Recruit the right people
Better matching of people to jobs can improve performance and reduce costly recruitment mistakes.
Cambridge International AS & A Level Business · 9609 · AS Level
2.1 Human Resource Management
Human resource management is about making effective use of people: planning the workforce, recruiting the right employees, supporting their welfare and development, and maintaining productive relationships between management and employees.
Exam-focusedAll 7 subtopicsInstant-feedback questions
What you need to know
For high marks, you need more than definitions. You should be able to explain why different HR decisions are suitable in different business contexts, calculate and interpret labour turnover, compare recruitment and training methods, and evaluate how HRM can affect productivity, costs, morale and competitiveness.
High-grade habit: connect the HR decision to the business objective. For example, external recruitment may bring new skills, but it is more expensive and risky than internal recruitment. Whether it is worthwhile depends on the skills already available, the importance of the vacancy and how quickly the business is changing.
Subtopics
These follow the textbook table of contents. Select a subtopic to jump directly to it.
2.1.1
Purpose and roles of human resource management
What is HRM?
Human resource management (HRM) is the process of making effective use of the people employed by a business. It covers activities such as acquiring employees, training and developing them, motivating and rewarding them, and dealing with changes in employment.
Human resource managementThe process of making the most efficient and effective use of an organisation’s employees.
Effective HRM should support the organisation’s wider objectives. A business seeking rapid growth may need more employees and leadership talent. A business competing on low costs may focus on labour productivity and flexible working. A business seeking innovation may need skilled employees, development opportunities and a culture that encourages ideas.
How HRM can improve organisational performance
Develop skills
Training can improve productivity, quality, flexibility and the ability to use new technology.
Improve motivation
Fair rewards, development and supportive management can improve morale and commitment.
Retain talent
Lower unwanted labour turnover reduces recruitment costs and helps retain knowledge and experience.
Why HRM has become increasingly important
- Workforces have changed: businesses use different patterns of employment and often require better-educated workers to perform more complex tasks.
- Organisations have changed: delayering, teamworking and empowerment mean managers closer to employees often take greater responsibility for people management.
- Competition has increased: a skilled, responsive workforce can become an important source of competitive advantage.
- Technology changes skill needs: some jobs disappear while new technical roles are created, so workforce planning and retraining become essential.
DelayeringReducing the number of levels in an organisation’s hierarchy.
TeamworkingOrganising employees into groups that work together to complete significant areas of work.
Evaluation: HRM does not automatically improve performance. Its value depends on the quality of implementation, the type of workforce, management attitudes, available finance and whether HR policies genuinely support the business strategy.
2.1.2
Workforce planning
The workforce plan
A workforce plan assesses the current workforce and identifies the actions needed to meet future labour requirements. Managers consider the number of employees needed, the skills required and where those employees need to work.
Workforce planAn assessment of the current workforce and the actions required to meet the business’s future labour needs.
Workforce planning is forward-looking. It helps the business prepare for expansion, new technology, retirement, changing demand and new skill requirements rather than reacting only after a shortage appears.
Information used in workforce planning
Sales forecasts
Expected demand influences how many employees, and what types of employees, will be required.
Labour turnover
Managers need to estimate how many existing employees are likely to leave or retire.
Wage costs
Rising wages may encourage a business to seek productivity improvements or greater use of technology.
Technology and productivity
Automation can reduce some labour needs but increase demand for workers with technical skills.
Labour turnover
Labour turnoverThe percentage of a business’s workforce that leaves during a given period, normally one year.
Labour turnover (%) = (Number of staff leaving during the period ÷ Average number of staff) × 100
Worked example: if 36 employees leave a business with an average workforce of 600, labour turnover = (36 ÷ 600) × 100 = 6%.
What can cause labour turnover?
- Low pay or poor working conditions.
- Weak morale or poor management.
- Inadequate training and development opportunities.
- Poor recruitment decisions, meaning employees and jobs were badly matched.
- Retirement, redundancy or employees moving for better opportunities.
Is high labour turnover always bad?
Possible disadvantages
Recruitment and training costs rise, experience is lost, service or production may be disrupted, and the business may have to raise pay to retain staff.
Possible benefits
Some turnover brings new ideas and skills into the business and may allow managers to replace poor performers or change the skill mix.
Context matters: high turnover may be manageable in a seasonal business using mainly unskilled labour, but serious in a hospital, engineering company or technology firm where skilled employees are difficult and expensive to replace.
2.1.3
Recruitment and selection
The recruitment and selection process
Identify needUse the workforce plan
→RecruitAdvertise and attract applicants
→SelectChoose the most suitable candidate
Recruitment attracts applicants for a vacancy; selection chooses from those applicants. Expansion, new products, new markets or an employee leaving can all create a recruitment need.
Recruitment and selectionThe process of filling vacancies by attracting candidates and appointing suitable employees.
Job description and person specification
Job description — about the job
Usually includes the job title, employment conditions, duties, responsibilities, objectives and where the role fits in the organisation.
Person specification — about the person
Sets out the qualifications, skills, experience and personal qualities needed to perform the job successfully.
A clear person specification helps the business shortlist applicants consistently. A clear job description helps potential applicants understand the work and can later be used when reviewing performance.
Methods of recruitment
| Method | Potential strengths | Potential limitations |
|---|---|---|
| Job advertisements | Can be targeted to local, national or specialist audiences. | Cost and effectiveness depend on where the advert is placed. |
| Employment agencies | Useful contacts and expertise, especially for scarce or specialist skills. | Can charge high fees. |
| Online recruitment | Low cost per applicant, very wide reach and can attract applicants internationally. | May produce too many unsuitable applications; digital access or screening may exclude some candidates. |
| Headhunting | Can target proven senior managers or specialists directly. | Usually expensive and mainly suitable for high-value appointments. |
Internal versus external recruitment
Internal recruitment
Advantages: candidate is known, understands the culture, may need less induction, cheaper advertising and provides promotion opportunities.
Limitations: small pool of candidates and may not introduce new skills or ideas.
External recruitment
Advantages: wider choice, new skills, fresh ideas and potentially stronger candidates.
Limitations: generally more expensive, slower and riskier because candidates are less well known.
Methods of selection
CVs / résumés / application forms
Useful for initial screening and comparing qualifications, experience and relevant background.
Interviews
Allow two-way communication and questioning, but interview performance does not always predict job performance.
References
Provide information from previous employers or other referees, although their accuracy can vary.
Aptitude tests
Assess the candidate’s ability to perform skills or tasks related to the job.
Personality tests
Explore likely behaviour and whether a candidate may fit the role or organisational culture.
Assessment centres
Use several methods over an extended period, such as interviews, simulations and group exercises; often more thorough but costly.
Employment contracts
An employment contract is a legal agreement setting out the terms and conditions of employment. Exact legal requirements vary between countries, but common items include pay, working hours, holidays, job duties, workplace, notice periods, disciplinary rules and grievance procedures.
Employment contractA legal agreement between an employer and employee stating the terms and conditions of employment.
Exam focus: do not just list recruitment methods. Explain why the method is appropriate for the vacancy. A local advert may suit a shop assistant; international online recruitment or specialist agencies may be more appropriate for a scarce senior-level skill.
2.1.4
Redundancy and dismissal
The difference
Redundancy
The employee loses the job because the job itself no longer exists, perhaps because the business closes, introduces new technology or relocates operations.
Dismissal
The employer terminates an employee’s contract. Redundancy is one possible form of dismissal, but dismissal can also occur because of capability, conduct or another legally accepted reason.
RedundancyLoss of employment because a job no longer exists.
DismissalTermination of an employee’s employment contract by the employer.
Why redundancies may occur
- The business or a particular site closes.
- Technology replaces some jobs.
- Operations are relocated or outsourced.
- Demand falls and the business needs fewer employees.
- Restructuring removes duplicated roles.
Voluntary and involuntary redundancy
Voluntary redundancy
Employees choose to leave in return for a compensation package. This may protect morale because people are not forced out, although the business could lose skilled employees it would prefer to retain.
Involuntary / compulsory redundancy
The employer selects employees whose jobs will end. This may be necessary if too few volunteers come forward, but it can damage morale and create fear among remaining employees.
Businesses may first try alternatives such as restricting overtime, freezing recruitment, not replacing people who leave naturally or redeploying workers. Where compulsory redundancy is unavoidable, fair and transparent selection criteria are important.
Important: employment law differs between countries. In exams, focus on the business consequences: cost savings, compensation costs, loss of skills, morale, reputation, productivity and the effect on the remaining workforce.
2.1.5
Morale and welfare
Employee welfare and morale
Employee welfareThe facilities, support and working conditions that contribute to employees’ well-being.
Employee moraleThe level of satisfaction and overall sense of well-being felt by employees at work.
Businesses must provide basic safe working conditions, but good employers may go further by supporting employees’ health, development and well-being. High morale can encourage co-operation and better performance; poor morale can contribute to absenteeism, low productivity and labour turnover.
Work–life balance
Work–life balanceThe balance between time and energy devoted to work and to non-work activities such as family, rest and leisure.
Very long working hours can increase stress, damage health and safety, and eventually reduce productivity. Businesses may respond through flexible working, sensible workload expectations, remote working where appropriate and support for family responsibilities.
Example: a business that offers flexible start and finish times may make it easier for employees with caring responsibilities to remain in employment, potentially reducing labour turnover and retaining experienced staff.
Diversity and equality
Diversity
Recognising and valuing differences between individuals and groups in the workforce, such as differences in age, gender, ethnicity, disability, religion and background.
Equality
Ensuring fair rights and opportunities so employees can contribute and progress without unjust discrimination.
DiversityRecognition and valuing of differences between individual employees and groups of employees.
EqualityA situation in which employees have fair rights and opportunities in the workplace.
Why diversity and equality can benefit a business
- A larger recruitment pool makes it easier to attract the best talent.
- Promotion based on ability helps the business use its human resources more effectively.
- A diverse workforce may understand the needs of a diverse customer base better.
- A reputation for fair treatment can strengthen employer branding and help recruitment and retention.
- Inclusive policies may improve morale and commitment.
Evaluation: welfare policies cost money, but the relevant question is whether they create greater value through stronger performance, lower turnover, reduced absence and better recruitment than they cost to provide.
2.1.6
Training and development
Training versus development
Training
Activities that provide job-related skills and knowledge needed to perform work effectively.
Development
A broader process of improving an employee’s skills, education, knowledge and abilities over time, including coaching, mentoring and formal study.
Types of training
Induction training
Introduces a new employee to the organisation, colleagues, workplace, basic duties and important policies. It can reduce early mistakes and help the employee become productive sooner.
On-the-job training
Training takes place in the workplace, often through observation, coaching, work shadowing or guidance from experienced employees.
Off-the-job training
Training takes place away from normal work, for example at a college, university, seminar or specialist training provider.
Benefits and drawbacks of training and development
| Benefits | Possible drawbacks |
|---|---|
| Higher productivity and improved quality. | Training uses finance and management time. |
| Employees can gain skills required for new technology and changing jobs. | Employees may be unavailable for production while training. |
| Can improve morale, motivation and retention. | A trained employee may leave and take the new skills elsewhere. |
| Can improve the employer brand and attract better applicants. | The return may be difficult to measure and depends on training quality. |
| Supports delegation, teamworking and flexible use of labour. | Some training may be unnecessary or poorly matched to business needs. |
Training for intrapreneurship
Businesses that want employees to act as intrapreneurs need more than creative people. Employees may need personal skills such as confidence, persistence and calculated risk-taking, technical skills for analysing problems and markets, and managers who are trained to support experimentation rather than punish every failed idea.
IntrapreneurshipEntrepreneurial behaviour by employees inside an existing organisation.
Multi-skilling and flexibility
Multi-skillingDeveloping employees so they can perform more than one role within the organisation.
Multi-skilled workers can be moved to where they are most needed. This gives a business greater labour flexibility when demand changes, employees are absent or production problems occur.
Example: a hotel employee trained in both reception and guest services can be moved between roles when demand suddenly changes, helping the hotel maintain service without immediately recruiting additional staff.
High-grade judgement: training is most valuable when the new skills solve an important business need. The benefits are likely to be greater where technology changes quickly, skilled labour is scarce or quality and innovation are important competitive factors.
2.1.7
Management and workforce relations
Why co-operation matters
Good relations between management and employees reduce the risk of disputes and industrial action. Poor relations can lead to strikes, overtime bans, lower morale, disrupted production and damage to the business’s reputation.
Benefits to employers
More reliable production, stronger employer brand, improved morale and productivity, lower disruption costs and potentially stronger competitiveness.
Benefits to employees
Greater job security, lower risk of lost pay during disputes, better prospects for improved conditions and more opportunities to participate in decisions.
Trade unions
Trade unionAn organisation of workers formed to protect and improve members’ economic position and working conditions.
Trade unions commonly seek higher pay, safer working conditions, job security and a stronger employee voice in workplace decisions.
Collective bargaining
Collective bargainingNegotiation between employers and representatives of employees, normally trade union officials.
Collective bargaining can cover pay, hours, holidays, pensions and working conditions. Negotiating collectively gives employees more bargaining power than negotiating individually, especially where industrial action is a credible possibility.
Impact of trade unions
| Potential benefits | Potential disadvantages |
|---|---|
| Provide a clear communication channel between employees and management. | Successful wage bargaining can increase labour costs. |
| Professional negotiation can save management time and help resolve disputes. | Industrial action can stop production and damage reliability. |
| Can improve health, safety and employee protection. | Higher costs may reduce competitiveness in price-sensitive markets. |
| May improve trust and employee participation where relations are constructive. | Conflict can damage long-term morale and relationships. |
Evaluation: do not assume trade unions are always harmful to employers. Their effect depends on the quality of industrial relations. A constructive union can improve communication and reduce conflict; an adversarial relationship can increase costs and disruption.
2.1 revision checklist
Define HRM and explain how it can support organisational objectives.
Explain why changes in workforce and organisational structures affect HRM.
Explain the purpose of workforce planning.
Calculate and interpret labour turnover.
Evaluate high and low labour turnover in context.
Explain the recruitment and selection process.
Distinguish a job description from a person specification.
Compare internal and external recruitment.
Evaluate common recruitment and selection methods.
Explain the purpose and contents of employment contracts.
Distinguish redundancy from dismissal.
Compare voluntary and compulsory redundancy.
Explain employee morale, welfare and work–life balance.
Distinguish diversity from equality and explain their business benefits.
Compare induction, on-the-job and off-the-job training.
Evaluate the benefits and costs of training and development.
Explain intrapreneurship, multi-skilling and workforce flexibility.
Explain the benefits of co-operation between management and employees.
Explain the role of trade unions and collective bargaining.
Evaluate the impact of trade union involvement on employers and employees.
Questions open in a pop-up. Each answer is marked immediately, with an explanation so you know why it is correct or incorrect.