Management Control Systems (2nd Edition)

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Chapter Code: MCS16

Pages : 528; Paperback;
210 X 275 mm approx.

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Management Control Systems Textbook

Control of Human Resource Management : Overview

The goal of human resource management is to help an organization meet its strategic goals by attracting, developing, and retaining employees and also by managing them effectively. It aims to achieve a fit between managing the organization's employees and the overall strategic direction of the organization.

Human resource planning deals with recognizing and fulfilling the human resource needs of an organization. In order to meet the effectiveness objective of management control, the HR plan should be formulated in such a way that it conforms to the organizational strategies and corporate plans. At the micro level, the organization needs to do career planning for employees and succession planning for key positions in the organization. At a macro level, the organization needs to carry out workforce (manpower) planning and salary planning. The nature of the HR planning process is primarily dependent upon the organizational size and the hierarchical structure within the organization. For the HR plan to be successful, it has to be supported fully by the top management, the HR department, and the line managers.

Recruitment and selection, training and development, attrition management, welfare management, and compensation management are some of the areas over which the organization needs to exert control. One of the effective ways of assessing HR functions is to use metrics in the control process.

Evaluation of the recruitment process will help in exercising control over certain aspects of the recruitment process like the costs incurred on the recruitment process, the people involved in the process, the quality of the new recruits, the final number of recruits selected, and the success rate of each sourcing channel.

The effectiveness of training and development activities of the organization can be assessed by monitoring job-impact indicators. The returns on the investment made on the training activities can also be measured by using quantitative tools like benefit-to-cost ratio, payback period, discounted cash flow, and utility analysis. The attrition levels in an organization can be assessed by using two metrics - employee turnover rate (separation rate) and employee retention rate (stability index). These metrics are periodically computed and the values compared with the industry average and with the past records of the organization.

Welfare measures are undertaken by organizations to keep employees happy with the expectation that there will be a consequent increase in employee productivity. It is important to prioritize the areas of spending, allocate the funds, monitor the utilization of funds, and gauge the level of satisfaction of the employees as a result of the welfare measures. It is also important to re-examine whether the allocation of funds across the various welfare schemes was appropriate.

The equity theory states that employees should be equitably paid for them to be satisfied and productive. The compensation structure should be designed taking into consideration both internal equity and external equity. Periodic evaluations should be done to ensure proper implementation of an equitable (both internal and external) pay structure. It is important to assess the overall effectiveness of human resource management in the organization. Survey feedback, Human Resource Development (HRD) Audit, evaluation of HR interventions, human resource accounting, and assessment of employee engagement are some of the techniques used for this purpose.

Survey feedback is useful as a control tool as it helps in getting feedback about the various problems and challenges that the organization is facing and finding various ways to bring about organizational changes. The HRD audit is used as a control and diagnostic tool in organizations with regard to the practice of the HR functions in the organization and the expected changes in the system. An HRD audit clarifies the respective roles of the HR department and the line managers in human resource development.

HR interventions refer to the proactive involvement of the HR department in the activities of the organization to improve the organization's performance. The effectiveness of a particular intervention can be determined in monetary terms by calculating the net present value (present value of benefits minus present value of costs) of taking up the HR intervention. If the net present value is positive and significantly high, the HR intervention is considered to be effective.

Human resource accounting refers to the process of identifying, measuring, and communicating the value of the human resources of the organization. Various human resource accounting models have been developed to aid managers in valuing their human resource assets. Employee engagement has two distinct yet related main factors - employee satisfaction and employee commitment. Employees who are both satisfied and committed to the organization are said to exhibit a high degree of engagement with their employer. Employee engagement levels can be periodically assessed through surveys. High levels of employee engagement are characteristic of an organization which is considered by employees as a 'great place to work' or as 'an employer of choice'.

The Workforce Scorecard approach views the workforce in terms of the contribution made by it instead of cost incurred on it. It makes use of metrics instead of benchmarking. It also makes the line managers jointly responsible with the human resource professionals for execution of the organization's strategy. The Workforce Scorecard has four dimensions - workforce success, leadership and workforce behavior, workforce competencies, and workforce mindset and culture. Taken together, the four dimensions help in assessing workforce effectiveness.

Human resource information systems are specialized application software built for implementing, monitoring, and benchmarking HR processes in any organization. At an operational level, the HRIS is used for transaction processing and administrative purposes. With a change in the competitive scenario, organizations are using the HRIS for strategic human resource management and decision-making. The HRIS is useful for controlling human resource management in the organization and achieving its management control objectives of efficiency, effectiveness, disclosure, and compliance.

Chapter 16 : Overview

Human Resource Planning

Control of the HR Department's Functions
Recruitment and Selection
Training and Development
Attrition Management
Welfare Management
Compensation Management

Selected Techniques for Assessing Effectiveness of HRM

Survey Feedback
HRD Audit
Evaluating HR Interventions
Human Resource Accounting
Assessment of Employee Engagement
The Workforce Scorecard

Human Resource Information Systems for Control
Using HRIS for Controlling HRM