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Cost Effectiveness in Human Resource Management


Human Resource Management is a continually evolving field of practice. It, of course, varies in application across industries. As an example, the recruitment, compensation, and retention of employees in the retail sector is likely to be be very different from that in the information technology or manufacturingg sectors.



The retail sector is typically made up of a modest number of highly skilled managers and supervisors, while the vast majority of frontline, customer facing workers are likely to be relatively low skilled. The organisation's human resource policies, therefore, may need to be tuned towards the attraction and retention of large numbers of low skilled workers.


An organisation in manufacturing, however, is likely to need highly skilled workers across all divisions and hierarchies, from design to assembly, and from senior management to the shopfloor worker. This means more targeted attraction of talent from a relatively smaller pool of candidates, and commensurate hiring and retention policies.


Cost effectiveness in the HRM context is a complex subject. People form one of the most important expense heads in almost every organisation. A CHRO or a senior HR Manager not only needs to contend with direct HRM cost-effectiveness, including cost-effective hiring processes, identification of the best available talent, hiring at optimal salaries, organisation structure, and organisation design, but also, equally importantly, indirect cost-effectiveness stemming from employer branding, employee engagement, morale, performance management, work-efficiency, learning and development, and employee retention.


The impact of HRM on over-all organisational cost-effectiveness, and hence on the bottom-line, cannot be underestimated.


Further, in a country as fast-developing as India, the evolution of HRM practices is happening at a break-neck pace. This is being driven by several factors: economic growth; the boom in education and, with it, the availability of skilled resources; rapidly rising salaries; high employee attrition; the advent of multinational corporations into India; exposure to, and adoption of, global standards; and changes in labour laws.


In this scenario, an organisation's people management strategy is as important as its business strategy. Senior managers, if they are to stay competitive, must understand the basic importance of HRM and its direct and indirect contribution to the company's bottom line, and must simultaneously learn, adapt, and keep pace with evolving conditions and circumstances.

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