware of and creating systems that adhere to employment law can save a company thousands. Many employment tribunal cases and expensive law suits are won by the employee, not because they didnt deserve to be sacked but because their dismissal was poorly administered or unlawful.

Absenteeism A company with poor systems and management behaviour often has high absenteeism which, given the fact that labour costs are one of the major expenses of a company, can be very costly.

 Bad recruitment decisions A lack of good practice can also have an impact on recruitment and selection. Have you ever worked with such a problematic employee that you wonder who on earth in their right mind taken this person on? Chances are they were employed by someone with little recruitment experience who acted on a hunch being confident in their judgement of character.

Positives Attraction Not only does a professional and subjective recruitment and selection process reduce poor appointments, it can help to identify, attract and appoint highly talented individuals but why would they choose your company ahead of another similar organisation?

Employer branding An effective HR department will be able to brand the organisation so that its employee value proposition is clear and inviting. The potential candidate will see working for your company as a net gain rather than a pure compensation package of their time for your money. This also means that if the best people on the market are working for you, theyre not working for your competitors. But beyond the rhetoric, what would make your company more attractive to work for?

Positive culture HR can help to create a positive culture that encourages innovation, entrepreneurship and enthusiasm rather than one where people have to stick doggedly to bureaucratic rules or be punished. Opportunity Beyond this HR can help to create an environment of internal job mobility and succession planning where people see their best career opportunities as staying with your company. Retention This means that labour turnover will be reduced and save money on further recruitment and retraining. But lets not forget the money.
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 Rewards Fringe benefits and praise are great but people need money too and HR can help develop a pay and reward system thats both fair and motivating. They can help dispel the myth that you should pay people as little as you can.

Increasing the value of human capital People are increasingly referred to as human capital and if the workforce is an asset, its worth protecting that investment and getting it to appreciate. This can be done by looking after the welfare of people and investing in training and development leading to a more motivated and skilled workforce.

The bottom line The net result is that you have reduced costs in litigation and putting things right, a more stable, motivated, skilled and productive workforce leading to fewer errors and customer complaints, increased sales and greater market share and ultimately, increased profits. Thats how HR adds value!

CHARACTERISTICS OF HUMAN RESOURCE Nothing moves unless a piece of paper moves and no paper can move, unless a person moves. Even if there is total automation, the organization will require a person to on the button. This shows how important manpower is to any kind of organization. All organizations, irrespective of size or extent of its resources, commercial or not for profit, have people they have human resources. Organisations survive and thrive only because of the Concept of Human Resource Management. Human Resource management is a process and philosophy of acquisition, development, utilization, and maintenance of competent human force to achieve goals of an organization in an efficient and effective manner. Concept of HRM contains two versions the hard version and the soft version. The hard version or variant emphasizes the need to manage people in ways that will obtain added value from them and thus achieve competitive advantage. On the other hand, soft version is concerned with treating employees as valued assets, a source of competitive advantage through their commitment, adaptability and high quality. Todays HRM is a combination of both the versions. HRM is management of human energy and capabilities.

It is an art and a science: The art and science of HRM is indeed very complex. HRM is both the art of managing people by recourse to creative and innovative approaches; it is a science as well because of the precision and rigorous application of theory that is required.

It is pervasive: Development of HRM covers all levels and all categories of people, and management and operational staff. No discrimination is made between any levels or categories. All those who are managers have to perform HRM. It is pervasive also because it is required in every department of the organisation. All kinds of organisations, profit or non-profit making, have to follow HRM. It is a continuous process: First, it is a process as there are number of functions to be performed in a series, beginning
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with human resource planning to recruitment to selection, to training to performance appraisal. To be specific, the HRM process includes acquisition (HR planning, recruitment, selection, placement, socialisation), development (training and development, and career development), utilisation (job design, motivation, performance appraisal and reward management), and maintenance (labour relations, employee discipline, grievance handling, welfare, and termination). Second, it is continuous, because HRM is a never-ending process.

HRM is a service function: HRM is not a profit centre. It serves all other functional departments. But the basic responsibility always lies with the line managers. HRM is a staff function a facilitator. The HR Manager has line authority only within his own department, but has staff authority as far as other departments are concerned.

HRM must be regulation-friendly: The HRM function has to be discharged in a manner that legal dictates are not violated. Equal opportunity and equal pay for all, inclusion of communities in employment, inclusion of tribals (like Posco or Vedanta projects) and farmers in the benefits and non-violation of human rights must be taken care of by the HRM.

Interdisciplinary and fast changing: It is encompassing welfare, manpower, personnel management, and keeps close association with employee and industrial relations. It is multi- disciplinary activity utilising knowledge and inputs from psychology, sociology, economics, etc. It is changing itself in accordance with the changing environment. It has travelled from exploitation of workers to treating them as equal partners in the task. Focus on results: HRM is performance oriented. It has its focus on results, rather than on rules. It encourages people to give their 100%. It tries to secure the best from people by winning the whole hearted cooperation. It is a process of bringing people and organization together so that the goals of each are met. It is commitment oriented.

 People-centred: HRM is about people at work both as individuals and a group. It tries to help employees to develop their potential fully. It comprises people-related functions like hiring, training and development, performance appraisal, working environment, etc. HRM has the responsibility of building human capital. People are vital for achieving organizational goals. Organizational performance depends on the quality of people and employees.

Human relations philosophy: HRM is a philosophy and the basic assumption is that employees are human beings and not a factor of production like land, labour or capital. HRM recognises individuality and individual differences. Every manager to be successful must possess social skills to manage people with differing needs. An integrated concept: HRM in its scope includes Personnel aspect, Welfare aspect and Industrial relations aspect in itself. It is also integrated as it concern with not only acquisition, but also development, utilisation, and maintenance. The characteristics of the HRM concept as they emerged from the writings of the pioneers and later commentators are that it is: diverse; strategic, with an emphasis on integration; commitment-orientated; based on the belief that people should be treated as human capital; Unitarist rather than pluralist, individual rather than collective, with regard to employee relations; A management-driven activity the delivery of HRM is a line management responsibility; Focused on business values.