Human Resource Management

This lesson is designed to be used in the classroom or as a homework task to support the teaching and learning of Human Resource Management in BTEC Business.

Human Resource Management

This resource is designed specifically for Unit 2 of the Edexcel BTEC qualification, 'Business and Management'.


The main aim of this unit is to develop an understanding of how management functions can affect the performance of a business.

Human resources are one of the most important features of many businesses - especially in an economy where there is an increasing shift towards service-based industries. Human resources account for a large proportion of many businesses' costs and it is the people that invariably drive a business. Management of these resources therefore is an integral part of business success.

Let's look at the range of factors you will have to consider in the management of human resources.

Human Resource Management mind map - linked to larger version

View larger version of the mind map.

We will look at some of these areas and attempt to identify how effective management of these factors can help a business to improve its performance.


First of all, we need to identify how we might measure that performance. This can be done through a number of ways:

  • Profit
  • Revenues
  • Accounting measures - Return on Capital Employed (ROCE), profit margin
  • Shareholder value - the share price x the number of shares issued - also known as the company value or market capitalisation
  • Growth - in sales, size, etc.
  • Market share
  • Share price

One of the difficulties may be in pinpointing just what contribution the human resources in a business makes to any of the above measures, but there is no doubt that a business that does not involve management of human resources correct will experience a number of problems. Poor motivation leads to poor performance. This may manifest itself in:

Workers on a building site

Image: The success of a business rests to a large degree on the quality of the workforce - successful management of this crucial resource is critical. Copyright: Twix twister

  • Lower productivity levels
  • Poor quality products and services
  • High levels of complaints from customers
  • Loss of customers with subsequently lower revenues
  • Higher costs
  • Higher staff turnover
  • Poor industrial relations

In addition, if human resources are managed ineffectively, then:

  • Teams may not function appropriately
  • Individuals may be placed in positions that do not maximise or utilise their skills
  • The culture of the business is not shared
  • Communication and decision making can be affected and mistakes occur

All of these affect the relationship between the business and its customers.

Having got some background information, let's do some research on the key points raised above.

Recruitment and Retention

Task 1

  1. Identify two businesses with which you are familiar and outline the methods the businesses might use to recruit new staff. Think about the different methods that might be used in recruiting different types of staff.
  2. Go to the Business Profiles section
    ( and select four different business profiles. Look at the section headed 'What sort of people work for the firm?' and identify what type and range of qualifications such firms would be looking for in recruiting staff to those organisations.
  3. Outline the difference between a 'job description' and a 'person specification'.

When candidates apply for a job, a business will have to make a shortlist and then draw up plans for the interview process.

Task 2

  1. What should be the criteria for the decisions on how many and who to place on the shortlist?
  2. What considerations should the business give to the interview process?


  • Should all candidates be invited together or separately?
  • How long should the interview take?
  • What legislation does the business need to consider?
  • Should they have an 'in-tray exercise' and psychometric tests?
  • What is the trade off between the time taken on the process and the cost? Does the latter depend on the nature of the job?

You can get help with some of these issues by using the following links:

Task 3

Part of the recommended assessment procedure for this unit is to take part in role-play activities.

Divide the class into four groups:

  • Group 1 is the recruitment team. Their task is to identify the key questions they are going to ask candidates in an interview for a fictional job.
  • Group 2 will consist of the candidates - they must write a short letter of application (no more than 100 words) for the post.
  • Group 3 will identify, construct and assess an in-tray exercise for the candidates. This should not take more than 20 minutes.
  • Group 4 will be observing the work of the three groups for feedback discussion.

Group 1 will interview each of the candidates - in private - but this could be videoed for later discussion. They will then compare notes with Group 3 - then, together, make a decision as to who they would offer the job to and why. The group should also identify some brief key points of feedback to the rest of the unsuccessful candidates. Group 4 will offer their judgements on the process in a discussion session following the activity.

An outline of the job is provided below:

Bizco are seeking to recruit a research officer to work as part of a team gathering information and data on the market in which Bizco is operating. The person appointed should be able to interpret the information and the data and present coherent reports to various layers in the business to inform their decision-making.

Some guidance:

  • Group 1: You are at liberty to decide what type of market Bizco operates in and what qualifications and skills you are looking for.
  • Group 2: You should make your application on the basis that you have a degree and two years' experience in a similar business environment. You are at liberty to sell yourself as much as possible but remember, the interviewers may well ask you searching questions about the claims in your application so ensure you can back up whatever you say!

Managing Employees

Once appointed, staff are entitled to a contract of employment. This sets out the rights and responsibilities of the employer and the employee.

Task 4

The following sites give an outline of the main requirements of the contract of employment:

  1. Identify the key features of a contract of employment.
  2. What does the contract imply about the terms and procedures under which an employee can be dismissed?


Many businesses have clearly defined functional areas - personnel (human resources), finance, production, marketing, administration and so on).


The Red Arrows

Many businesses place an emphasis on the importance of teamwork. What makes a good team? A good team consists of people with different skills, abilities and characters. A successful team is able to blend these differences together to enable the organisation to achieve its desired objectives.

Image: Team work - can it be assesed and constructed on the basis of different personality traits? Copyright: Jozsef Szoke

One of the main thinkers behind the development of successful teams is Meredith Belbin. Many businesses use tests such as the Myers Briggs Type Indicator (MBTI) or the Belbin Self Perception Inventory (SPI) to look at putting together the appropriate combination of skills and qualities to improve the likely success of teams.

Task 6

  1. Go to the Web site of Dr Belbin
    ( You can access a sample SPI from this site [PDF, 40 KB]. (
  2. Each member of the class should complete the test. To get the results and an assessment, you would have to pay a fee. However, you can get a sample of the type of feedback [PDF, 60 KB]. ( Another version also exists on the Better Production Design site which gives a summary of the roles. (
  3. Once you have completed the test, write down what 'role' you think you might be. Put yourself into teams with people of each team role. Discuss whether you think the team you are in would be an effective team.
  4. You should also have a look at a summary of the Myers Briggs Type Indicator. (
  5. Write a short report (300 words) commenting on the extent to which such processes might contribute to building successful teams in a business environment.


A poor office environment

An important part of the retention of staff, reducing staff turnover and minimising absenteeism at work is ensuring that staff are properly motivated. This is not as easy as it sounds. At first glance, you might be tempted to think that merely increasing wages is the way to motivate! Not so.Most thinkers on the subject would argue that motivation is a far more complex issue than merely 'money'.

Image: Motivation can be as much about the work environment and atmosphere as about money. Copyright: Dan Norder

The following Biz/ed resources will help you to understand the issues in motivation more effectively.

Remember, at each stage of your work, you will be expected to provide evidence of what you have learned and where you gained the information from so ensure you keep careful records.


If staff are absent from work, they are unable to carry out the functions for which they have been employed. In many businesses, these functions have to be taken on by someone else - if not, the customer could suffer. Reducing absenteeism is an important feature of human resource management.

The extent to which absenteeism affects businesses has been a topical feature. Go to In the News and search on 'absenteeism' to read more about its effects. (

Not only does absenteeism cause problems, but employers are beginning to recognise the effects of 'presenteeism' - staying at work when you are ill or because you believe that in some way your 'presence' will help boost your promotion prospects. A recent article in the Harvard Business Review estimated that 'presenteeism' is costing the US economy $150 billion a year!

This is because workers who are tired or ill are not likely to be as productive as they can be. This stresses the importance to businesses of promoting a sensible 'work-life balance' policy in helping the business to achieve its goals.

Task 8

  1. Look at the Mind Your Business article on Absenteeism, Lost Output and Bullying in the Workplace
    ( Read the information and complete the two tasks.

Final Tasks

We have been looking at different aspects of human resource management. The guiding principle in all that you have covered is to remember that effective management of human resources contributes to the success of the firm.

The policies and practices used by the firm set out the standards to which the firm seeks to aspire. They are designed, in most cases, to ensure that the right people are in the right jobs to help fulfil the business's objectives.

To achieve the distinction grade in this unit, you must demonstrate the ability to 'evaluate the role of management in improving business performance' (Edexcel Assessment Guidance, BTEC Specification).

To do this, you must be able to make judgements about how far effective management contributes to the success of a business. This might involve making a judgement as to how far a recruitment policy ensures that the business gets the right people in the right jobs. The policy can be there but does it achieve what it sets out to? Often, the 'right person' is appointed following the interview process but the person turns out to be something different to what was expected!

You might also have to consider how effective different methods of motivation technique might be in encouraging people to perform at their best or how policies related to the working environment might impact on productivity and efficiency.

Task 9

  1. Look at the Chartered Institute of Personnel and Development annual survey of recruitment and retention [PDF, 352 KB] and identify the main points that a human resources department should be taking on board in planning its future recruitment and retention policies. (
  2. Choose a business of your choice. Briefly describe its human resources policies in relation to the areas discussed in this resource.
  3. To what extent would you consider the performance of the business to be a direct result of the effective management of its employees?

Below is a selection of hints about businesses to investigate:

  • Marks and Spencer - has had lots of problems recently - how much of it is due to the staff and how much is because of other factors?
  • Sainsbury's - slipped to number 3 in the retail supermarket list - why?
  • British Airways - had its problems following 9/11 but is it now taking off again?
  • Equitable Life - insurance company who nearly couldn't pay its policies!
  • Richer Sounds - held up as a model in HRM
  • WH Smith - what is its role and identity?
  • Tesco - getting bigger and bigger