HRM activities have probably been performed since ancient times. The pioneering work of Peter Drucker and Douglas McGregor in the 1950s laid its formal foundation. Modern concept of HRM has developed through the following stages (Gupta, 1997).

a) The Commodity Concept: Before industrial revolution, the guild system was the beginning of personnel management. Guild was a closely knit group concerned with selecting, training, rewarding and maintaining workers. Labour began to be considered a commodity to be bought and sold.

b) The Factor of Production Concept: Employees were considered a factor of production just like land, materials, machinery. Taylor’s scientific management stressed proper selection and training of employees so as to maximise productivity. 

c) The Paternalistic Concept: Employees organised together on the basis of their common interest and formed trade unions to improve. Also employers began to provide schemes to workers. Employers assured a fatherly and protective attitude towards their employees.

d) The Humanitarian Concept: It is based on the belief that employees had certain inalienable rights as human beings and it is the duty of the employer to protect. Rather social and psychological satisfaction was equally important. Hawthorne Experiments of Douglas McGregor also generated considerable interest in human problems of work place. This is also known as human relations concept.

e) The Behavioural Human Resource Concept: It aimed at analysing and understanding human behaviour in organisation. Motivation, group dynamics, organisational climate, organisational conflict etc. became popular under this concept. Employees began to be considered as valuable assets of an organisation. Efforts were made to integrate employee with the organisation so that organisational goals and employees aspirations could be achieved simultaneously. Focus shifted towards management practices like two way communication, management by objectives, role of informal groups, quality circles etc.

f) The Emerging Concept: Now employers are considered as partners in industry. They are given share in company’s stock membership. Slowly and steadily, HRM is emerging as a discipline. 


HRM is the central sub-system of an organisation (Figure 1). 

Hrm as central subsystem

Figure 1: HRM as Central Subsystem in an Organisation

Source: Gupta, 1997

As the central sub-system, HRM interacts closely and continuously with all other sub-systems of an organisation. The quality of people in all sub-systems depends largely upon the policies, programmes and practices of the HRM sub-system. The quality of human resources determines in turn the success of an organisation. The importance of HRM can be discussed at four levels – corporate, professional, social and national (Gupta, 1997).

A) Significance for an Enterprise: Human resource management can help an enterprise in achieving its goals more efficiently and effectively in the following ways:

  1. Attracting and retaining the required talent through effective human resource planning, recruitment, selection, placement, orientation, compensation and promotion policies.
  2. Developing the necessary skills and right attitudes among the employees through training, development, performance appraisal, etc.
  3. Securing willing co-operation of employees through motivation, participation, grievance handling, etc.
  4. Utilising effectively the available human resources.
  5. Ensuring that the enterprise will have in future a team of competent and dedicated employees.

B) Professional Significance: Effective management of human resources helps to improve the quality of work life. It permits team work among employees by providing a healthy, working environment. It contributes to professional growth in the following ways:

  1. Providing maximum opportunities for personal development of each employee.
  2. Maintaining healthy relationships between individuals and different work groups.
  3. Allocating work properly.

C) Social Significance: Sound human resource management has a great significance for the society. It helps to enhance the dignity of labour in the following ways:

  1. Providing suitable employment that provides social and psychological satisfaction to people.
  2. Maintaining a balance between the jobs available and the jobseekers in terms of numbers, qualifications, needs and aptitudes.
  3. Eliminating waste of human resources through conservation of physical and mental health.

D) National Significance: Human resources and their management plays a vital role in the development of a nation. The effective exploitation and utilisation of a nation’s natural, physical and financial resources require an efficient and committed manpower. There are wide differences in development between countries with similar resources due to differences in the quality of their people. Countries are underdeveloped because their people are backward. The level of development in a country depends primarily on the skills, attitudes and values of its human resources. Effective management of human resources helps to speed up the process of economic growth which in turn leads to higher standards of living and fuller employment. 


According to Dale Yoder, the scope of human resource management is very wide. It consists of the following functions:

i) Setting general and specific management policy for organisational relationships, and establishing and maintaining a suitable organisation for leadership and co-operation.

ii) Collective bargaining, contract negotiation, contract administration and grievance handling.

iii) Staffing the organisation, finding, getting and holding prescribed types and number of workers.

iv) Aiding in the self-development of employees at all levels providing opportunities for personal development and growth as well as for acquiring requisite skill and experience.

v) Developing and maintaining motivation for workers by providing incentives.

vi) Reviewing and auditing manpower management in the organisation.

vii) Industrial relations research—carrying out studies designed to explain employee behaviour and thereby effecting improvement in manpower management.

The Indian Institute of Personnel Management has described the scope of human resource management into the following aspects:

  1. The Labour or Personnel Aspect: It is concerned with manpower planning, recruitment, selection, placement, induction, transfer, promotion, demotion, termination, training and development, layoff and retrenchment, wage and salary administration (remuneration), incentives, productivity, etc.
  2. The Welfare Aspect: This aspect is concerned with working conditions and amenities such as canteens, creches, rest rooms, lunch rooms, housing, transport, education, medical help, health and safety, washing facilities, recreation and cultural facilities, etc.
  3. The Industrial Relations Aspect: This is concerned with the company’s relations with the employees. It includes union-management relations, joint consultation, negotiating, collective bargaining, grievance handling, disciplinary actions, settlement of industrial disputes, etc.

All the above aspects are concerned with human element in industry as distinct from the mechanical element.

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