Challenges of Human Resource Management


The role of the Human Resource Manager is evolving with the change in competitive market environment and the realization that Human Resource Management must play a more strategic role in the success of an organization. Organizations that do not put their emphasis on attracting and retaining talents may find themselves in dire consequences, as their competitors may be outplaying them in the strategic employment of their human resources.

With the increase in competition, locally or globally, organizations must become more adaptable, resilient, agile, and customer-focused to succeed. And within this change in environment, the HR professional has to evolve to become a strategic partner, an employee sponsor or advocate, and a change mentor within the organization. In order to succeed, HR must be a business driven function with a thorough understanding of the organization’s big picture and be able to influence key decisions and policies. In general, the focus of today’s HR Manager is on strategic personnel retention and talents development. HR professionals will be coaches, counselors, mentors, and succession planners to help motivate organization’s members and their loyalty. The HR manager will also promote and fight for values, ethics, beliefs, and spirituality within their organizations, especially in the management of workplace diversity.

This paper will highlight on how a HR manager can meet the challenges of workplace diversity, how to motivate employees through gain-sharing and executive information system through proper planning, organizing, leading and controlling their human resources.

Workplace Diversity

According to Thomas (1992), dimensions of workplace diversity include, but are not limited to: age, ethnicity, ancestry, gender, physical abilities/qualities, race, sexual orientation, educational background, geographic location, income, marital status, military experience, religious beliefs, parental status, and work experience.

The Challenges of Workplace Diversity

The future success of any organizations relies on the ability to manage a diverse body of talent that can bring innovative ideas, perspectives and views to their work. The challenge and problems faced of workplace diversity can be turned into a strategic organizational asset if an organization is able to capitalize on this melting pot of diverse talents. With the mixture of talents of diverse cultural backgrounds, genders, ages and lifestyles, an organization can respond to business opportunities more rapidly and creatively, especially in the global arena (Cox, 1993), which must be one of the important organisational goals to be attained. More importantly, if the organizational environment does not support diversity broadly, one risks losing talent to competitors.

This is especially true for multinational companies (MNCs) who have operations on a global scale and employ people of different countries, ethical and cultural backgrounds. Thus, a HR manager needs to be mindful and may employ a ‘Think Global, Act Local’ approach in most circumstances. The challenge of workplace diversity is also prevalent amongst Singapore’s Small and Medium Enterprises (SMEs). With a population of only four million people and the nation’s strive towards high technology and knowledge-based economy; foreign talents are lured to share their expertise in these areas. Thus, many local HR managers have to undergo cultural-based Human Resource Management training to further their abilities to motivate a group of professional that are highly qualified but culturally diverse. Furthermore, the HR professional must assure the local professionals that these foreign talents are not a threat to their career advancement (Toh, 1993). In many ways, the effectiveness of workplace diversity management is dependent on the skilful balancing act of the HR manager.

One of the main reasons for ineffective workplace diversity management is the predisposition to pigeonhole employees, placing them in a different silo based on their diversity profile (Thomas, 1992). In the real world, diversity cannot be easily categorized and those organizations that respond to human complexity by leveraging the talents of a broad workforce will be the most effective in growing their businesses and their customer base.

The Management of Workplace Diversity

In order to effectively manage workplace diversity, Cox (1993) suggests that a HR Manager needs to change from an ethnocentric view (“our way is the best way”) to a culturally relative perspective (“let’s take the best of a variety of ways”). This shift in philosophy has to be ingrained in the managerial framework of the HR Manager in his/her planning, organizing, leading and controlling of organizational resources.

As suggested by Thomas (1992) and Cox (1993), there are several best practices that a HR manager can adopt in ensuring effective management of workplace diversity in order to attain organizational goals. They are:

Planning a Mentoring Program-

One of the best ways to handle workplace diversity issues is through initiating a Diversity Mentoring Program. This could entail involving different departmental managers in a mentoring program to coach and provide feedback to employees who are different from them. In order for the program to run successfully, it is wise to provide practical training for these managers or seek help from consultants and experts in this field. Usually, such a program will encourage organization’s members to air their opinions and learn how to resolve conflicts due to their diversity. More importantly, the purpose of a Diversity Mentoring Program seeks to encourage members to move beyond their own cultural frame of reference to recognize and take full advantage of the productivity potential inherent in a diverse population.

Organizing Talents Strategically-

Many companies are now realizing the advantages of a diverse workplace. As more and more companies are going global in their market expansions either physically or virtually (for example, E-commerce-related companies), there is a necessity to employ diverse talents to understand the various niches of the market. For example, when China was opening up its markets and exporting their products globally in the late 1980s, the Chinese companies (such as China’s electronic giants such as Haier) were seeking the marketing expertise of Singaporeans. This is because Singapore’s marketing talents were able to understand the local China markets relatively well (almost 75% of Singaporeans are of Chinese descent) and as well as being attuned to the markets in the West due to Singapore’s open economic policies and English language abilities. (Toh, R, 1993)

With this trend in place, a HR Manager must be able to organize the pool of diverse talents strategically for the organization. He/She must consider how a diverse workforce can enable the company to attain new markets and other organizational goals in order to harness the full potential of workplace diversity.

An organization that sees the existence of a diverse workforce as an organizational asset rather than a liability would indirectly help the organization to positively take in its stride some of the less positive aspects of workforce diversity.

Leading the Talk-

A HR Manager needs to advocate a diverse workforce by making diversity evident at all organizational levels. Otherwise, some employees will quickly conclude that there is no future for them in the company. As the HR Manager, it is pertinent to show respect for diversity issues and promote clear and positive responses to them. He/She must also show a high level of commitment and be able to resolve issues of workplace diversity in an ethical and responsible manner.

Control and Measure Results-

A HR Manager must conduct regular organizational assessments on issues like pay, benefits, work environment, management and promotional opportunities to assess the progress over the long term. There is also a need to develop appropriate measuring tools to measure the impact of diversity initiatives at the organization through organization-wide feedback surveys and other methods. Without proper control and evaluation, some of these diversity initiatives may just fizzle out, without resolving any real problems that may surface due to workplace diversity.

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Motivational Approaches

Workplace motivation can be defined as the influence that makes us do things to achieve organizational goals: this is a result of our individual needs being satisfied (or met) so that we are motivated to complete organizational tasks effectively. As these needs vary from person to person, an organization must be able to utilize different motivational tools to encourage their employees to put in the required effort and increase productivity for the company.

Why do we need motivated employees? The answer is survival (Smith, 1994). In our changing workplace and competitive market environments, motivated employees and their contributions are the necessary currency for an organization’s survival and success. Motivational factors in an organizational context include working environment, job characteristics, appropriate organizational reward system and so on.

The development of an appropriate organizational reward system is probably one of the strongest motivational factors. This can influence both job satisfaction and employee motivation. The reward system affects job satisfaction by making the employee more comfortable and contented as a result of the rewards received. The reward system influences motivation primarily through the perceived value of the rewards and their contingency on performance (Hickins, 1998).

To be effective, an organizational reward system should be based on sound understanding of the motivation of people at work. In this paper, I will be touching on the one of the more popular methods of reward systems, gain-sharing.


Gain-sharing programs generally refer to incentive plans that involve employees in a common effort to improve organizational performance, and are based on the concept that the resulting incremental economic gains are shared among employees and the company.

In most cases, workers voluntarily participate in management to accept responsibility for major reforms. This type of pay is based on factors directly under a worker’s control (i.e., productivity or costs). Gains are measured and distributions are made frequently through a predetermined formula. Because this pay is only implemented when gains are achieved, gain-sharing plans do not adversely affect company costs (Paulsen, 1991).

Managing Gain-sharing

In order for a gain-sharing program that meets the minimum requirements for success to be in place, Paulsen (1991) and Boyett (1988) have suggested a few pointers in the effective management of a gain-sharing program. They are as follows:

  • A HR manager must ensure that the people who will be participating in the plan are influencing the performance measured by the gain-sharing formula in a significant way by changes in their day-to-day behavior. The main idea of the gain sharing is to motivate members to increase productivity through their behavioral changes and working attitudes. If the increase in the performance measurement was due to external factors, then it would have defeated the purpose of having a gain-sharing program.
  • An effective manager must ensure that the gain-sharing targets are challenging but legitimate and attainable. In addition, the targets should be specific and challenging but reasonable and justifiable given the historical performance, the business strategy and the competitive environment. If the gain-sharing participants perceive the target as an impossibility and are not motivated at all, the whole program will be a disaster.
  • A manager must provide useful feedback as a guidance to the gain-sharing participants concerning how they need to change their behavior(s) to realize gain-sharing payouts The feedback should be frequent, objective and clearly based on the members’ performance in relation to the gain-sharing target.
  • A manager must have an effective mechanism in place to allow gain-sharing participants to initiate changes in work procedures and methods and/or requesting new or additional resources such as new technology to improve performance and realize gains. Though a manager must have a tight control of company’s resources, reasonable and justifiable requests for additional resources and/or changes in work methods from gain-sharing participants should be considered.

Executive Information Systems

Executive Information System (EIS) is the most common term used for the unified collections of computer hardware and software that track the essential data of a business’ daily performance and present it to managers as an aid to their planning and decision-making (Choo, 1991). With an EIS in place, a company can track inventory, sales, and receivables, compare today’s data with historical patterns. In addition, an EIS will aid in spotting significant variations from “normal” trends almost as soon as it develops, giving the company the maximum amount of time to make decisions and implement required changes to put your business back on the right track. This would enable EIS to be a useful tool in an organization’s strategic planning, as well as day-to-day management (Laudon, K and Laudon, J, 2003).


The role of the HR manager must parallel the needs of the changing organization. Successful organizations are becoming more adaptable, resilient, quick to change directions, and customer-centered. Within this environment, the HR professional must learn how to manage effectively through planning, organizing, leading and controlling the human resource and be knowledgeable of emerging trends in training and employee development.

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Implementation of HRM in the public sector

Finally, it is necessary to consider the relevance of the foregoing themes to the public sector, since

it is frequently argued that there are unique dilemmas which characterise management in the public

domain (Stewart and Ranson, 1988). Farnham and Horton (1996) outline three responses to this


1. Strategic management may be perceived to be of secondary importance to the public service

manager. For example it has been suggested (Boyle, 1995) that the public sector manager

operates in an environment which gives rise to complexities and constraints which do not

concern the private manager, including, political, legal and public dimensions and the absence

in many areas of competition.

2. Management practices, including HRM, may be perceived to be generic and equally applicable

to the public sector.

3. Finally, they describe a new public management (NPM) model, which differs from both public

administration and private management. NPM emerged as a model of public sector

management in response to pressures to cut public sector costs and a political ideology which

saw a need to develop a more market-oriented culture in the public sector. This model

emphasises the central role which HRM policies, including recruitment, training and

communications strategies, can play in achieving the cultural change necessary to bring about

employee commitment.

Features of the NPM approach are evident in reform initiatives in a number of OECD

countries, most notably the UK and New Zealand and these are considered further in Chapter 4

(see also Farnham and Horton, 1996). A number of other contributors suggest that there are

features inherent in the public sector which may impede the implementation of a strategic approach

to HRM. Storey (1989) suggests that while bureaucracy may ensure consistency, equity and

impartiality, it can also result in a lack of responsiveness which may conflict with the flexible,

commitment-based nature of HRM. Similarly, Barnhart (1997) suggests that in a bureaucratic

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structure, staff may be accustomed to following centrally determined rules and circulars, and a reallocation

of responsibility for HRM may represent a significant challenge to the status quo for

many who are comfortable with the existing structure and culture. This implies the need for a

planned approach to change in moving from personnel management to HRM, particularly since

very often what organisations are actually trying to change through the implementation of HRM is

culture itself (see Legge, 1995).

Lawton and Rose (1994) outline a number of questions which organisations should address

before implementing cultural change:

  • · Who brings about the change – is it externally or internally driven?
  • · What changes are required to structures, people, processes and culture?
  • · Who does it affect? Who will obstruct this change?
  • · Are there appropriate mechanisms and processes for change?
  • · How much will it cost? Can the organisation afford not to change?

The last point is of particular significance since the absence of significant political or economic

pressures may dilute the motivation for change. It is important therefore that the cost of not

changing is carefully considered. For example, in the US Federal Government Offices, the primary

motivation behind ongoing decentralisation of HRM is cost reduction, since it has been estimated

that central control structures not only stifle line management’s autonomy, but consume billions per

year in salary and administrative costs (Barnhart, 1997).

Lawton and Rose (1994) suggest that unless the above questions are addressed, those affected

may feel that change has been imposed from above and they may resent change. Similarly, it has

been suggested (Hendry, 1995, Beer et al, 1993) that a succession of top down change programmes

can actually inhibit change in the long run by promoting cynicism and scepticism among staff.

This has been identified as a barrier to change in the Irish civil service, where negative attitudes to

change may be ingrained because of experience of similar failed reform initiatives (Tuohy, 1996).

In the light of such concerns, a number of authors (Hendry, 1995, Armstrong, 1997) suggest that

change is more likely to be achieved when it is introduced incrementally, in a bottom up fashion,

focusing on the work itself rather than trying to change attitudes. Similarly, Beer et al (1993)

argue that the most effective way to change behaviour, and as a consequence performance, is to put

people into a new organisational context, which imposes new roles, responsibilities and

relationships on them, thus effectively forcing new attitudes and behaviours. Armstrong (1997)

stresses however that senior management must play a role by creating the right climate and

supporting structures for change. Additionally it has been suggested that reform is more likely to

be successful when there are significant driving forces for change, including political leadership,

legislative change, and economic crisis (see Schick, 1996). The influences of these factors are

considered in more depth in the review of international experience outlined in Chapter 4.

2.7 Conclusions

The literature highlights a range of challenges involved in the process of developing a strategic

approach to HRM. Regardless of whether an organisation wishes to emphasise a hard (control

focused) or soft (commitment focused) approach to HRM, typically what it wishes to achieve is

integration of HRM policies with business strategy, internally and at line management level. Key

stakeholders influence, and in some situations can undermine, the process of integration at these

levels. Similarly, the division of responsibilities between central and line department level shapes

and dictates the extent to which HRM policies provide strategic fit.

Integration of HRM with business strategy can assist the organisation in achieving its

objectives. In turn, the integration of HRM responsibilities at line management level frees up

resources in the personnel section to develop strategically integrated HRM policies which add

value to the organisation.

Drawing together these issues, a number of key stages in the development of a strategic

approach to HRM can be identified:

  • · A critical evaluation of the division of responsibilities between central and line department

levels is required to assess the extent to which it is both desirable and feasible to decentralise

HRM activities.

  • · HR strategies should be devised during the process of business strategy formulation. This has

a number of implications for the personnel section. Firstly, its ability to play a meaningful role

in this process depends on the belief of top management in the value which HRM can add to

the organisation. Secondly, personnel sections need to critically audit existing HRM policies

and develop the time and expertise required to devise new strategic policies.

  • · The auditing of existing activities and development of new strategic policies can be facilitated

by a number of key levers. Firstly, the devolution of appropriate HRM matters to line

managers can free up resources in the personnel section to develop strategic policies. Any

such devolution requires that line managers be equipped with the appropriate skills, knowledge

and attitudes to effectively manage and develop staff. This implies a significant need for

training and development; and this must be supported by key levers such as performance

management, to ensure that the managers’ HRM responsibilities are recognised, measured and

rewarded. Secondly, the development of strategic HR polices is dependent on appropriate

expertise in the HR section. Such expertise is critical if a HR section is to both support line

managers in their activities and make a more strategic contribution to the organisation.

  • · The selection and development of personnel staff is important in ensuring that the HR section

is equipped to develop a more strategic role. Best practice indicates that staff should be

selected on the basis of their competencies in a range of HR activities, including human

resource planning and performance management. Where such skills do not exist, they should

be specifically developed, assisted where necessary by external expertise.

  • · The process of moving from personnel management to HRM implies the need for change to the

organisation’s existing culture, and as a consequence, change may be resisted by key

stakeholders. Accordingly there is a need to plan for and carefully manage the change process.

The need for change, the process involved and the benefits of such change, need to be clearly

communicated and key stakeholders such as unions and line managers should be involved.

Partnership can be a valuable mechanism in involving stakeholders, but to be successful, it

requires a significant change in mindset among the various groups involved


A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending.[1]

A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

  1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.
  2. Enable the actual financial operation of the business to be measured against the forecast.
  3. Establish the cost constraint for a project, program, or operation.

Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include:

  • To control resources
  • To communicate plans to various responsibility center managers.
  • To motivate managers to strive to achieve budget goals.
  • To evaluate the performance of managers
  • To provide visibility into the company’s performance

Business start-up budget

The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example, equipment, inventory) and services (for example, remodeling, insurance), working capital, sources and collateral. The budget should contain a narrative explaining how you decided on the amount of this reserve and a description of the expected financial results of business activities. The assets should be valued with each and every cost. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting.

Corporate budget

The budget of a company (law)|company is often compiled annually, but may not be. A finished budget, usually requiring considerable effort, is a plan for the short-term future, typically one year (see budget year). While traditionally the Finance department compiles the company’s budget, modern software allows hundreds or even thousands of people in various departments (operations, human resources, IT, etc.) to list their expected revenues and expenses in the final budget.

If the actual figures delivered through the budget period come close to the budget, this suggests that the managers understand their business and have been successfully driving it in the intended direction. On the other hand, if the figures diverge wildly from the budget, this sends an ‘out of control’ signal, and the share price could suffer as a result.

Event management budget

A budget is a fundamental tool for an event director to predict with reasonable accuracy whether the event will result in a profit, a loss or will break-even. A budget can also be used as a pricing tool.

There are two basic approaches or philosophies when it comes to budgeting. One approach is telling you on mathematical models, and the other on people.

The first school of thought believes that financial models, if properly constructed, can be used to predict the future. The focus is on variables, inputs and outputs, drivers and the like. Investments of time and money are devoted to perfecting these models, which are typically held in some type of financial spreadsheet application.

The other school of thought holds that it’s not about models, it’s about people. No matter how sophisticated models can get, the best information comes from the people in the business. The focus is therefore in engaging the managers in the business more fully in the budget process, and building accountability for the results. The companies that adhere to this approach have their managers develop their own budgets. While many companies would say that they do both, in reality the investment of time and money falls squarely in one approach or the other.

Government budget

For more details on this topic, see Government budget.

The budget of a government is a summary or plan of the intended revenues and expenditures of that government. There are three types of government budget : the operating or current budget, the capital or investment budget, and the cash or cash flow budget.[2]

United States

Main article: United States federal budget

The federal budget is prepared by the Office of Management and Budget, and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to have balanced budgets, but the federal government is allowed to run deficits.


Main article: Union budget of India

The budget is prepared by the Budget Division of Department of Economic Affairs of the Ministry of Finance annually. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State. The railway budget is presented separately.


The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate.

After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.

Personal or family budget

For more details on this topic, see Personal budget.

In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet). In consumer theory, the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint.

Budget types

  • Sales budget – an estimate of future sales, often broken down into both units and currency. It is used to create company sales goals.
  • Production budget – an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.
  • Capital budget – used to determine whether an organization’s long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
  • Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
  • Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
  • Project budget – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
  • Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
  • Expenditure budget – includes spending data items.


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