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Literature Review

Concept of Human resource management has evolved over the years. Initially there was commodity concept in which viewed employees as commodities. Then came the factor of production concept this viewed employees as any other factor of production like land machine etc. After this concept good will concept was introduces which gave some basic facilities to the workers. But in this concept these facilities were given as gifts of favour by the employer not as the right of the employee. After this concept the paternalistic concept came into existence, here employer adopted a protective and fatherly attitude towards the employee. Then finally came the humanitarian concept this concept viewed employees as resources or capital. This concept started to recognise the importance of needs and wants of the employees. The next concept is emerging concept. Emerging concept now views employees as partners. This approach focuses on fully exploiting the talent of employees by providing them feeling of belongingness. In this emerging concept employees view themselves as partners of the organisation and therefore always work best for achieving organisational goal (Archana and Murali). Human resource management is defined as an approach to effectively manage the employees in the organisation to gain competitive advantage by strategically utilising the workforce taking into account cultural, personnel and structural considerations. In todays globalised world it has become very necessary to carry out human resource functions effectively.  Due to emergence of multinational organisations the diversity in workforce has increased which has made the function more challenging. Therefore it is always required to use the latest available resources and technology to achieve the human resource objectives. Linking the business strategy to the human resource management functions provide HRM more clear vision and direction. Today the challenges and issues of human resource management are also growing the organisation needs to overcome those challenges and exploit the best from the human resource of the company. There is a link between human resource management practices and organisational performance.  This report includes concepts of intellectual capital, people management and human resource management. It explains in detail the key functions of human resource management. It also contains a valid plan for various cultures and labour markets. It includes the case study of a company that has been criticised for its poor HR practices .It also emphasis on the available literature regarding link between human resource management and organisational performance. Recommendations are also provided that can provide benefits to the organisation .The report touches almost all the important topic regarding management of human capital.

Intellectual capital can be defined as the set of non-financial assets that provide value to the organisation. It comprises of three parts relationship capital, human capital and organisational capital (Adelman 2010). Relationship capital of the firm includes its relations with the external parties that exist outside the organisational boundaries such as suppliers, customers, clients and partners (Dollahite and Rommel 1993). Human capital involves traits and personalities that are possessed by the employees of the organisation it includes knowledge, skills, talents, abilities and experience (Barro 2001). Organisational capital involves things that provide value other than capabilities of employees this includes polies and procedure, intellectual property and information systems (Harrison and Sullivan 2000). Intellectual capital management deals with creating, shaping and updating the stock of intellectual capital in the organisation (Choo and Bontis 2002). Workforce management, People management and Human resurce management are relatively similar terms and highly related to each other. According to Thomas and Horman (2006) workforce management is the set of tools and processes that are designed to enhance the productivity of its workforce at various organisations levels. Human resource management is said to be evolved from people’s management. It can be described as a loose philosophy of people’s management. Significant developments to the traditional people’s management lead to the present form of human resource management (Price 2007). In the recent years management of employee relations have changed a lot. Personnel management approach is shifted to human resource management. According to Storey (2007) Human resource management is defined as an approach to effectively manage the employees in the organisation to gain competitive advantage by strategically utilising the workforce taking into account cultural, personnel and structural considerations. In the words of Guest, Michie, Conway, and Sheehan (2003) Human resource management deals with the best utilisation of the available workforce to maximise the corporate performance. Human resource management is emerging as an important function for every organisation because success of organisation is largely dependent on the performance of its employees and employee performance is largely dependent on the work culture and atmosphere in the organisation. The task to ensure a positive balance between organisation culture and employee performance is done by human resource department (Armstrong and Taylor2014). The concept of HRM can be better understood with the help of characteristics. The basic characteristics of human resource management are it is commitment oriented in nature, it is diverse & strategic, focus on business value and it is a management driven activity (Kim 2017).


An effective Human resource plan involves 6 basic steps, the extent and nature of these steps keeps changing according to different situations. The steps include determining human resource needs, determine recruiting strategy, select employees, develop training, determine compensation and appraise the performance (Noe, Hollenbeck, Gerhart, and Wright, 2003). The basic objectives of human resource management are achieving organisational goals, managing human capital; maintain employee relations, rewards and compensation management and knowledge management (Rees and Smith 2017). These objectives can be achieved only by performing the human resource functions well. HRM has various functions. Deb (2006) defines five basic categories of HRM functions which involve managerial, operational, developmental, analytical and strategic functions. Managerial functions involve basic management of planning, organising, directing and controlling. Operational functions involve human resource planning, human resource acquisition, compensation and benefits, occupational safety and health, integrations and maintenance and employee relationships. The main features of employee acquisition include recruitment and selection. Recruitment can be defined as process of attracting the pool of talent to the organisation (Breaugh, and Starke 2000). Selection in human resource management means evaluating the available alternatives and choosing the best suited person for the job (Minbaeva 2005). Designing an appropriate recruitment and selection system is very essential for an organisation as recruitment and selection has positive relationship with the organisational performance. The developmental functions include HR policy, career & succession development, training and development, performance management and total quality management. Analytical functions involve HR consultation, HR research and HR reform. Strategic functions include HR strategy, HR outsourcing, HR mergers and acquisitions.   

Organisations adopt human resource management to gain various benefits but at the same time it also presents various challenges and issues. Major HR challenges are discussed here. Recruiting new staff sometimes becomes the most tedious task for the organisation because finding the suitable candidate at the right time is difficult (Loo, Liu, Geller, and Gilchrest 2007). Other challenge of human resource management is related to employee engagement and employee retention the reason for this issues are contradicting objectives of organisation and employee, contingent workforce and  demand of expert employees (Firth, Mellor, Moore,and Loquet, C 2004). The other challenges of human resource management are change management, leadership development and health and safety. Most of the human resource managers believe that managing the change in the organisation has become one of the major challenges (Söderlund and Bredin 2006). Human resource managers have the responsibility to develop future leaders of the organisation. They have to provide with effective tools, trainings and methods to develop the future leaders of the organisation. It is not easy to develop leadership characteristics in other person some of these characteristics are inborn (Story, Barbuto, Luthans, and Bovaird, 2014). It is one the important function of human resource manager to ensure the health and safety of employee at workplace. Now a day this issues has gained much importance. Even the minute shortfall in the issue can raise legal concerns for the organisation. Therefore it is one of the key challenges to ensure effectiveness of workforce in the organisation (Bardoel, Pettit, De Cieri, and McMillan 2014).

Human Resource Management in Detail

Today’s organisations are much more diverse, innovative and aggressive to grow as compared from old classical organisation. Also one of the major reasons for this is change in labour markets. For example UK labour market has witnessed the change the participation of women has increased of the time and due to better transport facilities and increase in international trade there is rise in the migrant labour from various areas (Wilton 2016). These changes also change the role of HRM in the contemporary organisations and introduced various challenges. According to Ili? and Sadar (2006) one of the major challenges in contemporary organisation is attainment of balance between interest of organisation and employees. The other challenge is of devolution. In today’s context the major role of Human resource manager is to gain competitive advantage.

One of the most important factors that determine organisational performance is the human resource of the company. Therefore human resource practices of the firm directly link to the organisational performance. Human resource practices are the key aspects driving the organisational commitment. There are various theories and perspectives that have been discussed in this regard.

Universal perspective implies that relationship between independent & dependent variable is constant throughout the population of organisation.  According to universal perspective different organisations should imply selected series of human resource management practices in the organisation. There are several human resource management practises that can be applied to any organisation and enhance organisation performance (Tzafrir 2006). Contingency perspective contacts to universal perspective. Contingency perspective focus on identifying different cases and situations and adopting the human resource management practices accordingly. There is a need to identify contingency variables that affect the work (Jery and Souaï 2014).AMO theory suggests that three components that contribute to employee performance are ability, motivation and opportunity. The human resource practices that affect these three factors also affect the employee performance (Nehles, Riemsdijk, and Looise2013).KSA theory approach was based on result of employee knowledge, skills and abilities. This report argues that use of human resource management practices increases knowledge skills and abilities of the employees ultimately enhancing the overall organisational processes (Le Deist and Winterton 2005). Resource Based View of firm- this perspective suggests that if the resources of the firm stand up to VRIO (value, rareness, imitability and organisation) then they can give competitive advantage to the firm. This approach views resources as the key elements to organisational performance. In the context of HRM this approach views human capital as resources that enhance organisational performance.

 The above listed theories show that there is a direct link between human resource practices and organisational performance.  Good HR practices lead to high organisational performance and vice versa. However in some special circumstances this link is indirect. But those circumstances are very rare.

Today’s complex environment involves management of global workforce effectively for achieving sustainable growth. The task is not easy it is diverse and challenging.   Global talent management is challenging in nature because of the geographical and cultural boundaries (Tarique and Schuler).

There are various tools and systems that are used in the context of management of labour force. These systems and tools help the organisation to do the work with much ease and efficiency.

Issues and Challenges in HRM

Demand management -Today’s workforce management involves demand management process to forecast work orders and to plan the required number of workforce. Implementation of demand management process in the organisation ensures optimum utilisation of existing employees, avoiding bottle necks and reducing over staffing (Losey, Mesinger, and Ulrich). Workforce scheduling- Workforce scheduling is an effective technique used by the organisations world-wide. This is a technique which enables a manger to make a schedule that gets job done. In this technique manger forecasts the needs that require to be fulfilled and expected time required to meet the need. It is an effective technique but often criticised because it has the chances for unavoidable mistakes and time consuming. It can also be frustrating to some mangers (O'brien 2003).Workforce dispatcher- Workforce dispatcher is used by various organisations. There are different kinds to soft wares for this task. It automatically allocates the task to the suitable employees on the basis of some pre-defined criteria. This method saves lot of time and very efficient. The only disadvantage related to this is, sometimes wrong allocations are made. But to this issue the solutions are available the mobile solutions make employees and dispatchers to communicate in real time (Shah, et al. 2013). Softwares- There is varieties of software available in the market that helps the companies in workforce management. One such software is PeopleSoft Inc. This allows the organisations to maintain the rankings of its employees and also includes various comments by their supervisors, their location and availability. This software has also designed a Business Analyzer Modeler this helps identify the best suitable employees for a desired project. This software is widely used by UK companies. But the drawback with using this software’s is the cost and some of the HR software’s are reported to be complex in use (Sinclair, 2004).

Forever 21 is an America based fashion retailer company. It has headquarters in Los Angeles, California. It was founded in the year 1984 by a couple, Do Won Chang and Jin Sook Chang. In the initial years company sold only women’s clothes but later it expanded its target audience to men. Now the company is doing its operations access the globe including Asia, Middle East and UK. The company has 480 stores across the world. The company is manufactures most of its products in China. The company has been in spotlight for various issues regarding labour practices, copyrights and religion. The company is having around 30000 employees.

The company faced lot of criticism for its poor human resource management practices. These issues are listed below:

  • Asian Pacific American Legal Centre and the Garment Worker Centre filed lawsuit against the company for violating labour laws. They claimed that 19 workers were given wages below minimum wage rates, employees in the company felt working conditions like sweatshop, working hours were reduced on the time cards and the workers who complained against the same were fired (Cleeland, 2001). This case was filed in 2001 and after a lot of controversy final settlement took place on 2004.
  • Again in the year 2012 five employees of the company filed a lawsuit against the company. They accused the company for not paying for the hours they worked in their lunch time and the time spend by them while back checking.
  • In 2012 labour department of USA has found that the suppliers of the company violated various federal laws and labour laws.
  • Recently in the year 2017 another lawsuit was filed against company by Department of Fair Employment and Housing for discriminating against Spanish speaking employees. The department accused that the company’s English only policy stopped the workers to speak any other language during work hours and during the employee rest hours (Fashion Law, 2016).

These issues impacted organisational image to a large extent. The company is in a tough position because of these issues. The company has to incur various financial loses and also lost its brand images. Sales and profits of the company almost die out after these issues. After the lawsuit that was filed in 2001 US garment workers boycotted the company for 3 years this impacted the sales of company to large extent. The documentary named Made in LA was made that highlighted the struggle of the workers (Schlossberg, 2015). This added more to the plight of the company. The company’s image due to poor human resource practises degraded to a large extent. The company was not able to attract and hire talented employees.  The poor quality workforce impacted the organisational performance to the great extent. Company’s poor HR practices also imposed various kinds of fines on the company by various courts.  The funds that could be used for producing higher levels were used on paying fines. Poor human resource management adversely impacted the organisational performance of the company.

Integration of Human Resource Management with Business Strategy

The more strategic approach towards HRM can help the company to enhance its organisational performance. Recommendations for Forever New for developing strategic approach of human resource management for the benefits of the company:

  • The company should integrate corporate values with the HRM strategic plan. The Human resource management should highlight and reflect vision and mission of the company in the HRM plan.  Example the vision and mission statements of the company emphasize on providing a wide latest and trendy apparels to the customers. This should be highlighted while hiring the designers. This will benefit the company as designers will already by doing what kind of work they have to do.
  • The next thing that company should do is involving people. A strategic Human resource management plan should be written after consultation from people of various departments. The HR manger should consult with people of various departments that what is skillset of employees they have and what more they need. This will help the organisation to analyse the correct requirement and time on which the requirement needs to be fulfilled. This ensures recruitment of right people at right time.
  • Use of latest technology is recommended for the company. There are plenty of soft wares that are designed to make HRM an easy and efficient process.  Strategic human resource management plan of the company should include the use of such technology. This will help the company to have a budget friendly option for effective human resource management. The company can only be able to earn benefits if it uses the right technology for its business.

 It is already known that Human resource practices directly or indirectly affect the organisational performance. It is evident from various theories that good HRM practices lead to high organisational performance. Example of such an organisational is Google. Google is an organisational that is known for its HRM practices world-wide and is one of the topmost organisations of the world. The companies HR practices include free food, rest hours, bringing pets to the organisation, fun activities in the organisations, paid maternity leaves and much more. Google call its employees Google and always takes good care of its employees. This is the reason that it has emerged as one of the topmost attraction of talented workforce. Due to its HRM practices Google has skilled and talented workforce that is committed towards the organisation. This makes the organisational performance very high.

A valid recruitment and selection system for appropriate cultural contexts and labour market scenarios

Recruitment and selection are often regarded as most important function of human resource management. But it is not an easy procedure it should be planned and designed according to appropriate cultural context and labour market scenarios. The organisation must aim to recruit for diversity; it widens the potential pool of talent for the company. Planning recruitment and selection procedure for different cultural contexts and labour markets should ensure that the internal staffs is the part of process and your message about commitment to diversity should clearly reach to employees, recruitment partner and diverse pool of candidates. The steps for a valid recruitment and selection system for appropriate cultural contexts and labour market scenarios are given below (bitc, n.d.):

The first step involves framing the objectives that company wants to achieve. This can be framed by the background research and maintaining the representative demographic profile demographic profile.

Considering the social and ethical issues of the country:

 Workplace is a part of society. Thus it is the duty of organisation to ensure equal opportunity for culturally diverse people that are part of the society. It should try to remove unethical myths from the people’s mind and contribute to create a better society.

The next step involves deciding the way for recruitment & selection:

The recruitment and selection procedure can be conducted by company itself or by some external agency. If the task is delegated to some agency process is completed from organisation’s part it just has to make a good choice while selecting recruitment partner.


If the company is doing the process itself it needs to attract the workforce to the organisation. The company should go for various kinds of advertising and pay attention towards the communication message that is been spread.

Pre- screening:

After attracting the potential candidate the next step is to identify various tools and methods that could be used for selection. These tools and methods should not hurt the sentiments of any group or individual. This process is about ensuring the employees that everyone has an equal opportunity for selection.


Selection procedure is discussed in the Appendix. The company have to make sure that this does not include any kind of bias or unfair practice.

Making Appointments:

After selecting employees it is required to support them and make them feel that organisation is a good place to for.


It can be concluded from the above study that human resource management is vital function of any organisation. Human resource management can be understood as process of managing the employees in the organisation. Human capital is an important part of intellectual capital which involves all the non- financial assets that provide value to the firm. Human resource functions are divided into 5 categories that are managerial, operational, developmental, analytical and strategic. Most important functions are recruitment and selection. Recruitment means attracting a pool of talent in the organisation and selection involves choosing from the pool of available talent.  In todays globalised world it is very essential to perform the function of recruitment in selection keeping in mind the cultural and labour market scenarios. Today’s organisations are in the need of diverse workforce to perform various diverse tasks. The organisation must ensure that it is giving equal opportunity to everyone for selection.  Also every organisation must pay attention towards it HR practices. Various theories link the HR practices to organisational performance. HR practices have direct impact on the organisation performance. Good HR practices ensure high performance such as in Google. Whereas poor HR practices degrade the company image and adversely impact the organisation performance such as in Forever 21. After analysing the case of Forever 21 it has been concluded that company had a good image and high performance but its poor HR practises adversely impacted its image and performance. Various law suits were filed against the company for violating the human resource laws and several fines were imposed on it. These issues led to serious defaming of the company and sales of the company almost died out. The company faced a big financial crisis. More strategic approach towards HRM can help the company to enhance its organisational performance. The company should link business strategy to its human resource management practices. The company should implement latest technology for its human resource management function. One of the most important recommendations for the company is that it should involve people from all the departments. Human resource management affects the whole organisation thus before framing the plan people from all the departments should be considered. Workforce management is an important task for employees. The organisations should make best use of available resources, software and tools for optimum utilisation of workforce and avoiding the problems of over staffing and under staffing.


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