Welcome to Human Resource Objectives
Welcome to this essential chapter of Unit 2! Whether a business manufactures smartphones, operates an airline, or runs a local bakery, its success ultimately relies on its workforce. In this chapter, we explore why managing human resources is vital, what specific objectives the human resource (HR) department sets, and how internal and external forces shape those goals.
Don't worry if business terminology sometimes feels overwhelming. We will break every concept down into clear, everyday ideas with relatable examples and straightforward study tips.
Note: This chapter focuses on setting human resource objectives and planning. Detailed quantitative HR calculations, organisational structures, motivation theories, and industrial relations are covered in their dedicated companion chapters in this section.
1. The Importance of Managing Human Resources
What does Human Resource Management (HRM) actually mean? In simple terms, it is the strategic approach to managing, developing, and supporting an organisation's workforce so that the business can achieve its overall corporate objectives.
Why is managing people so critical?
Employees are not merely an expense on an income statement; they are a business's most valuable asset. Managing them effectively brings significant advantages:
• Direct link to operational efficiency: Well-trained, capable staff work faster, make fewer errors, and reduce waste.
• Customer satisfaction: In many industries, especially service sectors like retail, hospitality, or banking, frontline workers directly represent the brand. A positive interaction creates customer loyalty.
• Competitive advantage: Competitors can easily buy the same machinery or copy a marketing campaign, but they cannot easily replicate a committed, highly skilled, and passionate team.
• Cost control: Poor HR management leads to high rates of mistakes, accidents, absenteeism, and staff resignations, all of which carry heavy financial costs.
Real-World Analogy: Think of a professional sports team. Even if the club purchases the best training equipment and builds a modern stadium, they will not win matches without having the right players in the right positions, properly trained, and working together toward the same goal.
Key Takeaway: Managing human resources effectively ensures that a business has the right people, with the right skills, in the right roles, at the right time, enabling the entire firm to achieve its corporate aims.
2. Human Resource Planning
Human resource planning is the process by which a business anticipates its future personnel needs and designs strategies to meet them. It prevents a business from suddenly finding itself short of staff or burdened with surplus workers.
The Core HR Planning Equation:
HR planning primarily balances two sides:
1. Demand for labour: How many workers and what specific skills will the business need in the future? (Influenced by expected sales growth, new product launches, expansion into new markets, or changes in production methods).
2. Supply of labour: How many workers and skills will be available? This includes internal supply (existing staff who can be promoted or retrained) and external supply (potential recruits available in the wider labour market).
If demand exceeds supply, HR must recruit or train. If supply exceeds demand, HR may need to plan for natural wastage or retrenchment.
3. Key Human Resource Objectives
Just like marketing or operations, the HR department establishes specific targets to guide its work. The four primary HR objectives you need to master are:
A. Employee Engagement
Employee engagement refers to the emotional and intellectual commitment an employee has toward their organisation and its goals. An engaged worker does not just show up for the pay cheque; they care about the quality of their work and genuinely want the business to succeed.
• Why set this objective? Engaged employees work with greater effort, demonstrate initiative, propose creative solutions, and provide exceptional customer service.
• How businesses target engagement: Giving employees a voice in decisions, recognising their achievements, and ensuring their daily duties feel meaningful.
B. Diversity
A diversity objective means recruiting and developing a workforce that represents a broad variety of backgrounds, cultures, ages, genders, and experiences.
• Why set this objective?
- Richer decision-making: Teams with varied perspectives generate more innovative ideas and avoid "groupthink".
- Understanding customer bases: A diverse workforce better reflects and understands a diverse customer market, especially in international trade.
- Employer reputation: Inclusive companies attract top talent from a much wider pool of candidates.
C. Number and Skill of Employees
This objective ensures that the organisation matches its workforce capacity and talent profile to its current and upcoming operational demands.
• Number: Having neither too few employees (which causes stress, overtime costs, and missed deadlines) nor too many (which drives up unit labour costs and cuts into profits).
• Skill: Ensuring employees possess the exact technical, digital, problem-solving, and communication skills required. For example, if a retailer shifts to e-commerce, it must set objectives to acquire or develop digital warehouse management and web design capabilities.
D. Retention
Retention objectives focus on keeping talented employees within the business over time, thereby reducing the rate of staff departures (labour turnover).
• Why set this objective? Losing experienced staff is costly. The business loses institutional knowledge, spends significant funds on recruitment and selection, and faces reduced productivity while a replacement gets up to speed.
• How businesses improve retention: Offering clear promotion pathways, competitive pay packages, supportive leadership, and safe working conditions.
Quick Memory Aid: Remember the acronym SEND to recall the core HR objectives:
• Skill and number of employees
• Engagement of workers
• New horizons through Diversity
• Duration of stay (Retention)
Key Takeaway: HR objectives focus on building a motivated, inclusive, skilled, and stable team that can deliver the organisation's overall goals.
4. Internal Influences on Human Resource Objectives
HR targets do not exist in a vacuum. They are shaped by factors inside the firm (internal) as well as the world outside (external).
1. Available Resources and Finance
The financial position of the firm is a primary constraint. An organisation with healthy cash flow and high profitability can fund extensive training programmes, offer competitive salary packages, and modernise working environments. Conversely, a firm facing cash constraints may have to set restrictive HR objectives, such as freezing recruitment or focusing on low-cost engagement initiatives.
2. Operational and Corporate Objectives
HR exists to support the wider business. If the corporate objective is rapid growth and expansion, the HR objective must focus on recruiting large numbers of skilled staff. If the operational objective is lean production and cost minimisation, the HR objective will focus on improving labour productivity and multi-skilling existing workers.
Key Takeaway: What HR can achieve depends directly on the firm's overall strategy and the budget and resources allocated to it.
5. External Influences on Human Resource Objectives
External factors arise outside the control of the organisation. Businesses must continuously adjust their HR objectives to remain competitive in response to these factors.
1. Technological Change
Technology continues to transform the nature of modern work:
• Changing work and skills: Automation, robotics, and artificial intelligence replace repetitive manual and administrative jobs while creating urgent demand for digital, analytical, and technical skills. HR objectives must adapt to upskill the workforce.
• Tele-working (Remote Working): Fast communication tools allow employees to work from home or across different geographical locations. HR objectives may include setting up remote-work guidelines, managing digital engagement, and hiring talent from national or international candidate pools rather than just the immediate local town.
2. The Labour Market and Competition
The state of the local, national, and international labour market plays a huge role:
• Skills shortages: If there is a scarcity of qualified software developers or engineers in the economy, businesses cannot simply recruit at will. They must set HR objectives to invest heavily in apprentice schemes, internal training, or enhanced retention bonuses.
• Demographic shifts: An ageing population means firms may set objectives to retain older, experienced workers through flexible hours or phased retirement schemes.
• Competitor actions: If competing firms offer higher wages, superior perks, or better work-life balance, an organisation must adjust its retention and recruitment objectives to avoid losing its best staff.
3. Ethical and Environmental Influences
Modern employees, consumers, and investors care deeply about how a business conducts itself:
• Ethical treatment: Businesses increasingly set objectives around fair pay (e.g. paying above statutory minimum wages), promoting equality, guaranteeing transparent diversity metrics, and ensuring worker well-being.
• Environmental impact: Environmental policies influence HR targets, such as encouraging paperless offices, incentivising sustainable commuting (like cycling or carpooling), and training staff on waste reduction and energy efficiency.
Key Takeaway: External forces such as technological advancement, competitive labour markets, and ethical standards constantly push businesses to rethink who they hire, how they train, and how they treat their people.
6. Summary Review & Common Exam Pitfalls
Quick Review Summary:
• HR Management: The strategic management of workers to achieve business success.
• HR Planning: Forecasting the future demand for and supply of labour.
• Key Objectives: Employee engagement, diversity, matching the number and skill of employees to operational needs, and employee retention.
• Internal Influences: Financial resources, corporate goals, and operational strategies.
• External Influences: Rapid technology adoption (automation and tele-working), labour market availability/competition, and growing ethical/environmental expectations.
Common Student Mistakes to Avoid:
• Confusing engagement with motivation: A worker might be motivated solely by money (e.g. working overtime just for extra cash), but that does not necessarily mean they are engaged (emotionally committed to the long-term mission and quality of the business).
• Viewing HR in isolation: In exam questions, never discuss HR objectives without linking them to the firm's wider goals. For instance, if an airline aims to improve its customer service ratings (operational/corporate objective), the HR objective must focus on recruiting friendly staff and delivering customer-care training.
• Assuming one single objective fits all firms: A business in a high-tech industry may prioritise skill acquisition and retention, whereas a seasonal farm business might prioritise flexibility and managing short-term employee numbers. Always tailor your analysis to the case study context.