7.4.1 Approaches to human resource management (HRM)
At A Level, HRM is studied as a strategy: a long-term, business-wide approach to managing people so that the workforce supports the corporate strategy. Unit 2 covered HRM activities (recruitment, training, motivation); this topic considers the overall approach and how it is chosen.
The difference between 'hard' and 'soft' HRM
Definition Hard HRM treats employees as a resource to be managed in the same way as other resources — monitored, controlled and used efficiently, with a focus on minimising costs and matching labour numbers closely to demand.
Soft HRM treats employees as the most valuable asset of the business — a source of competitive advantage to be developed, involved and motivated, with a focus on long-term commitment.
| Feature | Hard HRM | Soft HRM |
|---|
| View of employees | A cost to be minimised; a resource like any other | An asset to be developed; source of competitive advantage |
| Link to McGregor | Theory X assumptions | Theory Y assumptions |
| Contracts | Short-term, temporary, zero hours; flexibility for the employer | Permanent contracts; job security |
| Pay | Minimum needed to recruit; performance-related | Competitive; wider benefits |
| Training | Minimal — only what the job requires | Extensive development and career planning |
| Management style | Autocratic; centralised; close control | Democratic; delegation; empowerment |
| Communication | Mostly one-way, top-down | Two-way; consultation and participation |
| Hard HRM | Soft HRM |
|---|
| Advantages | Lower labour costs; quick to adjust labour numbers to demand; clear control | Higher motivation, commitment and productivity; lower labour turnover; more innovation and intrapreneurship; attracts talent |
| Disadvantages | Low morale and loyalty; high turnover and recruitment costs; little initiative; poor reputation as an employer Hard HRM | Higher costs (training, pay, benefits); slower to adjust workforce size; benefits take time to appear Soft HRM |
| Suits… | Low-skill, routine work; highly price- competitive markets; short-term pressure to cut costs | Knowledge-based work; businesses competing on quality, service and innovation |
In practice many businesses use both: soft HRM for a core of skilled, long-term staff and hard HRM for a peripheral workforce of temporary or contracted workers (Handy's 'shamrock organisation').
Flexible working contracts
| Contract / arrangement | Meaning |
|---|
| Temporary contract | Employment for a fixed period or a specific project |
| Zero hours contract | No guaranteed minimum hours; the employee works only when called and is paid only for hours worked |
| Part-time | Fewer hours than a full working week |
| Full-time | A full working week (typically 35–48 hours), usually permanent |
| Annualised hours | Hours set for the year rather than per week, so the business can schedule more hours in busy periods and fewer in quiet ones |
| Flexi-time | Employees choose start and finish times around fixed 'core hours' |
| Home working | Employees work from home for some or all of the week (remote or hybrid working) |
| Shift working | Work divided into shifts so the business can operate for longer hours, up to 24/7 |
| Job sharing | Two people share one full-time job, dividing the hours and pay |
| Compressed working hours | Full-time hours worked in fewer days (e.g. four 10-hour days) |
| The gig economy | Work is offered as short-term tasks ('gigs') to independent workers, often via digital platforms, rather than as employment |
| Advantages of flexible/temporary contracts | Disadvantages of flexible/temporary contracts |
|---|
| For the business: match labour to fluctuating demand; lower costs (no pay for idle time, fewer benefits); easier to reduce the workforce; wider recruitment pool (people needing flexibility); lower office costs with home working | For the business: less loyalty and commitment; higher labour turnover and training costs; harder to coordinate and communicate; quality may suffer; reputational risk if seen as exploitative |
| For employees: flexibility to fit work around study, childcare or other jobs; better work-life balance (flexi-time, home working, compressed hours); less commuting | For employees: insecure income (especially zero hours and gig work); fewer rights and benefits (sick pay, pensions); stress; isolation when working from home; fewer training and promotion opportunities |
Example Zomato, Swiggy, Uber and Ola rely on gig workers who choose when to work. In India, the Code on Social Security 2020 introduced the category of gig and platform workers for social security purposes, and several states have since passed laws to protect them. In the UK, a 2021 Supreme Court ruling found that Uber drivers were 'workers' entitled to minimum wage and holiday pay. Infosys and TCS adopted hybrid home and office working after the pandemic.
Measurement of employee performance
| Measure | Formula / meaning |
|---|
| Labour productivity | Output per worker per period (Topic 4.1.2) |
| Absenteeism rate (%) | Number of working days lost through absence ÷ total possible working days × 100 |
| Labour turnover (%) | Number of employees leaving ÷ average number employed × 100 (Topic 2.1.2) |
| Waste / reject rates | Proportion of output rejected or reworked |
| Customer complaints and satisfaction scores | Indicate service quality |
| Appraisal results | Performance against agreed objectives |
Worked calculation
A Chennai garment factory employs 200 workers, each due to work 230 days a year. Last year 2 300 working days were lost through absence.
Total possible working days = 200 × 230 = 46 000
Absenteeism rate = 2 300 ÷ 46 000 × 100 = 5%
If the industry average is 3%, the factory loses about 920 more working days a year than a typical rival (2% of 46 000) — reducing output or requiring costly overtime and temporary cover.
Causes and consequences of poor employee performance
| Possible causes | Consequences for the business |
|---|
| Low motivation — poor pay, no recognition, repetitive work | Lower productivity and higher unit costs |
| Poor management and leadership; unclear objectives | More mistakes, waste and lower quality |
| Inadequate training and skills | Customer complaints and loss of reputation |
| Poor working conditions; stress; poor work-life balance | Higher absenteeism and labour turnover — more recruitment and training costs |
| Poor communication; job insecurity | Missed deadlines and lost orders |
| Inappropriate equipment or processes | Low morale spreads to other employees |
Strategies for improving employee performance
- training and development — closing skills gaps (Topic 2.1.6)
- financial and non-financial motivation — fair pay, performance-related rewards, job enrichment, empowerment (Topic 2.2)
- improving leadership and communication — clear objectives, feedback, consultation
- appraisal systems — regular review of performance against objectives, with support and development plans
- better working conditions and wellbeing — flexible working, health support, manageable workloads
- Management by Objectives — agreeing clear targets with each employee
- investment in equipment and technology that helps employees work effectively
Management by Objectives (MBO): implementation and usefulness
Definition Management by Objectives (MBO) is a method of coordinating and motivating employees by dividing the organisation's overall objectives into specific targets for each department, manager and employee, agreed through discussion between managers and subordinates (Peter Drucker).
Implementation follows a cascade:
- 1. Set corporate objectives (e.g. increase revenue by 12%)
- 2. Translate them into departmental objectives (e.g. sales department: open two new regions)
- 3. Agree individual objectives with each employee through discussion — SMART targets (Topic 1.4.2)
- 4. Provide the resources and authority needed
- 5. Monitor progress and review results in appraisals; reward achievement
- 6. Use results to set the next round of objectives
| Usefulness of MBO | Limitations of MBO |
|---|
| Every employee knows how their work contributes to corporate objectives — coordination | Time-consuming to agree objectives with every employee |
| Agreed (not imposed) targets motivate (Vroom's expectancy; participation) | Objectives may become outdated quickly in a changing environment |
| Provides a clear basis for appraisal and reward | Focus on measurable targets may neglect quality, teamwork or ethics |
| Encourages delegation and empowerment | Targets may be imposed in practice, losing the motivational benefit; may create pressure and stress |
The changing role of Information Technology (IT) and Artificial Intelligence (AI) in HRM
| HR activity | How IT and AI are changing it |
|---|
| Recruitment and selection | Online job portals; AI screening of CVs; online tests and video interviews; chatbots answering applicants' questions |
| Workforce planning | Data analytics forecast labour needs and predict which employees |
| HR activity | How IT and AI are changing it |
| may leave |
| Training | E-learning platforms; virtual reality simulations; personalised AI learning paths |
| Performance management | Real-time performance data; digital appraisals; productivity monitoring software |
| Payroll and administration | Automated payroll, attendance and leave systems; employee self- service apps |
| Communication and engagement | Intranets, collaboration apps, pulse surveys analysed by AI |
| Benefits | Concerns |
|---|
| Lower administration costs; faster, more consistent processes | AI recruitment tools may reproduce bias present in past data |
| Better decisions based on data | Employee privacy and surveillance concerns; data protection laws |
| Wider recruitment pools and flexible, remote training | Loss of the human element; reduced trust and morale |
| Frees HR staff for strategic work | Cost of systems; job losses in HR administration; need for new skills |
Analysis chain
Business introduces AI to screen job applications → thousands of CVs are shortlisted in minutes → recruitment time and cost fall → but the system learned from past hiring decisions that favoured one group → diverse candidates are unfairly rejected — human review and auditing of the AI are essential
Evaluation
The choice between hard and soft HRM depends on the business's strategy and market: a business competing on low cost may lean hard; one competing on quality, service or innovation needs soft HRM to retain and develop talent.
Flexible contracts benefit businesses most when demand fluctuates, but over-reliance damages commitment — the balance between core and peripheral workers matters.
Technology supports but does not replace good people management — its value depends on fair, transparent use and on HR professionals' judgement.