Human Capital: An Analysis Of Importance Of Human Resource Management
1. Introduction of Human Resource Management (HRM)
Human capital is defined as individuals in the workforce of an organisation. Human capital includes the training, experience, judgement, intelligence, relationships, and insight of employees in an organisation (Barney, 1991). Therefore, Human Resource Management (HRM) refers to a set of policies, practices and systems that influence employees’ behaviour.
HRM involves all management decisions and practices that influence employees’ behaviour, attitudes, and performance, which ultimately determine the effectiveness of the organisation or business (Noe, et al., 2011).
2. Analysis of Importance of HRM Today
Human capital qualifies as a source of sustained competitive advantage because it adds
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Being able to recruit the right people is only the beginning. The challenge is being able to retain those people. HRM aims to retain good employees through the above 3 processes. Performance management allows HRM to track and ensure that employees’ activities and outputs match the organisation’s goals. It allows HRM to decide on the compensation (pay and benefit of an employee) that an individual deserve in return for their achievements in the organisation. Compensation inevitably plays a huge role in motivating workers. Compensation is not the sole motivator for employees to remain in the same company. The 2013/2014 Randstad World of Work Report noted that one of the top reasons for job dissatisfaction in Singapore is misalignment with company culture. This is why organisations depend on HRM to help them maintain positive relations with …show more content…
An Analysis of One Major Challenge of HRM Facing Companies Today
Globalisation is one of the major challenge companies are facing today. The increase prevalence of globalisation may be attributed to shortage of talent in developed countries, availability of low cost labour and growing consumers in developing countries, and technological progress. As a result, an unprecedented number of organisations have increased the international focus of their businesses (DeCieri, et al., 2005).
Globalisation poses several challenges to HRM. Firstly, as companies expand globally, HRM needs to comply with the respective countries’ labour laws. Each government has different laws and regulations in regards to employment compensation, termination of employee, leave planning etc. Ensuring compliance with laws requires that human resource personnel keep watch over a rapidly changing legal landscape.
Secondly, a ‘best practice’ system in an organisation may not always be applicable across countries due to cultural and institutional differences (Zhang, 2003) (Ferner, 1997). Businesses need to integrate diverse value systems and adopt shared global work values to create an environment, where employees are able to communicate and coordinate their activities to reach common goals (Rosenblatt,
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