The factors, which lead to the development of HRM as a concept, replacing the traditional concept of labour welfare and personnel management, are as follows:
1. Search for Competitive Advantage:
The Competitive Advantage School of Thought, pioneered by M.B. Beer and others in 1984 and N.M. Tichy, C. Fombrun and M.A. Devenna in 1984, argued that better utilization of human resources is necessary to achieve the competitive advantage by an organization and by any nation.
This theory is based on the premise that human resource being inimitable resource for any organization, ultimate competitive strength of any organization rests on it and not on other factors like, technology, better process, quality, brand image, etc., because all these factors can be duplicated by other competing organizations.
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2. Models of Excellence:
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Study of successful organizations as models of excellence by T. J. Peters and R. H. Waterman (1982) and Rosabeth M. Kanter (1989) evinced the interest of HRM, isolating it from the traditional personnel management functions. Success of one organization became a role model for other organizations, who emulated it for better results.
3. Failure of Personnel Management:
Management of human resources as a mainstream management activity has been advocated by B.F. Skinner (1981) and many others as their studies show that the personnel management have failed to promote potential benefits of effective management of people.
4. Decline in Trade Union Pressure:
Changing economic and political climate around the world has resulted in the decline of trade unionism. Thus, the pressure of trade unions on the management in an organization reduced considerably. This has necessitated switch in the emphasis on from collective issues (traditional Industrial Relations Approach) to individual and cooperative issues, i.e., the Human Resource Management Approach.
5. Changes in Workforce and the Nature of Work:
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Structural change in the occupational pattern is now a worldwide phenomenon, of which India is also no exception. Technology, increased requirement of skill and knowledge, occupational shifts, restructuring of production, new quality systems requirement, etc., now demand better educated new generation of workers, who obviously have higher expectations from their organizations. Such trend calls for redefining employer-employee relationship associated with Human Resource Management.
All these factors listed above revolutionized the concept of traditional Personnel Management, which is restricted to the utilization of human resources complying mainly with statues and coping with the challenges of trade unions. This led to the development of HRM as another form of response for sustaining better employer-employee relation.
HRM is a sub-system of the total management system. This is the responsibility of all managers, irrespective of their functions, disciplines and levels. HRM is primarily concerned with the management of people, individual or groups at work, as also their interrelationship.
HRD, organizational development (OD) and interpersonal relations (IR) are separate aspects of a broader concept of HRM. However, in reality, each of this concept overlaps in practice and cannot be viewed in isolation. HRM practices, to succeed, must go concurrently with HRD, OD interventions. Sound IR systems cannot be visualized without good HRD practices.