Human Resource Management

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HUMAN RESOURCE
MANAGEMENT
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INDIAN INSTITUTE OF BANKING & FINANCE
I!' i^-.i''vvi';'THE ARCADE') WORLD TRADE CENTRE, CUFFE PARADE MUMBAI 400 005
Established on 30th April 1928
Mission
To develop professionally qualified and competent bankers and financial professionals

primarily through a process of education, training, examination, consultancy/counselling and
continuing professional development programs.
Vision
To be the premier Institute for developing and nurturing competent professionals in banking
and finance field.
Objectives
To facilitate study of theory and practice of banking and finance.
To test and certify attainment of competence in the profession of banking and finance.
To collect, analyse and provide information needed by professionals in banking and finance.
To promote continuous professional development.
To promote and undertake research relating to Operations, Products, Instruments, Processes,

etc., in banking and finance and to encourage innovation and creativity among finance professionals
so that they could face competition and succeed.
I!' i^-.i''vvi';COMMITTED TO PROFESSIONAL EXCELLENCE Website: www.iibf.org.in
HUMAN RESOURCE
MANAGEMENT
Indian Institute d Banking & Finance
MACMILLAN
INDIAN INSTITUTE OF BANKING & FINANCE, MUMBAI, 2010

(This book has been published by the Indian Institute of Banking & Finance. Permission of the Institute is essential for
reproduction of any portion of this book. The views expressed herein are not necessarily the views of the Institute)
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prosecution and civil claims for damages
First edition 2010 Reprinted, 2010
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that the contents of the book d^ not violate any existing copyright or other intellectual property rights of any person In any manner
whatsoever. In the event the uthor(s) has/have t>een unable to track any source and if any copyright has been inadvertently
infringed, please notify the publisher in writing for corrective action.
AUTHOR'S PROFILE
Mr. J Job Xavier is a senior H R professional with over 30 years experience and has headed HR in
Banking, Manufacturing, Media, Healthcare, and Financial services industries. He is professionally
quahfied in Law, Human Resources and Personnel Management.
He has 20 years experience in Banking; having worked with a nationalized bank, a private bank and a
new generation bank. He headed the HR in the latter two banks, with complete responsibility for all their
HR activities.
Passionate about training, he has built training centres in three of the organizations he had worked. Mr.
Xavier is Executive and Founder Director of Trinity Academy for corporate Training, Mimibai and is
currently associated with a number of firms as HR Advisor, dealing with recruitment. Assessment,
Training and Performance Management.
These modules are vetted by:

Shri C Krishnamurthi
Consultant and Former Head, HR
Grindlays Batik Limited Mumbai
FOREWORD
The Institute has adopted the practice of preparing dedicated courseware for all its examinations almost
a decade back and it continuously endeavors to update its books and courseware so that the candidates
taking the subject examinations are up to date with the latest knowledge in the banking and finance
industry. Apart from updating courseware the Institute also revamps courses and recasts it to suit the
requirements of the practising bankers. The revised format of CAIIB is an example of this endeavor of
the Institute to make the course more relevant for practising bankers.
The revised format of CAIIB underlines the fact that current day banking requires general as well as
domain specific knowledge. It is seen that, in the specialization era, a candidate who has worked under
one vertical in a bank for several years and has expertise in that area may not be equally comfortable
working in a new vertical unless the knowledge of the new vertical is made available in a professional
manner. Such persons need an opportunity to learn the nuances of a new vertical. Also a person
working in a given area in banking needs to keep pace with the current developments; which given the
work pressure may not be automatic. It is to meet with these divergent needs that we have formulated
the new CAIIB.
The new syllabus offers two compulsory papers viz.. Advanced Bank Management and Bank
Financial Management. The paper on Advanced Bank Management covers economic analysis,
business mathematics, human resources management and credit management. The paper on Bank
Financial Management includes international banking, risk management, treasury management and
balance sheet management. Thus, the two compulsory papers not only cover the modules of the three
papers of the current CAIIB but also include new areas such as economic analysis and business
mathematics, very useful skills for current day bankers.
As regards the third paper, candidates have the option to choose one out of the many optional papers
that will now be offered as electives. The electives cover the entire gamut of specialized domains in a
bank. The electives currently being offered are Human Resources Management, Risk, Treasury, Retail
Banking, International Banking, Corporate Banking, Co-operative Banking, Information Technology,
Rural Banking, Financial Advising and Central Banking.
The Institute brings out periodical subject updates for majority of its examinations. The updates help
the instimte in bringing out revisions in courseware once in three years. As such the book/courseware
and updates should be sufficient for the purpose of the examinations. Nevertheless, the book should not
be considered as the only source of information while preparing for the examination due to the rapid
changes witaessed in all the areas affecting banking and finance. The students have to keep themselves
abreast with the current developments by referring to economic dailies, articles, books and government
publications/websites etc. In view of this a few questions will be based on the recent developments
related to the syllabus, but may not have appeared in the book.
While the compulsory papers provide the breadth of banking, the electives provide the depth. We are
sure that candidates will find the new CAIIB useful for their purposes. Equally the banks will find the
CAIIB qualified professionals possess cutting edge knowledge.
The
books should also be useful for anybody

interested in banking including students,
academics, researchers and others. We take this
opportunity to place on record our sincere
all the expert resource persons who authored
courseware and experts who vetted the same.
their wholehearted support, involvement and
perseverance, this effort would not have been
thanks to
the
But for
successfiil in such a short period of time.
We welcome suggestions to improve the books and their content.
Mumba
i
1.7.201
0
R. Bhaskaran
Chief Executive Officer
Recommended Reading
The Institute has prepared comprehensive courseware in the form of study kits to facilitate preparation
for the examination without intervention of the teacher. An attempt has been made to cover fully the
syllabus prescribed for each module/subject and the presentation of topics may not always be in the
same sequence as given in the syllabus.
Candidates are also expected to take note of all the latest developments relating to the subject covered in
the syllabus by referring to Financial Papers, Economic Journals, Latest Books and Publications in the
subjects concerned.
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CAIIB SUBJECTS
Objective of the Examination: To provide advanced knowledge in banking subjects for better decision making.
Question Paper Pattern: Objective Type - Multiple Choice Questions
Eligibility: 1. Membership of the Institute
2. Pass in JAIIB examination of the Institute.
Revised Structure:
Revised CAIIB Examination (2010) is structured with 2 compulsory papers and 11 elective papers as
given below.
I. COMPULSORY PAPERS
1, Advanced Bank Management
2. Bank Financial Management
'
II. OPTIONAL PAPERS (Candidates to choose any one)

1. Corporate Banking
2. Rural Banking
3. International Banking
4. Retail Banking
5. Co-operative Banking
6. Financial Advising
7. Human Resources Management
8. Information Technology
9. Risk Management
10. Central Banking
11, Treasury Management
To be eligible for the award of CAIIB, a candidate must pass both the compulsory papers and any one
of the electives of the candidate's choice. Electives have been developed with the objective of giving
appropriate specialization to the candidates. Candidates may therefore choose those electives that are
relevant to their current and or immediate prospective job profile. Electives contain, in addition to the
knowledge inputs certain managerial inputs also. This is aimed to promote specialization in the study
by candidates at the same time enabling them to acquire skills required in bank management.
Ui
HUMAN RESOURCE MANAGEMENT

SYLLABUS
Module A: Human Resources Management
1. Concepts, Policies and Practices: Fundamentals of HRM; Importance of Human Capital, Management of
transformation. New insights into HR Management and contemporary issues. Relationship between HRM and
HRD; Structure and Functions, Policies and Practices, Role of HRD Professional, Development of HRM in
India.
2 Behavioural Dynamics in organizations; Person-Job Fit, Group Dynamics, Group Problem Solving and
effectiveness. Leadership and Team building. Change Management, Human Response Implications of
benchmaridng; TQM,BPR,ISO 9000 Series and other techniques for Organizational improvement and Management of Service Industry; Quality Circles. Six Sigma and its implication in organizational development.
3. Organizational Change and Development; Responsibility Chatting, Conditions for Optimal Success, Role of
Change Agent and Managing Change.
4. HRM in Banks: Traditional Role of Human Resources Department in Banks, Expectations from H R Depart ment .Conflict of new initiatives with work culture and capacity. Major HRM challenges facing Banks, Core
Banking and HR challenges,
3. Knowledge management in Banks; Need for Knowledge Management Officer, Role in the Banks, HRM and
Information Technology, Information and Database Management, Preparation and updation of Manuals and
job cards. Linkage with Educational Institutions.
Module B: Building an HR strategy
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I. Strategy Formulation and implementation; Need for a distinctive H R strategy. Formulating the strategy;
connecting strategy to organization, aligning H R Systems with decision framework. Relationship between
sustainable strategic success and performance of the organization. Execution of strategy: Role of CEO,
Executive team, and line Managers, Succession Planning, HRD Audit, Effectiveness of HRD, Best HR
practices in banks.
2 Organizational Communication; Barriers to Communications, Steps for effective communication in the
organisation.
3. Manpower Planning; Recruitment, Selection, Placement and Promotion, Recruitment Vs Outsourcing:
Concept and Feasibility of Outsoiucing, advantages, disadvantages and constraints. Compensation; incentive
system linked to productivity, dealing with Attrition.
4. Performance Managênt and Appraisal Systems : Performance Appraisal System, Role of P A S, Emeig- ing
Trends, 360 degree performance Appraisal, Appraisal Vs Feedback, competency mapping, key performance
areas (KPA)
Module C: Motivation, Training and Skill Development

1. Human implications of Organisations; Learning and instmctions, Learning Processes, Employee Behaviour,
Theories of Motivation and their practical implications.. Motivational strategies. Reward and Incentive
fi.-!''
schemes. Job Enrichment, Job Rotation, Employee Development strategies and Techniques.
1 Training and Development; Attitude development, Role and impact of training. Career Path Planning and
Counseling, Changing face of Banking, Future of Bank Education, Identification of Training Needs.
3. Training Methodology; subject matters of Training , Training infrastructure in Banks, outsourcing of Training,
On -the -job training. Management of conflict between Training and operations due to manpower constraints.
Development of soft skills and communications. Developing competencies through e-leaming, virtual
learning and self directed learning. Training measurement and impact.
Module D: Personnel Management and Industrial Relations

I. The personnel functions: Legal aspects of pereonnel functions, trade unionism and Industrial Relations;
Industrial Relations and Negotiations in the Indian Banking Industry, Collective Bargaining Concepts;
Bipartite Settlements in Banking, Employee Welfare; Pplicies and Schemes. Z Grievance Redressai and
Discipline; Mechanj^m and Processes, Discipline Management including Domestic Enquiry, Role of
Management and Functions, Conflict Management and Resolution, Frauds in Banks, Risks attached to
Delegation of Financial Powers; Precautions and Controls, Need for a vigilance Dept in Banks, Diversity and
Gender Issues, Dealing with cases of Sexual Harassment. 3. Workers' Participation in Management,
Experience of Employee Participation in Indian Banking Industry.
'fm
CONTENTS
vu
Foreword
3
2
6
6
9
8
0
9
1
MODULE A HUMAN
RESOURCE MANAGEMENT
1. Fundamentals of HRM
2. Organisational
Behaviour
3. Organisational Changes
4. HRM in Indian Banks
5. Knowledge
Management
MODULE B
BUILDING AN HR STRATEGY
6.
7.
8.
9.
HR as a Strategic Player
CEO and His Team
Communication
HR Functions
fi.-!''
10. Performance Management
MODULE C
MOTIVATION, TRAINING AND SKILL DEVELOPMENT
11.
12.
13.
14.
The Learning Process

Employee Motivation
Employee Development
Training Methodology
MODULE D PERSONNEL MANAGEMENT AND INDUSTRIAL

RELATIONS
15.
16.
17.
18.
19.
Industrial Relations (Part A)

Industrial Relations (Part B)
Employee Discipline (Grievance Redressai and Discipline)
Worker's Participation in Management
Employee Discipline (Discipline Management)
25
5
27
7111
12
28
85
13
29
57
14
30
8
3
166
18
5
20
4
222
23
2
MODULE-A
Fundamentals of HRM Organisational Behaviour

3.
Organisational Changes
4.
HRM in Indian Banks
5.
Unit
s
1.
2.
Knowledge Management
FUNDAMENTALS OF HRM
STRUCTURE
2,
Objectives
3,
Introduction
4,
Fundamentals of HRM
5,
New Insights into HR Management

Let Us Sum Up
Keywords
Terminal Questions ,
References
H.R.M-2
I HUMAN RESOURCE MANAGEMENTURCE MANAGEMENT
1.0
OBJECTIVES
After reading this unit, you should be able to:
1.1
Understand the basic concepts of Human Resource Management;

Grasp the importance of HRM and the value of Human Capital;
Relationship between HRM and HRD;
The role of the HRD professional.;
Have an insight into the HR systems and practices in the Indian banking industry.
INTRODUCTION
The Times of India, on the occasion of celebrating 170 years of existence in India, organised a number
of seminars, which discussed the future; the future of Hope, the future of Style and the future of India,
the country that is being widely recognised as one of the most exciting emerging economies in the
world. Besides becoming a global hub for outsourcing, Indian firms are spreading their wings across
countries through mergers and acquisitions. During the first decade of this century, Indian companies
have bought a large number of foreign companies for billions of dollars, inviting the attention of
leading players the globe over, resulting in considerable FDI (Foreign Direct Investment) inflow. This
impressive development has been due to a growth in inputs (capital and labour) as well as increased
productivity indices. By the year 2020, India is expected to add about 250 million to its labour pool at
the rate of about 15 million a year, which is more than the entire labour force of a number of
progressive European nations. The BRIC (Brazil, Russia, India and China) countries are expected to
dominate the world economy with India poised to have the second largest GDP after China, by 2040.
This so called 'demographic dividend' has drawn a new interest in the Human Resource concepts and
practices in India and given a new insight into the people profile and human resource strength of this
country.
1.1.1 Management Theory from Ancient Days

While India has a rich cultural heritage, few know of the development of managerial practices in this
civilization, over the centuries. Like all ancient civilizations, management at various levels has always
existed in India be it through enlightened rulers or practitioners of statesmanship.
FUNDAMENTALS OF HRM | 16
India has also, over the centuries, absorbed managerial ideas and practices from around the world.
Through a well developed network of international trade; travelers who exchanged ideas and practices,
a serious study was done of the then prevalent ideas of social and public administration. One of the
earliest management books, titled 'Arthashastra', written three millennium before Christ, codified many
aspects of general management principles as well as human resource practices in ancient India. This
treatise presented notions of the financial administration of the state, guiding principles for trade and
commerce, as well as the management of people. For example, in the matter of awarding punishment,
Kautilya says that it should be proportionate to the gravity of the crime. These ideas have influenced
our collective consciousness and have got embedded in various institutions and their thinking for
centuries. Increasing trade, that included engagement with the Romans, led to widespread and
systematic governance methods. Aroimd 500A.D, the Gupta Dynasty, encouraged the establishment of
rules and regulations for managerial systems, and later from about 1000 A.D, great emperors and their
kingdoms in the North and learned kings in the South, as well as the advent of Islam influenced many
areas of trade and commerce. A further powerful effect on the managerial history of India was provided
by the British system of corporate organisation for 200 years. The Civil Service instituted and practiced
by the British, developed an excellent process for people and business management so successfully that
even today, almost 60 years after independence, the Indian Administrative Services still follow major
practices set by the Civil Services.
In the contemporary context, the Indian management mindscape continues to be influenced, amongst
others, by the residual traces of ancient wisdom as it faces the complexities of global realities. One
stream of holistic wisdom, identified as the Vedantic philosophy, pervades managerial behaviour at all
levels of work organisations. This philosophical tradition has its roots in sacred texts from 2000 B.C.
and it holds that human nature has a capacity for self transformation and attaining spiritual high groimd
while facing realities of day to day challenges (Lannoy 1971). As Albert Schweister said in his book
"Indian Thought and Its Development": "I was compelled to admit the fact that world and life
affirmation is present at the back of this thought from the very dawn of history, and that the existence
and interfiasion within it of world and life negation and world and life affmnation constitute its special
characteristic and determine its development". Such cultural based tradition and heritage can have a
substantial impact in the way in which life is lived and on the psyche of various institutions including
current managerial mindsets, individual motivation and in understanding family bonding and mutuality
of obligations.
The caste system, which was recorded in the writings of the Greek Ambassador Megasthenes in the
third century B.C., is another significant feature of Indian social heritage that for centuries has
impacted organisational architecture and managerial practices, and has now become the focus of critical
attention in the social, political and legal agenda of the nation. Traditionally, the caste system
maintained social or organisational balance. Brahmins (priests and teachers) were at the apex,
Kshatriya (rulers and warriors), Vaishya (merchants and managers) and Shudra (artisans and workers)
occupied the lower levels. While the practice itself had a number of obvious drawbacks, what was
significant was a clear delineation of jobs and responsibilities that went with each caste. This was based
loosely on a not scientific but socially then accepted belief that the Brahmins who performed religious
rites were blessed with a higher intellect and hence considered superior.
1.1.2 Liberalisation and After

As against centuries of traditional approaches based on religion and caste, the liberalisation of markets
and global linkages have created a distinct transformation of attitudes towards human resource (HR)
policies and practices .The first such attempt came in with the introduction of reservations where the
message was to provide a window of opportunity to the less privileged to catch up with the rest. Soon
thereafter came the impact of globalisation with highly professional MNC companies with their
emphasis only on competence and merit and suddenly the work environment in the country changed for
the better when much more enlightened policies aimed at the individual, came into play. The traditional
role of the staff or personnel department, gave way to a more enlightened people management
approach, increasingly taking a broader and more reflective perspective of human resource
management (HRM) in India.
There has been considerable interest in the notion that managerial values are a fimction of the
behaviours of individual managers. The relevance of managerial values in shaping modern
organisational life is reflected in scholarly literature linking them to corporate culture (Deal & Keimedy
1982), organisational commitment and job satisfaction (O'Reilly, Chatham & Caldwell 1991), as well
as institutional governance (Mowday, Porter & Steers 1982).The most recent and widely acknowledged
work in this context is the research and findings from Marcus Buckingham and the Gallup polls which
have indicated a major linkage between a manager's capability to set expectations and get the best out
of the individual by playing to her strength. The feedback from the employee as an integral part of the
management process has been widely recognised. Employee engagement has thus come to be accepted
as a part of good HR practice and a number of companies have such rounds every year with an IT
major, conducting such exercises every quarter in critical and more sensitive departments. These
dimensions could be employed to explain relevant work attitudes, job incumbent behaviours and the
working arrangements within organisational structures.
In the contemporary context, multiple layers of values (core traditional values, individual managerial
values, and situational values) have emerged (Chatteijee & Pearson 2000). Though the societal values
largely remain very miich anchored in the ancient traditions, the younger generation who form the
critical mass in the workforce of today, are increasingly reflecting corporate priorities and values of
global linkages. The advent of satellite TV and global events shaping the economy impacting India in a
major manner has made change inevitable. The recognition that Indian technical education has received
the world over as also the fact that over a 100,000 Indian youngsters complete their higher studies in
the US and other western countries, has drastically altered the aspirations of today's workforce. Thus,
contemporary Indian multinational companies and global firms in India have started shifting their
emphasis to human resources with their knowledge andxperience as the central area of attention in
extending new performance boundaries (Khandekar & Sharma 2005). Considerable research evidence
attests to this trend with particular relevance to greenfield organisations with little or no historical
baggage in their organisational culture (Settt 2004, Roy 2006).
1.1.3 Contemporary Response to HRM

In a recent survey of Indian CEO's, it was suggested that Indian managerial leaders were less dependent
on their personal charisma, but they emphasised logical and step by step implementation processes.
Indian leaders focused on empowerment and accountability in cases of critical turnaround challenges,
innovative technology, product planning and marketing or when other similar challenges were
encountered (Spencer, Rajah, Narayan, Mohan & Latiri 2007). The increased shift towards people
management has found its way all across the industry verticals, especially the banking sector, which
employs a large section of the working population.
In 1969, nationalisation of some of the leading banks electrified the nation. New expectations were
aroused among people and this act of nationalisation led to opening up of the banking system in as
much as the banks were mandated to open a number of branches all across the country. With this, the
opportunity for employment with the banks went up. With the linking of the workers' DA with All India
working class index in 1970, the salaries of clerks and messengers started spurting. There was a
demand for joining banks among unemployed and qualified graduates and though the business of
banking continued to remain the same, the number of branches and the number of employees continued
to grow through the next decade and a half. Till 1990, banking in India was just another necessary
chore that people had to put up with. Except for a few and far between branches of foreign banks, the
entire banking scenario was dominated by the public sector and old generation private banks, offering
the barest minimum of facilities in an environment very few customers relished.
Some of the foreign banks in the country had introduced a few modern practices in people management
that resulted in a more systematic appraisal process, better employee grievance procedure and more
employee benefits within the constraints of the system. The old establishment and staff departments
were incapable of handling this change. It was during this time that Personnel Managers and Personnel
Departments started appearing in the PSU banks with a heavy slant on interpreting and implementing
the service conditions though rather mechanically. The economic liberalisation and globalisation of
trade and economy has transformed the way business is conducted the world over; opening new
economic opportunities. Banking in India could not remain a mere spectator and major transformation
took place subsequent to the Narasimham committee reports in the last decade of the 20th century,
resulting in the new generation private sector banks, and an entirely new banking experience for the
common man. Retail banking expanded to reach every street by way of ATMs and technology helped
make banking a pleasure by making available products and services at one's finger tips.
1.2 FUNDAMENTALS OF HRM

1.2.1
Concepts, Policies and Practices
The management theory of HRM has been developed over the last 150 years, originating with the
industrial revolution. Before we move on to the specific historical perspective, it is important to
understand a few common terminologies peculiar to HRM that have become the mainstay of any
reference to the discipline.
"HRM" is concerned with the people dimensions in management. Since every organisation is made up
of people, acquiring their services, developing their skills, motivating them to higher levels of
performance and ensuring that they continue to maintain their commitment to the organisation are
essential to achieving organisational objectives. This is true, regardless of the type of the organisation government, business, education, health, recreational, or social action.
HRM is a management function that helps managers to attract, set expectations and develop members
for an organisation. Concerned with the people dimensions in organisations, HRM refers to a set of
programs, functions, and activities designed and carried out for maximum efficiency.
1.2.2
Core Elements of HRM
People: Organisations mean people. It is the people who staff and manage organisations.
Management: HRM involves application of management functions and principles for acquiring,
developing, maintaining and remunerating employees in organisations.
Behavioural Dynamics: Decisions regarding people must be integrated and consistent.
Uniformity of application: HRM principles are applicable to business as well as non-business
organisations too, such as education, health, recreation and even voluntary organisations.
1.2.3 Objectives of HRM

1. Societal Objectives: To be ethically and socially responsible to the needs and challenges of the
society while minimizing the negative impact of such demands upon the organisation.
2. Organisational Objectives: To recognize the role of HRM in bringing about organisational
effectiveness; as a major constituent in achieving organisational objectives.
3. Functional Objectives: To develop and maintain departmental contribution and level of services
at a level appropriate to the organisation's needs.
4. Personal Objectives: To assist employees in achieving their personal goals, so as to enhance the
individual's contribution to the organisation. Employee policies are therefore geared towards
developing, retaining and motivating employees in the organisation.
Thus the Scope of HRM is from Entry to the Exit of an employee in the organisation.
1. Advisory Role: HRM advises management on the solutions to any problems affecting people,
policies and processes.
(a) Employment Policies: Designs the structure and guidelines on Organisation Structure,
Social Responsibility, Employment Terms & Conditions, Compensation, Career and
Promotion, Training and Development and Employee Relations as well as Retirement.
(b) Procedures: Lays down SOPs ( Standard Operating Procedures) for all activities starting
from manpower planning and recruitment to cessation of employment.
2. Functional Role: The HR functionaries interpret and help to communicate HR policies. Provides
guidance to line managers, to ensure that agreed policies are implemented. The HR department
also acts as a mentor and guide.
3. -Service Role: The HR department provides an environment for the services that need to be
carried out by full time specialists.
4. Specialist Role: The demands made on the HR profession over the years has led to the growth of
the HR specialist who has developed expertise in one major aspect of the HR function. Thus we
have a Compensation specialist, a Competency Assessment practitioner, PMS expert and the
most common, the recruitment specialist. Most such positions were started by HR Consultancies
but large organisations today have their own specialists for all these activities.
1.2.4 Managerial Functions4>f HRM

1. Planning: Plan and research about best employee practices, wage trends, labour market
conditions and forecast manpower needs for optimum efficiency.
2. Organizing: Organizing manpower and material resources by creating a positive work
environment for the achievement of organisational goals and objectives.
3. Staffing: Cost effective Recruitment and Selection, to attract the best.
4. Directing: Laying down policies, providing guidance and motivation of employees for optimum
efficiency.
5. Controlling: Regulating employee activities and policies according to structured plans and
ensuring optimum utilisation of available manpower.
1.2.5 Operational Functions of HRM

1. Procurement: Planning, Recruitment and Selection, Induction and Placement.
2. Development: Training, Development, Career planning and counseling.
3. Compensation: Wage and Salary determination and administration.
4. Integration: Integration of human resources with organisation.
5. Maintenance: Sustaining and improving working conditions, employee communication.
6. Retention: Minimal impact of separations caused by resignations, terminations, lay offs, death,
medical sickness etc.
7. Counselling or Advisory : Providing expert advice and preventive counselling for all levels of
employees for maintaining a healthier work environment.
8. Change Management: HR is often called on to manage change whether initiated internally
subsequent to some restructuring as also when mergers/acquisitions take place.
1.2.6 Employee Policies

A Policy is a Plan of Action. An employee policy spells out the Vision of the Management, addresses
basic needs of the employees and helps ensure a consistent treatment to all personnel by minimising
favouritism and discrimination. These policies are also plans of action to resolve intra-personal, interpersonal and inter-group conflicts. Managers need to ensure that their part of the organisation provides
an environment in which individuals can flourish to the benefit of the enterprise and the individuals
involved. A well thought out and a well defined policy helps manage the human resources effectively.
Ideally such policies should evolve over a period of time.
People management is so dynamic that it rarely reaches a level of stability. One can expect an
environment of continual change. The typical employee today is not just looking for a job, she also
seeks fulfillment of a number of social and personal needs and is ready to move on quickly if such
needs are not met by one company. Technology, Systems, and skills fend to get stabilised at least for a
certain period in their evolution process, but people management tends to remain an "alive" issue.
One of the reasons for this lies in its being different in nature compared to any other resources the
organisation depends upon. The other resources are passive - in the sense that they do not react or their
reaction can be controlled or predicted. But human resoxu-ce is not so. This resource is not just an
individual, but the product of varied cultures, certain level of education and above all, a living organism
whose compatibility to the organisation is rarely tested. She is capable of responding to the treatment
given but the response is not standard or uniform. Even a slight variation can create unexpected
reactions.
Organisations have attempted to deal with people, their employees, according to the understanding
prevalent about human behaviour at any point in time. The variations have been characterized from a
rather mechanistic approach to a philosophical one. The evolution of new approaches has been
triggered by research in the field of management as well as social sciences.
1.2.7 Importance of Human Capital

"Our employees are our greatest assets and the policy to attract and retain them is the key driver of our
future business", a statement being made routinely by all CEOs especially at the time of the Annual
General Meeting or when making presentations before the media and the finance community. While not
many take fliese statements forward to more meaningful levels, it is important to examine the actual
worth of human capital and how, if well utilised, this capital can be converted into a highly productive
resource.
The human capital can be defined as the knowledge and skills that individuals acquire through their life
and use to produce goods, services or ideas for productive purposes. While this definition would talk
about the depth of human capital, in reality human capital is one resource which is seriously
undermanaged in most organisations. This is because in most organisations, the management is more
concerned about the output than the processes and the efforts put in. A typical organisation rewards
performance indicated by higher sales, high share of the market or even cost savings done by more
efficient methods of working. In all these areas, there is an element of human effort but the intellectual
capital that leads to such contribution, the human capital effort is rarely rewarded.
An economic history of human wealth can be divided into 3 eras, namely Agrarian era. Industrial era
and the Knowledge era which is currently most widespread. In the Agrarian era, man and his immediate
surroundings were the primary source of wealth, in the Industrial era, machinery and natural resources
formed the source of wealth and in the current Knowledge area, it is the human capital that is the source
of wealth. The essence of business is to convert its knowledge into goods and services required by the
customer. Ultimately it is the knowledge that is exchanged for money. Human capital thus can be
discussed as the sum of people skills, knowledge, attributes, motivation and efforts. It can be given or
rented to others but purely on temporary basis, its ownership is not transferable.
A number of companies have identified the wealth of human capital and have even gone to the extent of
classifying the human capital as an asset with a footnote on the asset side of the balance sheet indicating
the value of their human resource. The Human Resources Accounting which has been introduced by a
number of leading corporates internationally as also in India take into account the cost of human
resources, their potential value to the company as also a replacement cost when good talent leaves. In
fact with the heavy price that the market pays for high calibre individuals for lateral movements, the
cost of manpower and by default of the human capital available to the company can rarely be
ascertained beyond an 80% confidence level.
1.2.7 Valuation Of Human Capital

Besides the customers, the products as well as the market capitalisation based on the strength of the
stock and its holding pattern, a company is also valuing the efficiency of its operations which can have
a direct linkage to their staff. The strength of the organisation therefore arises out of the efficiency of
their operations, the processes and the expertise which has been developed by the employees.
Developing expertise is not easy; it requires constant practice especially in the face of constantly
changing technological conditions and market environment. Thus human capital becomes the basis for
constant creation of customer and structural capital. A dynamic Management Information System
would therefore capture all the elements of the human contribution in an organisation's performance.
The employee displays over time a large number of competencies each of which can be measured and
valued. These competencies relate to domain knowledge, skills and technology and project
management and personal competencies such as initiative leadership, communication, etc. each of
which are important for specific functions. Software or an MIS that can capture these competencies and
convert them into productive and quantifiable output would result in a figure that is closest to the
human asset valuation.
1.2.8 Human Capital in Bank(s

The banking industry in the country today employes over a half a million employees both in the public
as well as the private sector and now that the outsourcing concept has gained major acceptance even in
the PSU banks, the number of people engaged by the banking industry directly and indirectly would run
close to a million. It is heartening to note that the new generation banks and the foreign banks have
given considerable importance to attracting the right talent, developing them to take up responsible
positions in the organisation and generally watch over their progress with considerable motivational
inputs along the way. Many banks have a system of continuous training and development of employees
across all levels of the organisation from the clerical to the senior most executive.
1.2.9 Transforming Employee into Productive Asset

Organisations understand the value of increasing an employee's output capability by investing in, and
adding worth to her abilities, rather than finding a mass of workers willing to work but unqualified to
excel in today's highly technological business environment. Simply put, the idea is that, contrary to the
old HR theory that emphasized people as the most fundamental asset to a company. Human Capital
Management, or HCM is focused on the right kind of people to get the job done.
Thus an organisation's first and foremost objective is the transformation of a worker into a resource that
is competitive and contributory. The entire Human Resources industry is scrambling to keep up with
this trend, and the most successftil are those who proactively seek to mould the new employee into an
asset that is potentially profitable to the organisation. Those who achieve high levels of success in
managing human capital are those who can harness the power of excellent leadership. The idea of
managers having a choice about how they lead was described by Tannerbaum and Schmidt in Harvard
Business review( 1973). They suggest that the choice related to the amount of authority used by the
manager and to the degree of freedom given to the team in making decisions. Successful leaders are
flexible in choosing the range of style. The failure of good leadership in the management of human
capital is one of the primary causes of bad employment processes, sagging profit margins and,
potentially, the overall failure of a company. In today's competitive and dynamic labour market, it is
vitally important for HCM to focus extensively on the strengthening and development of excellent
leadership skills. It is crucial to set up a proactive leadership team , developing a roster of professionals
with advanced leadership skills.
A number of Indian companies have been complaining about not getting adequate team work,
innovative capability and leadership qualities even from the A grade Business schools graduates. Too
often they realise that the youngster is very knowledgeable, technically skilled but lacks the soft skills
needed to keep organisations ticking to the demanding dynamics of markets. If a company's
management is imsure how to begin, it will be wise to pay close attention to the skills that really do pay
off. One of the
12
most valued leadership skills in the HR industry is trust building. If Human Capital Management cannot
deliver on promises it has made, both its corporate base as well as its labour pool will quickly slip
away. During the recent recession, a number of leading IT companies in India recruited a large number
of programmers from leading institutes. Dreaming to work for a reputed company, many gave up other
options assuming their future was set. Hit by the recession, many of these companies went back on their
promise and could not offer the promised jobs, thus earning a bad name in the market. College
graduates between the ages of 21 and 28 in most major tech industries respond incredibly well to
Human Capital Management programs conducted by engaging and personable leaders. It has been
found that leadership success comes most often from those who exhibit a mentoring approach to the
yoimger recruits, guiding them in a nurturing manner that inspires a sense of loyalty and trust. The list
of qualities a leader needs is long but are achievable. A leader should look for tomorrow's problems in
today's environment, lear to adapt to change, set high standards and clear objectives, think through a
problem clearly, create sense of value and purpose in work so that employees will believe in what they
do, make sound decisions based on principles. He should be able to create a harmonious atmosphere of
work so that employees will be enthused to work and he should be sensitive to the needs of people.
1.2.10
HRM and Management of Transformation
With globalisation shrinking the world map ofi a daily basis, technology stepping ahead at a rate that is
difficult to keep up with and a work force that is often hard to recognize. Human Resources
Management (HRM) is in a state of great upheaval and constant change.
1.2.11
Outsourcing from Overseas Markets
One of the biggest temptations for the US and to a lesser extent, the European businesses has been to
send jobs -overseas. With recent university graduates in developing nations earning wages anywhere
from a fifth (Comparing USD 75000 to USD 150000 a year in the US for IT technicians) to a tenth of
an American worker for a similar profile in India, all kinds of work can be sent out at incredibly cheap
rates. Such jobs include outsourcing call centers, credit card processing, legal transcription, genetic
codes analysis, invoicing, scanning of medical records and anything that has a set of simple instructions
that an employee can repeatedly follow throughout the work shift. This is the direct product of the gift
of technology, thanks to internet, wireless and high speed satellite based commimication channels
which has made it possible to decentralise the processing of information, and has provided access to an
entire world of workers from the world over, hooked on to a single practice.
1.2.12 indian HRM in Transition

One of the noteworthy features of the Indian workplace is its demographic uniqueness. It is estimated
that both China and India will have a population of 1.45 billion people by 2030, however, India will
have a larger workforce than China. It may be noted that half of India's current population of 1.1 billion
people are under of 25 years of age (Chatteijee 2006). While this fact is a demographic dividend for the
economy, it is also a danger sign for the country's ability to create new jobs, required at an
unprecedented rate (Meredith (2007).
An emerging dominant perspective is the influence of globalisation on technological advancements,

business management, education and communication infrastructures, leading to a converging effect on
managerial mindsets and business behaviours. The onset of a competitive service sector compelled a
demographic shift in worker educational status and heightened the demand for job relevant skills as
well as regional diversity. Expectedly, there has been a marked shift towards valuing human resources
in Indian organisations as they become increasingly strategy driven. Accordingly, competitive
advantage in industries like software services, pharmaceuticals, and biotechnology (where India is
seeking to assert global dominance), have led to a marked significance of HR function. These
relativities were demonstrated in a recent study of three global Indian companies with (235 managers)
when evidence was presented that positively linked the HRM practices with organisational performance
(Khandekar & Sharma 2005). HRM practices will therefore need to be at a much higher level and
imbibe global practices to train the workforce to become strategy driven rather than mere workers as at
present.
The drivers of contemporary India HRM trends would therefore be a global mindset, a collective
performance approach, and a professional autonomy leading to a change of market driven strategic
HRM, that will be viewed to be closely aligned with managerial technical competencies leading to a
higher involvement and better output. A hallmark of future Indian work places is likely to be a more
pronoimced emphasis on managerial training, a structural redesign to be contemporary and up-to-date,
and an entire institutional architecture to achieve enterprise excellence. The primary role of Indian
managers will therefore be to forge new employment and industrial relations through purposeful HRM
practices and policies.
1.2.13 The Role of Industrial Relations

Along with a more pronounced HRM approach would come the decline in the current IR focus. The
typical Indian industrial relations have evolved from political roots and labour market demands.
Politicians have sponsored unions and a number of major political parties have greatly influenced the
scope of legislation in the industrial relations area. Since the 1980s, the industrial relations culture has
been considerably affected by global trends. New industries like software, outsourced functions and the
emergence of a vibrant service sector have given rise to a new thinking on the IR front.
Some the major fallouts of rapid growth due to globalisation have been a change of work culture on the
shop floor, a changed outlook of the young professional today to change jobs frequently and a clear
choice on the type of jobs to be selected . Long hours on the job floor for retail, unrealistic result
orientation from insurance sales agents and inconvenient timing of BPOs have drastically reduced the
popularity of these sectors. Attrition in the BPO and R&D activity sector has reached almost 25% a year
and any number of schemes and initiatives are being devised regularly by HR managers across the
country to improve retention.
1.2.14 Development of HRM in India

The traditional Personnel department has given way to the Human Resource function but a glance at the
current HRM practice in Indian industry, indicates large remnants of traditional practices as well as the
burden of reservation in public sector undertakings.
1.2.15 Key HRM Practices in Indian Organisations

HRM Practice
Observable Features
.....
Percentage of employees with formally defined work roles is very high

in the
public sector.
RESOURCE
MANAGiEMENT
Job Description
U I HUMAN
Recruitment
Strong dependence on formal labour market. Direct recruitment from

institutions of higher learning is very common amongst management,
engineering and similar professional cadres. Amongst other vehicles,
placement agencies, intemet and print media are the most popular
medium for recruitment.
Compensation
Strong emphasis on security and lifetime employment in public sector

including a range of facilities like, healthcare, housing and schooling for
children.
Training and Development Poorly institutionalised in Indian organisations. Popularity of training

programmes and their effect in skill and value development
imdeveloped.
A very low coverage of employees under formal performance appraisal
Performance Appraisal
and rewards or organisational goals
Promotion and Reward
Moderately variable across mdustries. Seniority systems still dominate

the public sector enterprises. Use of merit and performance limited
mostly to globally orientated industries.
Career Planning
Limited in scope. The seniority based escalator system in the public

sector provides stability and progression in career. Widespread
acceptance of voluntary retirement scheme in public sector by high
performing stafE Cross flmctional career paths uncommon.
Gender Equity
Driven by proactive court rulings, ILO guidelines and legislature

provisions. Lack of strategic and inclusion vision spread.
Reservation System
The central government has fixed 15 per cent reservations for scheduled
castes, 7.5 per cent for scheduled tribes and 27 per cent for backward
communities. States vary in their reservation systems.
1.3 NEW INSIGHTS INTO HR MANAGEMENT

1.3.1 Contemporary Issues In Indian HRM
1. Growing internationalisation of business has its impact on HRM in terms of problems of
unfamiliar laws, languages, practices, competition, attitudes, management styles, work ethics
and more. The changing character of competition that is not between individual firms but
between constellations of firms also pose a threat with major companies operating through a
complex web of strategic alliances, resulting in completely new forms of organisational structure
and networked relations as against the more comfortable hierarchical relationships that existed
within the traditional organisation set up.
2. Changes in workforce are largely reflected by dual career couples, an ever younger workforce
with little sense of loyalty, old superannuating employees, working mothers, more education
leading to specialised sectors such as information technology. Biotechnology, and better
informed workers. Employee expectations and attitudes have also changed; traditional
allurements like job security, house, and terminal benefiits are less attractive today; employees
now demand high cash compensation, empo werment and a high degree of freedom to operate.
HR is required to redesign the profile of workers, and discover new methods of hiring, training,
remxmerating and motivating employees.
3. In today's dynamic world, even unions have understood that strikes and militancy have lost their
relevance; trade union membership has fallen drastically worldwide and the future of labour
movement is in danger. HR has to adopt a proactive industrial relations approach and be prepared
to renegotiate bargainable rights.
4. The HR manager's focus on people has to be justified and sustainable. Managers who demand
decision-making, bossism, and operational freedom have to realign their roles in enhancing
organisational and people capabilities.
1.3.2 Current Research

The World Competitiveness Report has noted HR capabilities in India as comparatively weaker as
against other Asian nations. One reason for this lack of professionalism could be that India has three
types of firms:1. Indian firms with a global outlook
2. Global firms seeking to adapt to Indian context
3. The homegrown private and public sector undertakings with their own outdated HR approach.
Add to this regional variation in types of industry size, business and culture and we have a number of
factors that could easily nullify any proactive efforts taken by a modern HR manager.
The number of unemployed school graduates, those who leave jobs at an early stage are increasing
among the young. Factors behind this problem include the following:
1. Significant decrease in job openings
2. Increase in young workers who are unable to set goals for the future
3. Education, employee training and employment systems that have not adapted to economic and
social structural changes
In order to facilitate employee training for young workers, it is important for schools, companies, and
employment service agencies to work together to generate more employment opportunities. A large
number of unskilled manpower now is engaged as indirect or outsourced employees also called "the
other" employee (Drucker).
A recent survey among these non regular employees showed that motivation for their own human
resources development was high, with over 80% stating that they "want to enhance their knowledge and
skills". However, employers' human resources development efforts for non-regular employees appear to
be insufficient, as only 20% of non-regular employees received company-provided education. This was
partly because less than half of the companies included non-regular employees in their human resources
development programs.
The number of the unemployed resulting from redundancies is increasing, thus the importance of
himian resources development fimctions outside the company (public vocational training agencies and
schools) is increasing. As there are increasing numbers of unemployed school graduates and drifters
among young workers, it is important to enhance human resources development associated with
schools, companies, by building better linkages between the educational institutions and the industry.
The level of satisfaction was low among non-regular employees in terms of human resources
development in their current jobs or workplaces. However, the level of satisfaction was high among
those who were able to receive support for human resources development in the workplace, such as
self-development or training at the workplace. Among these workers, the level of satisfaction was also
high with respect to "work content and involvement in work".
The percentage of part-time workers who expressed the willingness to "be engaged in important work,
rather than simple, supplementary work" or "receive education and training, to be engaged in the type
of work which would utilize their technical ability, skills and qualifications" was higher among those
who were receiving systematic OJT or Ofif-JT.
There are few human resources development opportunities for non-regular employees. In order to
enhance the motivation for working among non-regular employees and to make better use of their
U I HUMAN RESOURCE MANAGiEMENT

abilities, it is important to implement training needed for the job, as well as career development and
treatment corresponding to the employee's attitude and types of employment.
1.3.3 Relationship Between HRM, PM, HRD

From Labour Management to Human Capital Management
The management of people traditionally received very little exclusive attention as people as a resource
was given much less attention than finance or raw material and all employee costs were termed as an
unavoidable expenditure. The Management had appointed an officer to act a liaison between
management and workers in nmning the enterprise. The officer was more like a time keeper and his
activities revolved aroimd time-keeping, wage administration, or basic skill training. When the
Factories Act came into force, the officer was designated as Welfare Officer or Labour Welfare officer
who also oversaw the maintenance of welfare activities in factories. The labour or staff departments
attended to these fimctions till the emergence of a new dimension of bargaining between the two
groups, management and unions which gave rise to "Industrial Relations" which had roots in the legal
framework.
This bargaining process with a heavy reliance on legalistic approaches and principles resulted in a "bag
of rules" for meeting all labour management situations from fixation of wages to retirement age of
labour. The responsibility to implement these rules and maintain records fell on the labour department/
office in factories and staff departments in banks and establishment departments in Ports, Railways and
other Govt, undertakings.
The personnel department which modified the labour department concept, enlarged the people fimction
to include better methods of selection, training, with a regulated employee welfare approach though
typically in banks, training was not attached to the personnel department. This was the era of welfare
legislation and a number of studies to assess and measure employee productivity were taken up. The
Hawthorne studies were revealing, making it apparent that "productivity was primarily affected by the
emotional state of the employee; by his relationship with other people, particularly those with whom he
worked; and by the amount and kind of attention he received from his supervisors (Miner, 1969).
Similar experiments were conducted in the Calico Mills at Ahmedabad.
As employee productivity gained prominence, the selection systems underwent a change, and training
and management development programs became a standard and integral part of the personnel agenda.
However such training stemming out of Human Relations movement had limited results. It became
evident by mid-1950s that such treatment did increase the job satisfaction level but not necessarily the
productivity.
Just around this time, there was increasing awareness about making the individuals in the organisation
feel important, valuable rather than just happy. The studies conducted at the University of Michigan and
the Ohio State University by Likert and Stogdill respectively had contributed largely to this perspective.
A number of behavioural experts were increasingly involved in studying the individual worker in the
context of the work environment to measure factors that aided in better output. Mc Gregor's Theory X
and Theory Y explanation of organisations, McClelland's work on Achievement Motivation, Herzberg's
Motivation-Hygienic theory, and Argyris work on job contents were pointing out the perspective that
individuals need to perceive meaning in what they do (work) and this meaning can be created by
changing the components of the job, involving them in the processes of their work adding on
responsibility, recognition and sense of achievement as part of their "work". These studies led to the
concept of people management which in turn laid the foundation for Himian Resourdb Development
(HRD) as an approach to people management. Setting expectations before a careftilly selected
individual, providing development tools and assessing performance as part of the performance
management system, led to a structured career and succession planning, leading to growth for the
individuals as well as the organisation.
One process led to another till the entire people management equation became one of resource
management, as vital as any other precious resource, even to the extent of valuing the human capital as
an asset. Human Resource Management has by now been transformed as is evident in the changing
nomenclature of the flmction/department. Thus, we have the traditional Personnel Department being
renamed as the HR department which moved on to be termed Human resource Management, to
currently being called Human Capital Management. A careful look reveals that the traditional activities
still continue as sub- modules of the broad HR fimction.
In Banks, the Staff Department which was christened as the Personnel Department continued to
function till the late 80s.It was in some of the foreign banks that the designation slowly started to
change to the HR department and the Managers/officers of the Department had the nomenclature of
Relationship Managers. The departments with which a particular officer interacted became the
customers of that HR Relationship Manager. Some banks seriously started trying out assessment centres
as well. But in the public sector banks, there was no change. The department continued to retain the
Personnel Department tag. By the mid 90s and late 90s, these banks had a large number of old, surplus
staff and the solution by way of the VRS scheme was again introduced at an industry level and the
Personnel departments only implemented the scheme.
1.3.4 The Role of the HRD Professional

While most HR professionals are required to perform routine activities, the HR head has to work with
the management to develop a plan that would support a specific business strategy. Thus he would advise
the management as to how to bring about change, develop an incentive scheme that will make
compensation structure most competitive in the industry and provide expert professional advice for
optimal use of the human resources available. Working more as an internal consultant, the starting point
is to have a clear understanding of the firm's environment, culture as well as the demands that can be
made on this workforce.
His first role would be to put in place a clear organisational structure, then develop an internal
competitive environment and establish a very clear line of communication so as to result in coordination
and cooperation between business imits as well as the various tiers of management.
Typically the most important challenges start right from the recruitment stage as in good times, the front
office fimctions such as sales and marketing are always short of adequately trained staff. This challenge
for the right staff at the right time takes an about turn in times of recession when HR is faced with the
prospect of downsizing the same staff that they recruited and developed with great difficulty. A sound
HR Policy and an equally attractive downsizing policy will help the organisation tide over bad days and
still be able to attract good talent when the economy improves.
The credibility of the internal HR consultant will increase when the HR head has direct access to the
CEO and is in constant touch with other fimctions and gets accepted as an ally rather than a hindrance
to sound performance. HR being a major fimction in any organisation, the role of the HR professional
like every other activity or function also undergoes continuous changes. The HR professional who has
to face these challenges will therefore need to have a very clearly defined profile.
The traditional HR approach includes the following as major responsibility areas for the HR head:1. Plaiming- includes projections and plaiming for the skilled matrix of manpower required for the
friture organisation.
2. Staffing - providing the competency matrix required to face fiiture challenges.
3. Employee development - identify cost effective and modem methods of training for skill and
competency development.
4. Performance Management - Developing an entire gamut of performance linked measures to
align individual performance to the overall corporate performance.
5. Employee Rewards - with the pronounced emphasis on Pay for Performance, develop an
incentive scheme that would reduc^fixed costs while at the same time being motivating enough
to induce best performance from an employee.
6. Maintaining Quality of Work Life and Discipline - with the impact of global workforce it is
necessary to develop a linked work-life discipline for all employees in the organisation.
As a highly challenging and rewarding role, it is imperative that the person heading this function must
also have the required profile. A Competency Based Job Description for the HR Head is given as imder:
Position: HeadHR (Reports to

CEO) Role and
expectations

The HR Manager is responsible for providing a comprehensive range of strategic and operational
human resources services to achieve the organisational objectives as well as optimise employee needs
and engagement. This includes providing support to various fiinctional heads and regional priorities.
^Bil
OF HRM
1.3.5 Responsibilities and Tasks

Planning
Develop, monitor use and update policies in line with the Company's strategic objective.
Ensure uniform implementation of HR procedures as well as organisational compliance to
recognised HR practices.
Staffing
Provide each ilmction/section with adequate staff with up to date job descriptions in line with
managerial expectations
Implement all aspects of recruitment, induction, remuneration and termination in line with the
HR policies as the need arises.
Performance Management
Review performance processes and evaluate performance to ensure that the tasks performed are
in line with the Company's strategy.
Put in place measurement systems for periodic reviews and coêction.
li-aining and Development
'
Design a comprehensive training plan for the organisation.

Implement the staff career development plans annually.
Compensation and Rewards
Develop and implement a competitive remuneration strategy, updated annually, based on
current best incentive practices.
Design an Incentive "plan to link rewards to performance.
Maintaining Quality of Work life and Discipline
Develop and implement a healthy retention strategy.
Continually monitor statutory compliance and.
Ensure methods for creative work-life balance.
While the personnel head in PSU banks which have dominated the banking scene till the end of the last
century, may be reporting to the CEO, hardly any of the responsibility and tasks set out here is
performed by the Personnel Department. Most of the terms and conditions of the management staff as
well as the general category of employees are set by agencies outside the bank. This includes right from
the job grades, wages, working conditions to retirement age. Resourcing is also done by outside
agencies and the banks who are supplied with an exquisite bag of service conditions are free to
implement them fairly. In foreign banks though, things were much better and issues handled more
professionally.
1.3.6
Building an employment brand: Responsibilities of an HR executive
A great work place is where each one of us wants to find oxxrselves in. But then which is the right
place? A prospective employee will also have this question in his mind. If the KRA of the HR head is to
make her company's name to pop up in the candidate's mind, she has a great deal of work to do - Build
an employment brand for her company.
H.R.M-3
The essence is that an HR head wishing to convey focussed messages about the attribute and values of
products uses and promotes branded components (say of service conditions) whose own image
reinforces the desired attributes and values. As for banks, many in the clerical cadre (especially women
employees) joined because bank jobs were easy to perform and were considered fairly remimerative as
well. Now in a more competitive environment, this image also needs to undergo a major change.
Employee brand is a relatively new coinage but definitely a critical factor which will help one resolve
SJLjAMki
m\
HUMAN
most recruitment hardships. It is all about being a company where people will want to work. And
definitely stressing on literally "being a company where people want to work", because unless you have
a great workplace you cannot create such an image.
How can a good employment brand help HR?

Every time one comes across the "best employers to work for" lists, one has wondered what is that
extra somethmg that these companies do to attract and retain the best.
The HR Head will surely love it if she does not have to struggle in convincing her prospective
employees about the positives of joining her company. Having a brand image as a good employer will
help her:
Keep ahead in the talent war

.
Attract and induce the right kind of people she is looking for
Enhance her ability to get quality resumes to choose fi-om
Retain her existing employee pool
Subsequently see a dip in employee turnover
How to build the company brand

Being in the HR space, she has the best opportunity to drive the company towards building its brand.
Perhaps she should be the spearhead of this project. Before she starts, she has to remember that building
a brand cannot happen overnight. It is a long term strategy which needs a complete relook at the way
the organisation works.
So, where to start? Once she gets her top management convinced about her strategy, she goes ahead
with setting her brand objective. Be clear as to what is the employment brand image that company
wants to achieve. This is the first step and it has to proceed with the internal strategies and slowly move
into external promotional activities.
Encourage the senior management to support best practices in HR

Value, vision and practice have to start with the key strategy players - the top management. Get their
support to implement best HR practices in the organisation and this surely brings a head start to create a
great work place.
Build a great work place

If salary is not the only measure of good work place anymore, then what are employees looking for?
Freedom of work
Good work culture
I HUMAN
: MANAGEMENT
Leadership opportunity
Recognition for good work
Learning and career growth

Flexibility of timings
Challenges and responsibilities
Job Security
Good work life and social life balance
In simple terms, be a good employer and give employees the maximimi reasons to reject another job
offer and stay on with the current organisation.
Make them feel good and they will speak good. There is nothing like a satisfied employee who spreads
the goodwill of the company by word of mouth. He is speaking from his experience and he is the best
brand ambassador one can find.
While calling for resumes, word the advertisement in such a way to build the company brand on terms
of credibility and employee welfare. Public relations can help build a credible brand image through
newspapers reports and magazines. Getting hsted in those "best employers' surveys will add a lot of
value.
,
Online strategies like press releases, newsletters, articles are also a powerfiil media for spreading the
word about the company. Also make the best out of corporate website.
Classic examples of employer branding in India are Infosys, Accenture, The TATA group and among
banks, the State bank of India.
As regards the PSU banks, there is no difference in wages and other service conditions offered to
employees except in the case- of retiral benefits. Thus State bank employees get gratuity, pension and
employer's contribution to P.F whereas in other banks, employees do get gratuity and pension but only
their own contribution to P.F. Therefore the only reason why a person will prefer one or the other bank
should remain outside the compensation and service rule sector and that is where the factors related to
branding come in.
1.3.7 The HR Head in the Indian Banidng Industry

India is among the countries that has been identified as one of the big emerging markets as a result of
the liberalisation process which started in 1991 under the then Prime Minister Narasimha Rao and his
Finance Minister Dr. Manmohan Singh. A major need for refo^ was felt in the banking sector
subsequent to the Narasimham Committee Report which resulted in the formation of the new
generation private sector banks that revolutionised the entire banking industry in the .country. While the
emphasis was on technology and an entirely new approach to working with ho peons, or unionised
staff, a considerable effort had to be made by way of training initiatives to instill the new style of
working among the staff. Human Resources Management therefore played a very vital role in
developing a new mindset and getting people to work in an environment which had considerable
competition and a premium on efficiency and high productivity.
Success of the new generation private sector banks was based on quick growth where major deposit
base came from a decrease in the existing business of public sector banks. The old public sector and
private sector banks were faced with considerable domestic competition. Innovation became the order
of the day and computerising of accounts across thousands of branches became a priority. Banks had to
reorganise their structure and thek business model and HRM became critical in the restructuring phase
and improving the profile of the workforce.
With the arrival of competition in all the emerging markets, the HR Department had to develop new
skills towards recruitment and selection and also devise a new methodology to attract good talent in the
face of heavy competition in the campuses. The new concept called for segregating the workforce based
on age, education qualifications and business priorities. The State Bank of India, India's largest bank
opted to undertake an intensive restructuring programme. Leading MNC consultants were used for the
restructuring exercise and a new people policy was in place, to decentralise operations as well as routine
HR work towards making the workforce far more focused to assist the organisation in implementing
changes.
1.3.8 Role of HR Managers in Banks (Today)

1. Counselor: Consultations to employees about personal, health, mental, physical and career
problems. A Mend and career advisor to employees in the time of promotions, transfers as well
as lateral movements.
2. Mediator: Playing the role of a peacefnaker during disputes, conflicts between individuals and
groups and management. Display proficiency in union handling.
3. Problem Solver: Solving problems related to engagement of human resources and long-term
organisational planning.
4. Change Agent: Introducing and implementing institutional changes and installing organisational
development programs; most critical in PSU banks where major transformations take place due
to increased use of technology.
5. Management of Manpower Resources: Broadly concerned with leadership both in the group,
individual relationships and labour-management relations.
1.3.9 Role of HR Managers in Banks (Future)

1. Protection and enhancement of human and non-human resources
2. Optimising efficiency levels of expensive human resource assets to achieve organisational goals.
3. Be a strategic change agent for better organisational effectiveness. Identify change leaders from
the industry to add new dimensions to banking business.
4. Optimise use of technology for increased operational efficiency, explore new avenues for
disseminating knowledge and information.
5. Utilise behavioural scientists for people benefits, engage in human behaviour research for more
efficient work practices.
6. Manage diverse workforce, and engage the non-regular and outsourced employee for a more
integrated work approach.
Let Us Sum Up
In this nnit, we examined how people management, has evolved in India and elsewhere, some basic
concepts in HRM, the changing face of the workforce and attempts at valuing human capital. The rapid
changes all aroimd has resulted in constant up gradation of HR practices . We have examined the
relationship between HRM, the traditional personnel fimction and its developments, leading to the
current emphasis on human capital management.
I HUMAN
: MANAGEMENT
Keywords
History
of
management
Management theories
HRM terminology
HRM functions- managerial and
operational Human capital valuation
HR transformation
Employee outsourcing
Check your Progress

State whether the following statements are True or False.
1.
2.
3.
4.
People component of an organisation has always received due attention. f

Industrial revolution led to the rise of unions. f
Management theories and approach to people management are very closely related. t
Scientific Management approach is the foundation of today's concept of Human Resource
Management. f
5. Labour Management to Human Resource Management is not just a quantitative expansion of
the people management fimction but is qualitatively different. t
6. Personnel Management and HRD are synonymous terms. f
7. HRD and human relations movement are not the same. t
ANSWERS TO CHECK YOUR PROGRESS

1. False, 2. False, 3. True, 4. False, 5. True, 6. False, 7. True,
Terminal Questions
1. What is the basis for the rise of people management as an essential managerial function?
2. Why is it important to value human capital? Cite some examples of companies in India that
practice Human Resource Accounting.
3. Trace the transition of the HRM flinction from one of time keeping to people management.
4. How is Personnel Management different from HRM?
References
Business Week. (2007). A Red-HA Big Blue in India, Sept 3. Available: http://businessweek.com/
magazine/content/07_36/b4048052.htm.
Chatteijee, S.R. (2006). Human resource management in India. In A. Nankervis, Chatterjee, S.R. & J.
Coffey (Eds.), Perspectives of himian resource management in the Asia Pacific (41-62). Pearson Prentice
Hall: Malaysia.
Chatteijee, S.R., & Pearson, C.A.L. (2000). Indian managers in transition: OrientatibnsJ^ work goals, values
and ethics. Management International Review, 40(1), 81-95.
Buckingham, Marcus-First Break All Rules.
'
Deal, E., & Kennedy, A.A. (1982). Cdrpdrate culture. Reading, MA.: Addison-Wesley.
England, G.W., Dhingra, O.P., & Agarwal, C.N. (1974). The manager and the man: A crosscultural study of
personal values. Kent, Ohio; The Kent State University Press.
Gopalan, S., & Rivera, J.B. (1997). Gaining a perspective on Indian value orientations: Implications for
expatriate managers. International Journal of Organisational Analysis, 5(2), 156-179.
Lannoy, R. (1971). The speaking Tree: A study of the Indian society and culture. Oxford: Oxford University
Press.
Khalilzadeh-Shirazi, J., & Zagha, R. (1994). Achievements and the agenda ahead. The Columbia Journal of
World Business, 29(1), 24-31.
Khandekar, A., & Sharma, A. (2005). Managing human resource capabilities for sustainable competitive
advantage: An empirical analysis from Indian global organisation. Education & Training, 47(47/48), 628639.
Kumvilla, S. (1996). Linkages between industrial nation strategies and industrial relations/human resource
policies: Singapore, Malaysia, the Philippines and India. Industrial & Labour Relations Review, 49(4), 63558.
Meredith, R. (2007). The elephant and the dragon: The rise of India and China and what it means for all of
us. New York: W.W.Norton & Co.
Mowday, R.T., Porter, L.W., & Steers, R.M. (1982). Employee-organisation linkages: The psychology of
commitment, absenteeism and turnover. New York: Academic Press.
O'Reilly, C.A., Chatham, J.A., &. Caldwell, D.F. (1991). People and organisational culture: A profile
comparison approach to assessing person-organisation fit. Academy of Management Journal, 34(3), 487516.
Rangarajan, L.N. (1992). The Arlhashastra. New Dheli: Penguin Books
Roy, R. (2006). Quality of work life as a determinant of mental health: SCMS Journal of Indian
Management, 3(2), 87-91.
Sett, P.K. (2004). Human resoiuce management and firm level restructuring: The south Asian drama. Research
and Practice in Human Resource Management, 12(1), 1-18.
Singh, K. (2003). Strategic HR Orientation and Firm Performance in India. International Journal of Human
Resource Management, 14(4), 530-543.
Sihag, B. (2004). Kautilya on the scope and methodology of accounting, organisational design and role of
ethics in ancient India. The Accounting Historians Joumal, 31(2), 125-148.
Sinha, J., & Kanmmgo, R. (1997). Context sensitivity and balancing in organisational behaviour. International
Joumal of Psychology, 32(1), 93-105.
Slater, J. (2004). Job-hopping central: Far East Economic Review, 8(1),34.
Spencer, S., Rajah, T., Narayan, S., Mohan, S., & Latiri, G (2007). The Indian CEO: A portrait of excellence.
New Delhi: Response Books.
Time. (2007). Special Report: 60 years of Independence, 170(6), 4-42.
Venkatrataam, C., & Chandra, V. (1996). Sources of diversity and the challenge before human resource
management in India. International Joumal of Manpower, 17(4/5), 76-96.
ORGANISATIONAL BEHAVIOUR
STRUCTURE
2.0
Objectives
2.1
Introduction
2.2
Behavioural Dynamics in Organisations
2.3
Person - Job Fit
2.4
Group Dynamics
2.5
Leadership and Team Effectiveness
<
2.6
HR Implications in Benchmarking
2.7
Quality Initiatives In Organisations

Let Us Sum Up
Keywords
Terminal Questions
References
2.0 OBJECTIVES
ORGANISATIOPiiPL BEHVidil^^^^
2.1
Get insights into the behavioral dynamics in organisations

The person job fit - the right person for the right job
Theories of group dynamics
Qualities of Good Leadership & Team Effectiveness
Benchmarking and how they affect quality
Quality processes and their implications
INTRODUCTION
An understanding of organisational behaviour leads to the basics of people management. An

organisation is the coming together of individuals in order to attain a common goal or purpose. As
defined by Edgar Schein,. "An organisation is the rational co-ordination of the activities of a number of
people for the achievement of some conunon explicit purpose or goal, through division of labour and
fimction and through a hierarchy of authority and responsibility". (Schein 1979). Such a coming
together can be formal or informal, by way of a group of people for a specific purpose, can be for long
periods or even for the duration of a project. In a formal set-up, there is a given goal, a structure,
explicit roles and relationships in order to coordinate the activities whereas in an informal organisation,
these aspects evolve as an outcome of the group process.
The structure of an organisation denotes the formal hierarchical fi^mework by which job tasks are
divided, grouped, and coordinated. While most organisations start with a clear focus on levels and
fimctions along with the people to man these fimctions, it takes a while before the units of the
organisation get defined more clearly with a firmer statement of its policies, procedures, and goals.
2.2
2.2.1
BEHAVIOURAL DYNAMICS IN ORGANISATIONS

Organisation Charts
An organisation chart is a simple and understandable representation of the formal organisation

structure. It gives a clear overview of the shape and structure of an organisation, captured in a visual
form. It is a blue print for proper conceptualisation, further thinking; a discussion board for further
modifications without affecting the desired focus.
The organisation chart well drawn, can give an insight in to the organisation's philosophy, its
hierarchical structure, line and staff authority, authority and responsibility levels, chain of command,
line of delegated authority, decentralisation or otherwise in an organisation as well as span of control. It
also helps and guides the management in evolving changes as demanded by the environment and for
faster realisation of goals. It is a good guide for new recruits for their initiation into the organisation and
in understanding the authority and responsibility levels, including their own.
2.2.2
Formal and Informal Organisations
The intention to clearly define the structure and roles in a formal and organised manner, leads to an
enterprise that is a formal organisation. It may have an attribute of flexibility, room for discretion and a
method for recognition of individual talent and capacity. As for group functioning, the individual effort
will have to be channelised through the group leader and has to be for the organisation's good. The
informal group in an organisation is the network, of personal and social relationships unrelated to the
firm's formal authority structure, that arise spontaneously as people associate with one another in the
work environment. Such informal units can have pressure groups, that conflict with those of the formal
organisation. These informal units can make the formal organisation more effective by providing
support to management, stability to the environment, and become effective communication channels.
2.2.3
Matrix Structure
In a matrix organisation, teams are formed and team members report to two or more managers. Matrix
structures utilise functional and divisional chains of command simultaneously in the same part of the
organisation, commonly for one-of-a-kind projects. It is used to develop a new product, to ensure the
continuing success of a product to which several departments directly contribute, and also to solve a
difficult problem. The matrix concept facilitates working on concrent projects by creating a dual chain
of command, of the project manager and the functional manager. Project managers have authority over
activities geared toward achieving organisational goals while functional managers have authority over
promotional decisions and performance reviews. An example is an automobile ancillary firm with a
long term contract from a leading automobile manufacturer.
2.2.4
Divisional Structure
In a divisional organisation, corporate divisions operate as relatively autonomous businesses under the
larger corporate umbrella. Made up of self-contained strategic business units each of which produces a
single product, the controlling authority focuses on results, coordinates and controls the activities, and
provides support services between divisions. Functional departments achieve division goals. A
weakness however, is the tendency to duplicate activities among divisions.
2.2.5
Organic Structure
Organic organisations have a flat structure with only one or two levels of management, emphasising a
decentralised approach to management that encourages high employee involvement in decision
making. This structure creates independent small businesses or enterprises that can rapidly respond to
customers' needs or changes in the business environment.
2.2.6
Functional Structure
Functional structures group similar or related occupational specialties or processes together under the
familiar headings of finance, manufacturing, marketing, accounts receivable, research. Human
Resources etc. However, the organisation risks losing sight of its overall interests as different
departments pursue their own goals.
Drawing fk>m these distinctions, we can see that there are two interdependent aspects, i.e. one about
people and the other about activities. Historically, two streams of thoughts have developed; one, on
how to organise the activities most systematically and analytically so that uniformity in the work
processes
and operations can be brought about, and the other, on how to understand an individual's relation to a
given activity now recognised as "work". Obviously, enough thinking has developed in both these
spheres over the years and the two perspectives have affected each other due to the high degree of their
association.
The beginning of these two perspectives can be seen in the work of Robert Owen (1771 -1858) and
Charles Babbage (1792-1871). Owen a manager by profession claimed that a manager's best
investment was in his workers ("vital machines" as he called them). He believed in providing better
conditions for workers which he thought would result in higher productivity. Whereas Babbage, a
professor of mathematics, was an early advocate of division of labour. He believed in applying
scientific principles to work processes to increase productivity and reduce expenses. Whichever may be
the focal point, coordinating of individuals in an organisation is the beginning of people management.
Organisations have attempted to explore the best way of achieving this and continue to do so.
While designing an organisation structure, the following points need to be kept in mind:
1. Identification of key activities which will produce desired results.
2. Classification of the key activities.
3. Analysing the decisions required to be made at each level.

4. Analysing the relationship between jobs.
1.3 THE PERSON-JOB FIT

Most HR Managers would like to profess that their ultimate aim is to provide the right man for the right
job, in other words, the perfect job fit. Companies go to great extends to get their recruitment act right,
with the best possible presentation about the organisation; Campus recruitment goes well, they have the
best of the pick and everyone gets on board in time, to start a new career, and in a few months start the
first signs of cracks in an otherwise well oiled process of induction and on the job training. Somewhere
along the line, someone has forgotten to identify the real capability and potential of the new recruit as
there is no relationship between scores obtained in the college and actual performance on the job, with
the result, an extremely aggressive guy is rotting out in the operations department while another who is
an introvert, is strugglmg every day to meet his daily sales targets. The person job fit has not worked
and a careful scrutiny of the informal, subgroups formed among the new recruits will reveal the amoimt
of fhistration just beneath the surface with early exits indicating a demonstrable rejection of the system.
No employee is a blank slate, so organisations should leverage workers' prior experiences through
knowledge-sharing sessions to enrich learning content and draw that extra bit of contribution which
otherwise might remain untapped. The induction program is where major learnings about the
organisation, its people and products take place and therefore would be the right place to share
knowledge and experience and enhance the combined capability of the group.
When it comes to learning, most oiganisations go out of their way to treat everyone equally. Each
employee has the opportunity to receive training on technical and other skills, as well as to access
incentives for continued education. But sometimes in the pursuit of uniformity, it's easy to overlook the
fact that employees are people too; people who invariably have real-world experiences that give them
unique perspectives on learning.
iii!.:
"Y'l'ir
^ I HUMAn FÊStteiiî^^
"There's a lot that occurs in a person's life in terms of experiences and conditioning and attitudes, and
they bring all that with them into the worlqjlace," says Allen Jones, president of the Edge Leaming
Institute. "Businesses must recognise that people come to them with all sorts of prior knowledge, all of
which ultimately determine their contribution to an organisation way more than flieir technical
competence."
But many organisations do not have processes in place that can effectively leverage employees' realworld, on and off-the-job experiences. The benefits of effective knowledge sharing, can include
improved productivity, increased engagement and retention, strengthened loyalty and a workforce that
feels more valued and validated.
"It's absolutely imperative that knowledge sharing takes place for a business to be competitive," Jones
said. "Equally important. is for learning professionals to help the employee understand the impact and
influence of those experiences, the cause-and-effect relationship of those experiences and how that
affects their ability to make contributions."
2.3.1 Culture Counts

It all starts from the ground up: Having the right corporate culture in place is pivotal to fostering fruitful
employee discussion. There are subcultures within the Indian system where people are individualistic
and aggressive and at the other end of the spectrum we have people who are accustomed to be
dominated by a paternalistic system. Then there would be^strong team players as well. Understanding
them and moulding them through a right corporate culture which will foster fruitful employee
engagement is the real management task.
"If you're really going to have knowledge sharing staf valuable, you've got to have a culture that
perpetuates trust and vulnerability and authenticity," Jones said. "It's risky for me to sit down with a
group of people and start talking about my experiences. Depending on the person, if they've got a lot of
self-confidence and good healthy self-esteem, they might think, 'I can talk to anybody about anything' it's no big deal. But the reality is, the majority of the people in the workplace really don't have quite that
level of confidence, so they're constantly assessing, 'Is this a safe place to say what I know, or am I
going to be mocked or looked at differently?'"
A leading OB expert promotes this kind of collaborative culture in her organisation, by having certain
departments work side-by-side to avoid operating in silos.
"Everyone works together," she said. "We have erased the lines, and there's a clear partnership but
there's a respect for the roles and responsibilities. So in an environment like that, it's rich, it's fertile it's an excellent opportunity for learning."
Maintaining an open, candid culture also allows for more fluid and continuous communication, which
is critical for successful sharing.
"You obviously want some boundaries, but at the same time, you want to try to nurture something that's
more organic, something that becomes more a part of the culture and not just something we do in
weekly meetings" she said.
This kind of environment also encourages employees to spend time fully exploring a particular topic or
idea, absorbing and pondering over it and returning with folloW-up questions, rather than trying to fit
too much into too short a period of time.
2.3.2 Forum and Environment

While an open corporate culture is the first step toward successful knowledge sharing in a group,
learning professionals need to provide the appropriate forums and environments for effective discussion
to take place.
One of the first places where discussion occurs is in the classroom. That is why thoughtful leaders
encourage and promote a classroom experience that allows for lots of feedback and multidimensional
learning, most important when a group is new, with a multi-cultural background and individual
aspirations, most of which may not get fulfilled early enough.
Such organisations are committed to having interactive classes, sessions that are designed for the
participants to work together in groups and not only dig into the regulations and case studies to find out
what the realistic answer would be, but also to glean infonnation from each other. Every such class is an
opportunity for students to come into an environment where they are learning from the group leader who
in turn is learning from them and then they are learning from each other.
It is thus not just a matter of sitting next to each other for a period of time, but something that allows
people to have a little bit of social interaction to help easier integration with the new culture and
demands, and the less structured it is, the more free-flowing it is. The key is to make sure that the team
leaders are clear about their expectations and honestly convey to participants that while every aspect of
the discussion is helpful, not every idea can be implemented. In fact, if attendees feel that their thoughts
were valued and the discussion was worth it, they are going to be a cheerleader and a great
advertisement for such initiatives all across the organisation. And most important, a number of
frustrations and inability to cope comes through the informal net work which can help the authorities
take remedial steps towards better placement of staff for that elusive, correct fit.
Improving the effectiveness of a team (group) is one of the most cost effective ways of improving the
performance of an organisation. It is often quicker than attending to each individual because good teams
can compensate for individual weakness.
2.4 GROUP DYNAMICS

A group can be defined as several individuals who come together to accomplish a particular task or goal.
Group dynamics refers to the attitudinal and behavioural characteristics of a group and is concerned
with how groups form, their structure and process, and how they function. Group dynamics is relevant
in both formal and informal groups of all types. In an organisational setting, groups are a very common
organisational entity and the study of groups and group dynamics is an important area of study in
organisational behavior.
The following sections provide information related to group dynamics. The formation and development
of groups is first considered, followed by some major types or classifications of groups and then the
structure of groups is examined.
2.4.1 Group Development
Group dynamics is concerned with why and how groups develop. There are several theories as to why
groups develop. A classic theory, developed by George Homans, suggests that groups develop based on
activities, interactions, and sentiments. Basically, the theory means that when individuals share common
activities, they will have more interaction and will develop attitudes (positive or negative) toward each
other. The major element in this theory is the interaction of the individuals involved.
Social exchange theory offers an alternative explanation for group development, according to which,
individuals form relationships based on the implicit expectation of mutually beneficial exchanges based
on trust and felt obligation. Thus, a perception that exchange of relationships will be positive is essential
if individuals are to be attracted to and affiliate with a group.
Social identity theory offers another explanation for group formation. Simply put, this theory suggests
that individuals get a sense of identity and self-esteem based upon their membership in salient groups.
Group dynamics as related to development concerns not only "why" groups form but also "how". The
most common framework for examining the "how" of group formation was developed by Bruce
Tuckman in the 1960s. In essence, the steps in group formation imply that groups do not usually
perform at maximum effectiveness when they are first established. They encounter several stages of
development as they strive to become productive and effective. Most groups experience the same
developmental stages with similar conflicts and resolutions.
According to Tuckman's theory, there are five stages of group development: forming, storming,
norming, performing, and adjourning. During these stages group members mxist address several issues
and the way in which these issues are resolved determines whether the group will succeed in
accomplishing its tasks.
1. Forming: This stage is usually characterized by some confusion and uncertainty. The major goals
of the group have not been established. The nature of the task or leadership of the group has not
been determined (Luthans, 2005). Thus, forming is an orientation stage when members get to
know one another and share expectations about the group. Members learn the purpose of the
group as well as the rules to be followed,
2. Storming: In this stage, the group is likely to see the highest level of disagreement and conflict.
Members often challenge group goals and struggle for power. Individuals often vie for the
leadership position during this stage of development. This can be a positive experience for all
groups if members can achieve cohesiveness through resolution. Members often voice concern
and criticism in this phase. If members are not able to resolve the conflict, then the group will
often disband or continue in existence but will remain ineffective and never advance to the other
stages.
3. Norming: This stage is characterized by the recognition of individual differences and shared
expectations. Hopefully, at this stage the group members will begin to develop a feeling of group
cohesion and identity. Cooperative efforts begin to yield results. Responsibilities are divided
among members and the group decides how it will evaluate progress.
4. Performing: Occurs when the group has matured and attains a feeling of cohesiveness. During
this stage of development, individuals accept one another and conflict is resolved through group
discussion. Members of the group make decisions through a rational process that is focused on
relevant goals rather than emotional issues.
5. Adjourning: Not all groups experience this stage of development because it is characterized by
the disbandment of the group. Some groups are relatively permanent (Luthans, 2005). Reasons
that groups disband vary, with common reasons being the accomplishment of the task or
individuals
deciding to go their own ways. Members of the group often experience feelings of closure and
sadness as they prepare to leave.
2.4.2 Group Types

One common way to classify group is by whether they are formal or informal in nature. Formal work
groups are established by an organisation to achieve organisational goals. Formal groups may take the
form of command groups, task groups, and functional groups.
Command groups are specified by the organisational chart and often consist of a supervisor and the
subordinates that report to that supervisor. An example of a command group is an academic department
chairman and the faculty members in that department. Task groups consist of people who work together
to achieve a common task. Members are brought together to accomplish a narrow range of goals within
a specified time period. Task groups are also commonly referred to as task forces. The organisation
appoints members and assigns the goals and tasks to be accomplished. Examples of assigned tasks are
the development of a new product, the improvement of a production process, or the proposal of a
motivational contest. Other common task groups are ad hoc committees, project groups, and standing
committees. Ad hoc committees are temporary groups created tocesolve a specific complaint or develop
a process. Project groups are similar to ad hoc committees and normally disband after the group
completes the assigned task. Standing committees are more permanent than ad hoc committees and
project groups. They maintain longer life spans by rotating members into the group.
A functional group is created by the organisation to accomplish specific goals within an unspecified
time frame. Functional groups remain in existence even after achievement of current goals and
objectives. Examples of functional groups would be a marketing department, a customer service
department, or an accounting department. Friendship groups are formed by members who enjoy similar
social activities, political beliefs, religious values, or other common bonds. Members enjoy each other's
company and often meet after work to participate in these activities. For example, a group of employees
who form a friendship group may have an exercise group, a movie club,, or a cricket group that meets
after every major India match to discuss and analyse the game. A reference group is a type of group that
people use to evaluate themselves. According to Cherrington, the main purposes of reference groups
are social validation and social comparison. Social validation allows individuals to justify their
attitudes and values while social comparison helps individuals evaluate their own actions by comparing
themselves to others. Reference groups have a strong influence on members' behavior. By comparing
themselves with other members, individuals are able to assess whether their behavior is acceptable and
whether their attitudes and values are right or wrong.
2.4.3 Group Structure

Group structure is a pattern of relationships among members that hold the group together and help it
achieve assigned goals. Structure can be described in a variety of ways. Among the more common
considerations are group size, group roles, group norms, and group cohesiveness.
Group size can vary from 2 people to a very large number of people. Small groups of two to ten are
thought to be more effective because each member has ample opportunity to participate and become
actively involved in the group. Large groups may waste time by deciding on processes and trying to
decide who should participate next. Group size will affect not only participation but satisfaction as well.
Evidence supports the notion that as the size of the group increases, satisfaction increases up to a certain
point. In other words, a group of six members has twice as many opportunities for interaction and
participation as a group of three people. Beyond 10 or 12 members, increasing the size of the group
results in decreased satisfaction. It is increasingly difficult for members of large groups to identify with
one another and experience cohesion.
2.4.4
Group Roles
In formal groups, roles are usually predetermined and assigned to members. Each role will have specific
responsibilities and duties. There are, however, emergent roles that develop naturally to meet the needs of
the groups. These emergent roles will often replace the assigned roles as mdividuals begin to express
themselves and become more assertive. Group roles can then be classified into work roles, maintenance
roles, and blocking roles.
Work roles are task-oriented activities that involve accomplishing the group's goals. They involve a
variety of specific roles such as initiator, informer, clarifier, summariser, and reality tester. The initiator
defines problems, proposes action, and suggests procedures.
Role conflict occurs when there is inconsistency between the perceived role and role behaviour. There are
several different forms of role conflict. Inter role conflict occurs when there is conflict between the
different roles that people have. For example, work roles and family roles often compete with one another
and cause conflict. Intra-role conflict occurs when individuals must handle conflicting demands from
different sources while performing the tasks associated with the same role.
2.4.5
Group Norms
Norms are acceptable standards of behavior within a group that are shared by the members of the group.
Norms define the boundaries of acceptable and unacceptable behavior. They are typically created in order
to facilitate group survival, make behavior more predictable, avoid embarrassing situations, and express
the values of the group. Each group will establish its own set of norms that might determine anything
from the appropriate dress to how many comments to make in a meeting. Groups exert pressure on
members to force them to conform to the group's standards. The norms often reflect the level of
commitment, motivation, and performance of the group.
Performance norms determine how quickly members should work and how much they should produce.
They are created in an effort to determine levels of individual effort. They can be very frustrating to
managers because they are not always in line with the organisation's goals. Members of a group may have
the skill and ability to perform at higher levels but they don't because of the group's performance norms.
For example, workers may stop working a production machine at 20 minutes before quitting time in order
to Wash up, even though they produced fewer items that day than management intended.
The majority of the group must agree that the norms are appropriate in order for the behavior to be
accepted. There must also be a shared understanding that the group supports the norms. It should be
noted, however, that members might violate group norms from time to time. If the majority of members
do not adhere to the norms, then they will eventually change and will no longer serve as a standard for
evaluating behavior. Group members who do not conform to the norms will be pimished by being
excluded, ignored, or asked to leave the group.
2.4.6 Group Cohesiveness

Cohesiveness refers to the bonding of group members and their desire to remain part of the group. Many factors
influence the amoimt of group cohesiveness. Generally speaking, the more difficult it is to obtain group
membership the more cohesive the group. Groups also tend to become cohesive when they are in intense
competition with other groups or face a serious external threat to survival. Smaller groups and those who spend
considerable time together also tend to be more cohesive. Cohesiveness in work groups has many positive effects,
including worker satisfaction, low turnover and absenteeism, and higher productivity.
ORGANISATIONAL BF-HAVIOUR | 35
Evidence suggests that groups typically outperform individuals when the tasks involved require a variety of skills,
experience, and decision making. Groups are often more flexible and can quickly assemble, achieve goals, and
disband or move on to another set of objectives. Many organisations have found that groups have many
motivational aspects as well. Group members are more likely to participate-in decisionmaking and problem-solving
activities leading to empowerment and increased productivity. Groups complete most of the work in an
organisation; thus, the effectiveness of the organisation is influenced by the effectiveness of its groups.
2.4.7 Group Activities of the 21 st Century- the Web Networlcs

One of the newest areas that organisations are delving into to help facilitate successful discussion groups is the
Web.
Every major activity group today has a web network of people with common interests, sharing views through the
vast cyberspace. The most popular of them all, the Yahoo and Google groups. Face book, Linkedin and a million
others, all have become powerful groups in their own right. The HR community in India alone has over 100 such
groups where everything of interest in HR is shared and discussed. A lot of good information is exchanged with the
result, the copy right on a number of initiatives, articles as well as e-books seem hazy today. The web and
networked tools might not suit every organisation, and it is importt to assess the goals for one's discussion groups
and knowledge sharing before implementing online forums.
Many organisations, especially the IT giants have a healthy internal network on the web that acts as a formal and
informal discussion Board. The story goes that the Infosys chat room had a long series of discussions on the canteen
and the type of food served till someone in authority had to intervene and gently steer the discussion to more
important topics.
While going online has major advantages, from a traditional group dynamics point of view, they have come to
negate the advantages of formal group meetings. In fact they never should be a substitute for face-to-face discussion
as the anonymity of the net, especially on the discussion groups, tend to give opinions, a touch of irresponsibility.
Besides, the number and type of members of a typical chat or linked in group can vary and any one from anywhere
joins the discussions at any time, thus affecting continuity
It does not mean such web networks cannot be effective, says a communication expert, "It does not mean that if
you've got a core group of people that work together and know each other and have got good relationships, that net
based communication cannot be a good mechanism. It is just that body language has a lot to do with how we
receive information and interpret it, so that when we go to more efficient forms of communication and using online
tools, we lose a component of communication that
H.R.M-4 is always thought important." Hence the effectiveness of communication depends on how it is perceived, its
impact is governed by the expectation of the recipient and it must be remembered that communication makes its
own demand on the recipient. That means that communication is not mere information.
2.4.8 Group Effectiveness

Bringing together a group or team to address a problem or develop a solution is never easy, but talent managers can
create more successful, powerfiil groups by focusing on purpose - both of the individual and the group.
"If we can begin to understand why people come to groups - what they really at a subterranean level hope will
happen - and act in ways that will help those unarticulated needs get met, then we can intentionally do things that
help this extraordinary group experience occur," said Kathleen Ryan, co- owner of The Orion Partnership and coauthor with Geoffrey Bellman of "Extraordinary Groups: How Ordinary Teams Achieve Amazing Results".
Ryan and Bellman have developed a new concept to explain the findings of their research into groups - the group
needs model.
This model is based around six fundamental group needs, separated into three loops - self, group and world - of two
needs each - acceptance and potential; purpose and bond; and impact and reality.
"For the self loop, we as human beings, mostly unconsciously, bring needs to accept ourselves in this group," Ryan
said. "To feel like we belong, to feel like we don't have to pretend, that we can be our full selves, warts and all,
strengths as well as weaknesses. And, not only that, but that this group can be a part of us growing into our potential,
which is essentially becoming our fuller and better selves.
"The group loop is that we join with others around a common purpose, and purpose is simply the reason why we
come together. In the context of doing our work together, we form a bond, and the bond is all about a sense of
collective identity, what binds us together, what helps us to feel connected in a common definition of who we are.
"Finally, the world loop is about making a difference in the real world. Impact is about our desire to make a
difference, to know that our efforts essentially created some kind of change. Reality has to do with that we operate
in the real world, understanding and accepting it for what it is, rather than in some fantasy."
Ryan said the more of these needs that get met by a group, the more likely that the group will become transformative
for its members and in its results.
Whether a talent manager is bringing together a cross-functional team to handle a staffing issue or cope with layoffs,
Ryan said, "It's always wise to start with purpose."
"Make sure that people are clear about what the purpose of the group is," she said. "It's quite amazing how anybody
who's calling a group together can think it's perfectly clear what we're here for, when in fact, the 10 or 12 people
who show up don't have that understanding at all."
"Also, look at that purpose from the point of view of how compelling is it. Because one of the challenges in today's
world is that everybody's busy. Organisations ran so lean that everything's important and the pace can feel so rushed.
So the question becomes what's going to make this cross-functional team that we're creating important enough so
that people will really give their heads and hearts to it, and have it be significant enough so that when push comes to
shove, they will show up, they will do their homework, they'll be there on time, they'll follow through, they'll make
it a priority."
In an engineering company in India, whenever cross fimctional groups meet, one of the members writes down on a
board " what is the purpose of this meeting?", after the initial discussions. This obviously helps in setting the right
direction for the agenda.
Let Us Sum Up
Under this unit, we have leamt about the structure and various constituents of an organisation.
Understood the best manner in which to match a person to the job and gone through research reports which indicate
current trends in organisations.
Group Dynamics as a major topic giving inside into the formation and fimctioning of groups and how sub-groups
become effective within the over all organisation.
Keywords
Organisational structure
'
Matrix structure
Fimctional structure of organisations Organisational
culture Forming, Storming, Norming Group Norms
and Group Cohesiveness Cyber Networks
Check your Progress

1. Right man for the right job is always possible. f
2. Various subcultures play an important role in building the corporate culture. t
3. Storming in group dynamics results in disbanding of the group. f
4. Command groups demand complete obedience. f
5. When tasks to be performed require a variety of skills, groups outperform individuals. t
Answers to check your progress

1. False, 2. True, 3. False, 4. False, 5. True,
Terminal Questions
1. How do we ensure the right person job fit. Elaborate in the context of cultural fit?
2. What are the stages of Group Formation. Elaborate in the context of Tuckmans Theory.
3.What is Group Cohesiveness?
4.Short note on Cyber Groups and how they differ from traditional groups. References
Brainstorming; Group Decision Making; Teams and Teamwork; Amy McMillan; Revised by Tim Bamett
Further Reading
Cherrington, D.J. Organisational Behavior. Boston: Allyn and Bacon, 1994.
Frey, L.R., and S. Wolf "The Symbolic & Interpretive Perspective on Group Dynamics," Small Group
Research 35, no. 3 (2004): 277-316.
Greenberg, J., and R.A. Baron. Behavior in Organisations. 7th ed. Upper Saddle River, NJ: Prentice Hall,
2000.
Hellriegel, D., and J.W. Slocum, Jr. Organisational Behavior. 10th ed. Thomson South-Western, 2004.
#
Katz, D., and R. Kahn. The Social Psychology of Organisations. 2nd ed. New York: John Wiley & Sons,
1978, 196.
Luthans, F. Organisational Behavior. 10th ed. Boston: McCiraw-Hill, 2005.
Robbins, S.P. Essentials of Organisational Behavior. Upper Saddle River, NJ: Prentice Hall, 1997.
2.5 LEADERSHIP AND TEAM EFFECTIVENESS

A team is defined as a reasonably small group of people, who bring to die table a set of complementary and
appropriate skills, and who hold themselves mutually accoimtable for achieving a clear and identifiable set of goals.
2.5.1 Team Effectiveness

A team can be considered to be effective if their output is judged to meet or exceed the expectations of the people
who receive the output. Ideally, the team should still be able to fimction effectively after they have completed their
task and it should not be torn apart by dissension. Effectiveness is also judged by whether the team feels satisfied
with its efforts. If the team members are pleased with their efforts, if the experience has been a good one, if time
spent away from their normal work has been worth the effort, the team has likely been effective.
Improving the effectiveness of the team is one of the cheapest ways of improving the performance of the
organisation. This is because good teams can compensate for individual shortcomings.
There are three areas of group behavior that must be addressed for teams to be effective. The team must work hard;
it must have the right mix of skills, which includes, technical, problem solving and interpersonal skills. Above all,
the team must be able to develop appropriate approaches to problem solving.
liSBSS
MB*
The following factors contribute to hard work, skill development and effective problem solving strategies:
The task itself should be motivating.
The task itself should be seen as being worthwhile. It needs to be a whole piece of work with a
clear and visible outcome so that people can feel a sense of ownership.
The outcome of the task should be perceived as being important to other people's lives. It should
affect others in the organisation or impact the external customer.
The job should provide the team with an opportunity for self-regulation. They should decide how
the work is to be done. Meaningfiil feedback should be provided on the how well the team is
performing.
The team needs challenging goals, which are clearly defined which will help it mobilise its efforts to find
irmovative ways to achieve feats that may have been considered impossible. Providing a challenging job is
the most important motivator to sustain group effort.
Rewards are important and they need to suit the personal characteristics of the people on the team. It is
important that group effort is recognised and the disruptive habit of trying to single out individuals from the
group, when there has been a group effort, must be avoided.
2.5.2 Leadership and Team Buiiding

"Managers are the basic resource of the business enterprise" says Peter Drucker. "Managers are the most
expensive resource in most businesses" he goes on to add," and the one that depreciates the fastest and
needs constant replenishment". How well a manager manages business as well as people determines how
successful the enterprise is. Early history of management defined a manager as someone, responsible to get
work done from others. In other words, a manager is a leader of a group of workers, he is a leader for
getting desired results and he is a leader who has to show the way forward.
The team leader could ask the following questions:
Where is the team going?
Does the team commimicate where it is going?
Is the cormnimication both ways?
Are people in the team motivated?
Do they work under fear?
Is there a critical appraisal of team's performance?
Does the team have a clear set of standards?
Does it have benchmarks of performance?
2.5.3 What iMalces a Leader?

It was Daniel Goleman who first brought the term "emotional intelligence" to a wide audience with his
1995 book of that name, and it was Goleman who first applied the concept to business with his 1998
>
HBR article. In his research at nearly 200 large, global companies, Goleman found that while the qualities
traditionally associated with leadership-such as intelligence, toughness, determination, and vision-are required for
success, they are insufficient. Truly effective leaders are also distinguished by a high degree of emotional
intelligence, which includes self-awareness, self-regulation, motivation, empathy, and social skill.
Studies and analysis, have focused on how emotional intelligence operates at work, examining the relationship

between emotional intelligence and effective performance, especially in leaders.
2.5.4 Leadership and IManagement

The most pernicious half-truth about leadership is that it is just a matter of charisma and vision you either have it or
you don't. The fact of the matter is that leadership skills are not innate. They can be acquired, and honed. But then
leadership actually differs from management skills in a number of ways.
Management is about coping with complexity; it brings order and predictability to a situation. But that's no longer
enough; to succeed, companies must be able to adapt to change. Leadership, then, is about leaming how to cope with
rapid change.
Management involves planning and budgeting. Leadership involves setting direction.
Management involves organizing and staffing. Leadership involves aligning people.
Management provides control and solves problems. Leadership provides motivation.
Since the fimction of leadership is to produce and manage change, setting the direction of that change is
fimdamental to leadership. Planning is a management process, deductive in nature and designed to produce orderly
results, not change. Setting a direction is more inductive. Leaders gather a broad range of data and look for patterns,
relationships, and linkages that help explain things. The direction setting aspect of leadership does not produce
plans; it creates vision and strategies. These describe a business, technology, or corporate culture in terms of what it
should become over the long term and articulate a feasible way of achieving this goal.
A central feature of modem organisations is interdependence, where no one has complete autonomy, where most
employees are tied to many others by their work, technology, management systems, and hierarchy. For executives
who are overeducated in management and undereducated in leadership, the idea of getting people moving in the
same direction appears to be an organisational problem. What they need to do, however, is not organise people but
align them.
Managers as leaders must organise to create human systems that can implement plans as precisely and efficiently as
possible. This requires a stracture of jobs and reporting relationships, staffed with individuals suited to the jobs,
provide training for those who need it, communicate plans to the workforce, and decide how much authority to
delegate and to whom. He then needs to align people and positions and develop synergy. Since change is the
fimction of leadership, being able to generate highly energized behaviour is important for coping with the inevitable
barriers to change.
Good leaders motivate people in a variety of ways. They articulate the organisation's vision in a manner that stresses
the values of the audience they are addressing. This makes the work important to those individuals. Leaders also
regularly involve people in deciding how to achieve the organisation's vision, thus giving people a sense of
involvement and control. They support employee efforts to realise the vision by providing coaching, feedback, and
role modeling, thereby helping people grow professionally and enhance their self-esteem. Finally, good leaders
recognise and reward success, which not only gives people a sense of accomplishment but also a feeling of
belongingness to an organisation that cares about them.
Strong networks of informal relationships help coordinate leadership activities in much the same way that formal
structure coordinates managerial activities. The multitude of communication charmels and increased use of
technology to keep everyone connected any time, helps in a continuous process of communicating with all those
who matter.
Every enterprise functions within the areas of unshared certainty, certainty and shared uncertainty. In areas of
certainty, there is no problem; groups can be asked to share their views and feelings in areas of unshared certainty so
that they understand the issues and cooperate with each other in solving problems. In matters concerning shared
uncertainty, everybody is grouping in the dark. These are very rare instances for e.g. closing down a union office, or
as in the late 70s and early 80s, introducing computers in the banking system in Kolkatta.
Members of the group should be encouraged to express fully their uncertainties, talk about the imaccustomed risk by
airing their subjective views also and hefp build some common perceptions and possibilities. As for leadership in
such situations, one needs to be a catalyst.
2.5.5 Leadership Develops Leaders

Some companies have consistently demonstrated an ability to develop people into outstanding leader- managers.
Recruiting people with leadership potential is the first step, followed by managing their career patterns. Individuals
who are effective in large leadership roles often share a number of career experiences, starting with a significant
challenge early in a career. Successful leaders almost always have had opportunities during their twenties and
thirties to actually try to lead, to take a risk, and to learn from both triumphs and failures. Such learning seems
essential in developing a wide range of leadership skills and perspectives. These opportunities also teach people
something about both the difficulty of leadership and its potential for producing change.
People who provide effective leadership in important jobs always have a chance, before they get into those jobs, to
grow beyond the normal managerial careers. This is the result of lateral career moves or of early promotions to
unusually broad job assignments. BHEL has a practice of exposing potential general managers, to at least 3 distinct
functions before they are finally promoted as GMs. Gobalisation has also meant that a number of successful group
CEOs have actually spent time managing regional units in diverse geographical environments as the breadth of
knowledge developed in this way seems to be helpful in all aspects of leadership.
Effective leaders must have an edge. They must be courageous enough to take risks and have an unrelenting
readiness to act. Popularity is not a requirement, but the ability to generate respect from the employees is, without a
doubt, one of the most critical attributes. They must be relentless in their efforts, unconcerned about personal
sacrifice of their time, and willing to go beyond normal expectations. Tough decisions are commonplace; imcharted
territories will be the norm. Honesty and impeccable character are musts.
-
Leaders get results. They make things happen. They continually advance a clear agenda, get others to buy in and
move the organisation to accomplish specific objectives. They are explicit, consistent, concise and sincere. They
generally have an abundance of charisma although some leaders gain success with a quieter influence. Exemplary
leaders take charge and are not afi-aid of responsibility or risk. Most people want to follow them. Good leaders
develop openness, honesty, clarity of purpose and a sincere caring for the people they lead. They gain commitment
and trust by demonstrating respect for the individual. They have a keen sense of understanding. They believe in
their task, they understand the objectives, they communicate clearly and they honestly project the understanding that
they need the efforts of everyone to succeed. It is all about believing in employees and their ability to create success.
2.5.6 Effective Leadersiiip

New research by the consulting firm Hay/McBer, which draws on a random sample of 3,871 executives selected fiom a database of more than 20,000 executives worldwide, takes much of the mystery out of effective leadership.
The research foimd six distinct leadership styles, each springing fi'om different components of emotional
intelligence. Research indicates that leaders with the best results do not rely on only one leadership style; they use
most of them in a given week-seamlessly and in different measure- depending on tfie business situation. Thus
Coercive leaders demand immediate compliance. Authoritative leaders mobilise people toward a vision, Affiliative
leaders create emotional bonds and harmony. Democratic leaders build consensus through participation, Pacesetting
leaders expect excellence and self-direction and Coaching leaders develop people for the fiiture.
Leaders who have mastered four or more-especially the authoritative, democratic, affiliative, and coaching styleshave the very best climate and business performance. And the most effective leaders switch flexibly among the
leadership styles as needed. They are sensitive to the impact they have on others and seamlessly adjust their style to
get the best results. These are leaders, who can instantly imderstand the fiiistration of a talented but
underperforming employee or catch on potential business opportunity from suggestions made from the shop floor.
For an example of fluid leadership in action, consider Joan, the general manager of a major division at a global food
and beverage company. Joan was appointed to her job while the division was in a deep crisis. It had not made its
profit targets for six years; in the most recent year, it had missed by $50 million. Morale among the top management
team was miserable; mistrust and resentments were rampant. Joan's directive fi-om above was clear: turn the
division around.
Joan did so with a nimbleness in switching among leadership styles that is rare. From the start, she realised she had
a short window to demonstrate effective leadership and to establish rapport and trust. She also knew that she
urgently needed to be informed about what was not working, so her first task was to listen to key people.
Her first week on the job she had lunch and dirmer meetings with each member of the management team. Joan
sought to get each person's understanding of the current situation. But her focus was not so much on learning how
each person diagnosed the problem as on getting to know each manager as a person. Here Joan employed the
affiliative style: she explored their lives, dreams, and aspirations.
She also stepped into the coaching role, looking for ways she could help the team members achieve what they

wanted in their careers. For instance, one manager who had been getting feedback that he ijy'' -
was a poor team player confided his worries to her. He thought he was a good team member, but he was plagued by
persistent complaints. Recognising that he was a talented executive and a valuable asset to the company, Joan made
an agreement with him to point out (in private) when his actions undermined his goal of being seen as a team
player.
She followed the one-on-one conversations with a three-day off-site meeting. Her goal here was team building, so
that everyone would own whatever solution for the business problems emerged. Her initial stance at the off-site
meeting was that of a democratic leader. She encouraged everyone to express freely their fhistrations and
complaints.
The next day, Joan had the group focus on solutions: each person made three specific proposals about what needed
to be done. As Joan clustered the suggestions, a natural consensus emerged about priorities for the business, such as
cutting costs. As the group came up with specific action plans, Joan got the commitment and buy-in she sought.
With that vision in place, Joan shifted into the authoritative style, assigning accountability for each follow-up step
to specific executives and holding them responsible for their accomplishment. For example, the division had been
dropping prices on products without increasing its volume. One obvious solution was to raise prices, but the
previous VP of sales had dithered and had let the problem fester. The new VP of sales now had responsibility to
adjust the price points to fix the problem.
Over the following months, Joan's main stance was authoritative. She continually articulated the group's new vision
in a way that reminded each member of how his or her role was crucial to achieving these goals. And, especially
during the first few weeks of the plan's implementation, Joan felt that the urgency of the business crisis justified an
occasional shift into the coercive style should someone fail to meet his or her responsibility. As she put it, "I had to
be brutal about this follow-up and make sure this stuff happened. It was going to take discipline and focus."
The results? Every aspect of climate improved. People were innovating. They were talking about the division's
vision and crowing about their commitment to new, clear goals. The ultimate proof of Joan's fluid leadership style is
written in black ink: after only seven months, her division exceeded its yearly profit target by $5 million.
2.5.7 The Six Leadership Styles at a Glance

Here is a summary of the styles, their origin, when they work best, and their impact on an organisation's climate and
thus its performance.
Leadership Style Coercive
Authoritative Affiliative
The leader's
Demands
modus operandi immediate
compliance
Mobilizes
Creates
Forges
people toward harmony and consensus
a vision
builds
through
emotional
participation
bonds
The style in a
phrase
"Do what I tell "Come with

you."
me."
Democratic
Pacesetting
Coaching
Sets high
Develops
standards for people for the
performance future
"People come "What do you "Do as I do,

first."
think?"
now."
"Try this."
Lidership Style
Coercive
Authoritative Affiliative
Democratic
Pacesetting
Coaching
Underlying
Drive to
Self-
Empathy,
Collabora
Conscien
Developing
emotional
intelligence
competencies
achieve,
initiative,
self-control
confidence,
empathy.
change
catalyst
building
relationships.
communica
tion
tion, team
leadership.
communica
tion
tiousness,
drive to
achieve,
initiative
others.
empathy,
self-awareness
When the style
In a crisis, to
When
To heal rifls
To build buy- To get quick
works best
Overall impact
on climate
ORGANISATIONAL
kick start
a
changes
in a teamBF-HAVIOUR
or
in consen
turnaround. require a new to motivate
sus, or get
or with
vision, or
people
input from
problem
when a clear during
employees
employees
direction is
stressful
needed
circum
stances
| 54 from a
results
highly
motivated
and compe
tent team
Negative
Negative
Most
Positive
Positive
To help an
employee
improve
performance
or develop
long-term
strengths
Positive
strongly
positive
Most effective leaders use a collection of distinct leadership styles-each in the right measure, at just the right time.
Such flexibility is tough to put into action, but it pays off in performance. And better yet, it can be learned.
An authoritative leader states the end but gives people their own means.
Leaders who have mastered four or more- especially the authoritative, democratic, affiliative, and coaching styleshave the best climate and business performance.
2.6 HUMAN RESOURCE IMPLICATIONS OF BENCHMARKING 2.6.1 Benchmarking

Benchmarking is the process of comparing the business processes and performance metrics including cost, cycle
time, productivity, or quality to another that is widely considered to be an industry leader and hence considered as
the standard benchmark or best practice. Benchmarking helps to compare and understand where a given business is
in relation to the recognised standard. The term benchmarking was first used by cobblers to measure people's feet
for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes.
Benchmarking is most used to measure performance using a specific indicator (cost per unit of measure,
productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a
metric of performance that is then compared to others.
Benchmarking has come to be recognised as a process used particularly in strategic management, in which
organisations evaluate various aspects of their processes in relation to best practice companies' processes, usually
within a peer group defined for the purposes of comparison. This then allows organisations to develop plans on how
to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of
performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which
organisations continually seek to improve their practices.
In 2008, a comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a
network of benchmarking centers representing 22 countries. Over 450 organisations responded from over 40
countries. The results showed that:
1. Mission and Vision Statement^ and Customer (Client) Surveys are the most used (by 77% of organisations)
of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%).
Performance Benchmarking was used by (49%) and Best Practice Benchmarking by (39%).
2. The tools that are likely to increase in popularity the most over the next three years are Performance
Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of
organisations that are not currently using these tools indicated they are likely to use them in the next three
years.
Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual
companies. There is no single benchmarking process that has been universally adopted. The wide appeal and
acceptance of benchmarking has led to various benchmarking methodologies emerging. The first book on
benchmarking, written by Kaiser Associates, offered a 7-step approach. Robert Camp (who wrote one of the earliest
books on benchmarking in 1989) developed a 12-stage approach to benchmarking.
The 12 stage methodology consisted of: Select subject. Define the process. Identify potential partners. Identify data
sources. Collect data and select partners. Determine the gap. Establish process differences. Target future
performance, Commimicate, Adjust goal. Implement and Review/recalibrate.
The following is an example of a typical benchmarking methodology:

1. Identify the problem areas - Because benchmarking can be applied to any business process or function, a
range of research techniques may be required. They include: informal conversations with customers,
employees, or suppliers; exploratory research techniques such as focus groups; in-depth marketing research,
surveys, questionnaires, process mapping, quality control variance reports, and financial ratio analysis.
Before embarking on comparison with other organisations, it is essential to determine own organisation's
fimctions and processes; base lining performance provides a point against which improvement effort can be
measured.
2. Identify other industries that have similar processes and shortlist organisations that are leaders in these areas Look for the very best in any industry and in any country. Consuh customers, suppliers, financial analysts,
trade associations, and magazines to determine which companies are worthy of study. Survey companies for
measures and practices. Surveys are typically masked to protect confidential data by neutral associations and
consultants.
3. Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually
exchange information beneficial to all parties in a benchmarking group and share the results within the
group. Study and analyse practices best suited to the current scenario in the organisation and implement new
and improved business practices.
2.6.2
Types
Benchmarking
of
Process benchmarking the

initiating
firm
focuses its observation
and investigation of
business
processes
with a goal of
identifying and
observing the best practices from
one or more
benchmark firms. Activity analysis
will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office
processes where outsourcing may be a consideration.
Financial benchmarking - performing a financial analysis and comparing the results in an effort to assess
one's overall competitiveness and productivity.
Performance benchmarking - allows the initiator firm to assess their competitive position by comparing
products and services with those of target firms.
Product benchmarking - the process of designing new products or upgrades to current ones. This process can
sometimes involve reverse engineering which is taking apart competitors' products to find strengths and
weaknesses.
Functional benchmarking - a company will focus its benchmarking on a single function in order to improve
the operation of that particular fimction. Complex fimctions such as Human Resources, Finance and
Accounting and Information and Communication Technology are unlikely to be directly comparable in cost
and efficiency terms and may need to be segregated into processes to make valid comparison.
Best-in-class benchmarking - involves studying the leading competitor or the company that best carries out a
specific fimction.
Operational benchmarking - embraces everything from staffing and productivity to office flow and analysis
of procedures performed.
2.6.3 Peopie Issues in Benchmarking

Any new activity, especially one that involves comparing with the best in a given industry, has implications on the
workforce of the organisation. Some would feel threatened, a few would worry that they have missed on practices
that should have been effected and the senior management team that gets into the activity with enthusiasm, may try
to slow down the process if they fear that the findings and study of better practices may expose their own
shortcomings.
It is therefore important that any such benchmarking study is initiated after communicating clearly with all
employees on the need to be competitive and progressive , with a reassurance that introducing new practices after
the study is in no way a threat to existing staff; on the contrary, such new practices would only help improve their
own competencies and add to the overall efficiency of the company, with every one getting a share of increased
prosperity.
2.6.3 Benchmarking of IT Capability in Indian Banks

The following case study* from the banking industry would indicate the benefits of such comparison and study.
The Indian banking sector is at a watershed. Brisk economic growth is opening up unprecedented opportunities.
Several Indian banks are pursuing global strategies, as Indian companies globalise and people of Indian origin
increase their investment in India.
At
the
same time a number of
global banks have stepped up their focus on India, keen to participate in the sector's growth. Today, the question
often asked is how competitive are Indian banks and do the practices at work in these banks compare against global
best practices.
To assess this, McKinsey & Co. launched five proprietary surveys with help from the Indian Banks Association to
profile leading Indian banks. The surveys administered were The McKinsey Personal Financial Services Survey;
Excellence in Retail Banking Survey; IT Benchmarking Survey; Organisational Performance Profile Survey; and
Asset-Liability Management Survey. We will here refer to the IT survey.
2.6.4 IT Effectiveness
The IT Benchmarking Survey profiled 11 leading banks in India. The survey based on proprietary methodology
assesses the level of IT capability and how it links to business performance across foin parameters - total spends on
technology, alignment of IT systems with corporate objectives, utility and complexity of solutions, governance and
management processes.
The survey reveals that IT effectiveness at the top Indian banks is world-class. Most banks in India have used IT to
achieve superior business performance, driven mainly by the cost advantage in India, the focus on avoiding legacy
systems, superior IT governance that often entails direct CEO involvement and competent outsourcing.
Today, Indian banks are some of the most technologically advanced banks with vast networks of branches
empowered by strong banking systems. Their product and channel distribution capabilities are on par with those of
the leading banks in the world. Sustained improvements in infrastructure and a strong focus on technology have
helped India become one of the most IT-efificient countries in the world.
2.6.4 Highlights of Survey

To get a holistic view of the performance of Indian banks, a comparison was made between two dominant categories
- (i) new private and foreign banks and (ii) old private and public sector banks. The results of the survey bring out
stark differences ihat suggest that the former use technology more effectively than the latter to promote growth
while remaining operationally efficient. This can be explained by their origins.
India opened banking to the private sector less than 15 years ago. To compete with established banks, the new
private and foreign banks used low-cost technology and operations to address the urban mass market and have today
emerged successfiil on the following fronts:
Better-managed IT spends: New private and foreign banks focus their IT spends on innovations rather than
daily operations. Old private and public sector banks, on the other hand, focus on application development
directed more towards augmenting their existing systems that has resulted in low value-addition to their
business.
More focus on value adding activities: New private and foreign banks focus more on value-added activities
such as building new infrastructure like ATM networks and modem core banking systems; customer service
channels including call centres, Intemet banking and mobile banking;
sophisticated risk-assessment and pricing techniques; data warehousing/mining tools; and marketing tools
such as customer relationship management.
Better IT talent management: Although IT governance and management are strong in most Indian banks;
new private and foreign banks have focused on promoting and nurturing talent. This is well reflected in their
compensation structure, which is highly linked to individual performance. Further, continual effort is made to
increase the distributed ownership of initiatives among all employees.
Superior complexity handling: New private and foreign banks prove superior in managing both application
and infrastructure complexity. They are continuously advancing towards a centralised and consolidated
application portfolio. Better integrated and flexible applications are helping them to strengthen processes and
reduce the number of errors and maintenance costs. These banks also use infrastructure optimisation
technologies such as desktop and server virtualisation, grid computation, and Web service implementation.
To conclude, Indian banks have a strong competitive advantage on several dimensions such as alignment between IT
and business heads, management processes, and the ability to streamline administrative overheads and to channel
investments. But the survey suggests that several improvement opportunities exist for both new private and foreign
banks and old private and public sector banks. For instance, banks need to work towards streamlining commodity
areas such as application maintenance and infrastructure. They also need to focus on investing more in value adding
activities and outsourcing selectively. The PSU banks which is a major player in the Indian economy, have
obviously a long way to
go-
2.6.5 Role of Policymakers

Finally, policymakers have a vital role to play. They can enable players to increase customer reach in a cost efficient
way and drive economies of scale.
Questions for Reference

1. Define the qualities of Effective Leadership.
2. Elaborate on the tjês of Benchmarking.
3. What is the ideal process for benchmarking?
4. Indian banking has reached maturity in the use of technology elaborate in the context of the case study cited.
Check your progress

1. Emotional intelligence in leaders directly affect their performance. t
2. All six leadership styles are essential for successfiil leaders. f
3. Vision and Mission surveys are most used by companies in benchmarking. t
4. Effective communication is important in benchmarking. t
5. New private banks and foreign banks focus on value added activities such as ATMS. t
6. Unions are still a stumbling block for computerisation in PSU banks. f

1. True, 2. False, 3. True, 4. True, 5. True, 6. False,
Further Reading
An excerpt from McKinsey & Company's "Indian Banking: Towards Global Best Practices - Insights from
industry benchmarking surveys" released at the Bancon in November 2007.
Beating the competition: a practical guide to Benchmarking. Washington, DC: Kaiser Associates. 1988. pp.
176. ISBN 978-1563650185. http://www.kaiserassociates.com/cs firstbookonbenchmarking.
Camp, R. (1989). The search for industry best practices that lead 2 superior performance. Productivity Press.
*
"GROWTH MANAGEMENT-Experiences of successfiil companies in Central Europe".
Benchmarking: How to Make the Best Decisions for Your Practice[l].
Retrieved from "http://en.wikipedia.org/wiki/Benchmarking".
Categories: Strategic management.
2.7 QUALITY INITIATIVES IN ORGANISATIONS 2.7.1 TQM

Implementation Process
Total Quality Management as a Large Scale Systems Change, is seen primarily as a change in an organisation's
technology and its way of doing work. In the human services, this means the way client servicing is processed, the
service delivery methods applied to them and ancillary organisational processes such as paperwork, procurement
processes, and other procedmes. TQM also brings about a change in an organisation's culture, its norms, values, and
belief systems about how organisations function. And finally, it is a change in an organisation's political system:
decision making processes and power bases. For substantive change to occur, changes in these three dimensions
must be aligned: TQM as a technological change will not be successful unless cultural and political dimensions are
attended to as well (Tichey, 1983).
Many (e.g., Hyde, 1992; Chaudron, 1992) have noted that TQM results in a radical change in the culture and the
way of work in an organisation. A fimdamental factor is leadership, including philosophy, style, and behavior. These
must be congruent as they are presented by a leader. Any manager serious about embarking on a culture change such
as TQM should be involved in a personal program of leadership development which may be a prerequisite to
effective functioning as an internal change agent advocating TQM.
Other key considerations have to do with alignment among various organisational systems (Chaudron, 1992; Hyde,
1992). For example, human resource systems, including job design, selection processes.
I mil JIM,.... uiiin I I..I.P II _ ..J1.1 . n i . , L . I I.JJ!ll,,ip^Ji||i
50 I HUMAN RESOURCE MANAGEMENT

compensation and rewards, performance appraisal, and training and development must
align with and support the new TQM culture. Information systems will need to be redesigned to measure and track
new areas such as service quality as also budgeting and resource allocation systems. Organisational structure and
design will be different under TQM: layers of management may be reduced and organisational roles will certainly
change. In particular, middle management and first line supervisors will be operating in new ways. Instead of
acting as monitors and agents of control, they will serve as boundary managers, coordinators, and leaders who
assist line workers in getting their jobs done. To deal with fears of layoffs, all employees should be assured that no
one will lose employment as a result of TQM changes: jobs may change, perhaps radically, but no one will be laid
off. Hyde (1992) has reconmiended that we "disperse and transform, not replace, midlevel managers." This no
layoff principle has been a common one in joint labour management ch^ge processes such as quality of working
life projects for many years.
Another systems consideration is that TQM should evolve from the organisation's strategic plan and be based on
stakeholder expectations. TQM is often proposed based on environmental conditions such as the need to cut costs
or demands for increased responsiveness to stakeholders. TQM should be purpose oriented: it should be used
because an organisation's leaders feel a need to make the organisation more effective. It should be driven by results
and not be seen as an end in itself. If TQM is introduced without consideration of real organisational needs and
conditions, it will be met by skepticism on the part of both managers and workers. ,
2.7.2 People's Expectations and Perceptions

Many employees may see TQM as a fad, remembering past "fads" such as quality circles, management by
objectives, and zero based budgeting. TQM therefore must be related to key organisational problems, needs, and
outcomes. In another vein, workers may see management as only concerned about the product, not staff needs.
Management initiatives focused on concerns such as budget or cost will not resonate with beleaguered line
workers. Staff may not see quality as needing attention; they may believe that their services are already excellent
or that quality is a peripheral concern in these days of cutbacks and multi problem clients. Partly because of heavy
service demands, and partly because of professional training of human service workers, which places heavy value
on direct service activities with clients, there may be a lack of interest on the part of many line workers in
efficiency or even effectiveness and outcomes (Pruger & Miller, 1991; Ezell, Menefee, & Patti, 1989). This
challenge should be addressed by all administtators (Rapp & Poertner, 1992), and in particular those interested in
the successful implementation of TQM.
For TQM to work, employees must see a need (e.g., for improved quality from their perspective) and how TQM
may help. Fortunately, there are win win ways to present this. TQM should be focused on quality, presumably a
concern of both management and workers, and methods improvements should eliminate wastefril bureaucratic
activities, save money, and make more human resources available for core activities, specifically client service.
2.7.3 Sources of Resistance

Implementation of large scale change such as TQM will inevitably face resistance, which should be addressed
directly by change agents. A key element of TQM in the service sector is working with customers, and the notion
of soliciting feedback/expectations from customers/clients and collaborating
with them, perhaps with customers defining quality, is a radical one in many oiganisations,, particularly those in
banks which are highly regulated with very little scope for flexibility. Historical worker antipathy to the use of
statistics and data in the human services may carry over into views of TQM, which encourages the gathering and
analysis of data on service quality. At another level, management resistance to employee empowerment is likely.
They may see decision making authority in zero sum terms: if employees have more involvement in decision
making, managers will have less. In fact, one principle in employee involvement is that each level will be more
empowered, and managers lose none of their fundamental authority. There will undoubtedly be changes in their
roles, however; they will spend less time on control and more on facilitation. For many traditional managers, this
transition will require training, self reflection, and time as well, as assurances from higher management that they are
not in danger of being replaced.
Resistance in other parts of the organisation will show up if TQM is introduced on a pilot basis or only in particular
programs (Hyde, 1992). Kanter (1983) has referred to this perspective as segmentalism: each unit or program sees
itself as separate and unique, with nothing to learn from others and no need to collaborate with them. This shows up
in the "not invented here" syndrome: those not involved in the initial development of an idea feel no ownership for
it. On a broader level, there may be employee resistance to industry examples used in TQM terms like inventory or
order backlog (Cohen and Brand, 1993).
There are several tactics which can be helpful in dealing with resistance to TQM implementation. Generally, they
have to do with acknowledging legitimate resistance and changing tactics based on it, using effective leadership to
enroll people in the vision of TQM, and using employee participation.
2.7.4 TQM - Case study of Sundaram-Clayton

Venn Srinivasan and the Deming Prize. Kudos for India, (all figures relate to 1995-98) The Chennai- based
Sundaram-Clayton has won acclaim and international recognition for setting global quality standards. From the
swamp of unreliable quality that the traditional India Incorporation was known for, Simdaram- Clayton has emerged
the flag bearer of global class. Despite its disdain for TQM, Sundaram-Clayton, the manufacturer of air-brake
systems and castings has emerged as Asia's - first-ever winner of the Deming Prize for Overseas Companies. Every
mpee of its Rs 139.37 crore tumover carries the mark of quality that is world-class.
The Deming Prize is, quite simply, the last word in the world, on quality. The prize was instituted 40 years ago by
Japan to honour the man who gave quality to the world, W. Edwards Deming.
The Deming Prize Committee defines quality as "a system of activities to ensure the quality of products and
services, in which products and services of the quality required by customers are produced and delivered
economically."
Sundaram-Clayton's integrated Deming's 10 parameters into the 4 streams of its quality practices, namely policies,
people, processes, and products, respectively. Its TQM model ensures Total Employee Involvement, Policy
Deployment, Standardisation, Kaizen, and Training, besides promoting employer - employee relations.
In short, everyone everywhere in the company is a custodian of quality.
Sundaram-Clayton, led by its CEO Venu Srinivasan, has risen above the countrywide levels for total quality, to be
part of an exclusively small global elite, which have integrated all the Deming's 10 parameters
H.R.M.S into their streams of quality practices. This small elite group consists of only three other companies namely the
$6.51-billion Florida Power & Light, which won the Deming Prize in 1989; the $53.26- billion AT&T's Power
Systems Division in 1994, and the $38.05-billion Philips' Taiwan unit.
Even the great TQM corporations of the world, like the $48.88-billion Honda, the $55.03-billion Sony, and the
$190.84-billion General Electric, do not belong to it.
On November 14, 1998, when Srinivasan received the coveted prize, he joined the ranks of 163 CEOs and managers
who had received the award since it was instituted.
What makes Sundaram-Clayton's winning the Deming Prize for total quality (Company-Wide Quality Control (or
CWQC),)~an extraordinary feat is the fact that no global award for quality makes more demands of both the body
and the soul of the winning corporation, than this award.
Sundaram-Clayton's climb to the top of TQM started way back in 1979, when Venu Srinivasan took over from his
father, T.S. Srinivasan, as CEO after completing his MBA from Purdue University (US) in 1977. The SWOT
analysis he conducted, applying his B-school learning, revealed to the company's horror, that a 90% market share
was no insulation against top-class competition. Concluding that short- term tactics or defensive strategies would
not deliver what a long-term transition to excellence could, Srinivasan set his company off on quality sfreet.
In quick succession, Sundaram-Clayton's managers were exposed to the quality practices of global leaders, trained
in modern manufacturing techniques, and taught about Total Quality Control (TQC), first by Yoshio Kondo in a
workshop at the National Institute For Quality & Reliability in 1986. Srinivasan also set up a core taskforce to
initiate Sundaram-Clayton into the new religion of TQC.
The results of Sundaram-Clayton's total quality movement are reflected on the company's books. Its financial
indicators in the 5 years between 1992-93 and 1997-98 tell a tale of top-level performances.
Being a vendor to the auto-makers, its top line, of course, is tied to those of its customers: the Rs 2,048- crore Ashok
Leyland and the Rs 7,450-crore Tata Engineering & Locomotives Co. for air-brake systems, and the Rs 7,842 crore
Mamti Udyog and Hyimdai Motors India for castings. Thus, sales grew at an average rate of 35 per cent per annum,
between 1992-93 and 1996-97, although it shrank by 25 per cent in 1997-98, on account of the recession in the
automobile industry.
Likewise, the average growth in net profits in those 4 years was a stunning 83% per annum~a glowing tribute to
quality-led cost management-although it fell back by 35% in 1997-98. But, internally, its performance improved
consistently despite the recession, with tumover per employee rising by an average of 18% a year, and gross value
added climbing by an average of 12% per annum.
What Simdaram-Clayton's progress reveals is the all-important alignment, of the quality imperatives of the company
with the parameters used by an assessment framework, such as the one applied for the Deming Prize.
Sundaram-Clayton's integrated Deming's 10 parameters into the 4 sfreams of its quality practices, namely policies,
people, processes, and products, respectively. Its TQM model ensures Total Employee Involvement, Policy
Deployment, Standardisation, Kaizen, and Training, besides promoting employer - employee relations.
In short, everyone everywhere in the company is a custodian of quality.
63
I HUMAN aESOURCE MANAGEMENT
At Sundaram-Clayton, the Quality Policy deployment spreads across the entire organisational value- chain, including
the HR team. This is especially crucial in the context of the Deming Prize, which grades the performance of every
department and function separatelyincluding the CEO himself.
Related reading: 'Total Quality Ltd', By R Sridharan, Business Today, 1999 (Financial reference is to figures of
1995-98 for Sundaram Clayton).
2.7.5
Business Process Reengineering
Business process reengineering (BPR) is one approach for redesigning the way work is done to better support the
organisation's business goals and improve efficiency on all parameters. Reengineering starts with a high-level
assessment of the organisation's mission, strategic goals, and customer demands. Basic questions are asked, such as
"Does our mission need to be redefined? Are our strategic goals aligned with oin mission? Who are our customers?"
An organisation may find that it is operating on questionable assumptions, particularly in terms of the wants and
needs of its customers. Only after the organisation rethinks what it should be doing, does it go on to decide how best
to do it.
Within the general framework of the basic assessment of mission and goals, reengineering focuses on the
organisation's business processesthe steps and procedures that govern how resources are used to create products
and services that meet the needs of the company's current customers as well as the market. As a structured ordering
of work steps across time and place, a business process can be decomposed into specific activities, measured,
modeled, and improved. It can also be completely redesigned or eliminated altogether. Reengineering identifies,
analyzes, and redesigns an organisation's core business processes with the aim of achieving dramatic improvements
in critical performance measures, such as cost, quality, service, and speed.
2.7.6
BPR Implementation
While BPR is associated historically with the manufacturing sector with specific processes and product mix, a
number of service industries have also successfully implemented BPR which can be applied imiversally by
following these broad guidelines.
1. Envision new processes
1.
2.
3.
4.
Secure management support

Identify reengineering opportunities
Identify enabling technologies
Align with corporate strategy
2. Initiating change
1. Set up reengineering team
2. Define desired performance goals
3. Process diagnosis
1. Describe existing processes
2. Uncover deficiencies in existing processes
Li
t human
4. Process redesign
1. Develop alternative process scenarios
2. Develop new process design
3. Design HR architecture
4. Select IT platform
5. Develop overall blueprint for action and gather feedback
5. Reconstruction
1. Develop/install IT solution
2. Establish process changes
6. Process monitoring
1. Performance measurement, including time, quality, cost, IT performance
2. Link to continuous improvement
The following tiree illustrations of BPR implementation in Banks, would give an idea of the need assessment and
the implementation strategy used with considerable success.
2.7.7 BPR Implementation in State Bank of India

Private sector banks made their first appearance in January 1993, During that period, PSBs accounted
for over three-fourths of total banking industry assets. They were weighed down with huge NPAs
(Non-Performing Assets), falling revenues, lack of modem technology and a massive and highly unionized
workforce. New entrants began to erode the market share of the nationalised banks, especially in metro
cities and urban areas. The PSBs found it increasingly difficult to compete with the new private sector
banks and the foreign banks. These banks also employed state-of-the-art technology, which helped
them to save on manpower costs and concentrate on providing better service.
0
To overcome the intense competition firom private and foreign banks, SBI planned a major organisational
restructuring exercise. The key aspects involved redesigning of branches, providing alternate channels; focus on a
lean structure and technological upgradation. A business process reengineering (BPR) team was constituted in June
2003 with McKinsey & Company as consultants. The BPR's basic goal was to create an operating architecture that
would facilitate service delivery of international standards. The project objectives were defined as "increasing
customer satisfaction and convenience, fi-eeing up time for branch manager and branch staff to focus on sales and
marketing, simplifying process for employees, enhancing SBI's competitiveness in the market, increasing the
profitability through higher market share and improved process eflficiency."
New Products and Services

Apart from restructuring, SBI launched several irmovative, value-added products and services to project a customer
fi-iendly image. It launched a special service for corporate customers called 'telebanking and remote logins to
support transactional reports.
This facility would be available at 593 branches, and remote login at 269 branches. The bank's trade finance
solution, called EXIMBILLS, was intended to handle trade finance transactions efficiently and
enhance the range of services provided to corporates and network branches. In March 2004, SBI
announced that it would introduce 'anywhere banking' facility for its customers from over 9000
branches across India in the next two years. All branches in Mumbai would provide this facility
by December 2004. SBI also launched different customized loan programs to cater to various
sections of society depending on income levels and repayment capabilities. Interest rates and
repayment periods were tailor-made to suit the customer groups.
To boost its business, SBI entered into several alliances and tie-ups with automobile, insurance,
BEHAV.OUR
mutual fund, project finance and medical equipment companies.
Auto Finance
Unlike other competitors that relied on reduced interest rates to get business, SBI extended the tenure of car loans
from five to seven years, thereby lowering the monthly debt repayment burden of the loan seeker. SBI entered into a
tie-up with Maruti, the largest automobile manufacturer in India, to provide loans for purchase of Maruti cars at the
rate of 10.05% and 11.25% for three years and above three years respectively. After the scheme was inttoduced, SBI
emerged as the largest financier for Maruti cars in India and the number of Maruti vehicles financed grew by 17% in
the fiscal 2003-04 over fiscal 2002-03.
The Marketing Initiatives
SBI carried out various marketing initiatives to enhance its reach. They included segregating and targeting existing
high value customers, cross sales of other products, setting up call centers and outbound sales force to secure new
customers. Plans were also made to utilise database marketing to pursue large and medium sized corporates,
government and trade finance customers. Database marketing was expected to draw increased revenue from cross
selling, lower costs and increased customer loyalty. SBI also introduced various other ways of reaching out to
customers like extension of hours of work and aggressive marketing through print and television media. SBI
increased daily working hours by two hours and Sunday banking was introduced.
Looking Ahead
SBI's restructuring exercise and growth strategies resulted in an increase in profits for the fiscal 2003- 04. Net
profits stood at Rs 36.81 bn for the fiscal ended 2003-04 as against Rs 31.05 bn the previous fiscal, an increase of
18.55%. Operating profits stood at Rs 95.535 bn compared to Rs 77.754 bn in the fiscal 2002-03. In spite of SBI's
efforts to reduce workforce, staff costs rose by 13.3%, mainly due to additional contribution to pension fund and
provision for leave encashment. The net NPA level came down from 4.5% in the fiscal 2002-03 to 3.5% in 2003-04.
SBI aimed at 2% NPA by 2004-05.
BPRinlNGVysyabank
Established in 2002, the Bangalore-based ING Vysya Bank is an entity formed with the merger of erstwhile, \Vsya
Bank, a premier bank in the Indian private sector and ING, a Dutch financial services company.
Major outcome of BPR implementation

The service request fulfillment cycle was reduced by more than 90%, making the Bank's customers very happy By
making the bank easier for customers to interact with, helped save Rs 2.5 crore.
BEHAV.OUR
The issues
Financial institutions are perceived to be opaque and inwardly focused. And ING Vysya Bank's worldwide market
research suggested the same: customers do not feel in control of their money when dealing with financial services
companies.
56
ING Vysya Bank, wanted to change that. They decided to launch the 'customer first' initiative that would use
technology and BPR creatively towards the objective of making the bank 'easy to deal with' for customers.
Using pre-generated kits for accessing telephone banking and ATM, including instantaneous replacement of lost
cards was the first step. "Stocking pre-generated inventory of accounts and access devices like PINs and ATM cards
at all customer touch-points took us closer to our aim," said one senior official involved with the project.
He says that the company's focus was on pre-processing all operations and technology elements associated with
these processes, so that the only task would be to activate the account and channels as soon as the customer's request
is received.
However, there were some roadblocks in the implementation. From a technology perspective, all customers facing
core banking processes relevant for account opening and account maintenance had to be re- engineered for the
project. "This was veiy challenging," said the official. Users were comfortable with the existing processes and didn't
want to change the way they worked. Initially, there was a significant disconnect between the people who designed
the new processes and people involved in user acceptance testing. To tackle that, additional training on the current
and modified business processes with inputs on the benefits of the re-engineered process was provided to the users.
From a technology perspective, all customers facing core banking processes relevant for account opening and
account maintenance had to be re-engineered for the project.
Once these challenges were surmoimted, the final roll out was completed in August 2008. The project resulted in
overall cost savings of Rs 2.5 crore at the time of project closure. "The project reduced account opening and service
request fulfillment cycle times by more than 90%, making our customers very happy," said the official.
BPR in a Foreign bank

In one of the foreign banks, the management checked on the workflow of the cash department. For e.g. a cheque had
to pass through three hands if the value was over Rs. 10,000. The process as under:
The Processor > 'Checker' > A uthoriser

On computerisation, as the signature could be verified on the screen, the three jobs were combined and the
authoriser was assigned all three functions, with the checker being elevated as the authoriser. This resulted in the
promotion of a large number of checkers as officers and the management gained in terms of availability of these
officers for an hour and a half more every day whereas they worked only for six and half hours as checkers.The
other consequence was that worker (clerical) strength came down to about 600 from 1400 and officer strength went
up from 450 to 900. The bank subsequently came out with a VRS to trim its staff strength.
Business Process Reengineering (BPR), is the radical redesign and transformation of strategic organisational
systems to enhance the efficiency and productivity of these systems. BPR always questions the 'status quo'. It
involves change and change management to effectively transform the working of organisational systems and
processes. Information Technology (IT) tools facilitate the improved processes and employees who facilitate the
transition, reap the benefits through better product features and more satisfied customers.
Check Your Progress

state whether the following statements are IVue or False.
1.
2.
3.
4.
For TQM to work the top management involvement is essential t

BPR is most effective in a manufacturing and not the services industry f
BPR implementation results in reducing staff due to better processes t
The incident from the foreign bank has resulted in throwing up more issues for the management. t

1. True, 2. False, 3. True, 4. True,
2.7.8 ISO 9000 Series
ISO 9000 can help a company satisfy its customers, meet regulatory requirements and achieve continual
improvement. But it's a first step, and as many qualify professionals say, the base level of a qualify system, not a
complete guarantee of qualify.
2.7.9 ISO 9000 Facts

Originally published in 1987 by the International Organisation for Standardisation (ISO), a specialised
international agency for standardisation composed of the national standards bodies of 90 countries.
Underwent major revision in 2000.
Now includes ISO 9000:2000 (definitions), ISO 9001:2008 (requirements) and ISO 9004:2000 (continuous
improvement).
The revised ISO 9000:2000 series of standards is based on eight qualify management principles that senior
management can apply for organisational improvement:
Customer focus
Leadership
Involvement of people
Process approach
System approach to management
Continual improvement
Factual approach to decision-making
Mutually beneficial supplier relationships
human resource management

The requirements call for the processes to be comprehensively documented as procedures to which staff
are expected to consistently conform. This is with the aim of meeting the needs and expectations of the
customer and helping organisations to comply with applicable regulations. Implementation involves
making production procedures explicit (say what you do), documenting them, ensiuing they are
followed and checking they are effective. A quality management system can be audited by an
independent certification body as conforming to the standard (leading to an ISO 9001: 2008 certificate),
although this is not compulsory unless it is a market or regulatory requirement.
The basic premise for all ISO processes is "Document what you do;do what you document". ISO does
not prescribe any standards of its own, it is for the organisation to define how and what must be done
with a process or a product. Though ISO has generally been associated more with the manufacturing
sector, a number of service industries including Banks, have got major activities and functions certified
under the ISO series.
Assessments for certification are carried out against the ISO 9001: 2008 standard, which is the only
certification standard in the ISO 9000 family. To comply with ISO 9001: 2008 an organisation needs to
review its processes in accordance with the standard's requirements in order to meet the needs and
expectations of the 'customer base'.
The organisation completes a Quality Manual, outlining the implementation of quality management
procedures and how the ISO 9001: 2008 requirements are being met.
When the quality system and requirements are in place and established, organisations like the British
Standards Institution recommend a pre-assessment by a third party to identify areas where an
organisation may not be operating according the standard's requirements and to help make effective
change towards that goal.
Organisations then seek an independent auditing by a certification body to check conformity with the
requirements of the standard and to ensure that they are working in practice. However, an organisation
can implement ISO 9001: 2008 without having its management system audited and certified. ISO does
not itself certify organisations. Most countries have formed accreditation bodies that in turn approve
individuals and organisations to audit and certify organisations applying for ISO 9001:2008 compliance
certification.
2.7.10 Potential benefits

ISO 9001:2008 covers an extensive range of requirements and seeks to improve the quality of all
of the organisation's management activities, which has the potential to result in some substantial
overall organisational improvement.
ISO 9001: 2008 is one of the most nationally and internationally known quality standards that
affirms the independent approval of a management system designed specifically to deliver high
levels of customer satisfaction.
It has the potential to improve intemal and extemal accoimtability and communication of
management and production procedures.
ISO 9001 certification can help an organisation qualify for a tender or to achieve preferred
supplier status, typically in the westem countries.
>
2.7.11 Potential limitations

Pursuing the standard has the potential to be expensive in terms of start-up and running costs and has the
potential be time consuming to implement.
There is less flexibility than other tools and it is much more difficult to use in smaller parts of for single issues.
Its origins are in the industrial sector and whilst the latest version, has been made more user friendly for service
organisations it may be less suitable for socially enterprising organisations.
The vast majority of ISO standards are highly specific to a particular product, material, or process. However,
ISO 9001 (quality) and ISO 14001 (environment) are 'generic management system standards'. 'Generic' means that
the same standard can be applied to any organisation, large or small, whatever its product or service, in any sector
of activity, and whether it is a business enterprise, a public administration, or a government department. ISO 9001
contains a generic set of requirements for implementing a quality management system and ISO 14001 for an
environmental management system.
2.7.12 Resources needed

Leadership
Senior individuals in an organisation will need to be fully committed. Proficiencies or
skills
Training in understanding the standards may be required. Actions taken to meet implementation to the requirements are
left to the organisation itself. The organisation then needs to address the issues needed to comply with the standards.
The ISO requirements cover a wide range of topics:
Management commitment to quality.
'Customer' focus.
Adequacy of an organisation's resources.
Employee competence.
Process management (for production, service delivery and relevant administrative and support processes).
Quality planning.
Design, purchasing, monitoring and measurement of its processes and products.
Processes to resolve customer complaints.
Corrective/preventive actions.
A requirement to drive continual improvement of the organisation.

A requirement to monitor 'customer' perceptions about the quality of the goods and services it provides.
Staff time
While this may vary depending on the size of the organisation and the change that has to be implemented, estimates
from organisations and consulting bodies indicate that it can take from between 6 and 18 months to implement.
Procedure
Once a decision has been taken to get a function, process or a branch as in the case of banks, certified under the
appropriate ISO series, the management appoints an internal champion as the Management representative who will lies
closely with the external consultant and all the concerned officials in various sections.
Each procedure that is covered under the scope for ISO certification is carefully documented with paras and subparas
with clear numbering so that reference to any procedure is accurate and once completed, gets a sign off by the
departmental head as well as the MR. Thereafter, all activities of the section are carried out strictly in accordance with
the laid down procedure. For example, if it is mentioned that the customer relations executive in the bank would pick up
a phone call within 2 rings, compliance can be monitored easily. Any deviation has to be rectified as per a laid down
procedure by the specified authority. Once all the procedures within the planned set of activities is completed and
practiced for a reasonable amount of time, the MR presents the case to the external. Certifying Authority, who on being
satisfied with the implementation, grants the ISO certification to the organisation or branch as the case may be.
Periodic reviews happen, generally eveiy year or six months and in case deviations are not rectified within reasonable
time, the certification may even get revoked.
2.7.13 Quality Circle - A Way to Quality Improvement

Participative methods in the workplace are one way to improve both the work environment for employees and
productivity and quality for the company. Quality Circle is one such employee participation method. It involves the
channelisation of skills, capabilities, confidence and creativity of the workforce through cumulative process of
education, training, work experience and participation. It also implies the creation of facilitative conditions and
environment of work, which creates and sustains their motivation and commitment towards work excellence. Quality
Circles have emerged as a mechanism to develop and utilise the tremendous potential of people for improvement in
product quality and productivity.
2.7.14 Genesis of Quality Circles

After the Second World War, Japanese economy was in the doldrums. Seeing this disastrous effect of war, Americans
decided to help Japan in improving the quality standards of their products. General Douglas Mac Arthur who, at that
time, was the commander of the occupational forces in Japan took up the task of imparting quality awareness among
Japanese to help them improve their products and the reliability of manufacturing systems including men, machine and
materials. Thus, by 1975, they were topping the world in quality and productivity. This astonishing and unique
achievement in modern history became an eye - opener to the world. Industrialists and politicians from all over the
world started visiting Japan to know how they have achieved such magical results in such a short span. The answer to
this was painstaking and persevering efforts of the Japanese leaders and workers and the development and growth of the
philosophy of small working groups. This resulted in the Quality Circle concept being accepted all over the world as a
very effective technique to improve the total quality of work life.
Quality Circle is a small group of 6 to 12 employees doing similar work who voluntarily meet together on a regular
basis to identify improvements in their respective work areas using proven techniques for analysing and solving work
related problems coming in the way of achieving and sustaining excellence leading to mutual upliftment of employees
as well as the organisation. It is "a way of capturing the creative and irmovative power that lies within the work force".
The objectives of Quality Circles are multi-faced.
1. Change in Attitude: From "I don't care" to "I do care". Continuous improvement in quality of work life through
humanisation of work.
2. Self Development; Bring out 'Hidden Potential' of people. People get to learn additional skills.
3. Development of Team Spirit: Individual Vs Team - "I could not do but we did it" Eliminate inter departmental
conflicts.
4. Improved Organisational Culture: Positive working environment, total involvement of people at all levels,
higher motivational level and participative management process.
A Quality Circle has an organisational structure as under, for its effective and efficient performance.
(i) A steering committee: This is at the top of the structure. It is headed by a senior executive and includes
representatives from the top management persormel and human resources development people. It establishes
policy, plans and directs the program and meets usually once in a month.
(ii) Coordinator: He may be an HR or Administrative officer who co-ordinates and supervises the work of the
facilitators and administers the programme.
(iii) Facilitator: He may be a senior supervisory officer. He co-ordinates the works of several quality circles through
the Circle leaders.
(iv) Circle leader: Leaders may be from lowest level workers or Supervisors. A Circle leader organises and conducts
Circle activities.
(v) Circle members: They may be staff workers. Without circle members the programme cannot exist. They are the
lifeblood of quality circles. They should attend all meetings as far as possible, offer suggestions and ideas,
participate actively in group process, take training serioxisly with a receptive attitude. The roles of Steering
Committee, Co-Ordinator, Facilitator, Circle leader and Circle members are well defined.
The major prerequisite for initiating Quality Circles in any organisation is the total understanding of, as well as
complete conviction and faith in the participative philosophy, on the part of the top and senior management. In the
absence of a commitment from the Chief Executive to support the Quality Circle movement totally, it would be
inadvisable to seriously attempt the starting of Quality Circles.
2.7.15 Q C Implementation
Explain the concept to the employees and invite them to volunteer as members of Quality Circles. Nominate senior
officers as facilitators, form a steering committee.
i human ----------Arrange training of coordinators, facilitators in basics of Quality Circle approach, implementation, techniques and
operation. Facilitator may provide training to Circle leaders and Circle members. Training to include, brief orientation
programme for top management, training of facilitators as well as Circle leaders and members.
The operation of quality circles involves a set of sequential steps as under:
1. Problem identification: Identify a number of problems, decide the priority and select the problem to be taken up
first.
2. Problem is clarified and analysed by basic problem solving methods.
3. Generate alternative solutions: Identify and evaluate causes and generate number of possible alternative
solutions, and select the most appropriate solution. Discuss and evaluate the alternative solutions by comparison
in terms of investment and return from the investment.
4. Prepare plan of action for converting the solution into action plan and implement solution as a test case.
5. The management evaluates the recommended solution. Then it is tested and if successful, implemented on a fu ll
scale.
,
Qualify Circles also help to develop internal leadership, reinforce worker morale and motivation, and encourage a
strong sense of teamwork in an organisation. Other benefits include higher quality, improved productivity, greater
upward flow of information, broader improved worker attitudes, and job enrichment.
Qualify Circles are not limited to manufacturing firms only. They are applicable for variety of organisations where there
is scope for group based solution of work related problems. Quality Circles are relevant for factories, firms, schools,
hospitals, universities, research institutes, banks, government offices etc. The P. W.D. of Maharashtra has set an
example for the Government organisations marching on the path of Quality Improvement.
2.7.16 QC in Banks
As for banks, the following excerpt from the Caara Bank website is illustrative of the bank's approach.
Quality Circle is a voluntary group of employees in the same work area, coming together, working as a team, solving
work related problems resulting in self development and organisational benefit. The concept has been built on the basic
foundation of "Participative work culture" with motivation and involvement of employees at grass roots level exploring
their potentials, creativity and capabilities.
With a view to provide greater exposure and wide experience. Quality Circles which have successfully completed their
projects are nominated To participate in Bank's Apex Quality Circle Contest.
For p|resentations at external forums like - Local Chapter Conventions and Annual National Convention on
Quality Circles(NCQC) organised by Quality Circle Forum of India (QCFI).
Apart from the above, QC Teams are being nominated to International Conventions on Quality Control Circles
(ICQCC) organised by member countries. Several of our QCs have won prizes and accolades at these conventions.
2.7.17 Six Sigma

Six Sigma is a fact-based data driven structured methodology that is used to create breakthrough improvements in
business processes with a strong focus on customer needs. It is used to solve tough business problems when the root
cause of the problem or the solution is not known. Six Sigma is the most powerful methodology that is currently
available to attack and eliminate "pain" areas within a company. In today's business climate, as more and more
companies practice Six Sigma, it has become imperative for all companies to initiate the Six Sigma process in order just
to stay in business.
The number of companies that have deployed Six Sigma runs into the thousands. Six Sigma has been deployed in all
types of industries including manufacturing, IT, ITES, services, healthcare, design, BPO etc. Some companies that have
realised huge benefits are GE, Motorola, Caterpillar, Microsoft, Ford, Wipro, HP etc.
Six Sigma began in 1986 as a statistically-based method to reduce variation in electronic manufacturing processes in
Motorola Inc in the USA. Today, twenty-something years on. Six Sigma is used as an all- encompassing business
performance methodology, all over the world, in organisations as diverse as local government departments, prisons,
hospitals, the armed forces, banks, tihe tiffin service (Mumbai dabbawallahs) and multi-national corporations.
The UK Department for Trade and Industry defines Six Sigma as: "a data-driven method for achieving near perfect
quality. Six Sigma analysis can focus on any element of production or service, and has a strong emphasis on statistical
analysis in design, manufacturing and customer-oriented activities." June 2005. Six Sigma can be evaluated at three
different levels: As a metric, as a methodology, and as a management system. Six Sigma is a top-down solution to help
organisations align their business strategy to critical improvement efforts, mobilise teams to attack high impact projects,
accelerate improved business results and govern efforts to ensure improvements are sustained.
The word is a statistical term that measures how far a given process deviates from perfection. To achieve Six Sigma
Quality, a process must produce no more than 3.4 defects per million opportunities. An 'opportunity' is defined as a
chance for nonconformance, or not meeting the required specifications. This means, one needs to be nearly flawless in
executing the key processes.
2.7.17 Development of Six Sigma

In the mid-1980's engineers in Motorola Inc in the USA used 'Six Sigma' an informal name for an in- house initiative
for reducing defects in production processes, because it represented a suitably high level of quality. Certain engineers
felt that measuring defects in terms of thousands was an insufficiently rigorous standard. Hence they increased the
measurement scale to parts per million, described as 'defects per million', which prompted the use the 'six sigma'
terminology and adopted the 'Six Sigma' branded name, given that six sigma was deemed to equate to 3.4 parts - or
defects - per million.
In the late 1980's following the success of the above initiative. Motorola extended the Six Sigma methods to its critical
business processes, and significantly Six Sigma became a formalised in-house 'branded' name for a performance
improvement methodology.
In 1991 Motorola certified its first 'Black Belt' Six Sigma experts, which indicates the beginnings of the formalisation of
the accredited training of Six Sigma methods.
M i HUMAN
In 1995, General Electric's CEO Jack Welch decided to implement Six Sigma in GE, and by 1998 GE
claimed that Six Sigma had generated over three-quarters of a billion dollars of cost savings. (Source:
George Eckes' book. The Six Sigma Revolution). In Jack Welch's own words "Nothing compares to the
effectiveness of six sigma when it comes to improving a company's operational efficiency, raising its
productivity and lowering its cost. It improves design processes, gets products to market faster with
fewer defects and builds customer loyalty. Perhaps the biggest but most unheralded benefit of six sigma
is its capacity to develop a cadre of great leaders( pg.245- "Winning" by Jack Welsh and Suzy Welch).
By the mid-1990's Six Sigma had developed into a transferable 'branded' corporate management
initiative and methodology, notably in General Electric and other large manufacturing corporations, as
also in organisations outside the manufacturing sector. By the year 2000, Six Sigma was effectively
established as an industry in its own right, involving the training, consultancy and implementation of
Six Sigma methodology in all sorts of organisations around the world.
Six Sigma is a methodology which requires and encourages team leaders and teams to take
responsibility for implementing the Six Sigma processes. Significantly these people need to be trained
in Six Sigma's methods - especially the use of the measurement and improvement tools, and in
communication and relationship skills, necessary to involve and serve the needs of the internal and
external customers and suppliers that form the critical processes of the organisation's delivery chains.
Training is therefore an essential element of the Six Sigma methodology. Six Sigma terminology
employs attractive names for other elements within the model, for example 'Black Belts' and 'Green
Belts', which denote people with different levels of expertise (and to an extent qualifications), and
different responsibilities, for implementing Six Sigma methods. Six Sigma teams and notably Six
Sigma team leaders ('Black Belts') use a vast array of tools at each stage of Six Sigma implementation
to define, measure, analyse and control variation in process quality, and to manage people, teams and
communications.
When an organisation decides to implement Six Sigma, first the executive team has to decide the
strategy - which might typically be termed an improvement initiative, and this base strategy should
focus on the essential processes necessary to meet customer expectations. This could amount to twenty
or thirty business process. At the top level these are the main processes that enable the organisation to
add value to goods and services and supply them to customers. Implicit within this is an understanding
of what the customers - internal and external - actually want and need.
A team of managers ('Black Belts' normally) who 'own' these processes is responsible for:
identifying and understanding these processes in detail, and also
understanding the levels of qualify (especially tolerance of variation) that customers (internal
and external) expect, and then
measuring the effectiveness and efficiency of each process performance - notably the 'sigma'
performance - ie., is the number of defects per million operations.
Most practitioners and users of Six Sigma refer to Motorola's early DMAIC acronym (extended since to
DMAICT) as a way of reinforcing and reminding participants what needs to be done.
2.7.18 Six Sigma DiMAIC and DiMAICT process elements

D - Define opportunity
M - Measure performance
A - Analyse opportunity
I - Improve performance
C - Control performance, and optionally:
T - Transfer best practice (to spread the learning to other areas of the organisation)
A measurement of four sigma equates to approximately 6,200 DPMO, or around 99.4% perfection. A measurement of
five sigma equates to just 233 defects per million opportunities, equivalent to a 99.98% perfection rate, and arguably
acceptable to many businesses, although absolutely still not good enough for industries that need that 100% safety
record.
2.7.19 Six Sigma in India - The Dabbawallahs of Mumbai

The best known example of six sigma in operation in India is the efficiency of the Mumbai dabbawallah which has
been studied and documented from around the world. Forbes, The US-based business magazme rates the lunch-box
carriers of Mumbai on a par with Motorola.
The dabbawallahs ferry 1.5 lakh lunches daily with the help of Simple codes.
It was an unusual story by Forbes Global, a marked departure from its sought-after macro-economic reviews and
corporate analyses. The US-based business magazine recently zeroed in on Mumbai's dabbawallah - The lunch
logisticians who deliver 1.5 lakh lunch boxes to hungry office goers every day have in the past found mention in the
Indian press, but the Forbes story was the first time an international organisation had analysed them scientifically and
rated them as if they comprised a corporate body. And the conclusions were more than flattering.
The dabbawallahs scored a 6 Sigma performance rating, a term used in quality assurance if the percentage of
correctness is 99.999999 or more. In simple words, this means one error in six million transactions, a benchmark
reserved for blue-chip companies like Motorola. For the humble dabbawallah, it was a treasured feather in his Gandhi
cap. But the ground realities for him will not change.
His story begins every sultry Mumbai morning at 9 a.m. sharp. The doorbell rings at the Bhalekar residence in Dahisar,
a far-flung suburb, in a ritual that is being played out simultaneously in thousands of Mumbai homes. Vrinda Bhalekar
hands over an aluminum container with piping hot lunch for her husband to a middle-aged man wearing the regulation
white cap. In an hour's time, the man will have collected 30 such dabbas (lunch boxes) to pass on to a waiting colleague
at the local railway station.
It's not easy covering so many houses quickly in a city like Mumbai. The heat and the crawling peak- hour traffic make
reaching a home a task in itself At each stop the dabbawallah has to park his cycle at the gate, go to the client's flat
which invariably means an elevator ride up a high-rise, collect the lunch and then come down again. But it is a part of
the daily grind. Just as it is for his colleague who sweats it out in the crowded local train to reach, say, south Mumbai's
Churchgate terminus by 11.30 a.m. There groups of team members effortlessly sort out the tiffins; thousands of them in
less than 10 minutes- while others pack their carts with the boxes and dash off to the office districts.
By noon, Bhalekar and thousands like him have warm food in front of them. The entire process is reversed after the
meal and Bhalekar's dabba reaches home well before he does. Behind this reliable-as- clockwork system is a relay of
4,500 hardworking dabbawallahs and a simple but effective coding system. The residential address, office address,
railway stations of delivery and pick up are all crunched
;agement
into a small series of letters and nmnbers, hand-painted on each client's tiffin. For instance, Bhalekar's lunch would
carry the coding 3MC4, 3 for the carrier who delivers in Nariman Point, MC for his office in Mafatlal Centre and 4
for the floor his office is located on.
In another code below it, 10 is the number for the Churchgate station where the tiffm is offloaded and D for Dahisar
station where it was collected. So advanced, and so loved by the people, is the service that you can order it from
online grocery store webrishi.com. Despite such facilities and efficiency-a level which Forbes noted "western
businesses can only aspire to" - the service comes at an amazingly cheap fee of Rs 150 a month, the price determined
somewhat by the recession in the business. From its peak days in 1955 with deliveries of over two lakh tiffins per day,
the century-old trade received its first blow when bank employees began leaving home early with the change in office
timings in the late 1960s. The rapid closure of mills in the 1980s-'90s also robbed the dabbawallah of his largest
clientele, the mill
workers. Now, canteens and food courts in the office districts have taken their toll.
>
2.7.20 One to six sigma conversion tabie

'Long Term Yield' (basically the percentage of
successful outputs or operations) %
Defects Per Million^

Opportunities (DPMO)
'Process Sigma'
99.99966
3.4
233
6,210
66,807
308,538
691,462
5
4
3
2
1
99.98
99.4
93.3
69.1
30.9
The sigma scale is exponential. The difference between the DPMO equating to each whole number more than doubles
as one moves up through the scale. By a rough calculation, 'seven sigma' would equate to about 2 defects per 100
million opportunities which is perhaps a little over-demanding even for zero defect industry, and that is perhaps why
nobody looks beyond six sigma.
2.7.21 Six Sigma in Indian banks
New age banks are becoming more quality and cost-conscious; six sigma is increasingly getting popular. ICICI Bank,
HDFC Bank and some of the back office operations of MNC banks have initiated the six sigma process for specific
activities in the bank. While Citibank has six sigma running as a worldwide initiative, HSBC has started the process
for its Jndian operations.
Let Us Sum Up
In unit 2 we have gone through various aspects of an organisation as well as the groups of employees as well as
management that make up the structure.
Formation of small groups and group dynamics play a vital role.
We also understood how effective leaders develop and fimction and how they build functional teams. In
benchmarking we have briefly looked at the process and how it impacts organisational behavior.
In the long chapter on quality processes, we have looked at traditional techniques of TQM, BPR and ISO, and also
understood the implications of quality circles and the now widely prevalent six sigma process.
Keywords
Behavioural Djmamics
Formal and Informal Organisations
Matrix Structure
Divisional Structure
The Person-Job Fit
Culture Counts
Group Dynamics
Group Norms
*
Cyber Groups
Leadership and Team Effectiveness
Leadership Develops Leaders
The Six Leadership Styles at a Glance
Human Resource Implications of Benchmarking
Benchmarking of IT capability in Indian banks.
TQM Implementation Process
Business Process Reengineering
ISO 9000 Series
Quality Circle
Six Sigma
Six Sigma Conversion Table
Check your progress

1. Documentation is critical in ISO for ensuring consistency of process. t
2. Unsatisfactory audit will not affect ISO certification. f
3. Objective of QC is team development. t
4. Training is an essential element of six sigma implementation. t
5. The Mumbai dabbawallahs were the first to introduce six sigma in India. f
H.R.M.6

1. True, 2. False, 3. True, 4. True, 5. False,
Terminal Questions
Discuss briefly the history of TQM Implementation in history.
Discuss how Business Process re-engineering can be implemented in the Indian Banking Industry. Cite some
examples of actual implementation.
Elaborate on the feasibility of introducing quality circles in banks branches.
Six sigma is considered the most efficient quality measure. Elaborate with examples from the Indian scenario.
References
Cunningham, J. B. & Eberle, T. (1990). "A Guide to Job Enrichment and Redesign," Personnel, Feb 1990, p.57
in Newstrom, J. & Davis, K. (1993). Organisation Behavior: Hmnan Behavior at Work. New York: McGraw68

Hill.
Knoster, T., Villa, R., & Thousand, J. (2000). A framework for thinking about systems change. In R. Villa & J.
Thousand (Eds.), Restructuring for caring and effective education: Piecing the puzzle together (pp. 93-128).
Baltimore: Paul H. Brookes Publishing Co.
Koch, C. (2006). The New Science of Change. CIO Magazine, Sep 15, 2006 (pp 54-56). Also available on the
web: http://www.cio.eom/archive/09l506/change.html
Feldmann Clarence.G, (1998),The Practical Guide to Business Process Reengineering using IDEFO., Dorset
House Publishing, New York.
Grover,Varun., Malhotra, Manoj.K.,(1995), Business Process Reengineering: A tutorial on the concept,
evolution, method, technology and application.. Journal of Operations Management 15 (1997) 193-213.
Harrison, Brian.D., Pratt, Maurice.D., (1993), A methodology for Reengineering Business., Planning Review
21(2), 6-11.
Hunt, Daniel.v., (1996), Process Mapping: How to Reengineer your Business Process, John Wiley and Sons Inc,
New York.
Manganelli, Raymond.L., Klein, Mark.M., (1994), The Reengineering Handbook: A Step-by-Step Guide to
Business Transformation., American Management Association, New York.
Martin, James., (1995),The Great Transition: Using the Seven Disciplines of Enterprise Engineering to Align
People, Technology, and Strategy., American Management Association, New York.
ORGANISATIONAL CHANGES
STRUCTURE
3.0
Objectives
3.1
Introduction
3.2
Change and Development
3.3
Change Agent
3.4
Managing Change
3.5
Responsibility Charting
Let Us Sum Up
Keywords
Terminal
Questions
References
3.0
OBJECTIVES

Understand the significance of change in organisations and how they affect individual reactions
and career growth
The role of the change agent and aligning change to HR initiatives
Understanding and managing change
Responsibility charting and how it can be used to advantage
3.1
INTRODUCTION
Change management is a systematic approach to dealing with change, both from the perspective of an
organisation and on the individual level. A somewhat ambiguous term, change management has at least
three different aspects, including: adapting to change, controlling change, and effecting change. A
proactive approach to dealing with change is at the core of all three aspects.
Successfiil adaptation to change is as crucial within an organisation as it is in the natural world. Just like
plants and animals, organisations and the individuals in them inevitably encounter changing conditions
that they are powerless to control, be it changes in the business environment (such as a fluctuation in the
economy, or a threat from a competitor) or at a ny)re individual level, trying to respond suddenly to
changes in the workplace due to new policies, technology or even a new boss.
Change management entails thoughtfiil planning and sensitive implementation, and above all,
consultation with, and involvement of, the people affected by the changes. Change should rarely be
forced on people, it must be gradual, well planned, realistic, achievable and measurable. Identify what is
expected to be achieved, who will be affected, and how much is to be changed and when. These aspects
if considered, exhibit an employee concern.
Change does not get sold to employees, instead, it needs to be understood and managed in a way that
people can cope effectively with it. Change can be unsettling, so the manager logically needs to be a
settling influence. It is important to check that people affected by the change agree with, or at least
understand, the need for change, and have a chance to decide how the change will be managed, and to
be involved in the planning and implementation of the change. Managers need to communicate face-toface with their people too if they intend to manage an organisational change. Email and written notices
are extremely weak at conveying and developing understanding.
3.2 CHANGE AND DEVELOPMENT

Significant organisational change occurs, when an organisation intends to change its overall strategy for
success, adds or removes a major section or practice, or plans to change the very nature by which it
operates. Such change happens when an organisation evolves through various life cycles, influenced by
the external environment that forces it to undergo significant change at various points in their
development. Thus organisational change management has become important in communications about
business, organisations, leadership and management.
Leaders and managers continually make efforts to accomplish successfiil and significant change - it is
inherent in their jobs. Some are very good at this effort while others continually struggle and fail.
OR
(
Even in successfiil and professional organisations, change can be quite difficult to accomplish; it can be
like trying to change a person's habits. The increased body of research, practice and tools available,
provides a clear perspective on overall organisational change and development, along with sufficient
guidelines and action points for successful change.
There are many approaches to guiding change ~ some planned, structured and explicit, while others are
more organic, and implicit. Some approaches work fi-om the future to the present, for example,
involving visioning and then action planning about how to achieve that vision. Other approaches work
from the present to the future, for example, identifying current priorities (issues and/or goals) and then
action planning how to address those priorities. Different people often have very different ~ and strong
~ opinions about how change should be conducted and arguments as to how to implement whether at
one go or in phases and various modalities.
To initiate organisational change and begin guiding successfiil change efforts, the change agent should
have at least a broad understanding of the context of the change effort. This includes understanding the
basic systems and structures in organisations, including their typical terms and roles. This requirement
applies to the understanding of leadership and management of the organisations, as well. That is why
graduate courses in business often initially include a course or some discussion on organisational theory.
*
Organisational change should not be conducted for the sake of change. Organisational change efforts
should be geared to improve the performance of organisations and the people in those organisations.
Therefore, it's useail to have some understanding of what is meant by "performance" and the various
methods to manage performance in organisations.
3.2.1 Top Trends in Change IManagement

The 2009 study is the sixth benchmarking effort Prosci has conducted over the last twelve years. The
objective of this study is to uncover lessons learned from practitioners and consultants so current change
management teams can benefit from these experiences - it is a forward looking, action-oriented report
aimed at improving change management work.
The top trends with regards to organisational change as per Prosci's 2009 edition of the Best Practices in
Change Management benchmarking report is the most complete body of knowledge available on change
management. Given below are the findings in a summary form.
Trend:
1. A greater recognition of the need for change management - seen as critical to success and
contributor to ROI.
2. Change management competency building - more knowledge and training opportunities at all
levels.
3. Dedication of resources for change management - assigned on projects and identified in
organisations.
4. Use of methodology and tools - structured approach to the people side of change.
5. Application on projects - sought out and brought in rather than looking for projects to support.
HUMAN RESOmCE MANAOEMENT

6. Integration with project management levels.
7. Change saturation - feeling the consequences on various levels of having too much change
occurring.
8. Standard change management approach - sends
strong message and increases consistency and
efficiencies.
organisational structure to support change
9. Establishment of a change management group management.

10. Management of the portfolio of change - tracking, managing and prioritizing competing
initiatives.
Successfiil change efforts often include several key roles, including the initiator, champion, change
agent, sponsor and leaders. Organisation-wide change in corporations should involve the Board of
Directors. Whether their members are closely involved in the change or not, they should at least be
aware of the change project and monitor if the results are being achieved or not.
The experience of a number of banks, especially the foreign banks in India, indicate that change affects
many areas in the organisation simultaneously. Change does not happen incrementally and creates fear
of the unknown in the minds of people as it affects people. One foreign Bank decided to upgrade its
technology and this affected the organisaticwi structwre and work flow. The bank had to introduce the
'hub and spoke concept' internationally or at least in South east Asia with the result, back office
processing had to be shifted offshore. This had its own legal compliance issues. To cater to the
requirements of high speed technology, changes were made in the concept of processor, checker and
authoriser, combining the 3 fimctions into one. Operational process and systems had to change,
throwing up surplus employees. An appropriate redeployment and exit policy had to be envisioned. The
hub and spoke model and operating margins led to the closure of some branches. Transfer of business
had to be organised. Thus the consequence of technological change was felt through and through the
organisation.
3.2.2 Responsibility for managing change

The employee does not have a responsibility to manage change - the employee's responsibility is no
other than to do their best, which is different for every person and depends on a wide variety of factors
(health, maturity, stability, experience, personality, motivation, etc). Responsibility for managing
change is with management and executives of the organisation - they must manage the change in a way
that employees can cope with it. The manager has a responsibility to facilitate and enable change,
understand the situation from an objective standpoint, and then help people understand reasons, aims,
and ways of responding positively. Increasingly the manager's role is to interpret, communicate and
enable and not just to instruct and impose, which nobody really responds to well. In view of their
proximity to the people, managements normally choose the HR manager as the Change agent.
3.3 CHANGE AGENT

The Hay/McBer group an intemational
consulting firm specialising in the
competency field have identified change
management as increasingly important for
organisations of the fiiture.
creating partnerships at the project and methodology
HUMAN RESOmCE MANAOEMENT
Dave Ulrich has completed extensive research in this area as well. His research, validated by HR
professionals and their line manager "clients", showed that successfiil change agents had the ability to:
Diagnose problems - Understanding both the business drivers and the organisation well enough
to identify performance issues and analyse their impact on short and long term business results.
Build relationships with clients - Forming partnerships with mutual responsibility for the
outcomes of the change effort. Because the risk is higher than with most other HR roles the level
of trust required is much higher.
Ensure that the Vision is Articulated - Inteipreting the hopes and motivations of the workforce
through the Vision statement.
Set a Leadership Agenda - This requires the HR executive (if the change agent) to understand
intimately the dynamics, history and competencies of the leadership team and to have the tenacity
to insist on the agenda's accomplishment.
Solve Problems - When dealing with change, the problems encoimtered are often loaded with
emotional and political dynamics. The change agent must possess the insight to recognise the
problem, the sensitivity to see its importance to those involved, the courage to take honest and
often difficult measures to resolve it and the credibility'to be heard.
Implement Plans to Achieve Change Goals - Successful organisational change on any
significant scale can be attributed to the right strategy and appropriate change in organisation
culture. Culture change, in turn, relies heavily on aligned and supportive people policies, systems
and processes. In short, the implementation plan is an HR plan for both the HR function and for
management.
The four key factors for success when implementing change within an organisation are:
Pressure for change - demonstrated senior management commitment is essential.
A clear, shared vision - you must take everyone with you. This is a shared agenda that benefits
the whole organisation.
Capacity for change - you need to provide the resources: time and finance.
Action - and performance - "plan, do, check, act" - and keep commimication channels open.
The most important contributions to be made through the change agent role are those that sustain the
organisation's current performance and assure its future performance by;
Enabling people to work effectively as they plan, implement and experience change
Increasing people's ability to manage future change
Where change is needed to be made quickly, probe the reasons - is the urgency real? Will the effects of
agreeing to a more sensible time-frame really be more disastrous than presiding over a disastrous
change? Quick change prevents proper consultation and involvement, which leads to difBculties that
take time to resolve.
The chief insecurity of most staff is change itself Senior managers and directors responsible for
managing organisational change do not, as a rule, fear change - they generally thrive on it. People do
not relish change, they find it deeply disturbing and threatening; people's fear of change is as great as
the management's own fear of failure.

3.4 MANAGING CHANGE
1. At all times involve and solicit support from people within system (environment, processes,
culture, relationships, behaviours, etc., whether personal or organisational).
2. Understand where the organisation is at the moment.
3. Understand where one wants to be, when, why, and what the new measures will be, having got
there.
4. Communicate, involve, enable and facilitate involvement from people, as early and openly and
as fully as is possible.
The most important factor is acceptance at all levels of management that change is inevitable and is
necessary. Expressions like 'mindset change', and 'changing people's mindsets' or 'changing attitudes',
betray a tendency towards imposed or enforced change and it implies sfrongly that the organisation
believes that its people currently have the 'wrong' mindset, which is never, ever, the case. If people are
not approaching their tasks or the organisation effectively, then the organisation has the wrong mindset,
not the people. Change such as new structures, policies, targets, acquisitions, disposals, re-locations,
etc., all create new systems and environments, which need to be explained to people as early as possible,
so that people's involvement in validating and refining the changes themselves can be obtained.
Employee engagement surveys give considerable insight into the organisational climate and provides
clues for the change agent as to the best methodology to be used when implementing change.
Management training, empathy and facilitative capability are critical areas - managers are crucial to the
change process - they must enable and facilitate, not merely convey and implement policy from above,
which does not work.
3.4.1 John P Kotter's 'eight steps to successful change'

John Kotter's highly regarded books 'Leading Change' (1995) and the follow-up 'The Heart Of Change'
(2002) describe a helpfiil model for imderstanding and managing change. Each stage acknowledges a
key principle identified by Kotter relating to people's response and approach to change, in which people
see, feel and then change Kotter's eight step change model can be summarised as:
1. Increase urgency - inspire people to move, make objectives real and relevant.
2. Build the guiding team - get the right people in place with the right emotional commitment, and
the right mix of skills and levels.
3. Get the vision right - get the team to establish a simple vision and strategy, focus on emotional
and creative aspects necessary to drive service and efficiency.
4. Communicate for buy-in - Involve as many people as possible, communicate the essentials,
simply, and to appeal and respond to people's needs. De-clutter communications - make
technology work for you rather than against.
5. Empower action - Remove obstacles, enable constructive feedback and lots of support from
leaders - reward and recognise progress and achievements.
organisational changes | 75
6. Create short-term wins - Set aims that are easy to achieve - in bite-size chunks. Manageable
numbers of initiatives. Finish current stages before starting new ones.
7. Don't let up - Foster and encoinage determination and persistence - ongoing change - encourage
ongoing progress reporting - highlight achieved and future milestones.
8. Make change stick - Reinforce the value of successful change via recruitment, promotion, new
change leaders. Weave change into culture.
Perhaps the best study of organisational development was the one conducted by Sloan (1964).
According to Sloan, General Motors Corporation divided its activities into engineering, production,
sales and finance; set up committees to coordinate the policies at the center, while decentralising
administration, established financial controls, added engineering, research and technical staff; and made
continuous changes in technology and products.
In India, in the health field, the organisational structural changes made by Apollo Hospitals recently to
expand its operations is an example. It has created several divisions keeping in view its products and
services it wishes to market, and appointed chosen leaders in the health field to provide leadership. In
the industrial field, organisational structural changes being made by Birlas, Tatas, and Ambanis are
examples.
3.5 RESPONSIBILITY CHARTING

A method of assigning role and defining the interrelationship of roles for specific decisions and
tasks
A foundation for sound delegation
A basis for holding people accountable for their roles in specific decisions and tasks
A short-hand language for communication about roles and responsibilities
A decision matrix or grid with actual and potential stakeholders (those involved in or affected by
a decision or task) listed horizontally and decisions or tasks listed vertically
3.5.1 Use of Responsibility Charting

Identify individual and team roles and inter-relationships
Clearly state procedural specification of individual and team and set time frames.
Understand and clarify roles and expectations
Improve accountability, delegation, communication and teamwork
3.5.2 Key Elements of Responsibility Charting

Decisions or tasks
Stakeholders
Level of participation of each stakeholder in each decision of task
ANAGEMENT
3.5.3
Analysis of a Responsibility Chart
A complete analysis of responsibility charting should be done in collaboration with all important
members. A quick look at the codes in the chart can address die following questions:
A Do too many "Don't knows" indicate the need for more structural and procedural specification?
B.
Do the project directors have too many responsibilities? This not only sets the project
director up for "burnout" but also prevents the fullest development of participation and
leadership from other participants.
C.
Is there a sufficient level of participation by the collaborative members to promote
"ownership" of decisions?
D.
How can one use the structure and procedures of collaboratives to promote higher
levels of participation?
E.
Can one "cluster" various tasks/decisions according to planning and policy,
implementation and day-to-day administrative categories?
F.
What other agencies/organisations besides those in the collaborative should be kept
informed of one's activities? How will they be so informed?
The responsibility chart itself could be shared and approved by the various committees and boards.
3.5.4
Responsibility Chart Design
Responsibility Charting is a good example of a project management tool. This tool can be used in a
veiy interactive and participatory way to engage a group of stakeholders who all have some connection
to a common set of tasks or decisions that must be made in carrying out a 'project'. The process is used
to compare how different stakeholders currently perceive their roles, to identify discrepancies, and then
to reach consensus on how decisions ought to be made. It can be quite a good design activity, and in the
end produces a clear picture of the interrelated roles and relationships that must be managed to
accomplish the project within a given time fi-ame. It usually produces a lot of leaming for the
participants as well.
As with many management tools, the important aspect is how it is utilised. It can be used in a
bureaucratic manner that precludes participation, or in an interactive way that encourages exploration
and action leaming.
3.5.5 Exercise - Sample Chart

(Distribute this chart to all members in the participatory group. Enter tasks in the left column, then have
team members mark who they think is responsible for each task. Discuss the answers as a group, and
make final decisions regarding responsibilities.)
Name
Tasks
Remarks
Anil Singh
Dilip Mohite
Chitra Iyer
Jeevan Akash
i..
Date
ANAGEMENT
i/mi
1. Identify Tasks: Have your team list activities not clearly assigned to a person or group of people. Use the
following examples to spur your own discussion (some of these may already be assigned to your team). Aim
for a list of no more than 20 items.
Meeting Respomibittties
Sending out meeting material, agendas, and minutes.
Setting up the meeting room; cleaning up after meetings.
Taking minutes.
Facilitating meetings.
Arranging meetings with Managers.
Helping the group when it's stuck.
Maintaining files.
Leading warm-ups.
Leading the meeting critique.
Containing digression and monopolising; using other discussion skills.
Project Responsibilities
Maintaining the picture book format.
Gathering data.
Plotting charts.
Maintaining files.
Education/Training Responsibilities
Teaching statistical tools
Teaching project management skills
Teaching meeting management skills
2. Create a Chart; Set up charts as illustrated above. Then list the tasks identified in the group meetings and
discussions in the TASK Colunm.
3. Work Through the Chart: Work through the chart one task at a time, having each member mark (with an
X or initials) the colxunn representing the group or person he or she thinks is responsible for that task.
(NOTE: Have each member use a different colour marker when marking the columns to simplify later
discussion). Do ttiis for every task listed.
Instructions
4.
4.
4. Di
scuss
the
Answers: Discuss the answers, again working through the matrix one task at a time. Do not move to the
next item imtil the team has reached consensus on which person or group is responsible for that task. You
can decide to rotate a responsibilify between people or groups, but you must clearly set down procedures for
how and when to switch.
ANAGEMENT
Let Us Sum Up
In unit 3 we have tackled an issue of continuous interest to all organisations niamely Change Management.
Resistance to change and responsibility for managir>g change are common place.
The change agent is preferred from the HR Dept. and he has very clearly identified duties and responsibilities.
Managing change effectively is important for continuous growth.
78
We also studied responsibility charting and its impact on effective implementation of a task.
Keywords
Change agent
The Prosci Study of Top Trends in Change Management
The Leadership Agenda for Change
John Kotter's Steps to Successful Change
Responsibility Charting"
Key Elements
Sample Chart
Check your progress

1. It is essential to involve everyone in the change process. t
2. Change will always sustain current levels of performance. f
3. Responsibility charting improves accountability and team work. t

1. True, 2. False, 3. True,
Terminal Questions
1. The H R manager is considered the most appropriate person as change agent. Do you agree? Elaborate with
reasons.
2. Write a short note on John P Kotter's eight steps to successful change.
3. What do you understand by responsibility charting? Elaborate with the help of a sample chart.
References
John Fisher's personal change theory
Conscious Competence - a personal change model in leaming and development

Elisabeth Kiibler-Ross's Five Stages of Grief - primarily for dealing with death and
bereavement, but helpfiil for understanding change reaction to other types of major shock and loss
Modem principles which underpin successfiil change in organisations
Sharon Drew Morgen's Facilitation model - for change, coaching, decision-making and selling
Web References
ChangingMinds.org
Employee Commimication: 6 Steps to Communicate Change - Marcia Xenitelis
CHANGES I 79
Change Management and Employee Communication Strategies - Marcia Xenitelis
Reasons Why Change Fails - Richard Derwent Cooke
HRM IN INDIAN BANKS
STRUCTURE
4.0
Objectives
4.1
Introduction
4.2
Traditional Role ofHRM in Indian Banks
4.3
Expectations from HR Dept.
4.4
HRMinBanks
4.5
Major HRM Challenges facing Banks
4.6
Core Banking and People Challenges
Let Us Sum Up
Keywords
Terminal Questions
References
IN fNDSAM 8ANKS
4.0
OBJECTIVES
4.1
Understand the traditional role ofHRM in Banks

Need for HRM in Banks
Expectations frojh the HRD^t.
Conflict of new and old work cultures
Major challenges faced by HRM
Core Banking and People Challenges
>
INTRODUCTION
People, rather the employees are the asset of any organisation. An organisation, whether it is a
manufacturing concern or service oriented, cannot function without the active participation of people.
Banks as custodians of people's money and trust, have a major responsibility to streamline the HR
activities of its most vital resource.
,
4.2
TRADITIONAL ROLE OF HRM IN INDIAN BANKS
The qualitative changes in staff composition, skills required, absorption of functionally skilled
personnel, retaining staff in the face of competition, and in dealing with a host of problems arising out
of massive and sudden expansion in the last few decades have not been given the attention they
deserve.
There is a move afoot to entrust some of the banks with the entire responsibility for HR functions, such
as wage negotiations and recruitment. As of now, the collective bargaining for wage revision is
undertaken by the Indian Banks' Association while recruitment has been decentralised to respective
banks, from the centralised BSRB. Sudden transfer of these functions may find these banks woefully
ill-equipped to handle them. It is, therefore, necessary to begin with listing out the problems involved
before looking for solutions.
The last few years witnessed an exodus of qualified and experienced staff. The environment of
vigilance inquiries and the problems on account of frequent transfers might have led these qualified
and experienced staff to decide to opt out with the introduction of pension schemes. The introduction of
Golden Handshake voluntary retirement scheme in the year 2000 has made the public sector banks
virtually bleed a very sizeable portion of their performing persormel. Even after the introduction of the
voluntary retirement scheme, the problem of overstaffing has not been totally solved. The overstaffed
cadres still remain with the banks and the areas where there is more manpower requirement have been
fiirther depleted in strength due to this scheme.
The introduction of new technology and absorption of its various dimensions as part of a new work
culture has brought in its wake new problems. The need for a total change in the mindset to deal with
the transition from a traditional, monopoly existence to one of considerable freedom has to be fully
appreciated.
Training institutions are trying desperately to make things happen. But they themselves lack the much
needed support and clarity in approach. Some may condemn these prime bodies as a resort for nonperformers and for those who want to escape from rough and tough routines of an active bank branch
HUi'i/IArJ RESOURCE IVIA^jAGEi^lENT

life with constant interaction with the customers. In fact in the past, the non performers were routinely moved to the staff
training colleges as faculty; the deeply committed and devoted were overlooked in selection to these training institutions. The
result: poor performance by these trend setting and concept building institutions. The list can be expanded but that will make
the picture much bleaker. Moreover, these training institutes were not even part of the HR department. An Asst. General
Manager headed these training colleges independently in most of the public sector banks. The task before the HR departments
HRM IN INDIAN BANKS | 100
82
therefore is to reorient themselves quickly and to get on with work immediately.
4.2.1 Changing roie of HRiM

The personnel departments, which are firefighters in some banks, are charged with duties of putting out industrial relations
fires and to ensure that industrial relations problems do not otherwise compromise the position of management. The more
recent HR functions - a major resource supplier - may be thus operating at the fringe of corporate activities. Part of the present
problems crippling our personnel departments can be fraced to the personnel managing these departments themselves. They
lack essential skills in developing manpower plans, building up appraisal systems, and looking far ahead, keeping in mind the
changed times as well as the ever looming competition. Nor is staff, competent enough to handle such tasks, readily available.
An innate belief that availability of manpower in a country with growing unemployment should not pose any problems is the
basis for the neglect.
The emphasis has to shift from industrial relations to core HR functions like manpower planning, employee development and
performance management. The HR departments must be involved in various activities, be looked on as an integral part of
management and be equally responsible for business results. In these charged competitive days HR specialists must be
actively involved in the process and preparation of business plans and strategies. They must be thoroughly committed to the
fulfillment of such plans. Compared to business planning, manpower planning takes much longer to become operational.
Therefore departments should rightly be working on plans for two years ahead. In any case, for some of the banks the prime
necessity is to retain their separate existence and survive in the face of emerging challenges.
4.2.2 Changing iMindset

The HR functionaries need to break out of the present mentality and acknowledge that adherence to the rules and their
implementation is the key to their success. The banks can ill afford adherence to irrelevant rules. While staff shortage may be
an issue, the solution should lie in better use of technology which if harnessed well, can acmally make up for the shortage,
with better MIS and prompter action. Emphasis has to shift from fire fighting to developing executives for tomorrow. A
number of long established PSU banks have started with the help of consultants, the process of reorganisation and
restructuring. One thing, however, stands out. World-wide experience has shown that organisations are in a flux. Considerable
changes through process re-engineering, etc., are going on with the avowed intention of meeting the new challenges.
Organisations are becoming flatter and leaner. Efficiency in all that banks will be the key to continued success, applicable in
equal measure to the HR departments themselves.
According to Dr. Bimal Jalan, former Reserve Bank of India Governor "capital and technology are replicable but not human
capital which needs to be viewed as a valuable resource for the achievement of
competitive advantage." Jack Welch, former CEO of General Electric, has commented "outside of the CEO, HR is the most
critical function in any company. Development of leaders is the ultimate responsibility of every CEO and thus is an integral
part of HR. I saw my job as allocating people and dollars to opportunities. I wasn't designing products. 1 was putting people
where I thought they were right for the job. I did that with my partners in HR." According to Wharton Management Professor
Nancy Rothbard "If top management doesn't see value in having HR as a strategic partner - and if HR can't think out of the
box in that role then the partnership is probably not going to happen."
Given below is the HR approach of a typical multinational bank present in India, with a staff strength of over 10,000 people
across 200 offices in more than 20 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, United Kingdom
and America. All major activities are covered with emphasis on the manner in which the Bank values its human capital.
1."
4.2.3 Human Resource Planning

HR planning is a process, which anticipates and maps out the consequences of business strategy on an organisation's human
resources. This is reflected in planning of skill and competence needs as well as total headcounts. At this bank, human
resource planning involves forecasting the numbers of people which will be needed by the bank, and then working out the
best way of obtaining them as and when they are needed.
Forecasting is a major function of the bank's HR department. The forecasting activities include:
1. Workforce numbers in sufficient detail along with the desired position profile.
2. Likely changes to the business focus of the bank and its impact on the work force; the variations in the current work
force estimated to occur over the following years.
3. Impact on budgets and funding.
As the Bank operates in a dynamic environment where new and advanced practices are frequently emerging resulting in
changing customer requirements, HR is expected to draw inputs from the business leaders.
An efficient collection and analysis of employee statistics and trends in the workforce help in predicting the future manpower
requirements for the Bank.
4.2.4 Recruitment and Selection

The Bank recruits talented individuals from the external market to supplement their internal wealth of talent. The HR
department provides guidance on the use of psychometric tests and has robust recruitment criteria to ensure that all candidates
are treated fairly, equally and with respect. It has global as well as national recruitment programs, where in around 100
graduates are recruited each year on a management trainee program across all businesses, functions and countries.
Selection of employees is based on knowledge, skills and talent. As an Equal Opportunity Employment practitioner, the Bank
is committed to providing equality of opportunity to all candidates, regardless of gender, race, nationality, age, disability,
ethnic origin, or marital status while at the same time, identifying the unique strengths each individual brings which can be
harnessed.
H.R.M- 7
4.2.5 Training & Development

Development is critical to the bank's future business success and the bank's performance is linked to people development
amounting to investing in the future. Training here is a partnership between the employee and the Bank. The Bank provides a
framework within which the employee can identify the training and development needs. Such an approach provides a
consistent standard of management learning throughout. It also enables employees to take all of the programs or study for
individual modules according to their particular development needs.
The Bank has a unique one year training period for fresh graduates during which, the employee can expect to experience a
blend of core and discretionary elements, through exposure to the following:
84
1. Induction, the process that introduces the new entrance to the bank, the employee's own business or function and
particular department.
2. Training in specific products and technical skills.
3. On the job training post the initial exposure, to all operational areas including a systems training.
4. Work-based assignments in respective business or function i.e. doing a job in a particular department for a period of
time.
5. Cross-functional attachments - experiencing short stints spent in another business or support
function.
Development and training are an ongoing process; after the initial training, the employees are provided with internal
development programs, business-related studies and professional qualifications, and the bank also offers the opportunity to
develop skills through extemally accredited courses. These are designed in conjimction with top universities and business
schools including postgraduate, MBA programs.
Product training is provided e.g. cash handling training, operational training etc. to help the staff gain hands on exposure about
the products. The bank provides a lot of skill related training by way of credit workshops, sales & negotiation skills, project
management, etc. to help staff enhance their skill in specialised areas. On the-job training continues and staff are given job
rotation to increase their exposure to more areas of operations.
The bank sends out CDs and books to staff for self study on credit, operations, trade finance, etc. In addition, by way of more
advanced MDP programs, employees are given strategic perspectives and business goals management skills; people
management, networking and customer focus abilities to better understand and manage their jobs. Specific Competency
Training ensures that the staff excels in product knowledge, understands regulatory procedures and is equipped with unique
techniques needed for a given position.
4.2.6 Employee Welfare

The Bank believes that the health and well-being of their employees and their families is important. Concerned not only about
the physical health of their employees, but also of their mental and emotional well- being, the Bank has policies and practices
that provide for a safe and healthy working environment. Thus all employees and their immediate family members are covered
under a comprehensive mediclaim policy, scholarships instituted for employee children and a number of welfare programs
planned for informal get togethers, all to bring about better interaction among staff and families.
4.2.7
Compensation
The bank aims to reward talented and high performing employees competitively. They regularly conduct salary surveys to
ensure that the reward package remains competitive in the market place. The compensation package provided to the
employees can be divided into two categories; one for the sales persormel who are compensated on their ability to meet their
targets and the other for executives who are responsible for the overall functions of the Bank. All sales staff have goals which
are clearly defined, performance against set goals is tracked and, achievement rewarded with a clearly defined incentive
scheme. Executive compensation packages typically comprise of a number of fixed elements such as basic pay and other
common allowances and is supplemented by generous incentives and long term benefits such as stock options and attractive

severance packages.
Performance at all levels is closely monitored and feedback provided to staff on areas of improvement and linked to both
financial and non-financial rewards. The bank also provides various incentives in the form of bonuses to encourage the
employees and motivate them to continue with their high performance. These include Spot Award, Surprise Arrears, Best
Performer Award and Service Quality Awards.
4.2.8
Performance management is the process through which managers ensure that employee activities and outputs are congruent
with the organisation's goals.
In this bank, a number of measures and tools are used for the implementation of PMS. The performance appraisal system is
the primary means for managing employee performance. A performance measurement system is developed that incorporates a
tool for measuring and rewarding performance. A longstanding question that most institutions including banks face is the issue
of equitable distribution of rewards. While salary increments are given based on assessed performance, the Bank has a
generous reward structure for those who excel in performance. Thus senior officials are paid a performance bonus, part of
which is given in the form of stock options.
4.3 EXPECTATIONS FROM HR DEPARTMENT

The ongoing process of economic globalisation and liberalisation of financial sector as well as reforms in the Banking Sector
in India, from the last decade of the 20th century, have brought about many changes in business environment and also in the
managerial ingredients of banks. The business environment is now no more static, or predictable though controlled and
governed under a strong regulatory framework. Similarly, Bank Management, has no more remained a mere "Man" and
"Money" Management but translated into complex managerial system of which "Knowledge" has become the critical
ingredient in the fast changing banking business. Following are the major factors, which led to the change in the profile of
banking business over a period, particularly in last one decade.
Deregulation of Banking operations. Entry of Private Sector Banks, Foreign Banks, Foreign Capital Participation etc.
Introduction of prudential Norms for Asset classification and Income Recognition vis--vis stipulations for greater
transparency in financial statements, disclosures etc.
Stipulation of Capital Adequacy Ratio.
Extensive use of computer and information Technology.
Global alignment of Indian Economy.
Increased dependence on real time MIS
A highly demanding customer base.
Choice of products in the retail sector.
It may be noted that these are the major factors, which are responsible to transform ow stereotype, static, banking business
into a dynamic, competitive, knowledge based, free playing for all, banking business HRM contributes to organisational
performance in different ways: through sound functional basics; through effective realignment when the external environment
changes; and by building an organisational context to that the organisation can cope with the dualistic forces.
As seen from the example of Human resource practices in one leading MNC bank in the country, the core fimction of HR in
banking industry should be to manage performance of the human resource available. Factors such as skills, attitudes and
knowledge of personnel, play a critical role in determining the competitiveness within the organisation or the industry. The
availability of trained manpower would greatly influence the ability of banks to deliver value to clients or customers.
Indian banking industry has been an important driving force behind the nation's economic development. Over 100 banks in the
public sector, the private sector, (both old as well as the new generation) and foreign banks from all the leading economies in
the world, contribute to a large network of branches numbering over 50,000 and a workforce in excess of 1 million. The
emerging environment poses both opportunities and threats, particularly to the public sector banks, as well as the human
resource in changing economic and business environment. The primary emphasis needs to be on integrating human resource
strategies with the business strategy. In addition to standard aspects of recruitment, placement, performance management,
rewards and employee relations; a radical change in the existing promotion policy in public sector banks like seniority over
performance, a more focused training effort on making the counter staff more customer friendly and proactive, and a clear
distinction between the major functions of the banks (corporate, retail, centralised operations), could go a long way in
transforming the environment in the banking industry towards attracting the best talent from the young competitive
environment.
4.4 HRM PRACTICES IN BANKS

To make the Indian Banking System stronger, efficient and low-cost, the industry must lay down some specific standards with
regard to the operations, strategies and processes, strengthen the prudential norms and market discipline; adopt international
benchmarks; manage organisational change and consolidation within the financial system; upgrade the technological
infrastructure of the financial system; and project the HRM function as the catalyst of the transformation.
97
The Indian economy, which slowed down significantly during the second half of 2008-09, largely due to the knock-on effect
of the global financial crisis, has begun to stabilise. Performance of the industrial sector has improved markedly in recent
months. Both domestic and external financing conditions are on the upturn. Capital inflows have revived. Activity in the
primary capital market has picked up and funding from non-bank domestic sources has eased. Liquidity conditions have
remained easy and interest rates have softened in the money and credit markets.
The evolution of banking system in India has affected the hiunan resource practices, recruitment and selection practices, as
well as the entire training system. As a service industry, the primary strength of the banking sector lies with its human
resource making it imperative that sufficient efforts are made to develop the skills and competencies needed for the future of
banking in this country. Some such skills to be developed will relate to credit appraisal and risk management as also in
increasing the range of their retail portfolio. Information technology will remain a key contributor to overall human resource
development. Therefore, the HR model of the future will require professionals to be both driving and anticipating change,
understanding the complexities of the new business environment and forces shaping it.
The PSU banks decided to offer voluntary scheme (VRS) to trim its workforce as recommended by the government which felt
that the banking industry was overstaffed. The vast workforce that was once regarded as one of the PSU banks' strongest
assets became a liability following the computerisation in the banking industry. The introduction .of this scheme led to ^trong
protests from unions but the end result was that many PSU banks faced the prospect of losing its talented employees and were
left with less efficient employees.
The new generation private sector banks on the contrary continued to increase their intake of staff particularly in the retail
businesses in line with the business growth. They focused on a combination of human resource and technology in
disseminating their banking functions and practices in a more efficient and customer friendly manner. The growth of the
employee base was in line with the growth in the banks' business and growth was organic as well as through mergers. Thus
HDFC bank had a number of mergers starting with the Times bank and most recently, the combined Centurion, Bank of
Punjab as well as the south based Lord Krishna bank making it second only to ICICI bank, in the private sector.
The private sector banks in general, focus on training its employees on a continuing basis, both on the job and through
training programs conducted by intemal and extemal faculty. Some of them have introduced stock options, under the belief
that employee ownership in the company shares has a positive impact on its performance and employee motivation.
4.5 MAJOR HRM CHALLENGES FACING BANKS

A key focus of the human resource management is expected in the role of staffing, performance management, training and
development, and compensation that will greatly affect business strategies of the future. Retention is already becoming a
major challenge in all the banking sectors be it the PSU, private or MNC banks. A number of bright bankers have moved on to
the financial advisory services sector (broking. Wealth management). The HR strategy for banks must therefore address the
following issues:
HR planning must illustrate the process of developing human resource available from all sources. The strengths and
weaknesses of staffing options such as outsourcing, use of contingent workers, and downsizing must find a place in
manpower planning.
The recruitment process must be done strategically to source the correct talent mix for an early fit for the position.
The selection process should emphasise ways of minimizing errors in employee selection and placement to improve
the bank's competitive position. Increased use of scientific selection methods will be needed.
An effective training program to define expectations, develop competencies and grow talent for the future need of the
Bank.
Beyond the human resource strategies are the rewarding and compensating that can strengthen or weaken employee
effectiveness. In order to give recognition and increase motivational levels amongst the employees, many Banks have linked
individual performance to an incentive and reward scheme though here again the PSU banks lag behind. The HRM strategies
and practices should be aligned to help the banks meet their objectives - as well as better customer focus.
88
4.6 CORE BANKING
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank
customers may access their funds and other simple transactions from any of the member branch offices.
Core Banking is normally defined as the business conducted by a banking institution with its retail and small business
customers.'Many banks treat the retail customers as their core banking customers, and have a separate line of business to
manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking
basically is depositing and lending of money.
Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services
available across multiple channels like ATMs, Internet banking, and branches.
4.6.1 Core Banking Solutions

Core Banking Solutions is a new jargon frequently used in banking circles of India. The advancement in technology especially
internet and information technology has led to new way of doing business in banking. Technology has helped cut down time,
work simultaneously on different platforms and increased efficiency. The platform where communication technology and
information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here computer
software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest
calculations on loans and deposits, customer records, balance of payments and easy facilitation of withdrawals with the use of
anywhere banking. This software is installed at different branches of bank and then interconnected by means of
communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch
if it has installed core banking solutions. This new platform has changed the way banks are working. Now many advanced
features like regulatory requirements and other specialised services like share (stock) trading are being provided. Core
banking solutions have helped revolutionise banking in India.
4.6.2 Core Banking Around the world
In a number of developing countries such as India and others in Asia, it is only recently that core banking has caught on as the
I T infrastructure necessary for such services did not exist in these countries until recently. The PSU banks, staffed as they
were by the stranglehold of the imions, had for years, been able only to use what was termed as Advanced ledger posting
machines, which were basically a mirror image of the ledger accounts. A quantum leap in technology happened with the
advent of the new generation banks in 1993. Competition and a siu-e loss of business to the new banks, as far as the younger
generation of wage earners were concerned, spurred the nationalised and old private banks also to push hard with
computerisation. Most of the nationalised banks in India for example: State Bank of India, Punjab National Bank, Allahabad
Bank, HDFC and ICICI Bank today support core banking. As of 2007, many Cooperative banks in India such as Jain Urban

Cooperative Bank, Kangra Central Cooperative Bank, Udaipur Urban Cooperative Bank, Kollam District Cooperative Bank,
Kerala State Cooperative Bank and Panchsheel Mercantile Cooperative Bank have started to use and offer centralised Core
Banking too. The three standard software used are Flexcube from iFlex Solutions, Finacle from Infosys and B@ncs from
TATA Consultancy Services.
Surprisingly in countries such as Japan, core banking is still in its early stages. Although having autonomous reign over their
currency for over half a century, the consumers themselves do not see much use for such services - low demand, thus less
services. It is only within the last decade that banks started placing ATMs outside the bank premises. Many of the bank
services must be done in person at the account holder'sêgistered branch. Japanese banks rely heavily on paperwork and
physical evidence, such as the personal chop or Inkan - thus rendering core banking impractical.
Let Us Sum Up
In unit 4 we have understood how from a traditional routine function HRM has evolved in Indian Banks.
The challenges faced by HRM with regard to new and old cultures as also due to technology changes have been examined.
We have also understood the human implications of technology especially with regard to core banking
Keywords
Narasimham Committee Economic
Liberalisation
Changing role and Mind Set of People and Management Core banking
Voluntary retirement scheme
Check Your Progress

1.
2.
3.
4.
5.
Availability of the right manpower is critical to a bank's progress. t

Selection of employees is based on knowledge, skills and talent. t
Performance linked to incentive is not applicable in PSU banks. f
Core fimction of HR is performance management. t
Core banking deals with retail customers. f

1. True, 2. True, 3. False, 4. True, 5. False,
Terminal Questions
1.
2.
3.
4.
Elaborate on the changing role of HRM in the banking industry.

What are the major HRM challenges facing banks especially with regard to introduction of technology?
What are the management's expectations from HRM?
Short notes on "Core banking".
90
Reference Bibliography
DBA Bulletin
Effective Executive ICFAl University
Professional Banker
Webiiography
http://www.emeraldinsight.com
http://www.accesskm.com
http://www.KnowledgeStorra.com
http://www.KMBook.com
http://www.brint.org/
KNOWLEDGE MANAGEMENT
STRUCTURE
5.0
Objectives
5.1
Introduction
m
5.2
Concept of Knowledge Management
5.3
Significant Features of Knowledge Management
5.4
Knowledge Management in Banks
5.5
Application of Knowledge Management in Banks
5.6
I.T &. Database Management
5.7
People Dimension of Knowledge Management
5.8
Knowledge Management Applications in Banks - Current & Future
Let Us Sum Up
Keywortk
Terminal Questions
References
92
5.0 OBJECTIVES
After reading this unit, you should be
able to:
Understand the concept of
Knowledge Management (K M)
I HUMAN
5.1
The key drivers of KM

The significant features of K^
Importance of K M in banks
KM model for banks
Application of K M in banks
I.T. in Banks and Database Management
INTRODUCTION
The internet revolution has changed the very basis of knowledge dissemination. From the days of a
research scholar painstakingly going through manuscripts, to analyse and summarise information, the
amount of data being made available in any format today is literally mind blowing. Thus the traditional
kingdom of knowledge has now multiplied into a galaxy of information yielding desktops that have
changed the very nature of knowledge as something precious and difficult to come by.
Nearly every day, everyone survives a flood of information that is trying to drown us in its depths.
Companies don't just hire people; they hire a pool of knowledge base that has developed into talent over
time. Some companies have the requisite resources to enrich that pool whereas others let that pool dry
up. This simple realisation about the ubiquitous term knowledge which is often used in today's scenario
in the manner of knowledge economies, knowledge organisations and more recently knowledge banks
has made Knowledge Management in Banks interesting and rewarding.
5.2
CONCEPT OF KNOWLEDGE MANAGEMENT (KM)
Existence and continued success of an organisation mainly depends on how well it can deploy and
manage its corporate assets. These assets can be divided into tangible assets and intangible assets.
Traditionally tangible assets have been considered to be the most important and fundamental corporate
asset with intangible assets relegated to play a minor role in the success of an organisation. As
intangible assets are easily copied by competition, organisations have found that they have to take all
steps to protect their assets to some extent.
Some researchers have defined knowledge in the context of know-why, know-what, know- who and
know-when, in order to relate it with managing knowledge concepts. For instance. Van den Bosch and
Van Wijk (2001) presented a conceptual framework of managerial knowledge integration. Know-what
can be defined as something people carry round in their minds and pass on to each other. In contrast.
Know-how embraces the ability to put Know-what into practice. Japanese researchers like Nonaka,
Toyomo and Kormo (2002) defined Knowledge by emphasizing on the relative, d)mamic and
humanistic dimensions rather than the traditional western epistemology (the study of knowledge) that
focused on absolute, static and non-human view of knowledge. The term 'knowledge' is one of the more
confiising aspects of KM. The terms 'information' and 'data' are often used as synonyms for the term
knowledge. In fact they are different from one another.
5.2.1 Types of Knowledge Management

Basically, knowledge is of two types. They are explicit and tacit knowledge.
The term explicit knowledge can be defined as that component of knowledge which can be codified and
transmitted in a methodical and prescribed language. For example, documents, databases. Webs, Emails, charts, etc.
On the other hand, tacit knowledge is personal, intuitive, contextual, and difficult to formulise, and
record or articulate. It is built out of experience and is stored in the minds of people.
m
It is estimated that tacit knowledge constitutes about 70% of all organisations' knowledge base and is
difficult to identify and convert into real value unless a structured approach is adopted to manage
knowledge through KM techniques involving intensive dialogues, discussions and sharing in teams.
KM refers to management of knowledge. It is an important component of organisational intangible
assets. Continuous changes in the market expectation and the demand for new products have replaced
capital and labor intensive firms by knowledge-intensive firms. It is a concept in which enterprise
gathers, organises shares and analyses ijs knowledge in terms of sources, documents and skills of the
people.KM is also viewed as a conscious strategy of putting knowledge into action as a means to
increase organisational efficiency.
In practical application, it covers identifying and mapping of intellectual assets, generating knowledge
for competitive advantage, making large amount of corporate information accessible, and sharing of
best practices and technology within the organisation.
The companies where KM initiative are already in place and practiced with success may be called
Knowledge Intensive Firms (KIF). A Chief Knowledge Officer (CKO) as he is called, is mainly
assigned the task of managing the reservoir of knowledge residing in the individual employee and
setting up a mechanism by which knowledge is shared by all concerned that would otherwise remain in
some remote department of the company. Under the stewardship of CKO, certain number of knowledge
harvesters fimction whose main task is to identify knowledge assets in the company with a view to
harness them for the benefit of company; ultimately it may result in creating new clientele base or
substantial increase in sales tumover year-on-year.
The key drivers for KM initiative are:
1. Rapid advances in the field of Information and Communication Technology (ICT) which has
revolutionised the way in which businesses are being carried out.
2. Extremely high business competition arising because of the globalisation of economies
worldwide; this is particularly relevant in emerging economies like India.
3. Increased complexity of business and complexity of management.
4. Faster pace of innovation because of growing industry competition.
5. Increased mobility of workforce.
6. Growing recognition across all industries regarding the need and significance of ongoing and
lifelong learning etc.
5.3
SIGNIFICANT FEATURES OF KNOWLEDGE MANAGEMENT

1. KM initiatives can substantially contribute towards cost cutting, product and process
innovations, competitiveness, and hence can ensure improved operational efficiency as well as
better systems, procedures and intemal control systems. However, it may not be possible to
establish any direct relationship between investment in KM and its impact on profitability (like,
ROI for example) of the firm. This is because KM seeks to transform the entire organisation by
bringing about desired qualities in several fronts such as openness in interpersonal
94

communications, avenues for continuous learning etc. and as such the impact of KM on financial
performance of an organisation could be just one among the different parameters which KM
seeks to achieve. Further, building a sound KM system involves long term efforts along with
systematic planning and foresight.
2. KM can tremendously improve the competency profile of the employees in an organisation in
respect of their skills and knowledge levels. It provides the employees with a wider and holistic
perspective of their own organisation vis--vis competitor firms. It facilitates continuous
learning and updation of skills and knowledge. Employees are groomed as knowledge workers
and e- learning has helped considerably in enabling a highly individualised learning.
3. Unlike in case of physical assets which deteriorate in value over a period of time, organisational
value gets enhanced progressively as it is used. The value addition to the organisation and also to
the individual and groups therein, continues as an ongoing process as long as a sound KM
system is in place.
4. KM initiatives can significantly contribute towards creation and addition of value in
organisations. In many knowledge intensive companies in US, for example, the real value is as
high as 10 times of their book value.
5. KM initiatives can significantly contribute towards customer service to a large extent and can
support CRM initiatives considerably. All new generation banks in India owe their quick growth
to the better use of technology and the consequent collective knowledge base.
6. KM can provide inputs in assessing the risks associated with a loan proposal and hence can help
in taking more informed and objective credit decisions. Latest developments like Knowledge
Discovery and Data Mining (KDD) softwares have fiirther revolutionised the field.
7. KM ensures the availability of relevant and up to date information regarding customers,
competitors as well as other markets and enables faster and more scientific decision making in
organisations.
5.4
KNOWLEDGE MANAGEMENT IN BANKS
Knowledge Management as a topic has often been associated with other business setups like IT than
banks. So for the entire Banking, Finance and Insurance (BFSI) Sector, understanding the importance of
Knowledge Management as a competitive tool helps assist them in being more contemporary as from
the bank's perspective, it is important to be well informed when dealing vidth customers who may be
equally knowledgeable. Peter Dmcker had renamed employees as knowledge workers and stressed on
Knowledge Management because Knowledge management prevents tiie organisations' collective
knowledge
KNOWLEDGF: MANAGEMENT | 95
from perishing while the individual employee's knowledge will help the organisation achieve optimum
organisational efficiency. The essence of business is to convert its knowledge into goods and services
required by the customer.
5.4.1 Importance of Knowledge Management in Banks

The term knowledge itself is in a banks' context - the difference between ordinary and the extraordinary
96

handling of any task, process or interaction-between employees, with customers or with any other stake
holder of the bank-has always been the explicit and tacit usage of knowledge by the person guiding the
transaction.
The application of knowledge and the practice of knowledge management as a precise science can give
excellent results in any bank, whether in the public or private sector. Successful banks of the 21st
century will be those who do the best job capturing, storing and leveraging what their employees know.
Though, KM is not a new concept for Indian Banks it was not viewed as an important managerial
function of banks. This was mainly because banking was mainly "Follow the Rule" and "Command and
Control" style of management. Competition and the need for better operational efficiency have led
banks to adopt a more KM based approach to all operational areas.
Continuous improvisation of selection procedure for quality manpower, a more competitive
compensation structure, promotions based on competency assessment, are certainly aimed at an
objective and knowledge based procedure. Encouragement for Study, Training, Group Activities, and
knowledge sharing through network portals have improved commimication within organisations and
helped development of knowledge sharing attitude to some extent. Voluntary Retirement Scheme and
other similar schemes implemented by the Banks have not only made it possible to downsize the
organisation but also to remove the obsolete knowledge blocks in the system.
Though the banks have recognised the importance of knowledge management, they are facing problems
while implementing this concept. Having worked for long periods under a controlled environment, a
typical closed mindset has developed among those who manage banks. Strong unions of bank
employees who claim to protect the rights of their members and a uniformly structured pay and service
conditions without reference to motivational needs and different cultural settings of banks have
inadvertently contributed by protecting inefficiencies, leading to a low enthusiasm for KM. Further, the
compelling need to adhere to operating procedures killed the need to develop services around customer
needs. Adherence to rules and regulations became an end by itself The traditional work culture in the
banks has encouraged a "Command and Control" approach which has discouraged innovation and the
desire for a better knowledge base. Comfort and an all pervading sense of security has also brought in
resistance to any change from the traditional approach to work.
The first step for banks would be to create the required mindset among employees, they should be
reoriented to appreciate the nuances of KM by taking advantage of Technological, Infrastructural,
Financial and Management resources that are available to the organisation. KM guides the personnel in
being able to deliver projects in time in a cost effective manner which is critical in a service industry
like banking. KM instills in the minds of the employees that projects assigned to them have to be
delivered, it teaches them that their roles and the resources available are the ones that matter.
In present era of competition, banks have to acquire, develop, update and make use of th requisite
knowledge of business environment by identifying the areas in respect of which knowledge is required
and acquiring the desired knowledge by induction of the right quality manpower. Develop a knowledge
pool, knowledge bank within the organisation and update the same from time to time; make available
the appropriate updated knowledge to employees (the users) anjrtime, anywhere and reuse the same and
replenish knowledge pools by adding fresh intakes, while getting rid of obsolete knowledge.
5.4.2
KM Model for Banks
Banks can follow the DIKAR model, which is recommended strongly for the software industry. This
model is different from the usual approach in the sense it starts from the end i.e. from the results, which
is a reverse process. In the DIKAR model, since results are kept at the very top and one works
backwards, there is greater possibility of achieving the desired results. In that sense DIKAR is turned
upside down and approached as RAKID where:
R = Ensuring Worthwhile Results
A= Taking effective action such that the effects of which generate data. K= Procuring the
knowledge which is the basis for the above. 1 = Having the necessary information which
is reflected to produce. D= Accordingly data is collected, stored and processed to create

the above information.
5.4.3
Activation of KM in Banks
Problems in effective KM processes are mostly related to behavioural areas and can be solved with the
help of intensive use of technology to some extent but still needs the human and more so, behavioural
inputs so as to put in place a firm foundation for the KM culture. Free communication methods get
established, and more participative management is encouraged.: it is also essential to give way to the
MENT
I 97
"Command and Control" style of working and encourage participative attitude among employees.
5.4.4 Implementation of KM in Banks

In the preparatory stage, banks help the employees make an effort to imderstand the critical business
processes within. Value chain audit and knowledge chain creation audit is conducted in order to
measure the creation of knowledge and sharing of culture. An exercise is carried out to pinpoint the
current and future knowledge requirements. Tacit and explicit knowledge management systems are
developed, which are aligned with the organisational goals. KM is used for developing a new or
customising an existing scheme or product with suitable enabler technology. A link is established with
the overall return on investment and assets (both tangible and intangible) and KM systems developed
based on performance appraisal, role definition, and training methodology.
Once implemented, banks can set up evaluation machinery which could generate data and knowledge
about the KM systems, status and awareness. The essence of KM implementation is thus, developing^
individuals' câbilities to deal with the organisational knowledge profitably and developing
organisational capability through enhancement of support systems.
5.5 APPLICATION OF KM IN BANKS

The increased thrust of service orientation in banks have brought in considerable use for technology as
knowledge management plays a pivotal role in not only securing to protect the customer base but also
broad-basing it in the long run. The storage of data created in respect of customers of a bank would
help study the customer's financial standing and behavioral pattern, whether the customer fully depends
on a bank for all his transactions or only for few transactions and reasons for selecting another for may
be higher value transactions. Customer Experience Management (CEM) which involves understanding
the customers, their preferences, dislikes as also reasons for choosing another bank, could all, form a
major decision making tool.
5.6 I.T & DATABASE MANAGEMENT

Data mining is the process through which the required data can be accessed from the maze of data
stored in the warehouse. The intuitive and tacit knowledge that reside in individuals in the organisation
are invaluable assets and it should be a management strategy to evolve a system by which such
collective knowledge captured and shared by all concerned. Unless this i5 done, intuitive or tacit
knowledge which are necessarily mobile in nature, go with the person when he happens to leave the
organisation.
Technology is an enabler that can impact cost cutting, ^d other processes aimed at rendering quality
and quick service to the customer, but at the same time any iimovation, which negatively impacts the
service, should eschewed. The Centralised Data Warehouse where the data of all customers of the
branches of a bank is stored-should be in a position to provide readily the required information called
for, as imdue delay would tell upon the quality of service. Pursuant to total automation of branches
which turn out sizeable business for the bank, the inter-connectivity among branches to provide any
where banking experience to its customers is quite welcome but at the same time many a customer at
the time of opening or closing the account would have to bear the imdue delay due to the practice of
centralised back office functions. The front office staff who handles customers always have stereo-type
98

replies, blaming the Centralised Data Processing Unit for delays. This does not appeal to the customer
who always expects the service rendered to be fairly quick.
One of the reasons for current rise of KM is the advent of large scale use of technologies like network
computing, Groupware, intranet, e-mails etc. that make large scale knowledge sharing possible among
geographically distributed employees. These technologies are the driving force towards the ubiquitous
availability of information and as such a key driver of knowledge management. Through enhanced
technologies, users can rate and categorise the knowledge they are sharing to ensure that it reaches the
right people. They can also define, categorise and prioritise the type of knowledge they would like to
receive.
New technologies are also making knowledge less dependent on the direct contribution by employees
as the only means of acquiring new knowledge such as:
Data mining allows for gaining new knowledge by analysing past performances.
Electronic access to external sources of information, provide rich resource to create new
knowledge.
Video conferencing, application sharing and electronic meetings are useful knowledge sharing
enablers.
Some of the commonly used KM tools and technologies are as under:

1. Online Discussion Forums: Discussion groups enable the exchange of ideas and information, helping a
geographically separated team function as efficiently as if the team members shared the same office. It provides
an efficient way to get specific answers and keeping every one informed on the relevant issues.
2. Online conferencing and collaborations: Online meetings and collaborations make it easier to communicate and
collaborate with people in an organisation's network. With the chat feature, one can talk with multiple people.
Using the whiteboard, one can explain concepts by diagramming information, using a sketch or displaying
graphics.

3. Instant messaging: Instant messaging system helps every day, more people to collaborate with coworkers,
immediately sharing business information across widespread geographical locations and time zones. It has the
advantage of connecting people in real time across the time zones.
4. Communities of Practice: KM technologies provide a convenient and effective way to form 'Communities of
Practice' (COP), around areas of common interest or projects. Communities are subgroups of people who have a
shared specialisation, interest or project. Users can ask and answer questions, as well as passively read about the
practice area. Discussion forums help in sharing information among commimity members.
5. Document and Content Management: Document management is a systematic method for storing, locating and
keeping track of information that is valuable to a business. A structured document management system can
increase productivity by workers reusing existing documents and expertise already generated.
6. Web Intelligence: It brings together some key information pieces vital for an organisation's survival by focusing
on the organisation's information, public relations and market intelligence needs. It also helps integrate the
organisation with its customers, so as to offer a seamless, time- independent blend of services.
7. Personalised Portal Interface: A personalised, portal interface becomes a great motivator to receive and share
information. Different users are able to have different home pages based on their roles. One single screen on the
computer enables the user to find relevant information in minimum possible time.
5.6.1 DATABASE MANAGEMENT - Adding Vaiue to Customer Services in Retail Banking

The strong urge to lure customers and attract them with several services is an important issue for all organisations. It is
also a necessity in the current era of a cut throat competition. Presenting one's products in a decorative package of
services - personalised or otherwise is therefore inevitable. The financial services too have undergone several changes
with changes in business environment.
The study enumerated here looks into the various Database Management Techniques used by Banks in India and the
extent to which the use has been made a part of everyday customer services by the various sectors of Indian banks.
The databases of the clients can play a veiy important role in customising the services and hence adding value to it.
Highly competitive environment has made the marketing of retail banking services a challenging job. The study
proposes to find out the use of database amongst these banking institutions and the level of acceptability of the same to
meet their organisational goals.
The Indian Banking Sector has evolved immensely through history- starting from the early coinage system to the era of
credit cards and now furthers on to Internet and home banking. Today we have a host of Nationalised, Public sector and
Private sector banks that are ready to cater extensively to the needs of the customer.
Banks are no longer restricted to any particular arena of Finance. With rapid changes in the economic environment,
Indian banks have diversified into several sectors viz.: Consumer/Retail banking. Corporate Banking, Rural
Development, Industrial Development, etc. Again, Indian Bankmg Sector is no longer restricted to Indian Banks alone.
A number of Foreign Banks e.g.: Citibank, ANZ Grindlays, ABN Amro have found Indian markets as highly attractive
and profitable avenues for their business.
5.6.2 I.T in Banks, the Historical Perspective

A brief insight into history reveals the story of the establishment of systemised banking in India. During the British Raj,
there were a few banks such as Presidency, Imperial Bank and the Joint Stock Banks who were the major players. Apart
from these were a few and scattered organisations belonging to small and large kingdoms that deal in lending,
mortgaging and banking activities. By 1930, the banking inquiry committee established the Reserve Bank of India, who
was given the supreme power of monetary control over the rest of the scheduled banks. This kind of control and
supervision further strengthened the framework of the organisations and gave a boost to the bank deposits. Further, this
was followed by the establishment of the Development banks. Co-operative Banks, Regional Rural Bank's etc.
With so many banks now prevalent, the customer has a large choice in front of him. Attracting the customers and
retaining them is then a challenging task necessary for survival. But to be able to do that, banks should be in a position
to understand their own resources properly.
With the introduction in Technology in Banking, more and more number of banks are turning towards modern
techniques to find out ways and means to systematise their functions. Each bank has a huge amount of information,
which can be useful to it in direct and indirect ways. However, it is essential for the banks to be able to maintain the
data in a proper manner so that it can be processed in the required manner. Proper processing can help Banks to
understand explicit, implicit and implied meanings to evolve clear trends and patterns of customer behaviors.
5.6.3 Definition of Database IManagement in Banks

"The management of a list of genuine prospects for whatever it is you have to sell, pinpointing the type of person most
likely to buy it". In simpler terms, it is "a collection of related data organized for efficient retrieval and manipulation".
The names of customers in the database could be obtained from intemal and extemal sources. They may also have been
created to meet specific requirements of the bank. Most organisations now make or try to make optimal utilisation of
the database in its marketing activities and in the up gradation of the quality of its services. Such kind of marketing is
termed as the Database Marketing.
H.R.M-8
-1
I HUMAN
Database marketing can be defined as "A Direct marketing technique emanating from the use of data collection on
actual and prospective customers".
Since banking in its core a service industry, most transactions are dependent on the type of relationships that the banks
share with those who trust them. In other words, relationship marketing can be termed as the pillars of bank stability.
Database Management and database marketing adds to the strength of this pillar by helping in knowing a clear picture
of the customer profile, to understand who requires what and the specific type of service and meet such expectations as
closely as possible.
These databases, also called as the Customer Information Files have to be then indexed and scored according to the
probability of the their purchasing a product or service. One of the direct and earliest application of the databases was
by Mailers or Booklets of information to all customers that would advertise the Bank and give information of
products /services. With technology, databases have been integrated and logically used to produce personalised
packages for its clients. Now, different strategies and styles began to emerge for different banking institutions.
5.7 DATABASE MANAGEMENT METHODOLOGY

Among the various methods used by Banks the,world over are:
1. Segmentation Techniques
2.
3.
4.
5.
6.
7.
8.
Custom Clustering
Data mining technologies
Online Analytical Processing Methods
E-Retail
Database Conquest Marketing
Telebanking
Call Center and Call processing Units.
5.7.1 Data Mining

"Data Mining Technology"~This mode uses both routine and statistical techniques such as Artificial Intelligence, neural
Networks, Fuzzy Logic and Decision Trees. E.g.: Bank of America extensively uses DMT to identify customers for
Loan Campaigns, seek new customers and enhance customer service. They utilise a specially designed Model of
Metadata which serves as a road map for end-users of the database, giving them the context of data and helping to
provide quick service to the customers.
Elaborating further on quicker services. Databases have been used by most American and European banks to reduce
processing times and Queuing of customers. Through the behavioral patterns obtained from records in the database, the
future needs of regular customer are predicted.
Thus as future needs of a customer are known to a bank in advance, the necessary documents are kept ready and
valuable time is saved.
Case Study on Data base Management in Indian Banks.
5.7.2
Objectives of the Study
1. To understand the specific areas in which the database systems are widely used in the Indian
banking industry.
2. To gauge the intensity of the use of database systems for marketing purposes and to enhance the
image of the organisation among the customers by the various banks in India.
3. To know the reasons behind high or poor use of systems in banking industry.
5.7.3
Assumptions
I HUMAN
A1--.Increased use of systems will enable the banks to enhance on their quality of performances.
A2~The greater the involvement of systematised databases in the functioning of the bank the quicker
will be its overall processing times and faster will be its services.
A3~Customers becoming lifelong partners of the bank will be an easy task. This not only ensures
revenues but also creates opportunities to build on business with new people coming from references.
The study would help to bring abou^ a comparative pictur depicting the current level of the use of
databases in Indian banks of three categories:
(a) Private sector banks
(b) Nationalised banks
(c) Co-operative banks.
5.7.4
iUfethodology
Methodology: To obtain a comparative picture, a sample of 20 Banks was taken that covered all three
categories. A semi-structured questionnaire was prepared with 40 questions that encompassed Nature
and Designs of Databases and the level of Use of the databases for the various decision-making issues
related to products and customer services.
5.7.5 Resuits and inferences

Largely the Private banks incorporated the use of Databases Management and Database
Marketing techniques. Even amongst these, the new private sector banks showed an active use
of the modern technologies. This included keeping a systematic knowledge base of their
customers, further dividing them into segments like Loyal, High Net worth. Privileged and New
Customers. The banks aimed at getting to know the customers as much as possible and to track
their purchasing behaviors and preferences to be proactive in their actions towards customer
service.
These private banks were actively and successfully using these techniques for:
1. Computerised Coding of Customers
2. IDs-for Preferred clients
3. Tailor-made Packages
4. Mapping purchase patterns
To handle Techno-Banking Facilities
Call-center Implementation
Most of the above come into practice where there is stress on issues of Class-Banking and Customer Differentiation
for Preferential treatment and Privileges.
Since this is not the issue with nationalised Banks and Co-operative banks, there is less incorporation of Data
Handling technologies in their day-to-day services. It was seen that the Databanks were more used for handling
customer bases and performance reports of the branches. These bases were then used to understand markets and
Competitions. Also as most banks did not believe in Techno-banking, use of technology was limited to major
decision making at the corporate level than at the Branch levels as opposed to Private Banks.
Private banks thus also have an edge on the issue of Proactive disposition since they have the capability to
understand their customer preferences better and much faster than their counterparts.
Similarly is the benefit that arises out of proper database management for sending mailers, alerts, reminders etc to
the customers regarding their investments with the bank.
Due to lack of the technology, at which the Nationalised and Co-operative Banks are slowly picking up, they have
to handle accounts and customers more on a person to person relationship. This is also necessary to a certain extent,
as the proliferation of these banks in rural India is much larger and denser than the new private banks. In addition,
at the rural level a smile and warm greeting by the bankers is much more appealing to the rural customers than the
technical gizmos prevalent in the culture of the urban bank.
However, there was an 85-100% involvement of all types of banks when it came to the issue of decisions on
Promotional Activities.
This shows that the banking sector as such has understood the intensity with which they are faced with immense
competition. Each Bank wants to attract the masses to them and they are all in the race for Customer Acquisition
and Retention and for the low cost CASA deposits.
New private banks in India have reached a fair level of development as far as systems and its iinplementations are
concerned. The old private banks do riot possess the flexibility in their policies that can allow them to involve technical
systmatisation at a large level. Interbranch networking is yet to stabilise in nationalised and old private banks. In cooperative banks, presence of the same is limited, thus hampering data accessibility across the branches of the bank
countrywide.
I HUMAN
9. The People Dimension in KM: Technology usually dominates the KM initiatives because it is the most visible and
tangible of the three components of KM- people, process and technology. However if people and processes are not
set in place there is no guarantee that people will use technology to promote KM in the organisation. Most
organisations need a change of culture without which no KM initiative will take off. Knowledge management (KM)
programs are bound to fail if not supported by leaders through their active participation. Organising knowledge fairs
and knowledge workshops bring people together so that they can share experiences. Face to face contact is an
important pre-requisite to effective computer based knowledge networking under KM initiatives.
knowledge management | 103
A knowledge network is not to be measured by the extent of its reach and capabilities to communicate, but rather by
the extent to which it supports and promotes reciprocity. To build and sustain a KM system, a cultural change in
propensity to share knowledge is fimdamental, which is most difficult part of knowledge management. An
organisation should be able to induce the behavioral change among people who are the contributors and users of
knowledge. It requires strong leadership to bring in cultural changes, set the right direction, and continuously
monitor the progress.
10. Application of KM in Banks - Current & Future: While the banks in India, both under public sector and private sector,
are endowed with adequate intellectual capital, in general they are yet to adopt KM as a strategic weapon for
gaining competitiveness. That is, with exception of a few new generation private banks and foreign banks, all other
banks especially the public sector banks are yet to appreciate and adopt KM initiatives in a big way. This could be
argued to be because of lack of operational flexibility and functional autonomy. Right from the grass root level to
the top management, the need for adoption of KM mitiatives for survival as well as sustained business growth and
competitiveness, has to be understood by all.
Worldwide, all progressive organisations, including many reputed banks and consultancy firms, have already recognised
knowledge of their employees as the most valuable asset; and knowledge of the organisation as the most valuable and
strategic resource.
It is therefore relevant to look into the practical ways in which banks in India can improve their strategic competence in
today's extremely competitive market scenario. International best practices, those prevailing in foreign banks and high tech
new generation banks in India, latest advancements in the field of IT and IT enabled services, research findings relating to
banking industry with practical relevance etc. provide us with certain meaningful insights into the above aspect. These are
briefly discussed in the following paragraphs.
With liberalisation and globalisation of business, competition has become the very core of business success or failure of
firms. This is particularly relevant in the banking industry in India in the post reforms period. Actually, KM can facilitate
competitiveness of a product significantly; because it can contribute, towards putting into practice all the three generic
competitive strategies viz.
(a) Cost Leadership (b) Differentiation and (c) Focus
Banks can gain strategic competence through creating and managing organisational knowledge available to it. Maximum
amount of an organisation's knowledge is it's people; this could be as high as 90% in certain cases, of the total
organisational knowledge. When the knowledge in people is shared it becomes helpful for the organisation as a whole and
can be recorded and made use of for a long time in the fiitin-e. In the present scenario especially in the public sector banks,
and old private sector banks, there is no provision to consider knowledge contributions of the employees as part the
performance appraisal system and also to offer rewards or incentives to such contributions. For solving such cultural and
behavioral issues banks can adopt certain measures like changing their HRM policies to incorporate rewards/incentives to
staff for sharing of their knowledge and also consider such contributions during the performance appraisal process.
5.7.6 Customer Knowledge

This is one of the most vital sources of knowledge of a bank. However banks in India, in general except a few foreign
banks and progressive private sector banks are yet to put in systems for creation, maintenance and updation of suitable
115
customer databases, and to advantageously use the same for various managerial decision making. These decisions include
customer segmentation based on various parameters, studying the behavior of customers based on their track record in
respect of facilities already availed, launching various innovative and "tailor made" products to different customer groups/
segments etc. Various business intelligence software have already been used by foreign banks and new generation private
sector banks for quite some time. This enables their business innovation and also meaningful decision making. It is wellaccepted fact that in today's world of cut throat competition, customer centricity has emerged as a strategic imperative for
all organisations, especially for commercial banks. Consequently, firms are vying with each other for enhancing their
customer service by putting in place latest management practices like Customer Relationship Management (CRM). KM
along with sufficient IT support can be uped as a powerful enabler of CRM. The application of CRM concept on the entire
organisation as well as all the customer touch points gives rise to Enterprise Customer Relationship Management
(Enterprise CRM). This cyclical, closed loop business process seeks to identify, maintain and enlarge the "best" customers
of the organisation. Further, it seeks to drive its business growth and profitability through creation of lifetime value apd
long standing relationships with such customers. Enterprise CRM results in development of "must have" products and
services and also in customer optimisation.
For supporting sound CRM systems in banks, what is expected out of KM is proper maintenance of relevant and up-to-date
customer database by the use of latest IT applications packages which in turn enables the generation of meaningful reports
and statements. Thus, decision-making on such aspects as launching new and innovative products, modifying the existing
ones, customer segmentation based on various parameters, selection of the right customer group/segments for specific
products (based on their track record, eligibility etc.) and so on becomes very scientific and meaningful. Further, this
ensures customer optimisation and better operational eflBciency. Nowadays, very advanced software is available for Data
Mining, which can be used for acquiring customers, increasing value of customers and also retaining good customers.
These are used very constructively and skillfully by some of the dynamic banks and foreign banks. Data Mining also helps
in marketing of banks products since it helps to target the right customers groups/ segments more accurately.
1. KM for Business Innovation: KM contributes substantially to bring about both product and process innovation.
There is no doubt regarding the fact that any business innovation is not caused by chance; rather it is the result of
deliberate and systematic effort by the organisation towards achieving the same after careful analysis of the
opportunities in the environment vis-- vis its own strengths and weakness. KM can act as an important enabler for
the innovation efforts of a bank, since it can provide the latest and relevant information and other decision inputs.
The basic point behind product innovation or process innovation being such factors as changing customer tastes,
preferences, aspirations, profitability considerations etc. a typical KM system can provide all this relevant
information and can prove itself to be one of the necessary pre-requisites for effective business innovation. KM
systems can make development of new products and processes very fast as well as very cost effective.
2. KM for assessing loan risks: KM can provide tremendous inputs in assessing the risks associated with a loan
proposal. Modern KM systems make use of latest Knowledge Discovery and Data Mining (KDD) software. These
systems can extract unknown useful information from different databases and use the same in the given application.
Accordingly, these systems can predict the repayment behavior, credit risk of loans and hence help take sound credit
decisions.
3. Knowledge Analysis: It is not easy to identify what knowledge differentiates between one bank and another. The
process of identifying specific skills contributing to the success of a firm is called knowledge analysis. It is not an
easy subject. Constant practice is required for its development. Leadership among banks will depend on which bank
leads in knowledge. In the 70s and 80s, Citi Bank in India was considered quite dynamic because of its innovative
products (based on knowledge).
5.7.7 THE FUTURE

Banks will see themselves appointing Chief Knowledge Officers who would be responsible for the implementation of the
KM Concept effectively in the near future. Since the future of banking industry would be based on the knowledge economy
which is thriving and developing by the day thanks to IT explosion, KM way would be the only way in which banks can
sustain themselves till such time another major revolution which could match the one on the IT front takes place and which
would force people and processes to look for altematives to IT. Clearly this possibility looks highly remote and unlikely
presently. As of now there is no better way for the banks to manage than the KM way. After all, the essence of KM is the
conscious process of control and organising, planning for knowledge, and evolving a system to motivate people. The
Indian Banking of the future just depends on this as elsewhere.
Case Study
Knowledge Sharing Initiatives at the World Bank - Creating Knowledge Bank.
"The World Bank is changing its vision of itself from that of a financial bank to that of a knowledge bank, with increasing
attention given to supporting knowledge institutions in its borrowing member countries."
-An official at the World Bank Economic Development Institute in 2001.
"Given the complexity of the global challenges we face on a daily basis, it is critical that we respond to the needs of our
member coimtries in timely fashion, and with the best, most relevant knowledge available".
-James Wolfensohn, World Bank President, in 2003.
In October 1996, when James Wolfensohn (Wolfensohn), the newly appointed president of the World Bank, annoimced that
the organisation would transform itself into a 'knowledge bank', there were mixed reactions. Some were excited about
knowledge management and its potential in helping the World Bank achieve its objectives. Others considered it a waste of
time and resources and felt the Bank should stick to its original mission of eliminating poverty.
However, by the early 2000s, the World Bank had already emerged as one of the foremost knowledge organisations in the
world. It was one of the few non-commercial organisations to invest in knowledge management in a major way, and
analysts were surprised at its success in this area in a very short time. In early 2000, the World Bank was recognised as one
117
of the five top knowledge management organisations in the US by the American Productivity and Quality Center (APQC).
In June 2000, the Bank featured in the list of the 10 top Most Admired Knowledge Enterprises (MAKE) in a survey
conducted by the KNOW Network.
By harnessing the vast amount of knowledge present across the organisation and making it readily available to all
employees and clients, the World Bank created a global knowledge community. Knowledge moved seamlessly across the
world to make the work involved in poverty elimination and economic development (the Bank's primary objectives) faster
and more effective.
5.7.8 The Background

The Great Depression of the late 1930s, followed by the devastation caused by the Second World War (1939-1945), left the
world unstable. Economic systems had weakened and world leaders realised the need for a major reconstruction initiative.
Even as the war raged, in 1944, leaders from the Allied Nations and their associates met at Bretton Woods a resort in New
Hampshire in North-Eastem US, to deliberate upon and develop an action plan to stabilise politico-economic conditions in
the world. Representatives of the 45 countries that attended the conference signed the Bretton Woods Agreement in July
1944. The Agreement set up a system of rules, institutions and procedures to regulate world economy and help in
reconstruction efforts of war- ravaged nations. The International Bank for Reconstruction and Development (IBRD) and
the International Monetary Fund (IMF) were the institutional arrangements created under the Agreement to aid
reconstruction. They came to be known as the 'Bretton Woods Twins'. The IBRD, popularly known as the World Bank,
formally came into existence on December 27,1945, and became operational in June 1946, with an initial authorised
capital of $12 billion. Initially, the World Bank focused on the reconstruction of Europe and Japan, while also concerning
itself with promoting growth in less developed regions of Africa, Asia and Latin America. It mainly gave loans at low
interest rates to help finance large scale projects like construction of airports, highways and power plants. However, as the
economies of Europe and Japan revived, the Bank shifted its focus more towards developing nations.
In the 1970s and 1980s, the Bank faced criticism for some of its policies and social and economic issues came into focus.
The critics called the World Bank a promoter of 'neo-colonialism' and condenmed its interference in the national politics of
countries which depended on it for loans. They said the US, the most powerful country in the Bank's membership, sought
to promote its own interests through the Bank's policies. (Refer I Exhibit on the membership composition of the World
Bank). To address these issues, the Bank set up a three member Inspection Panel in 1994 to examine the allegations.
In the early 1990s, the World Bank announced that its specific objective was the elimination of global poverty. It became
involved in several local small scale industries in different countries and set up facilities to improve the general standard of
living in the least developed areas of the world.
Thus case shows an analysis of the strengths and weaknesses of the knowledge sharing system at the WoridBank.
Let Us Sum Up
In unit 5 we have been introduced to the current exiting topic of Knowledge Management, its concepts and how it is
applied in the Banking Industry.
The application of Knowledge Management in banks and progressive use by different banks. We also saw I.T and
Database Management as a major support for Banking Operations.
Keywords
The Knowledge Management capital in Banks Key drivers for Knowledge Management in Banks
Activation of Knowledge Management in Banks - Both in Private as well as Public Sector Banks Data Mining
Online Discussion Groups
Instant Messaging
Check Your Progress

1. KM refers to management of knowledge. t
2. KM is not applicable to traditional Indian banks. f
3. Data mining is the basis for KM, used in document and content management. t
4. Private banks understand customer preference using technology. t
5. Traditional customer relations in PSU and cooperative banks are better than the impersonal, hi- tech relationship
of modem banks. f
6. KM is an important enabler, for innovative efforts by banks. t
Answers to Check Your Progress

1. Tme, 2. False, 3. Tme, 4. Tme, 5. False, 6. Tme,
Terminal Questions
What is Knowledge Management and its significance in industry today?
As a service industry, intellectual capital is the biggest asset in the banking industry. Elaborate.
How has technology transformed the profile of Human Resource in the Banking Industry?
V -V'.-.-;-..-'..
....
ni i human resuicî:^
References Bibliography
IBA Bulletin
Effective Executive ICFAI University
Professional Banker
Webiiography
http://www.eineraldinsight.com
http://www.accesskm.com
http://www.KnowledgeStorm.com
http://www.KMBook.com
http://www.brint.org/
MODULE-B
BUILDING AN HR STRATEGY
Units
6.
7.
CEO and His Team
8.
Communication
9.
HR Functions
10.
Vf
<B
J
ir ^
HR AS A STRATEGIC PLAYER
STRUCTURE
6.0
Objectives
6.1
Introduction
6.2
6.3
HR Strategy Formulation and Implementation
6.4
Need for a Distinctive HR Strategy
6.5
Connecting Strategy to Organisations
6.6
Strategy Execution
6.7
Aligning HR Systems with Decision Framework
Let Us Sum Up
Keywords
Terminal Questions
References
r aw I muM
6.0 OBJECTIVES
Understand the importance of HR as a strategic player
Developing a distinctive HR Strategy
Strategy Execution
Aligning HR Systems to the HR Strategies
6.1 INTRODUCTION
The following anecdote is described by Dave Ulrich in one of his articles.
"A while back, the vice president of hvtaan resources (HR) of a big consumer product company
decided to visit with a few key customers and improve his line of sight with his company's
marketplace. To avoid wasting his customers' time, he began by reading everything he could-annual
reports, reports, product brochures, analysts' reports. His counterpart in sales was sceptic of the whole
idea, but once the HR-VP showed how knowledgeable and thoughtful he was, his sales colleague
agreed to set up a meeting with the VP of purchasing at one of their main customers. The moment they
walked into the office, however, the customer snapped, "I'm busy today. Why should I spend time with
you?"
This short story captures the past, present, and future of the field of HR. Twenty years ago, it would
have been unthinkable for almost anyone in HR to even consider spending time with external
customers. HR professionals built staffing, compensation, training, and other programs and policies
that focused on employees and kept companies legally compliant. Over the last few years however, HR
professionals have worked to become business partners and to align their work with business strategies.
They have been coached to spend time with general managers and with their counterparts in sales,
marketing, and manufacturing to ensure that HR work helps deliver business results.
6.2 HR AS A STRATEGIC PLAYER

Most discussions on strategy today deal with the Balanced Scorecard model as the benchmark as this
approach takes into account all major aspects of an organisation including the financial, customer,
internal processes as well as learning and development. However, a strategic approach in HR needs to
go far beyond the definable limits as HR deals with a vital and not easily definable resource namely the
Human Resource. Some of the major points to be covered while formulating strategy are as under:1. How strong is the linkage between the HR activities and the business strategy?
2. Does HR take an active part in the overall corporate strategy?
3. HR to play a vital support role by getting the best out of every single human resource that the
organisation invests in.
4. HR to create an environment for optimising the full potential of employees.
5. HR to put in place a structure

and approach whereby continuous
improvements are possible in all
major activities where people strengths converge so as to arrive at the best fit for the right job.
cb manadei
6.2.1 Developing Strategy

In most organisations today, HR is a major support function and one that is more involved in resourcing
and placing people in various functions. Again, because of time constraints and work pressure, HR is
not exactly seen to be proactive and a number of instances arise where marketing and other business
leaders always find HR's inadequacy as a major reason for non-performance. Unless the organisational
development process is closely related to organisation's driving strategy, the HR strategy is unlikely to
be effective. A number of progressive companies have outsourced a lot of routine activities currently
performed by HR, thus giving a very clear indication that HR is as good as any back office function.
Typically a back office function is understood as something not directly relevant to the core activities of
an organisation with hardly a say in the organisation's strategic approach to business.
No HR professional would agree to label his department as a back office fimction as HR has a far more
responsible job to perform. Jack Welsh in fact went to the extent of calling the HR department among
the most critical functions in an organisation. He worked closely wi& the Head of HR at GE to bring in
the legendary changes in training and quality measures that transformed GE to the top of the corporate
hierarchy. Today professional comganies the world over, rely on good human resources to take them
where they intend to go and HR must therefore align with the business and transform itself into a
business partner than a business supporter. HR needs to build a strong team of professionals with their
own areas of strength. For HR to command the respect of all others in the corporate, the following
should be the constitution of the HR department:
The Resourcing Expert who is able to identify each and every potential recruit as a considerable
value add to the organisation. Recruitment then must no longer remain a routine activity but go
beyond, to ensure that candidates with the right profile are available who have a combination of
education, good family upbringing and good social skills with the potential to grow with the
organisation.
The Developer: Every HR professional must believe in the Pygmalion Effect. Just as good
schools and good coaches can transform individuals into excellent students and outstanding
sportsmen, an HR professional as a developer must play the role of a coach, a catalyst and above
all a mentor. Many youngsters join organisations with stars in their eyes and look forward to that
one encouraging spark which she can relate to. Stories abound of a number of individuals in
high positions today who still remember their very first boss and mentor and give open credit to
them for their current success.
The Behavioural Specialist: Organisations have silos and individuals can get sucked into
systems and procedures which are not necessarily meaningful and contributory. The HR
professional will therefore require to look around and understand the undercurrents in the
organisation and guard against undesirable practices getting an upper hand. He should be a good
mind reader, a specialist in body language and must have a good netwoili to catch up with the
grapevine. He anticipates a problem much before even the management gets to know about them
and would have solutions to nip such issues in the bud.
The Value Creator: Individuals have to create value. The market is full of stories of headhunters
who source out exceptional talent be it in marketing, finance or even in manufacturing. What
they are looking at is value which has been created, by the individual over a period of time.
There
is a commercial value attached to any individual who succeeds and is exceptional. HR must necessarily
take on this responsibility of creating value for the entire department with the organisation. So when the
marketing team is not successfiil against competition, HR must be able to develop a people's analysis to
understand finstrations, if any and design a motivational approach to assist the marketing team.
HR professionals add value when their work helps someone reach their goals. It is not the design of a program or
declaration of policy that matters most, but what recipients gain from these actions. In a world of increasingly
scarce resources, activities that fail to add value are not worth pursuing. No matter how interesting or valuable an
activity may seem to those doing it, if those who receive the output of that activity do not find it of value to them,
continuing the activity cannot be justified. The HR value proposition means that HR practices, departments, and
professionals produce positive outcomes for key stakeholders, employees, line managers, customers, and
investors. When others receive value from HR work, HR will be credible, respected, and influential.
6.2.2 HR Transformation
Many attempts at HR effectiveness start without defining value. For example, some companies invest in e-HR
services such as portals and online employee services and believe that they have transformed HR, but they have
not. While e-HR may be a part of an overall transformation, it is merely a way to deliver HR administrative
services. Moving toward service centers, centres of expertise, or outsourcing does not mean that HR has been
transformed. If new delivery mechanisms provide basically the same old HR services, the function has changed
but not transformed itself HR transformation changes both behavior and outputs. Changing any single HR practice
(staffing, training, appraisal, teamwork, upward communication) does not create a transformation. Unless the
entire array of HR practices collectively adds value for key stakeholders, transformation has not occurred.
Transformation requires integrating the various HR practices and focusing them jointly on value-added agendas in
intangibles such as customer connection, organisation capabilities, and individual abilities.
Writing an HR strategy or making a statement about HR roles does not necessarily create a transformation. In
presentations on HR strategy, a method has been evolved to ask six random participants to complete the following
statements as fast as they can:
Our goal is to be a___________________.
We will do this by leveraging
And we will ensure that we anticipate And we
will invest in
And we will be known for
And we will work with unyielding
Filling in these six blanks with the first thing that comes to mind and then connecting these statements to a vision
generates an amazingly plausible HR strategy statement that can convert a statement of desire
HR AS A STRATEGIC PLAYER
and actual transformation from corporate rhetoric to actionable steps. HR transformation must be more
than rhetoric; it must shape behavior and create and ensure stakeholder value. A fundamental
transformation of HR starts with a definition of HR value-who the receivers are and a clear statement of
what they will receive from HR services. It also requires a complete picture of all the elements of HR
transformation, so that piecemeal attempts do not become isolated events.
6.2.3 Premise of HR value

Since value is defined byfthe receiver, not the giver, any value proposition begins with a focus on
receivers. Often, HR professionals have beliefs, goals, and actions that translate into things that they
want to have happen in their organisation-so they go straight for their desired results, without paying
enough attention to the perspectives of others. Influence with impact occurs when HR professionals
start with the beliefs ai\d goals of the receivers.
To an employee worried about getting laid off, HR professionals should demonstrate that being more
productive will help the employee stay employed. To a line manager worried about reaching strategic
goals, HR professionals need to show how investment in salq? training may help deliver business
results. As for customers, the HR professional's interest must create value in the products and services
customers receive. For shareholders who are worried about shared returns and growth, HR must create
organisations that deliver results today and an assmance and confidence that results will be delivered in
the future.
HR professionals need a perspective that is compatible with and distinct from other business
perspectives. An HR perspective that is both unique and powerful is one that establishes the linkages
between employee commitment, customer attitudes, and investor returns. This unique view
demonstrates a powerful connection between what is carried out by managers and employees inside the
firm and what happens with customers and investors on the outside. Thus when HR professionals view
the market environment, they should address the following questions:
What are the organisational capabilities that my company must have to create products and
services that result in our customers' taking money out of their wallets and putting it into ours
instead of giving it to our competitors?
What employee abilities do our people need so that they can understand and respond to shortterm and long-term market demands?
How do we invest in HR practices that deliver business results and how do we organize HR
activities to deliver maximum value?
How do we ensure that HR professionals will know what to do and have the skills to do it?
When HR professionals respond to these questions, they will know why others would benefit by
listening to them, because they will be delivering real value and the recipient will know what that value
is. When HR professionals begin with the receiver in mind, they can more quickly emerge as full
strategic contributors; add greater value for key stakeholders (customers, investors, line managers, and
employees); enhance business productivity; achieve measurable and valuable results; create sustainable
competitive advantage; and have more fiin in their careers
H.R.M-9
ns I HUrÂf^ RESOURCE MANAGEMENT

6.3 HR STRATEGY FORMULATION AND IMPLEMENTATION
6.3.1 The Seven-Step Model For Using HR as a Strategic Business Asset
Clarify and articulate the business strategy
Create a strategy map for the llfm: Business Indicators - teadini and lag Results - tangible and
intangible
finn'a
strategy
map and
Periodically testHR
maasunss
Align the HR architecture with HR HRftmclion HR system
Strategic employae behaviors
Design the strategic measurement system: The HR scorecard Results measurements - tangable and
intangable
Execute management by measurement
6.3.2 Evolution of HR Strategy

The HR role within a firm has evolved over the past century quite dramatically:
1. The traditional perspective was to view HR or the earlier personnel department as being purely
administrative - administering benefits and payroll.
2. In the 1990s, HR started to be seen as a strategic asset from several perspectives:
ns I HUrÂf^ RESOURCE MANAGEMENT
Personnel - Hiring and developing exceptional employees.
Compensation - Rewards for exceptional performers.
Alignment - Executing whatever management wants.
High-performance - Using HR to achieve greatness.

Developments over the last decade suggests that HR has a direct impact on business performance since
the HR architecture influences how effectively a business can execute its preferred business strategy.
HR's contribution to the success of a firm's strategy can be measured. HR needs to show it is helping
control costs by driving out inefficiencies in the HR fimction, that it is creating value at all points of
intersection between parts of the HR architecture and the strategy implementation process. HR's
NR. AS A STRATEGIC PLAYER \ 117

conventional metrics (hotirs oi training," fime tb fill a position, tmnover rates) need to be replaced by
new metrics which fulfills internal customer demands, subject of course, to legal compliances.
6.3.3
Strategy Implementation
HR managers should identify all HR performance drivers and HR enablers or deliverables which exist
within the strategy map, and enhance those factors that can be developed. To be able to correctly
identify where HR creates most of its value, HR managers must understand the business intimately and
in detail. That will then give them the insight to see precisely where HR deliverables are supporting the
firm level performance drivers in the strategy map. This will allow the return on investment (ROI) in
HR to be calculated using these three steps.
Step 1 - Identify all potential costs: Costs comes in various combinations such as Fixed - those that
don't vary with production levels. Variable - those that change directly with the level of output and Sunk
- the total resources invested in a project.
Step 2 - Identify the likely benefits: Every expenditure must find a corresponding revenue generation;
and investment on human assets, should also correspond to contribution by high-performing employees
as opposed to the output of low-performing employees. The economic impact of an average
performance must get compensated by the superior performance of a higher cost employee.
Step 3 - Calculate the ROI of the program: The ROI can be expressed as a percentage or counted in
cash terms; or in time slots, indicating the amount of time required before the program recovers its
costs. This could be stated as breakeven, more sophisticated net present value calculations to reflect
factors like the opportunity cost of capital, uncertainty and risks or even incorporate benchmarks from
peer group companies for improvement.
"Determining the ROI of specific HR interventions, whether as an end in itself or as a means of
deciding on policies and practices, is not as difficult as it might first appear. Nevertheless, it does
require some knowledge of finance, accounting and the process of capital budgeting. It also requires a
consistent, step-by-step approach."
- Brian Becker, Mark Huselid and Dave Ulrich
6.3.4
The HR strategic measurement system
A well designed HR scorecard will accurately measure the impact of all HR policies on organisational
performance and capture the full impact of HR. A well thought-out HR scorecard has four basic
dimensions; HR Deliverables, which help identify the causal relationships through which HR generates
value in the firm, with an emphasis on HR performance drivers and HR enablers. Once the HR
deliverables have been clearly defined, the High-Performance Work System (consisting of HR policies,
processes and practices) implements the business strategy and generates the deliverables specified. It is
also important to measure how the HR system is aligned with the firm's key performance drivers. When
properly aligned, the HR system should be making a definable and significant contribution to the value
creation process.
These are the metrics, benchmarks and standards by which the HR system's performance will be gauged
and evaluated. Most HR managers divide their key efficiency metrics into two categories; Core
il
118
i HUMAN RESOURCE MANAGEMENT
efficiency measures - significant expenditure items which make no direct contribution to the firm's
strategy implementation and; Strategic efficiency measures - HR activities and processes designed to
produce HR deliverables such as cost per new hire, costs per trainee hour, HR expenses per employee.
1. Execute management by measurement: Implementing the HR scorecard is more than just a oneoff event. It is also more than simply keeping a running total of HR results. Instead, a well
constructed HR scorecard allows HR managers to monitor their input into the firm's results on
an ongoing basis and make periodic adjustments to ensure the HR architecture remains aligned
with the evolving business strategy of the firm. If the HR scorecard can solve a long standing
problem or do something significant, people will notice. That will create momentum, which can
then be strengthened with regular updates and validation programs. Update the HR scorecard,
make an ongoing investment in the methodology and people will gradually get onside with the
scorecard as they see what it is achieving.
5. Need for a Distinctive HR strategy: A great human resource strategy provides a compelling and
convincing business case for aligning people and organisation with business strategy. It
commands the attention of management and builds the necessary commitment for required
resources and support for implementation. Great strategies create a dissatisfaction with the
current state of affairs and causes an acute sense of urgency and readiness to change. The
importance of people to organisational success has multiplied as businesses have become more
knowledge- and technology- driven. As a result, rnost sttategy gurus emphasise the importance
of the "individualised corporation".
6.3.5 Corporate Strategy and HR Strategy

HR has come centre stage in Indian traditional business houses which were exposed to global
competition for the first time in the last decade. Increasingly, questions are being asked about what
value the business group adds to each individual business. Most groups have focused on HR as an area
for change - the Aditya Birla group and the RPG group are two examples of prominent business houses
that have made visible and substantive interventions in the HR arena towards increasing
professionalism, independence in operational decision-making, greater transparency in performance
measurement, and market-linked compensation. Some groups like the Tatas recognised early that HR
initiatives were a powerful way for the group to create value - the creation and running of the TMTC;
the Tata Administrative Service; support for XLRI; and an industry renowned graduate engineer
training scheme at Tata Steel and Telco.
For companies with otherwise strong HR strategies like the software majors, the new challenges for HR
are likely to be on a fresh dimension of corporate strategy - mergers and acquisitions. Research on the
success and failure of M&A has consistently found post-merger integration especially on the people
front to be a significant factor in the success of a merger or acquisition. Companies that have grown
through acquisitions like Cisco Systems have specialised groups that focus on these integration issues.
6.4 CONNECTING STRATEGY TO ORGANISATIONS 6.4.1 A

5-Point Agenda for HR Professionals
For corporate, business and HR strategies to be integrated well, it is apparent that the top management,
business heads and HR professionals need to work closely with each other. In most of the companies
mentioned above, the lead and the philosophy have come from the vision and strongly-held beliefs of
the CEO with HR professionals in an important, but essentially complementary role. There are five
ways in which HR professionals can enhance their ability to contribute to this integration process.

1. HR professionals must spend more time and effort understanding the business environment and
the key strategic issues faced by the company: HR professionals need to be able to anticipate
issues that will be of concern to the top management before they actually come on the table. They
also need to build credibility with the top management. With the increasing uncertainty in the
business environment, and the volatility of different markets, organisations are increasingly
forced to take drastic decisions at short notice. HR must step in to soften the blow if such drastic
steps result in employee downsising.
2. HR professionals must get more involved in the nitty-gritty's of the business, i.e., in operational
details and issues: In a number of progressive companies, line managers are expected to perform
a number of HR functions as those with a good track record enjoy considerable credibility with
people across the organisation. They are also seen as being able to focus more on performance
issues. HR professionals will then have no option but to get their hands dirty by understanding as
much of operational issues as they can. If opportunities arise to move into a business or
operational role, they should be pursued with alacrity. Better understanding of operational
concerns will also help HR professionals play a more useful role in training and development,
transcending behavioral training programmes and leadership. This is particularly important in an
era when domain knowledge and technical expertise are becoming more important.
3. HR professionals must move towards taking an integrated look at the people in the organisation,
bridging the gap between HR and IR (Industrial Relations): Manufacturing organisations are
becoming more compact and relying more on manufacturing technology (automation, hi-tech
design software, real time customer feedback) to ensure output and quality. The worker on the
shop floor is becoming more qualified, multi skilled and is operating more and more expensive
equipment. In service organisations such as call centres and other remote service providers, in
spite of the repetitive nature of the work, employees see themselves more as professionals than
blue collar workers.
4. HR professionals must see themselves as knowledge workers and facilitators of knowledge flows
within the organisation: Organisations are increasingly dependent on leveraging knowledge from
within the organisation to be competitive in the marketplace. Documentation and sharing of such
knowledge helps organisations do this effectively. Performance appraisal processes and incentive
systems need to reflect the importance of this activity. Besides creating such systems within the
organisation, HR professionals need to first internalise the knowledge creation and dissemination
mindset within themselves.
5. HR professionals need to change from a support paradigm to a value creation paradigm: To be
recognised as an important contributor to the performance of the company, HR contributions
need to be measured in the right framework. Unfortunately, HR professionals often measure
themselves in a very limited way such as "we hired 120 people" instead of "we enabled the
addition of an additional Rs. 5 crores to the EVA of the company". Human resource valuation
may never enter balance sheets as a regular practice,, but concepts like EVA are here to stay, so
HR has to find ways of linking itself to such measurement concepts.
120
HUUm RESOURCE
6.5 STRATEGY EXECUTION

All good strategy has to convert itself into meaningful action and desirable results. We will here
examine the impact of good strategic action in major HR functions.
6.5.1 Acquisition of Employees

In the era of increasing globalisation and the struggle to create sustainable competitive advantages,
organisations are continuously evaluating their strategies to ensure they have the expertise needed to
help achieve the mission of the organisation. The economic challenges post the recent recession of2008
continue to affect organisations' financial position and subsequently recruitment and selection
strategies.
Gatewood and Field (2001) define selection as a "process of collecting and evaluating information
about an individual in order to extend an offer of employment." Fitz-enz (2002) described ways of
measuring the cost per hire, source cost per hire, and interviewing costcritical metrics in deciding the
cost of acquiring employees. To understand fully the value and effectiveness of the selection process,
one has to analyse the impact of the employee's contribution to the organisation not only from a cost
factor, but also from performance in the short-term and long-term. One also has to examine the
effectiveness of the planning process, advertising and recruitment sources, effectiveness of the
interviewers in selecting the right candidate, change in the pool of qualified candidates, and
performance of the incumbent on the job.
The process entails determining how many employees the organisation needs to perform at its optimum
and where the employees should be working in the organisation given the external and internal
challenges and opportunities. With the economy till struggling to improve after the recent recession,,
organisations have been forced to lay off thousands of employees in some cases in order to survive. The
real challenge for HR in the upcoming months and even years will be to predict the demand for
products and services and then to predict the manpower needs, keeping in mind optimisation of the
employee spend. HR planning should assess the skills and competencies currently available within the
organisation and what other intellectual capital will be needed in the future to meet the needs of the
stakeholders adequately.
6.5.2 Training and Development

The American Society for Training & Development estimates that U.S. organisations are spending more
than $60 billion annually on employee training and development. Progressive Indian companies also
spent considerable amounts on training. The PSU banks in India also spent considerable amounts on
training but then as it happens often, candidates do well during the training programs but once they
return to work, they go back to the old ways and the impact of training is not felt. Given this significant
investment, it is reasonable to ask about the benefits of such investments, especially because more
companies are seeing a need for lifelong learning and are integrating technology in their strategies.
Conceptually, T&D has been shown to be a source of competitive advantage; there is still a critical need
to develop frameworks and strengthen the argument for the actual benefits provided by this
intervention. Developing a framework for assessing the financial benefits of T&D, Swanson (2001)
listed three questions that provide the variations on the assessment of human resource development
(HRD), of which T&D is a major category.
1. Has the employee's attitude changed since the training?
2. Did the employee acquire knowledge and expertise in an area that would enable him/her to
perform more effectively on the job?
3. Did the employee's performance improve after the training?
4. How has the change in the employee's performance affected the achievement of the business
STRATEGIC PLAYER
121
strategy and performance of the organisation?
6.S.3 Performance Management

"Performance management systems make clear to employees what is expected of them and assure line
managers and strategic planners that employee behaviors will be in line with the company's goals"
(Noe, et al., 2003). Many organisations still rely on the performance appraisal, viewed as an annual
ritual and primarily the responsibility of the HR function. In today's economy, which calls on the
owners of performance management to create a competitive advantage, Noe, et al. (2003) grouped
performance management into three categories of defining performance, measuring performance, and
the feedback aspect of performance.
^
Performance management systems are geared to ensure that each employee within the organisation,
based on previously conducted job analysis, is performing the tasks intended at the expected level to
support the strategic business objectives of the organisation. The thinking of HR practitioners and other
business leaders that an annual performance appraisal is performance management must become
obsolete. Effective performance management entails a process where each employee is fully aware of
his or her role in the organisation, the type of output expected, and how the output will be measured.
One of the critical strategies in performance management is to understand the fundamental role of each
employee in achieving the mission of the organisation. By clearly identifying the purpose and role of
each individual, one is able to identify where deficiencies may exist and develop corrective actions,
identify the strengths of each individual, and maximize each employee's potential and hence his or her
contribution to the financial bottom line of the organisation.
6.5.4 Reward System

A number of studies have shown that effective reward systems can significantly increase the motivation
of individuals to increase their performance. The fundamental intent of rewards in organisations is to
provide incentives to achieve individual and organisational behaviors that would enable the organisation
to create competitive advantages and maximize the value of the shareholder's investment.
A survey conducted by Watson Wyatt (1998) concluded that organisations with reward systems linked
to business strategy to a great extent have higher returns than those with less of a linkage. Schuster
(1996) also concluded that organisations using strategically designed pay systems perform better than
the traditional pay counterparts based on financial objectives such as earnings per share, return on
assets, profit per employee, and cash flow; therefore, the outputs of an effective reward system are
centered around the financial profitability of the organisation and the creation of competitive advantage
for the organisation.
6.6 ' ALIGNING HR SYSTEM WITH DECISION FRAMEWORK

A key aspect of successful leadership is the ability to understand one's workforce, to be able to
influence their behaviors, and to predict their behaviors given any specific conditions. McShane and
Von Glinow (2002) defined organisational behavior as the study of what people think, feel, and do in
and around organisations. Focusing on organisational behavior is important in assessing whether the
way people are thinking, feeling, and behaving corresponds to the strategic intent of the organisation
and produces the outcomes necessary for the attainment of the organisation's business goals.
Organisations can be much more successful if HR and other leaders are able to analyse historical data,
benchmarking other departments and organisations, and even using simulations in planning and
implementing future interventions. The measurements for organisation theory and behavior would
therefore be the ability of HR and other leaders reasonably to predict and plan accordingly for the future
based on historical data and current environments.
Recognising the importance of showing how HR contributes to business strategy and financial
profitability, and determining the level of HR effectiveness are major areas where HR can play a
strategic role. Given that several large-scale studies have proven that HRM is a critical driver in an
organisation's financial performance, it is imperative for HR and other leaders to understand the critical
nature and utmost importance of monitoring the effectiveness of all HR activities in creating value for
the organisation.
The HR profession is at a juncture where measuring HR's efforts has become an integral focus of the
HR department. Indicators of a successfully crafted strategic plan include creating advantages that are
sustainable over a long period. Has the planning resulted in (1) attainment of the organisation's goals
and objectives, (2) financial profitability, (3) positioning to create advantages for the short-term and
long-term, and (4) creation of a stronger sense of social responsibility? In essence, this process
determines the decisions and actions an organisation will undertake to create and sustain competitive
advantage.
6.6.1 Business Strategy and HR Strategy Implementation - Indian Scenario

Changes in business strategy pose interesting problems for HR strategy. Consider the case of Tata
Consultancy Services (TCS), India's largest and highly successful software company. TCS has always
been well known for its good training programmes that enabled engineers from diverse disciplines to
become productive software programmers within a short period of time. In the days of body shopping,
TCS was seen by students on engineering campuses as a passport to the US. After a few assignments
with TCS, many of them found jobs in the US, often with the very companies where they were working
for TCS. TCS did take action against some of these people, filing cases to recover bond amounts, but on
the balance did not seem exceedingly concerned by the constant outflow and the need to replenish the
stock of software professionals. However, with the increase in size, the shift to the offshore mode, and
the need to increase value added per employee, employee retention and a higher skill profile have
become more important. Today TCS is making a transition to hiring experienced people from the top
business schools with competitive salaries and to shedding the image of being a relatively poor
paymaster and merely a passport to the US.
Let Us Sum Up
In this unit we have understood the strategic nature of HR and how HR can be used as a strategic tool
for organisational development.
We have also seen the transition of HR into a strategic fimction and how strategy can be applied in all
HR activities to give a more meaningfiil approach to the HR fimction.

Keywords
Strategy HRValue
HR as a behavioral specialist Sustainable strategic success
Check your progress

1. HR must create an environment for optimising full potential of employees. t
2. Use of increased technology in process will transform the HR fimction. f
3. HR practices must deliver business results. t
4. An HR scorecard will measure impact of all HR practices. f
5. The lead for good HR practices always comes from progressive CEOs. f
6. Training always results in an attitude change in the employee. f

1. True, 2. False, 3. Tme, 4. False, 5. False, 6. False,
Terminal Questions
1. How does one develop HR strategy for an existing company with no formal HR fimction?
2. The HR fimctionary has to find a place in the top management by being strategic. Elaborate.
3. What are the applications of HR strategy in banks?
References
Sumantra Ghoshal and Christopher Bartlett The Individualised Corporation HarperBusiness, 1997
Michael Porter Competitive Strategy Free Press, 1980
Charles W.L. Hill and Gareth R. Jones Strategic Management Theory: An Integrated Approach
Houghton Mifflin, 1998
124
M/
Dorothy Leonard Wellsprings of Knowledge Harvard Business School Press, ' 1995
Nucor's business and HR strategy are taken from Pankaj Ghemawat and Henricus J. Stander III
Nucor at a Crossroads Harvard Business School case No. 9-793-039 May 5, 1993
Details of Lincoln's HR strategy are taken from Jamie O'Connell and Christopher Bartlett Lincoln
Electric: Venturing Abroad Harvard Business School case No. 9-398-095, April 22,1998.
For more details of how McKinsey matches its corporate strategy and HR strategy, see Sumantra
Ghoshal and Christopher Bartlett The Individualised Corporation and Christopher Bartlett McKinsey &
Company:
Managing Knowledge and Leaming Harvard Business School case No. 9-396-357 April 20,1998.
Se Rich Teerlink & Lee Ozley More than a Motorcycle: The Leadership Journey at Harley- Davidson
CEO AND HIS TEAM
STRUCTURE
7.0
Objectives
7.1
Introduction
7.2
Role of CEO
7.3
CEO and Talent Management
7.4
Executive and Line Managers
7.5
Succession Planning
7.6
HRAudit
Let Us Sum Up
Keywords
Terminal Questions
References
126
7.0
I ^ HUMAN RESOURCE MANAGEMENT
OBJECTIVES

Understand the role of the CEO in modem organisations
7.1
CEO and talent management

Executive Team and Line Managers
Succession Planning
Effectiveness of HRD through HRD Audit
INTRODUCTION
The "chief executive officer" is the singular organisational position that is primarily responsible to carry
out the strategic plans and policies established by the Board of Directors. In business without a board of
directors (sole proprietorship, partnership, etc.), the "chief executive officer" is the singular
organisational position (other than partnerships, etc.) that sets the direction and oversees the operations
of an organisation.
7.2 ROLE OF CEO

Ask what a chief executive does and you will likely be told that he/she "plans," "organises,"
"coordinates," and "controls." In fact, these four words date back to 1916, when Hemy Fayol first
described the executive's job and do not describe management work at all, but only certain ones of its
vague objectives.
Over the years, a number of researchers have undertaken systematic studies of the work of managers,
usually by having them fill out diaries or by actually observing them while they worked. From an
analysis of this research, and from more specific examination of the ways in chief executives spent their
working time, a picture of the top executive's job emerges that is entirely different from the classical
view of managerial work.
"Figurehead", the simplest of roles, describes the manager as a symbol, required by the status of the
office, to carry out a variety of social, legal, and ceremonial duties. The leader role describes the
manager's interpersonal relationship with his/her own subordinates, the need to hire, train, and motivate
them; in other words, developing a human organisation. The lison role focuses on the manager's
interpersonal dealings with people outside of his/her own organisation. Here he should establish sound
relationship with suppliers, dealers, govt, agencies and other companies as well. In the monitor role, the
CEO continually seeks and receives information about the organisation to understand the environment
thoroughly. It does not stop here. Ultimately he should asses and monitor the company's performance.
As entrepreneur the manager takes responsibility for bringing about change in the organisation. Here,
we deal with strategic decisions, objectives and priorities. As resource allocator, the CEO decides who
will get what in the firm. The CEO schedules his own time according to their own priorities; designs the
organisation stmcture, in effect deciding who will do what; and authorises all its important decisions.
No major action can be taken without the CEO's approval, for the CEO must take responsibility for it.
Finally, as negotiator, the manager takes charge whenever the firm enters into crucial negotiations with
other parties. His presence is required because he has the information and the authority to make the
"real-time" decisions/hat difficult negotiations require.
CEO AND HIS TEAM | tZT
1. The chief executive must serve as the key link between the organisation and its environment. In
the liaison role the manager develops high-status contacts, and in the spokesman and negotiator
roles, deals with the fum's public. In effect, the CEO uses his status in the maintenance of prime
links with outsiders. He is the nerve center of key information in the firm and must take full
charge of the organisation's strategy-making system. Decisions related to crises, problems, and
major opportunities must be overseen and integrated by the chief executive.
The chief executive officer is the overall, primary management and leadership role in the organisation.
Therefore, it is critical that chief executive officers have strong knowledge and skills in a wide variety
of
areas.
7.2.1 Planning
Business Planning (plan a new business organisation, product, business department, etc.)
Strategic Planning (establish organisational goals and how to reach them)
Leading, co-coordinating activities and Resources (including performance management)
To briefly summarise at this stage, the CEO has to:
Identify key activities.
Assign each key function to be the exclusive responsibility of one executive who is selected on
the basis of personality and competence.
CEO functions as the captain of the team.
7.3 CEO AND TALENT MANAGEMENT

The management of a company's pool of talent is now too important to be left to the human resources
(HR) department alone and has become the responsibility of the top executive. This is the main finding
of a study by the Economist Intelligence Unit in co-operation with Development Dimensions
International (DDI).
The study consists of interviews with 20 corporate leaders. All 20 corporate leaders interviewed for the
study said that talent management is their responsibility. Of the 18 chief executive officers (CEOs) and
two chief operating officers (COOs) interviewed, seven say they spend 30-50% of their working time
on talent management, and a further seven executives estimate their time commitment to be about 20%,
a substantial percentage, given a top executive's crowded agenda. The remaining executives say it is a
priority and either spend 5-15% of their time on talent management or could not provide a time
estimate. In the words of Tom Wilson, the CEO of Allstate Corp.:
"The most important thing I have to worry about is people." And John Swainscjn, the CEO of CA Inc.,
says: "I would say on a long-term basis, as the CEO, I have primary responsibility for the issue of
organisational health and ensuring that the management team remains vital, relevant and refreshed, and
that we create a process to nurture and facilitate our own succession. That is one of the two or three
most important things that a CEO must do."
Almost all the companies whose senior executives were interviewed generate at least US$1 bn in
annual revenue and possess strong brand recognition. They cover a broad cross-section of industries,
including retail, manufacturing, financial services, energy, technology, consumer goods, real estate,
consulting.
128
pharmaceuticals and medical devices. The 20 corporate leaders interviewed are located in ten major
industrial countries, including the US, the UK, Japan, Australia and India. The firms include GA
(formerly Computer Associates) of iJie US, which was founded just 30 years ago, and the Go-operative
Group, a UK-based conglomerate with roots in the mid-19th. century. One company, Johnson &
Johnson China, is a subsidiary of the New Jersey-based pharmaceuticals giant.
The main points
Chief executive officers (CEOs) are increasingly responsible for, and involved in, talent
management. The heads of human resources departments play an important, supporting role in
executing talent strategy.
CEOs spend a large amount of their time-often more than 20%-on talent management. However,
this effort is not typically guided by a formal talent strategy explicitly linked to the company's
overarching goals or embedded in the business planning process. Rather, CEOs engage in
selected supporting activities where they believe they add value.
Talent management has become more important because of a growing recognition that it helps to
drive corporate performance, even though the exact impact is hard to quantify.
Good talent management is not undertaken in a piecemeal fashion but consists of comprehensive
development programmes. These include the identification of leadership potential, performance
evaluations, targeted development activities and job experience.
Many CEOs mentor executives in their organisations- an additional and important part of the
programme. They regard the development of the next generation of leaders as one of the best
ways of leaving a strong legacy.
7.3.1 The CEO'S Role in Talent Management

How top executives from ten countries are nurturing the leaders of tomorrow others are respectively
units of the Swiss-based Bossard Group, a maker of fasteners, and US-based Delphi Corp., a provider
of mobile electronics, technology and transport components (see corporate leaders' profile box).
The executives come from diverse backgrounds. Mark Zesbaugh, a former chief financial officer and
accountant, was just 37 in 2001 when he became CEO of Allianz Life Insurance Company of North
America, a division of Germany's Allianz Group. Shiv Nadar founded the Indiim company he leads,
HCL Technologies, in 1991. Lars Josefsson of Vattenfall of Sweden had previous CEO experience and
was an engineer by training. Cindy Lau, the only woman in the group, became the managing director of
Johnson & Johnson China , after 11 years as head of marketing at her company.
7.3.2 Key Features of CEO-led Talent Management

Despite the variety of backgrounds, all the interviewees share a similar understanding of the importance
of talent management in identifying and grooming employees at all levels of the company so that they
can rise faster up the corporate ladder. Talent management consists of many elements including
performance evaluations to identify potential; psychological testing and assessment centres to determine
capability gaps; training and development programes, relocations, project work and job experience to
accelerate development.
129
However, few of the executives appear to have a strategic approach to talent

management of the same rigour as other business platming processes; One who does is
Martin Beaumont, the CEO of the Cooperative Group, who sets clear targets. The Coop. wants to graierate about 70% of its promotions from internal candidates; at present,
the company uses headhunters to find about 80% of its executives. All of the firms
evaluate executives annually or more frequently using scores and documenting the
outcomes. CEOs hold follow-up meetings to discuss results and determine what
programmes and job experience their subordinates need to improve on their
weaknesses. HR advises on what programming is most appropriate from a range of
options, including off-site retreats, classroom and Internet learning, executive coaching
and formal mentoring. Most of the executives; mentor their direct reports and others on
a more informal basis.
Good talent management promotes people based not only on their performance but also
on the manner in which they have made their mark. "If I have a leader who's getting
results but is damaging the organisation because of the way they've achieved results,
that's not okay," says Zesbaugh. And Robert Care, the CEO of Amp Australasia, a
division of Amp Group, remarks; "If their [employes'] attitude isn't strong about the
culture, ultimately that will undo you."
Talent management was traditionally the domain of HR and the role of the CEO and
COO was'intermittent and distant. Two factors largely account for increased CEO
involvement in the past few years: the shift in focus towards intangible assets such as
talent, and increased board scrutiny in relation to both ethics and performance. Now it
is a strategic necessity for these executives not only to keep abreast of the latest
developments in the company's talent programme but also to plot strategy, own
associated initiatives and regularly participate in events related to talent management.
"The competitive advantage of any company comes from excellent execution," notes
Maarten Hulshoff, the CEO of Rodamco Europe. "The execution of strategy is driven
by the behaviour of the leaders." Says Thierry Porte, the CEO of Shinsei Bank in
130

Japan: "Very specifically [my responsibility] is to be working with the senior team in
developing their capabilities but also to assist them in coming up with ideas,
"If their [employees'] attitude isn't strong about the culture, ultimately that will undo
you. "Robert Care, the CEO of Amp Australasia, a division of Amp Group.
7.4 EXECUTIVE AND LINE MANAGERS

An executive team is formed to achieve specific strategic business objectives within a
defined time frame. When the selection process is done correctly, team members are
chosen based on their individual abilities to contribute to achieving those objectives. In
the first few months of the team's life, its cohesiveness is low and so is its
effectiveness. There is much uncertainty about how the team will work together, what
each member will contribute, and how the team will fare as it interacts with the outside
world. Team members are barely committed to the team, and are still strongly
immersed in their external environments. There are abundant challenges and healthy
doses of the unexpected. There is imcertainty and anxiety about whether or not the
team will succeed. The team's energies are concentrated on future successes. Each team
member contributes the stimuli of his person and the information from his reality
outside the team. This is the team's first stage of activity, a time of maximum learning
by team members, and maximum sensitivity to the world outside the team.
As
team
ment
members learn
from one another and take successful actions together, the team's effectiveness and cohesiveness increase. This
increases the members' enthusiasm and commitment to the team. For a while there is a positive feedback loop in
which success increases cohesiveness, which increases effectiveness, which generates more success. This is the team's
adolescence.
Eventually the team accomplishes its first major success, the strategic objective for which it was framed. That strategic
success marks the point at which the team is considered to be highly cohesive and highly effective. The team develops a
team memory based on past successes and previous communication. The team memory now defines each member's
role, the team's knowledge of the outside world, and how the team operates in that world. The team memory enables the
team to perform like an experienced adult, able to quickly handle challenges in previously learned ways. When the
outside world changes, for example in customer requirements, competitors' innovations, or new technologies, the
members of a highly cohesive and highly effective team needs to learn new techniques to respond appropriately.
Winning teams are built with credible leadership and capable people in each role, who have a common purpose and
clear direction and a mutual understanding of roles, dependencies and values. They also have strong relationships with
stakeholders outside the team, have the trust and respect of their peers and are able to review their performance
continuously.
Line management is a hierarchical chain of command from executive to front-line level, a rather complex management
structure, in which top management has total and direct authority and employees report to only one supervisor. Line
management structures are usually organised along functional lines, although they increasingly undertake a variety of
cross-functional duties such as employee development or strategic direction. The lowest managerial level in an
organisation following a line management structure is supervisory management.
7.5 SUCCESSION PLANNING

Thinking ahead is a cardinal rule of business. In addition to monitoring the daily operation of the business, one needs to
think about the future. And, as difficult as it may be, it is important to envision the day when the present boss is no
longer in charge.
Most oraganisations that have grown to large size today started as proprietary concems with generations of the same
family occupying pivotal positions. A recent survey indicated that only one percent of family-owned businesses in
North America reach a third generation with family members running them. Another report shows that 30 percent of all
family-owned businesses have not considered a successor, with only 63 percent having done so when the owner has
already reached age 65. Finally, another recent survey shows that more than 58 percent of small-business owners list
inadequate succession planning as the biggest threat facing their business. The situation is no different in India with the
encouraging fact that most second generation owners are more professionally qualified, generally from the best
universities in the world and hence bring a lot of new thoughts, including the need for professional management in their
organisations. A classic example in India is of the Aditya Birla group, where a young new Chairman put in place long
needed revamp of the old guard, bringing in professional managers to take charge.
become disabled or
cfo and his team |
Given the fact that 80

percent of the major
businesses the world over
in the developed world are
familyowned
and
managed, it is obvious that
a solid succession plan will
be important should the
majority
owner
die,
retire.
Typically, succession planning entails three steps: a decision-making stage (choosing a successor), the gradual transfer
of management responsibilities to the successor.
As the generations pass it will be seen that the burden of managing the business requires the skills of a professional
with few or no ties to the original promoter. If such a person is already in employment, his or her ascent to leadership
may prove more advantageous to the business than carrying on a "family tradition."
Most experts in the field of succession planning suggest using these steps to pave the way for a suitable successor:
Set a target date as one's last day with the company and start shifting responsibilities ahead, overseeing the
transition.
Set standards that take into consideration the needs of the successor.
Decide on the level of responsibility as well as authority that should rest with the successor.
7.5.1 Planning for Succession

The transition from one senior executive to another can be a smooth, productive process or it can be a bumpy ride for
all concerned. This is particularly true of CEO transitions. The occasion can be as simple and predictable as an
armounced and scheduled retirement or as complicated as a surprise departure. Such transitions are especially delicate
operations when the outgoing CEO has been in place a long time and is leaving a personal and indelible imprint on the
organisation. It is important that these transitions leave all concerned with a good feeling about the people and the
company. If not handled properly, the organisation can suffer and the new executive's path can be strewn with obstacles.
Facilitating these transitions requires considerable expertise. Given below are some points that help.
1. Every organisation is different, even within the same industry or segment. Good transitions are tailored to suit
the distinctive culture, structure, priorities, and personality of the organisation and of the key players involved.
How outgoing executives are treated and how they respond to the transition-period events and people will never
be foigotten internally. Coaching, rehearsals, visioning, orchestration - one or more of these is usually helpful for
both the incoming and the outgoing executives.
2. Employees at all levels, but certainly at the senior management level need to be prepared for the inquisitiveness
of a new executive. Designing and orchestrating a series of orientation sessions with the new executive and key
groups is a useful activity. Properly planned, these group orientation sessions can be an efficient means of
sharing information, getting a sense for one another, breaking the ice, creating the right mix of formality and
informality.
3. Work with the new executive to develop and publish a communications plan for the first 60-90 days so everyone
knows roughly what to expect. Some seniors with long experience can share the history and take the CEO
through the major landmarks, the culture and what are the differentiating features within the industry.
H.R.M-10
4. The incoming executive should produce an organisation assessment and proposed action plan.
Board would typically expect this within 3-6 months depending upon the organisation's size and
complexity. It can be the primary vehicle for initial strategic discussions between the CEO and the
board.
A typical example of succession planning in a Foreign Bank

The chosen successor is briefed about the country of operations, its people and culture, the personnel
details of the core team, important and critical issues faced by the bank and the goals for the successor.
Thereafter the core team is asked to make presentations on each of its member's area of operations and
areas of concern. The predecessor also sits through these time bound presentations. The successor
meets the core group and their family and once these presentations are over, the Successor meets the
other executives and officers over dinner. This procedure is repeated at all regional centres and the
successor lays down the goal for the others to follow.
7.5.2
Managerial Succession Planning
Methods of managerial succession plans may vary. Most successful programs include top managements
involvement and commitment, high-level review of succession plans, formal performance and potential
assessment and written development plans for individuals. A typical succession planning involves the
1
following activities.
Analysis of demand for managers and professionals
1The staffing process is documented so that the responsibility of each person in the process is clear and
understood.
Performance appraisals are completed for each employee in the organisation.
There is a train-the-trainer program for each major trainir^ program within the company.
New employees complete a new hire orientation program of key company policies and procedures within
the first 30 days of work.
There is an issue resolution process that is well understood and used by employees.
7.5.3
Audit of existing executives, future likely supply from internal sources

Individual career path planning
Career counseling
Accelerated promotions
Performance related training and development
Strategic recruitment for filling in gaps
Human Resource Audit
Regardless of the type of company or the size of the HR department, the HR Audit is a simple, yet
comprehensive tool to analyse and improve HR's effectiveness as a function.
The audit is made up of four main steps:
1. Define desired HR practices for the organisation.
2. Assess current practices against the criterion that has been established.
3. Analyze the results.
4. Establish improvement goals and take action.
This simple four-step approach can be repeated as the annual planning and goal setting process occurs
within the company. Progress can be measured against goals and a continuous improvement cycle
naturally unfolds.
7.5^4 Purpose of an Audit
The HR audit can serve any of the following purposes:

To clarify desired practices of HR work and roles within the organisation (HR Department, Line
Managers).
To evaluate current effectiveness and establish a baseliiie for future improvement.
To standardise practices across multiple sites within a division or company.
To assess current knowledge and skills required of HR practitioners.
To improve performance levels for key customers within the organisation.
7.5.5 Tlie Audit Process

Defining Audit Statements
Regardless of the number, what is being developed is a description of the level and quality of performance desired
from the Human Resource function.
Assessing Current Practices

With the list of statements completed, the assessment of current practices demands looking for evidence that
supports or reflects each statement made. Evidence may take the form of policies and procedures, output from
employee surveys, interviews with key customers, data collection from a Human Resource Information System,
reports issued to regulatory departments, statistics, etc.
Definition of desired HR practices can occur through a variety of ways. A good starting point is to take some time
and reflect on the legal requirements and programs that the department must administer. Simply listing them is a
good first step. Next, consider the areas of responsibility and traditional HR practices covered by the function:
They may include HR Plaiming, Staffing, Performance Management, Employee Relations, Compensation and
Benefits, Trainipg and Development, Safety and Wellness, Employee Surveys, and Communication. Finally, other
areas to consider are company initiatives that the HR fimction may be required to support, such as supporting a
Total Quality Management initiative, introduction of new initiatives, specialised training etc.
With this list in hand, a statement can be written about each major practice that needs to be defined. Typically,
they are stated in the present tense and in a positive manner. The following examples illustrate these traits:
Analyse the Results

It is important to recognise strengths and opportunities for improvement. As results are reviewed,
themes will emerge around specific HR areas. For example, while one company may be very strong in
administration and managing legal requirements, it may need improvement in developing higher-level
systems definition. Another company may be very strong in areas of Safety, Security, and Training, but
need improvement in Communication practices that run across the company. Reviewing the data in a
variety of perspectives is helpfiil to formulate a picture of overall HR performance against the audit. It
can reflect the positive effect of actions taken in previous years as well as provide information for
future actions.
In summaiy, the purpose of analysis is to sort through the areas of strength and opportunities for
improvement in order to take positive action steps to improve the effectiveness of the HR function.
Establish Improvement Goals and Take Action

The ideal time to complete an audit is just prior to the annual planning process. The audit information
in hand, can be used to advantage when setting next year's goals.
There are two aspects of setting goals: maintenance of current good practices and development of
improved practices. Knowing the capacity and capability of the HR department and system is critical in
developing a realistic plan. Good practices need to become a part of the HR system so that they occur
m a reliable, predictable fashion. Once a process or program has reached that level, then future
development can occur more effectively.
With little discretionary time available, it is prudent to review the analysis of step three and decide
which one or two areas will provide the greatest overall improvement for the HR fimction, its
customers and the organisation. These need to be the areas that goals are established for the next year.
Examples of Improved HR Measures Using the Audit Process:

Development and sharing of Total Compensation Philosophy
Reduction in the time taken for filling open positions
Control over employee turnover rate
% of current employees trained
Reduction in response time of administrative requests
Prompt action on Employee engagement survey results
Succession/replacement planning
HR's contribution to Business results
The HR Audit can be a powerful lever of change for the HR department as well as the organisation. As
time passes, the Audit enriches itself through better definition of development and higher levels of
performance expectations. It takes on a systems approach because it is comprehensive, inclusive of all
fraditional HR practices, yet accommodating to the uniqueness of company cultures and business
initiatives. And it moves HR professionals into an active state of defining their direction, making sense
of their choices, and contributing to the business in a more definitive manner.
Let Us Sum Up
In this unit we have understood the role of the CEO, his responsibility for Talent Management, the '' executive
team and line managers along with practices followed for succession planning.
We have also understood how to measure the effectives of HRD through an HRD Audit.
Keywords
Chief Executive Officer Talent Management Executive Team and Line Managers Succession Planning Human
Resource Development Audit
Check your progress

State whether the following statements are True or False. *
1. The CEO's primary management role is to lead the organisation. t

2. Wiiming teams do not need a CEO; but only good strategy and execution. f
3. Succession plaiming is not necessary in family owned organisations. f
4. Succession plan involves top management commitment, constant review as well as periodic
performance and potential assessment. t
5. HR audit is unnecessary interference, not leading to any meaningful improvements. f

1. True, 2. False, 3. False, 4. True, 5. False,
Terminal Questions
1. The CEO is the captain of the organisational team. Discuss in the context of ideal qualities to be
displayed by a CEO.
2. Describe the role ofCEO in talent management.
3. Managerial succession planning is a strategic HR activity. Elaborate.
4. The HR audit is necessaiy every six months in an organisation. Do you agree? Give reasons.
References
.i.^
Field Guide to Leadership and Supervision in Business by Carter McNamara, published by

Authenticity Consultmg, LLC. Provides step-by-step, highly practical guidelines to recruit, utilize
and evaluate the best employees
Loeb Marshall- Leadership for Dtmliqies ",
Maxwell John Leadership 101,What every leader needs to know

Blanchard, Ken- Leadership and the One Minute Manager
http.7/www.thinkingmanagers.com/the-thinking-ceo
STRUCTURE
8.0
COMMUNICATIO
N
Objectives
8.1
Introduction
8.2
Organisational Communication
8.3
Types of Commimication
8.4
Barriers to Effective Communication
8.5
Steps for Effective Communication
8.6
HR and Communication
Let Us Sum Up
Keywords
Terminal Questions
References
8.0
OBJECTIVES

Understand Organisational Communication
Types of Commununication
Barriers to Effective Communication
Steps for Effective Commimication
HR and Commimication
138
8.1
i NUBIAN RESOURCE ,\tANAGEMENT
INTRODUCTION
Until the 1950s, organisational communication as a discipline consisted of a few professors within
speech departments who had a particular interest in speaking and writing in business settings. Several
seminal publications stand out as works broadening the scope and recognising the importance of
communication in the organising process, and in using the term "organisational communication". In the
1950s, organisational communication focused largely on the role of communication in improving
organisational life and organisational output. In the 1980s, the field turned away from a businessoriented approach to communication and became concemed more with the constitutive role of
communication in organising. In the 1990s, organisational communication scholars focused more on
communication's possibilities to oppress / liberate organisational members.
8.2 ORGANISATIONAL COMMUNICATION

Some of the main assumptions underlying much of the early organisational commimication research
were:
Humans act rationally. Sane people behave in rational ways, they generally have access to all
of the information needed to make rational decisions they could articulate, and therefore will
make rational decisions, unless there is some breakdown in the communication process.
Communication is primarily a mechanical process, in which a message is constracted and
encoded by a sender, transmitted through some channel, then received and decoded by a receiver.
Distortion, represented as any differences between the original and the received messages, can
and ought to be identified and reduced or eliminated.
Organisations are mechanical things, in which the parts (including employees fiinctioning in
defined roles) are interchangeable. What works in one organisation may not work in another
similar organisation though individual differences can be minimized or even eliminated with
carefiil management techniques.
Through the 1960s, 1970s and 1980s the field expanded greatly, parallel with several other academic
disciplines, looking at communication as more than an intentional act designed to transfer an idea.
Research expanded beyond the issue of "how to make people understand what I am saying" to tackle
questions such as "how does the act of communicating change, or even define, who I am?", "why do
organisations that seem to be saying similar things achieve very different results?" and "to what extent
are my relationships with others affected by our various organisational contexts?"
139
i NUBIAN RESOURCE ,\tANAGEMENT
In the early 1990s Peter Senge developed new theories on Organisational Communication. These
theories are "leaming organisation" and "systems thinking". These have been well received and are now
a mainstay in current beliefs toward organisational communications.
8.2.1 Communications Networlcs

Networks are another aspect of direction and flow of communication. Bavelas has shown that
communication patterns, or networks, influence groups in several important ways. Commimication
networks may affect the group's completion of the assigned task on time, the position of the de facto
leader in the group, or they may affect the group members' satisfaction from occupying certain positions
in the network. Although these findings are based on laboratory experiments, they have important
implications for the djmamics of communication in formal organisations.
8.2.2 Direction of Communication

Formal communication as they occur in traditional military organisations, include messages which have
a "one-way" directional characteristic. In the military organisation, the formal communication proceeds
from superior to subordinate, and its content is presumably clear because it originates at a higher level
of expertise and experience. Military communications also carry the additional assumption that the
superior is responsible for making his communication clear and understandable to his subordinates.
This type of organisation assumes that there is little need for two-way exchanges between
organisational levels except as they are initiated by a higher level. Because messages from superiors are
considered to be more important than those from subordinates, the implicit mle is that communication
channels, except for prescribed information flows, should not be cluttered by messages from
subordinates but should remain open and free for messages moving down the chain of command.
"Juniors should be seen and not heard," is still an unwritten, if not explicit, law of military protocol.
Vestiges of one-way flows of communication still exist in many formal organisations outside the
military, and for many of the same reasons as described above. Although management recognises that
prescribed information must flow both downward and upward, managers may not always be convinced
that the two-way method should be encouraged. For example, to what extent is a subordinate free to
communicate to his superior that he understands or does not understand a message? Is it possible for
him to question the superior, ask for clarification, suggest modifications to instmctions he has received,
or transmit unsolicited messages to his superior, which are not prescribed by the mles? To what extent
does the one-way rale of direction affect the efficiency of communication in the organisation, in
addition to the morale and motivation of subordinates?
On the basis of a number of experiments, Leavitt formed these conclusions:
1. One-way communication is faster than two-way communication.
2. Two-way communication is more accurate than one-way communication.
3. Receivers are more sure of themselves and make more correct judgments of how right or wrong
they are in the two-way system.
4. The sender feels psychologically under attack in the two-way system, because his receivers pick
up his mistakes and oversights and point them out to him.
i ...........
5. The two-way method is relatively noisier and looks more disorderly. The one-way method, on the
other hand, appears neat and efficient to an outside observer.
Thus, if speed is necessary, if a businesslike appearance is important, if a manager does not want his
mistakes recognised, and if he wants to protect his power, then one-way communication seems
preferable. In contrast, if the manager wants to get his message across, or if he is concemed about his
receivers' feeling
that they are
IV t
participating and
are making a
contribution, the
two-way system
is better.
In either event, communication depends on how it is perceived by the recipient. In a two way
communication system, there is a chance to correct misperception if any. It is also tme that the impact
of receiving the commimication depends on the expectation of the recipient. Also every communication
is either a command or is an instmction or is for reproaching for doing wrong thing or may even be for
entertainment. The mood of the recipient while receiving the communication may determine whether he
will accept, understand, improve and also act as per the instmctions.
8.3 TYPES OF COMMUNICATION

8.3.1
Interpersonal Communication
Another facet of communication in the organisation is the process of face-to-face, interpersonal

communication, between individuals. Such communication may take several forms. Messages may be
verbal (that is, expressed in words), or they may not involve words at all but consist of gestures, facial
expressions, and certain postures ("body language"). Nonverbal messages may even stem from silence.
Nonverbal content always accompanies the verbal content of messages. This is reasonably clear in the
case of face-to-face communication. As Virginia Satir has pointed out, people cannot help but
communicate symbolically (for example, through their clothing or possessions) or through some form
of body language. In messages that are conveyed by the telephone, a messenger, or a letter, the situation
or context in which the message is sent becomes part of its non-verbal content For example, if the
company has been losing money, and in a letter to a supplier, the message indicates considerable
financial difficulties, this could be constmed to mean that the company is in deep frouble and some
people's jobs could be in danger.
8.3.2
Verbal and Non-verbal Communication
Most communication as we understand is verbal through the use of words, written, by way of mails and
writing. But a more important form of communication is the non formal one where body language plays
a vital role.
People cannot live without each other, we are social beings. As soon as we are in contact with others we
are communicating. For this we can make use of spoken and written language through which we make
the content of a message clear to each other. However we can also communicate without words. This
kind of communication tells iis something about the relationship between people. Often this is more
important than getting the content of the message across. The communication about this non spoken
communication, which tells us something about the relationship between people, is called MetaCommunication.
communication i
When we connect with a person, we also have to make it clear to each other how the content of a spoken
message needs to be interpreted. How we do this says something about the relationship we have with
the other person, or think we have anyway. Often words are inadequate for this purpose. To make the
meaning of ow words clear we use body language. Body language is a language without spoken words
and is therefore called non-verbal communication. We use body language all the time, for instance
looking someone in the eyes means something different than not looking someone in the eyes when
talking to her.
8.3.3 Body Language

Research shows that 55% of communication is conveyed by the body language we use, i.e.; use of eye
contact, gestures and facial expressions. 38% is conveyed in the voice, by its quality, use of tone and
inflections. Only 7% is conveyed in the words we use. The way we communicate also plays a large role
when making a good first impression. Again body language, is the dominant factor including, posture,
handshake and the way we are dressed. If one wants to send out the message of professionalism it is
important to have good upright posture, use good eye contact, open body language and have a firm
handshake. Dress must be appropriate to the work situation, the appearance, that of a well groomed
person.
Whereas people often try to disguise their true feelings in their utterances, they communicate them
freely through their non-verbals. When one's body language tells a different story from the spoken
words, what is believed is the body language. It imparts eight times as much information. Some tips on
how to avoid as well as develop good body language gestures.
Hand and arm movements are very expressive. Leam to use hands for emphasis, and keep hand
movements smooth and flowing. Avoid:
Folding your arms or wrapping them around yourself (like a cuddle). This indicates a closed,
defensive attitude and makes you appear unapproachable.
Placing your hands in your pockets. Tapping on surfaces such as tables and desks with your
fingers or on the back of your other hand. Fidgeting, scratching, wringing your hands (which
shows tension).
Touching your face or neck. This reveals discomfort or embarrassment. Become aware of all
your mannerisms and gestures. If possible video yourself, watch carefully and make adjustments.
Eyes are very expressive
Lively, sparkling eyes are attractive. They say, 'Talk to me, I'm approachable.' Looking away shows
disinterest or deviousness. Looking down conveys submission. Confident people make more frequent
eye contact than people who are unsure of themselves, so develop a steady gaze. When you enter a
room move around comfortably, smile and make gentle eye contact with everyone; not too much, not
too little.
Men and women behave and respond to body movements in different ways. So it is cmcial for you to
suit your body language depending on the gender of the person you meet, or you could damage a
relationship or business without even knowing it.
.............- - "
Body language thus is a key part of effective and precise communication. Human beings are
programmed to communicate verbally and non-verbally, combining the two aspects of communication
to send and receive accurate messages. Neither form of communication is more important than the
other. However, if one form is missing or inconsistent ,the impact on communication is huge. In
general, verbal messages enhance accuracy and specificity, while non-verbal messages enhance intent,
meaning, and subtlety.
A high proportion of a manager's time is taken away by one to one communication with staff, peers and
superiors. The advantage of one to one communication is that it enables you to gauge reactions
immediately. One also gets feedback about one's plans and ideas.
8.3.4 Modem Communication Issues

An obvious communication issue in this modem world relates to electronic messages, such as email and
instant messaging. These methods of communicating rely on words almost exclusively, leaving out the
subtleties and nuances that come with non verbal cues and behaviours. Combine this with the
extraordinary ease and speed with which email and instant messaging occur, and you can see why
miscommunication and misunderstanding can so easily happen with these forms.
8.3.4 Communication Approaches in an Organisation

Informal and Formal Communication are used in an organisation. Informal communication, generally
associated with interpersonal, horizontal communication, was primarily seen as a potential hindrance to
effective organisational performance. This is no longer the case. Informal communication has become
more important to ensuring the effective conduct of work in modern organisations.
Top-down approach: This is also known as downward communication. This approach is used by the
Top Level Management to communicate to the lower levels and used to implement policies, guidelines,
and even strictures.
8.4 BARRIERS TO EFFECTIVE COMMUNICATION

1. Perhaps the most common communications problem is managements' (leaders' and managers')
assumption that because they are aware of some piece of information, then everyone else is, too.
Usually staff are not aware unless management makes a deliberate attempt to carefiilly convey
information.
2. When organisations are just getting started, their leaders can often prize themselves on not being
burdened with what seems as bureaucratic overhead, that is, as extensive written policies and
procedures. Writing something down can be seen as a sign of bureaucracy and to be avoided. As
the organisation grows, it needs more communication and feedback to remain healthy, but this
commimication is not readily available with the result, increasing confusion ensues ~ unless
management matures and realises the need for increased, reliable communication.
3. Another frequent problem is managements not really valuing communication or assuming that it
just happens. So they are not aware of what they told to whom ~ even when they intended for
everyone to know the information.
COMMUNfCAtlON | illî^
4. With today's increasingly diverse workforce, it is easy to believe information has been
communicated but the way they get interpreted may be different from what was intended.
Rumours if not tackled in time can lead to massive amounts of miscommimication.
5. When personnel are tired or under stress, it is easy to do what is urgent rather than what is
important. Misunderstanding is a common occurrence and again can get too late before the
correct picture emerges.
6. As organisations grow, their management tends to focus on matters of efficiency. They often
generate systems that produce substantial amount of data ~ raw information that doesn't seem to
really be important. Communication problems can arise when management simply sees no value
whatsoever in communicating with subordinates, believing subordinates should shut up and do
their jobs.
There is an invisible barrier between the superior and subordinate. Because of this, in any given
situation in an organisation, there is an expected answer and an actual answer. For example:
The CEO " How are you Ravi?
"I am well sir". This is the answer expected though at that moment, Ravi may not be well. "How
is the production in the department ?" CEO "Fine sir"
This is the expected answer and Ravi will say so even if there are problems in the department.
The real issue for Ravi is, in spite of his problems, he must somehow convey convincingly that
everything is all right. The other answer that" I have problems" may lead the CEO to believe
that Ravi is not effective.
8.5 EFFECTIVE ORGANISATIONAL COMMUNICATION

Groups cannot exist without communication which involves transfer of ideas, content, and their
meaning to all members of the group. Any idea or information can be passed on only through
transmission of meaning. For the process of conununication to be complete, the meaning has to be
understood too. A member of a group who speaks only French will not be folly understood by the
others in the group if they do not know French. Conununication, therefore, must include both the
transfer and the imderstanding of meaning.
Since commimication is a process of transmission of message and understanding of information
between two or more people, it involves at least two parties-a sender and a receiver. Conununication
has occurred when a message is received-even if the received message is different from what was
intended. Thus, two major communication-related problems are communication failure (no meaningfol
message exchanges hands) and miscormnunication (the message received is different from the one
intended).
8.5.1 Steps for Effective Organisational Communication

1. Unless management comprehends and fully supports the promise that organisations must have
high degrees of communications, the organisation will remain stilted. Too often, management
learns the need for communication by having to respond to the lack of it.
wSiiB
144
2. Effective internal communications start with effective skills in communications, including basic skills
in listening, speaking, questioning and sharing feedback. These can developed with some concerted
review and practice. Perhaps the most important outcome from these skills is conveying that you
value hearing from others and their hearing from you. Soimd meeting management skills go a long
way toward ensuring effective communications.
3. A key ingredient to developing effective communications in any organisation is each person taking
responsibility to assert when they do not understand a communication or to suggest when and how
someone could communicate more effectively.
8.5.2 Policies to Support Effective Organisational Communication

Downward Communication
1. Ensure every employee receives a copy of the strategic plan, which includes the organisation's
mission, vision, values statement, strategic goals and strategies about how those goals will be reached.
2. Ensure every employee receives an employee handbook that contains all up-to-date personnel
policies.
3. Develop a basic set of procedures for how routine tasks are conducted and include them in standard
operating manual.
4. Ensure every employee has a copy of their job description and the organisation chart.
5. Regularly hold management meetings even if there is no formal agenda. If meetings are held only
when there is something to report, then communication will occur only when the boss has something
to say ~ communication will then be one way and the organisation will suffer.
6. Hold full staff meetings every month to report how the organisation is doing, major accomplishments,
concerns, aiilments about staff, etc. Leaders and managers should have face-to-face contact with
employees at least once a week. .
7. Regularly hold meetings to celebrate major accomplishments. This helps employees perceive what is
important, gives them a sense of direction and fiilfillment, and lets them know that leadership is on
top of things.
8. Ensure all employees receive yearly performance reviews, including their goals for the year, updated
job descriptions, accomplishments, areas of improvement, and plans to help the employee accomplish
the improvements.
Upward Communication
1. Ensure all employees give regular status reports to their supervisors. Include a section for what they
did last week, will do next week and any actions/issues to address.
2. Use management and staff meetings to solicit feedback. Act on feedback from others. Write it down.
Get back to it ~ if only to say you can't do anything about the reported problem or suggestion, etc.
145
3. Respect the "grapevine" It is probably one of the most prevalent and reliable forms of communication. Major
"movements" in the organisation usually first appear when employees feel it safe to venture their feelings or
opinions to peers.
8.6 HR AND COMMUNICATION

Whether planning your intemal or extemal communications efforts, it helps a great deal to
develop a communications plan, either informally or formally. Managers have traditionally
spent the majority of their time communicating in one form or another (meetings, face-to-face
discussions, memos, letters, e-mails, reports, etc.). However, a sea-change in communication
technologies has contributed to the transformation of both work and organisational stmcture.
Communication has become more instant, at times faceless and above all, brief and to the point,
making it highly efficient.
Organisational communication encompasses many aspects. It spans a wide range, from formal
and informal intemal communication practices to extemally directed commimications (media,
public, inter- organisational). Organisational communication includes marketing, public
relations, investor relations, corporate advertising and enviromnental communication. In the
largest sense, it encompasses the organisation's initiatives that demonstrate social responsibility
and good citizenship.
8.6.1 HR and Effective Communication

Hiunan resource professionals position themselves at both the starting and finishing points of
the communication continuimi. From an HR viewpoint, effective organisational communication
contributes to leaming, teamwork, safety, innovation and quality of decision-making in
organisations. In an age of increased competition for talent, communication has become a
strategic tool for employee engagement, satisfaction and retention. In fact, effective
organisational communication contributes directly to employee and organisational leaming, an
essential factor for competitive advantage. The most successfiil HR professionals are
consummate communicators. Tjîcally, their organisations over-communicate with all
constituents, and their leadership styles transmit the traditions and values of their company.
Thus, as a promoter of effective organisational communication, HR is a key strategic partner in
leveraging the relationships between employees and top management.
Let Us Sum Up
146
In this unit we have leamt about organisational communication, types of communication,

downward & upward communication, barriers to communication as also steps for effective
communication along with HR's role in effective communication.
Keywords
Organisational Communication
Interpersonal Communication
Communication Networks including Cyber Networks
Body Language
Effective Communication
Check your progress

1. One way communication as in armed forces is more effective. f
2. Communication is effective when the message is acknowledged by the intended recipient. t
3. Role of body language in communication is highly exaggerated. f
4. Most successfiil HR professionals are competent communicators. t

1. False, 2. True, 3. False, 4. True,
Terminal Questions
1. What are the basic components of organisational communication and who is responsible for ensuring the right
type of communication?
2. Write a short note on body language.
3. Identify barriers for effective communication and how they can be overcome.
References
Notes
Herbert Simon, Administrative Behavior, 4th ed., p 208.
Summarised fiom concepts developed by Alex Bavelas, "Communication Patterns in Task-Oriented Groups," pp.
503-11; Harold Guetzkow, "Differentiation of Roles in Task-Oriented Groups," pp. 512-26, in Cartwright and
Zander, Group Dynamics; H.J. Leavitt, "Some Effects of Certain Communication Patterns on Group
Performance," Joumal of Abnormal and Social Psychology vol. 46, (January 1951), pp. 38-50.
Harold Leavitt, Managerial Psychology (Chicago: University of Chicago Press, 1958), pp. 118-28.
Richard Arvid Johnson (1976). Management, systems, and society : an introduction. Pacific Palisades, Calif:
Goodyear Pub. Co. pp. 148-142. ISBN 0876205406 9780876205402. OCLC 2299496.
Virginia Satir (1967). Conjoint family therapy; a guide to theory and technique. Palo Alto, Calif: Science and
Behavior Books, pp. 76-81. OCLC 187068.
References
Gergen, Kenneth and Tojo Joseph. 1996. "Psychological Science in a

Postmodern Context." American Psychologist. October 2001. Vol. 56.
Issue 10. p803-813
Redding, W. Charles. 1985. "Stumbling Toward Identity: The

Emergence of Organisational Commimication as a Field of Study" in
McPhee and Tompkins, Organisational Communication: Traditional
Themes and New Directions. Thousand Oaks, CA: Sage.
May, Steve and Mumby, Dennis K. 2005. "Engaging Organisational

Communication Theory and Research." Thousand Oaks, CA: Sage.
Cheney, G., Christensen, L.T., Zom, T.E., and Ganesh, S. 2004. Organisational Communication in an Age of
Globalisation: Issues, Reflections, Practices." Long Grove, IL: Waveland Press.
H.R.M-11
HR FUNCTIONS
STRUCTURE
9.0
Objectives
9.1
Introduction
9.2
Human Resources Planning
9.3
Recruitment and Selection
9.4
HR Outsourcing
9.5
Compensation
9.6
Incentive based Compensation
9.7
Attrition
9.8
Employee Risk Assessment in Banks
Let Us Sum Up
Keywords
Terminal Questions
References
I
d
e
a
a
a
i
w
s
i
9.0 OBJECTIVES
After reading diis unit, you should be able to:
Understand Human Resources Planning

Recruitment and Selection
HR Outsourcing
Advantages and Disadvantages of HR Outsourcing
Compensation
Incentive based Compensation
Attrition
Employee Risk Assessment in Banks
9.1 INTRODUCTION
If one is given the task of setting up a new Human Resource Department in a small company where
would she begin? Such a task would be extremely daunting, but not impossible, if she follows a few
tips. To begin with, she needs to answer some basic questions:
Why set up an HR department now? What developments have made the organisation believe
that an HR department is needed now?
What is expected of the HR department and how will this function contribute to the success and
bottom-line of the organisation? Will it add value?
In other words, before she begins the task, she needs to have a clear definition of the mission and goals
of the department and secondly, what role she will play as "head" of the HR function. Once direction is
clear, there are some key "audit" issues that she needs to focus on.
The current head count of employees, is all documentation with regard to their personal details
complete, are such details stored in their personnel files and are they current?
Has someone framed policies and procedures? Are they up-to-date? Are they followed?
Does the company have an employee handbook and are all relevant rules and regulations
communicated to all employees?
How dynamic is the compensation structure, does it give scope for incentivising performance?
Does the company have in place policies dealing with sexual harassment, workers'
compensation, safety, benefits, discipline, etc.?
Many other issues to be tackled relate to recruitment, promotions, statutory compliance, training and
development etc. As the HR function is yet to take off, most of these activities may not be very well
established and even routine functions such as recruitment, salary as well as training will be managed
on an ad hoc basis, thus leaving a lot of scope for introducing and implementing a number of very
relevant and important HR activities in a professional manner. In the following pages, we shall
examine the scope and range of various HR activities ranging from the manpower planning to
termination of employment with insights into the development and positive role each of these functions
play in an organisation's structure.
9.2 (MANPOWER) HUMAN RESOURCE PLANNING (HRP)

HRP includes estimation of how many qualified people are necessary to carry out the assigned
activities, how many people will be available, and what, must be done to ensure persormel supply
equals persormel demand at the appropriate point in the fixture."
HRP is a Process, by which an organisation ensures that it has the right number and kind of people at
the right place, at the right time, capable of effectively and efficiently completing those tasks that will
help the organisation achieve its overall objectives.
In simple words, HRP is understood as the process of forecasting an organisation's future demand for
and supply of the right type of people in the right numbers. It is only after HRP is done, that the
company can initiate and plan the recruitment and selection process. HRP is a sub-system in the total
organisational planning and facilitates the realisation of the company's objectives by providing right
type and right number of persormel. HRP is important because without a clear-cut manpower plan,
estimation of an organisation's human resource need is reduced to mere guesswork. A balanced HRP
helps the top management have a better view of HR dimensions of business, anticipate imbalances
before they become unmanageable and
expensive, and explore all avenues for sourcing the right candidates in a cost effective manner.
9.2.1 HRP System

A comprehensive HRP System keeps its mind the following elements:
The organisation's growth plans

Current and possible future trends in business
Gaps in current manpower in terms of numbers and capabilities
The employment scenario and availability of the desired profiles
Approach towards cost effective sourcing of candidates
Based on these elements we can draw "HRP System Architecture" as under.
Marpower Forecast
Projected Manpower
r
Surplus Manpower
profile 1
1
Shortage of Manpower
Business Environment
Strategic goals of orgainzation
Manpower Supply Assessment

Current manpower capability
Projected Manpower profile
9.2.2
HRP Process
Once the manpower gaps have been identified, the next stage is the sourcing process with serious thought given to
internal as well as external hiring, the methodology to be used for both along with the training to be given. In the process
of estimating the future quantity and quality of people required, the basis should be annual budget and long term
corporate plans.
Demand forecasting is based on the following factors.
Internal Factors:
Business projections
Budget constraints
New products and services
Employee separation
External Factors:
9.2.3
Competitive environment
The job market scenario
Economic climate
Technology changes
Social Factors
Manpower Forecasting Techniques
Range from a quick management judgment where managers from across all functions forecast based on a simple
assessment. Another method is to study past ratios, and forecast future requirement, making some allowance for
organisational priorities. Work Study Techniques though a little dated, still gives the numbers for routine activities and in
new areas such as BPO operations where productivity can be measured based on number of calls per hour etc. Delphi
Techniques involve estimates fix)m a group of experts, and HRP experts normally act as intermediaries, and summarise
requirements based on a qualitative assessment. Looking within, the HR experts also identify the talent available in
house, and take into account typical absenteeism, internal movements as well as loss due to attrition.
9.3 RECRUITMENT & SELECTION

Recmitment is understood as the process of searching for and obtaining applicants for jobs, from among whom, the right
people can be selected. The recmitment process extends from sourcing applications to the final selection of the
candidate.
A well defined recmitment policy helps the organisation identify the right mix of candidates and fill in requirements in a
cost effective manner and where needed, also maintain a pool of selected candidates to be used in future. The factors
governing recmitment are extemal ones like Demand and Supply of the required skills, labour market conditions and
ability of the organisation to attract the right type of candidates. Internal factors include the size of the organisation,
priority of functional requirement as well as the growth plans necessitating a particular profile of the candidate.
9.3.1
Recruitment Process
^^^^^^ . - ^ /
;-
All progressive organisations need to have a dynamic recruitment strategy that is demanding, flexible as well as able to
meet the needs of the organisation in quick time, in an efficient manner. The recruitment strategy takes into account the
potential of current and future employees to sustain and improve on business levels, build an image for attracting the best
talent and maintain the competitive edge throughout. Efficiency and productivity form the basis for all long term
commitment with regard to employee selection and development. A brief idea of the major advantages of internal as well
HUMEAN RÔRCE MANAGEMENT
as external recruitment (associated with promotions from within V/s lateral recruitment) is given below:
9.3.2
Internal Recruitment
Advantages
Disadvantages
1. Less Costly
2. Candidates already oriented towards organisation
3. Organisations have better knowledge about internal
candidates
L Traditional approach, play safe.

2. It abets raiding
3. Candidates' current work may be affected
4. Politics play greater roles
5. Morale problem for those not promoted.
4. Employee morale and motivation is enhanced

*
9.3.3 External Recruitment

Advantages
1. Benefits of new skills and talent
2. Benefits of new experiences
3. Compliance with reservation policy becomes easy
4. Scope for resentment, jealousies, and heartburn are
avoided
Disadvantages
1. Better morale and motivation associated
with intemal recraiting is denied
2. Costly method
3. Chances of negative and costly errors of
wrong recmitment.
4. Adjustment of new employees takes longer
time.
9.3.4 Selection
Selection is the process of picking up individuals (out of the pool of job applicants) with requisite qualifications
and competence to fill jobs in the organisation. It is the process of differentiating between applicants in order to
identify and hire those with a greater likelihood of success in a job.
DIFFERENCE BETWEEN RECRUITMENT AND SELECTION

Recruitment
1. Recmitment refers to the process of identifying and
encouraging prospective employees to apply for jobs.
2. Recmitment is said to be positive in its approach as it
seeks to attract as many candidates as possible.
Selection
1. Selection is concerned with picking up the
right candidates from a pool of applicants.
2. Selection on the other hand is negative in
its application in as much as it seeks to
eliminate as many unqualified applicants as
possible in order to identify the right
candidates.
9.3.5 Selection Process - Steps Involved

1. Screening and Preliminary Interview: Screening helps to eliminate applicants who do not fit the desired profile.
Preliminary interviews also help weed out the less qualified and weaker candidates.
2. Selection Tests: Selection tests help in bringing down the number of job seekers, especially in popular jobs such
as banking while at the same time helping in short listing better qualified candidates. These tests can be Aptitude
Tests, Personality Tests, and Ability Tests and are conducted to judge how well an individual can perform tasks
related to the job. Besides this there are some other tests also like Interest Tests (activity preferences). Graphology
:^NaTK>NS I
Test (Handwriting), Medical Tests, Psychometric Tests etc.

3. Personal Interview: Interview is a formal and in-depth conversation between the applicant and a panel of experts
whose role is to assess the potential candidate's profile and match perceived competencies to that of the given
role. Interviews can be One-to-One, Panel Interview, or Sequential Interviews. Besides, there can be Structured
and Unstructured interviews. Behavioral Event Interviews and Stress Interviews. The higher the role, the more
focused, the interview process.
4. Reference and Background Checks: Reference checks and background checks are conducted to verify the
information provided by the candidates. Reference checks can be through formal letters, telephone conversations.
Though earlier considered more a formality, with the recent spate of data theft firom call centres as also the
possibility of computer hacking and even the terrorist threats, reference and background checks have become very
important and today almost all leading companies conduct elaborate background checks.
5. Selection and Job offer: After assessing the results of all the tests, interviews and other assessment tests if any, a
decision is taken on selection of the most suitable candidate. Selected candidates undergo a mandatory medical
examination following which the successful candidates are given a job offer, with all relevant details of the
position. On acceptance of the offer, an appointment letter is issued, giving all terms and conditions of
appointment.
9.3.5 Essentials of a Good Selection Practice

1. Detailed job descriptions and job specifications prepared in advance and endorsed by HR andline management.
2. Trained panel of interviewers, with special emphasis on behavioural event interviewing.
3. Line managers involved at all possible stages.
4. All newly appointed candidates are put through a well designed training program.
9.3.6 E-recruitment
There is no doubt that today online recruiting has overpowered traditional methods of recruitment. The HR professional
is considered 'out of date' if she does not use e-recruitment, as this is clear indication of how much of change the HR
industry has seen because of IT.
9.3.7
10 Compelling Reasons to Ciioose E-recruiting
A leading survey says that 73% of the world's largest companies would adopt an e-recruiting strategy. Thinking why
erecruiting is becoming so popular and is considered to be the most efficient way of recruiting? The following are the
reasons:
It is highly cost efficient and promises increased ROI
It gives accessibility to a big pool of resumes compared to other methods like newspaper ads
E-recruitment brings in an organised and proactive recruiting process
Easy and efficient way of recruiting
Shortened recruiting time span
Reduced complexity, reduced paper work and streamlined workflow
Establishes efficient commimication channel between recruiter and candidate
Helps in establishing a relationship between the recruiter and the candidate
Dependable database applications available to support the company's recruitment process
Modern HR departments cannot ignore the efficiency that internet brings in
9.3.8
How E-recruitment Ciianged the Way HR functions
From talent hunt to applicant tracking to the core recruitment process, online recruitment has changed everything. Jeff
Taylor, Monster.com's founder and CEO says, "The Internet's impact on recruiting has been astronomical. The Net
lets companies hire faster. You don't have to wait for your ad to run in the Sunday classifieds or for resumes to arrive
by mail. The Internet lets you reach applicants more cost effectively than any medium ever has."
Forrester Research says that the online recruitment industry has grown from being a $ 1.2 billion industry to $7.1
billion by 2005. It is not yet late to get on board with the competition and prepare one's organisation for the
challenges.
9.3.9
How Companies Can IMake the Best Use of E-recruiting
Organise HR process and get the right recruiting solution:

which is flexible
customisable to match the needs of your organisation
and which gives you enough room to experiment and use creative recmiting methods
9.3.10 Costs
The costs for registering in any online job portals like Monster or Naukri will be a much cheaper bet than advertising
in a newspaper. The existing recmiting process, will have to see some changes and though the initial costs are high,
the new process embarked on will make it cost effective as the days go by.
*
^\
9.4 HR OUTSOURCING
In keeping with the worldwide trend of outsourcing non-core activities, a large number of corporates
have started outsourcing certain routine HR functions to experts. This practice that was started in the
1990s have come to stay as a cost effective practice for a number of leading organisations all across the
world. HR Outsourcing refers to the process in which an organisation uses the expert services of a third
party (generally professional consultants) to take care of its HR functions while HR management can
focus on the strategic dimension of their function. The functions that are typically outsourced are the
functions that need expertise, relevant experience, knowledge and best methods and practices. HR
Consultancies such as Ma Foi and Planman Consulting and a host of others provide such services
through expert professional consultants. Human resources business process outsourcing (HR BPO) is a
major component of the worldwide BPO market. Performance management outsourcing involves all
the performance monitoring, measurement, management being outsourced from a third party or an
external organisation.
Many organisations have started outsourcing its recruitment process i.e. transferring all or some part of
its recruitment process to an external consultant providing the recruitment services. It is commonly
known as RPO i.e. recmitment process outsourcing.
The present value of the recruitment process outsourcing industry (RPO) in India is estimated to grow
at the annual rate of 30-40 per cent for the next couple of years, provided the recessionary trends get
over soon. The number of companies outsourcing their recmitment processes is increasing at a very fast
rate and so is the percentage of their total recmitment processes being outsourced. Outsourcing helps
save up to as much as 40 per cent of the regular recruitment costs. With the experience, expertise and
the economies of scale of the third party, organisations are able to improve the quality of the recmits
and the speed of the whole process. Also, outsourcing enables the human resource professionals of
organisations to focus on the core and more sfrategic issues. The portion of the recmitment cycle that is
outsourced range from preparing job descriptions to arranging interviews, the activities that consume
almost 70 per cent of the time of the whole recruitment process.
Outsourcing the recruitment processes for a sector like BPO, which faces an attrition of almost 50-60
per cent, can help the companies in BPO sector save costs fremendously and focus on employee
engagement and better retention. At the other end of the spectrum, job seekers are also availing the
services of the third parties (consultants) for accessing the latest job opportunities. Naukri.com, the
leading job portal claims to have a huge data base of potential candidates which they sell to corporates
for a fee.
Outsourcing is beneficial for both the corporate organisations that use the outsourcing services as well
as the consultants that provide the service to the corporates. Apart from increasing their revenues,
outsourcing Process provides business opportunities to the service providers, enhancing the skill set of
the service providers and exposure to different corporate experiences thereby increasing their expertise.
9.4.1 Employee Outsourcing

Employee outsourcing started in the 1970s in Silicon Valley's highly competitive, high tech labour
market. Fast-growing high tech companies were hard-pressed to locate and hire the technical
specialists they required, and so had little choice but to pay large fees to highly specialised external
recruiters in order to
mi
staff their
time,
began to
they might
growing
projects. Over
companies
examine
how
reduce
the
expenses
of
recruitment fees
hiring hard-to-
emnt
while still
fmd
technical
specialists. Toward this end, companies
began to examine the various steps in the recruiting process with an eye toward outsourcing only those
portions that they had the greatest difficulty with and that added the greatest value to them. Initial RPO
programs typically consisted of companies purchasing lists of potential candidates from RPO vendors. This
"search/research" function, as it was called, generated names of competitors' employees for a company and
served to augment the pool of potential candidates from which that company could hire.
Over time, as business in general embraced the concept of outsourcing more and more, RPO gained favor
among Hinnan Resource management: not only did RPO reduce overhead costs from their budgets but it
also helped improve the company's competitive advantage in the labor market. As labour markets became
more and more competitive, RPO became more of an acceptable option. Furthermore, with the advent in the
1980's and 1990's of human resources outsourcing (HRO) companies that began taking on the processes
associated with benefits, taxes, and payroll; companies began recognising that besides recruiting, they could
have their entire requirement of staff, outsourced to agencies who would then supply just the required
number of staff without having to carry the risk of such low paid, short term candidates. This would reduce
costs, reduce risk and above all, do away with the process of continuous recruitment.
9.4.2
Benefits of Outsourcing
Champions of outsourcing claim that the solution offers improvement in quality, cost, service and speed.
They claim that leveraging economies of scale enables them to offer recruitment processes at lower cost
while economies of scope allow them to operate as high-quality specialists. Those economies of scale and
scope arise from a larger staff of recruiters, databases of candidate resumes, and investment in recruitment
tools and networks.
Outsourcing solutions are also claimed to change fixed investment costs into variable costs that vary with
fluctuation in recruitment activity. Companies may pay by transaction rather than by staff member, thus
avoiding under-utilisation or forcing costly layoffs of staff when activity is low.
9.4.3
Problems of Outsourcing
If a company fails to define its overall recruitment strategy and hiring objectives, then any recruiting
program may fail to meet the company's needs. This is especially true for outsourced programs which can
only succeed in the context of a well-defined corporate and staffing strategy.
As with any program, a company must manage its outsourcing activities by providing initial direction and
continued monitoring to assure the desired results. Overall, providing guidance to external activities can
present a significant management challenge. Outsourcing of company processes may fail or prove a poor
organisational fit. Improperly implemented outsourcing could have an adverse impact on effective
functioning of the respective sections as RPO service providers may fail to provide the quality or volume of
staff required by their customers.
Business Process Outsourcing has now come to be accepted the world over and during the recent recession, has proved
beneficial to a large number of big corporates who would otherwise have had to
bear very heavy

firsthand how the
with regular staff
retrenchment
and
current revival will
companies going the
non-core activities
opportunities
to
outsourced
to
professional firms.
fixed costs. Having seen

more traditional ones
suffered
through
periodic downsising, the
see
many
more
outsourced route for all
and
explore
have
junior
staff
I
I
9.5 COMPENSATION
Human Resource as an important resource, is responsible for each and every decision taken, work done and the results
achieved. Employees should therefore be managed well and motivated by providing a competitive compensation based
on industry standards. A well thought out compensation package will also serve the need for attracting and retaining the
best employees.
Gompensation is the remimeration received by an employee in return for his/her contribution to the organisation. It is an
organised practice that involves balancing the work-employee relation by providing monetary and non-monetary
benefits to employees. Compensation is an integral part of human resource management which helps in motivating the
employees and improving organisational effectiveness.
9.5.1
Components of Compensation System
Compensation systems are designed keeping in minds the strategic goals and business objectives and on the basis of
certain economic factors as well as the job work and responsibilities. For good working relationships it is essential to set
fair and appropriate salary levels and benefits.
Salaries should be linked with the specific job that someone carries out. For example, a manager would normally be paid
more than an administrator.
Benefits usually apply to all staff, although they may depend on the type of contract they have. For example, different
benefits may be given to permanent staff than staff on fixed-term, temporary or casual contracts.
9.5.2
Grading and Salaries
There are three key issues to take into account when considering salaries:
Salaries should be consistent with the organisation's grading structure - the higher the grade the higher the
salary. This ensures that the principle of equal pay for equal work is followed.
Salaries should be fair. Consider what other similar organisations are paying people for carrying out similar
jobs.
The grading and salary system should be transparent and easy to understand. This means that staff can clearly
see where their salary fits within the organisation's overall grading and salary structure. This helps to ensure
fairness and consistency because it enables staff to keep the organisation accountable.
9.5.3 Types of Compensation

Compensation provided to employees can be direct in the form of monetary benefits and/or indirect in the form of nonmonetary benefits known as perks, inceritives, variable pay etc. Compensation does not
>i
include only salary but it is the sum total of all rewards and allowances provided to the employees in
return for their services. If the compensation offered is effectively managed, it contributes to high
organisational productivity.
A good compensation package is important to motivate employees to increase organisational productivity.
Salary is just a part of the compensation system, the employees have other psychological and
self-actualisation needs to fiilfill. This, a well thought out compensation structure tries to address.
9.5.4
Strategic Compensation
Strategic compensation is determining and providing the compensation packages to the employees that
are aligned with the business goals and objectives. In today's competitive scenario, organisations have
to take special measures regarding compensation so as to help retain valuable employees. Thus
compensation systems have changed from traditional ones to strategic compensation systems.
9.5.5
Cost to Company
Moving away from the traditional concept of salary and allowances which would be paid on a fixed
basis, more progressive companies now talk of the total cost to the company or CTC which includes
besides the fixed pay, a number of variable features such as performance linked incentives, notional
cost of subsidised loans (more relevant in banks which give employees highly concessional loans), cost
of car and other transportation and every item of expenditure incurred by the company on the individual
employee. This figure being obviously much larger than the sum of the traditional fixed pay, plays an
important role when attracting candidates from campus or other high profile organisations.
9.5.6 Compensation Structure in PSU Banks

Grade
Compensation Structure
Scale 1
Junior
Management
Scale
II
Management
Normal pay stmcture including basic pay and allowances
Middle
Normal pay stracture including basic pay and allowances In addition

special allowances associated with designated positions
Grade
Scale III
Middle
Management
Scale IV-V
Senior
Management
Top Management
Normal pay stmcture including basic pay and allowances

Special allowances associated with designated positions and benefits if
appointed as Branch Managers
Nomial pay structure including basic pay and allowances
Benefits associated with Senior Positions as incharge of regions/zones.
Normal pay structure including basic pay and allowances
Additional benefits as per structure of bank/as applicable to Top Level executives.
9.6 INCENTIVES BASED COMPENSATION

Incentives are monetary benefits paid to employees in recognition of their outstanding performance.
They are defined as variable rewards granted according to .variations in the achievement of specific
results.
9.6.1
Advantages of Incentive Based Compensations
1. Incentives are important for inducement and motivation of workers for higher efficiency and
greater output.
2. Employee earnings go up, resulting in enhanced standard of living of employees.
3. Productivity increases and production capacity is also likely to increase, even with reduced
supervision.
4. Companies can reduce the burden of fixed costs by keeping a portion of the remuneration as
variable.
9.6.2
Disadvantages of Incentive Based Compensation
1. Tendency to bypass quality in pursuit of increased output for higher incentives.

2. Sometimes employees may disregard security regulations due to payment by results approach
adopted for higher incentive figures.
3. Overworking may affect employee health.
4. Can demotivate employees not in a position to earn higher incentive due to sectional differences.
9.7 ATTRITION
A number of theories and practices have been documented right through the history of labour on how to
induce higher productivity from the worker. Time and motion studies, in the early days to incentives for
exceeding hourly targets as practiced in modern day BPOs and call centres, all have been designed to
induce that extra bit of productivity from an employee.
At the higher levels, there are the performance based bonuses paid by large financial advisory services
where the number of senior employees is kept to the minimum but their workload is heavy and highly
stressful. The amounts paid out are largeûp to a crore in some of the treasury departments of MNC banks in the
country and measurement for the incentive is the volume of business transacted and profits generated for the Bank.
Whether a fixed incentive for the hourly worker or large payouts for highly skilled specialists, the underlying feature is
an incentive which is clearly variable in nature and directly linked to performance.
One of the most concerning issues for HR managers in India is the high staff tumover. In industries like call centres,
staff attrition is the single biggest issue. The industiy has grown from zero employment to an employer of quarter of a
million young English speaking, well educated and ambitious people. Attrition is highest in fraditional customer service
jobs, where young people find themselves having to spend all night on the phone, often with irate callers. In other areas
such as claims processing or accounting, the tumover rate is much lower. More worrying for many companies is the
'merry go round' in supervising and management jobs, as new centres are only too willing to pay higher salaries to
hijack experienced staff
The issue of retention is much more critical in the high value adding BPO sector such as R&D activities. This $40
billion industry has one of the highest attrition rates of around 20 to 25 per cent. The service laden BPO and KPO
industry have the highest attrition rates.
160
Research and experience suggest that many managers are concerned that their best and brightest employees may pack
their bags in search of greener pastures if they receive smaller bonus checks than what they think they've eamed.
Managers are struggling with how to explain to employees that their hard work in 2009, hit by recession, will not result
in a salary increase or a bonus.
Recent Hay Group research shows that employee engagement and retention of top talent are the top two human capital
concems of management in organisations today. The counterargument of many managers - that people should feel lucky
just to have a job - is difficult to rebut in today's economic environment. But managers need to be mindful that their top
talent may indeed bolt when the economy turns around not necessarily because of pay.
Hay Group's research suggests that compensation is not even in the top five reasons employees are prone to taking calls
from headhunters and exploring their career options. Top reasons employees begin a job search include the need for
meaningfiil work, utilisation of their skills and abilities, career advancement opportunities and a clear sense of
organisational direction. Based on this, managers should concenfrate their efforts on increasing employee engagement
and developing systems that better support their employees' success.
To increase engagement in the bonus season, organisations and their managers would be well served by speaking from
a "total rewards" mindset m their discussions with employees. Managers are likely to strike out if they only focus on
base salary increases and incentive payments, or lack thereof They need to broaden the dialogue to a discussion around
the entire total rewards package employees receive, which includes career development, job enrichment, recognition
and meaningful performance development feedback, in addition to base pay, bonuses and benefits.
Again, the Recent Hay Group research shows that organisations understand the need to focus on total rewards, but have
not done a great job at communicating this to employees.
NS I tT '
Ideally, total rewards discussions should be held throughout the year, not just at bcAius or salary
increase time." Managers should see each day as an opportunity to provide employees with meaningful
feedback and coaching and should shy away frorii the once-a-year performance appraisal discussion.
The engagement and job performance of employees and managers is significantly improved when
performance feedback is a continuous conversation rather than a distant event.
Following are six practical steps managers can take to improve employee engagement:
1. Help employees view their pay as more than base salary increases and bonuses and understand
that total rewards also include recognition, meaningful work and career opportunities.
2. Understand what truly engages and motivates employees. It is often much more than money as
different people value different rewards.
3. Clearly commimicate the link between performance and rewards. Clearly explain the reasons for
the reward and the amount of the reward.
4. Ensure that performance assessments and total rewards appropriately differentiate the best, solid
and weakest performers.
5. Assess and improve the organisation's work climate by training managers to motivate employees.
6. Use feedback as a gift - make it meaningful and give it often.
9.7.2 Arresting Attrition

During the peak period of economic activity in the first decade of this century, the job market opened
up to provide a whole new world of opportunities especially in the financial as well as the lifestyle
sectors. Banks, insurance and financial advisory firms went on a hiring spree with some giants in these
sectors hiring up to 500 new staff every month. Besides maintaining a large head count, these
aggressive players were also faced with the need to replace at least 30 % of staff who left within 6
months on the job. The attrition rate in the BPO sector touched a peak of 50%, Retail was close behind
with a 35% attrition rate while Insurance and banks were losing over 20 % of staff in the highly
demanding sales sections.
Placement agencies made merry, HR managers got highly stressed and all strategy plans had to take a
clear note on the availability of skilled manpower.
An analysis of the situation made on an industry, sector as well as company wise basis, showed up a
few very obvious factors as reasons for the heavy attrition. Some are cited here:
1. Heavy pressure of work without adequate rewards
2. Inadequate training
3. Poor working conditions
4. Limited scope for career growth
5. Inadequate salary
6. Stress leading to health problems
The last finding was rather surprising given that youngsters are not prone to succumb to fatigue easily.
But a further analysis of certain sectors such as Insurance, Retail as well as Consumer retail banking
revealed that pressure to sell and achieve monthly targets were so heavy that many a youngster would
lose sleep and be highly stressed as month end approached as a major chunk of their salaiy came in the
way of target linked incentive and some companies even had a policy of recovering from the incentive,
shortfall in sales achievement. Leaving jobs at the slightest excuse became the norm, with even a few
hundred rupees raise being enough attraction for the youngster, lured by the promise of a better working
environment, only to face similar pressure at the new place of posting.
Many companies are developing innovative practices in countering this job hopping phenomenon. The
following table illustrates some of these initiatives by leading companies in India.
9.7.3 Examples of Retention Strategies for young Professionals in India's BPO and
Services Sectors
Name of the Company
Retention Strategy
Impact
Tata Consulting
Services(TCS)
A choice of working in over 170 offices across 40

countries in a variety of areas.
Paternity leave for adoption of a girl child
Discounts on group parties
Significant impact on job

hopping achieved
ICICI Bank
Identification of potential talented staff

Alternative stock options
Quicker promotion
Have been able to achieve

higher retention rate
WIPRO
'Wings Within' programme where existing employees get Has led to a higher
a chance to quit their current job role and join a retention rate
different
within WIPRO
162 I ^firm
HUMAN
RESOURCE MANAGEMENT
INFOSYS
Fostering a sense of belongingness, creative artistic and

social activities for the employees and their families.
Initiating one of the best 'corporate universities' in the
world
Moderate Retentions rate

increase achieved
Microsoft-India
Excellent sporting and wellness facilities

Employees allowed to choose flexible working schedule
Moving people across functions and sections in assisting
employees find their area of interest
Straggling to minimise job

hopping
Mahindra & Co
Culture change valuing innovation and talent over age

and experience
Institutionalising a practice called 'reverse mentoring'
where young people are given opportunities of
mentoring their seniors
Stabilised job hopping

significantly
The banking sector went

decade. The PSU and old
staff, due to their badly
frozen till 2008, they had to
no end in sight to the
through two major levels of attrition during the last

private banks lost a considerable number of bright
executed VRS scheme. As new recruitment was
put up with shortage of staff at most locations with
problem of attrition.
As for the new generation

retail assets and liability
in the more aggressive banks
made the situation go from
worse. In their anxiety to
banks, attrition was a way of life especially in the

sections. Pressure of work, heavy targets especially
and a general lack of preparedness through training
bad
to
fiilfill
targets, most
yoimgsters
9.7.4 Attrition in Banlcing

would complete a deal without the necessary documentation and backgroimd checks, resulting in huge
NPAs in the retail sector. This resulted in large scale retrenchment and a drastic reduction in all the retail
activities.
The latter part of 2008 and the whole of 2009 have seen a consolidation in employment in all these sectors. And
now that the revival is on, there is a marked shift towards reducing fixed costs by way of employment and resorting
to outsourced agencies for many non core activities.
9.8 EMPLOYEE RISK ASSESSMENT IN BANKS

Risk Assessment is a systematic method of looking at work activities, considering what could go wrong, and
deciding on suitable control measures to prevent loss, damage or injury in the workplace. The Assessment should
include the controls required to eliminate, reduce or minimise the risks. Employee risk assessment is a careful
examination of what, in the organisation, could cause harm to people, so that one can assess whether they have
taken enough precautions or should do more to prevent harm. Workers and others have a right to be protected from
harm caused by a failtne to take reasonable control measures. A risk assessment is an important step in protecting
employees as well as business, as also complying with the law. It helps to focus on the risks that really matter at the
workplace - the ones with the potential to cause harm.
In the context of employees per se, the risk assessment goes a step beyond the physical aspects of safety and
security. Here, what is important is the potential risk that the organisation suffers due to bad or improper hiring.
Some of the issues involved are; negligent hiring, the screening policy and do all employees need to be screened,
and what is the legal implications for an employee's firaudulent actions, with regards to customer fimds as in a
bank.
NegUgent hiring and negligent retention lawsuits are increasing the world over, and so are employer expense and
liability as a result of these suits. Underlying the idea of negligent hiring and retention is an employer's legal
responsibility to provide employees, customers and the public a reasonably safe environment, and the liability
imputed to employers when they fail to exercise reasonable care in providing such an environment. It's when this
failure occurs that as an employer, the business, could be held liable for negligent hiring or retention. In banks, the
detection of a fraud by an employee who happens to have an earlier criminal record, could go against the bank if no
proper police verification was done prior to hiring. Consequently, from a cost contairunent and legal liability
perspective, it is increasingly crucial that businesses conduct criminal backgroimd checks, conduct such checks in a
competent manner and take reasonable action as a result of these inquiries.
H.R.M-12
A more subtle but equally harmful risk is that of bad or wrong hire. In the PSU banks, where average
performance is considered the norm, the cost of hiring substandard candidates could be a long term
liability. In other progressive banks, consistently below average performance could stand out and such
candidates get weeded out early after the first or second performance appraisal.
Let Us Sum Up
In this unit we have gone through the various HR Functions starting with Human Resources Planning,
Recruitment and Selection & Compensation.
We have also understood the concept of Employee Outsourcing with specific advantages and
disadvantages.
We have also understood the concept of employee attrition and its linkage to compensation.
The last topic covered was employee risk assessment in banks.
Keywords
Human Resources Planning
Recruitment & Selection
Employee Outsourcing
Incentive link to
Productivity Employee
Attrition Employee Risk
Assessment
Check your progress

1. Demand forecasting in manpower planning helps in ensuring better employee efficiency. t
2. The composition of the selection panel plays a critical role in right selection. t
3. E-recruitment is too mechanical a process and can affect quality of new recruits. f
4. Recruitment outsoiircing helps reduce recruiting costs by 40%. t
5. Strategic compensation is one aligned with business goals and objectives. t
6. Incentive based pay increases overall costs of business. f
7. Compensation is among the top 5 reasons for employee tumover. f

1. Trae, 2. Trae, 3. False, 4. Trae, 5. Tme, 6. False, 7. False
Terminal Questions
1.
Enumerate the difference between recruitment and selection.
2. What are the good practices for a sound recruitment policy? How does e-recruitment add value?
3. Outsourcing is a major cost saving and efficient method in hiunan resources planning. Do you agree?
4. Incentive based compensation will not function in the banking industry. Do you agree?
5. It is not advisable to reduce attrition below 10% per year. Elaborate on this statement in the context of the
new generation of employees.
References
The Human Resource Function In Emerging Enterprises {entrepreneurship Series) (Hardcover - 2001-10-17)
by Jeffrey S. Homsby, Donald F. Kuratko
The Human Capital Challenge (ASTD Public Policy Cduncil, August, 2003)
* Tom McMullen is the vice president of North American reward practice at Hay Group and is based in
Chicago.
Webiiography
BeakWare-net articles
'ii.i
PERFORMANCE MANAGEMENT
STRUCTURE
10.0
Objectives
10.1
Introduction
10.2
Performance Management System
10.3
Performance Appraisal System
10.4
Use of Performance
10.5
360 Appraisal
10.6
Competency Mapping
10.7
Key Result Area
Let Us Sum Up
Keywords
Terminal Questions
References
10.0
OBJECTIVES
10.1
Understand the concept of Performance Management

Process for Performance Appraisal
RoleofPerformance Appraisal and New Trends m Appraisal
360 Performance Appraisal
Competency Mapping
Key Result Area
INTRODUCTION
Performance Management System (PMS) is a formal, structured system of measvuing, evaluating job
related behaviors and outcomes to discover reasons of performance and how to perform effectively in
future so that employee, organisation and society all benefit. The most familiar aspect of PMS is the
performance appraisal, which is derived from the goals and objectives set, which again get derived fiom the Vision and Mission of the organisation.
Management of Performance is a major managerial activity and leads to a number of other HR
initiatives starting with rewards, training and development and shows the way for a company's
accelerated growth. Performance management is the process of looking both to the fiiture and to the
past, in the context of the collective performance of all the employees in an organisation.
10.2 Performance Management System

From a traditional, yearly appraisal, today's dynamic environment has triggered the need for a
continuous evaluation of performance and every employee understands that her performance is being
measured constantly. The usual grace period has now shrunk to a few weeks and based on the demands
made by the job, measurement matrix are set in place which have a direct relevance to the
organisational goals, department and fimctional goals as well as the expectations set before the
individual employee. Some of the major ingredients are setting clear, agreed objectives based on the
Job descriptions and position profiles. Performance is evaluated against the laid down objectives,
feedback provided and fiuther planning, prioritising and agreeing make up the way forward.
Traditionally, PMS refers to the process of establishing goals, assessing employees and implementing
the annual performance appraisal process. The goal of performance management is to create a
consistent, fair and equitable process for the establishment of performance standards across an
organisation. This process is fimdamental to a high-performing organisation because it establishes the
way in which people are managed.
In performance analysis, we set to find out answers to the following questions:
1.
2.
3.
4.
What did we set out to do and what time firame?

Have we achieved it?
What are we going to do next?
How will we know if we have done it?

10.2.1 Some Salieat Points Associated with Performance iUlanagement
1. Development of individual goals;- based on the KRAs set as well as the organisational goals, and as per the goal
setting method followed in the organisation
2. Alignment of goals across the organisation;- the sum total of the individual goals must add up to achievement of
the corporate goal.
3. Manager assessment of performance;- typically, appraisal is done by the immediate manager, based on a self
.
assessment by the appraisee

4. Employee self-assessment of performance;- an important feature, giving an opportunity for the employee to state
his accomplishments.
5. Peer or 360 assessment of perforrhance- a more sophisticated and comprehensive assessment, taking into
account a number of views from a cross section of boss, subordinate and peers.
6. Competency assessment (often called assessment of "potential"); and,
7. Coaching and development, related planning for fiiture career positions.
Each of these processes is complex - and is performed in different ways by different organisations. While there are
hundreds of books on how to "conduct performance appraisals," ultimately "performance management is also
management." It forms the tâsis for the way in which employees work with their managers every day.
These seven processes form and enhance the relationship between managers and employees. Well- implemented
performance management systems will reinforce and institutionalise the company's overall process of management.
Unfortunately, in many organisations (approximately 70 percent), performance management itself is not a wellestablished, consistent process. Even in those that have a consistent process, it often tends toward the "annual appraisal"
- leaving much of the other processes up to the whims of a manager.
10.3 PERFORMANCE APPRAISAL SYSTEM

Research shows that, despite the great importance of performance management in HR departments:
Sixty-one percent of line managers do not feel that the process they have today is driving-greatfer performance;
Fifty-six percent of managers are not satisfied with the process; and,
Fifty percent of HR managers are not happy with the process.
The biggest complaint from managers is that they are not given enough guidelines on how to assess people, and the
biggest complaint from employees is that the process is not equitable and fair. So in the vast majority of organisations,
performance management is a "work in progress."
Driven by today's competitive business environment and the changing demographics of the workforce, organisations of
all sizes are implementing integrated talent management strategies. These programs are designed to improve the
leadership pipeline, improve workforce skills, and increase retention and staffing to meet the needs of growing
organisations. Almost two thirds of HR organisations are building integrated
v
Vj
talent management strategies - which look at HR processes as an integrated whole (not only as separate fimctional
processes). Ultimately, however one defines talent management, research clearly shows that performance management
is foundational - it establishes the ground rules for conversations between managers and employees.
How, for example, does one decide who gets the bigger raise? How to decide who is promoted into a given position?
How to decide who to lay off during a downturn? Who should be given an opportunity to take on a challenging,
business-critical new assignment? Everywhere one looks, these talent management decisions are dependent upon the
appraisal of an individual's performance, capabilities and potential. In most HR textbooks (and in many organisations),
performance assessment is broken into the following two fimdamental pieces.
The "What" - What did this person accompUsh? What value is he / she delivering to the organisation?
Is he/she achieving his/her business objectives?
The "How" - How did this person achieve such results? What is his / her skills and competencies?
How well are they aligned with our corporate values?
Performance Appraisals which is the most visible form of the performance management system, is a developmental tool
used for all round development of the employee and the organisation. Performance is measured against such factors as
job knowledge, quality and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation,
judgment, versatility and health. Assessment relates to past as well as potential performance.
10.3.1
Techniques/Methods of Performance Appraisals
Numerous methods have been devised to measure the qxiantity and quality of performance appraisals.
Each of the methods is effective in a relative msmner for various organisations. Broadly all methods of
appraisals can be divided into two different categories.
i
s
;
.i
Past Oriented Methods

Future Oriented Methods
10.3.2
Past Oriented Methods
1. Rating Scales: Rating scales consists of several numerical scales representing job related performance
criterions such as dependability, initiative, output, attendance, attitude etc. Each scale ranges from excellent to
poor. The total numerical scores are computed and final conclusions are derived. Advantages - Adaptability, easy
to use, low cost, every type of job can be evaluated, large number of employees covered, no formal training
required. Disadvantages - Rater's biases.
2. Trait Analysis: Under this method, checklist of statements of traits of employee in the form of Yes or No based
questions is prepsffed. Here the rater only does the reporting or checking and HR department does the actual
evaluation. Advantages - economy, ease of administration, limited training required, standardisation.
Disadvantages - Raters biases, use of improper weights by HR, does not allow rater to give relative ratings.
II
181
3. Forced Choice Method: The series of statements arranged in the blocks of two or more are given and
the rater indicates which statement is true or false. The rater is forced to make a choice. HR department
does actual assessment. Advantages - Absence of personal biases because of forced choice.
Disadvantages - Statements may be wrongly framed.
4. Forced Distribution Method: Here employees are clustered aroimd a high point on a rating scale. Rater
is compelled to distribute the employees on all points on the scale. It is assumed that the performance
is conformed to normal distribution. Assumption of normal distribution, unrealistic, errors of central
tendency may occur.
5. Critical Incidents Method: The approach is focused on certain critical behaviors of employees that
makes all the difference in the performance. Supervisors as and when they occur record such incidents.
Advantages - Evaluations are based on actual job behaviors, ratings are supported by descriptions,
feedback is easy, reduces recent biases, chances of subordinate improvement are high. Disadvantages Negative incidents can be prioritised, forgetting the positive ones, overly close supervision.
6. Confidential Records: Mostly used by government departments, and in older organisations where the
concept of self assessment is not encouraged. Here the report is given in the form of Annual
Confidential Report (ACR) and may record ratings with respect to following items; attendance, self
expression, team work, leadership, initiative, technical ability, reasoning ability, originality and
resourcefiilness etc. The system is highly secretive and confidential. Feedback to the assessee is given
only in case of an adverse entry. Rather negative in impact as the ratings are highly subjective and can
be manipulated to suit an occasion.
7. Pen portrait: The assessor pictures in writing about the assessee, regarding his qualities and
performance as well as his potential. Armies use this method in evaluating cadets.
10.3.3 Future Oriented Methods

Management by Objectives: A concept popular till recently and introduced by the management Guru, Peter
Drucker, where performance is rated against the achievement of objectives stated by the management. MBO
process goes as under.
Establish goals and desired outcomes for each subordinate
Set performance standards
Assess performance achieved against goals set for the employee
Identify reasons for shortfall and establish new goals and new strategies for the coming year.
10.3.4 Organisational Support Factors for Performance Appraisal Systems

Performance appraisal serves many organisational objectives and goals. Besides encouraging high level of
performance, the evaluation system is usefiil in identifying employees with potential, rewarding them
equitably, and determining employee needs for development. All these activities are instrumental in achieving
corporate plans and long-term growth although the typical appraisal system in most organisations have been
put to limited use due to lack of a committed follow up on the findings.
Feedback Mechanism: Performance evaluation is the central mechanism that not only provides feedback to
individuals but also aids in the assessment of the progress of organisation as a whole. Without appraisals,
managers of any firm can only guess as to whether or not employees are working towards realisation of the
organisation goals.
A good performance appraisal system is not complete without an effective feedback mechanism. Most
appraisals have an element of discussion between appraiser and appraisee where the events of the previous
year are discussed and plans made for better performance in the coming years. Where the appraisee has an
apprehension that she has not been fairly appraised or that just rewards would not be available to her due to
the biased approach of the appraiser, there is a provision for review with a higher authority where again clear
feedback is given on the performance and reasons for poor rating. Such checks and balances help make the
appraisal system more transparent and less threatening.
10.4 USE OF PERFORMANCE APPRAISALS

1.
2.
3.
4.
5.
Promotions
Confirmations
Training and Development
Compensation reviews
Competency building
Goals of Performance Appraisals

General Goals
Specific Goals
Developmental Use
Individual needs Performance feedback

Transfers and Placements Strengths and
Development needs
Administrative Decisions / Uses
Salary Promotion
Retention / Termination
Recognition
Lay offs
Poor Performers identification
Organisational Maintenance
HR Planning
Training Needs Analysis
Organisational Goal achievement
HR Systems Evaluation
Reinfoicement of organisational priorities
Documentation
HR Records and individual dossier Validation

Research Legal Requirements
10.5
360-DEGREE APPRAISAL
It is a technique which involves systematic collection of performance data on an individual or group,

derived from a number of stakeholders like immediate supervisors, team members, customers, peers
and self In fact anyone who has usefiil information on how an employee does a job may be one of the
appraisers. This technique is highly usefiil in terms of broader perspective, greater self-development
and multi-source feedback. SO-^degree appraisals are usefiil to measure inter-personal skills, customer
satisfaction and team building skills. However on the negative side, receiving feedback from multiple
sources can be intimidating, threatening as it is likely that multiple raters, not trained in the system may
be less adept at providing balanced and objective feedback.
10.6
COMPETENCY MAPPING
Finding the right fit for the right job has always been a matter of concern for most organisations. In
managerial terms, the right profile is a combination of several traits, such as behaviour, knowledge,
attitudes etc. A well established practice to ensure the right fit, is to map the competency of the person
against the competency profile defined for a given position. Some definitions of Competency:
A Competency is an underlying characteristic of ar person which enables him /her to deliver superior
performance in a given job, role or a situation.
A Competency is a set of skills, related knowledge and attributes that allow an individual to
successfiilly perform a task or an activity within a specific fimction or job.
Some examples of organisational competencies and how they get described and derived.
10.6.1 Ahalytieal Thinking

The ability to break problems into component parts and consider or organise parts in a systematic
way; the process of looking for underlying causes or thinking through the consequence of different
courses of action.
10.6.2 Key Behavioural indicators
Independently researches for information and solutions to issues.

Ability to know what needs to be done or find out (research) and take steps to get it done.
Ask questions when not sure of what the problem is or to gain more information.
Able to identify the imderlying or main problem.
Shows willingness to experiment with new things.
Develops a list of decision making guidelines to help arrive at logical solutions.
Competencies get defined by levels, fimctions as well as the industry.
10.6.3 Generic Competencies

Competencies which are considered essential for all employees regardless of their fimction or
level. - Communication, initiative, listenmg etc.
10.6.5
10.6.4
hfanagerial Competencies
10.6.5
Competencies which are considered essential for employees with managerial or supervisory
10.6.5
responsibility in any fimctional area including directors and senior posts e.g. decision making,
leveraging relationships.
Teclinicai / Functional Competencies

Specific competencies which are considered essential to perform any job in the organisation within a defined technical or
fimctional area of work, e.g.: Finance, environmental management, etc.
Competencies help companies 'raise the bar* of performance expectations, help teams and individuals align their behaviours
with key organisational strategy and help employees understand how to achieve expectations. Ehiring the selection process,
Competocy based interviews reduce the risk of making a cosdy hiring mistake and increase the likelihood of identifying and
selecting the right person for the right job.
Competencies enable establishment of clear high performance standards, collection and proper analysis of factual data against
the set standards and conduct of objective feedback meetings leading to the right direction with regard to specific areas of
improvement.
Core competencies apply to all employees and typically relate to the company's high-level values. Examples include items
such as communication, integrity, and time management.
With core competencies established, one can delve into tiie detail of fimctional Competencies which are more inclusive and
apply to specific job fimctions. For example, fimctional HR competencies might include those items that represent the basic
tasks within HR, such as employee relations, benefits, and compensation.
After completing the competency profiles, consider adding the next level of detail: proficiency levels. For some
organisations, this step is optional, but those looking to generate greater success within an overall talent development strategy
should include this as proficiency levels represent the company's expectations for mastery across all of the different
competencies within a profile-and armed with this information, employees are better prepared to make progress in their
careers.
Proficiency levels will vary by position, and will also vaiy within the same position over different job levels. For example, an
HR Head with 14 years' experience is expected to perform at a higher level than an HR Manager with only six years'
experience. Given below are two simple profiles, which indicate proficiency level expectations on a scale fi-om 1 (beginner)
to 5 (mastery):
10.6.6
Competency Matrix
HR Head
HR Manager
Communication (core)
Communication (core)
Decision-making (core)
Decision-making (core)
Conflict resolution (core)

Employee relations (functional)
4
5
Conflict resolution (core)

Employee relations (fimctional)
5
5
Compensation (functional)
Compensation (functional)
By running competency reports, the management can analyse the data and pinpoint, for example, which
core competency has the biggest gap in expected proficiency. Furthermore, this information can be used
to develop the organisation's training needs as well as talent gaps, which when anticipated, helps plan
effectively in advance, so as to ramp up intemal bench strength, fill key positions without recmiting
new hires, and potentially save the company major expenses.
A performance management system will allow to fiilly capitalise on competency reports for this
purpose- not only by providing specifics geared toward identifying skills gaps, but also by linking to
leaming management technology that seamlessly bridges those gaps. Clearly, competencies impact
every phase in the employee lifecycle-firom recmitment through career development and beyond.
While the legwork in defining and establishing competency plans might be extensive, the end results
hold tremendous potential in terms of ramping up employee caliber, rating and building employee
skills, and identifying and bridging gaps. By combining a properly constmcted competency model with
a fiill-featured performance management system, HR departments can systematically generate, apply
and leverage competency data across a comprehensive talent development strategy, ultimately boosting
business results through a stronger, more productive workforce.
A leading MNC company in India has a comprehensive career management fi:amework that helps
employees map their growth paths, lateral or vertical. Each role has a defined set of competencies
aligned to it. "Employees are expected to first acquire the competencies defined for the current role and
then focus on the competencies for a growth role before they are considered eligible for movement.
Trained experts facilitate the mapping of specific leaming activities for each competency required for a
role in the organisation and has over 4000 training programs, both e-leaming and instmctor-led to help
bridge any gaps in employee competencies.
This company has a robust and transparent Intemal Job posting process where the positions available
are indicated with the desirable competency profile for each position, thus enabling employees to get a
complete picture of the opportunities available within the company. With this information, employees
are better equipped to make informed career decisions and develop the competencies with regards to
knowledge and skills they require to move up the career ladder.
Another leading organisation has the advantage of employees delivering and exceeding requisite
performance levels since the company has mapped out competencies that are required to perform
specific roles. "New hires are pegged against those that are required for the role before being hired to
ensure they fit as per their deliverables. Existing employees are periodically reviewed with the help of
assessment tools and based on the gap analysis, are provided the necessary training and development to
hone the requisite competency. The action plans for the competency development outcome based on
such assessments are fmalised and the entire initiative is institutionalised.
A new generation Bank follows a Competency Based Training ( CBT) approach by which the desired
competency profile the trainees must attain by the end of a given training program is clearly defined
and regular tests and feedback sessions, give an indication of the extent to which the training program
is successful.
Competency mapping not only helps know your competencies but also your weak areas which can be
worked upon. Besides increasing employee morale and enhancing productivify, it induces fi-esh
thinking, fosters innovation and thereby aims to provide an enriching job experience.
Over the past 10 years, human resource and organisational development professionals have generated a lot of interest
in the notion of competencies as a key element and measure of human performance. Competencies are becoming a
frequently-used and written-about vehicle for organisational applications such as:
10.6.7
Defining the factors for success in jobs (i.e., work) and work roles within the organisation
Assessing the current performance and fiiture development needs of persons holding jobs and roles
Mapping succession possibilities for employees within the organisation
Assigning compensation grades and levels to particular jobs and roles
Selecting applicants for open positions, using competency-based interviewing techniques
Competency Mapping Process
Competency mapping is a process through which one assesses and determines one's sfrengths as an individual worker
in the context of an organisation. Large organisations frequently employ some form of competency mapping to
imderstand, identify and effectively use the competencies of their employees.
10.6.8
Steps in Competency Modei Buiiding
Background information about the organisation

Decide on the Occupation/Job Position(s) that require competency Model(s)
Discuss the application of the competency model
Select a data collection method and plan the approach
Organise Data collected
Identify main themes or pattems, build the model - defining specific behaviour Indicators and review the
model
10.6.9 Assessment Centers

This technique was first developed in USA and UK in 1943. An assessment center is a central location where
managers may come together to have their participation in job related exercises evaluated by trained observers. It is
more focused on observation of behaviors across a series of select exercises or work samples. Assesses are made to
participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which
require specific attributes for successful performance in actual job. The characteristics assessed in assessment center
can be assertiveness, persuasive ability, conununication, planning and organisational ability, self confidence,
resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental
alertness etc. At least two foreign banks had started assessment centre in the late 80s with considerable success.
Advantages - well-conducted assessment center can achieve better forecasts of future performance and progress than
other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment
centers.
Disadvantages - Costly and time consuming, ratings strongly influenced by assessee's inter-personal skills. Good
performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.
10.6.10
Key Result Area
The Individual Performance and Development Plan has ô component parts, the Performance Plan and its related
Individual Development Hn. th Prfonriance Plan is constructed by the manager and employee together,
focusing on priority-setting for the performance management cycle and, working co-operatively through a fourstep process:
1.
2.
3.
4.
Agreeing upon Key Results Areas

Agreeing upon Performance Objectives
Agreeing upon Key Performance Indicators and their associated Performance Targets
Agreeing upon Action Plans
10.6.11
Key Result Area (KRA)
KRAs refer to general areas of outcomes or outputs for which the Sector / Department is responsible.
Identifying KRAs helps individuals
Clarify their roles

Align their roles to the organisation's business or strategic plan
Focus on results rather than activities
Communicate their role's purposes to others
Set goals and objectives
Prioritise their activities, and therefore improve their time/work management
Make value-added decisions
Most roles include 3 to 5 key result areas. If individuals are accountable for more than this, they may be
overloaded, or they may not be delegating effectively. KRAs deal with results and not Avith day to day activities
and hence more quantitative the KRAs the easier they are to track. So, KRAs help individuals align their day to
day activities to overall organisational/project goals in terms of results delivered.
10.6.12
Steps for Arriving at KRA
Talk to individual team members, gather information

Identify their day to day activities and hence derive key result areas
10
Document them and allocate a timeline

Communicate KRA's to the team members
Revisit progress of an individual on these KRA's periodically
Critically review performance against each of these KRAs periodically (preferably quarterly)
Facilitate correction in case of deviations
Observe, measure, discuss and appraise
10.6.13
Key Performarce Indicators
In order to measure if the KRAs are achieved, some Key Performance Indicators (KPI) are developed.
10.
A KPI is a specific, agreed measure of achievement within a KRA, wîch gci n to make up the
goals and objectives measured under the performance appraisal process. Key characteristics of
KPIs are that they are objective, independent and standardised measures of performance, not
ratings or judgments of performance, they may be QUANTITATIVE or QUALITATIVE. The
measure is activity based rather than outcome based, as these KPIs will often be more suitable to
routine repetitive ftmctions. Some examples of these terms in practice.
KPIs are usually Specific, Measurable, Attainable, Realistic and Time-bound (SMART), which
help to determine if and how much the KRAs are met. KPIs Should be:
quantifiable
quality oriented
time specific
cost effective
10.6.14
Number of units produced/published/sent/received/processed/deadlines met

Contacts per hour/day/week
Cost reduced
Resources increased
Increase in area/beneficiary coverage etc.
10.6.15
Quaiity
New innovative ideas introduced

Benefit Increased
Error rate or reworks
Grievances of employees
Conflicts
Returned goods
Staff tumover
Complaints and compliments received etc.
10.6.16
Quantity
Cost
Variance against budget

Amount spent vs. benefit
Utilisation of fimds
Wastage of fimds
10.6.17 Time
Speed of delivery (emergency response) etc.
Reduction in number of minutes/hours/days etc.
Deadlines and schedules met
Average call response time
Projects completed per week/month etc.

Scheduling and maintenance
A balanced approach to the setting of KRAs brings together many of the seemingly disparate elements of
an organisation's agenda, and relates them to individual performance. It allows a supervisor and employee
to see whether improvement in one area may have been achieved at the expense of another. This approach
is based on four perspectives:
Organisational perspective
Client perspective
Task perspective
Interpersonal perspective
Key Result Areas should, always identify the current most significant objectives of the position, giving an
indication of the rationale for the given position.
K^ Result Area for a trainer

Bring the Competency level of employees ( grade 4) from current level 2 to level 3.
K^ performance indicators
1. Study current practices and industiy standards with regard to similar grade 4 employee training.
2. Define an illustrative competency profile for the group.
3. Design a model leaming program to cover the desired topics.
4. Identify the right profile of faculfy for the training programs.
5. Prepare a training calendar and define time frame within which to complete training the entire
group.
Performance measures
1. Whether program design accepted by functional heads as relevant to current and future
requirements, cover all identified sectors, technical areas and required qualification levels.
2. Training program results in continuous improvement of processes and enhanced productivify.
K^ Result Area for the Training Manager

A life long leaming culture to be promoted in the orgnisation.
Key Performance Indicators

1. Promotion of industry career information, websites and other mechanisms.
2. Ensuring that career services adequately addresses the industries.
3. Revising and promoting relevant careers publications.
4. Provide targeted careers information to employers.
5. Provide targeted ci.reers information to existing employees.
6. Identifying vocational education and training opportunities for existing workers.
7. Working with industry organisations and government agencies on industry action plans and
agendas.
8. Working with industry organisations and government agencies on a concerted approach and strategy
to promote industry careers.
9. Investigating innovative ways of promoting industry careers.
Ensure that training addresses the vocational education and training needs of industries and provide viable
career paths through vocational education and training.
Performance measures
1. Industry career information and websites and other mechanisms valued as providing relevant and
appropriate industry careers information.
2. Careers information systems and services adequately addressing the industries.
3. Careers information publications revised and published.
4. Continued and active involvement with industry action plans and agendas. Critical success factors
1. Resoince capability to imdertake the required work.

2. Sufficient access to career information and products by leamers, career aspirants and advisers.
3. Industry imderstanding of requirements regarding careers promotion.
4. Continued and enhanced support and promotion of vocational education and training by industry
organisations and government agencies.
10.6.19 Illustrations of KRA and KPI for HR

The following points will illustrate the KRA and KPI for the HR Manager: KRA .Employee Productivity to
increase by 7%
average sales tumover per employee
average profit per employee
value added per employee
KRA 2. Employee Cost Reduction by 6% p.a. KPI

employment costs as % of sales tumover/profit
employment costs per employee
employment -osts as % of operating costs
KRA 3. Employee Turnover to be reduced to 10%
% of employees that leave the organisation in a given time period
Analysis of the resignations

(average length of service, age,
reasons
fOT'leawiag^liQaêtitiYe"
Cost of replacement
Ultimately the criteria for a performance
system should be genuinely related to
success or failure in the job and as far

as possible, should be amenable to
objective judgement.
Systems Design for the appraisal process as under:
1. It should be such that the appraisee will, mê a contribution to the appraisal process.
2. There should be a reflection of short term and long term guidance.
3. It should be used for self development.
4. There should be something to indicate appraisee's agreement/disappointment. Should be a
reflecfibn of short term and long term guidance;, <
Let Us Sum Up
In this unit we have learnt Basics of Performance Management System, the Performance Appraisal
Process, the role of Appraisal, 360 Appraisal, Competency Mapping and Key Result Areas.
Keywords
PMS
Appraisal System
360 Performance Appraisal
Competency Assessment
Key Result Area
Key Performance Indicators
Check your progress

1. Majority of staff and managers in most organisations are not happy with existing appraisal systems.
2. Competency defines the skills, knowledge and attributes for successfiil completion of a job.
3. A good performance management system can identify competencies.
4. KRAs relate to the most significant achievement areas.
5. KRAs are synonymous with goal setting.
1. True, 2. True, 3. False, 4. True, 5. False
Terminal Questions
1. Introducing and managing a healdiy performance management system is the first priority of the
HR department. Do you agree?
2. Write a short note on 360 appraisal.
3. Elaborate on how Competencies are developed in the context of the organisational competency
fi-amework.
4. Identify the KRA for the Head HR position and elaborate on the selection process you would
use for getting the right candidate..
References
Ganesh Shermon, Competency based HRM, 1st edition, 2004
Seema Sangvi, A Hand book of Competency Mapping, 2004
www.ignou.ac.in
www.citehr.com
High-Impact Talent Management; Trends, Best Practices andlndustry Solutions, Bersin &
Associates/Josh Bersin, May 2007
mmm
MODULE-C
motivation, training and skill
development
Units
11.
The Leaming Process
12.
Employee Motivation
13.
Employee Development
14.
mmm
the learning process
STRUCTURE
11.0
Objectives
11.1
Introduction
11.2
Human Implications of Organisations
11.3
The Leaming Theory
11.4
The Leaming Process
11.5
Employee Behavior
Let Us Sum Up
Keywords
Terminal Questions
References
11.0
OBJECTfVES
After reading this imit, you should be able to understand:

Human Implications in Organisations
Various Theories of Leaming
The Leaming process
Appropriate Workplace Behaviour
11.1
INTRODUCTION
Human Resource Management is a way of management that links people-related activities to the
strategy of the organisation's business. HRM is often referred to as "strategic HRM". It has several
goals:
To meet the needs of the business and management (rather than just serve the interests of
employees);
To link human resource strategies / policies to the business goals and objectives;
To find ways for human resources to "add value" to a business;
To help a business gain the commitment of ejnployees to its values, goals and objectives.
11.2
HUMAN IMPLICATIONS OF ORGANISATIONS
All elements of the business strategy have implications for human resources, as illustrated in the table
below. The challenge for management is to identify and respond to these HR issues:
Exanqiles of Key Strategy Issues

What markets should the business compete in?
Possible Human Resource Implications

What expertise is required in these markets? Do existing
management and employees have the right experience
and skills?
Where should the business be located to compete Where do we need our people? How many do we need
optimally?
and at what stage of business growth?
How can we achieve improvements in our unit How productive is the workforce currently? How does
production costs to remain competitive?
this compare with competitors? What investment in the
workforce (e.g. training, recmitment) and their
equipment is required to achieve the desired
improvement in productivity?
How can the business impact cultural change?
What are the current values of the workforce. How can

the prevailing cultwe be influenced/changed to help
implement a change programme?
How can the business respond to rapid technological What technological skills does the business currently
change in its markets?
possess? What additional skills are needed to respond to
technological change? Can these skills be acquired
through training or do they need to be recmited?
An important part of HRM is the Hmnan Resources Plan. The purpose of this plan is to analyse the
strategic requirements of the business in terms of manpower - and then to find a way of meeting the
required demand for labour.
11.2.1 Creating Competitive Advantage

Companies that achieve long-term success are those that are able to develop and maintain competitive
advantage. The challenge, of coiffse, is that today's competitive advantage becomes tomorrow's minimum
level of acceptable performance. Unique products, decreased time to market, high quality, and excellent
customer service; each, at various times, provide competitive advantage-and competitors quickly replicated
each.
11.2.2
Common implementation Ciiaiienges
Most organisations do a relatively good job of figuring out what must be done to solve their problems or
exploit their opportunities. The difficulty is that the vast majority is not able to implement these solutions
very well as they unwittingly apply their resources toward identifying new solutions rather than realising
existing potential. Such new solutions (merger, reorganisation, updated processes, etc.) are armounced and
introduced to the organisation with a typical sequence of events to include armoimcing the project,
providing new equipment or software, training, or a host of other related activities. Realisation, however, is
achieved when the organisation goes beyond just deploying the change and reaps the fiill business benefits
that were anticipated when the resources were allocated to pursue the initiative.
Realisation has become a major differentiator because one of the crucial issues facing businesses today is
not what strategy or solution to put in place, but rather how to implement these initiatives in such a way
that they have their intended impact. In volatile markets, leaders cannot afford to risk their organisation's
fiiture on important strategies and projects that are simply "installed." Today, success also depends on
being able to ensure that the promised benefits are delivered. It is very rare for one to get a platform to test
one's products, competencies etc. before launching the product or service in the market.
For example, in mergers, though fmancial and physical merger is achieved, it is very rarely that two
organisations achieve the cultural merger. Lloyds Bank was taken over by National Grindlays bank p.l.c in
the year 1961. Even in the 80s, the staff of the former, continued to refer themselves as Lloyd's staff. In the
case where Standard Chartered bank took over Grindlays, the latter's office staff who had attained 55 years
of age but below 58, had to be sent home by payment of salary for the remaining part of service as the age
of retirement in the former bank happened to be 55 years.
11.2.3
iMoments of Trutii
All too often, the top management feels they have determined the right strategy and plan of action, but then
something happens and the intended outcome just never seems to happen. Regardless of what the initiative
involves (opening new markets, realignment of strategy and structure, altering corporate culture, etc.), there
are inevitably "moments of truth" that dictate whether or not an organisation actually receives the value the
decision makers hoped to achieve. Companies come to these crucial crossroads and each time they must
decide whether to pay the true price of change or face whatever consequences exist for maintaining the
status quo. As change initiatives move through these critical decision points, there are four possible
outcomes: early termination, meltdown, installation, or realisation.
11.2.4
Early Termination
Oceasionally, approval is secured for a new initiative, but the project never really gets off the ground. Agreements are
reached about what is to be done and budgets are set, but before any official announcements can take place, everything
is discontinued. This is sometimes the result of an obvious financial or political crisis. Other times, the reasons behind
these abrupt terminations are less clear. Regardless of the cause, when efforts to introduce change are blocked after
being approved but before being officially launched, it clearly indicates that the organisation was not ready to fulfill its
aspirations.
199 I ^ HUMAN RESOURCE MANAGEMENT
11.2.5
Meltdown
Sometimes a project is announced and engaged, but at some point during implementation, it is discontinued with a
complete withdrawal of resources and activity. Meltdowns are visible failures for all to see, and the economic and
political price they incur are so costly they are generally avoided if at all possible. Because of the high visibility and
vulnerability associated with such withdrawals, it is easy for decision makers and intemal change agents (or extemal
consultants) to informally (sometimes unconsciously) conspire to camouflage a meltdown as a project that was
completed even though it never achieved the desired results.
11.2.6
Installation
When change projects are first introduced into a work setting, they are deployed (i.e., announced, set up, or in some way
inaugurated) but have not yet achieved their ultimate intent. Installation is about placement; managing the tangible
aspects of inserting a new initiative into the work environment (logistics, plugging in hardware and software, training
schedules, work sessions, etc.).
Installation is an essential part of the overall implementation process, but it is a two-edged sword. With it comes the
potential for either furthering the primaiy purpose of the intended change or actually preventing it from ever tmly taking
form.
Realisation
Realisation takes place when the key purpose for an initiative (for example, confirmed cost savings, measurable
increases in customer loyalty, and documented productivity gains) is actually achieved. Only when installation has taken
place are the necessary elements there to ensure that the installed solution is fiilly used as intended.
The impact of all these four stages on the human resource is substantial. Fmstration and even abmpt withdrawal by way
of resignations happen when projects are killed or terminated early for no apparent reason. When projects get delayed or
discontinued due to a meltdown, a number of the staff involved could also be directly affected; by retrenchment or if
they continue with the project, continued fiiistration at the slow progress. Installation is a happy phase as at least the first
signs of accomplishment are visible; and the people involved find a meaning to their role and efforts. The last stage of
realisation results in meaningfiil role clarity for all those involved as also possible rewards by way of increased benefits
once the project starts bringing in the projected revenues.
11.2.7 Human Landscapes
What differentiates those organisations that simply install new initiatives from those that are able to fiilly realise the
hoped-for benefits is their ability to manage "human landscapes. "At its most basic core, a work environment is
composed of two types of building blocks; those that are "inert" (dealing with such things as structures, policies,
technology, strategies, capital, and tools) and those that are "human" (dealing with such things as perceptions,
assumptions, resistance, fears, aspirations, beliefs, and values). Each work environment has its own configuration of
inert and human components that form a unique identity or landscape that distinguishes it from any other work setting.
The inert aspects are isolated, independent features of the landscape that have no inherent connection to one another (i.e.,
a change in software does not by itself trigger a shift in the way budgets are managed). It is the human component of a
landscape that provides all the links, bonds, and affiliations that exist within work settings. Without the human
component, meaningfiil integration of the various inert components would not exist. For example, a procedure could
stand alone, unaffected by a report showing declining quality, which would be completely detached from employee
performance ratings, which would be unrelated to the new IT system, which would be disconnected from the
implications of a recent merger. People are the bridging agents between themselves and all inert features of a work
environment; therefore, it is the human landscape that is most crucial to the success or failure of efforts to change the
way an organisation functions.
When new initiatives are introduced into a work environment, they cause shock waves of disruption . These points of
impact are the physical and political locations where new entities (advances in technology, new organisational structures,
leadership changes, etc.) are introduced and potentially affect the people they touch. Around each point of impact is a
human landscape that reacts to and dictates the success of the change being introduced. The degree to which a new
initiative spreads throughout a work environment or dies an early death is directly dependent on the human dynamics
reflected in these landscapes (how much commitment or resistance exists, how many other changes are competing for
people's attention, etc.).
Why are the human dynamics around change so problematic? Human landscapes are the breeding grounds for resistance
because all initiatives designed to bring about change, by definition, interrupt the status quo. The greater the promise of
change, the more disruption required. Despite wishful thinking to the contrary, most people are reluctant to disturb the
routines that have formed in their lives. What people resist is not the technological and other changes but changes in
social relationships in the organisation. Employees as human beings, are addicted to established habits, and often cling to
them even when doing so is unproductive or, worse, self-destructive.
This reluctance to depart from the familiar makes it difficult to bring about true organisational transformation. Even
executives who sanction what they say are important changes often hope to somehow accomplish their intentions
without having to personally leave their comfort zones. Furthermore, even if leaders are attuned to the importance of
human landscapes, they often lack the knowledge and tools to deal with these issues adequately. Whether done because
of ignorance, avoidance, or ineptaess, the human landscapes that surround important business solutions are all too often
left unattended or poorly addressed. And when this happens, these landscapes become incredibly effective at
undermining and preventing projects from achieving their fiill potential.
Because of the powerful influence people and their reactions have on the success of change initiatives, it is vitally
important for decision makers to ensure that the human landscapes encircling key business solutions are managed
properly. Many leaders, however, choose instead to deal rather peripherally with or ignore altogether the people
dynamics associated with the major changes they attempt to implement. The key to the problem is to understand the true
nature of the resistance. Much of the time, it is because executives have not fully grasped that leadership today involves
more than making the right decisions about what should be done. In addition to correctly determining the proper course
of action, senior managers must also know how to orchestrate the human infrastructure to ensure that there is enough
support from the key people involved to actually achieve the true purpose of the initiative.
Regardless of the nature of the initiative, introducing change into an organisation is always a resource- consuming
activity (capital, time, energy, attention, etc.). These resources are corporate assets that ultimately fall under the oêrship
of shareholders. All too often however, the promises made about impending change fail to actually translate into the
intended results. Usually this is due to decision makers being dangerously naive about what is required on the
organisation's part for a major initiative to succeed. What is usually missing is either an awareness that perfectly thought
out strategy about what to do can still fall flat when not supported by the people being affected or the tools and
techniques needed to successfiilly direct the human aspects of the project's execution get overlooked.
Another issue inhibiting decision makers from fiilfilling their change-related promises is the assumption that the burden
of accountability for achieving their goals falls on staff or consultants. Although intemal staff can play key supportmg
roles and extemal consultants can deliver sound recommendations, the decision makers carry the greatest obligation for
success. They are the ones who must ultimately ensure that the surrounding human landscape is ready to support
whatever needs to happen.
Regardless of how leaders may contribute to the problem, dysfimctional installation takes place when correct business
solutions are inserted into human landscapes that have not been properly prepared to provide the necessary support.
When this happens, initiatives offer little more than temporary, superficial relief from whatever symptoms the
organisation was trying to resolve. Under such circumstances, the promised ROI cannot be fulfilled. Maximum retum on
the shareholder's investment and full realisation of expected value can only be accomplished by delivering on the
promises made. Fulfilling these promises is unlikely unless the corresponding "human landscapes" have been properly
addressed.
11.2.8 What Leaders Need to Know

Leaders do not need a deep expertise in the psychology of change to deal with human landscape issues, but a solid,
working imderstanding of the dynamics involved is essential. The problem is that many executives are not predisposed
to focus on the "people" aspects of their work environments at all, and those who are interested often lack the knowledge
of how human landscapes operate and/or how to influence them. For change promises to be realised rather than installed,
leaders need to know enough about how key transitions unfold to provide the proper guidance to their organisation.
Human landscape readiness involves four critical elements.
The status of these elements reflects people's predisposition toward realisation success:
Sponsors: The management stmcture responsible for ensuring that initiatives are applied appropriately.
Capacity: The availability of the resources people need to adapt to the desired change.
Culture: The formal and informal ground rules for how things are really done on a day-to-day basis.
Taigets: The people whom the initiatives are intended to influence.
Creating the proper readiness around important initiatives requires that the following four questions be asked and the
necessary actions taken to ensure the key people are adequately prepared to absorb the changes being introduced. The
critical questions are:
Sponsorship: To what extent are the appropriate leaders, managers, and supervisors unwilling or unable to
provide the level of commitment needed to sustain the project?
Capacity: To what extent do users lack the intellectual, emotional, and physical resources needed to adjust to the
changes required by the initiative?
Culture: To what extent do the behaviours, beliefs, and assumptions necessary to achieve the goals of the change
differ from those that are currently shared throughout the organisation?
Resistance: To what extent are various stakeholders exhibiting overt and/or covert reluctance to support the
effort?
The challenge facing leaders today is delivering on the commitments they make when armouncing critical changes.
"Installation" of change is seldom in jeopardy; it is the "realisation" of the promise to shareholders that is typically at
risk. Fulfillment of these promises is possible only if leaders are carefiil to limit their initiatives to those they are serious
about implementing. For each of these business imperatives, they must require proper preparation of the human
landscape as a non-negotiable part of the rollout sfrategies being formulated.
One needs to have a real imderstanding in depth and detail of the specific social arrangement that will be sustained or
strengthened by the change. For this you need to know intuitively how the change will affect complex social
arrangements in the human landscape. Participative management of change may be an answer as then people will
implement agreed change.
11.3 THE LEARNING THEORY

Leaming is acquiring new knowledge, behaviours, skills, values, preferences and understanding and may involve
synthesizing different types of information. The ability to leam is possessed by humans, animals and some machines.
Progress over time tends to follow leaming curves.
Human leaming may occur as part of education or personal development. It may be goal oriented and may be aided by
motivation. Leaming may occur as a result of habituation or classical conditioning, seen in many animal species, or as a
result of more complex activities such as play seen only in relatively intelligent animals and humans. Leaming may
occur consciously or without conscious awareness. Given below are some of the most common methods under which
human beings leam.
Play has been approached by several theorists as the first form of leaming. Children play, experiment with the world,
leam the rales, and leam to interact. In psychology, habituation is an example of non- associative leaming in which there
is a progressive diminution of behavioural response probability with repetition of a stimulus. Sensitization is an example
of non-associative leaming in which the progressive amplification of a response follows repeated administrations of a
stimulus. Associative leaming is the
process by which an element is learned through association wth a separate, pre-occurring element. The
typical paradigm for classical conditioning involves repeatedly pairing an unconditioned stimulus
(which unfailingly evokes a particular response) with another previously neutral stimulus (which does
not normally evoke the response). Following conditioning, the response occurs both to the
unconditioned stimulus and to the other, unrelated stimulus (now referred to as the "conditioned
stimulus"). The response to the conditioned stimulus is termed a conditioned response.
The leaming process most characteristic of humans is imitation; one's personal repetition of an
observed behaviour, such as a dance. Humans can copy three types of information simultaneously: the
demonstrator's goals, actions and enviromnental outcomes. Through copying these types of infonnation,
most infants will tune into their surrounding culture.
Enculturation is the process by which a person leams the requirements of their native culture by which
he or she is surroimded, and acquires values and behaviours that are appropriate or necessary in that
culture. The influences which as part of this process limit, direct or shape the individual, whether
deliberately or not, include parents, other adults, and peers. If successful, enculturation results in
competence in the language, values and rituals of the culture. Most induction programs have
enculturation as a major, if subtle objective.
11.3.1 E-iearning and Augmented Leaming

Electronic leaming or e-leaming is a general term used to refer to internet-based networked computer-
1^02 I HUMAN RS
enhanced leaming. A specific and always more difflised e-leaming is mobile-leaming (m-Leaming), it
uses different mobile telecommunication equipments, such as cell phones.
When a leamer interacts with the e-leaming environment, it is called augmented leaming. By adapting
to the needs of individuals, the context-driven instmction can be dynamically tailored to the learner's
natural environment. Augmented digital content may include text, images, video, audio (music and
voice). By personalising instmction, augmented leaming has been shown to improve leaming
performance considerably.
Informal leaming occurs through the experience of day-to-day situations (for example, one would leam
to look ahead while walking because of the danger inherent in not paying attention to where one is
going). It is leaming fi-om life, during a meal at table with parents, exploring or piu^ly by association.
Formal leaming is leaming that takes place within a teacher-student relationship, such as in a school
system.
11.3.2 Domains of Learning

The three domains of leaming are:
Cognitive- To recall, calculate, discuss, analyse, problem solve, etc.
Psychomotor- To dance, swim, ski, dive, drive a car, ride a bike, etc.
Affective- To like something or someone, love, appreciate, fear, hate, worship, etc.
These domains are not mutually exclusive. For example, in leaming to play chess, the person will have
to leam the mles of the game (cognitive domain); but he also has to leam how to set up the chess pieces
on tiie Qhessboard and also how to properly hold and move a chess piece (psychomotor). Furthermore,
later in the game the person may even leam to love the game itself, value its applications in life, and
appreciate its intellectual appeal.(affective domain).
11.3.3
Learning Process
Learning theory may be described as a body of principles advocated by psychologists and educators to
explain how people acquire skills, knowledge, and attitudes. Various branches of leaming theory are
used in formal training programs to improve and accelerate the leaming process. Key concepts such as
desired leaming outcomes, objectives of die training, and depth of training also apply. When properly
integrated, leaming principles, derived from theories, can be useftil for all areas of activity. Over the
years, many theories have attempted to explain how people leam. Even though psychologists and
educators are not in complete agreement, most do agree that leaming may be explained by a
combination of two basic approaches: behaviorism and the cognitive theories.
11.3.4
Beliaviourism
Behaviorists believe that animals, including hmnans, leam in about the same way. Behaviorism stresses
the importance of having a particular form of behavior reinforced by someone, other than the student,
to shape or control what is leamed. Frequent, positive reinforcement and rewards accelerate leaming.
This theory provides the instmctor with ways to manipulate students with stimuli, induce the desired
behavior or response, and reinforce the behavior with appropriate rewards. In general, the behaviorist
theory emphasises positive reinforcement rath r than no reinforcement or punishment.
11.3.5
Cognitive Tlieory
1^02 I HUMAN RS
Unlike behaviorism, cognitive theory focuses on what is going on inside the student's mind. Leaming is
not just a change in behavior; it is a change in the way a student thinks, understands, or feels. There are
several branches of cognitive theory. Two of the major theories may broadly be classified as the
information processing model and the social interaction model. The first says that the student's brain
has intemal stmctures which select and process incoming material, store and retrieve it, use it to
produce behavior, and receive and process feedback on the results. This involves a number of cognitive
processes, including executive fimctions of recognising expectancies, planning and monitoring
performance, encoding and chunking information, and producing intemal and extemal responses.
The social interaction theories gained prominence in the 1980s. They stress that leaming and
subsequent changes in behavior take place as a result of interaction between the student and the
environment. Behavior is modeled either by people or symbolically. Cultural influences, peer pressure,
group dynamics, and film and television are some of the significant factors. Thus, the social
environment to which the smdent is exposed demonstrates or models behaviours, and the student
cognitively processes the observed behaviors and consequences. The cognitive processes include
attention, retention, motor responses, and motivation. Techniques for leaming include direct modeling
and verbal instmction. Behavior, personal factors, and environmental events all work together to
produce leaming.
Both models of the cognitive theory have common principles. They both acknowledge the importance
of reinforcing behaviour and measuring changes. Positive reinforcement is important, particularly with
cognitive concepts such as knowledge and understanding. Evaluation is often limited to the kinds ot
knowledge or behaviour that can be measured by a paper-and-pencil exam or a performance test.
Although psychologists agree that there often are errors in evaluation, some means of measuring
student knowledge, performance, and behavior is necessary.
The ability to leam is one of the most outstanding human characteristics. Leaming occurs continuously
throughout a person's lifetime. Leaming can be defined as a change in behavior as a result of
experience. An individual's way of perceiving, thinking, feeling, and
doing may change
as a result of a learning experience. This can be physical and overt, or it
may
involve
complex intellectual or attitudinal changes which affect behavior in
more subtle ways.
11.3.6 Characteristics of Learning

Although characteristics of learning and learning styles are related, there are distinctions between the
two. Leaming style is concerned with student preferences and orientation at several levels. For
example, a student's information processing technique, personality, social interaction tendencies and the
instructional methods used are all significant factors which apply to how individual students leam.
The key point is that all students are different, and training programs should be sensitive to the
differences. Some students are fast learners and others have difficulties; and, motivation, experience,
and previous training affect learning style. And learning style differences depend on how students
process information. Some rely heavily on visual references while others depend more on auditory
presentations. Visual students learn readily through reading and graphic displays, and auditory students
have more success if they hear the subject matter described. Some learn more easily when an idea is
presented in a mathematical equation, while others may prefer a verbal explanation of the same idea.
Where hands-on activities are involved, students also learn by feel. This is sometimes called kinesthetic
learning.
Personality also affects how students learn. Dependent students require a lot of guidance, direction, and
external stimulation as they tend to focus on the instructor. The more independent students require only
a minimum amount of guidance and external stimulation as they are not overly concerned with how the
lesson is presented.
Some generalisations about these classifications indicate that compliant students are typically task
oriented, and anxious-dependent students usually score lower than others on standardised tests.
Discouraged students often have depressed feelings about the future, and independent students tend to
be older, intelligent, secure, and comfortable with the academic environment. Attention seekers have a
strong social orientation and are frequently involved in joking, showing off, and bragging. In contrast,
silent students usually are characterised by helplessness, vulnerability, and other disconcerting
behaviorisms.
The existing learning environment also influences leaming style. In real life, most students find it
necessary to adapt to a traditional style learning environment provided by a school, university, or other
educational/ training establishment. Instructors who can recognise student leaming style differences and
associated problems will be much more effective than those who do not understand this concept. Also,
these instructors will be prepared to develop appropriate lesson plans and provide guidance, counseling,
or other advisory services, as required.
11.3.7 Assumptions
Adult Learning
about
1. Adults need to know why

they need to learn something.
2. Adults need to learn
experientially.
3. Adults approach learning
as problem-solving.
4. Adults learn best when the
topic is of immediate value.
5. Adult view
learning as an active
process in the construction of meaning.
11.3.8
Principles of Learning
Over the years, educational psychologists have identified several principles which seem generally
applicable to the leaming process. They provide additional insight into what makes people leam most
effectively.
Readiness
Individuals leam best when they are ready to leam, and they do not leam well if they see no reason for
learning. Getting students ready to learn is usually the instructor's responsibility. If students have a
strong purpose, a clear objective, and a definite reason for learning something, they make more progress
than if they lack motivation. Readiness implies a degree of single-mindedness and eagerness. When
students are ready to leam, they meet the instmctor at least halfway, and this simplifies the instructor's
job.
Exercise
The principle of exercise states that those things most often repeated are best remembered. It is the basis
of drill and practice. The human memory is fallible. The mind can rarely retain, evaluate, and apply new
concepts or practices after a single exposure. Students do not learn to weld during one shop period or to
perform complicated dance steps with just one demonstration. They leam by applying what they have
been told and shown. Every time practice occurs, leaming continues. The instmctor must provide
opportunities for students to practice and, at the same time, make sure that this process is directed
toward a goal.
Intensity
A vivid, dramatic, or exciting leaming experience teaches more than a routine or boring experience. A
student is likely to gain greater understanding of classical dance by performing them rather than merely
reading about them. The principle of intensity implies that a student will leam more fi-om the real thing
than fi-om a substitute. The classroom imposes limitations on the amount of realism that can be brought
into teaching. But today, instmctors can benefit fi-om a wide variety of instmctional aids to improve
realism, motivate leaming, and challenge students.
Recency
The principle of recency states that things most recently leamed are best remembered. Conversely, the
fiirther a student is removed time-wise fi-om a new fact or understanding, the more difficult it is to
remember. Instmctors recognise the principle of recency when they carefiilly plan a summary session
after each major topic gets covered. The mstmctor repeats, restates, or reemphasises important points at
the end of a lesson to help the student remember them. The principle of recency often determines the
sequence of lectures within a course of instmction.
H.R.M-14
11.4 THE LEARNING PROCESS

Learning Styles can be divided into three broad categories: auditory, visual and kinesthetic.
Characteristics of each are:
Auditory: "I hear": Leam best through hearing, using their ears and voices. These leamers remember
what they hear and remember by talking aloud, like to talk through a concept, enjoy class discussions.
Visual "1 see": Learn best through seeing. These leamers remember seeing things written down, enjoy
pictures of what is described, like written assignment instructions, observe the physical elements of the
teaching situation.
Its
I HUMAN RESOUaC MANAOEMENT

Kinesthetic: "I do": Learn best through doing, touching. These learners enjoy acting out a situation,
making a product or completing a project, remember and imderstand through doing something.
Most {damlns oecuis tiiraugfi ^t, i3ut tte

$tth MiutionofflfiMai
0f it plti^lHItl.
i
We learn:
We Remember:
1% through taste
10% of what we read
1.5% through touch
20% of what we hear
3.5% through smell
30% of what we see
11% through hearing
50% of what we see and hear
83% through sight
80% of what we say
90% of what we say as we act
Initially, all learning comes from perceptions which are directed to the brain by one or more of the five
senses: sight, hearing, touch, smell, and taste. Psychologists have also found that leaming occurs most
rapidly when information is received through more than one sense.
THE LEARNING PBOCSS ]
11.4.1 Perceptions
Perceiving involves more than the reception of stimuli from the five senses. Perceptions result when a
person gives meaning to sensations. The meanings which are derived from perceptions are influenced
not only by the individual's experience, but also by many other factors. There are several factors that
affect an individual's ability to perceive. Some are internal to each person and some are extemal. A
person's basic need is to maintain and enhance the organised self. The self is a person's past, present,
and future combined; it is both physical and psychological. A person's most fundamental, pressing need
is to preserve and perpetuate the self All perceptions are affected by this need.
Just as the food one eats and the air one breathes become part of the physical self, so do the sights one
sees and the sounds one hears become part of the psychological self. Psychologically, we are what we
THE LEARNING PBOCSS ]

perceive. A person has physical barriers which keep out those things that would be damaging to the
physical being, such as blinking at an arc weld or flinching from a hot iron. Likewise, a person has
perceptual barriers that block those sights, sounds, and feelings which pose a psychological threat.
Helping people learn requires finding ways to aid them in developing better perceptions in spite of their
defense mechanisms. Since a person's basic need is to maintain and enhance the self, the instructor must
recognise that anything that is asked of the student which may be interpreted by the student as
imperiling the self will be resisted or denied. Perceptions also depend on one's goals and values. Every
experience and sensation which is fimneled into one's cenfral nervous system is colored by the
individual's own beliefs and value structures. Spectators at a game may see an infraction or foul
differently depending on which team they support. The precise kinds of commitments and philosophical
outlooks which the student holds are important for the instructor to know, since this knowledge will
assist in predicting how the student will interpret experiences and instructions.
Otiier learning concepts include

1. Distance leaming: here the leamer is a solo leamer and the delivery system is through hardware.
2. Open leaming: this leaves the leamer with the choice about leaming goals, sequence and depth,
process and level of involvement and has imrestricted access.
3. The new technology leaming: This will be available for long distance delivery, facilitating
distance leaming.
4. Interactive leaming.
11.4.2 Self-Concept
Self-concept is a powerful determinant in learning. A student's self-image, described in such terms as
confident and insecure, has a great influence on the total perceptual process. If a student's experiences
tend to support a favorable self-image, the student tends to remain receptive to subsequent experiences.
If a student has negative experiences which tend to contradict self-concept, there is a tendency to reject
additional training.
A negative self-concept inhibits the perceptual processes by introducing psychological barriers which
tend to keep the student from perceiving. They may also inhibit the ability to properly implement that
which is perceived. That is, self-concept affects the ability to actually perform or do things unfavorable.
Students who view themselves positively, on the other hand, are less defensive and more receptive to
new experiences, instructions, and demonstrations.
Learning is a psychological process, not necessarily a logical one. Trying to frighten a student through
threats of unsatisfactory reports or reprisals may seem logical, but is not effective psychologically. The
effective instructor can organise teaching to fit the psychological needs of the student. If a situation
seems overwhelming, the student feels unable to handle all of the factors involved, and a threat exists.
So long as the student feels capable of coping with a situation, each new experience is viewed as a
challenge.
A good instructor realises that behavior is directly influenced by the way a student perceives, and
perception is affected by all of these factors. Therefore, it is important for the instructor to facilitate the
leaming process by avoiding any actions which may inhibit or prevent the attainment of teaching goals.
Teaching is consistently effective only when those factors which influence perceptions are recognised
and taken into account.
11.4.3
Memory
Memory is an integral part of the learning process. Although there are several theories on how the
memory works, a widely accepted view is the multi-stage concept which states that memory includes
three parts: sensory, working or short-term, and long-term systems. The sensory register receives inputs
from the envirormient and quickly processes it according to the individual's preconceived concept of
what is important. The sensory register processes inputs or stimuli from the environment within
seconds, discards what is considered extraneous, and processes what is determined by the individual to
be relevant. This is a selective process where the sensory register is set to recognise certain stimuli and
immediately transmit them to the working memory for action. No matter what is happening at the time,
when the sensory register detects a fire alarm, the working memory is immediately made aware of the
alarm and preset responses begin to take place.
11.4.4
Long-Term Memory
Long-term memory is where information is stored for future use. For the stored information to be
useful, some special effort must have been expended during the coding process in working or shortterm memory. Long term memory is a reconstruction, not a pure recall of information or events. It also
is subject to limitations, such as time, biases, and, in many cases, personal inaccuracies. This is why two
people who view the same event will often have totally different recollections.
11.4.5 Forgetting
A consideration of why people forget may point the way to help them remember. Several theories
account for forgetting, including disuse, interference, and repression. The theory of disuse suggests that
a person forgets those things which are not used. The high school or college graduate is saddened by the
lack of factual data retained several years after graduation. Since the things which are remembered are
those used on the job, a person concludes that forgetting is the result of disuse. But the explanation is
not quite so simple. Experimental studies show, for example, that a hypnotised person can describe
specific details of an event which normally is beyond recall. Apparently the memory is there, locked in
the recesses of the mind. The difficulty is summoning it up to consciousness. People forget something
because a certain experience has overshadowed it, or the leaming of similar things has intervened. This
theory might explain how the range of experiences after graduation causes a person to forget or to lose
knowledge. In other words, new events displace many things that had been leamed. From experiments, at
least two conclusions about interference may be drawn. First, similar material seems to interfere with
memory more than dissimilar material; and second, material not well learned suffers most from
interference.
All theories of forgetting imply that when a person forgets something, it is not actually lost. Rather, it is
simply unavailable for recall. The instructor's problem is how to make certain that the student's learning is
readily available for recall. The following suggestions can help.
Teach thoroughly and with meaning. Material thoroughly learned is highly resistant to forgetting. This is
suggested by experimental studies . Meaningful learning builds pattems of relationship in the student's
consciousness. In contrast, rote learning is superficial and is not easily retained. Meaningful learning goes
deep because it involves principles and concepts anchored in the student's own experiences.
There is a considerable amount of literature on retention of leaming during a typical academic lesson.
After the first 10-15 minutes, the rate of retention drops significantly until about the last 5-10 minutes
when students wake up again. Students passively listening to a lecture have roughly a five percent
retention rate over a 24-hour period, but students actively engaged in the learning process have a much
higher retention. This clearly reiterates the point that active learning is superior to just listening.
11.4.6 Transfer of Learning

Some degree of transfer is involved in all learning. This is true because, except for certain inherent
responses, all new learning is based upon previously learned experience. People interpret new things in
terms of what they already know. Many aspects of teaching profit by this type of transfer. It may explain
why students of apparently equal ability have differing success in certain areas. Negative transfer may
hinder the learning of some; positive transfer may help others. This points to a need to know a student's
past experience and what has already been learned. In lesson and syllabus development, instructors should
plan for transfer by organising course materials and individual lesson materials in a meaningful sequence.
Each phase should help the student learn what is to follow.
The cause of transfer and exactly how it occurs is difficult to determine, but no one disputes the fact that
transfer does occur. The significance of this ability for the instructor is that the students can be helped to
achieve it. The following suggestions are representative of what educational psychologists believe should
be done.
Plan for transfer as a primary objective. As in all areas of teaching, the chance for success is
increased if the teacher deliberately plans to achieve it.
Make certain that the students understand that what is learned can be applied to other situations.
Prepare them to seek other applications.
Maintain high-order learning standards. Over-leaming may even be appropriate. The more
thoroughly the students understand the material, the more likely they are to see its relationship to
new situations. Avoid urmecessary rote leaming, since it does not foster transfer.
Provide meaningful leaming experiences that build students' confidence in their ability to transfer
learning. This suggests activities that challenge them to exercise their imagination and ingenuity in
applying their knowledge and skills.
Use instructional material that helps form valid concepts and generalisations. Use materials that
make relationships clear.
Use modern teaching aids, such as multimedia, eleaming and more of animation and visuals to
help retain more.
11.5 EMPLOYEE BEHAVIOUR

1. Raising and responding to concerns about someone's behaviour* in the workplace is probably
the most challenging aspect of managing people. It can make everyone feel uneasy, regardless of
whether they are personally involved or not.
2. Employees may feel defensive, upset and even aggressive when their behaviour is called into
question.
3. Managers may be put under pressure, not only to address concerns about employee behaviour,
but also to minimise the potential disruption to ongoing work.
4. Organisations have the dual obligations of ensuring proper standards of behaviour are
maintained and of treating their employees fairly and reasonably.
5. When dealing specifically with concerns about behaviour, it is not suprising that such cases can
quickly escalate and divert so much time, attention and resources away from more productive
activity. This underlines the need to maintain the highest possible standards of practice by reviewing
policies and ensuring people have the right information and skills.
6. Most organisations have detailed policies and procedures for dealing with issues of poor
behaviour in the workplace. However, no matter how well developed these policies and procedures
are, there is always room for improvement.
The following quiz with appropriate answers by respective groups could give an insight into various
shades of employee behaviour.
Appropriate Workplace Behaviour Quiz

1. Raju and Shweta are new employees who have just come to Bangalore to take up jobs with the
same company. Already, Raju, who is from Chennai is famous for his jokes, some of which are
slightly off-color. Shweta tries to be a good sport, but she quickly tires of Raju making fun of her
Bihari accent. When she hints around for Raju to knock it off, he tells her, "Hey, lighten up. I'm
making fim of myself. If I am from Chennai and don't mind madrasi jokes, neither should you."
Raju's behavior is:
(a)
(b)
(c)
(d)
illegal
inappropriate
okay, since he making fim of his own cultural background
effective, since he is showing his new colleagues that he has a sense of humor
2. Julie is Venkat's immediate boss. Due to a stringent deadline, Julie and Venkat have had to work
closely over the past three months and they have gradually developed romantic feelings for each
other. They start dating. However, when word gets back to human resources, the HR Head is
concerned about the impact this could have on work. His number one concern is likely to be:
(a) perception of favouritism on the part of other employees
(b) possibility of retaliation if the relationship ends
(c) conflict of interest between job responsibilities and personal feelings

(d) Venkat and Julie will show affection towards each other at work
thi tleaanlng process
iw
d.1. What would be a reasonable course of action for the HR Head?

(a)
(b)
(c)
(d)
advise them to discontinue the romantic relationship

have Venkat report to another section head
have a group meeting and reassure the employees that no favouritism will be shown
mind her own business
d.2. A person who does not intend anything offensive in his or her behavior:
(a) cannot sexually harass someone because the behavior must be intentional
(b) can unintentionally offend someone but will not be held liable in a courtroom
(c) can be held liable in a court of law
3. Jagan just got an e-mail at work from a colleague in Delhi. It contained the fimniest sexual cartoon he
has ever seen and he wants to pass it along to his good friend and coworker, Ajay, whom he knows
will think it is funny, too. Unfortunately, Jagan makes a mistake and forwards the e-mail to all
company employees. Jagan:
(a)
(b)
(c)
(d)
has unintentionally put himself and the company at legal risk

should apologise to employees and ask them to delete the cartoon immediately
is a victim of cultural differences
a and b
4. Sandra works in the operations department of a bank. She considers herself to be pretty tough; she's
been around the block a few times and is confident that she can speak up and take care of herself.
However, several of her coworkers are from a background that values respecting authority. It
bothers her that her boss often takes advantage of their quiet demeanor, teases them in a sexual
manner, and says things to intentionally embairass them when he is stressed. She doesn't know
what to do, though, since he doesn't do those things to her. What is happening to Sandra could be
considered:
(a)
(b)
(c)
(d)
(e)
none of her business

third party sexual harassment
a stressfiil work situation that impacts Sandra's work performance
the mevitable consequences of a tough boss
b and c
5. John is a savvy engineer who has been trained to handle workplace stress. When his group goes
out together and he wants to tell a sexual joke, he always prefaces it with "I hope no one is
offended by this ..." and warns that he's about to tell a racy joke. His approach:
is a good way to prevent against unintentionally offending someone
is unnecessary since he's talking off hours
has a good intent but does not respect others' feelings
a andb
Let Us Sum Up
In this unit we have understood various aspects of Human behavior in the organisation. The Leaming
Theory and Processes, some insight into Memoiy and Forgetting and Employee Behavior
Keywords
Employee Engagement Competitive Advantage Moments of Tmth Hiunan Landscape Augmented
Leaming Cognitive Theory Adult Leaming
Check your progress

State whether the following statements are Tme or False.
1. Moment of truth relate to critical milestones that affect a company's growth. t
2. Any change initiative without caring for the human landscape will end in problems. t
3. The leaming process can be defined through theories and concepts. f
4. Adults need to leam experientially. t
5. Rote leaming is the best way to retain and remember. f

1. Tme, 2. Tme, 3. False, 4. Tme, 5. False
fifro^
Terminal Questions
1. How does an employee feel that he has contributed to an organisation's performance. Elaborate in
the context of human implications of organisations.
2. Define the leaming process and characteristics of leaming.
3. Identify the process of adult leaming and how organisations can identify the right process of
leaming and development for different employee categories.
4. What is accepted employee behaviour at work? Cite instances from your workplace of deviation
and how it was dealt with.
References
Holt, John (1983). How Children Leam. UK: Penguin Books. ISBN 0140225706. http://
books.google.frôoks?id=glEiAAAAMAAJ.
Mayer, R. E. (2001). Multimedia leaming. New York: Cambridge University Press. ISBN 0-
52178-749-1. http://books.google.com/books?id=ymJ9o-w_6WEC.
Paivio, A. (1971). Imagery and verbal processes. New York: Holt, Rinehart, and Winston, http:/
/books.google.com/books?id=xmB9AAAAMAAJ.
Jvmgle Gyms: The Evolution of Animal Play, Aât behavior can we expect of octopuses?
Sandman, Wadhwa, Hetrick, Porto & Peeke. (1997). Hirnian fetal heart rate dishabituation between
thirty and thirty-two weeks gestation. Child Development, 68, 1031-1040.

Wood, D. C. (1988). Habituation in Stentor produced by mechanoreceptor channel modification.
Joumal of Neuroscience, 2254 (8).

Gmsec, Joan E.; Hastings, Paul D. "Handbook of Socialization: Theory and Research", 2007,
Guilford Press; ISBN 1593853327, 9781593853327; at page 547.

Augmented Leaming, Augmented Leaming: Context-Aware Mobile Augmented Reality
Architecture for Leaming

Bloom's Taxonomy of Leaming
employee motivation
STRUCTURE
12.0
Objectives
12.1
Introduction
12.2
Types of Motivation
12.3
Motivational Theories
12.4
Employee Attitude Development
12.5
12.6
Practical Applications of Motivation

Job Enrichment
12.7
Job Rotation
Let Us Sum Up
Keywords
Terminal Questions
References
12.0 OBJECTIVES
. Understand the concept of Employee Motivation

. Theories of Motivation and their practical Implications
Types of Motivation
Job Enrichment
Job Rotation
.for faction and one tot give. Pâ^d^

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hat avenue of toir lite; be - personal "
external source. T h e
- d i v i d -
^ ^^^^^ i, ,
breach greater heigh^^
eome from an mtemal or
^
reasons for working. The
^ " - ^ - e obtain
rarLbeendefmed.toêholo^^^
(Kreimer, 1995); a predisposition to
^ ^^^^^^^^
Buford,Bedeian,&Lindner, 199 ); an internal^
Lwilltoachieve(Bedeian,
1994);and
^^^^^ ^^^^ ^^
organisational behaviour over the years.
12.2 types OF MOTIVATION

Motivation can thus be intrinsic or extrinsic.
12.2.1 Intrinsic Motivation

12 21 Intrinsic Motivaiion
. SvXlt effective agents in reaching desired goals (i.e. to results a ^

.
and
in n^stering a topie. rather ton just rot^leaming to achieve good grades.
12.2.2 Extrinsic Motivation
""iwate a penron
which
"bout a rappor,
"ves could be sparked by

driv<^ miS, ^tf^r' ^^ ^ "S-, which
"?
Sgcaliom IheTIIS
______________Intrinsic
Expressive
Interest for its
own sake:
satisfaction
derived directly
from
understanding/
skill
Enthusiasm,
commitment
-Achievement
Extrinsic
Social
Instrumental
______
Desire to
succeed: "I'm
not going to let
this beat me":
mastery
represents
something
important
Commitment
In order to gain
social acceptance,
either within the
class/course etc.
("Pleasing
teacher" or being
one of the incrowd, or outside
Co-operation if classoriented.
In order to gain a
tangible reward
or avoid negative
consequences.
Can develop
into
more
significant
commitment.
Achievement rests on
strict criteria of
"relevance"
Strengths
Intrinsic
Expressive
Weaknesses
Extrinsic
Achievement
Social
May get "carried Potentially fickle May concentrate on

away": lose sight of What the teaming the appearance of
wood for trees.
represents to the achievement to the
student may not be detriment of "deep"
the same as what it learning.
Social
represents to you . aspirations
may
change.
Instrumental
Aspirations may
be met in other
ways. Anxiety
may impede
learning.
12.3 MOTIVATIONAL THEORIES

12.3.1 The Incentive Theory of iMotivation
A reward, tangible or intangible, is presented after the occurrence of an action (i.e. behavior) with the
intent to cause the behavior to occur again. This is done by association of positive meaning to the
behavior. Studies show that if the person receives the reward immediately, the effect would be greater,
and decreases as duration lengthens. Repetitive action-reward combination can cause the action to
become a habit. Motivation comes from two sources: oneself, and other people. Called intrinsic
motivation and extrinsic motivation, respectively.
Applying proper motivational techniques can be much harder than it seems. Steven Kerr notes that
when creating a reward system, it can be easy to reward A, while hoping for B, and in the process, reap
harmful effects that can jeopardize your goals.
12.3.2
Need Hierarchy Theory
Abraham Maslow's theory is one of the most widely discussed theories of motivation. Abraham H
Maslow (1908-1970) was a humanistic psychologist who rejected the prevalent paradigm of exploring
psychology either from experimentation with animals (behaviourism) or from the experience of mixedup people (principally psycho-analysis), and concentrated on human potential for self-actualisation. He
is chiefly known for his "hierarchy of needs" theory.
i human liesr"^"^^^^^^
The theory can be summarized as follows:
h'i.riLtr^S:J
'-"-'i'X.and
The needs, hsKd torn basic (lowestÛes.) ,o n, eomplex (highest-lates.) a,c as follows:
Physiological
Safety
Belongingness
Self esteem '
Selfactualisation
how ve. b.ic P.blch as being .00 ho. or 0 SSri^^lt^T'ilZ ZZ
12.3.3 Herzberg's Two-Factor Theory
He distinguished between:
Motivation; (e.g. ehdlenging woH. recognition, responsibiliW which give positive satisfaction,
yo heavier, b.
12.3.4 Alderfer's ERG Theory

Clajôn Adler, expanding on
Maslow's hierarchy of needs, created
the
ERG
theory
(existence,
relatedness
and
growth).
Physiological and Safety, the lower
order needs, are placed in the
existence category, while love and
self esteem needs are placed in the
relatedness category. The growth
category
contains
our
selfactualisation and self-esteem needs.
The theory is sometimes called the "Motivator-Hygiene Theory" and/or "The Dual Structure Theory."
Herzberg's theory has found application in such occupational fields as information systems aid in
studies of user satisfaction.
12.3.5
Self-determination Theory
His theory, developed by Edward Deci and Richard Ryan, focuses on the importance of intrinsic motivation in driving
human behavior. Like Maslow's hierarchical theory and others that built on it, SDT posits a natural tendency toward
groAvth and development. Unlike these other theories, however, SDT does not include any sort of "autopilot" for
achievement, but instead requires active encouragement from the environment. The primary factors that encourage
motivation and development are autonomy, competence feedback, and relatedness.
12.3.6
Broad theories
The latest approach in Achievement Motivation is an integrative perspective as lined out in the "Onion- Ring-Model of
Achievement Motivation" by Heinz Schler, George C. Thornton III, Andreas Frintrup and Rose Mueller-Hanson. It is
based on the premise that performance motivation results from the way broad components of personality are directed
towards performance. As a result, it includes a range of dimensions that are relevant to success at work but which are
not conventionally regarded as being part of performance motivation. It integrates formerly separated approaches as
Need for Achievement with social motives like Dominance. The Achievement Motivation Inventory AMI (Schler,
Thornton, Frintrup & Mueller-Hanson, 2003) is based on this theory and assesses these three factors (17 separated
scales) relevant to vocational and professional success.
12.3.7 Cognitive Theories - Goal Theory

Goal Theory is based on the notion that individuals sometimes have a drive to reach a clearly defined end state. Often,
this end state is a reward in itself. A goal's efficiency is affected by three features: proximity, difficulty and specificity.
An ideal goal should present a situation where the time between the initiation of behavior and the end state is close.
This explains why some children are more motivated to learn how to ride a bike than mastering algebra. A goal should
be moderate, not too hard or too easy to complete. In both cases, most people are not optimally motivated, as many
want a challenge (which assumes some kind of insecurity of success). At the same time people want to feel that there is
a substantial probability that they will succeed. Specificity concerns the description of the goal in their class. The goal
should be objectively defined and intelligible for the individual. A classic example of a poorly specified goal is to get
the highest possible grade. Most children have no idea how much effort they need to reach that goal.
identify flieir motivating factor or thirTi^ST;,^

goal, they ill neyerhave JôwitolZ.t
"'''I can clearly

^
12.3.8 Unconscious MoMvafion

irnsSSi:::,!::^^:^
.
and directed by
between a conscious desire
In other words, stated motives do Lt aCsra^r'
all direct."
ispossiblethataperôncanbeaccid
not because he is careless or ignoi^nt of rLferê^^ si? others do because they harbour unconscious filw of ^
times, the theory of attmction propordX
g^-1 recent
tor wishing things to happen.
works on a similar,
unconscious level
feel I am to blame", become, -It is her fault

têeplable motiyes may result in outwa4 lllrio .h^^^K
^ example of .his would beflre
that he holds hta, in high regard.
f'
"I
<>' Powerful but socially
?!
b but overworks himself on the job to show
exist can lead to a more carefirl TsTss ^h^ ,

psychologists deny the existenrof ^c
n times of anxiety and stress, and ô^'.^
subjeefs point of view . is miooayZ^^
"i* T
-tcmporaty
" tc
12J.9 Inwnsic MoUvstPon andTT,. ,6 Baste de.isT1,eory
The desires are:

Acceptance, the need for approval
Curiosity, the need to think
Eating, the need for food
Family, the need to raise children
J.
employee
motivation |
traditional values of one's clan/ethnic group
Idealism, the need for social justice
Independence, the need for individuality
Honor,
the need to be
loyal
to
the
Order, the need for organised, stable, predictable environments

Physical Activity, the need for exercise
Power, the need for influence of will
Romance, the need for sex
Saving, the need to collect
Social Contact, the need for friends (peer relationships)
Status, the need for social standing/importance
Tranquility, the need to be safe
Vengeance, the need to strike back
In this model, people differ in these basic desires. These basic desires represent intrinsic desires that directly motivate
a person's behavior, and not aimed at indirectly satisfying other desires. People may also be motivated by non-basic
desires, but in this case this does not relate to deep motivation, or only as a means to achieve other basic desires.
We can assume that given the motivation levels in a person, there is a certain amount/ degree of satisfaction in him at
any given time. When this satisfaction level is disturbed, the search for greater satisfaction or another level of
satisfaction begins him. The greater the expected level of reward, the greater or more intensive the search. The greater
the reward, greater is the satisfaction. In other words, the level of satisfaction has moved to a higher level. But there
could be cases where the search does not yield expected results and could produce frustration. Some struggle and fmd
out newer ways of overcoming frustration; some fail to find a way out and this could lead to displacement, aggression,
resignation or
regression.
12.4 EMPLOYEE ATTITUDE DEVELOPMENT

Workers in any organisation need something to keep them working. Most times the salary of the employee is enough
to keep him or her working for an organisation. However, just working for salary is not enough for employees to stay
at an organisation. An employee must be motivated to work for a company or organisation. If no motivation is present
in an employee, then that employee's quality of work or all work in general will deteriorate.
Keeping an employee working at full potential is the ultimate goal of employee motivation. There are many m'^thods
to help keep employees motivated. Some traditional ways or motivating workers e placing them in competition with
each other. Friendly competition is a great way to generate motivation among employees. This gives a chance for
employees to flex their working skills m a com^tition against their peers. This not only will motivate employees with
a result of greater production, but the competition with recorded results will give the employer an idea of who is being
most productive.
H.R.M-15
W^m
I HUMAN I
1^.5.1 Education
Motivation in education can have
sevP, 1. behavior toward particular goals

Lead to increased effort and energy
3. Waseiitiationof,andpe.istencei,activities
4. Enhance cognitive processing
5. Dete^ what consequences are reinforcing
6. Lead to improved performance
W i, , a mots fri"*^ l. .ta. m a fe s o ^ ^ I " ' ' ' a ' '
Sudbwy Model schools do no, ^^',
o .eir shKte,., fcy
" '<> Wve.
t ihsc?!
Mode, sc o
12.5.3 Business
At lower levels of Maslow's hierarchy of needs,, such as Physiological needs, money is a motivator,
however it tends to have a motivating effect on staff that lasts only for a short period (in accordance
with Herzberg's two-factor model of motivation). At higher levels of the hierarchy, praise, respect,
recognition, empowerment and a sense of belonging are far more powerfiil motivators than money, as
both Maslow's theory of motivation and Douglas McGregor's theory X and Y (pertaining to the theory
of leadership) demonstrate.
Maslow has money at the lowest level of the hierarchy and shows other needs are better motivators for
staff. McGregor places money in his Theory X category and feels it is a poor motivator. Praise and
recognition are placed in the Theory Y category and are considered stronger motivators than money.
Motivated employees always look for better ways to do a job.
Motivated employees are more quality oriented.
Motivated workers are more productive.
The average workplace is about midway between the extremes of high threat and high opportunity.
Motivation by threat is a dead-end strategy, and naturally staff are more attracted to the opportunity
side of the motivation curve than the threat side. Motivation is a powerful tool in the work environment
that can lead to employees working at their most efficient levels of production.
The assumptions of Maslow and Herzberg were challenged by a classic study at Vauxhall Motors' UK
manufacturing plant. This introduced the concept of orientation to work and distinguished three main
orientations: instrumental (where work is a means to an end), bureaucratic (where work is a source of
status, security and immediate reward) and solidaristic (which prioritises group loyalty).
According to the system of scientific management developed by Frederick Winslow Taylor, a worker's
motivation is solely determined by pay, and therefore management need not consider psychological or
social aspects of work. In essence, scientific management bases human motivation wholly on extrinsic
rewards and discards the idea of intrinsic rewards.
In contrast, David McClelland believed that workers could not be motivated by the mere need for
money - in fact, extrinsic motivation (e.g., money) could extinguish intrinsic motivation such as
achievement motivation, though money could be used as an indicator of success for various motives,
e.g., keeping score. In keeping with this view, his consulting firm, McBer & Company, had as its first
motto "To make everyone productive, happy, and free." For McClelland, satisfaction lay in aligning a
person's life with their fundamental motivations.
Elton Mayo found out that the social contacts a worker has at the workplace are very important and that
boredom and repetitiveness of tasks lead to reduced motivation. Mayo believed that workers could be
motivated by acknowledging their social needs and making them feel important. As a result, employees
were given fireedom to make decisions on the job and greater attention was paid to informal work
groups. Mayo named the model the Hawthorne Effect. His model has been judged as placing undue
reliance on social contacts at work situations for motivating employees.
In Essentials of Organisational Behavior, Robbins and Judge examine recognition programs as
motivators, and identify five principles that contribute to the success of an employee incentive
program:
4 i human resource management

1.
2. Allowing employees to participate

3. Linking rewards to perfonnance
4. Rewarding of nominators
5. Visibility ofthe recognition process
1- SeiaiMjorgoaUulfollowapathneMftl,
succeed a. goala'you^lSri^"'"""""''^"-- ^Xou
2. FtaishwteyoustartAhalftoi^h.,. ^
12.5.5 Requisites to Motivate
We have to be Motivated to Motivate

Motivation requires a goal
Motivationrequires Recognition
Participation has motivating effect
Seeing ourselves progressing Motivates us
Challenge only motivates ifyou can win
employee motivation | 215

12.6 JOB ENRICHMENT
Job Enrichment is the attempt to build in to jobs a higher sense of challenge and achievement. The accimiulation
of achievement must lead to a feeling of personal growth accompanied by a sense of responsibility and should be
distinguished from job enlargement which attempts to make a job more varied by removing the dullness
associated with performing repetitive operations.
A job may be enriched by giving it variety, and also may be enriched by giving employees more latitude in
deciding about work method, sequences and pace or by letting them make decisions about accepting or rejecting
materials; giving workers a feeling of personal responsibility for their tasks, taking steps to make sure that
people can see how their tasks contribute to a finished products and the welfare of the enterprises and by giving
constructive feedback on their job performance.
Thus in an enriched job the employee sets the deadlines and the quality standard he must meet and within that
fitime work plans the work schedule for the entire team. He holds himself responsible both for meeting the
deadline and for producing the required quality, and he does not pass his work on for others to judge until he is
satisfied that it meets the standards.
A nimiber of companies have introduced programs of job enrichment and in all such cases, productivity has
increased, absenteeism and turnover reduced , and morale improved .
12.6.1
Limitations
But even the strongest supporters of job enrichment readily admit that there are limitations in its application
Some such observations as under:
1. Technology: There are some jobs, which are highly technical requiring a special range of skills where it
would be difficuh to enrich such jobs. And with specialised machinery and assembly line techniques it
may not be possible to make every job meaningful.
2. Cost: Though a great many companies appear to be interested in job enrichment programs, the extra cost
may seem high if a company is not convinced that the return will at least offset the incremental
expenditure. General Motors tried six man and three man teams in the assembly line but found the work
slowed and cost increased. At Saab & Volvo motors India, it was found that increased cost was
compensated by reduced absenteeism and labour turnover. Yet the cost of the programme was a
formidable factor.
3. Attitude of managers and workers as lack of interest in doing something different or plain laziness to take
on an enlarged role act as deterrents. Some have complained that enriched jobs provide too many
opportunities to commit mistakes and some workers fear that the increased productivity sought may even
mean loss of jobs.
4. Reaction of union Leaders: There has been little or no support of job enrichment by imion Leaders. As
they could later on be held responsible if better efficiency levels result in loss of jobs.
12.6.2
Job Enlargement
As early as 1950 in the USA, job rotation and job enlargement were being both advocated and tested as means
for overcoming boredom at work with all its associated problems.
I;
<l.ssa,,sftc bu, , Of^^,
increasing personal accountability for work-
12.6.3 Benefits Of Job Enlargement

I- TaskVariety
2. Meaningful Work Modules
3. Full Ability Utilisation
4. Worker Paced Control
5. Meaningful Perfomiance Feedback
They ere seen as potential som^Tf '
hlZV..
EMPLOYEE MOTIVATION | 2t7
12.6.4 Disadvantages of Job Enlargement

1. High Training Costs
2. Redesigning existing work system required
3. Productivity may not increase necessarily
4. Workload increases
5. Unions demand pay-hike
6 . Jobs may still remain boring and routine
U'-
12.6.5 Herzberg's Checltlist for Job Enricliment

Herzberg's other major contribution to the development of ideas in the area of job design was his checklist for
implementation. This is a prescription for those seeking success in the enrichment of jobs:
select those jobs where technical changes are possible without major expense;
job satisfaction is low;
performance improvement is likely with increases in motivation;
hygiene is expensive;
examine the jobs selected with the conviction that changes can be introduced;
screen the list (red lighting) for hygiene suggestions and retain only ideas classed as motivators;
remove the generalities from the list retaining only specific motivators;
avoid employee involvement in the design process;
set up a controlled experiment to measure the effects of the changes;
anticipate an early decline in performance as workers get used to their new jobs.
Job enrichment, then, aims to create greater opportunities for individual achievement and recognition by
expanding the task to increase not only variety but also responsibility and accountability. This can also include
greater worker autonomy, increased task identity and greater direct contact with workers performing servicing
tasks.
Whilst job enrichment is based on a theory resulting from research carried out by Herzberg and his colleagues, the
research is not itself without its critics. Later research has not always produced such neat results. Also the focus of
the approach is the individual job and only limited consideration is given to the wider context in which the job is
carried out, particularly social groupings.
Job enrichment is improvisation of both tasks efficiency and human satisfaction by building into people's jobs,
quite specifically, greater scope for personal achievement and recognition, more challenging and responsible work
and more opportunity for individual advancement and growth. An enriched job will have more responsibility,
more autonomy (vertical enrichment), more variety of tasks (horizontal enrichment) and more growth
opportunities. The employee does more planning and controlling with less supervision but more self-evaluation.
In other words, ti:ansferring some of the supervisor's tasks to the employee and making his job enriched.
Volvo's experiment in job enlargement is worth mentioning. The ti-aditional assembly line in car manufacturing
was replaced by work teams, consisting of 15 to 20 who were given the task of some specific work like
manufacturing of breaks etc. The team was to work in an independent work shop and
greater work au,

21 I human resource MANAGE bemg^
,my, ie,ed
tS ^nHê.^ """
12.6.6 BenefiteofJobEnrichment
io"-'"- vaHety.
3.
It also adds to employee self^steem and self-conftol
4.
emêhment giyes status to jobholder and aets as a st^g ^
5. Job ennetaent stimulates improvements in other areas of oânisation.
'"
-^"'-t. I, means passing on mor. authority and
12.6.7 Demerits of Job Enrichment
- -- êareh on long
5. Worker, partieipation may affect the enrichment process itself.
12.7 JOB ROTATION
em be defined as lale,^ Wer of employ^ a nl
eittptoyê m^tivttoini |
11
efficiency of production and customer service, and how each member of the team contributes to the process.
Hence, job rotation permits individuals to gain experience in various phases of the business and, thus, broaden
their perspective. Job rotation is a developmental technique that has been widely used but, surprisingly,
received little attention in himian-resources studies. Empirical research in this regard is sorely needed (Beatty,
Schneier & McEvoy, 1987).
Traditionally, job rotation is usually addressed at an organisational level. From the employers' point of view,
organisational theorists have advocated frequent rotation as a means of reducing fatigue and boredom on
production jobs so as to maintain productivity (Miller, Dhaliwal, & Magas, 1973) and fairly frequent rotation
after the initial hiring as a means of orientation and placement (Wexley & Latham, 1981). Job rotation enables
the training of workers to be backups for other workers so that managers have a more flexible work force and a
ready supply of trained workers (Rothwell & Kazanas, 1994). When rotation occurs at longer intervals, it has
been thought as a practice of progressive human resource development or a means of enhancing the value of
work experience for career development (Campion, Cheraskin, & Stevens, 1994).
The importance of job rotation has been recognised even at the national and transnational level. It has been
considered as one of the main solutions to the challenge of unemployment in the European Community.
Currently, 14 countries, 5000 public or private enterprises, and 100000 students have been involved in a "EUJob rotation" project, to resolve the bottleneck problems resulting from economic growth and to help reduce
the unemployment rate (See http://www.aof-give.dk/eujob/presentation.html).
Let Us Sum Up
In this imit we have learned about Employee Motivation, the various Theories and Strategies of Employee
Motivation, Employee Attitude Development, Job Enrichment and Job Rotation.
Keywords
Needs Theory
Herzberg's Two Factor Theory
Unconscious Motivation Intrinsic &
Extrinsic Motivation Job Enlargement
Job Rotation
Check Your Progress

State whether the following statements are True or False. 1
.Intrinsic motivation is long lasting.
2.Self esteem is the highest level under Maslow's Need Hierarchy theory. 3
.Workers' motivation is solely determined by pay.
4.Job enrichment aims to create greater opportunity for individual achievement.
Answers
1- True, 2. False, 3. False, 4. True
Terminal Questions
'
"
le d job. Do you ag,^.
References
Bedeiau, A. G. (,3, Mauageu,, (3rd ed., New VoHc: D,yde P,^

Boe,B.E,&Radhakri,j^ R b (1991,
, eoustat phenomena. Journal of AgriÎhr^
ûcation faculty: A
Education 32
' Sill'. oioiSrSel;:;^^^^^
Ex,in (3,^ ecL).
-.<,993,Beyouroho. Ju,ofHx^l,3i (1)
Dickson, W. J ri9"7^-i Ho^hû
Ineemalional Business StZ^"""'?;!"'"'* " '"'=""'1 perspeetive. Journal of ' "^X'i^r" ^
.iva.io .o won, New
VoHc-
Busies;HoriLrS^~=^'>'-'Wo,te.andsuperviso,sgivediffe,,,an^^^
''"''"^''-^""-"vaion.Psychologiea, Review. July ,943. 370.
Skinner, B. F. (1953). Science and Human Behavior. New York: Free Press.
Smith, G. P. (1994). Motivation. In W. Tracey (ed.). Human resources management and
development handbook (2nd ed.).
Smith, K. L. (1990). The future of leaders in Extension. Journal of Extension, 28 (1). Terpstra,
D. E. (1979). Theories of motivation: borrowing the best. Personnel Journal, 58. 376. Vroom, V.
H. (1964). Work and motivation. New York: Wiley.
THERTON J S (2009) Learning and Teaching; Motivation [On-line] UK: Available: http://
www.leamingandteaching.info/leaming/motivation.htm Accessed: 9 December 2009
Arogyaswamy, B. & Simmons, R. P. (1993). Value-Directed Management: Organisations,
Customers, and Quality. Westport, CT: Quorum Books.
Beatty, R. W, Schneier, C. E. & McEvoy, G. M. (1987). Executive development and
management succession. Research in Personnel and Human Resources Management, 5, 289322.
Berger, C. I. & Cummings, L. L. (1990). Organisational structure, attitudes, and behaviors. In B.
M. Staw and L. L. Cummings (eds.). Personality uad Organisational Influence. Greenwich,
CT: JA Press. 287-326.
Campion, M. A., Cheraskin, L. & Stevens, M. J. (1994). Career-related Antecedents and
Outcomes of Job Rotation. Academy of Management Journal, 37(6), 1518-1542.
Campion, M. A. & McClelland, C. L. (1993). Follow-up and extensin of the interdisciplinary
costs and benefits of enlarged jobs, Joumal of Applied Psychology, 78, 339-351.
Dessler, G. (1994). Human Resource Management, 6th ed. Englewood Cliff, NJ: Prentice Hall.
Gannon, M. I., Poole, B. A. & Prangley, R. E. (1972). Involuntary job rotation and work
behavior. Personnel Joumal, Jime, 446-48.
Hackman, J. R. & Oldham, G. R. (1975).
unit
13
employee development
STRUCTURE
13.0
Objectives
13.1
Introduction
13.2
Training and Development
13.3
Identification of Training Needs
13.4
Role & Impact of Training
13.5
Changing Face ofBanking in India
13.6
Future ofBank Education in India
Let Us Sum
Up Keywords
Terminal Questions
References
mmmm^m
"T'rttfi
. 'l:
IB
13.0 OBJECTIVES
Understand the difference between Training & Development
The Methods used for Traiiiing Needs Identification ,,
Role and Impact of Training
Changing Face ofBanking in India
Future ofBank Education in India .
13.1
INTRODUCTION
Growth is a natural, physical phenomenon and a number of faculties develop over time in every human
being. While the majority of those of average education and caliber do not get much opportunities to
grow in a job, (till recently, the maximum a shop floor worker could aspire was to become a foreman
by the time he retired)the last few decades have seen a dramatic change. HRM became institutionalised
and training got to play a major role in corporate strategy with the result that development of an
employee became a major key result area for all managers in whatever field. Specialised training
approach along with generous budgets have made development a core issue, mandated by the Board
and enforced by every well meaning CEO.
13.2 TRAINING & DEVELOPMENT

The objective of any training can simply be put as to "Improve performance".
"Training & Development is any attempt to improve current or future employee performance by
increasing an employee's ability to perform through learning, usually by changing the employee's
attitude or increasing his or her skills and knowledge."
The need for Training and Development is determined by the employee's performance deficiency,
computed as follows.
Training & Development Need = Standard Performance - Actual Performance We can make a distinction
among Training, Development and Education.
13.2.1 Training
Training refers to the process of imparting specific skills. An employee undergoing training is
presumed to have had some formal education. No training program is complete without an element of
education. Hence we can say that Training is offered to operatives. Education is a theoretical learning
in classrooms. The purpose being to teach theoretical concepts and develop a sense of reasoning and
judgment. That any training and development program must contain an element of education is well
understood by HR Specialists. In fact organisations depute or encourage employees to do courses on
part time basis. CEOs are known to attend refresher courses conducted by business schools.
13.2.2 Development
helpful to employee. i Ser SomTff' ,

and bon. development
""
-
Principle, and SLqurh^ S^H^tZ^ r''"^

management of a company.
"I
-ve
belter
provides the returnS lotowtSaS^L^^^^

with regard to their
career advancement
at
employees at all levels, especially
point, now is not the time top reaching more efficiently, tes etd d^L
opportunities as well trained employees work
development. Employment traning improves employee engagement, loyalty and
give salosttoxctle^^^^
^sri/^s
rr ~
Employee development also helps crlf ae^^
Training is skills focused. Training is presumed to

have a formal education
deficiency in
"'tions.
Trainings are generally need based. Training is a

narrower concept focused on job related skills.
Training may not include development.

Training is aimed at improving job
related efficiency and performance.
Development is creating leaming
abilities. Development is not education
dependent. Development depends on
personal drive and ambition.
Development is voluntary.
Development is a broader concept focused on
personality development.
Development includes training wherever necessary
Development aims at overall personal effectiveness
mcludmg job efficiencies.
to machinery and reduces dissatisfaction, absenteeism,

complaints and turnover of employees. Above all, training is
an investment in the right type of employee resources, with
a promise of better retums in fiiture.
Training is needed at the individual level, to improve
individual performance or fix performance deficiency,
improve skills or knowledge and shape attitude. To
anticipate fiiture skill-needs and prepare employee to handle
more challenging tasks and also to prepare for job transfers
and assigning of more responsibilities. At the group level,
training helps prepare for any change in organisation strategy, when new products and services are
launched as also to avoid wastage and accidents.
13.3 IDENTIFICATION OF TRAINING NEEDS (METHODS)

Individual Training Needs Identification is made from performance appraisals, interviews,
questionnaires, employee engagement surveys, training feedback as well as periodic demands made by
field functionaries.
Group Level Training Needs are identified from organisational goals and objectives, personnel / skills
inventories, organisational climate indices, efficiency parameters, exit interviews, customer satisfaction
surveys and analysis of current and anticipated changes.
Training needs identification is a major exercise that need to be done with care and patience. Typically,
a number of employees from a cross section of staff are met for soliciting their views on everything
from the work environment to the gaps in functioning of the system, their colleagues as well as the laid
down procedures. Each activity is analysed and feedback sought from the concerned sections. Thus, a
mystery shopping is done to identify gaps m customer service, employee engagement surveys if
available, studied and business parameters and growth plans analysed so that the final
recommendations made reflect not only the immediate need for training but also provide enough scope
for developing a strategic training plan for the future.
13.4
ROLE AND IMPACT OF TRAINING
Given the vast range of skills and other competencies which can be developed in people it is useful for
some sort of prioritising to take place so that training focuses on the areas which will yield best benefit,
and the return on investment gets justified. Prioritisation can be on the basis of the essential and
desirable for an existing or a new activity (skill, competency, new knowledge) and based on how it will
impact the job and organisational performance. The highest training priorities are obviously the
activities which are of high importance and immediate in need.
Many organisations face the challenge of developing greater confidence, initiative, solutions-funding,
and problem-solving capabilities among their people. Organisations need staff at all levels to be more
self-sufficient, resourceful, creative and autonomous. While conventional skills training gives people
new techniques and methods, what will develop their maturity, belief, and attitude, which are so
essential for the development of managerial and strategic capabilities is a well planned behavioural
trainmg intervention. The focus here is on developing the person, along with the skills. Provide
learning and experiences that they would like for their own personal interest, development and
fulfilhnent. Performance and capability are ultimately dependent on people's attitude and emotional
maturity. Help them to achieve
responsibilities, roles and teams.employee development relevant to managing higher
Johan window based programs L useil-^mZlo^'t C ^ '

acting m a conforming' state, often because thVv Z Cri ^P'^ through the
employee motivation .better efficiencies in pilSf^lT^^^ T"

OAer benefits include increased capacity t ad^Zw
strategies and products, reduced emoW
motions',
^^
organisation.
better
innovation in
perspective as well as for attracting LtJ^r ta^r Things to be Avoided in training:
1. ^-find knowledge about what employees need and want

2. No step taken to build relations before training
3. Notîlding^^^
Emphasis on knowledge rather than helping to bi^g
5.
Sufficient time not devoted to the programs
6. Trainee trainer ratio not kept in mind.

7. Not using participant's work experience.
13.5 THE CHANGING FACE OF BANKING

reforms aimed at improving the
rapid development in communication csc^

m tum boosting private capital flows anTfS shê of emerging market
economies in wo^Sdf alS^f ?
13.5.1 Aligning with Global Standards
Banking system closer to international standards.
fôf
.o) ai SLR
IMdity .o). Ingres. ,n
various segments of financial markets have been deregulated in a phased manner.
^t^^r-.lsoisingf.isabroada.managing the external
guidelines, financial markets.

On the HR front a major shift has taken place with regard to the freeze on '"'^^'tme'it. With ^ K t Von of the BSRB
banks now have the freedom to recruit staff on their own and also invite
ttlltjo-rem"^
Cel. many banks are trying to introduce a perfomiance linked mcentive system.
There is snecial focus on corporate governance and the setting up of specialised board-level panels such
on.
Standine Committee on International Financial Standards and Codes under the Chairmanship ^ iTy. V
t^hriLfified glow standards and codes as part of the efforts to create a sound
The RBI's
financial architecture aligned with global practices. 13.5.2 Banking Operations
or in some cases substitute products and services to the same customer.

H.R.M-16
-".e could o. ta
^ ^XZTV
13.5.3 Future of Indian Banking
O serve by """"
13.6
and .vai, of v^lîiLSS
future OF BANK EDUCATION IN INDIA
" >s now commonplace to say that the 7Uf n
are as critical ^ eTo-^^
------ II^LÎM
^ demographic
The transformation of banking caused by the rapid development of information and communication
"irh^provided baling entities with new ways of bringing th^^^
iê banks would now have to increasingly deal with knowledge worke^ i.e -/ô works pnmmly ^^ information and
uses knowledge in the work place. Traditional banking has electronic banking, and therefore the standard form of
contact - personal contact - is taking a back seat to new, faster, more conformable, and cheaper means of
communication.
The introductionofelectronicbanking services also creates new tasks to be faced, such^theoptimis^^^^^
^d HLn chamiels and the security of data transfer. The customer will not purchase a servie &at ?ails to meet his
requirements or a service that does not guarantee the required pnvacy and sec^^^ B^ therefore are trying to devote
enough attention to all aspects of the modernisation of traditional
banking.
Basic electronic banking includes services provided through self-service zones,
^^
mail Banking andPhoneBanking.Anew product is the electronicpurse,sometunescalleda multipurpose
wLh is a payment instrument for making non-cash paên.. The I S^cific fomi of electronic banking.
Electronic commerce comes m three basic forms, the e-shop,
e-store, and e-exchange.
With such an array of new products and more on the way, based on customer demand, India's banMng 72sTnZi
strengthen itself significantly if it has to support the modem and vibrt economy which
Moires to be pTcusing on enriching humancapilal will help theb^^^
^ eS. ms sector nlds to fiindamentally strengflien institutional skill ^-Is ^^ and marketing, service operations, risk
management and the overhaul the organisational Perfo^ce tSiic Strengthening humL capital will be the single
biggest challenge. The older employees wdl either fede awT-get Quipped ^^th some of the skills needed for the new
banking while the younger empirees ZSZ^Zd PSU banks would come with a different set of capabilities, which need
to
"Siderightwaythrough training andperiodicrefr^^^^^
also have the need to fimdamentally strengthen skill levels.
In the field of the knowledge economy, the re-orientetion in banking is required at two levels. The first
of banking man^-nt, the continuous improvem^t of which the use of infomiation technologies and
knowledge systems. This will involve, above W for
financialsystemmanagement,intemalqualitymanagementsystemsmba^,m^^^^^^
and manaiment infomiation systems. All these will need strengthenmgthroughasenesofwelldesig^^^
training programs, to be conducted by experts in the respective fields. 13.6.1 Issues and Challenges in
the Learning Environment

The expansion of banking services for the millions of new customers would imply that there would be
^m^Zlîn the volumeofsuchservices. While thispres^^
TZtZ, sector, it also raises new issues and challenges for the
^^^
makers. And as the banking sector takes initiatives to cater to the evolving needs of the economy, we
need to deliberate on the following issues:
1. What are the appropriate systems and stmcture to generate infomiation for fiiture generation banks? Let
us not do GenNext banking without information.
fomgn players be .tonsed .0 peib TesTsi^^S'
collaborativeroute?
'
^^ âsed on universal banking, subsidiary or
. Whes, smar. ear. an.
~ ^^^
. drese el^lenges aad .
^^
' piis z-zz^zzr^^^:^ r ^ - .r

"ake arem aecounrable fa
and also
13.6.2 Changing Role of Thi,,g ^ ^^^ ^ ^

e-Learning
Interne, has revolutionised the concept

Cffc^ndate the good and the Bêr
le ^
a^Tf "" ^ ^
/^"Ige Tranter h,auBantu^Mry,
industry a vertical segment, where timeTlption oSno.^^^^^^^^

leader and the laggard. With an employeeL^C d i ^ t '
becomes imperative to enhance the Largess Td 5 T
manner. If we look at the traditional mp^n^^^^^^^^
^.nmgcollegesandsimilaracademicinsCrCeei^^^^^
met die requirements, the changing face of
need for a different and more LfghteLd ^"w on ^^^^^^ ^f^^7
orgamsation is more apparent in toco's dynai^^re'virÎ^^.
Let Us Sum Up
rT.n,g ,n theBanking Indus, d^
"anLg
deciding thf
it
^ ^^^^
^
necessitates'the
Keywords
Identification of Training Needs Impact of Training Changing face ofBanking e-Leaming
Future of training in Indian Banks Check your progress

state whether the following statements are True or False.
1. Need for training is determined by the employee's performance deficiency. t
2. Employee development is possible without training. f
3. 3 Training and development are one and the same. f
4. New generation banking being highly technical, training can be minimised. f
Answers
1. True, 2. False, 3. False, 4. False
Terminal Questions
1 Hire for Knowledge and Train for Attitude. Do you agree with this traditional approach?
2'. Differentiate between training and development. What does a training needs analysis help m
developing?
u*
3 Indian banking today is exciting for the employee as well as the customer. Elaborate
4. Training and education inlndianBanking has tobebasedontransferofastrongknowledgeba
Do you agree?
References
^ , , .,
. Gagne, R. (1962). Military training and principles of leaming. American Psychologist, 17,263276
. Gagne R (1985). The Conditions of Leaming (4th ed.). New York: Holt, Rinehart & Winston.
. Gagne R (1987). Instractional Technology Foundations. Hillsdale, NJ: Lawrence Erlbaum Assoc.
. Gagne! R. & Driscoll, M (1988). Essentials of Leaming for Instmction (2nd Ed.). Englewood Cliffs, NJ:
Prentice-Hall.
. Gagne, R., Briggs, L. & Wager, W (1992). Principles of Instmctional Design (4th Ed.). Fort Worth,
TX: HBJ College Publishers. Relevant Web Sites:
. The following web sites provide fiirther information about Gagne and his work:
http://www.e-leaminggura.com/articles/art3_3.htm
http://www.my-ecoach.com/idtimeline/theory/gagne.html
http://www.ibstpi.org/Products/pdf/appendix_A-C.pdf
training methodology
STRUCTURE
14.0
Objectives
14.1
14.2
Introduction
Subject matter of Training
14.3
14.4
Current Trends in Training
14.5
Training Infrastructure in Banks
14.6
Types of Training
14.7
Benefits of Training
14.8
Soft Skills Training
14.9 Talent Management

14.10 Training the new Generation
14.11 ROI on Training
Let Us Sum Up Keywonk

Terminal Questions
Rêrences
14.0 OBJECTIVES
Understand the approach to training

The subject matter of training
Current trends in training
Training Infi^structure in Banking
Alternate modes of Training
Training measurement and impact
ROI on Training
14.1 INTRODUCTION
Indian Companies are using latest technologies to train and re-skill employees, rich are P^ji^^g ^ ^
more flexible and convenient compared to traditional methods. The demand for skilled
Znowttrwori^^^^^^^ is encouraging companies to adopt the latest technologies for corporate
techniques, as well as a host of other innovative, technology-dnven teaching methodologies.
Corporate training programs in India have long been synonymous with elaborate itineraries and long
S^programs Larôcal and multinational companies were known to take employees to exotic Sri^hem up
in up-market hotels to attend corporate training sessions. This involved much
logistics and heavy expenditure.
Today, with the recession on, all that is history. But Training must still proceed
Hidi Economic growth and the country's outsourcing boom have created an increased demand for X
Zp'weulSi^^ to acute slSis scarcities. However, while the numbers to be trained have
remained high, training budgets have shrunk.
"Comnanies today can't afford to ignore corporate training," MuraUdhar Rao, president and COO of NIS
SpJSridZM
training, education and leaming solutions provider m India.
"Comnetition does not recognise inflation," Rao said, noting that technology-driven training modules
haveT-hS; rthe ciTent business clinlate.''We a^^
These include media like Web, video, audio and broadband."
Ashok Zutshi, senior vice president of training at New Horizons India, said in a phone interview 'We
oishe X-s have not Lily disappeared, they defmitely prove to be a lot mo^
consuming."
Usine technology thercfotc, pix.ves not only more cost-effective, but also offers a lot of flexibility, S
S^^Horizon Ma is an IT training company, and a joint venture between New Honzons
Worldwide and the Shriram group.
Rao said: "We are on the threshold of a revolution in the corporate training industry. Today, there are
several innovations taking place in this space."
foaddn,on,tofilItheskiIlsgap Indiante.h
tâm ,ts employees.
Similarly, in the banking industry the leirr r u
Thiruvananthapuram, respectively
According to Rao of NTS Soarta TnH;
1 SUBJECT MATTER OF TRAINING
TRfLiNIN
However, while coi>ventional skills training gives people new techniques and methods, it won't
develop their maturity, belief, or courage, which is essential for the development of managenal
and strategic capabilities.
2 Performance and capability are ultimately dependent on people's attitude and emotional matmty.
Help them to achieve what they want on a personal level, and this provides a platform for trust,
'emotional contracting'with the organisation, and subsequent sMlls/process/knowledge development
relevant to managing higher responsibilities, roles and teams^
3 When people develop confidence, integrity, and more knowledge, they automatically become
more proactive, solutions-focused, responsive, which has implications across a whole team with
multiplying effect. This means the rewards must be there too, or people have no reason to stick
their Lks out. And not just the prospect of fmancial reward. More importantly the He^berg- type
motivators - real extra responsibility, recognition, and involvement in new successfiil and
interesting projects. This is the fiiel of people's growth and change.
The Society for OrganisationalLeaming (MIT) definesa'-Learning Organisation''asonem
all levels, individually andcollectively,are continually increasingtheir capacity toF^^

care abo^t. The Leaming Organisation is therefore a collective ideal, a vision. The distmguishing feature
aboutaleaming organisation is that it promotesacultureofleaming,acommunityofleêrs,anditei^
that individual leaming enriches and enhances the organisation as a whole. There c^ be no organisatioml
learning without individual learning, but individuallearningmustbesharedandusedbyft^^^^
familiar litany of challenges and changes in global competition, technological advances, quality
improvement, knowledge work, demographic diversity, changing social stractuies - is toving
orgamsatiom to adapt and change."The ability to learn faster than your competitors may be the only
sustainable competitive advantage" (Murrell and Walsh 1993, p. 295). Today, the banking industry is m
the mitbt of a huge transformation. The demographic profile of the banking sector indicates a huge gap
m temis of staUs and knowledge. While the PSU and old private banks have a large number of old^,
expen^ced and knowledgeable staff, the new generation banks have a young bunch rf employees hi^ly
operatioml aspects and technology but low on banking knowledge. The need of the horn is to im^
l^wledge more than leaming, and to retool the experienced persomiel mto more valuable one^ ê
traditional approach of job rotation and promotional incentives too are being looked at m a different
perspective. Lks today reaUse the need to design career paths and job profilesclearly for Its pe^^^^^
the flux of human capital across industries is not a barrier for the learners. Ihe issue that a bank faces today is
to have cost effective, highly
knowledge transfer. How can a bank ensure that its employees are knowledgeable than just literate.'
How can it hamess the power of various media to impart the same knowledge across different leaming
curves? Most importantly, how can a bank ensure that training goes in tandem with daily operations,
without compromising on the quality aspect?
14.3 TRAINING METHODOLOGY

Combines pedagogic / lecture methods with participative / experiential training techniques for adult
leaming like cL Studies, Human Process Lab. Role Play, Group Work, Panel discussion as well as
interactions with senior executives and Customers.
I I HI-".
-
14.3.1 Internet as a Leaming Medium
Thegoal is to transfras effectiveZ"^

from the teacher or the computer Lo the S o^rT
"'
of information
IS often left out in order to simplify the contenflk fT P'"'' ^^^raneous information skills in areas of knowledgeTafart^Ce^^^^^^
remain stagnant or stable to ensure'L" SSpâct^^^^

after another. The specific facts that we Ce to
obsolete almost as Ln as we miteT it
technology does not tend to

S P^^êm
'^"^'^dge becomes
14.3.2 Traditional Corporate Training
instruction modes were lacking in reaTlseZlTr^ T

-g^^îng d
compromised for volumino'::'ro:SLT^r o ZS^^^
^
knowledgeti^sfer. The approach was increasin^lvn!r TK Interactions were not optimised for must be with constnictivL
,and less teacher-focussed. TraimW sZZ be ^n ^ ^
^'^"d
should nonnally lead to reward these we must incorporate quality
14-3.3 Learning systems
a meaningfiil manner. The pSî loSw^n^^^^

system should be capable of ZoS^^^^^
them enough scope L
is to deliver contemporary coZTrrTltoLt n^.^T.

Platfonns. Web based traSLg
environment, while offeSL"^^'^;'"^'
more learner fbcussed 2o coo^^^^^^^^ IZ^ 7"

training context.
^
14.3.4 Developing People and Capabilities
development to take place over time, in

P-^-P-ts. The
^^to^y
different
"
ênns, to ensure success in corporate
points from a PowerPoint presentation to games to hasten leaming, training has taken on entirely new beginnings, suited
for a new generation of employees who have to compete against the best and most competent.
14.3.5
internet and e-Learning
The same basic principles apply to designing self-study programs as to any other sort of training design. The internet
enables self-study leaming and development programs which have come to be accepted as more useful, empowering and
cost-effective than ever before. With e-Leaming becoming the way of life for big and small companies, effective and
robust interfaces are also required to ensure the system is robust, effective and dependable.
TRAINfl^Q METHODOLOGY | 2
Corporates expanding their geographic presence and increasing their headcount are looking at virtual universities to
enhance employee knowledge. Traditional sectors are actively pursuing e-leaming, more common in the knowledge
sector. Providers of e-leaming tools and technology say that they are witnessing over 100% aimual business growth.
Competition is forcing corporates to commit substantial resources to enhancing employee knowledge. Indian companies
increasing their global presence through acquisition and intemal growth are seeing a growing base of culturally and
academically diverse base of employees, with a wide range of skills sets. To provide them with a uniform knowledge
platform, corporates are leaning on e-leaming solutions.
14.3.6
Web Based Training Using LIMS (Learning iManagement Systems)
Starting with the IT companies, LMS is now common place with most large corporates as it helps them share information
and is used as a ready reference point for disseminating information and knowledge. AS a self leaming tool, LMS has
some unique advantages which transcend time and place.LMS can provide 24X7 flexi-time training to the users, who
may be geographically dispersed, enables one to put in place consistent leaming standards and has the capacity to give
instant feedback by way of test scores and other statistics.
The LMS can prescribe individualised trainings for users based on their needs and get the most out of the investment, by
simplifying administration and monitoring of training programs. Integration with other enterprise applications ensxn-es
there is no redundancy of data. Measure the effectiveness of training initiatives and align it to organisational goals.
Ability to limit and control access to the courses ensures that security is never compromised. Conformance to leading eLeaming standards, such as SCORM and QTI allows one to plug content from any third-party vendor.
14.4 CURRENT TRENDS IN TRAINING 14.4.1 Training

Outsourcing
Till recently most PSU and old private banks did not outsource training, but with the new generation banks using better
technology and more specialised trainers through outsourced agencies, has forced a rethinking. The traditional skill set
required of the banker, centred around a lot of knowledge and specialised skills in areas like credit, foreign exchaftge,
treasury etc. most of which could be met with in house trainers, selected from within. However once completion set in
and the required skill set in say an area
and foreign exchange as evrûS^^ônS^^
not adequate.
^W^h, homegrown talent is
videoc^feL^, une itSn^m^^^
- f
I'
fta, inetades exiive e^,^'"

wUch are open to all its employ^.
CiseoDêiopmentO
Management System (EMS)

engmeenng, management and leadership areas,
îxirtoriorria^^
i'XtaiZtt^tTZi:
an. and business
Piyush Dutta, associate vice president for human resources at Hrr r.. c . o
.eer^panyalsousesaL
respeetively
^cr,::^^^
S; ru-Sr^^-^-'Oiie. and Tata
ta êir own tnmnng eamps in Mysore and Thimvananthap,
WK
^ i m i
Similarly, in the banking industry, the ICICI Bank partnered IT education services provider NUT to set
up the Institute of Finance, Banking and Insurance (IFBI), which provides training in the banking
insurance and allied services.
According to Rao of NIS Sparta. India continues to face an acute skill shortage and more needs to be
done to resolve the issue. "Corporate India is not doing enough insofar as training employees is concerned
Companies often find it difficult to identify skill set gaps of their employees," he said.
14.5 TRAINING INFRASTRUCTURE IN BANKS

PSU Banks as well as the well established MNC banks have always been at the forefront of organised
tommg for bank staff. All of them have elaborate training establishments, spread over vast acres where
besides the classroom training, a number of facilities for recreation and outbound training are provided
In fact most of the major PSU banks have a number of such Staff training colleges all across the
coimtry, with one major centre acting as their nodal training college whichis headed by a senior functionary
with considerable exposure to operational banking as well as training. Given below is a brief
description of the traning facility as well as the training approach of the State bank of India.
14.5.1
The Role of STC in The Bank
Professional centre of excellence for training and research in Banking and Bank Management
Development of Customer-centric and Market-oriented professional Managers and Leaders
Internal Consultant / Change Agent for the Bank
Research and Development to support strategy formulation for achievement of Corporate Goals
Consultancy and guidance to Staff Training Centres operating in various Circles of the Bank.
14.5.2
Challenges for Training
Vast network of branches

Wide geographical distribution
A huge workforce
11 levels of officers
Various entry levels
Diversified educational backgroimd
Frequent Rotation of staff
Variety of Roles
Rise in customer needs and expectations
Rapidly changing environment
Increased Competition
Fast changing Technology
Wide range ofBanking Services & Products
240 I human RESOURCE MANAGEMENT

14.5.3 Types of Training
14.5.4 induction
include
"""
14.5.5 Typical Topics of Employee Training
'
Ki.-.. .
-"-îng .dn,inis.,ive and
7. Team building and Leadership
14.5.6 Training and Career Development

differences The middle aged staff,tend
fro!^ t'tv
is less likely to participate in or benefit
from traditional classroom instruction than in collaborative training environments that encourage
SZ St
T^
^^ P^^ ^^
According to
in^ln A ^ t rr
but guaranteed immediate access to
ntoon. As such, this "immediate-gratification" generation operates in a rapid-fire mode. In contrast
to fee- older worker counterparts who prefer to receive and act on information in a linear fashion
millemuals are multi-taskers who prefer to receive information quickly and from multiple sources in real'
time and parallel process it immediately.
mile the generational differences, expectations and approaches to the workplace vary, organisations IZ
management strategies to accommodate each generation. Organisations can
^d shou d consider incoôrating nontraditional, informal training programs such as online leaming dis^ce leaming and
other opportunities that facilitate leaming and collaboration. In many case! w o S o r S ' . ' " " organisation's
strategy around effectively managing a multigenerationai
Content, for example, isanext-generation talent management solution designed
offenngs avadable to users. Organisations can tailor such solutions to ensure that their employees are
recervmg^dmterBctmgwiththemost appropriate
^dactmties.Byprovidmgasingleplac^
such as Content allow organisationstomanageandexposeawiderangeofle^
and courses m a way that transcends employee leaming styles and generational sensitiviti^. Since Gen-Y thrives on
constant praise, organisations should consider updating their approach to
perfomiance mâgementtoprovide these employe^^
to receive feedback Perfomiance plans for this group should allow managers to easily recoê both
pnvately and publicly the accomplishments of the winners. 14.5.7
Broadly Spealcing
Employees and managers can be divided into 4 categories viz; activist, reflector, theorist and pragmatist. Activists are
gone for anything. Reflectors as the term suggests, would like to think over. Theorist is a person who would like to
connect his experience with theory. Pragmatist is a person who thinks it best o apply his experience m practice.
Acknowledging the learning styles of the participants will be helpful
llU LtgZf^'"
^^
with
14.6 TYPES OF TRAINING 14.6.1 On the Job

Training
14.6.2 On the Job Training Method
spirit Disadvantage - It may beeZ^^T^^? coordmtton ean be improved, iitstills team Îwtiot" - = verba, potation to
explain the nitty-
"cir^rr; tjt-s:.: --- ^ ~ ta. or a

L'S'Sir
employee to lean, .he
14.6.3 Off the Job Training

.i.e classr trainings,
systemadeally organise^ well
prn^s e" Z TT
"methodology ean give good insigh int^TTd i^^Jh
""
away from the job eontext, have a mbced gronn s o t ^ f ^ ' " l ^ ^ ^ ^ S e s relate to being be very enthnsiastie after tepeated png-TTf
"^"y "y "t
14.6.4 0 the Job Training Methods
popularity. It is not leaming b7pStee^rOn;

meehanism. Likely ,o borelm.
rge Of'^stral?"^
"
""""^'i"- No authentie feedback
- Uw
Advantages
training methodology '

(a) Case Studies: It is a written description of an actual situation and trainer is supposed to analyse and give his
conclusions in writing. The cases are generally based on actual organisational situations. It is an ideal method to
promote decision-making abilities within the constraints of limited data.
(b) Role Plays: Here trainees assigned the part of the specific personalities in a case study and enact it in front of
the audience. It is more emotional orientation and improves interpersonal relationships. Attitudinal
change is another result. These are generally used in MDP.
(c) Sensitivity Trainings: This is more from the point of view of behavioral assessment, under
different circumstances how an individual will behave himself and towards others. There is no
preplanned agenda and it is instant. Advantages - increased ability to empathise, listening skills,
openness, tolerance, and conflict resolution skills. Disadvantage - Participants may resort to their
old habits after the training.
(d) Independent study: individual can plan and carry out their own learning programs.
(e) Action leaming: Individual managers can assist each other in the learning process.
(f) Laboratories: Here experience of individual managers are stored and are available for use.
4. Programmed Instractions: Provided in the form of blocks either in book or a teaching machine using
questions and Feedbacks without the intervention of trainer. Advantages - Self paced, trainees can
progress at their own speed, strong motivation for repeat leaming, material is structured and selfcontained. Disadvantages - Scope for learning is less; cost of books, manuals or machinery is expensive.
5. Computer Aided Instractions: It is extension of PI method, by using computers. Advantages - Provides
accountabilities, modifiable to technological innovations, flexible to time. Disadvantages - High cost.
14.7 BENEFITS OF TRAINING

14.7.1 General Benefits from Employee Training and Development
There are numerous sources of online information about training and development. Several of these sites (they're
listed later on in this library) suggest reasons for supervisors to conduct training among employees. These reasons
include:
Increased job satisfaction and morale among employees
Increased employee motivation
Increased efficiencies in processes, resulting in financial gain
Increased capacity to adopt new technologies and methods
Increased innovation in strategies and products
Reduced employee tumover
Enhanced company image, e.g., conducting ethics training (not a good reason for ethics training!)
Risk management, e.g., training about sexual harassment, diversity training
H.R.M-17
14.7.2 Career Advancement

Since te ,any Ue,
n=.ai sttong performe,,,
to mee. fte needs and expccaLs of LXpClSr """
h""
e1
8M I HUMAN-
does no, always mean pronto
well aa
P"'-
proacflvely commnmcalc U,a. "advancement-
by Job role, geogn.phic'^tations an'XjrCli"'"'
mote tested. stJicrjSêSi^tgTl"'"''^
14.7.3 Managing Performance
performancemanagementtoprovidethei.^r^ ?^^
to receivc feedback. PerflS^tTo
Privately and publicly the accompHshme^ ^f thf Jnnt
want a real time view into wh "LrCTcom^^^^^^^

and how and when they can expecl to be Xw
(e.g., promotion, more Lponsibi^ s
^
functions and geographic rotati^' o su^^rt^^^^^^^^^

traming and leaming programs via olutions Se Con'^^^^^^^^^
goals of multigenerationai workforces.
^PPâch to
advancement. They
"
''
'' ^^
(often across
and
14.8 SOFT SKILLS TRAINING

each of these generations - which span ZLt frr ?
career goals and work styles^Je^
managing leaming, training andl^de^^^^^^^
organisations will be better able to retain a ^rl " T ?
them engaged, productive and suiTsfoU: re lonTeftel'li^^^^^
are cultural differences as well.
^
^he workplace. Workers in

motivations,
~ ^^"vering and
^^
employees,
^^
generational differences, there
14.9
TALENT MANAGEMENT
Many organisations face the challenge of developing greater confidence, initiative, solutions-finding,
and problem-solving capabilities among their people. Organisations need staff at all levels to be more
self-sufficient, resourcefiil, creative and autonomous. This behaviour enables staff to operate at higher
strategic level, which makes their organisations more productive and competitive. People's efforts
produce bigger results. It's what all organisations strive to achieve.
However, while conventional skills training gives people new techniques and methods, it won't help
develop their maturity, belief, or courage, which is so essential for the development of managerial and
strategic capabilities. The focus is, on developing the person, along with the skills. It is important to
provide leaming and experiences that they would like for their own personal interest, development and
fiilfillment. Perfomiance and capability are ultimately dependent on people's attitude and emotional
maturity. Help them to achieve what they want on a personal level, and this provides a platform for
tmst, 'emotional contracting' with the organisation, and subsequent development of the skills,
knowledge and attitude relevant to managing higher responsibilities, roles and teams.
Participative workshops work well in beginning for this type of attitudinal development. Involve people
right from the start. Focus on what they want. Begin with a personal development questionnaire to set
the scene and provide examples of'altemative' leaming opportunities. It starts with the person, not the
skills. It is about attitude and emotional maturity. Emotional intelligence principles and methodologies
fit very well with modem approaches to developing people's belief, maturity and attitude. Case study
methods as well as situational experiences studies and discussed will also help give the participants a
better feel for tackling real life situations.
When people develop confidence, integrity, and sound knowledge of the job,, they automatically
become more proactive, solutions-focused, responsive, which across a whole team has a cumulative
effect. Johari window is a usefiil model too. So many people at work are simply 'going through the
motions', acting in a 'conforming' state, often because they feel insecure, lack confidence to do what
they think is right, or are nervous about being bold, most of which can be avoided with a Httle effort
and planing to design appropriate training programs which will address a lot of these deficiencies.
14.10
TRAINING FOR THE NEW GENERATION
Generation Y, Millennials, or however you like to refer to the latest generation to move into the
workforce ... they're here, and now we must train them.
More than past generations, today's college grads rely heavily on technology and social interaction.
They can send instant messages while reading an article online and text a fiiend on their phone, all at
the same time. Training Gen Y employees requires a mix of technology, social networking and
entertainment in order to drive the message home.
14.10.1 Gen Y at Work

If they can't read the employee handbook in 140 characters or less, they're not even going to tum the
first page. Long-term employment translates to anything over two years and the thought of working 30
years for one company is absmd. They want to leam everything possible from their current employer to
help them advance in their job.
looking busy from nine to five. C wl fr^lm ' 7

book, MySpace and Twitter at JZ
'
"
^^^ ^^ hair
ôt to forget Face
So. how do we train this group Of casual social butterflies now that theyVe pa. of our wo
14.10.2 Training the New Generation (Gen Y)

and convictions. Thev trust th^ ^Z/'r^
^ 'ô'npletely
new set of beliefs

friends across all networks and use tôT^'in
'I u
niHion
When these so called Millennirs^'â^^r^^^^^
eagertoleamanythingnewandexpecttousewhrth^^^^^^^^^
If the organisation does not have the t^ rl^^^^^^^
a static training program with simulatio" o oZc^^^ToZTT'''''' ^^^ -PP'^-t tips on the best modes of
training for them
^
^^^ employees engaged. Some
Keep it Short
consume the informaton. If i, is impoXeTo
'
"> "P "P'oyees letter
Make training entertaining
aud-oand video
Allow freedom
itsss
at their leisure. Digital options also gi^ G^TtLffr f
previous training session on thero^
r
courses
"^^âls that were taught in a
Explore mobile learning (m-leaming)

videos on the training topic.
training points.
courses and share expert Encourage teamwork

courses to foster teamwork and reinforce
When training any generational group, the goal must be to provide valuable leaming experiences that give
employees the tools to develop in their careers. Training is a gift employers give to their workforce that
keeps employees engaged, happy and productive. Knowing how younger generations leam best will help
develop the next great leaders in our organisations.
14.10.3 Training for New Hires at a New Generation Banic - Playing Games
For some new hires at a new generation bank, play is an integral part of work. These hires, typically
junior and middle-level managers hired for customer-facing fiinctions, are made to play online games for
several hours before they get down to the business of dealing with people.
"Gaming is an integral part of our induction programme," says one of the new trainees at the bank. More
than 2,000 ICICI employees have been playing games, and winning prizes, as preparation for handling
customers. The use of online games fits in nicely with the HR department's focus on e-leaming. "The
gaming initiative reinforces our brand proposition of anytime, anywhere leaming." Say the trainees.
The training department uses four games-queue management, cheque clearing (operations), cheque
payment across the counter, and savings accounts. As the names suggest, these games present situations
with customers seeking services in these areas. The games, developed by the Tata group's e-leaming
company, Tata Interactive Systems, require the staff to provide quick services and resolve issues
efficiently
For instance, the cheque clearing game involves all the steps involved-fi-om the point a customer presents
the cheque to the bank executive till the encashment of cheque. For every right move players make, they
get a part of the key to the kingdom, while they lose a life for every wrong move.
It is only after the new hires become adept at winning and achieve a certain proficiency that they are
allowed to actually deal with customers. "The drill prepares employees to deal with customers efficiently
from day one. All the effort is about creating a good experience for customers," says one official.
Experts say gaming could become an important tool in human resource management. "Gaming as a skill
enhancement and training tool has a huge potential in sectors and companies that are growing very fast,"
says Quentin Staes-Polet, CEO, Kreeda Games India Pvt Ltd. "This is all the more trae for sectors that
have a significant population of young people in the workforce. The fan element in the games infiises
interest in leaming, which is an important thing for the young generation known for its changing interest
levels," adds Staes-Polet.
Games-based training also tums out to be much more cost effective than other training methods. The
gaming engines used at the Bank cost up to Rs5 lacs. Games also provide the Bank with an opportunity to
assess skills and performance of employees without actually allowing these people to interact with
customers. "Games can be used to capture key real-time information about people, activities and
outcomes and to provide more frequent guidance and link performance to recognition," says Daniel Dias,
director, IBM India Research Laboratory.
Meanwhile, the Bank says there has been a tangible reduction in error rates and improvement in
productivity among employees trained through games. "But we would like to be a little guarded and
gauge the results across functions, and over a period of time, before we call it a success," says bank
officials.
management
14.10.4 Return on Investment (ROI)
more programs in house, seelcing low cosfta lal.
^"^h as
one thing in common, to improve the RW raôn tail' T"
" ^^c. have
programs and not really being sure of ^ Z rZTZVlT '^^ various approach to training; now, companies want
to s
^
e
^
efficient
spendmg money on actually works. ROI and WA hav IvI ^
draining they are
-stobeabletoprovethattrainrngisac
benefit the organisation draws from alamt

^^^^^^
made to develop, produce, and deliver Ztp'roZ^'Th"!^^^
associated with the program and even hardrtH^te ^ f f u " ^ ' " "
finding a fair value
^^^ "eial
costs exercise does help in
^ê program, this
(Total Benefit- Total Costs)
development costs, learner's time away from

this also includes program materials SSSÎ'^Y T
coverage during training, overhead of ^^^to^tS at' It^'t
servers, graphics, web development or CD-pr^^c'bn^lt
^^^^
'"
14.10.5 Measuring the Success of Training
tn,iee felb.ck sheete. Such

've ^^^
ta oisanisaion can ke to imp" 1 "^
evaluated can i, be compared againSTI^ otto ZhT
ptefercnee to or in comLnation a oto tftl
being one of many acta

'^""""''y- ""'y f taining 3 p^perly
" r
and self-study methods. Using comparative evaluation techniques, orgamsations can make rational decisions about the
methods to employ. As training has to cover the maximum number of staff, it is also important to track the numbers
though from a different perspective than mere statistics.
Costs related to training are both direct, such as external design and development, consultancy and trainer fees, travel
expenses and actual venue costs including food and material. Indirect costs on the other hand relate to costs that may or
may not be directly associated with a training event but which would have been incurred anyway, whether or not the
training took place. Examples are salves of in- house trainers and establishment costs of rooms and equipment. Efficiency
is a measure of the amount of learning achieved relative to the amount of effort put in. In practical terms this means the
am^t ot time it takes to complete a piece of training. Efficiency has a direct relation to cost - the more efficient a training
method is, the less it will cost.
The most important results sought from training are learning, behaviour as well as performance changes.
Learning in terms of new or improved skills, knowledge and attimdes, is the primaiy aim of a training event. Leaming
can be measured objectively using a test or exam or some form of assessed exercise. If a trainee has to achieve a certain
level of leaming to obtain a 'pass mark', then the number of passes may be used^ an evaluation measure. Another
important aspect of leaming is the degree of retention - how much of the
leaming has stuck after the course is over.Anumber of organisations resort to Competency BasedTraming,
where the competency level expected to be attained after a training program is defmed upfront and trainees, measure on
the actual competency levels attained through a series of tests and feedback.
14.10.6
Behaviour Change
If a student has leamed something from a course, it is expected that this will be reflected in their
behaviour on the job. Ifatrainee employs what they have learned appropriately,thentheirworkbehavioij
will meet desired criteria. Behaviour can be measured through observation or, in some cases, tlôugh some automated
means. To assess behaviour change requires that the measurements are taken before
and after the training.
14.10.7
Performance Change
If as a result of training, trainees display appropriate behaviours on the job, then the training has indeed caused the
positive impact on performance. A wide variety of indicators can be employed to measure the impact of training on
performance - numbers of complaints, sales made, output per hour and so on. In order to gauge the real difference in
performance, it may be also advisable to compare with a control group , a group of employees who have not been
through the training.
14.10.8 Return On Investment as a Measure

Return On Investment (ROI) is a measure of the monetary benefits obtained by an organisation over a specified time
period in return for a given investment in a training programme. Looking at it another way, ROI is the extent to which
the benefits (outputs) of training exceed the costs (inputs).
ROI can be used both to justify a plamxed investment and to evaluate the extent to which the desired return was
achieved. However, it cannot measure all aspects of training success such as whether
i hufwun resource iwanagtment
nee. ,Ue<, ,te
, ^^
^^^
te managemen, eom^taen, s.
.eg^ted Witt teb focs ia .
be te ed nesu,. fa,,
X ivesef
Stm,egy and nmi ge.
eff. ajtaizlzllnli
one's axe and get ready for bigger acL in Zlys
grind
ts^rrds ~ ^^
niora,e and confidence.
-- efficiency
'""'"S
gives a boost to emp,oyee
How can organisafions emb^ce genet^tiona, differences in the orMace.
shou d inchde specific guidelines and se^^"T rir,'""''

*ve,op,g,evaluating, and rewarding each gLItaa^^lir"'^
Best PrBctlces to Help Organisations
address generational differences. Older work^f frexl f

using technology as their GenerationXanTitta^^^ T " ' i ^ ^ ^
and make these workei. more comfortable I
based learning situations while Gen X workei^ prSo eis less likely to participate in or benefit
^
P^^ that specifically

""
^^
relationshipThis generation
training environments that encourage knowledge ^

^^ collaborative
peer, and colleagues. According to ForrJ^r^Zt Sn^
^^ their
m todays workforce (bom between 1981 an^lw - ~ immediate access to -rniafion.^^rs^^r^^^
operates in a rapid-fire mode. In conlxast to their older worker counterparts who prefer to receive and
in a linear fashion, millemiials are multi-taskers who prefer to receive information
quickly and from multiple sources in real time and parallel process it immediately.
Whilethe generational differences in, expectations for andapproaches to the workpl^^^^
can adjust horizontal talent management strategies to accommodate each generation. Organisafions c^
and should consider incorporating non-traditional, informal training programs such as online leaming
ItT^leaming, and oL opportunities that facilitate leaming and collaboration. In many cases
workforce.
Content, for example, isanext-generationtalentmanagementsolutiondesignedtom^^^^^
offerings available to users. Organisations can tailor such solutions to ensure that Aeir employees are
receiving andinteractingwithlhemostappmpriateandrelevantleaming^dtrai^^
and activities By providingasingleplace where leamerscanbrowseandselectlearmng content, solutions
and courses in a way that transcends employee leaming styles and generational sensitivities.
Let Us Sum Up
In this unit we have leamed the subject matter of training, training methodolo^, current trends in ttailg,
as well as various types of training. We also saw the benefits of training talegem^^^
^special emphasis ontrainingofnewgenerationemployees.ROIontrainingcompletedt^^
Keywords
Subject Matter of Training
Training Infi^stmcture Soft
Skills Training Training of
Generation Y Talent
Management ROI on
Training
Check your progress

State whether the following statements are Trae or False.
1. Companies are right in reducing training budgets during a recession. f
2.
Alternate modes of trainmg are more cost effective but their effectiveness is not guaranteed. f
3.
An effective training program must address generational differences and develop better
competency among trainees. t

4.
On the job training is superior to off the job training. t
I
5 - All traditional training methodologies need to change for Gen Y employees
f
6. ROI on traming is directly measurable on the job. f

1- False, 2. False, 3. True, 4. Tme, 5. False, 6. False
Terminal Questions
^
2. Where wil, you ê al,er,te modes of .raining such as web based ttaining.
3. In fte banldng indusUy onteourcing of ttaining is essenUal. Do you ag,.
5. WMt are the common applications Of training?
References
Swali Prasad is a freelance IT wi^^ based in IndU
. Gaê, R. (19.2, Milita, tuning and principles of leaming. American Psychologist, 17, 263-
G.gne.R.,^87,Instruco^,Techno,ogyFonndations.Hillsdale,m^^
SK;
"
(2nd Bd.,. Hng,ewod'
-yering
. The following web sites provide further infonnation about Gagne and his workhttp://www.e-leamingguru.com/articles/art3_3 htm
http://www.my-ecoach.com/idtimeline/theory/gagnehtml
http://wwwibstpi.org/Products/pdâppendix_A-Cpdf
Hd., Fort
and Relevant Web Sites:
MODULE-D
PERSONNEL MANAGEMENT AND INDUSTRIAL RELATIONS
Units
15.
Industrial Relations (Part A)
16.
Industrial Relations (Part B)
17.
Employee Discipline (Grievance Redressai and Discipline)
18.
Worker's Participation in Management
19.
Employee Discipline (Discipline Management)
V7 -v-i
INDUSTRIAL RELATIONS
(Part A)
STRUCTURE
15.0
Objectives
15.1
Introduction
15.2
15.3
Personnel Function
Legal Aspects of Personnel Function
Let Us Sum Up
Keywords
Terminal Questions
Reference
15.0 OBJECTIVES
After studying this Unit, you should be able to*
15.1 INTRODUCTION
labour too has seen the change from a hillv ^r .

secondly no longer matters and each ^tTe^d/ ''
A look at the newer trends in managing neoole th* ^

anagmg, nurturing and retaining talm Lems ^ bt
^ ajor change and

- wSl
environment, reveals that attracting

-- facing organisationrS strong values, or robust
llm ^
performance ethics and n^, u f ^ organisation that is flexible has
has led to companies proactively taking the^^^^^^
work on latest technology The whe talent can bl^^^^
^d recognition mechanism that provides value t pt^
^--d
hpe sessions, mentoring, online chats on thert^fATv
Open
hand, the union bargaining for tough concession /Jlu '

something more democr^tk and inivXalleTMr
management dealing with an iron

"^^^^-tion is giving waô
^ganisationFromapurelypeopleco
^ far, we have focussed on various asnerts of
Ta ^
traditional industries including the PSu C stfu ^

mâgement with unions and'an
ôrganisation. In our discussions

many of t^
retrenchment across all other industries, including the new generation banks. This development itself is an
indicator that the power of collective bargaining as well as the influence of the imions over the workforce in the
banking sector, will not fade away for quite some time to come.
15.2 PERSONNEL FUNCTION

Personnel management is a managerial function of planning, organising, directing, controlling and cocoordinating the line fiinctions or operative functions such as recruitment, development, compensation,
integration, utilisation and maintenance of people so that their individual objectives as well as the
organisational goals are achieved.
Personnel management deals with the aspect of relationship between and among people and is concerned about
their well-being as individuals and as groups so that they can give their best.
Personnel management which has evolved into HRM has three major spheres of activities; viz. strategic,
professional as well as administrative. These again get bifurcated into welfare aspect relating to safety, health,
amenities and facilities, personnel aspect relating to recruitment, development, compensation and incentives,
and relationship aspect relating to employee relations, settlement of industrial disputes, negotiation with unions
etc. HRM is also concerned with the maintenance of a high degree of employee morale and satisfaction as
organisational results are achieved by the people and through the people.
With the help of above definitions and our imderstanding of the concept of personnel management, the
functions of HR management are given in more detail below:
15.2.1
Strategic
Organisation Mission / Vision, Business Goals, Strategy, Oiganisation Life Cycle Stage and Organisation
Competency Identification (Key Competencies Required) including Competency Mapping Industry/
Competitor Analysis
15.2.2
Professional
15.2.3
Administrative
Performance Management and Review Mechanism, Key Result Areas, Key Performance Indicators and
Key Deliverables.
Employee Morale and superior performance.
Selection, Performance and Potential Evaluation, training and development. Compensation, Rewards
and Recognition, Employee retention.
Career and Succession Planning.
Employee welfare.
15.3 LEGAL ASPECTS OF PERSONNEL FUNCTION
Labour has for centuries, been at the mercy of the employer, and exploited to the maximum whether it be in the
coal mines of Europe in the 1 c e n t u r y , modern mines in China, or even the hi tech call
environment though some of the acCrue Itj H

organisation is free to decide its activity L of h!^.
^^^^^^^
a relook. A buêss
nauon-a corpomte citizen who ha^ tr^^/rbf c ~

under the labour legislation.
The important labour laws in India which annlv

'
Legislation on Working Conditions
^^^ l a cilL of I
regulations which have b^n^
organisations can be classified under the following
The Factories Act, 1948 The Mines Act, 1952

Shops and aubtaen, Act. (enacted by diff,.,
Legislation on Wages
The Payment of Wages Act, 1936

The Minimum Wages Act, 1948
The Payment of Bonus Act, 1965
The Equal Remuneration Act. 1976
Legislation on Social Security
The Workmen's Compensation Act, 1923 The

Employees' State Insurance Act 1948
The Payment of Gratuity Act, 1972
LegislationonEmploymentandTraining
Legislation on Industrial Relations The Trade Unions Act, 1926

new Industry, Employment (Sanding Order) Act, ,1946
The Industrial Disputes Act 1947
The broad objective, of these enacnênts can be summarised as. under
o,d,e n. Cass against tbe p.sib,e
To regulate and improve the working conditions. To provide for fixation and payment of minimum wages.
To ensure timely payment of wages and avoid unauthorised deductions from the wages.
To spell out and notify the service conditions for the information of all concerned.
To provide for formation of trade unions with a view to promoting collective bargaining.
To arrange for social security measures in the event of sickness, disablement and death of
workmen.
8. To promote industrial peace by providing for machinery for settlement of industrial disputes.
9. To be receptive to the market demands and enact legislation for facilitating modem businesses.
15.3.1 Labour Laws and Personnel Functions

From the objectives of the labour laws listed above it is clear that they directly affect many of the
personnel functions. Thus for recmiting the required kind of people one needs to follow the provisions
of the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 and for designing
and delivering the compensation package, follow the provisions of the Payment of Wages Act, 1936
and the Minimum Wages Act, 1948. These laws are anchor points or guide posts for the organisations.
While organisations have the liberty to design their own rules and practices, the minimum standards
have to be kept m view while filing the policies. The social security legislation compels the employers
to take care of health, safety and superannuation of employees while the law relating to industrial
disputes authorises the Government to intervene to prevent industrial unrest.
Introduction to some important Labour Laws

Labour has been placed in the 'concurrent list' under Article 246 of the Constitution of India. As such,
both the Central and State Governments can and have framed labour legislation. In this section we will
go through some of the important labour laws applicable to the Indian organisations, particularly to
banks.
15.3.2 Legislation on Working Conditions

1. The Contract Labour (Regulation and Abolition) Act, 1970
Objectives: The Act provides for abolition of contract labour and where possible regulation of the
contract labour.
Features and main provisions

The Act is applicable to every establishment in which 20 or more workmen are employed or were
employed on any day of the preceding twelve months as contract labour. It is also applicable to
a contractor who employs or had employed on any day in preceding twelve months 20 or more
workmen.
H.R.M-ia
human resource
mmts^.
/.cense nnde, .,e Ac, for execu Jg IJ^
"
. Whêr .e cn..s f and bene, pro., for con,^, ^

we.er.ewor...c.e.ornecess..for,ebns.essoru,ees.BsW
whearer .e work is Of a per,ia, n., or Of snfflcien. dion; and
. whefter i, is ordinarily done tfm,gh n,g,a, orlanen. A conliaclor is requited to provide:
a canteen if the establishment employs 100 or more worker.rest rooms if the conttact labour is requited to halt at nighf
sufficient supply of drinking
^^^
first-aid box.
principal employer has to provide these
-- - p-. of If the contractor fails to pay the same. ' P^^ ""Paid wages
By a notification of December 6 I07A
^.^
Note
contract
- labour by banks for sweeping/dus^td';:!^^^^^^^^^^^
of
mcreîngly taking a lenient view on JelS r^^^^

^^
provided and the conditions of employmen do
^ties
only a means to reduce costs, it h^ 1 to^^
ôday outsourcing is not
as many back office operations of major baX iSLthe quality of services of quality in operations. ' ^Û ones are ISO
certified, the hallmark
2. The Bombay Shops and Establishments Act, 1948

Objectives: The Act regulates the conditions of work and employment in shops and establishments, hotels,
INDUSTRIAL RELATIONS iPartINDUSTRIAL R

restaurants etc.
A shop or establishment (which includes commercial establishment) is to be registered under the Act
with the local authority. The license is valid for one year and needs to be renewed.
No employee should be asked to work more than 9 hours on any day and 48 hours in a week. He is
allowed to work 6 hours extra in each week and six days in a year for preparation of accounts, stock taking
etc. But such over-time should not exceed 24 hours.
It provides for rest intervals in such a way that no employee is required to work for more than 5 hours
before he has had an interval for rest of at least one hour.
It also provides for weekly holidays. Every commercial establishment has to remain closed on one day of
the week and the employee is to be paid for such closed day.
The Act makes provision for leave. If an employee has worked for more than 240 days during a year, he
is entitled to 21 days leave which can be accumulated up to 42 days. If the employee is discharged before
he has availed of the leave he is to be paid for that leave. Even when the employee quits employment, he is
to be paid for such leave if his application for such leave was rejected earlier.
The Act requires the employer to maintain attendance register, leave record, etc. Notes:
Different States have enacted similar legislation and these are applicable to the shops and establishments
located in those States.
Banks have been granted exemption from many of the provisions of these State Acts.
The advent of malls and other service sectors offering round the clock services, authorities under the Act
have been lenient in permitting relaxation on the opening and closing timings as long as individual working
hours and regulations with regard to rest, holidays and overtime payment are adhered to.
3. TRADE UNION ACT, 1926

The Objective: The main objective of the Act is to provide for registration of trade imions and give the registered
trade imions a legal status and immunity to their office bearers from civil and criminal liability for pursuing
legitimate union activities.
Salient features
Trade dispute' has been defined by the Act is a dispute between employers and workmen, or workmen
and workmen, or employers and employers, which is connected with the employment
or non emplojênt or terms of employment or the conditions of labour. The definition is almost similar
6
I HUMAN RESOURCE MANAGEMENT

to the definition of industrial dispute given in the Industrial Disputes Act
. Workmen- means all persons employed in trade or industry with whom the trade dispute arises.
Trade union' means a combination formed:
or between employers and employers; or 2. for imposing restrictive conditions on the conduct of
any trade or business. Note: although trade union is commonly understood as union of workmen, an
organisation of employers
can also be registered as a trade union under the Act.
-on or employers
'
^ trade union can by subscribing their names to the rules of the
union and by complymg with the provisions of the Act, apply for registration of the trade union
. If Ae trade union is in existence for more than a year before it applies for registration it shall submit a
statement of assets and liabilities in the prescribed
to the S^Trade
fZ
The following is necessary for registering the trade union:

1. name and the object of the trade union,
2. purpose for which its general funds shall be employed,
3. list of members and facility for inspection of it by the members,
4. rules regarding admission of an ordinary member and honorary member,
5. the procedure for amending the rules of the trade union,
6. manner in which the trade union can be dissolved.
'
- the following
(i) on the application from the trade union, or
(ii) if the Registrar is satisfied that:
the certificate is obtained by fraud or mistake,

the trade union has ceased to exist,
allowed any rule to continue which is inconsistent with the provisions,
has rescinded any rule which is required to be in the mles of trade union.
A trade union after registration:
INDUSTRIAL RELATIONS (Part A) |
becomes a body corporate and a legal entity, distinct from its members,
has perpetual succession and a common seal,
has powers to acquire and hold movable and immovable property,
has power to contract,
can by its name sue and be sued.
. The general fund of the registered trade union shall not be spent on any objects other than the following:
payment of salaries and expenses of the office-bearer of the trade union;
administrative expenses including audit of the accounts of the general fund;
. expenses of legal proceedings for prosecuting or defending the trade union or its member for securing or
protecting any right of the trade union;
for the conduct of trade dispute;

compensation to members for loss arising out of trade disputes;
. allowances to members or their dependants on account of death, old age, sickness, accidents;
taking out insurance policies on the lives of members;
provision of social, educational or religious benefits to the members or their dependents.
Funds cannot be spent on any objects other than those given in the Act.
. A registered trade union can constitute a separate fund for political purpose. This fund can be utilised in
furtherance of the following objects:
expenses incurred by a candidate for election as a member of any legislative body;

holding of any meeting or distribution of any literature in support of any candidate;
. maintenance of any person who is a member of any legislative body or local authority;
holding of political meetings or distribution of political literature.
The political fund can be created:
. only from the contributions separately levied or received for that fund; without compelling the members
to contribute to the fund;
without excluding any member from any benefits of the trade union who has not contributed to the
fund, or putting him to any disadvantage;
without making it a condition for admission to the trade union.
. The account books and list of membership of a trade union shall be opened for inspection to any member.
. Not less than one-half of office-bearers of the trade union shall be the persons actually engaged or
employed in the industry to which the union is connected.
I hsourch management ^^^
''^''''^^îDISPUrESACT, 1947
Objectives
Preven'illegal strite and Wouts features
and importent previsions
The definition of 'industry' given in th.
any per,n:
a.
- -nsequenee of indn. dispute, J^Tr^ZZt
() ""oissabjecoa.eAirForceAe, 1950 orlheA
(m Who is employed mainly in a
S7
""
"" ^^^
In an attempt to resolve th^ ^
The Act provides for constitution of conciliatory machinery with Conciliation Officers to be appointed on
Boards of Conciliation to be constituted by the appropriate government. The role of the conciliation officer
or board is to mediate and promote settlement of industrial disputes. If the conciliation proceedings fail, the
Act provides for appointment of Labour Courts, Tribunals and National Tribunals for the adjudication of
the industrial dispute. The Act also provides for voluntary arbitration of disputes, if the parties so agree.
Thus the Act provides for redressal of industrial disputes in a three pronged way:
by constituting works committee;

by appointment of conciliation officer or constitution of Board of Conciliation;
by referring the matter to the labour court, tribunal or national tribimal.
The Act also provides for voluntary reference of disputes to arbitration if the employer and workmen
agree to refer it to the arbitrator before the dispute has been referred to the labour court or tribunal.
The Act makes it obligatory for the employer to give a notice of change before effecting any change in
the conditions of service in respect of wages, hours of work, leave and holidays, introducing new rules of
discipline, withdrawal of any concession or privilege. 21 days' notice to the workmen likely to be affected
i
by the proposed changes is required to be given.
The Act prohibits strikes and lock-outs in public utility services without giving due notice and also
provides for general prohibition of strikes and lock-outs under certain circumstances.
The Act provides for lay-off, retrenchment and closure for which a specified procedure is required to be
followed and compensation at the prescribed rate to be paid to the workmen affected.
15.3.3 Legislation on Wages

1. The Payment of Wages Act, 1936
Objectives: To regulate payment of wages at least once in a month and at a regular interval, and to
prevent unauthorised deductions from the wages.
The Act can be made applicable by the State Government by notification to establishments.
The Act covers employees whose wages are less than Rs 1600/- p.m.
The term wages has a very wide coverage meaning remuneration, overtime payment, leave salary,
payment on termination etc., but excludes any bonus, contribution to PF or Pension Fund, and any Gratuity
payable.
In organisations employing less than 1,000 persons wages shall be paid before the expiry of the seventh
day, and where more than 1,000 persons are employed it shall be paid before the expiry of the tenth day,
after the last day of the wage period in respect of which wages are payable.
Deductions are authorised for absence. However if 10 orn,.
286
I HUMA^J. RESgMBpE:;,^!^^
BiiW
rsrsiâ::
applicable to banks.
- -- -
incorporated some of these provisions and made this Act
2. The Minimum Wages Act, 1948
es.aWishme,s covered are: rice milfCrî,T

agriculture, dai^
pl":^'
"""'"y^"'
-nufacmriug, oil 1,1, employment in
\'::roer:H:crurvr:;ro'rds
con,rio ,0 d,e pension Jd or
on discharge, and (veiling allow^
' "d ',
""" """
'
^^ PyaWe
. A ^
'
a guaranteed time rate and overtime rate
.^^ragreemen.hyaneployeereh,.shinghisrigh.udcr.isAc.-
3. The Payment of Bonus Act, 1965

Objectives: The objective of the Act is to provide for payment of bonus to persons employed in certain
establishments on the basis of profits or on the basis of production or productivity and matters connected
therewith.
The Act applies to all factories and establishments employing 20 or more persons.
Bonus is payable to:
employee whose salary/ wages does not exceed Rs 10000 per month *
who has worked in the establishment for not less than 30 days
Not disqualified to claim bonus due to fraud, theft or any other misconduct.
Bonus of very person drawing salary between Rs 3500/- and Rs 10000/- per month shall be calculated as
if his salary were Rs 3500 pm.
Salary includes basic pay and deamess allowance but not other allowances.
Determination of Gross Profit is the first step towards calculating amount of bonus. The procedure of
calculating Gross Profit is given in the First Schedule for banking companies and in the Second Schedule
for other companies. From Gross Profit certain charges are to be deducted such as remuneration of partners
or proprietors, a return of 8.5 per cent on equity capital and 6 per cent in reserves, depreciation under the
Income Tax, direct taxes, dividend paid or payable. After deducting these, 'available surplus' is arrived at.
67 per cent of available surplus is 'allocable surplus' for a company and for others it is 60 per cent. Bonus is
to be paid from the allocable surplus.
Every employee who has worked for not less than 30 days in an accounting year is eligible for bonus. He
is, however, disqualified if he is dismissed for fraud, riotous behaviour on the premises of the
establishment, or thefVmisappropriation of any property of the establishment.
It is an obligation on the employer to pay bonus at a minimum rate of 8.33 per cent of the salary or Rs
100/- whichever is higher. It is to be paid irrespective of profit or loss or whether there is allocable surplus
or not in the accounting year. The maximum rate is fixed at 20 per cent.
Where the monthly salary exceeds Rs 3,500/- the bonus payable is calculated as if the salary was Rs
3,500/-*.
The Fourth Schedule to the Act illustrates the method of set-on and set-off. The excess of allocable
surplus after distributing bonus shall be set-on and carried forward up to the fourth accounting year. In the
case of shortage or want of allocable surplus, the amount distributed will be carried forward for set-off out
of allocable surplus.
New establishments get exemption from payment of bonus for a period of 6 years or up to the year they
show profit, whichever is earlier.
If the employee is found guilty of misconduct causing financial loss to the employer, the amount of loss
can be deducted from the bonus payable for the year in which he was found guilty of misconduct.
'^m
m
^""-^tobepaidwithinaperiodofSmonthsfromtheclosethea
An acknowledeement n f . ,
accounting
year.
Note: - ne upper i, ^ ^^^^
ITie Equal Rem,nenttl,n Ac, ma Features and main provisions
or work of a atai^r rl^, -""em te m and omen for U,e same wori, ' "
-ê ma..er
Of eondons of service
15.3.4 Legislation on Social Security

The Workmen's Compensation Act, 1923
^.^..and.er<.men.n.aonteemp,o.ees ^
hazardous oceupaSons specif!^ i Sehlle f T!
employer's business.
?
^ f - - -
<Ws no. eoMinue for more .han S
- -enee of .k
"ndgi a^d^^
he should be employed for the period of

. e workman in an aeeiden.
"'^We,^
compensation is payable. Similarly, if the workman does not present himself for medical
examination or does not take the treatment which aggravates the injury, he is not eligible for
compensation. Schedule I lists the different types of injuries and percentage loss of earning
capacity or disablement.
Section 4 to 7 detail the rate at which compensation is payable for different types of disablement
caused due to injiiry for.fatal injury as well as permanent total disability.
Permanent Partial Disablement - According to incapacity caused.

Temporary Disablement - fixed amount per month up to a period of 5 years.
The Act provides for the compensation amount to be deposited with the Commissioner for
Workmen's Compensation in the case of fatal accidents. The amount deposited with the
Commissioner is payable to the dependants of the workman.
If any workman who is in employment for more than 6 months, contracts occupational disease
peculiar to that employment, it is deemed to be an injury arising out of and in the course of
employment. Some of the occupational diseases listed in Schedule III are: anthrax, poisoning by
lead, phosphorous or mercury, telegraphist's cramp etc.
Doctrine
of Notional Extension: The Supreme Court explained this doctrine: "as a rule
employment does not commence until the workman has reached the place of employment and
does not continue when he has left the place of employment. This is however subject to the
theory of notional extension of the employer's premises so as to include the area the workman
passes and repasses while going to and returning from the workplace. There may be reasonable
extension in both time and place and a workman may be regarded as in the course of
employment even though he had not reached or had left the employer's premises. The facts and
circumstances of the case will have to be carefully examined in order to determine whether the
accident arose out of and in the course of employment keeping in view at all times this theory of
notional extension" (Saurashtra SaUMfg. Co. Vs. B V Raja and others: AIR 1958 S.C.881).
Incidentally, the Supreme Court has subsequently observed, while examining the point under the
Employees' State Insurance Act, 1948, that in order to succeed in such cases, it has to be proved
by the employee that: (1) there was an accident, (2) the accident had a causal connection with
the employment and (3) the accident must have been suffered in course of employment
(Regional Director, E.S.I. Corporation and another Vs. Francis De Costa and another: 1996 (II)
CLR 812). In short, the accident should have causal coimection with the employment.
2. The Employees' Provident Fund and Miscellaneous Provisions Act, 1952

Objectives: The objective of the Act is to provide substantial security and monetary assistance to the
employees and their families and to protect them during old age, disablement, etc. The Act provides for
a scheme for institution of provident fund. Although it was found that the provident fund was quite
useful in the old age, in the event of early death of the employee, the accumulations were not adequate
to provide long-term financial support to the family. The Employees' Family Pension Scheme was
therefore, introduced from 1 st March 1971. This has since been replaced by the Employees' Pension
Scheme, 1995. The new scheme provides for a regular income after retirement/death in the form of
pension.
. h e g e e . e . g e h Jheen
. ê te wage, tae.ude. basic pay. de,ess allowance and .ining allowance if anv
mvested in gve,n,en. sectHfe. neôâSe^s
. -e accn. of
retirement on account Of permanent incapacity,

migration for permanent settlement abroad,
termination in the course of mass retrenchment
sister, etc.
'
marriage or marriage of his son, daughter, brother,
^^ZT^Z"^:
--
.Meres, credited during fte year and cloLSce
y"--.
^^ baches or depa^nen. h, ore d,an one S.te or
i. The Maternity Benefit Act, 1961.
leave and certain monetae benefits.
delivety. It provides for

'
-tae cc. The Ste Gove^nen. can extend d,e

The maximum period of maternity leave is 12 weeks; six weeks before the date of delivery and six weeks following that date.
To be entitled for maternity leave a woman must have worked for not less than 80 days in the 12 months immediately preceding the day
of expected delivery.
In case of miscarriage, a woman is entitled to six weeks of leave from the day of miscarriage.
For illness arising out of delivery, premature birth or miscarriage, a woman can take extra leave up to a maximum period of one month.
A woman employee can ask for light work for one month preceding the six weeks prior to delivery.
No pregnant woman shall be given any work of arduous nature, or which involves long hours of standing or which is likely to interfere
with her pregnancy or normal development of foetus or is likely to cause miscarriage.
A woman worker after resuming duties after delivery is to be given two nursing breaks in addition to her regular rest intervals, to nurse
the child till it attains the age of fifteen months.
Every woman entitled to maternity benefit is also entitled to a medical bonus of Rs 250/- if no pre-natal or post-natal care has been
provided for by the employer free of charge.
Apart from the benefits provided under the Act, some States provide additional benefits such as free medical aid, maternity bonus,
provision of creches.
4. The Payment of Gratuity Act, 1972

Objectives: The Act provides for a scheme of compulsory payment of gratuity to employees employed
in factories, mines, shops and other establishments.
An employee is a person employed to do any skilled, semi-skilled or unskilled, manual, supervisory or technical or clerical work.
The Amendment Act of 2010 removed the salary ceiling of an employee, but the maximum gratuity payable shall be Rs 10 lakhs.
Family of a male employee is his wife, his children, married or unmarried, dependant parents and the widow and children of his
predeceased son, and in the case of female employee, her husband, her children, married or unmarried, her dependant parents and
dependant parents of her husband and the widow and children of her predeceased son.
Salary or wages means all emoluments earned and which are paid or payable in cash and includes deamess allowance, overtime and
any other allowances.
Section 4 confers a right on the employee to receive gratuity if he has rendered continuous service of not less than 5 years, on his
superannuation, retirement or resignation or on his death. The completion of 5 years is not necessary if the termination of employment is
due to death or disablement.
14

no. exceed R, 10 lallÎ-t". STs?
or ac. of Solent or an
employment.
turpitude committed by him
member(s). An employee ho
has to be m fte name of a family
Payment of gratuity is on submission of application form
Pension
Amended with effect from 2010.
15.3.5 Legislation on Employment and Training

The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
Thevacaneyahonld days before d.e datel SSr" "

of employees.
szox^l^cr:^^
in the course of
- - - 'PPota.
""'y .hose
The Act does not apply to vacancies to be filled through promotion or on the results of any examination
conducted or interview held by any independent agency such as Union or State Public Service
Commission and the like.
Note: Notification of vacancies is compulsory for' public sector banks. Where the appropriate government has
issued notification, notifying vacancies is compulsory even in private sector banks. By a letter of September
30,1978, the Government has advised that all vacancies in the subordinate cadre be filled through the
employment exchange and other sources can be tapped only if the employment exchange issues a non-
INDUSTRIAL RELATIONS (Part A) | 15

availabilify certificate.
We have seen the main provisions of certain important laboiir laws. We will study in detail the provisions of the
Trade Unions Act, 1926, the Industrial Disputes Act, 1947 and the Payment of Subsistence Allowance Act
(States) in Unit IV. Apart fi'om the labour Jaws, certain Articles of the Constitution of India, provisions of
Awards, Settlements, Contracts, Case Laws (important judgements of the Courts/ Tribunals) apply to the banks
and other establishments and these have a direct bearing on the personnel functions. One has to be mindful of
these provisions while discharging the personnel functions. The following two enactments need special mention
in this context:
(a) Banking Companies' (Acquisition & Transfer of Undertakings) Act, 1970: This is the Act under which
the 14 major banks were nationalised in July 1969 and subsequently in April 1980, 6 more banks were
nationalised. The Act provides for the Central Government to make regulations on service conditions for
the employees of these banks.
(b) Banking Regulation Act, 1949: This Act is applicable to all the scheduled banks including the
nationalised banks. Section 10( 1) prohibits employment of any person who has been adjudicated
insolvent or has been convicted by criminal court of an offence involving moral turpitude.
It may be restated that all labour legislations have one common objective which is to protect the employees from
the arbitrary actions of the employer. The courts have over the years been interpreting these laws and there has
been a number of amendments by the legislature both by Parliament as well as individual states, all of which
have led to make these laws dynamic and more relevant to the times. In spite of the strictures under these laws, if
the action of the employer is in good faith and does not adversely affect the employee, he may still find support
from the appropriate authorities vested with the power of implementing the provisions of these laws. However, a
blatant disregard to these laws may not be looked at kindly.
15.3.6 The Changing Scenario

There have been clear indications that the Government is seriously thinking about revamping the labour laws.
There has been a feeling that the labour laws tend to over protect the workmen. In many cases it has resulted in a
sort of indifferent attitude on the part of the employees affecting adversely their performance. This attitude has
developed because termination of employment is now extremely difficult on grounds of inefficiency. While one
may fully respect the principles of equity and natural justice being followed in employment contracts, the
underlying understanding in the parties is that the employee will work sincerely to the best of his ability. This,
however, does not seem to be the case in an over regulated laboiu" scenario. It is a natural tendency for a human
being to relax when he is assured that there is no threat to his position.
necessao. 10 ensure ,ha, ,here is no eZtata ofT 1 ''
' ""I ^
m fte organised sector are relatively edueawIese Zs li^

amUKlehaschangedovertbeyea,., withthechiesTnth^^^^^^
the employees are now beingLted as pl^X^^rn ^'"T'*" Philosophies,
d favoutab,y respond in their own iuLest a: Srr
opZta ^rSt
cover major items of both the Tde UtSL A str t^f
"""
p-sions o,d,ese a, b have faced s,f

""-ch was to
worke... factanamendtêitllftoX OA^Tmy^Z^

more than 100 worker needs to get pemiission fom ^ f
(and in ptactice that permission fs siSZ g
at^ZTirH'"'""
groivth of India's manufeeturing sector thm am oZ
ny other Indian laW laws fs that Cea^nr^m^rJlL"" """" "" """ "
"""
"> hold back U,e
month's notice and asked to leave.

^ T ""
ven a
in advance how and when workers 4
tLS
contracts. A. first sight this law looks like a Idnd J/ ^ ^Mrenched. Hence we do not see such worke,^.
What this popular view mTs oTo
u
Jobs of
poor
ofworketsunemplo^^becirZwCftLtetia*^^^^^^
hire in the first place. Also,
in areas of vnlafiipA ywi no e able to offload them, do not because they
realise that India's cutrent
^^
^^-e
.n the mid-'SOs. Some recent data coS bTth^Wol R T ?

firing ntles in different nations -100 wS
1
become its advocate, .e refo will n^TsrJh^
^"taent
"f hiring and
complimentary policies for providing social security and welfare to workers. But if this goverrunent can achieve
a major rationalisation of India's labour laws, it will leave behind a legacy for many future generations.
Indeed, the present situation seems promising. There has been a climate of mutual trust and opermess. For the
past almost a decade, no major industrial strife has taken place. The management of Air India could openly go to
the employees seeking their help to bring the ailing airline in profit. It is commendable the way the employees
have reacted to the situation by voluntarily opting for a cut in the salary. This is a welcome change. The country
is ready for a quantum jimip in the industrial output and overall economy. If the political atmosphere lends some
stability, the march on the charted path is indeed a possibility. We all need to view our roles from this perspective
and contribute our might earnestly.
Let Us Sum Up
In this Unit you have been exposed to traditional personnel fimctions as well as the legal aspects of the fimction.
We have seen major labour laws affecting employees especially in the banking industry. Some insight into
specific labour laws and the features affecting employees have been described. We also saw the changing
scenario on the labour front which will have a direct impact on the union and their influence over the working
class.
Keywords
Employee Morale
Employee Welfare
Available Surplus and Allocable Surplus
Labour Legislation
Dispute
Conflict Settlement Check
your progress
1.
2.
3.
4.
Legislation on working conditions has helped in ensuring better working conditions for staff t
The Shops and Establishment Act is applicable to banks in all states. f
Legislation on wages is strictly adhered to by industry. f
The ID Act as well as the Trade Unions Act have lost their relevance for modem industry like BPO and
Retail. t
5. Recent amendments to labour laws are more frequent and more realistic. f

1. Tme, 2. False, 3. False, 4. Tme, 5. False
H.R.M-19
Terminal Questions
1. Describe the operative functions of personnel management.
2. What are the objectives of labour legislation?
3. Describetheolêctivesandmainpn,visionsofthesocialwelfarelegislation
5 Tr rr"
Establishments Act of your State applicable to your bank.
5. Explam the doctrine of Notional Extension.
y "r oanK.
6. Critically examine the statement 'The Trade' unions Act is redundant today.
fh^gTs
-Terence to the labour laws. What
Reference
Malik P.L LABOUR LAWS

Labour.nic.in wvm.laws4india.com/labouriaws.asp indiabudget.nic.in/es200506/chapt2006/chapl05.pdf www.helplinelaw.com/docs/bareact.shtml
INDUSTRIAL RELATIONS (Part B)
STRUCTURE
16.0
Objectives
16.1
Historical Background of Trade Union Movement
16.2
Trade Unions in Banks
16.3
16.4
Industrial Relations
Collective Bargaining
Let Us Sum Up
Keywords
Terminal Questions
References
16.0
OBJECTIVES
After studying this Unit, you should be in a position to:

. Narrate the Trade Union movement in India and in the banking industrv .
Appreciate the problems faced by trade unions and the pêm cen^ ôw
about collective bargaining and its process
vZZT'.T the negotiations take place in the banking industry
Understand the mechanism of Bi-partite settlements.
16.1
HISTORICAL BACKGROUND OF TRADE UNION MOVEMENT
indXdrcrLrA:^::
n the ^^^^^^ environment that existed m the prelabour movement in ma^r p a L " " e ^ ^ ^
leftist movements in India.'while We^t^XTL fe itt
legitimacy With the first electedMarîstgoveLn^î^hXi^^^
cooperation but even then, the induiiiarwolr,^^^^^^^
at the work place. There was an increasLTaw^srof
by the employers. There were no regulaXrfs rrrect^^^^^^^^
wages were very low and were paM irre^y ^
MeghjeeLokhandayinBombTyin 1890 lierea^^^^

Industry, Indian Post Offices et êlô
movement throve. The po itical aSln ^^ '

their spectacular growth in the 1960 t^^^^^^^ . T"'
parties. Due to the'ônfliclg
was always tense with the unLs fi^ fSh^^^^^^^^^^^
"" ^
^
'" the
of non'
^^^
-P^-ted
^^ Naray
literacy amongst workers and for rSês^^thr^Zci
the trade union

Independence and
^ -"tinuous support of the political
" ^^^P^^
one ground or the other. Social imLanLrthl LT!

literacy, fiielled the growth of a r^^!^ T^
was the breeding ground fof tê^^sTd
T
'
T
'
t
o
this day
country where the Naxalites h^Zlf
resisting the demand on

"
This remains unabated in the two MancS st2s rf WeT
The important trade unions in the country today are:

'
National Trade Union Congress
BMS-BhartiyaMazdoorSabha
the

Besides these, there are any number of state level unions, again promoted by political parties, prominent among them
being the Bharatiya Kamgar Sena, ( BKS) promoted by the Shiv Sena in Maharashtra.
16.2 TRADE UNIONS IN BANKS

The Trade Union movement in the banking industry also has a similar story of growth. The banks in India were
owned by a few capitalists or industrial houses and they were regional banks, all in the private sector, their primary
aim being to gamer resources and lend it back to the owners. The working conditions were not very favourable,
employees had to put in long working hours and wages were also not adequate. A fertile ground for Trade tmions ,
workers got together under large organised imions, to fight for adequate wages. When their demands were not
accepted the industrial atmosphere became tense with the Government referring the matter for adjudication to the Sen
Tribunal way back in 1949. Trade unionism in banks came to stay and have been active ever since.
The important Trade Unions/federations in the banks are:
All India Bank Employees'Association (AIBEA)
All India Bank Employees' Federation (AIBEF) National Confederation of Bank Employees (NCBE)
National Organisation of Bank Workers (NOBW) Indian National Bank Employees' Congress (INBEC)
These unions played a very important role in safeguarding the interests of the bank employees so that their collective
bargaining strength at its peak covered almost 90% of the workmen staff". Almost all these unions also had a parallel
Officers' Association which again came to play a vital role at the negotiating table. The workers in the banking and
insurance sector are well organised under the flag of their respective Trade Unions and therefore they could get their
demands settled either through negotiations or through agitations. Today, the banking industry and the insurance
sector enjoy the benefits of good salary, good working conditions and other facilities, thanks to the untiring stmggle
put up by these unions some two-three decades back.
Their stranglehold on the fimctioning of banks had a major adverse impact both on the service provided as also the
implementation of technology in the banking operations, which led to the formation of the new generation banks who
could capture a large slice of the PSU banks' business with the tech savvy, customer friendly approach. It is only now,
after almost 15 years of the formation of these new banks that the old venerable PSU giants have completed a
semblance of computerisation and better approach to custorner service. Though a bit late in the day, unions and
workers have now realised that their survival depends on embracing technology and extending prompt and courteous
customer service. There is a new awakening; the unions are becoming pro-active and are concerned about the business
prospects of the banks which is a good thing to happen in an industry that controls the monetary and economic wealth
of the country.
16.2.1 Problems Faced by Trade Unions

Traditionally, the unions fimction on three basic principles. These are:
Unity is strength
Equal pay for equal work
Security of service-to ensure social and economic security for the members
matter cannot be resolved through negLtiora,^
ô agitation only if the
16.2.2 Weaknesses of Trade Unionism
through means, both fair and unfair. It gives rise to un ' f

violence. It is surely not in the interest'oT^" w^r^
&1S precise purpose the trade unions have come

heartedly involve themselves in the trade u^âîr
workersfiutherfromtheunionactivitiesCLXic^î^^^^^^
ô achieve goals
in
"e victimised. It is an irony that for

of the problem faced by the workei. an^^TtocWe
situation which may be alien from reality
'
fr" ^heir perception of the
Employers' attitude: To begin with th^ t..^

todlemtegrovvthofindml^.However ae^î^lln T
as an eêM pêr in u,e ofta^SL ^ "
rr "^""'sn orod,eL. Ltas13Z
sir, r" - sss itb,: h " -
aggressive, Ueateig
"eeessa.y,
""nsiderS
"f ffons by 1
Similarly, promotions and career advancement are based on merit as against the fixed time scales and
seniority of the unionised environment. In short, employees in the new generation organisations do not
feel the need for some external help as they are confident in their ovm merit and ability for career
progression. As for job security, they do not even understand the term as jumping jobs is considered the
norm today, with very little thought for long term associations.
The drawback of multiplicity of union is that it vitiates the atmosphere. Frequent clashes, violence etc.
have root cause in multiplicity of unions. Of late, the workers and the union leaders have realised these
drawbacks. Different unions attempt to join a common platform and pursue the goal unitedly. This is a
good sign. One may not wish away the problem. But wisdom lies in attaining the best results in the
conflicting situations both for the imions and employers.
16.2.3
Check-Off Facility
Multiplicity of unions leads to another problem of dual membership of workers where a worker is
shown as a member of more than one union. Many of the benefits imder the Trade Unions Act and
Industrial Disputes Act or Bombay Industrial Relations Act accrue on the basis of membership of the
union and more importantly, the most sought after recognition of a union. This solely depends on the
membership the union has of the workers within the industrial unit. But in the scenario of multiplicity
of unions, there is a kind of competition in getting more and more workers as members. Thus, it
becomes necessary to verify the membership of the unions before any status is allotted to them. Checkoff facility is one such measure.
In the banking industry the unions have been enjoying this facility through the payment of union
membership fees by way of deduction from salary. This has been considered as authorised deduction
under the Payment of Wages Act. The union in turn gets an authentic information fi-om the employer as
to how many members it has. In case of dispute the data is verifiable as the deduction is made on the
strength of the authority letter given by the worker and the amount is credited to the account of the
union. The member may, however, withdraw the authority given to the employer without formally
resigning from the membership of the union. Thus the union will still show him as its member, whereas
there may not be any membership fees received fi-om him through salary payment which of course can
be verified. Another method of check-off is that the employer gives data to the unions as to how many
workers are members of any union operating in the unit. The check-off facility is considered usefiil for
both the employer and the unions. For the employer, it serves the purpose of verification of
membership and to decide as to which union should be recognised if required under any of the
applicable Act. Even otherwise he gets to know the trend of membership of the unions. For the unions,
it serves the same purpose but from a different point of view. It can stake its claim for being a
recognised union and therefore for being invited for negotiations.
The lack of faith in each other despite the verifiable data leads the labour enforcement authorities to do
this verification, in case of dispute. The Industrial Disputes Act provides for a machinery to amicably
settle various disputes, including the basic one - the check-off.
16.2.4 The Present Scenario

We have so far seen how the trade union movement,started in India, its historical background, the trade
union movement in banks, problems faced by the unions, features like multiplicity of trade unions and
We also saw fta, fte employe.' aSl^^t S ' ' r ' "
maker and inten=sied only in higher wages rSstrZ? f""" ^
aggressiveness of fc unions who teok'on ra^TnTpl;
"O
' .'"We"" al
The present scenario is, however different- tu^

need of mechanisation and comp^ttS^n t Z^ZT^""'
^^^^ ^-Pêd the
reahsed that it is in the interest of the barring idu't^ anH^r
^^ have
service they attract more business. The e ^ ^ ^ Z
" ^
^hat with better customer
miions as an important partner in the procZ of mlf e
P'"^ nd consider the bêen the unions and
managemeLX:
banking and anywhere banking along with 100% Snl T
introducing core
back office functions have beL estfbhIdll
P^^îons. Centralised
though with some negative fall out for the ba^ks anLb^ ^
^^^ -Produced
reward merit by way of fast track promo^nfandTatS^^^^^^ '
^ P^ shift to
agam triumphantly for the unions, having conldldTi ST "
^^^ ^^-r ended
wage increase across the board with other êne^^^^ fo l'!
with a hefty 17.5%
challenging the established practice this year
-'ost
low and a number of benefits cut to conLrve thekbssL '
'"^s were
16.3 INDUSTRIAL RELATIONS
some of the more aggressive pri4e banks too^fh '^^^^ out unscathed from the ordeal though âfi
especially at the lower end but w^
^hers did
retrench
would have made it impossible for the industry to^J^^
"
^PP^^^'^h which
scenario m the countiy where even though ZLsZe 'i^ T " ^^
'"^-^rial relations
have changed hands from individuals to co^me hZlT
^^^he industries
more m tune with their lifestyle changes tI lol^f' ^ "^P'^^îons of workers have changed importance in
the changing scenario.
""^'^'P
^ ât
achieved onty through satisfactoiy industn^l XZ r A '
^^^ ^^^^ c be
pursuit of the industrial objective Badly
^^^^îons contribute greatty in the
problems leading to a tense atmosphereôSntd^^S^S^^^^^ - industrial relation:
16.3.1 What is Industrial Relations^
trade umons and management.
"''^^"des the complex relations between

Industrial relations are an integral aspect of social relations arising out of employer-employee interaction in modem
industries, which are regulated by the State in conjimction with organised social forces.
The Encyclopedia Britannica (1961) states of industrial relations as "a concept extended to denote the relations of the
State with employers, workers and their organisations.... The subject includes individual relations and joint
consultations between employers and workers at their places of work; collective relations between employers and their
organisations and trade unions; and the part played by the State in regulating these relations".
It will be seen from the above definitions that industrial relations encompass a very vast area of relationship, starting
with individual relations of the employers and workers to the relations of the State with the employers, workers and
their organisations. Rightly so, that the State should and does intervene to ensure an atmosphere of industrial harmony
for ensuring industrial growth and the rate of growth of the economy. The State cannot remain a silent spectator in the
hope that the relations will on their own reach the state of harmony. That is why under the Industrial Disputes Act, the
appropriate Government, where it feels that there may be an industrial dispute, refers the matter to adjudication, suo
moto. Thus, 'industrial relations' is not merely a simple relationship; it is a fimctional, inter-related complexities and
requires inter-disciplinary approach.
16.3.2 Interested Groups In Industrial Relations

Interest groups in industrial relations are the parties involved in it. The interest groups are:
Workers including the indirect, outsourced staff and their organisations
Managers (employers) and their organisations including multinational organisations.
The government
Each group has different interests and priorities. The workers and their organisations want higher wages, good
working conditions and other benefits like medical insurance, accident benefits etc. As against these, the employers
and their organisations want maximum productivity at the lowest possible cost. They, therefore, offer lowest possible
wages, although the unit may have capacity to pay higher wages, want long working hours and no other expenses. The
interests of the first two groups are thus conflicting though of late, they have both come to see reason which has
resulted in an attitudinal change leading both of them to be reasonable, in their approach. The third interest group is
the government. It is the responsibility of the government to ensure that there is an atmosphere of industrial peace and
harmony. Thus, when the govemment apprehends that there may be an industrial dispute, it refers the matter for
adjudication. The Industrial Disputes Act, provides that during the pendency of the dispute before the tribunal,
employees cannot go on strike and the employers cannot declare lock-out. The govemment endeavours to see that the
industrial harmony is maintained even when there is an impending dispute.
16.4 COLLECTIVE BARGAINING

Collective bargaining assumes importance in the organised sector where the workers demonstrate a united front either
through their own unions or in groups with similar interests and demands. As a general practice, collective bargaining
works best for determining wages and other benefits which affect a number of individuals representing an industry or
organisation.
.b
- - Of a
Of
^ the tenns and coLitLs
^^ P^'^ ^^ly^ng on
'"tions to their problems. THe
" ^^^ "âns a s^
of objectives where both f them
forth their vilw
^heir service or adopting otheT
-"-tive LgLlg
these action!
"^P'^y^r thus
^^^ and workei.
-
of -ployment. This decision makii"^^^^^^

their own resources to develop their own relations^rSl ^
parties need to reach agreements though thJ^^^^
of negotiation between the employer an^wXeTZ- LT' '
have common interest. TTie workers deriveTwôwefl^^!^^^^^
pcMnt and demands which if not considered cliTZuinT"'
actions which will adversely affect the emSo""
draws Its power from the strength of bei'fS T^
as ê concerted action by.the workers ca^ Z^t in Lw"IT T
agrees to negotiate the matter and the bargainiîêers be ^
have areas of common interest, the bargaiLg^fn^s^^
ft aêement in a fair and equitable mannef ît^
16.4.1 Pre-Requisites for Collective Bargaining

Right to rnlWfi,,^ 1_____ .
''"ve oargaining
employees of Buckingham Camatiri^lkâ^rk" Z

was granted by the court. The British pLtatn
a responsive employer- coUectivebargaiSng.
bm deal tot is ntutnally beneleial
T ^^^
I'- ^Sa led the

damages which
"f '"""dual ba.gaiig and
agen,ent together can o^^t fte
18.4.2 Bargaining Process
wage settlement. It may also begin with the mel^^ of tfe '
^lement such as
benefits being necessary for the worker, of t h T , ^ ^ t h e need of certain other
typically, the process could include:
1.
The union writing to the employer making new demand and arguing as to how it is necessary and relevant to
sanction the demand.
2. The employer may on his part try to convince the union as to how the demand is irrelevant, and
carmot be acceded to.
3. The process may continue for some time with each party issuing notices, letters, replies to each
other.
4. The union may thereafter decide to intensify its action and give notice of non-cooperation or
strike.
5. To avert the production coming to a stand-still, the employer may call the union leaders for
negotiations.
6. The negotiations or rounds of negotiations, may take place with parties trying to prove their
point of view.
7. Finally, an agreement may be reached by both the parties leaving their rigid stand and
compromising in the larger interest of the workers and the industrial unit.
How strong is the union, how serious and important is the issue raised by the union, will decide what
kind of negotiations will take place. It will also depend on the financial state of the unit and the burden
the demand puts on the unit. While different views may prevail in the beginning of the bargaining
process, differences get ironed out and the settlement is reached. The cardinal principle both for the
employer and the union is a display of fairness. It is necessary for the union to keep in mind that no
demand can be in real sense fiilfilled if it bleeds the unit. Similarly, it is for the employer to realise that
he should be paying willingly what is within his capacity to pay and is the practice in the industry. He,
on his part, may, however, try to see how strong is the union on its commitment and whether the
agreement once reached will settle the dispute in reality. This point carries fiirther weight when the unit
has more than one union operating. Of late, employers have started making demands on the unions as
quid pro quo by listing several factors like increase in productivity, reduction of wastage, zero error,
improvement in quality, lower wage scales for fiiture recruits. This only adds to the complicated process
of collective bargaining.
16.4.3 Bi-Partite Settlements in Banks

The trade union movement in the banking industry has flourished to the extent that it is today one of the
most recognised bargaining parties in Indian industry so much so that when the govemment was
planning to give out licenses for new private banks, one of the stipulation was that such banks should
have no unionised staff. This was an indirect admission that the collective might of the unions in the
banking industry would never allow the type of modem banking envisaged when these new licenses
were being handed out.
The objectives of the bank unions was to ensure justice and adequate wages to its members. They have
been fiilfilling these objectives quite successfiilly The practice of salary negotiations in the banks started
almost 45 years ago. Indeed, the first Bi-partite settlement of October, 1966 in the banking industry is a
tuming point. Prior to that the Sen Award (1949-50), The Sastry Award (1953)the LAT award, the
Award of the Desai tribunal, set the working conditions of the workmen in banks Dissatisfied with the
TTthi t
'
-le issues, â
n(rte IS that the spint persists with almost the same results. There have so far been nine fiTpSe
settlements m the industry, as indicated below:
bipartite
October, 1966
October, 1970
August, 1979
September, 1983
April, 1989
February, 1995
March, 2000
June, 2005
First bi-partite settlement Second bi-partite settlement ' Third bi-partite settlement ' Fourth bi-partite
settlement Fifth bi-partite settlement Sixth bi-partite settlement Seventh bi-partite settlement Eighth bipartite settlement Ninth bi-partite settlement
April, 2010
jê bi-pîte settlements in the banking industry have set a t^^^^^^
issues of salary and allowances, duty hours, medical aid and hospitaliLon scheme kafe
cornputensatton^^^^^^^
wortmerT
" ^^
eT^" a^^^^
Ter; hrieei no m^^^^^^
ofX 0^^
or me omcers of the banks, the same process is followed.
'^^g^tiations between the banks Ld ftek

- about the staff product^ ty
""j^'^tively impllented and
Even for deciding the salary
16.4.4 Present Scenario and Emerging Changes

The W-partite settlements and collective bargaining seem to be an acceptable way of settling the salarv
fSiseTid Xr T
^^^
^^^ -^h bi-partite's^
IS imalised and will soon be made effective. But there has been a debate going on L to whether the
Banks Association to negotiate with the unions on behalf of all the banks. The point in favour of thk
^.mentis that salary relatedmattersbebettersettledatthebanklevel^^^^^
about Its capacity to pay mile the weaker banks may find the agreed incremental burdrî^Zite strcâger
banks may feel the need to decide their own salary levels so that they can attract a^rSiri L
?ec mtltt i T rr
the Opacity to p" i^:^ tI
ZTLTill^T
^
candidateL a hfgher salJy
may act^Hy lead to a situation where even salary and allowances along with the working conditiZ
may be detennined at individual bank levels. A decade back, one of the nationaliseTiZ d "
'
^^
of md"^
S nLd lo t H . f ri u
ther service conditions. Such
t Z ' i^^T
^^^
a- no longer on
current terms, but more on an mdividual basis, linked to a "Pay for Performance" approach
Let Us Sum Up
In this Unit we have discussed the nature of trade unions in general and specific unions in the banking
industry. We have also understood the manner in which the majority union is identified and given
recognition. Collective bargaining and its fimctioning in banks especially through the bi-partite
settlement has been studied in detail.
Keywords
Trade
Multiplicity
Union
of
Unions Check-off
Facility Collective
Bargaining
Bi-
partite Settlement
Check Your Progress

1.The Trade union movement originated due to social imbalance and exploitation of workers. t
2.The Trade Union Act has not kept with the times with most provisions outdated. t
3.The bipartite settlements in banks is the best example of collective bargaining. t

1. True, 2. True, 3. True
Terminal Questions
1.The term 'industrial relations' needs to be changed to 'employee relations' for bringing about a
more positive work environment. Do you agree?
2.Describe the rise and influence of unions in banking industry.
3.Enumerate the stages involved in a typical collective bargaining.
4.Majority of the banks still choose to bargain under the umbrella of the Indian banks'
Association. Is this a retrograde step. Critically examine the concept of negotiations and its
impact on the Indian Banking Industry.
References
Labour.nic.in www.laws4india.com/labourlaws.asp
indiabudget.nic.in/es2005-06/chapt2006/chapI05.pdf
www.helplinelaw.com/docs/bareact.shtml
Sarma, A M; Industrial Jurisprudence and Labour Legislation; Himalaya Publishing House, 1991.
employee discipline
(Grievance Redressal and
Discipline)
STRUCTURE
17.0
Objectives
17.1
Introduction
17.2
What is a Grievance?
17.3
Grievance Redressal
17.4
Conflict Resolution
Let Us Sum Up Keywords

Terminal Questions
References
17.0
OBJECTIVES

Understand what is a grievahce and what are tiie redressal procedures
Distinguish between a grievance and a dispute
Appreciate how a conflict situation arises
learn the techniques of conflict management.
17.1
INTRODUCTION
The group of people who make up an organisation follow certain levels of hierarchy, with various
functions and responsibilities assigned to each. These managers work in teams where again there are
leaders and followers, all with common goals to be achieved. Management in a broad sense means
officers and supervisors who are responsible to manage the day-to-day affairs of the organisation, and
who direct the workforce to achieve the defined goals. In a situation where one group of persons is
directed by another group, it is quite common to have a difference of opinion on values, procedures,
systems, and methods, among these people. If the differences are strong, it takes the form of a
grievance. There cannot be an organisation where its members do not have any grievance at any point
in time. It is but human, where emotions come into play constantly, that disagreements,
disappointments would take place. When a person feels aggrieved on the behaviour of another person
in the same group, or due to certain procedures and systems, it is a grievance.
It is necessary that the grievance is redressed immediately. Not resolving a problem can become a
cause of worry later on. Allowing the grievances to remain unattended will create a situation of tension,
dissatisfaction and will result in lack of interest on the part of the affected party, leading to poor work
output and even major errors. In a worst situation it may lead to accidents, disharmony and strikes-a
situation every one would like to avoid. Thus, it is imperative to handle the grievances immediately
when they are noticed.
17.2 WHAT IS A GRIEVANCE?

Experts have attempted to distinguish between dissatisfaction, complaint and a grievance.
Dissatisfaction is a state or feeling of discontent, whether expressed or not. Dissatisfaction made
known by one employee to another is a complaint. Dissatisfaction related to the work situation brought
to the notice of management, is a grievance. We may consider here a few definitions of grievance.
Dale Yoder defines grievance as "a written complaint filed by an employee claiming unfair treatment."
Keith Davis defines it as "any real or imagined feeling of personal injustice, which an employee has,
concerning his employment relationship."
Beach defined it as "any dissatisfaction or feeling of injustice in connection with one's employment
situation that is brought to the notice of the management."
The International Labour Organisation comprehensively defines it as "a complaintof one or more
workers in respect of wages, allowances, conditions of work and interpretation of service stipulations
such as overtime, leave and termination of service."
An analysis of the definitions given above shows that grievance covers dissatisfaction, it may be voiced
or not stated expressly, it could be valid or mith and even imaginary, it may or not be connected with
the organisation's work, but the employee feels an injustice has been done to him.
17.3 GRIEVANCE REDRESSAL

Any organisation that is proactive and means well for its employees need to have a grievance procedure
m place where the aggrieved employee should feel confident of getting justice. An open and healthy
culture where employees feel free to express their grievances and seek early redressal would result in an
atmosphere of mutual trust and encouragement. It becomes the responsibility of the HR department to
ensure the institution of a grievance redressal process within the organisation so that no one really has
to ieel that extra pressure when resolving a genuine grievance. Accumulation of unresolved grievances
may create tension and vested interests may take undue advantage of such situations. A grievance may
be expressed or not voiced and it requires a very sensitive management to take the initiative, try to
make the employees open up and then handle the grievances.
Unresolved grievances may result in a dispute and get magnified till it needs to be settled in a formal
manner involving considerable time and effort. The origin of dispute could be in grievances either not
expressed, nor sensed or if expressed, not resolved. A grievance could be a feeling, and could be a
nascent stage of disputes which again may be a result of many unsettled grievances. Disputes normally
get expressed through a collective or joint action such as by the union submitting its charter of demands
A grievance is normally a feeling of injustice of an individual. As such, early redressal of grievance is a
sure way of reducing the potential of disputes in an organisation.
Grevances can be caused virtually by any reason related to work conditions. They originate from a
feeling of discrimination, a lost opportunity, an injustice done or the mere loss of benefits thought to be
due to the individual. Grievance is not the prerogative of the employee, even employers could have
greivances which relate to indiscipline among workers, poor supervision, go slow tactics and failure of
the trade union to live up to its promises to the management.
It is necessaiy to analyse the nature and types of the grievances and the causes. It is the responsibility of
the persomiel department to help the line managers in the formulation of the policies and their
implementation so that the causes of grievances are reduced. These policies or programmes are called
grievance redressal procedure. It is a problem solving method, set up in majority of the cases following
an agreement between the management and workers.
A grievance procedure is a formal process which enables the parties to resolve their differences in a
peacefiil and expeditious manner. The procedure and mechanism involved in the process may have the
following features:
Open communication channel.

Understanding the employee point of view with sympathy
Identifying levels of authority where decisions can be taken speedily
Communicating the decision to the aggrieved employee without delay
Providing a scope for appeal and review where the employee is not satisfied with the decision.
The objective should be to ensure that grievances are handled effectively and expeditiously and they are
not allowed to snowball into disputes.
Paragraph 517 of the Sastry Award provided for a grievance procedure. Any employee aggrieved by unfair
treatment or wrongful exaction of work on the part of a superior, either on his own or through his union,
submit a complaint to the manager. The manager, as soon as possible, should investigate the complaint and the
employee concerned or the union representative will have a right to be present.
The Code of Discipline which was adopted in the 15"^ session of the Indian Labour Conference in 1957
provided for a draft grievance procedure. This was approved in the 16th session of the Conference in 1958 and
was recommended by the Govemment of India as a Model Grievance Procedure for adoption by various
Eft.iPLOYEE DISCIH-iWE | 35
organisations. Following this, some banks provided for a formal grievance machinery and widely circulated the
information among the staff. However, the efforts were not very successfiil. This was because the management
introduced it more as a mere compliance of the suggestion received from the Govemment while the unions
looked at it as a device to imdermine their importance. The felt-need of both the parties, which is so vital for its
success, was conspicuous by its absence.
17.3.1 Grievance Settlement Authority

The Industrial Disputes (Amendment) Act, 1982 provides for the reference of certain individual disputes to
grievance settlement authorities. By this amendment a new section, namely. Section 9C was added. Though
this section has not yet been brought into force, its main provisions are indicated below:
Section 9-C of the Act requires the employer to set up Grievance Settlement Authorities. In every
industrial establishment which employs 50 or more workmen Grievance Settlement Authority is required
to be set up for settlement of industrial disputes connected with an individual workman employed in the
establishment.
Where an industrial dispute connected with an individual workman arises the workman or any trade
union of which the workman is a member refer the dispute to the Grievance Settlement Authority
provided for by the employer.
The Grievance Settlement Authority shall attempt to resolve the dispute.
No reference shall be made under Chapter III of the Industrial Disputes Act with respect to any dispute
referred to under Section 9C unless such dispute has been referred to the Grievance Settlement Authority
concemed and the decision of the said authority is not acceptable to any of the parties to the dispute.
Check Your Progress

1.
2.
3.
4.
5.
What is a grievance? Give two definitions of grievance.

Differentiate between a grievance and a dispute.
What are the causes of grievance?
Describe a grievance redressal procediu-e.
Study and write a note on the grievance procedure of your organisation.
17.4 CONFLICT RESOLUTION

In organisations where there is necessarily an interaction of people or groups of people, there would be
situations giving rise to grievances, conflicts and disputes. These situations need to be managed. In
H.R.M-20
organisations where there is an open and trusting atmosphere, and people are involved in decisions related to their
position and career, the chances of conflicts are remote and even where they occur thev can be resolved faster.
Where the atmosphere is of excessive control, free flow of information is not possible which may create an
atmosphere of tension, more difficult to handle.
denote opposite orclashingpointofviews.Inaworksituation differing opinions andperceptions
can be termed as conflict. Man is a social animal and the human tendency to be a part of one group or
the other results in the individual becoming part of an organised group. A conflict may arise within the
group members when a particular member or members hold a different view than the others about a
work situation, work procedure, systems etc. which can immediately be solved by referring to the
manual or to a senior officer. But if the difference is in approach or ideology relating to the working
Conflicts
conditions, it needs to be addressed, either at the individual level or when it affects more people by the
representative union.
^
"ic
Conflict arises basically from different perception of a situation and'the prestige and ego of the person percieving
the situation. The conflict resolution therefore would lie in the fact that the persons involved should endeavour to
view the problem from the other's point of view, analyse the problem from a detached attitude, devoid of
36
! HUMAN
emotions and then attempt to solve the issue. It is likely that once an emotion-free approach is adopted, it may be
easy to resolve the conflict.
17.4.1 Sources of Conflict

Conflict is a product of group dynamics and differing perceptions of the members of the group It also IS a
function of emotions attached to the problem by the person, or his ego. Apart from these behavioural reasons,
there could be other sources of conflict in a workplace as under:
(a) Status incongruence: Differences in the status in an organisation involving a salary diff-erence
of employees with similar profile, or that one gets promoted and the other does not can lead to
a conflict situation as the one who got promoted finds it difficuh to interact with the other
person freely. An attempt at counseling and a realistic assessment of the situation could heb resolve the
conflict.
^
(b) Competitive work enviromnent: Goals set in a highly competitive enviromnent, and the lack of equal
opportunities for achieving the same can lead to major conflicts especially if career growth and monetary
rewards depend on the successful attaimnent of these goals. A judicial approach to such goal setting and a
fair opportunity for all to succeed may help save the situation.
(c) Differences in value systems: This is a common source of conflict. People come from different back
grounds, different up-bringing, different culture and religion at the work place They are of different age
groups. Their value systems as to interpersonal interaction, societal references etc. differ. This, some times,
causes a problem in the organisation.
(d) Inadequate communication: Many of the conflicting situations arise due to improper, incorrect inadequate
communication in the organisation. The communication at times get distorted-though umntentionallywhich creates confiision and problems. It will be observed that the sources of conflicts are manageable and
conflicts can be resolved. Let us see how this is achieved
17.4.2 Conflict IManagement/Resolution
As in any issue that needs to be solved, some basic steps if in place, can help solve a problem. Clear
communication, a perception of the goals and targets, adequate role clarification and a process that can identify
and resolve conflicts quickly, will help in the management of conflicts.
In a group situation, one needs to acknowledge the fact that each one depends on the other to accomplish team
goals. Once this inter dependence is realised, cooperation becomes easy. Emotional outbursts under control, the
problem should be identified and analysed realistically to know whether the problem is 'real' or 'perceived'.
Conflicts cannot be resolved unless there is a culture of openness and mutual trust. Seniors can set examples by
encouraging an open culture and practice at all the levels.
Many problems have their origin in defective commimication systems. It is therefore necessary to improve the
communication channels, and encourage upward communication so that the tensions are released. Ambiguity in
the role definition and lack of clarity as to what is to be achieved by the group, creates a conflicting situation.
Properly defined goals for the groups and the roles of the individuals to achieve, will minimise the problems.
Let Us Sum Up
In this Unit we have studied the nature of a dispute as well as grievance and understood the procedure for
grievance settlement. We have also seen how conflicts are identified negotiated and resolved.
Keywords
Grievance Dispute
Grievance Settlement Conflict
Check your Progress
EMPLOYEE DISCIPLINE |
37

1. Unresolved grievance can be escalated to the highesf level. t
2. The Code of Discipline failed to take off as the unions opposed it. t
3. Grievance procedure is followed by all industries. f

1. False, 2. True, 3. False
Terminal Questions
1. Describe a 'conflict'. Why is it necessary to resolve a conflict situation?
2. Differentiate between a dispute and a grievance. How do you resolve both?
management?
-------
play,
a constructive role in conflict
References
Labounnic.in www.laws4india.com/labourlaws.asp indiabudget.nic.in/es2005.06/chapt2006/chapl05.pdf
www.helplineIaw.com/docsâêactshtml
WORKER'S PARTICIPATION IN
MANAGEMENT
STRUCTURE
18.0
Objectives
18.1
Introduction
18.2
What is Participation
18.3
Methods of Participation
18.4
Indian Banking Experience

Let Us Sum Up
Keywords
Terminal Questions
References

......
18.0
OBJECTIVES
18.1
ZrT'
Understand what is workers' participation in management

Know what are the methods of participation
Evaluate the Indian banking industry's experience in this regard
Appreciate the benefits of the workers' participation in the management process.
INTRODUCTION
involvement in the initiation, formulation and implementation of
through people and they play a very important and influential role in the management process An
the Z to" f
-- due to the perceived conflict of interest basically between
the two groups of management and workers. Lots of energy gets dissipated in resolving the grievances and
conflicts and to maintam hannony To a large extent, the conflict of interests can be minfmised iTa
iebfo^'drt^ ' "
organisational goals are their goals which can bTtohe
reinforced by what is generally termed as workers' association or participation in management. In a hteral
sense, it means allowmg workers to take decisions in matter, affecting them and their organisation which is
primarily considered to be the prerogative of the management.
gamsation,
Laboii ronT'
f f riment in this direction started in the year 1957-58 when the Indian
rir . P
recommendation of a working group to set up the Joint Management
Counals. Pnor to this, the Industrial Disputes Act, 1947 stipulated constitution of Works CommiTtee.e
consisting of representatives of employers and workmen in the industrial establishments in which ToO
18.2 WHAT IS PARTICIPATION?
. Economic decisions - methods of manufacturing, automation, shutdown, lay-offs, mergers

Pejmie decisions - recruitment and selection, promotions, demotions, transfers, grievance settlement,
work distribution.
gucvcuicc
. Social decisions - hours of work, welfare measures, questions affecting work rules and conduct of
individual worker's safety, health, sanitation and noise control.
Partcbation basically means sharing the decision-making power with
mirnrand forT
T
joint'decisionZnZ'
i nation, a wm-wm situation where important decisions are taken which can be
implemented easily as they are based on consensus, notwithstanding the fact that the concerned parties
take care to safeguard their interests. In a true sense participation should mean to all the parties-at least to the
management and workers-joint decision-making with the entailing responsibilities being shared jointly and also
the duty to implement the decision. But such an ideal situation is possible only if the level of understanding of
both the management and workers have reached such a level that there is an atmosphere of openness and mutual
trust and there are no different groups of workers or trade unions. But idealism is seldom a reality!
Despite the differences in perception it has now come to be accepted that participation helps workers to
contribute better to the overall effectiveness of the organisation. The level of participation, in practice, ranges as
WORKER'S PARTICIPATION IN MANAGEMENT J
42
under:
Informative participation: refers basically to information sharing concerning the balance sheet, production
schedules etc.
Consultative participation: in which a joint council is constituted which considers matters such as welfare
programmes, safety procedures etc. However, the decision making power rests with the management.
Associative participation: Here the role of the joint council is not limited only as an advisory body. The
coimcil's recommendations in the defined areas are implemented by the management.
Administrative participation: Where the decision comes to the council with alternatives to select from for
implementation. Still there is no participation in the decision-making process but there is a choice to be
made from a few alternatives and the alternative chosen jointly will be accepted for implementation.
Decisive participation: Here the decisions are taken jointly on matters relating to production, welfare etc.
Having seen what is participation and different levels of participation, let us now consider the purpose and
advantages of workers' participation in management. Participation in important areas affecting workers, result in
a unique motivational power and a great psychological value. Peace and harmony between workers and
management lead to workers getting to see how their actions would contribute to the overall growth of the
company. They tend to view the decisions as 'their own' and are more enthusiastic in their implementation.
Participation makes them more responsible and they become more willing to take initiative and come out with
cost-saving suggestions and growth oriented ideas. It also ensures optimum utilisation of resources because of the
feeling of "ownership" of the decision made. Some of the more visible benefits are:
The confrontation orihe level of resistance and resistance to change comes down. Change is the sign of
growth, and willingness to accept change helps the organisation adopt new methods easily.
It ensures free communication and the channel for upward communication opens up. It helps in reducing
the distortion or failure of communication and consequently implemented decisions become more
effective.
Joint decision-making reduces the conflicting situations and therefore the disputes. The productivity of the
unit increases.
18.3 METHODS OF PARTICIPATION
is achieved.
^^^ ^"kers and the unit. Let us see how this
aB j human RESOURCE MANAGEMENT

18.3.1 Works Committees
??0
the works committees in units employing
workers- representatives to brctosrtcoLTr''r
among the employees of the registered tmde
management. The
unions and from

of amity and good'relations berenrenô^^^^^
?
~es
of common interest and endeavour'Xo^
committees is limited only in the area of r S o n T h t 1
management in the real sLe. NonetLlerstr"^^^^^^^
T^
^^ Participation in
An evaluation of works committees/how;^!^^^
due to the fact that they function essentially^ ad"^^^^^
very eflfective. This may be
Another reason for failure is that works
capacity. There is also mter-union rivaby.
cnZJn
conflicting with the objectives oC ^ oTCma^

being not very effective.
^^ the works committee
18.3.2 Joint IManagement Councils
as well as private sector. Experts studied imemô^rleS ^ fconsultation in public and recommended a nonsLtory ai?roa7mre e^Z.^^
per the Industrial Disputes Act, LfManf c^^
- ^ -nt as
participation in management. Joint Managernent ConnT ! I?P'"^ workers- workmen. There are equal
number
fUnctionsasaconsultativeforum w^tifiZt^! f"
management. The Council
responsibilities are also giveZ'leînfMr^ ^^
Certain administrative
admitted that the Joint M^^Selnt
^ ^ "e
tothefactthattheseCouncilâsicJi:;^ 18.3.3 Workers' Participation on The Boam
nghte as any other director has on the Board. The workers' participation is thus ensured at the highest
Zl^
^^ goent extended this concept elsewLe
specially, in the public sector banks and also appointed officers' representative on the Board of Directoi.
with status similar to any other director.
iîreciors
Of
Normally, ^ representative of the majority miion gets this appointment. Due to multiplicity of unions
iLroTr^ nr "
^^ confrontation with the other union challenging
Ae appointment, challenging the membership nmnber of the selected union and even challenging the
membership venfication process. In a few cases, the matter is referred to the court for adjudiLion.
WORKER'S PARTICIPATION IN MANAGEMENT J
52
Another point of concern is that although the participation is ensured at the highest level, it is not
supported m many organisations at the shop-floor level. Thus the participation does not become effective
in ui6 iruc sense.
18.3.4 Joint Consultative Committees

firsl^l^ ^^
introduced this particular form of workers' participation in management. In the
ml work? 'ir r
" manufacturing and mining industries in units employing 500 or
33;
'
P-^-Paviz. shop councils for L shôor
level and joint councils at the enterprise level. Joint comicils are constituted for each department with
equal representation of employers and workers. IHe total representation is restricted to 12. t
works for increase in production, ovemll efficiency, elimination of wastage etc. It identifies
S sip cmmcil
iioTh?rn J f
foductivity norms for the unit as a whole, efficiency level etc. It looks
into the matters which remained unsolved at the shop councils. The joint comicil thus operates on broader
issues concerning the unit. The employers and the workers implemented the scLme, bu" Ziir of compulsion
from the govemment. In 1984 again this scheme was
SniZte^ T govemment. The objectives of the shop council and joint councils are very noble. In stlmT
noticed in the system of workers' participation in Board as that
I^ZZT"
f
^ ^"PP^'^-g
at the shop-level or
S n^X H f TT
management attempted at the Board level does
not percolate down to the shop-floor where there still remains the "we" and "they" attitude In this respect
the two-tier model of joint consultative committees appears to be more pra^natic.
18.3.5 Other Forms of Worker participation

Participation through Collective Bargaining
I^S^T rr''
and workers may reach collective agreement regarding mles
Zlm^ZlT "i
of employment, as well as conditions of service in an
coUe
^y have some force. For
collective b^gammg to work, the workers' and the employers' representatives need to bargain in the
pmlToTcB^^^^^^ while bargaining, each party tries to take advantage of the other. Tit process of CB camiot be
called worker participation in its strongest sense as in reality; CB is based on
htd^trn
P^- Worker participLn on the other
Participation through Suggestion Schemes
increasingly use the suggestion scLmesXirns

managements
ranging from changes in inspection procedure to ^L InT
reduction and the like. Out of various suggestion trose^cfeîT'
paper-work
benefits to the company. The rewards givrtoX'ln^ ^
"'ântial
the suggestions.
employees are m line with the benefits derived from
Participation through Quality Circles
and law problem, in fcir a,ea. Zt^l Iwer."!"^ ' ?
'>'' quali^-
Advantages
members to get promotions are eLnced Tried w

lm
among others. Experiencedmixedresults MrMrteeo^^^^^
results. Technical problems got solved W^tfs tuo r^^^
challenging.
QC
S^t out of their daily routine and do something
Disadvantage
long run, the management needs to show
Fo- QCs to
succeed in the
-he groups and providing feedbaelc on
18.3.6 Employee Stock Option

rr^- scheme can be stock
exchanges of the countiy. Essentially thisTs a IôSn f T
In India, it is implemented in various MuW Nîonal Sl^
as infosys, Wipro and TCS. TTiev intro.";;;:,^::
'"jor
- America,
^^
^^^ software
companies such
which is admittedly veiy high in the softwê Indul^
^^^^
We have seen in this unit various methods of workers' participation. The idea though very noble, has not been
successful due to various reasons. The main reasons have been:
The experiment has not been successful partly because of the inhibitions of the trade unions that their
importance is being eroded by adopting this method.
At many places the information sharing has not been total by the employer, because of his
apprehensions.
The representatives on the Board or council could not rise above the conflict of different roles in which
they had to function. On the one hand, they have their role as trade union leader and on the other, they
have to act as a Director on the Board taking a broader perspective of an issue. The experience shows
that the representatives could not overcome this dilemma. Thus, the level of participation was only
restricted to specific issues.
The participation could not come to the level of decision making and remained at the level of resolving
personnel and welfare issues.
18.4 INDIAN BANKING EXPERIENCE

The Indian banking industry's experience in the area of workers' participation in management has been partially
successfiil. As regards the method of participation, the banks have adopted the model of participation on the
Board of Directors. One director is nominated by the govemment on the board of directors of the public sector
banks fi-om the workmen union. The practice is to appoint the workman director from the union enjoying
majority membership of the employees of the bank. Due to multiplicity of unions, this appointment in many
banks has been a contentious issue, particularly where the membership strength of the unions is very close to
each other. In such cases membership verification is insisted upon through the office of the Regional Labour
WORKER'S PARTICIPATION IN MANAGEMENT | 30t

Commissioner, Central.
Apart from the problems in appointing the workmen director, the model being a single tier model, participation
at the top level does not get support at the unit or branch level management of the banks! Thus, the participation
is not really effective. Another problem faced by this model is the size of the branch network of the branches of
public sector banks. With an average of more than 1000 branches, it is a very difficult task to ensure workers'
participation at the shop-floor level, i.e. at the branch level!
Nonetheless, the banks are continuing with the model of participation at the Board level. The scheme also
includes nomination of a representative of officers on the Board of Directors of the bank. Studies have been
conducted to assess the value of these participative processes and have seen some merit in such appointments. It
may also be noted that unless the mindsets of both the workmen (and their unions) and the management are
changed, the system cannot be fully successful.
Let Us Sum Up
In this Unit we have studied the approach to the setting up of committees made up of staff members on a
voluntary basis. We have familiarised ourselves with works committee, joint management committee as well as
the manner in which the workers get represented on the board. We also have familiarised ourselves with the
concept of employee stock option and how some banks have tried to implement join committees for
negotiations.
Keywords
Workers' Participation Works Committee Employee Stock Option Employee
representative on the board
Check Your progress

1. Decisive participation is more effective than consultative participation.
2. Works Committees are mandatory under the Industrial Disputes Act.
3. Employee Stock Option is a direct method of employee participation in management
4. EmployeerepresentationontheBoardofBankshasimpactedtheworkingconditionsofemployees

1. True, 2. False, 3. True, 4. True
Terminal Questions
1. Describe the concept of workers' participation in management.
2. What are the typical joint committees and how are they constituted?
3. What is participation? What are the various levels of participation?
4. Describe the legality of various joint committees.
5. Enumerate SEBI guidelines on employees stock option.
the experience of the banks in respect of participation of workers on
References
Labour.nic.in www.laws4india.com/labourlaws.asp indiabudget.nic.in/es200506/chapt2006/chapl05.pdf www.helplinelaw.com/docs/bareact.shtml
STRUCTURE
19.0
Objectives
19.1
Discipline in Workplace
19.2
Discipline Management
19.3
Disciplinary Rules in Banks
19.4
Domestic Enquiry
19.5
Frauds in Banks
19.6
The Risk Attached to Delegation of Financial Powers
19.7
Need for Vigilance Department in Banks
19.8
Diversity and Gender Issues
19.9
Dealing with Cases of Sexual Harassment

Let Us Sum Up
Keywords
Terminal
Questions
References
EMPLOYEE DISCIPLINE
(Discipline Managenfient)
19.0
304 i human
OBJECTIVES
After studying this Unit, you should be in a position to
Understand the concepts of discipline in workplace

Know what is indiscipline and misconduct
Appreciate the reformative theoiy
State what are the principles of natural justice
19.1 DISCIPLINE IN WORKPLACE

Any organisation which has a groun of nennl. ^
procedures for conducting its buSLTs SoCf
^'^tions, has a set of rules and
othei. call it the Code o/co^d" ^^
HR department provides an HR ply is
the organ'Lon
categories of employees mamiing speckl flmcSle !" ""
"'^^^Ptions for certain
semce is required. These rules m^be" êl rehT^' "^'tr^
-êre round the clock
customer or the coirect operational proced^f li baT" I ' u
^^h the
not allow any deviation. In a manufacturing unitThe m w'''
P^^îsions may
standards which do not permit shipment of sTstlrrH ^ ^
requirements, or quality
the êe movement and behaviour'of S
^ on effective conduct of business and constitute discipline
The following are the assumptions in employee discipline- 3. ^^ issuing instruction of good behaviour on his
pari must set an example to his
^^;2-'--ncomparedwithahotstove.Theapplica.onofhotstove.^^^ total impartiality

while handling disciplinaiymatteis,
no undue time-lag in the action and effect
there should be consistency in managerial follow-up action, i.e. the outcome should not be at a large
variance.
AVhat emerges from the above is that for effective discipline at the workplace it is imperative to have fair play,
proper and crisp communication of the rules and regulations, and impartial treatment of the cases of
indiscipline.
Discipline that restricts the freedom of an employee connotes a negative feeling as failure to comply invites
EMPLOYEE DISCIPLINE (Discipline Managernent) | 30S|

penalties. Discipline should instead involve creation of mindset and an attitude to follow the desired pattern of
behaviour. When more and more employees follow the rules, an ideal organisational climate is created where
employees willingly conform to the standards of behaviour. The seniors play an important role in creation and
maintenance of such a climate by setting an example by themselves. Positive discipline leads to team spirit, cooperation, mutual respect, high employee morale and a positive environment.
On the other hand, negative discipline refers to people being forced to follow rules and regulations threatening
liiem with severe punishments if they fail to follow the standards. Such punitive discipline where adherence is
sought to be ensured through penal actions ensures only minimum adherence to the rules and regulations, that
too, out of fear of being punished. It is always advisable to strive for positive discipline as it results in many
other benefits and fosters an atmosphere of mutual trust and openness.
19.2 DISCIPLINE MANAGEMENT

Discipline management involves creating an environment where employees voluntarily obey rules and
regulations. It also means and includes handling cases of indiscipline or misconduct. There are various
approaches to discipline management, where it is necessary to identify the causes of indiscipline, analyse the
reasons, try to convince employees-through counselling-that they need to follow rules, and as a last resort, go
in for punitive action. Trying to maintain discipline only through punitive measures would mean negative
discipline which is not in the ultimate interest of the workers and the organisation. Following are some steps,
which should enable the organisation to ensure promotion of positive discipline:
1. The code of conduct, rules and regulations should be laid down clearly, with the consequences to the
organisation-in terms of losses and bad reputation which may resuh from not conforming to these
norms, should also be clearly communicated to the workers. The consequences the worker would face
by not following the rules should be clearly speh out.
2. Conscious efforts should be made to see that the rules have easy acceptability. The norms and standards
should be so decided that they are easy to adhere to. Setting impossible standards is boimd to lead to
deviation.
3. Once the rules are framed, the adherence thereof must be insisted upon. Mere laying down of rules and
regulations, and laxity in its implementation would not create an atmosphere of positive discipline. It is
an admitted fact that the rules and regulations restrict freedom of the employees. Once they notice that
the management is not keen in implementing the rules, they will not be inclined to voluntarily follow
regulations.
4. The laid down rules need to be modified periodically to ensure that outdated rules are removed from the
rule book.
19.2.1 Counselling
counsel ing process could be

helnfi,! Th
the
is found tât the br^L o^b^^^^^^
i.
wnicli is ot minor nature,
by giving necesâo- advice" te^^ri^L'^Sr"; 19.2.2 Reformative Theory
19.2.3 Disciplinary Process
en,ui,> followed by
in penal aeto if
^lê t?"
p^ved tTJ^^
be followed a. p..Hbed in Z Z^^tXtJ^^^ZZ^'' ~
"""
^
19.2.4
Disciplinary Procedure and Principles of Natural Justice
Misconduct of any type is a matter for concern, and where such misconduct involves acts of moral turpitude,
they need to be addressed iimnediately and appropriate action taken. We have seen the steps to be taken
while initiating disciplinary action against an erring employee. However grave the offense, there are certain
clearly laid down principles with regard to the manner in which disciplinary action can be initiated, the most
important being the principles of natural justice.
EMPLOYEE DISCIPLINE (Discipline Managernent) | 30S|

Handling employee misconduct is a very critical task to be performed by the senior managers. Misconduct
and other offensive behaviors often lead to decreased levels of productivity as they affect the individual
performance of the employees. To manage discipline among employees, every company opts for a discipline
policy which describes the approach it will follow to handle misconduct and which will act as a deterrent to
others.
19.2.5
Principles of Natural Justice
These principles are universally accepted set of rules which have survived the test of time. They ensure
protection of rights of the individual employee. They provide a sort of guideline for disciplinary proceedings
in all cases of misconduct. In essence, the principles say that there has to be a fair play, all along, during the
disciplinary process, i.e right from the issuance of charge sheet to the imposition of punishment, if the
employee is found guilty of the charges. It states that the person who is proceeded against should have
adequate notice of the proceedings against him, he must have reasonable opportunity of being heard before
the case is decided, and the authority must act impartially and in good faith.
These principles have come to be accepted over time and have a semi legal status so much so , there are
instances when punishment by a Disciplinary Authority has been set aside if the procedure followed has
been arbitrary and the pimishment disproportionate to the offence.
The principles of natural justice, including later additions to these principles, are enumerated below:
no man should be a judge in his own cause;
no one should be condemned unheard;
the employee proceeded against should be clearly informed of the charges levelled against him;
the witnesses should be examined in the presence of the employee who should also be given a
chance to cross-examine them;
the employee should be given a chance to examine his own witnesses;
documents relied upon for proving the charge should be given to the employee for inspection; and
the punishment to be imposed should be commensurate with the nature of the misconduct.
19.3 DISCIPLINARY RULES IN BANKS

The Standing Orders prescribe the rules of an establishment in respect of disciplinary procedure. In the
banks, the disciplinary rules originated in the tribunal awards and are presently a part of the First Bi partite
Settlement of October, 1966. They are in respect of workmen or award staff. For the officers of
H.R.M-21
cannot be enforced.
^pecitic Relief Act,a personal contract of service
19.3.1 Disciplinary Rules-Award Staff

-p"- c. a .e action.
Chapter 19 of the First B^^Zfe Lu^Sôn n , r'","'
teâr. _ ..portant poit of
"""
~
. Ifê e,p,o,ee is not prosecuted for soch a o,fece the hak .ay take steps to prosecute hi ir rCZ^T.^:
52
^~ta, proceeding cI
Wngheldsintultaneousiy.Ho!,^ fcbita't
been stken to prosecute an enirr ^ ; ^^^
offence, the aage,et nray' then dtl
s if hTi::;" ""
mtseonduet. Thus, it is necessary to wait for a peri^ of "'/"'"'"tel act of gross
against the employee.
" J - "
f" the authorities to proceed
have also been So ' """ P"" """y be imposed under

' ^"f^l':;:" ^
~ 'W ntiseonduet- and each categoty
- employee, the following procedure is to
The employee shail begiyen a chatê-sheet expiaming the circumstances appeari^^
.Heshallheg,vesuic,e.t,mctog.vehisexplanatitothcoharge-sheer
e.am,e any -on o.
ting , the ban., rw^;!" ^^^ ^^
employee discipuine
mrnrrnqmnsmj
He shall be given a hearing as regards the nature of punishment proposed to be imposed on

him, if any charge is established against him.
Pending enquiry, the employee may be suspended and during such suspension he will be paid
subsistence allowance.
In awarding punishment the authority will take into account the gravity of misconduct,
previous record and aggravating or extenuating circumstances.
An enquiry need not be held if the misconduct is such that even if proved the bank does not intend to award punishment of
discharge or dismissal;
53
the employee has made voluntary admission of his misconduct;
the employee is charged with minor misconduct and the punishment proposed to be imposed
is warning or censure.
The Managing Director of the bank shall decide which officer-i.e. disciplinary authority-shall
be empowered to take disciplinary action. He shall also decide which officer shall act as appellate
authority. The disciplinary authority may conduct the enquiry himself or appoint another officer
as the enquiry officer for the purpose of conducting an enquiry.
19.3.2 Disciplinary Rules-Officers

In case of officers of public sector banks, the Officer-employees Conduct Regulations codify the
behaviour or conduct expected of them. Breach of any norms of conduct is treated as a misconduct. The
Conduct Regulations cover the following main points:
An officer at all times shall take all possible steps to ensure and protect the interest of the bank
and discharge his duties with utmost integrity, honesty and devotion.
He shall maintain secrecy regarding the affairs of the bank and its constituents.
There is a restriction of employment of the members of family of the officer in firms enjoying
credit facilities with the bank.
He is prohibited from taking outside employment while in the service of the bank.
There is restriction on excessive lending and borrowing by the officer.
Breach of any of the Conduct Regulation is construed to be an act of misconduct punishable
under the Officer-employees Discipline and Appeal Regulations.
The important provisions of the Discipline and Appeal Regulations are:
The penalties have been classified into two categories,
viz.: (a) Minor penalties:
censure;
withholding of increments of pay with or without cumulative effect; withholding of
promotion.
310 i human resource managep^fnt

(b) Major penalties:
reduction to a lower grade or post or to a lower stage in a time scale;

compulsory retirement;
removal from service which shall not be a disqualification for fiiture employment;
dismissal which shall ordinarily be a disqualification for fiiture employment.
recoveiy from pay or such other amount as may be due to the officer-employee
of the whole or part of any pecuniary loss caused to the bank by negligence or breach
of orders.
The Managing Director or any other authority empowered by him may institute or direct the
disciplmary authority to institute disciplinary proceedings against an officer-employee of the
bank.
Major penalty cannot be imposed unless a departmental enquiry has been conducted in
accordance with the laid down procedure. However, for imposing minor penalty the procedure
is relatively simple and the same has been spelt out in the appropriate regulation.
Where it is proposed to hold an enquiry, the disciplinary authority shall frame definite and
distinct charges on the basis of allegations and the articles of charge together with a statement
of allegations shall be communicated to the officer.
The officer is asked to submit his written statement of defence to the articles of charge and
statement of allegations within a stipulated period.
54

If the statement of defence is not received or it is not found to be acceptable, the disciplinary
authonty may itself hold an enquiry or appoint an Inquiring Authority to conduct enquiry.
The disciplinary authority may appoint a Presenting Officer to present on its behalf the case in
support of the articles of charge while the officer may take the assistance of any other officeremployee.
The disciplinary authority shall take action on the enquiry report and impose penalty.
The provisions relating to suspension of the officer-employee and payment of his subsistence
allowance are also covered by the Regulation.
An officer-employee may appeal against an order imposing penalty an order of suspension to
the appellate authority.
The reviewing authority can call for records within 6 months and review the penalty.
19.3.3 Practice in Private Sector Bani(s

Majority of the old private sector banks are members of IBA. They follow the Bi-partite Settlement
Thus, for the award staffi the disciplinary rules are similar to those followed by the public sector banks
The disciplinary rules for the officer employees seen by us above are for public sector banks These
rules are, thus, not applicable to the private sector banks. In the absence of defined rules for disciplinary
proceedings, the principles of Natural Justice will apply. All these banks are in existence for quite some
time and have their disciplinary rules which are more or less on the same lines of the public sector
banks. Not following the principles of Natural Justice, will make the enquiry proceedings and
consequential action invalid.
There are other types of banks, namely new private sector banks which came into existence during the early
nineties. These banks also have their own rules in respect of conduct and behaviour but the same may not be
as exhaustive as the one we saw. But the underlying principle in any rules is that they should be fair and
meet the requirements of the principles of Natural Justice. If penalty is imposed without following these
55
principles, it may be declared null by the court, if the action is challenged.
Mam
--A
311
19.4 DOMESTIC ENQUIRY

The principles of natural justice apply to the conduct of domestic enquiry. There is, however, a slight
difference in the procedure for conducting enquiry for award staff and that of the officer employees. Before
commencing the enquiry, the enquiry officers are expected to go through the procedure carefully.
19.4.1 Guiding Principles

Departmental enquiry is not a mere formality but is a serious procedure and should, therefore, be
conducted with due seriousness.
Domestic enquiry is a quasi-judicial proceedings. Although the provisions of the Evidence Act, 1872
do not apply, substantive principles of the Act should be kept in view.
The scope of the enquiry is determined by the charge-sheet or articles of charge. It lays down the
terms of reference for the enquiry officer. He should not go beyond the terms of chaige-sheet.
The employee proceeded against should be clearly informed of the charges levelled against him.
The entire proceedings should demonstrate a fair play on the part of the enquiry officer. If he is
doubtfiil in a complex matter of what decision or ruling should be given, he will do well to err in
favour of the charge-sheeted employee.
19.4.2 The Enquiry Procedure

Enquiry is a quasi-judicial proceeding and is required to be conducted with due diligence. The important
points in the procedure are indicated below:
Notice of enquiry: The time, place and date of the enquiry should be clearly stated in the notice.
Reasonable period should be given to the employee to prepare for the enquiry If the employee does
not attend the proceedings, it is advisable that the enquiry is adjourned and a fresh date fixed and the
employee is notified. Proof of delivery of notice should be obtained and held on record. Notice may,
therefore, be sent by registered post.
Venue: The place of the enquiry should generally be the unit where the employee is posted. It does
not, however, mean that the enquiry should be held at the very place where the misconduct took
place. The enquiry could be held elsewhere so long it does not inconvenience the charge- sheeted
employee (CSE).
Evidence: Although the provisions of the Evidence Act are not apphcable, it is advisable to observe a
certain procedure similar to that followed in a court. Any statement made in support of charges must
be made in the presence of the charge-sheeted employee so that he has an opportunity to question
such a statement. The documentary evidence in support of the case must be taken on record only after
giving the CSE a chance to inspect the documents.
56
57
f .
i-h' './'.iA
Witness: A witness is a person who appears in the enquiry either in support of the charges or in
support of the CSE. The statements made by the witness are considered as oral evidence. The
witness should be examined first by the party producing him; this is known as examination-inchief
Thereafter, the opposite side can cross-examine the witness. The enquiry officer should carefiilly
observe the demeanour of the witness so as to arrive at the credibility of his statements.
Persons who can be present at the enquiry: Departmental enquiry is a closed door proceedings and
not one where anyone can attend. Only those connected with the proceedings can attend the enquiry.
They are: (a) the enquiry officer, (b) the management representative (MR), (c) the CSE, (d) the
defence representative (DR), (e) the witness whose evidence is being recorded and a typist or a
stenographer who records the minutes of the proceedings. The witnesses are allowed to depose in the
enquiry one after the other and, therefore, no two witnesses should be present in the enquiry at a
time.
- The proceedings: At the first hearing the enquiry officer should enquire from the CSE whether he
has received the charge-sheet and has understood the contents thereof Then in the presence of his
representative he should put a question to him as to whether he pleads guilty to the charges. If he
pleads guilty he should be asked whether he has understood the consequences of his pleading guilty
and whether he is doing so at his volition. Answers to these questions should be recorded, preferably,
verbatim. If the CSE does not plead guilty to any or all the charges, the enquiry officer should ask
the management representative to lead the case in support of charges. The MR may lead his case
through witnesses who should be permitted to depose one after the other. After the examination-inchief of the witness, the CSE should be given a chance to cross- examine him. Only after the crossexamination is over the next witness should be called. The documents taken on record should be
given to the defence for inspection and thereafter taken on record. When the MR closes his case the
defence should be asked to present its case repeating the same procedure. After both the sides have
led their evidences and have also summed up their respective arguments, the CSE should be asked
whether he has anything else to say or submit. Thereafter, the enquiry proceedings are closed.
19.4.3 Follow-Up Action

After the enquiry proceedings are over the following actions are necessary, to take the matter to its logical
end:
1. The enquiry officer has to submit his findings, giving reasons, to the Disciplinary Authority.
2. The Disciplinary Authority either agrees with the findings or remits the case back giving reasons, for
fijrther or fresh enquiry. He may disagree with the enquiry officer and record his owri findings also
giving reasons and if these findings go against the employee, he will have to be given an opportunity
to have his say.
3. The Disciplinary Authority in the case of award staff may then propose the punishment and give a
hearing to the CSE as to why the proposed punishment should not be imposed on him. The CSE may
make submission and then the disciplinary authority can take a final view. No such hearing is
necessary in case of officers.
4. Thereafter, the order imposing the punishment is passed.
58
f .
E^'iPlOYEE DISCfPllME iDiscipiine Miiiayerns-rii
313"
5. If the CSE prefers an appeal against the decision of the disciplinary authority, the appellate
authority should dispose of the case, as per rules and the principles of natural justice.
6. In the case of officers, there is one more step involved, i.e. review. The reviewing authority
may call for the record of the case within six months of the date of the final order and pass
such orders as it may deem fit. If the reviewing authority proposes to enhance the penalty, a
show cause notice will have to be issued.
As mentioned earlier, domestic enquiry is a quasi-judicial proceeding. If the matter goes to the
labour court (in the case of award staff) or to the High Court, these courts may go through the
enquiry proceedings, findings and orders passed by various authorities. It is, therefore, imperative
that every concerned authority acts in good faith, and follows the principles of Natural Justice.
19.4.4 Employee's Right to be Defended

The Model Standing Orders as also the Discipline and Appeal rules of an organisation provides for
the right of a delinquent employee to be defended at the domestic enquiry by a union representative
or in exceptional cases, by a lawyer. The Enquiry officer therefore has to ensure that the defence
representative is no one other than a representative of a registered union, or with the permission of
the Disciplinary Authority, a lawyer. The defence representative need not necessarily be a
representative of the recognised union. If the employee wishes to engage a lawyer, the matter
should be referred to the Disciplinary Authority and fiirther proceedings should be recorded as per
procedure.
Where the delinquent employee does not have a Defence Representative and would still like
himself and his witness examined, the Enquiry Officer should formulate the questions in the
Examination- in-Chief and re-examination on behalf of the employee, the cross examination being
conducted by the Presenting Officer.
Defence Representative And His Role in Banks: The charge sheeted employee has a right to have
him defended by a representative of a registered trade xmion of Bank Employees. He can also be
represented by a Lawyer with the prior approval of the Disciplinary Authority. The Enquiry Officer
should note that he has no powers to permit the delinquent employee to be represented by a
Lawyer. If a request therefore is received, it should be referred to the Disciplinary Authority for his
approval. It should also be noted that there can be only one representative for each employee. The
59
f .
role of the Defence Representative is to disprove the charges leveled against the delinquent
employee in the charge sheet. To this end, he will also produce documents and witnesses well in
advance and cross-examine prosecution witnesses. He will also submit a brief to the Enquiry
Officer, after going through the prosecution brief
19.5 FRAUDS IN BANKS

Banking which deals with money and hundreds of daily transactions involving deposits,
withdrawal as well as transfer of money is prone to frauds involving money. The most conmion
frûd that occurs in banks relate to shortage of cash when crediting a person's account or when
paying out over the counter. Higher versions of fraud involve sanction of loans and advances on the
basis of fraudulent documents as also providing loans to individuals without insisting on required
documents. In all these cases, what is common is the intention to defi-aud the bank of monies that
belong to the bank or its customers.
^314... I MUMM msomce MANAGEMENT

A recent look at the number of judicial as well as CBI enquiries initiated against officials at various levels in
banks would reveal the extent of fraudulent practices prevalent in banks. Most such litigation and enquiry are
conducted in the public sector banks as officials of PSU banks are considered to be public servants and are
liable for disciplinary action under the provisions of the Disciplinary and Conduct Rules of the Bank. As regards
Private Sector Banks, such frauds are given less publicity as action taken is swift and summary, generally
resuhing in dismissal of the employee. Even in Private Sector Banks, a discipUnary procedure is followed when
it is felt that the erring employee needs to be given a proper hearing. However, the offence here does not come
under the jurisdiction of the Vigilance Committee or the CBI Enquiry as the ownership of these banks does not
rest with the Government. The best way to prevent frauds is obviously better education of the work force as well
as computerisation of the entire work processes within the bank. Thus in a new generation bank which does not
have unions, also have a lesser extent of frauds as all procedures and activities are mechanised with very little
Level
Authority
Top Management
Strategy and sanction of loans of large amounts.
Senior Management
Regional Large Branch Level. Sanction of Loans and Advances

both Retail and Wholesale.
Middle Management
Large Medium Branches. Sanction of Loans more in Retail.
Junior Management
Processing of Loan Applications.
scope for manual handling thus leading to minimal chances of frauds except in collusion with two or more
officials.
19.6 THE RISK ATTACHED
TO DELEGATION OF FINANCIAL POWERS
All organisations that have different layers of staff as well as fimctions spread over various geographical areas
have the need to delegate power and authority to officials at various levels. Thus typically in a bank, the top
management fimctions at a strategic level with very little exposure or involvement in day to day affairs of the
Bank.
A cursory glance at various activities in a bank would reveal a broad division of fimctions and responsibilities
as under:From the above table, it is obvious that authority has to be delegated at various levels for the smooth fanctioning
of the Bank. While all large loans requires sanction of a Committee or a Higher Authority, it is at the small and
retail loans that employees tend to misuse the authority delegated to them.
The risks associated with delegation of authority essentially refers to the possible misuse of financial powers.
While the reason is obvious, the best preventive measure is by training employees in the correct procedure, by
putting in checks and balances at every stage of a proposal being prepared and approved and also a
measurement system which gives indication of deviations if any from the laid down procedure which are
considered as early indicators of defaults which again could be related to fraudulent activity.
19.7 NEED FOR VIGILANCE DEPARTMENT IN BANKS

The Central government has a Chief Vigilance Officer who is the moral guardian of major activities of the
Government and its servants and the authority that should work towards prevention of frauds in all
EMPLOYEE DISCIPLINE {Discipline Management) | 315

public institutions. Vigilance by itself means guarding against a possible occurrence of something bad or amoral.
This could relate to frauds and dishonest behaviour among public servants doing acts prejudicial to the country
as well as the organisation and also prevention of slow but steady acts of corruption which can result into major
scams involving hundreds of crores of rupees.
The Central Goverrmient has defined the role of Chief Vigilance Officer and all public sector imdertakings
including banks are required to have a Chief Vigilance Officer at a senior level who would be in a position to
influence decisions and developments that could prove detrimental to the financial stability of the Bank. The
Chief Vigilance Officer has a Department both at the Central Office as well as at major regional offices so that
preventive measures could be taken by these officers as soon as they come cross any signals that could lead to
frauds in banks.
19.8
DIVERSITY AND GENDER ISSUES
The Central Government has enacted a number of laws to safeguard the equality of all people in the coimtry so
as to prevent any discrimination due to one's gender, cast or creed. The Constitution guarantees freedom of
movement, freedom of employment and the right to pursue any dignified vocation in any part of the coimtry.
The Central Government Institutions including PSU Banks are required to be "equal opportunity employers"
which means that they are required to show no discrimination in the selection of people based on commxmity,
caste, creed, region or gender except for reservations prescribed by the Constitution of India. This prevents
harassment of individuals due to their personal or religious background and also can be acted against by banks, if
individuals are discriminated and suffer disadvantages on account of such discrimination.
19.9
DEALING WITH CASES OF SEXUAL HARASSMENT
The Central government has made it mandatory that all organisations with a sizable number of women
employees should have a procedure for recognising and preventing cases of sexual harassment. Under this
provision, all organisations including banks are required to notify a senior lady officer as Head of Sexual
Harassment Committee in the organisation with powers to investigate and recommend action whenever a case of
sexual harassment is reported. This notification is aimed at preventing the occurrence of sexual harassment cases
at the workplace both against ladies as well as gents and the procedure lays down clear guidelines regarding the
manner in which such incidents are to be investigated and the action required to be taken against erring officers
in case the law of the land (Criminal Procedure Code) has not been invoked in terms of a police compliant. The
enactment of this directive has been welcome all across the country and a whole generation of women employees
have benefitted as any case of sexual harassment once brought to the attention of the authority has to necessarily
be examined and investigated with the Head of Sexual Harassment Committee taking an active role in
recommending suitable action.
What Is Sexual Harassment

According to The Supreme Court definition, sexual harassment is any unwelcome sexually determined
behaviour, such as:- 316 \ h
Physical contact
A demand or request for sexual favours
Sexually coloured remarks
Showing pornography
Any other physical, verbal or non-verbal conduct of a sexual nature.
Sexual Harassment takes place if a person:
subjects another person to an unwelcome act of physical intimacy, like grabbing, brushing touching,
pinching etc.
makes an unwelcome demand or request (whether directly or by implication) for sexual favours from
another person, and further makes it a condition for employment/payment of wages/
mcrement/promotion etc.
makes an unwelcome remark with sexual connotations, like sexually explicit compliments/cracking
loud jokes with sexual connotations/ making sexist remarks etc.
shows a person any sexually explicit visual material, in the form of pictures/cartoons/pin-ups/
calendars/screen savers on computers/any offensive written material/pornographic e-mails, etc.
engages in any other unwelcome conduct of a sexual nature, which could be verbal, or even nonverbal,
like stanng to make the other person uncomfortable, making offensive gestures kissing sounds, etc.
'
It is sexual harassment if a supervisor requests sexual favours from a junior in return for promotion or other
benefits or threatens to sack for non-cooperation. It is also sexual harassment for a boss to make intrusive
mqumes into the private lives of employees, or persistently ask them out. It is sexual harassment tor a group of
workers to joke and snigger amongst themselves about sexual conduct in an attempt to humiliate or embarrass
another person.
Let Us Sum Up
In this unit we have leamt the need for discipline in organisations, procedure for enforcing discipline and
also for dealing with indiscipline. We have gone through the domestic enquiry procedure, the guidelines
with regards to pnnciple of natural justice as also the need for corrective and quick action. We have also
understood how frauds occur in banks and the need for a vigilance department to arrest the incidents of frauds.
Keywords
Discipline
Positive
Discipline
Negative
Discipline Principles of
Natural Justice Prevention
of
Frauds
Department
Vigilance
EMPLOYEE.
Check Your Progress
1. Disciplined behaviour is a voluntary concept.
2. The enquiry officer can permit the delinquent employee to be defended by a lawyer.
3. Instances of reported sexual harassment if not acted upon promptly invites punishment.
317
4. Principles of natural justice are guidelines and not mandatory.
Answers to Check Your Progress

1. False, 2. False, 3. True, 4. False
Terminal Questions
1.
2.
3.
4.
5.
Enumerate an ideal disciplinary procedure for workmen staff in banks.

Describe the duties and responsibility of the enquiry officer as well as the disciplinary authority.
Short notes on principles of natural justice and reformatory action.
Discuss precautions needed to reduce risk when delegating financial powers.
How does an organisation enforce a positive environment to reduce cases of sexual harassment.
References
Labour.nic.in www.laws4india.com/labourlaws.asp indiabudget.nic.in/es200506/chapt2006/chapI05.pdf www.helplinelaw.com/docs/bareact.shtml
Datta, SK; Guide to Disciplinary Action, Tata McGraw-Hill, New Delhi, Third Edition, 1994.
http://EzineArticles.com/?expert=Seema_Jhingan
James G March; Herbert A Simon (1958). Organisations. New York: Wiley, pp. 9-11. ISBN 0471567930
9780471567936. OCLC 1329335.

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I!' i^-.

INDIAN INSTITUTE OF BANKING & FINANCE

To develop professionally qualified and competent bankers and financial professionals

To facilitate study of theory and practice of banking and finance.

To promote continuous professional development.

To promote and undertake research relating to Operations, Products, Instruments, Processes,

I!' i^-.i''vvi';COMMITTED TO PROFESSIONAL EXCELLENCE Website: www.iibf.org.in

Indian Institute d Banking & Finance

INDIAN INSTITUTE OF BANKING & FINANCE, MUMBAI, 2010

First edition 2010 Reprinted, 2010

MACMILLAN PUBLISHERS INDIA LIMITED

Typeset by Sara Assignments, Delhi 110 0032

These modules are vetted by:

books should also be useful for anybody

We welcome suggestions to improve the books and their content.

Chief Executive Officer

II. OPTIONAL PAPERS (Candidates to choose any one)

Module B: Building an HR strategy

Module C: Motivation, Training and Skill Development

Module D: Personnel Management and Industrial Relations

The Learning Process

MODULE D PERSONNEL MANAGEMENT AND INDUSTRIAL

Industrial Relations (Part A)

Fundamentals of HRM Organisational Behaviour

HRM in Indian Banks

New Insights into HR Management

I HUMAN RESOURCE MANAGEMENTURCE MANAGEMENT

After reading this unit, you should be able to:

Understand the basic concepts of Human Resource Management;

1.1.1 Management Theory from Ancient Days

1.1.2 Liberalisation and After

1.1.3 Contemporary Response to HRM

1.2 FUNDAMENTALS OF HRM

Concepts, Policies and Practices

Core Elements of HRM

1.2.3 Objectives of HRM

1.2.4 Managerial Functions4>f HRM

1.2.5 Operational Functions of HRM

1.2.6 Employee Policies

1.2.7 Importance of Human Capital

1.2.7 Valuation Of Human Capital

1.2.8 Human Capital in Bank(s

1.2.9 Transforming Employee into Productive Asset

HRM and Management of Transformation

Outsourcing from Overseas Markets

1.2.12 indian HRM in Transition

An emerging dominant perspective is the influence of globalisation on technological advancements,

1.2.13 The Role of Industrial Relations

1.2.14 Development of HRM in India

1.2.15 Key HRM Practices in Indian Organisations

Percentage of employees with formally defined work roles is very high

Strong dependence on formal labour market. Direct recruitment from

Strong emphasis on security and lifetime employment in public sector

Training and Development Poorly institutionalised in Indian organisations. Popularity of training

Moderately variable across mdustries. Seniority systems still dominate

Limited in scope. The seniority based escalator system in the public

Driven by proactive court rulings, ILO guidelines and legislature

1.3 NEW INSIGHTS INTO HR MANAGEMENT