1. Introduction
Over the years, Human Resource Management (HRM) has gone through a lot of changes to adapt to the current needs of organisations who are searching for the right employees to add value to the company. In the early 20th Century, the main purpose of HRM was to keep the records of employees (Thite & J. Kavangh 2011). However, in the current day, HRM is defined as being involved in policy making, practices and system of an organization that has to support their business strategy (Noe et al. 2014). With the existence of HRM, employees are seen as human capital. As economist Schultz (1960) mentioned, human capital holds an economic value that consist of education, experience and abilities that can contribute to the economy.

2. Importance
The organisation will then have the upper hand over a sustained period of time (Noe et al.2014). HRM practices provides training and development programmes in order to set the employees different in terms of skills acquired. As each employee has its own capabilities, imitated them is impossible. HRM has to identify competitor’s valuable employee and source for people with similar skills. Organization then realised that it is difficult to find a substitute that has the same capabilities. The effectiveness of HRM is also important as it will in turn attract effective HR which can be formed as a basis of high performance work system. Therefore, HRM is important for organisation to be at advantage in a competitive environment.

3. The major challenge of HRM
Recently, Society for Human Resource Management (SHRM) conducted a survey to identify the major challenges that human resource (HR) professionals think will surface in 10 years’ time (November 2012).

From the findings, SHRM managed to identify some of the key challenges that the upcoming HR professionals will be facing:
- Retain and reward the best employees
- Developing the next generation of corporate leaders
- Create a corporate culture that attracts best
4. Evaluation
Before we look into how an effective HRM is formed, let’s evaluate the aspects of an effective HRM.

HR professionals need to set his/her mind in the view of the business goals of the organisation. By focusing on the organisations’ business strategies, HR professionals will be able to add value to its performance. The concept of ‘Outside In’ mentioned by Ulrich (Ulrich et al. 2012), encourages HRM to have an overall view of the business that enables organisation to have sustainable competitive advantage. 4.1 External business environment
Based on this approach, HR professionals must be aware of the changes and trends occurring outside the organisation. They need to understand how external changes might affect the business environment in the organisation. For example, the Lehman Brothers collapse affects the behaviour of HR professionals:
- Encourage them to review their policies to prevent unethical behaviour
- To foresee where the organisations stands in the future based on the changes in the business