Chapter 6: Introduction to Human Resource Management
Human Resource Management (HRM) is the strategic management of an organization's most valuable asset — its people. HRM encompasses all activities related to acquiring, developing, motivating, and retaining employees. This chapter covers HRM functions, evolution, strategic HRM, and the HRM environment in Nepal.
6.1 Definition and Functions
HRM: The process of acquiring, training, appraising, compensating, and attending to employees' labor relations, health, safety, and fairness concerns (Gary Dessler).
Functions of HRM
| Category | Functions | Activities |
|---|---|---|
| Managerial | Planning, Organizing, Directing, Controlling | HR planning, organizing HR dept, motivating, monitoring HR metrics |
| Operative (Procurement) | Recruitment, Selection, Placement | Job analysis, advertising, interviewing, onboarding |
| Operative (Development) | Training, Development, Career Planning | Orientation, skills training, leadership development |
| Operative (Compensation) | Wages, Salary, Benefits, Incentives | Job evaluation, pay structures, bonus systems |
| Operative (Maintenance) | Health, Safety, Welfare, Labor Relations | Workplace safety, employee assistance, union relations |
6.2 Evolution: Personnel Management to HRM to Strategic HRM
| Aspect | Personnel Management | HRM | Strategic HRM |
|---|---|---|---|
| Focus | Administrative, record-keeping | People development, integration | Aligning HR with business strategy |
| Employee View | Cost to be minimized | Asset to be developed | Strategic partner in value creation |
| Time Frame | Short-term, reactive | Medium-term, proactive | Long-term, strategic |
| Role of HR | Support function | Business partner | Strategic decision-maker at C-suite level |
6.3 HR Planning
HR Planning: The process of forecasting an organization's future demand for and supply of employees, and developing action plans to fill gaps.
| Step | Activity | Tools |
|---|---|---|
| 1. Assess Current HR | Skills inventory, HR audit | HR Information System (HRIS) |
| 2. Forecast Demand | How many and what type of employees needed? | Trend analysis, managerial judgment, Delphi method |
| 3. Forecast Supply | Available internal and external candidates | Succession planning, labor market analysis |
| 4. Develop Action Plans | Bridge gaps through recruitment, training, or restructuring | Recruitment plans, training programs, retirement plans |
6.4 Job Analysis
| Output | Content | Purpose |
|---|---|---|
| Job Description | Title, duties, responsibilities, working conditions, reporting relationships | Recruitment, performance evaluation, training needs |
| Job Specification | Qualifications, skills, experience, personal qualities required | Selection criteria, career planning |
6.5 HRM in Nepal
Legal Framework: Labor Act 2074 (2017) and Labor Rules 2075 govern employment in Nepal. Key provisions: minimum wage, working hours (8 hrs/day, 48 hrs/week), overtime at 1.5x, mandatory provident fund, gratuity after 3 years, Dashain bonus (1 month salary), maternity leave (98 days), Social Security Fund contributions.
Challenges: Brain drain of skilled workers; informal sector dominates (80%+ of employment); limited professional HR practices in SMEs; union politics in manufacturing; gender inequality in senior positions; transitioning from personnel management to strategic HRM.
Emerging Trends: HRIS adoption, competency-based HR practices in banks and MNCs, performance-based pay systems, focus on employer branding to retain talent.
6.6 Job Analysis Methods
| Method | How It Works | Advantages | Disadvantages |
|---|---|---|---|
| Observation | HR specialist watches employee perform job | Direct, accurate for physical tasks | Time-consuming; not suitable for mental/managerial work |
| Interview | Ask employees and supervisors about job duties | Detailed information; can probe complex jobs | Employee may exaggerate; time-consuming |
| Questionnaire | Structured form filled by job holders | Efficient for many jobs; standardized data | May not capture nuances; low response rate possible |
| Diary/Log Method | Employee records daily activities over time | Comprehensive picture over extended period | Relies on employee accuracy; tedious |
| Critical Incident | Record specific examples of effective/ineffective behavior | Identifies key performance behaviors | Time-consuming to collect; may miss routine duties |
Sample Job Description (Nepal Format)
JOB DESCRIPTION — Himalayan Commercial Bank
Job Title: Branch Manager | Department: Branch Operations | Reports To: Regional Manager
Location: New Road Branch, Kathmandu | Grade: Officer Grade 7
Job Summary: Oversee all branch operations, achieve business targets, manage staff, ensure regulatory compliance, and deliver excellent customer service.
Key Responsibilities:
• Achieve deposit mobilization and lending targets set by head office
• Supervise 15-20 branch staff including tellers, relationship officers, and support staff
• Approve loans within delegated authority (up to NPR 50 lakhs)
• Ensure compliance with NRB directives, KYC/AML requirements
• Handle escalated customer complaints and resolve within 48 hours
• Prepare monthly branch performance reports for regional management
• Conduct staff performance reviews and identify training needs
Working Conditions: Office-based, 10 AM - 5 PM Sun-Fri. May require Saturday work during peak periods.
Sample Job Specification
Education: BBS/BBA minimum; MBA preferred
Experience: 8+ years in commercial banking, 3+ years in supervisory role
Skills: Strong leadership, customer relationship management, credit analysis, team management, proficiency in core banking software (ABBS/Finacle)
Certifications: Diploma in Banking preferred; AML/KYC certification
Personal Qualities: Integrity, decision-making ability, communication skills, stress tolerance, community orientation
6.7 HR Planning — Demand Forecasting Methods
| Method | Type | How It Works | Best For |
|---|---|---|---|
| Managerial Judgment | Qualitative | Managers estimate future needs based on experience | Small organizations, short-term planning |
| Delphi Method | Qualitative | Expert panel provides independent estimates; iterate to consensus | Long-term planning, uncertain environments |
| Trend Analysis | Quantitative | Project historical employee-to-output ratios into future | Stable organizations with historical data |
| Ratio Analysis | Quantitative | Calculate employee ratio (e.g., 1 supervisor per 10 workers) | Operations-based workforce planning |
| Regression Analysis | Quantitative | Statistical relationship between business factor and staffing | Large organizations with reliable data |
Ratio Analysis Example — Nepal Bank:
Current: 20 branches, 400 employees (ratio 20:1). Plan: Expand to 30 branches next year.
Projected need: 30 × 20 = 600 employees. Current: 400. Expected attrition: 40 (10%).
New hires needed: 600 - 400 + 40 = 240 employees
Recruitment plan: 100 fresh graduates (training program), 80 experienced bankers (lateral hiring), 60 internal promotions filling lower positions.
6.8 Nepal Labor Act 2074 — Key Provisions for BBS Students
| Provision | Detail | HR Implication |
|---|---|---|
| Working Hours | 8 hours/day, 48 hours/week | Must track attendance; overtime beyond this at 1.5x rate |
| Minimum Wage | NPR 17,300/month (revised periodically) | No employee can be paid less; includes basic + allowances |
| Social Security Fund | Employer 20% + Employee 11% contribution | Mandatory registration; covers medical, maternity, accident, old age |
| Gratuity | 50% of last basic salary × years of service (after 3 years) | Significant liability for companies with long-tenured employees |
| Dashain Bonus | One month's basic salary mandatory | Must budget and pay before Dashain festival annually |
| Maternity Leave | 98 days (60 before + 38 after delivery) with pay | Must plan coverage for absent employees; cannot terminate |
| Annual Leave | 18 days paid leave + 13 days public holidays + 12 days sick leave | Must track leave balances; accumulated leave encashable |
| Termination | 1 month notice or pay in lieu; severance based on tenure | Cannot terminate without cause; procedures must be followed |
Practice Questions
Short Answer:
1. Define HRM. List its major functions.
2. Differentiate Personnel Management from HRM.
3. What is HR planning? Explain its steps.
4. Distinguish job description from job specification.
5. Outline key provisions of Nepal's Labor Act 2074.
Long Answer:
6. Discuss the evolution from Personnel Management to Strategic HRM. Where are most Nepali organizations? (15 marks)
7. Explain the HR planning process. Why is it important for Nepali businesses facing brain drain? (15 marks)
8. Discuss the functions of HRM with examples from a Nepali commercial bank. (15 marks)
9. "Nepal's Labor Act 2074 has significantly impacted HRM practices." Discuss key provisions and their implications. (15 marks)
10. What are the emerging HRM challenges and trends in Nepal? How should organizations respond? (15 marks)
Exam Tips: ✓ Functions of HRM (managerial + operative) frequently tested ✓ PM vs HRM comparison table is common ✓ Know Nepal Labor Act provisions ✓ HR planning steps with forecasting methods ✓ Job analysis outputs (description vs specification)