UNIT I-INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

INTRODUCTION
MEANING
DEFINITION OF HUMAN RESOURCE MANAGEMENT
• According to Pulapa Subba Rao, Human Resource Management (HRM) is managing
(planning, organizing, directing and controlling) the functions of employing , developing
and compensating human resources resulting in creating and developing human
relations and utilization of human resources with a view to contribute proportionally
(due to them) to the organizational, individual and social goals.
• According to Prof. K. Aswathappa, “Human Resources Management is
a management function that helps managers' recruit, select, train and develop members
for an organization”

• It is defined by Armstrong as ‘a strategic and coherent approach to the management of an

organisation’s most valued assets – the people working there who individually and collectively
contribute to the achievement of its objectives’

OBJECTIVES OF HRM
SCOPE OF HRM
PERSONNEL MANAGEMENT VS HUMAN RESOURCE MANAGEMENT
FUNCTIONS OF HRM-OPERATIVE AND MANAGERIAL FUNCTIONS
HRM MODEL
EVOLUTION OF HRM
IMAGES AND QUALITIES OF HR/PERSONAL MANAGER
ENVIRONMENT OF HRM-EXTERNAL AND INTERNAL FORCES
MAJOR CHALLENGES OF HRM

WHAT ARE HUMAN RESOURCES?

According to Leon C Megginson , the term human resources can be thought of as, “ the total
knowledge, skills, creative abilities , talents and aptitudes of an organization's workforce, as
well as the value , attitudes and beliefs of the individuals involved.

WHAT IS HUMAN RESOURCE MANAGEMENT?

NATURE AND SCOPE OF HUMAN RESOURCES
• People in any organization manifest themselves, not only through individual sections
but also through group interactions.
• When individuals come to workplace, they come with not only technical skills
knowledge, etc., but also with their personal feelings, perception, desires, motives,
attitudes, values, etc.,.
• Therefore, employee management in an organization does not mean management of
only technical skills but also other factors of the human resources (soft skills and
behavior)

Scope of Human Resource Management

The scope of HRM is very wide:
1. Personnel aspect-This is concerned with manpower planning, recruitment, selection,
placement, transfer, promotion, training and development, layoff and retrenchment,
remuneration, incentives, productivity etc.
2. Welfare aspect-It deals with working conditions and amenities such as canteens,
creches, rest and lunch rooms, housing, transport, medical assistance, education, health
and safety, recreation facilities, etc.
3. Industrial relations aspect-This covers union-management relations, joint
consultation, collective bargaining, grievance and disciplinary procedures, settlement of
disputes, etc.
OBJECTIVES OF HRM
Objectives are pre-determined goals to which individual or group activity in an organization is
directed.
• Institutions procure and manage various resources including human to attain the
specified objectives.
 • Thus, human resources are managed to divert and utilize their resources towards and
for the accomplishment of organizational objectives.
• Therefore , basically the objectives of human resources management are drawn from
and to contribute to the accomplishment of the organizational objectives.

• To help the organization reach its goals.

• To ensure effective utilization and maximum development of human resources.
• To ensure respect for human beings.
• To identify and satisfy the needs of individuals.
• To ensure reconciliation of individual goals with those of the organization.
• To achieve and maintain high morale among employees.
• .To provide the organization with well-trained and well-motivated
employees.
• To increase to the fullest the employee's job satisfaction and self-
actualization.
• To develop and maintain a quality of work life.
• To be ethically and socially responsive to the needs of society.
• To develop overall personality of each employee in its multidimensional aspect.
• To enhance employee's capabilities to perform the present job.
• To equip the employees with precision and clarity in trans¬action of business.
• To inculcate the sense of team spirit, team work and inter-team collaboration.

FUNCTIONS OF HRM
The functions of HRM can be broadly
classified into two categories , viz.,
1. Managerial functions and
 2. Operative functions
1.Managerial functions
• Managerial functions of personnel management involve planning, organising, directing
and controlling.
• All these functions influence the operative functions
(i) Planning
• It is a pre-determined course of action.
• Planning is determination of personnel programmes and changes in advance that will
contribute to the organizational goals.
• In other words , it involves planning of human resources, requirements, recruitment,
selection, training etc.,
(ii) Organizing
• An organization is a means to an end .
• It is essential to carry out the determined course of action.
• In the words of J.C.Massie , an organization is a “ structure and a process by which
cooperative group of human beings allocates its task among its members, identifies
relationships and integrates its activities towards common objective.”
(iii) Directing
• The next logical function after completing planning and organizing is the execution of
the plan.
• The basic function of personnel management at any level is motivating, commanding,
leading and activating people.
The willing and effective co-operation of employees for the attainment of organizational goals ,
is possible through proper direction
(iv) Controlling
• After planning, organizing and directing the various activities of the personnel
management , the performance is to be verified in order to know that the personnel
functions are performed in conformity with the plans and directions.
• Controlling also involves checking , verifying and comparing of the actual with the plan
,identification of deviations, if any and correcting of identified deviations.
II. OPERATIVE FUNCTIONS
 • The operative functions of human resource management are related to specific
activities of personnel management , viz., employment, development, compensation
and relations.
• All these functions are interacted by managerial functions.
1. Employment
2. Human Resource Management
3. Compensation Management
4. Human Relations
1.EMPLOYMENT
It is the first operative function of HRM. Employment is concerned with securing and employing
the people possessing required kind and level of human resources necessary to achieve the
organizational objectives
• It covers the functions such as job analysis, human resource planning, recruitment ,
selection, placement, induction and internal mobility.
(i) Job Analysis
• It is the process of study and collection of information relating to the operations and
responsibilities of a specific job. It includes:
• Collection of data, information, facts and ideas relating to various aspects of jobs
including men, machines and materials.
• Preparation of job description, job specification, job requirements and employee
specification which will help in identifying the nature, levels and quantum of human
resources.
• Providing the guides, plans and basis for job design and for all operative functions of
HRM
(ii) Human Resources Planning
• It is process for determination and assuring that the organization will have an adequate
number of qualified persons, available at proper times, performing jobs which would
meet the needs of the organization and which would provide satisfaction for the
individuals involved.
(iii) Recruitment
• It is the process of searching for prospective employees and stimulating them to apply
for jobs in an organization. it deals with :
 • Identification of existing sources of applicants and developing them
• Creation/identification of new sources of applicants
• Stimulating the candidates to apply for jobs in the organization.
(iv) Selection
• It is the process of ascertaining the qualifications, experience, skill, knowledge etc., of an
applicant with a view to appraising his/her suitability to a job. The function includes:
• Framing and developing application blanks.
• Creating and developing valid and reliable testing techniques.
• Checking of references.
• Sending letters of appointment and rejection,
• Employing the selected candidates who report for duty
(v) Placement:
• It is the process of assigning the selected candidate with the most suitable job in terms
of job requirements. It is matching of employee specifications with job requirements.
This function includes:
• Counseling the functional managers regarding placement.
• Conducting follow-up study, appraising employee performance in order to determine
employee adjustment with the job
(vi) Induction and Orientation
• Induction and orientation are the techniques by which a new employee is rehabilitated
in the changed surrounding and introduced to the practices, policies, purposes and
people, etc., of the organization.
• Acquaint the employee with the company philosophy, objectives, policies, career
planning and development, opportunities, product, market share, social and community
standing, company history, culture, etc.,
• Introduce the employee to the people with whom he or she has to work such as peers,
supervisors and subordinates.
(2)Human Resources development:
• It is the process of improving, moulding and changing the skills, knowledge, creative
ability, aptitude, attitude, values, commitment, etc., based on present and future job
and organizational requirements]
(i) Performance Appraisal:
• It is the systematic evaluation of individuals with respect to their performance on the
job and their potential for development
(ii) Training
• It is the process of imparting the employees the technical and operating skills and
knowledge..
• Identification of training needs of the individuals and the company
• Developing suitable training programmes
(iii)Management Development
• It is the process of designing and conducting suitable executive development
programmes so as to develop the managerial and human relations skill of employees.
• Identification of the areas in which management development is needed.
• Conducting development programmes
(iv) Career Planning Development
It is the planning of one’s career and implementation of career plans by means of education,
training, job search and acquisition of work experiences. It includes internal and external
mobility.
Internal Mobility:
• It includes vertical and horizontal movement of an employee within an organization. It
consists of transfer, promotion and demotion.
Transfer:
• It is the process of placing employees in the same level jobs where they can be utilized
more effectively consistence with their potentialities and needs of the employees and
the organization
Promotion:
• It deals with upward reassignment given to an employee in the organization to occupy
higher position which commands better status and/or pay keeping in view the human
resources of the employees and the job requirements
(V)Organization Development
It is a planned process designed to improve organizational effectiveness and health through
modifications in individual and group behavior, culture and systems of the organization using
knowledge and technology of applied behavioral science.
3.Compensation:
• It is the process of providing adequate, equitable and fair remuneration to the
employees. It includes job evaluation, wage and salary administration, incentives,
bonus, fringe benefits, social security measurer etc.,
(i) Job Evaluation: It is the process of determining relative worth of jobs:
• Select suitable job evaluation techniques.
• Determining relative value of jobs in various categories.
(ii) Wage and Salary Administration
• This is the process of developing and operating a suitable wage and salary programme.
• Conducting wage and salary survey.
• Determining and salary rates based on various factors.
• Administering wage and salary programmes.
• Evaluation its effectiveness.
(iii) Incentives:
• It is the process of formulating, administering and reviewing the schemes of financial
incentives in addition to regular payment of wages and salary. .
• Formulating incentive payment schemes
• Helping functional managers on the operation
• Review them periodically to evaluate effectiveness
(iv) Bonus:
• It includes payment of statutory bonus according to the Payment of Bonus Act, 1965
and its latest amendments:
(v) Fringe Benefits:
• These are the various benefits at the fringe of the wage. Management provides these
benefits to motivate the employees and to meet their life’s contingencies.
(vi) Social Security Measures:
 • Managements provide social security to their employees in addition to the fringe
benefits.
4.Human Relations:
• Practicing various human resources polices and programmes like employment
development and compensation and interaction among employees creates a sense of
relationship between the individual worker and management, among workers and trade
unions and management.
• Human relations is the process of interaction among human beings. Human relations is
an area of management in integrating people into work situation in a way that
motivates them to work together productively, co-operatively and with economic,
psychological and social satisfaction.
5. Effectiveness of Human Resources Management
• : Effectiveness of various personnel programmes and practices can be measured or
evaluated by means of organizational health and human resources accounting etc.,
(a) Organizational Health
• Organizational health may be studied through the result of employees contribution to
the organization and the employee job satisfaction.
(b) Human Resource Accounting, Audit and Research:
• Effectiveness of human resources management can also be found out through human
resource accounting, audit and research
(i) Human Resources Accounting (HRA):
• It is a measurement of the cost and value of human resources to the organization.
Human resource management is said to be effective if the value and contribution of
human resources to the organization is more than the cost of human resources.
(ii) Human Resource Audit:
• Human resource audit refers to an examination and evaluation of policies, procedures
and practices to determine the effectiveness of HRM
(iii) Human Resources Research:
• It is the process of evaluating the effectiveness of human resources policies and
practices and developing more appropriate ones.
Personnel Management Human Resource Management

It is traditional approach of managing It is modern approach of managing

people at workplace and is concern of people at workplace and is concern of
personnel department. managers of all level (from top to
bottom).

It is a routine function. It is a strategic function.

Efficient management is given priority. Human values and individual needs are
given priority.

Personnel administration, labor Acquisition, development, utilization

relation and employee welfare are and maintenance of human resource
major functions of personnel are major functions of human resource
management. management.

Personnel Management Human Resource Management

It manages people in accordance with It determines human resource needs

organization’s goal. and formulate policies by matching
individual’s needs with organization’s
needs.
It regards people as basic input to It regards people as strategic and
make desired output. valuable resource to make desired
output.

Jobs are designed on the basis of Jobs are designed on the basis of
division of labor. teamwork.

Organization’s interest is valued the Interest of organization and interest of

most. employee is harmonized.

Personnel Management Human Resource Management

Communication is limited, or Communication is open.

even restricted.

It emphasizes on adherence of It emphasizes on combination of

rules and regulations and their human energies and
implementation. competencies.

• Disciplined employees • Committed human

resource
• Increased production
• Readiness to change
• Increased production
• Increased profit
 • Quality of worklife

HRM MODEL
HRM model (or HR framework) is a term which stands for an organisation’s strategic scheme
designed to help administer and coordinate business functions regarding human capital. This
article outlines five models every HR practitioner should know.
The goal of creating HRM models is to help companies manage their workforce in the most
efficient and effective manner possible, in order to achieve the established objectives.

Human resource management is often defined as a concept that includes two possible
approaches, or forms. A hard approach to HRM is characterised by its distinct focus on
performance management and the emphasis it puts on the instrumental approach to the
management of employees.

A soft approach to HRM, on the other hand, focuses on empowerment, motivation, and trust
in dealing with employees, considering individual contributors the most important resource
an organisation can have.

In her book “Strategic Human Resource Management: Corporate Rhetoric and Human
Reality” Lynda Gratton, a British organisational theorist, consultant, and Professor of
Management Practice, concludes that “…even if the rhetoric of HRM is ‘soft’, the reality is
almost always ‘hard’”.

HRM models often combine principles of soft and hard HRM, but with more emphasis put on
one of these two approaches. Here are the five most significant HRM models every HR
practitioner should know of.

The Harvard Model

One of the most significant and most influential models of HRM, the Harvard model, was
initially developed by several experts lead by Michael Beer in 1984 at Harvard University. The
Harvard Model is operating with five significant components: situational factors, stakeholder
interests, HRM policies, HRM outcomes, and long-term consequences the organisation is set
out to accomplish.

According to this HR framework, the correlation between situational factors and stakeholder
interests strongly affects and helps shape HRM policies, which should be implemented to lead
to the desired HR outcomes (commitment, competence, congruence, and cost-effectiveness).

According to the creators of this HRM model, aspiring to improve these four Cs will lead to
favourable consequences for individual well-being, societal well-being, and organisational
effectiveness.

The Harvard Model nurtures cooperation and motivational practices and empowers general
managers to get involved in the HR aspect of the business.

It is established on the belief that human resources can give any organisation a significant
competitive advantage, so, therefore, the employees should be treated as assets rather than
the costs.

The Warwick Model

The Warwick HRM Model was constructed by the researchers Chris Hendry and Andrew M.
Pettigrew at the University of Warwick in the early 1990s. Developed from the Harvard
Model, this HRM framework represents an analytical approach to HRM.

Similarly to the Harvard Model, the Warwick framework focuses on five different elements:

The outer context (which includes political, technical, and competitive factors, among
others);
The inner context (concerning the structure, leadership, culture, task-technology);
Business strategy content (representing company objectives, product market, and general
strategy);
HRM context (including role, definition, organisation, HR outputs);
HRM content (HR flow, reward systems, employee relations, work systems, and other
aspects).
Essay writing service contributor for the topics focused on HR and organisational matters,
Sam Michaels, explains the Warwick model as a “framework focused on achieving
performance and company growth by reaching the appropriate balance between internal and
external context”, utilising HRM context and HRM content elements that adapt to the
changes in the process.

The 5P’s Model

The 5P’s HRM Model is a form of strategic HRM developed in 1992 by Randall S. Schuler, a
praised scholar dedicated to the matters of global HRM, strategic HRM, the function of HRM
in organisations and the interface of business strategy and human resource management.

As its name suggests, The 5P’s Model is based on five constitutional aspects: purpose,
principles, processes, people, and performance. According to this framework, aligning and
balancing these five principles leads to achieving company success.

The 5P’s Model defines;

Purpose as the organisation’s vision, mission, and primary objectives;

Principles are defined as operational protocols set to lead to achieving a purpose;
Processes include organisation architecture, systems, and methods of operation;
People are the vital HR resource performing tasks in line with the appointed principles and
processes;
Performance, ultimately, is a result that can be measured by the appropriate standards.
5P’s Model used by M. G. Pryor, C. White, and L. Toombs in 1998, as a tool for the long-term
continuity and progress of the businesses, operates with the same components. Strategy
prompts the system, the system affects staff behaviour, and staff behaviour triggers the
performance.
Shortly put, according to the 5P’s HRM Model, organisational performance directly depends
on the performance of people engaged in processes and guided by organisation purposes and
principles.

human resource models

The Ulrich Model

The Ulrich Model (or the Business Partner Model) was first introduced in 1995 by Dave Ulrich,
“the father of modern HR.” In his book “Human Resource Champions”, published in 1997,
Ulrich elaborated the idea further.

The Ulrich Model falls under the creative HRM and focuses on organising all HR functions into
four central roles: strategic partner, change agent, administrative expert, and employee
champion (or employee advocate). Rather than focusing on processes and functions, this
model is centred around people of the organisation and the roles they play in the grand
scheme of things.

Ulrich emphasised that remodelling HR doesn’t rely primarily on HR functions, however. He

stressed that CEO, together with senior management, also has a significant part to play in the
process.

Although the Business Partner Model is causing much debate when it comes to determining if
it’s still valid today, it represents an important milestone in HRM history and is still in use in
many organisations.

The ASTD Competency Model

The ASTD Competency model was developed in 2004 by the American Society for Training
and Development, after a conference and research process conducted by ASTD, DDI, and
Rothwell and Associates.
The model delivers a roadmap of success that lays out performance against a credible set of
descriptors. Two slight modifications to the model were made since then: first time in
2008/09, and then again in 2010/11.

This framework is founded on three subsequent layers or blocks:

Foundational level includes essential competencies: personal, interpersonal, and managerial;

Focus level introduces Areas of Expertise (AoE) such as coaching, improving employee
performance, social learning, career planning, and evaluating;
Execution level focuses on four crucial professional roles: learning strategist, project
manager, business partner, and professional specialist.
The ASTD Competency Model considers professional development the key to personal and
company success. It mainly focuses on providing an answer to the question: “What
competencies should people possess and develop to succeed in their field and offer a
valuable contribution to the organisation?”

THE CHALLENGES FACED BY HRM ARE:

1. Growth in employee education and expectation
2. Changing Demographics and life-styles of Workforce
3. Organizational Restructuring /corporate Reorganization
4. Economic Conditions and Competition
5. Quality of Work Life
6. Technological Changes
7. Achieving Competitive Advantage
8. Globalization
9. Outsourcing of HR Activities

ENVIRONMENT OF HRM
Environment in Human Resource Management: Internal and External Environment!
What is environment? In simple words, environment comprises all those forces which have
their bearing on the functioning of various activities including human resource activities.
Environment scanning helps HR manger become proactive to the environment which is
characterised by change and intense competition. Human resource management is performed
in two types of environments- internal and external.
These are discussed one by one:
Internal Environment:
These are the forces internal to an organisation. Internal forces have profound influence on HR
functions. The internal environment of HRM consists of unions, organizational culture and
conflict, professional bodies, organisational objectives, polices, etc. A brief mention of these
follows.
Unions:
Trade unions are formed to safeguard the interest of its members/workers. HR activities like
recruitment, selection, training, compensation, industrial relations and separations are carried
out in consultation with trade union leaders.
Organisational Culture and Conflict:
As individuals have personality, organizations have cultures. Each organisation has its own
culture that distinguishes one organisation from another. Culture may be understood as sharing
of some core values or beliefs by the members of the organisation “Value for time” are the
culture of Reliance Industries Limited. The culture of Tata conglomerate is “get the best people
and set them free”.
HR practices need to be implemented that best fit the organisation’s culture. There is often
conflict between organizational culture and employee’s attitude. Conflict usually surfaces
because of dualities such as personal goal vs. organisational goal, discipline vs. autonomy, rights
vs. duties, etc. Such conflicts have their bearings on HR activities in an organisation.
Professional Bodies:
Like other professional bodies, the NIPM as the HR professional body regulates the functions of
HR practitioners in India. For this the NIPM in of ethics which the HR practitioners are expected
to declare their allegiance to the code (see Figure 2.2). Thus, professional bodies also influence
HR functions of an organization.
External Environment:
External environment includes forces like economic, political, technological, demographic etc.
these exert considerable influence on HRM. Each of these external forces is examined here.
Economic:
Economic forces include growth rate and strategy, industrial production, national and per
capita incomes, money and capital markets, competitions, industrial labour and globalisation.
All these forces have significant influence on wage and salary levels. Growing unemployment
and reservation in employment also affect the choice for recruitment and selection of
employees in organisations.
Political:
Political environment covers the impact of political institutions on HRM practices. For example,
democratic political system increases the expectations of workers for their well being.
The total political environment is composed of three institutions:
1. Legislature:
This is called Parliament at the central level and Assembly at the state level A plethora of labour
laws are enacted by the legislature to regulate working conditions and employment relations.
2. Executive:
It is the Government that implements the law. In other words, the legislature decides and the
executive acts.
3. Judiciary:
This is like a watchdog above the two. It ensures that both the legislature and the executive
work within the confines of the constitution and also in the overall interest of the people. These
affect, in one way or the other, all HR activities from planning to placement to training to
retention and maintenance.
Technological:
Technology is a systematic application of organised knowledge to practical tasks.
Technological advances affect the HR functions in more than one way:
First; technology makes the job more intellectual or upgraded.
Second, it renders workers dislocated if they do not equip themselves to the job.
Third, job becomes challenging for the employees who cope with the requirements of
technology Fourth, technology reduces human interaction at the work place. Finally job-holders
become highly professionalized and knowledgeable in the job they perform.
Demographic:
Demographic variables include sex, age, literacy, mobility, etc. Modem work force is
characterized by literate, women and scheduled caste and scheduled tides workers. Now,
workers are called knowledge workers’ and the organisations wherein they work are called
‘knowledge organisations’.
As such, the traditional line of distinction between manual and non-manual workers is getting
blurred. Employees are demanding parity in remuneration and responsibility among various
categories and levels of employees.
QUALITIES OF HR MANAGER
ORGANIZATION
One of the most important characteristics of HR professionals is the ability to get
organized. This includes strong time management skills and the ability to complete
tasks efficiently. On a typical day, you’ll be balancing a variety of different tasks, ranging
from hiring and firing, dealing with employees’ personal issues and creating recruitment
strategies for open positions. Multitasking is key, as well as self-discipline. You’ll need
to set ethical and behavioral standards for others to follow, and make sure you are
following them as well. HR professionals also manage deadlines and accomplish tasks
quickly so that both employee and employer needs are met.

ETHICS
In a lot of ways, the HR department of a company serves as its conscience. This means
that you’ll need to have a keen sense of ethics when it comes to confidential information
and following company policies. HR professionals have to earn the trust of company
employees and executives so that they can effectively do their job; honesty and
discretion are key components of any successful HR department.

COMMUNICATION
A primary function of all HR professionals is facilitating communication between
employers and employees. This means that both your oral and written communication
skills need to be sharp so that you can relay information clearly and effectively to
employees at all levels. Part of the communication requirements also involves
negotiation. During the hiring process, or when conflicts arise between employees,
successful HR pros are able to help opposing groups compromise and find middle
ground.

PROBLEM SOLVING
In order for businesses to function at their best, the HR department must ensure that
individuals with different personalities can work together civilly and accomplish company
goals. Also, in order to accomplish the other tasks required of you as an HR
professional, you have to be skilled at conflict management and diffusing tense or
combative situations

EXPERTISE
Successful HR professionals are experts on their company’s industry. This will enable
you to make informed recruitment and hiring decisions, as well as have a context for
company guidelines and policies. Sometimes it’s easy to overlook the fact that HR
professionals are business professionals as well. Just because you won’t be working in
the accounting department doesn’t mean you don’t need a clear idea of how your
company works and the business processes that structure it.

LEADERSHIP
In many situations, employees look to HR professionals for answers and leadership.
The nature of many HR positions is that you’ll be seen as an expert on a wide variety of
company-related topics, so you’ll need to have the confidence to lead. This can mean
anything from finding the answers to employee concerns to putting together a team to
run a local 5K race for charity. The best HR professionals can balance being a friendly
presence in the office with taking control and helping things run smoothly.

EXTERNAL AND INTERNAL FORCES

What is environment? In simple words, environment comprises all those forces which
have their bearing on the functioning of various activities including human resource
activities. Environment scanning helps HR manger become proactive to the
environment which is characterised by change and intense competition. Human
resource management is performed in two types of environments- internal and external.

These are discussed one by one:

Internal Environment:

These are the forces internal to an organisation. Internal forces have profound influence
on HR functions. The internal environment of HRM consists of unions, organizational
culture and conflict, professional bodies, organisational objectives, polices, etc. A brief
mention of these follows.

Unions:

Trade unions are formed to safeguard the interest of its members/workers. HR activities
like recruitment, selection, training, compensation, industrial relations and separations
are carried out in consultation with trade union leaders.

Organisational Culture and Conflict:

As individuals have personality, organizations have cultures. Each organisation has its
own culture that distinguishes one organisation from another. Culture may be
understood as sharing of some core values or beliefs by the members of the
organisation “Value for time” are the culture of Reliance Industries Limited. The culture
of Tata conglomerate is “get the best people and set them free”.

HR practices need to be implemented that best fit the organisation’s culture. There is
often conflict between organizational culture and employee’s attitude. Conflict usually
surfaces because of dualities such as personal goal vs. organisational goal, discipline
vs. autonomy, rights vs. duties, etc. Such conflicts have their bearings on HR activities
in an organisation.

Professional Bodies:

Like other professional bodies, the NIPM as the HR professional body regulates the
functions of HR practitioners in India. For this the NIPM in of ethics which the HR
practitioners are expected to declare their allegiance to the code (see Figure 2.2). Thus,
professional bodies also influence HR functions of an organization.

External Environment:

External environment includes forces like economic, political, technological,

demographic etc. these exert considerable influence on HRM. Each of these external
forces is examined here.

Economic:

Economic forces include growth rate and strategy, industrial production, national and
per capita incomes, money and capital markets, competitions, industrial labour and
globalisation. All these forces have significant influence on wage and salary levels.
Growing unemployment and reservation in employment also affect the choice for
recruitment and selection of employees in organisations.

Political:

Political environment covers the impact of political institutions on HRM practices. For
example, democratic political system increases the expectations of workers for their well
being.

The total political environment is composed of three institutions:

1. Legislature:

This is called Parliament at the central level and Assembly at the state level A plethora
of labour laws are enacted by the legislature to regulate working conditions and
employment relations.

2. Executive:

It is the Government that implements the law. In other words, the legislature decides
and the executive acts.

3. Judiciary:
This is like a watchdog above the two. It ensures that both the legislature and the
executive work within the confines of the constitution and also in the overall interest of
the people. These affect, in one way or the other, all HR activities from planning to
placement to training to retention and maintenance.

Technological:

Technology is a systematic application of organised knowledge to practical tasks.

Technological advances affect the HR functions in more than one way:

First; technology makes the job more intellectual or upgraded.

Second, it renders workers dislocated if they do not equip themselves to the job.

Third, job becomes challenging for the employees who cope with the requirements of
technology Fourth, technology reduces human interaction at the work place. Finally job-
holders become highly professionalized and knowledgeable in the job they perform.

Demographic:

Demographic variables include sex, age, literacy, mobility, etc. Modem work force is
characterized by literate, women and scheduled caste and scheduled tides workers.
Now, workers are called knowledge workers’ and the organisations wherein they work
are called ‘knowledge organisations’.

As such, the traditional line of distinction between manual and non-manual workers is
getting blurred. Employees are demanding parity in remuneration and responsibility
among various categories and levels of employees.

 UNIT II

MEANING AND DEFINITON OF HRP

Human resources undoubtedly play the most important part in the functioning of an
organization. The term ‘resource’ or ‘human resource’ signifies potentials, abilities, capacities,
and skills, which can be developed through continuous interaction in an organizational setting.
The interactions, interrelationships, and activities performed all contribute in some way or
other to the development of human potential. Organizational productivity, growth of
companies, and economic development are to a large extent contingent upon the effective
utilization of human capacities.
Hence, it is essential for an organization to take steps for effective utilization of these resources.
In the various stages in the growth of an organization, effective planning of human resources
plays a key role. Matching the requirements of the job with the individual is important at all
stages, including the recruitment procedures, in this endeavor
When organizations contemplate diversification or expansion, or when employees have to be
promoted, human resource planning plays an important role. Further, the organizational plans,
goals, and strategies also require effective human resource planning.
Human Resource Planning or Manpower Planning (HRP) is the process of systematically
reviewing HR requirements to ensure that the required number of employees with the required
skills is available when they are needed. Getting the right number of qualified people into the
right job is the crux of the problem here.
The following points highlight the need and importance of HRP in the organizations:
I. Assessing Future Personnel Needs:
Whether it is surplus labour or labour shortage, it gives a picture of defective planning or
absence of planning in an organization. A number of organizations, especially public sector units
(PSUs) in India are facing the problem of surplus labour.
It is the result of surplus labour that the companies later on offer schemes like Voluntary
Retirement Scheme (VRS) to eliminate surplus staff. Thus, it is better to plan well about
employees in advance. Through HRP, one can ensure the employment of proper number and
type of personnel.
II. Foundation for Other HRM Functions:
HRP is the first step in all HRM functions. So, HRP provides the essential information needed for
the other HRM functions like recruitment, selection, training and development, promotion, etc.
III. Coping with Change:
Changes in the business environment like competition, technology, government guidelines,
global market, etc. bring changes in the nature of the job. This means changes in the demand of
personnel, content of job, qualification and experience needed. HRP helps the organization in
adjusting to new changes.
IV. Investment Perspective
As a result of change in the mindset of management, investment in human resources is viewed
as a better concept in the long run success of the enterprise. Human assets can increase in
value as opposed to physical assets. Thus, HRP is considered important for the proper planning
of future employees.
V. Expansion and Diversification Plans:
During the expansion and diversification drives, more employees at various levels are needed.
Through proper HRP, an organization comes to know about the exact requirement of personnel
in future plans.
VI. Employee Turnover:
Every organization suffers from the small turnover of labour, sometime or the other. This is high
among young graduates in the private sector. This necessitates again doing manpower planning
for further recruiting and hiring.
VII. Conformity with Government Guidelines:
In order to protect the weaker sections of the society, the Indian Government has prescribed
some norms for organizations to follow. For example, reservations for SC/ST, BC, physically
handicapped, ex-servicemen, etc. in the jobs. While planning for fresh candidates, HR manager
takes into consideration all the Government guidelines.
VIII. International Expansion Strategies:
International expansion strategies of an organization depend upon HRP. Under International
Human Resource Management (IHRM), HRP becomes more challenging. An organization may
want to fill the foreign subsidiary’s key positions from its home country employees or from
host-country or from a third country. All this demands very effective HRP.
IX. Having Highly Talented Manpower Inventory:
Due to changing business environment, jobs have become more challenging and there is an
increasing need for dynamic and ambitious employees to fill the positions. Efficient HRP is
needed for attracting and retaining well qualified, highly skilled and talented employees

The following points highlight the need and importance of HRP in the organizations:
I. Assessing Future Personnel Needs:
Whether it is surplus labour or labour shortage, it gives a picture of defective planning or
absence of planning in an organization. A number of organizations, especially public sector units
(PSUs) in India are facing the problem of surplus labour.
It is the result of surplus labour that the companies later on offer schemes like Voluntary
Retirement Scheme (VRS) to eliminate surplus staff. Thus, it is better to plan well about
employees in advance. Through HRP, one can ensure the employment of proper number and
type of personnel.
II. Foundation for Other HRM Functions:
HRP is the first step in all HRM functions. So, HRP provides the essential information needed for
the other HRM functions like recruitment, selection, training and development, promotion, etc.
III. Coping with Change:
Changes in the business environment like competition, technology, government guidelines,
global market, etc. bring changes in the nature of the job. This means changes in the demand of
personnel, content of job, qualification and experience needed. HRP helps the organization in
adjusting to new changes.
IV. Investment Perspective:
As a result of change in the mindset of management, investment in human resources is viewed
as a better concept in the long run success of the enterprise. Human assets can increase in
value as opposed to physical assets. Thus, HRP is considered important for the proper planning
of future employees.
V. Expansion and Diversification Plans:
During the expansion and diversification drives, more employees at various levels are needed.
Through proper HRP, an organization comes to know about the exact requirement of personnel
in future plans.
VI. Employee Turnover:
Every organization suffers from the small turnover of labour, sometime or the other. This is high
among young graduates in the private sector. This necessitates again doing manpower planning
for further recruiting and hiring.
VII. Conformity with Government Guidelines:
In order to protect the weaker sections of the society, the Indian Government has prescribed
some norms for organizations to follow. For example, reservations for SC/ST, BC, physically
handicapped, ex-servicemen, etc. in the jobs. While planning for fresh candidates, HR manager
takes into consideration all the Government guidelines.
VIII. International Expansion Strategies:
International expansion strategies of an organization depend upon HRP. Under International
Human Resource Management (IHRM), HRP becomes more challenging. An organization may
want to fill the foreign subsidiary’s key positions from its home country employees or from
host-country or from a third country. All this demands very effective HRP.
IX. Having Highly Talented Manpower Inventory:
Due to changing business environment, jobs have become more challenging and there is an
increasing need for dynamic and ambitious employees to fill the positions. Efficient HRP is
needed for attracting and retaining well qualified, highly skilled and talented employees

The factors that affect HRP can be classified into external factors and internal factors as
under:
1. External Factors:
As it is evident from their name the external factors which affect the human resource planning
externally.
These include following:
(i) Level of Economic Development:
Level of economic development determines the level of human resource development in the
country and thereby the supply of human resources in the future in the country.
(ii) International Factors:
International factors like the demand and supply of human resources in various countries also
affect human resource planning.
(iii) Business Environment:
Business environment means the internal and external factors that influence the business.
Business environmental factors influence the volume of mix of production and thereby the
supply of human resources in the future in the country.
(iv) Government Policies:
Various policies of the government like labour policy, industrial policy, policy towards reserving
certain jobs for different communities and sons-of-the-soil, etc., affect human resource
planning.
(v) Level of Technology:
Technology can be interpreted as the application of knowledge to practical tasks which lead to
new inventions and discoveries. The invention of the latest technology determines the kind of
human resources required.
Information technology has brought amazing shifts in the way the business operates. These
shifts include the following business process re-engineering, enterprise resource planning and
supply chain management. These changes brought radial reduction in human resource and
increase in software specialists. To illustrate, Computer Aided Design (CAD) and Computer
Aided Technology (CAT) also reduced the existing requirement of human resource.
2. Internal Factors:
These factors include following aspects:
(i) Company Policies and Strategies:
The organisation’s policies and strategies are related to expansion, diversification, etc.,
determines the human resource demand in terms of quantity and quality.
(ii) Human Resource Policies:
Human resource policies of the company are about the quality of human resources,
compensation level, quality of working conditions, etc., influence human resource planning.
(iii) Company’s Production and Operational Policy:
Company’s policies regarding how much to produce and how much to purchase from outside
for manufacturing the final product influences the number and kind of people required.
(iv) Trade Unions:
In case it is declared by the unions that they will not work for more than 8 hours in a day, it
affects the human resource planning. Therefore, influence of trade unions regarding the
number of working hours per week, recruitment sources, etc., affect human resource planning
and is to be kept under consideration.
(v) Organisational Growth Cycles:
At the starting stage, the organisation is small as such it is but natural that need of employees is
usually smaller, however by the passage of time as the organisation enters the growth phase
more young people need to be hired. Likewise, in the declining/recession/downturn phase
human resource planning is done to retrench the employees.
(vi) Job Analysis:
Job analysis means detailed study of the job involving the skills needed for a particular job.
Human resource planning is based on job analysis which determines the kind of employees to
be procured.
(vii) Time Horizon:
Company’s planning differs according to the competitive environment, i.e., companies with
stable competitive environment can plan for the long-run whereas firms without a stable
environment can only plan for short-term. As such short-term planning is adopted in the
following cases.
There are many competitors entering business/when there is swift change in social and
economic conditions of business/if there is constant change in demand patterns/when there
exists poor management practice, otherwise long term planning is adopted.
(viii) Type and Quality of Information:
Every planning process is in need of qualitative and accurate information about the following
organisational structure, capital budget, functional area objectives, level of technology being
used, job analysis, recruitment sources, retirement plans, compensation levels of employees,
etc. Hence, human resource planning is determined on the basis of the type and quality of
information.

Planning Process
As planning is an activity, there are certain reasonable measures for every manager to follow:
(1) Setting Objectives

 This is the primary step in the process of planning which specifies the objective of an
organisation, i.e. what an organisation wants to achieve.

 The planning process begins with the setting of objectives.

 Objectives are end results which the management wants to achieve by its operations.

 Objectives are specific and are measurable in terms of units.

 Objectives are set for the organisation as a whole for all departments, and then
departments set their own objectives within the framework of organisational objectives.
Example:
A mobile phone company sets the objective to sell 2,00,000 units next year, which is double the
current sales.
(2) Developing Planning Premises

 Planning is essentially focused on the future, and there are certain events which are
expected to affect the policy formation.

 Such events are external in nature and affect the planning adversely if ignored.

 Their understanding and fair assessment are necessary for effective planning.

 Such events are the assumptions on the basis of which plans are drawn and are known
as planning premises.
Example:
The mobile phone company has set the objective of 2,00,000 units sale on the basis of forecast
done on the premises of favourable Government policy towards digitisation of transactions.
(3) Identifying Alternative Courses of Action

 Once objectives are set, assumptions are made.

 Then the next step is to act upon them.

 There may be many ways to act and achieve objectives.

 All the alternative courses of action should be identified.

Example:
The Mobile company has many alternatives like reducing price, increasing advertising and
promotion, after sale service etc.,
(4) Evaluating Alternative Course of Action

 In this step, the positive and negative aspects of each alternative need to be evaluated
in the light of objectives to be achieved.

 Every alternative is evaluated in terms of lower cost, lower risks, and higher returns,
within the planning premises and within the availability of capital.
Example:
The mobile phone company will evaluate all the alternatives and check its pros and cons.
(5) Selecting One Best Alternative

 The best plan, which is the most profitable plan and with minimum negative effects, is
adopted and implemented.

 In such cases, the manager’s experience and judgement play an important role in
selecting the best alternative.
Example:
Mobile phone company selects more T.V advertisements and online marketing with great after
sales service.
(6) Implementing the Plan

 This is the step where other managerial functions come into the picture.

 This step is concerned with “DOING WHAT IS REQUIRED”

 In this step, managers communicate the plan to the employees clearly to convert the
plans into action.
  This step involves allocating the resources, organising for labour and purchase of
machinery.
Example:
Mobile phone company hires salesman on a large scale, creates T.V advertisement, and starts
online marketing activities and set up service workshops.
(7) Follow Up Action

 Monitoring the plan constantly and taking feedback at regular intervals is called follow-
up.

 Monitoring of plans is very important to ensure that the plans are being implemented
according to the schedule.

 Regular checks and comparisons of the results with set standards are done to ensure
that objectives are achieved.
Example:
A proper feedback mechanism was developed by the mobile phone company throughout its
branches so that the actual customer response, revenue collection, employee response, etc.
could be known.

What is a job?
Job
• Group of related activities and duties
• Made up of tasks
Tasks
• Basic elements of jobs
• “what gets done”
 STAGES OF HRM
• Job Analysis
• Human Resource Planning
• Recruitment
• Selection
• Placement
• Induction
What is job analysis?
• A systematic approach to collect information about a job such as tasks, responsibilities
and the skills required to perform those tasks
• An important part of Human Resources (HR) planning
• A job analysis is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes, and work environment of a particular job.
• Process of defining a job in terms of its component tasks or duties and the knowledge or
skills required to perform them
DECISION IS MADE TO CHECK THAT:
Whether already existing post is valuable or not.
To create a Post.
PURPOSE OF JOB ANALYSIS
• It is of fundamental importance to manpower management programmes because of the
wider applicability of its results. The information provided by JA is useful, if not
essential, in almost every phase of employee relations.
• 1. Organisation and Manpower Planning:
It is helpful in organisation planning, for it defines labour needs in concrete terms and
co-ordinates the activities of the workforce, and clearly divides duties and
responsibilities.
• 2. Recruitment, Selection:
By indicating the specific requirements of each job (i. e., the skills and knowledge), it
provides a realistic basis for the hiring, training, placement, transfer and promotion of
personnel. “Basically, the goal is to match the job requirements with a worker’s
aptitude, abilities and interests. It also helps in charting the channels of promotion and
in showing lateral lines of transfer.
• 3. Wage and Salary Administration:
By indicating the qualifications required for doing a specified job and the risks and
hazards involved in its performance, it helps in salary and wage administration. Job
analysis is used as a foundation for job evaluation.
• 4. Job Reengineering:
Job analysis provides information which enables us to change jobs in order to permit their being
manned by personnel with specific characteristics and qualifications
• Employee Training and Management Development:
Job analysis provides the necessary information to the management of training and
development programmes. It helps to determine the content and subject matter of in-
training courses. It also helps in checking application information, interviewing, weighing
test results, and in checking references.
• 6. Performance Appraisal:
It helps in establishing clear-cut standards which may be compared with the actual
contribution of each individual.
• 7. Health and Safety:
It provides an opportunity for identifying hazardous conditions and unhealthy
environmental factors so that corrective measures may be taken to minimise and avoid
the possibility of accidents.
In sum, it may be noted that job analysis is a systematic procedure for securing and
reporting the information which defines a specific job. It has many uses in the
management of personnel. It determines the qualifications required for a job; provides
guidance in recruitment and selection; evaluates current employees for transfer or
promotion; and establishes the requirements for training programmes.

• How to conduct job analysis? We should perform eight steps as follows for conducting
job analysis.
• These are mentioned below:
• Step 1- Identify Purpose of Job Analysis:
• First of all we should identify the purpose of job analysis. Otherwise we will not be able
to collect all the pertinent information concerning job analysis and job analysis methods.
• Step 2- Selection of Analyst:
• We have to choose analyst to whom responsibilities will be assigned for job analysis.
The analysts will be taken from professional human resource, line managers,
incumbents or consultants.
• Step 3- Selection of Method:
 • We will select representative positions to analyze because it may not be necessary to
analyze all jobs and there may be too many similar jobs to analyze. After selecting
representative jobs we must identify the appropriate method which is the best one in
order to analyze a particular job.
• Step 4 -Train the Analyst:
• If we use internal analyst then we have to give them appropriate training so that they
can use the selected methods of job analysis in an efficient and effective way.
• Step 5- Preparation of Job Analysis:
It includes communicate the project in the organization and preparing the documentation
• Step 6- Collection of Data:
• Job analysts will collect data relating to job activities, employee behaviours, working
conditions, human traits and abilities to perform the job, etc.
• Step 7- Review and Verify:
• Analysts must verify the collected data to confirm that the information is factually
correct and complete.
• Step 8- Develop a Job Description and Job Specification:
• Develop a job description and job specification from the job analysis information. A job
description is a written statement that describes the activities and responsibilities of the
job, working conditions, safety and hazards. A job specification summarizes the personal
qualities, traits, skills, and background required for getting the job done.
METHODS OF JOB ANALYSIS
• Direct observation
• Interview of existing post holder
• Interview of immediate supervisor
• Questionnaires
• Previous studies
• Work dairies

Methods of Job Analysis: Observation

• Information Source
 • Observing and noting the physical activities of employees as they go about their
jobs
• Advantages
• Provides first-hand information
• Reduces distortion of information

• Disadvantages:
• Time consuming
• Difficulty in capturing entire job cycle
• Of little use if job involves a high level of mental activity
• Observer’s Difference of mental disposition.
• Analyst’s caliber should match employee’s caliber

Methods of Job Analysis:

The Interview
• Information Sources
• Individual employees (existing job holder)
• Immediate boss (Supervisors )
with knowledge of the job.
• Interview format
Structured
Unstructured
• Advantages
• Quick, direct way to find overlooked
information required.
• Disadvantages
• Exaggeration or depreciation of importance of job
• In case of supervisor, he may not be interesting in the JD of the subordinates.
 • Attitude may not be supportive.
• Difference in perception, attitude and aptitude of the interviewee.
• Lack of communication.
Analyst’s caliber should match employee’s caliber

Methods of Job Analysis: Questionnaires

• Information Source:
Have employees fill out questionnaires to describe their job-related duties and
responsibilities.
• Questionnaires format:
1. Structured checklist.( to identify the task performed)
2. Open ended questions
Advantages
1. Quick and efficient way to gather information from large numbers of employees
2. Quick and economical to use
Disadvantages
3. Expense and time consumed in preparing and testing the questionnaire.
4. Becomes less useful where the employees lack verbal skills.

Methods of Job Analysis:

Previous studies
• Information source:
Past record of any employee.

The analyst keeps the past record of the employees and keeps the previous
experiences and issues related to the job analysis process of the organization.
• Advantages
Easy to use this method.
 Helps to find out that whether it is
beneficial or not
• Disadvantages
Wrong assessment of previous post
Bad performance of previous employee

Methods of Job Analysis:

Work Diaries
• Information Source
• Workers keep a chronological diary/ log of what they do and the time spent on
each activity.
• Advantages
• Produces a more complete picture of the job
• Employee participation
• Maintained on daily basis.
• Disadvantages
• Distortion of information
• Depends upon employees to accurately recall their activities

Methods of Job Analysis:

Manager trying the job
• This method is used to check the new post.
• In this method the manager start a new job to check that whether this job is beneficial
or not.
• It’s a risky step to take because it may cause many fundamental problems.
• Advantages:
1. Very fruitful if the manager is an experienced analyst and strategic risk taker.
• Disadvantages:
 1. Very expensive
2. Risky
3. Time consuming
The person who conducts job analysis is interested in gathering data on what is involved
in performing a particular job.
Types of data collected, that may help in analysis are,
( WORK ACTIVITIES,WORK PERFORMANCES,WORK SCHEDULES,PERSONAL
REQUIRMENTS).

Human resource experts cannot rely on individual job analysis techniques so normally all the
methods are used collectively.
Job Analysis can be studied under two headings
• Job Description
• Job Specification

• Job description is a written statement showing job title, tasks, duties and responsibilities
involved in a job. It also prescribes the working conditions, hazards, stress and
relationship with other jobs.
• Thus, a job specification contains the following information:
• 1. Job title, code number, and department / division.
2. Job contents in terms of activities or tasks performed.
3. Job responsibilities towards effective performance of the job.
4. Working conditions specifying specific hazards/stress.
5. Social environment prevailing at the workplace.
6. Extent of supervision given and received.
7. Relationship with other jobs-vertical, horizontal, and diagonal

Job specifications, also known as man or employee specifications, is prepared on the

basis of job specification. It specifies the qualities required in a job incumbent for the
effective performance of the job.
• Basic contents of a job specification are as follows:
 • 1. Personal characteristics such as education, job experience, age, sex, and extra co-
curricular activities.
2. Physical characteristics such as height, weight, chest, vision, hearing, health, voice
poise, and hand and foot coordination, (for specific positions only).
3. Mental characteristics such as general intelligence, memory, judgment, foresight,
ability to concentrate, etc.,
4. Social and psychological characteristics such as emotional ability, flexibility, manners,
drive, conversational ability, interpersonal ability, attitude, values, creativity etc.
Various contents of a job specification can be prescribed in three terms:
(1) Essential qualities which a person must possess;
(2) Desirable qualities which a person may possess; and
(3) Contra-indicators which are likely to become a handicap to successful job performance.

JOB DESIGN
• Definition:
• Job design is defined as the process of deciding on the content of a job in terms of
duties and responsibilities of the job holders; on the methods to be used in carrying out
the job, in terms of techniques, systems and procedures and on the relationships that
should exist between the job holder and his superiors, subordinates and colleagues.
• Job design involves systematic attempts to organize tasks, duties and responsibilities
into a unit of work to achieve certain objectives. Job design integrates the work content
and qualifications required for each job that meets the needs of employee and the
organization. Job design makes the job highly specialized and well designed jobs are
important in attracting and retaining a motivated work force.
• The term ‘Job Design’ refers to the way the tasks are combined to form a complete job.
It can be defined as building the specifications of the position, contents, method and
relationships of the job so as to meet with various technological and organizational
requirements as well as meet the personal needs of job holders.

All the factors that affect job design are broadly classified into three

categories:

1. Organisational factors

2. Environmental factors
3. Behavioural factors.

A description of each of these follows:

1. Organisational Factors:

The various factors under organisational factors include task features, work flow,

ergonomics, work practices, etc.

A brief description of these follows:

Task Features:
A job design involves a number of tasks performed by a group of workers. Further, each

task consists of three internal features, namely, (i) planning, (ii) executing, and (iii) con-

trolling. An ideal job design needs to integrate all these three features of tasks to be

performed.

Work Flow:

The very nature of a product influences the sequences of jobs, i.e., work flow. In order to

perform work in an effective and efficient manner, the tasks involved in a job need to be

sequenced and balanced. Consider the car as a product. The frame of a car needs to be

built before the fenders, and similarly the doors will be built later. Thus, once the

sequences of tasks are determined, and then the balance between tasks is established.

Ergonomics:

Ergonomics refers to designing and shaping job in such a manner so as to strike a fit

between the job and the job holder. In other words, jobs are designed in such a way to

match job requirements with worker’s physical abilities to perform a job effectively.

Work Practices:

Practice means a set way of doing work based on tradition or collective wishes of

workers. While designing jobs, these work practices need to be taken into consideration.
Evidences are available to state that ignoring work practices can result in undesirable

consequences F.W. Taylor determined work practices by time and motion study.

Such determination requires repeated observations. However, the accuracy of the

determined work practice is subject to distortions depending on the competence of the

observer and deviations from the normal work cycle. Another limitation of this method

is its applicability only when production is underway.

2. Environmental Factors:
Environmental factors include social and cultural expectations, and employee ability

and availability. These are discussed one by one.

Social and Cultural Expectations:

Gone are days when workers were ready to do any job under any working conditions.

But, with increase in their literacy, education, knowledge, awareness, etc. have raised

their expectations from the jobs. In view of this, jobs for them need to be designed

accordingly.

It is due to this reason that the job design now is characterised by the features like work

hours, rest breaks, vacations, religious beliefs, etc. Disregarding these social

expectations can create dissatisfaction, low motivation, high turnover and low quality of

working life”.

Employee Ability and Availability:

The various task elements should be included in accordance with the employee abilities

and capabilities. Incorporating job elements beyond the employee ability will be causing

mismatch between the job and the job holder.

Therefore, due consideration should be given to employee ability while determining j ob

design. Henry Ford did follow it. He made job design simple and requiring little training

for assembly line considering that most potential workers lacked any automobile-

making experience.

3. Behavioural Factors:

Behavioural factors are based on the premise that people are influenced to work to

satisfy their needs. Higher the need, more one finds job challenging.

One’s behaviour at work is governed by certain factors are :

Autonomy:

Autonomy means freedom to control one’s actions/responses to the environment.

Research studies report that jobs that give autonomy to workers also increase sense of

responsibility and self esteem. On the contrary, absence or lack of autonomy can cause

workers apathy to jobs and, in turn, low and poor performance.

Use of Abilities:

Workers perform jobs effectively that offer them opportunity to make use of their

abilities. Workers find such jobs as interesting and challenging.

Feedback:

Job design should be determined in such a way that workers receive meaningful

feedback about what they did. Feedback helps workers improve their performance.

Variety:

Lack of variety, or say doing the same work, causes boredom which, in turn, leads to

fatigue. Fatigue causes mistakes and accidents. But, by incorporating elements of variety

in the job, boredom, fatigue and mistakes can be avoided and the job can be done in

more effective and efficient manner.

APPROACHES TO JOB DESIGN
• There are three important approaches to job design are:
• Engineering approach
• Human approach
• Job characteristic approach

Engineering Approach:
• The most prominent single element in the Engineering approach, envisaged by FW
Taylor and others, was the task idea. The work of every workman is fully planned by the
management at least one day in advance and each man received in most cases
complete written instructions, describing in details the task which he is to accomplish.
This task specifies not only what is to be done but how it is to be done and the exact
time allowed for doing it.
• The principles offered by scientific management to job design can be summarized thus:
• Work should be scientifically studied. Taylor advocated fragmentation and
regularization of work to reap the advantages of specialization.
• Work should be arranged so that workers can be efficient.
• Employees selected for work should be matched to the demands of the job.
• Employees should be trained to perform the job.
• Monetary compensation should be used to reward successful performance of the job.
2. Human Approach:
• The human relations approach recognized the need to design jobs which are interesting
and rewarding. Herzberg’s research popularized the notion of enhancing need
satisfaction through what is called job enrichment. Herzberg has identified two types of
factors:
• 1. Motivators like achievement, recognition, work itself, responsibility, advancement
and growth and
• 2. Hygienic factors (which merely maintain the employee on the job and in the
organization) like working conditions, organizational policies, inter-personnel relations,
pay and job security.
Job characteristics approach
• Goals of job design:
• To Meet the organizational requirements such as higher productivity, operational
efficiency, quality of product/service etc and
• To satisfy the needs of the individual employees like interests, challenges, achievement
or accomplishment, etc.
• Integrate the needs of the individual with the organizational requirements.
Job Design options:
• 1. Job Rotation: Job rotation refers to the movement of an employee from one job to
the other. The jobs remain the same, the employee’s are rotated among various jobs.
This relieves employees from boredom and monotony, improves their skills on various
jobs,
enhances their self - image and provides personal growth. Job rotation helps managers
cope with frequent absenteeism and high turnover of workforce. It is an effective
technique for training new or inexperienced employees. It helps in developing
managerial generalists at higher organizational levels by exposing them to several
different operations.
• 2. Job Enlargement: Job enlargement means adding more and different tasks to a
specialized job to provide greater variety. Expands job horizontally. Job enlargement
reduces the amount of specialization required by the employee and makes the job
more interesting.
• Increases job scope - the number of different operations required in a job and the
frequency with which the job cycle is repeated.
• Reallocates tasks and responsibilities
• Changes the pace of work and operation
• It does not increase the job depth i.e. the extent of planning, decision making and
controlling done by the employee in the total job.
• 3. Job Enrichment: Job enrichment is an attempt to employees by giving them the
opportunity to use the range motivate of their abilities. This concept was developed by
Fredrick Hertzberg in 1950’s. Job enrichment has been described as vertical loading of a
job and job enlargement is horizontal loading. An enriched job should ideally include:
• A range of tasks and challenges of varying difficulties (Physical or Mental)
• A complete unit of work - a meaningful task
 • Feedback, encouragement and communication
UNIT III
Process of Recruitment
• Recruitment or Hiring is the process of searching and attracting the right candidates for
hiring them for vacant jobs in an organization. There are two sources of recruitment,
internal sources and external sources. Recruitment refers to the process of searching for
potential employees and influencing them to work for their organization.
• The purpose of the recruitment process is to find talented and qualified individuals for the
growth and development of their organization. It is part of the human resource
management(HRM) department

• Internal Sources: Internal recruitment seeks applicants for positions from those who are
currently employed. Internal sources include present employees, employee referrals,
former employees, and former applicants.

• There are two important internal sources of recruitment namely : (i) transfers and (ii)
promotions.
• (i)A promotion is the transfer of an employee to a job that pays more money or one that
enjoys some preferred status. A promotion involves reassignment of an employee to a
position having higher pay, increased responsibilities, more privileges, increased
benefits and greater potential.
• Promotion leads to shifting an employee to a higher position carrying higher
responsibilities, facilities, status and pay. The employees can be informed of such a
vacancy by internal advertisement
• (ii)Transfers : Another way to recruit from present employees is transfer without
promotion. Transfers are often important in providing employees with a broad-based
view of the organisation, necessary for future promotions. Transfer involves the shifting
of an employee from one job to another.
• (iii)Family and Friends of Employee : This can be a good source of internal recruitment.
This source is usually one of the most effective methods of recruiting because many
qualified people are recruited at a very low cost to the company.
• (iv)Previous employees : Former employees are also an internal source of applicants

External Recruitment
(1) Advertisements :
• These constitute a popular method of seeking recruits as many recruiters prefer
advertisements because of their wide reach. Advertisement in local or national
newspapers and trade and professional journals is generally used when qualified or
experienced personnel are not available from other sources. Advertisement gives the
management a wider range of candidates from which to choose.
(2) Educational Institutions :
Direct recruitment from educational institutions for jobs which require technical or
professional qualifications has become a common practice. A close liaison between the
company and educational institutions helps in getting suitable candidates to various
positions. This is also known as `Campus Recruitment'.
(3) Professional or Trade Associations :
Many associations provide placement services for their members. These services may
consist of compiling job seeker's lists and providing access to members during regional or
national conventions.
Further, many associations publish or sponsor trade journals or magazines for their
members. These publications often carry classified advertisements from employers
interested in recruiting their members.
Professional or trade associations are particularly useful for attracting highly educated,
experienced or skilled personnel.
(4) Management Consultants
Management consultancy firms help the organizations to recruit technical, professional and
managerial personnel. They specialize in middle-level and top-level executive placements.
They maintain data bank of persons with different qualifications and skills and even
advertise the jobs on behalf of their clients to recruit right type of personnel.
(5)Write-ins
Write-ins are those who send written enquiries. These job seekers are asked to complete
application forms for further processing.
(7) Competitors
Rival firms can be a source of recruitment. This is called `poaching'. This method involves
identifying the right people in rival companies, offering them better terms and luring them
away.
Selection
meaning and definition
• Finding the interested candidates who have submitted their profiles for a particular job
is the process of recruitment, and choosing the best and most suitable candidates
among them is the process of selection. It results in elimination of unsuitable
candidates. It follows scientific techniques for the appropriate choice of a person for the
job.
• The recruitment process has a wide coverage as it collects the applications of interested
candidates, whereas the selection process narrows down the scope and becomes
specific when it selects the suitable candidates.
Selection Process
Application Forms
• The prospective candidates from within the organization or outside the organization are
called for applying for the post. Detailed job description and job specification are
provided in the advertisement for the job. It attracts a large number of candidates from
various areas.
Receiving applications:
• Detailed applications are collected from the candidates which provide the necessary
information about personal and professional details of a person. These applications
facilitate analysis and comparison of the candidates.
Scrutiny of applications:
• As the limit of the period within which the company is supposed to receive applications
ends, the applications are sorted out. Incomplete applications get rejected; applicants
with un-matching job specifications are also rejected.
Selection Test
Written tests:
• As the final list of candidates becomes ready after the scrutiny of applications, the
written test is conducted. This test is conducted for understanding the technical
knowledge, attitude and interest of the candidates. This process is useful when the
number of applicants is large.
• Many times, a second chance is given to candidates to prove themselves by conducting
another written test.
Psychological tests:
• These tests are conducted individually and they help for finding out the individual
quality and skill of a person. The types of psychological tests are aptitude test,
intelligence test, Attiude test and personality test
Interviews
• Candidates proving themselves successful through tests are interviewed personally. The
interviewers may be individual or a panel. It generally involves officers from the top
management.
Evaluation
Medical examination:
• Physical strength and fitness of a candidate is must before they takes up the job. In-spite
of good performance in tests and interviews, candidates can be rejected on the basis of
their ill health.
Reference check:
• Generally, at least two references are asked for by the company from the candidate.
Reference check is a type of crosscheck for the information provided by the candidate
through their application form and during the interviews.
Placement
Final selection:
• At this step, the candidate is given the appointment letter to join the organization on a
particular date. The appointment letter specifies the post, title, salary and terms of
employment. Generally, initial appointment is on probation and after specific time
period it becomes permanent.
Placement:
• This is a final step. A suitable job is allocated to the appointed candidate so that they
can get the whole idea about the nature of the job. They can get adjusted to the job and
perform well in future with all capacities and strengths.
• Placement is the process of assigning specific jobs and work places to the selected
candidates. It involves putting square pegs in to square holes i.e. matching the individual
and the job.
• Correct placement is in no way less important than accurate selection.
Even a competent employee maybe inefficient and dissatisfied if put on a wrong job.
Orientation
 • According to Gary Dessler, “Employee orientation is a procedure for providing new
employees with basic background information about the firm.”.
• Decenzo and S. P. Robbins said, “An orientation program should familiarize the new
member with the organization’s objectives, history, philosophy, procedures, and rules,
communicate relevant personnel policies such as hours of work, payment procedures
and fringe benefits, etc.”
Purpose or Objectives of Recruitment
As we know that human resource is a vital part of any organisation and to ensure the regular
supply of personnel in an organisation, recruitment is a significant step.
Following are some of the objectives which justify the need for recruitment for any business:

 Ensures Uninterrupted Business Process: Recruitment aims at providing the required

number of skilled employees to the organisation to keep the business process going
even after labour turnover.

 Identifies Present and Future Personnel Requirement: It is the initial step for detecting
and analysing the workforce requirement in the organisation, at present as well as in
future say within a year.

 Acquisition of Maximum Number of Relevant CVs: It advertises the vacant position

such that a maximum number of prospective candidates apply for the same.

 Improves Cost-Effectiveness: It is a systematic and well-planned process. Thus it has

proved to be more cost-effective.

 Accelerates the Selection Process: It backs the selection process with a pool of
candidates’ Curriculum Vitae (CV).
Types of Recruitment Needs
Recruitment is a means of filling the vacant position in the organisation.
The need for recruiting new talent in the organisation can arise in the following three types of
the condition:

 Planned Need: When an organisation develops a requirement of hiring new employees

due to a known reason and is prepared for the same in advance is a planned need.
E.g. retirement of an employee

 Anticipated Need: Anticipated needs are majorly controlled by internal and external
environmental factors. Such requirements can be predicted by the management with
the help of past experiences, news updates, etc.
E.g. technological advancement, expansion, merger, acquisition
  Sudden Need: Sometimes, the need for recruiting personnel arises due to an
unexpected reason.
E.g. employee walkouts, accident, demise, sickness
Factors Influencing the Recruitment
The organisation needs to be updated with the changes in market conditions as well as with the
changes taking place in the organisation to monitor the impact of such changes on the business.
Thus, recruitment is also affected by these factors, which can be classified into the following
two categories:
External Factors
An organisation experiences some external changes in the business environment, which affects
all business process and are beyond the control of the organisation. Therefore, management
has to develop strategies to adapt to such changes. The primary external factors affecting the
recruitment process in the organisation are as follows:
Political and Legal: The government of India ensures the employability of scheduled castes and
scheduled tribes through the reservation system. The trade unions also come into action to
restrict the organisation’s recruitment process if the candidate does not fulfil its criteria.
Technological: With the emergence of new technology, the organisation experience the need
for recruiting employees who are more skilled and tech-friendly.
Socio-Economic: The organisation functions in a society and is greatly influenced by business
ethics, no child labour and other social views of society. The changes in economic conditions,
share markets, minimum wages, recession, boom, etc., sometimes lead to employee layoffs or
requirement of new employees.
Supply and Demand: At times, the organisation requires employees having a particular set of
skills, recruitment of such employees is affected by the demand and supply of such personnel in
the labour market.
Labour Market: The availability of labour in the area where the organisation is located
influences the recruitment criteria. In case, there is surplus labour in the labour market; the
organisation will relish the easy availability of human resources at a cheaper rate.
Organisation’s Image: The image of an organisation may attract or distract the prospective
candidates — every personnel like to work for the organisation which holds a good reputation
in the market and among the job aspirants.
Internal Factors
The changes taking place within the organisation are the controllable factors but creates a
massive impact on all the business process. Recruitment is also influenced by such
considerations. Some of them are as follows:
Recruitment Policy: Every organisation have a different recruitment policy. Some companies
prefer internal recruitment of employees to appoint personnel who know the company in a
better way, while others go for external recruitment to acquire new talent.
Size of Business Unit: A small business unit requires less number of employees. Therefore it
involves short and simplified recruitment process. On the other hand, large business units need
a large number of employees. Thus, they prefer bulk recruitments. The recruitment process is
comparatively lengthy and complicated, involving a panel of employees to conduct interviews
in such units.
Cost of Acquisition: Every organisation has a budget within which it needs to function. So goes
for recruitment too. The cost incurred in hiring new employees is quite high nowadays.
Therefore recruiters have to optimise this cost through different means.
Growth and Expansion: At the time business expansion, the organisation needs to hire more
employees.
Working Conditions: The organisations which provide the right working conditions and take
proper health and safety measures of the employees tend to get more attention from the
prospective candidates.
Effective Human Resource Planning: Effective HRP provides an appropriate elaboration on the
number of employees required as well as the skills and qualification they must possess.

IMPORTANCE OF RECRUITMENT

 Determine the present and future requirements of the organization in conjunction

with its personnel planning and job analysis activities.

 Increase the pool of job candidates at minimum cost.

 Help increase the success rate of the selection process by reducing the number of
visibly under qualified or overqualified job applicants.

 Help reduce the probability that job applicants, once recruited and selected, will leave
the organization only after a short period.

 Meet the organization’s legal and social obligations regarding the composition of its
workforce.
  Begin identifying and preparing potential job applicants who will be appropriate
candidates.

 Increase organizational and individual effectiveness in the short term and long term.

 Evaluate the effectiveness of various recruiting techniques and sources for all types of
job applicants.

Process of Recruitment
A recruitment process is an organised approach towards searching new talent and introducing
them to the organisation.
In the absence of a systematic recruitment process, the cost of employee acquisition will rise.
To carefully understand the steps involved in the recruitment process, read below:

 Identifying Job Requirement: The recruiter first recognises the job opening regarding
the department in which the vacancy is, number of vacancies and urgency of hiring.

 Preparing Job Description and Job Specification: The next step is making a job
description disclosing the job-related details like designation, location, duties to be
performed and required experience. The recruiter also chalks out the job specification
having information regarding the skills, qualification, the area of expertise, etc.

 Advertising the Vacant Position: A job vacancy is advertised through newspapers,

brochures, job portals, consultancies, etc. It ensures that the maximum number of
relevant candidates can apply for the job.

 Attracting Candidates to Apply for Job: The recruiter needs to provide proper
assistance and guidance to the candidates willing to apply for the job.

 Managing Applications: The recruiter has to arrange the applications in an orderly

manner to simplify the task of scrutinising them.

 Scrutinising Applications: Next step is the initial investigation of the applications to go

through the candidate’s profile thoroughly.

 Shortlisting Candidates: By scrutinising the applications, candidates with the matching

profile are picked out for the process of selection.
UNIT IV
Training and Development
Training and Development is one of the main functions of the human resource management
department. Training refers to a systematic setup where employees are instructed and taught
matters of technical knowledge related to their jobs. It focuses on teaching employees how to
use particular machines or how to do specific tasks to increase efficiency.
Whereas, Development refers to the overall holistic and educational growth and maturity of
people in managerial positions. The process of development is in relation to insights,
attitudes, adaptability, leadership and human relations.
The following points explain the nature of training:
1. Training is a must in every organization. The alternative to systematic training is training
through ‘trial and error’, which is more costly, time-consuming and nerve-raking.
2. Expenditure on training is not an expense but an investment in human resource
development. It yields attractive returns in the form of higher productivity and employee
satisfaction.
3. Training has become more important these days because of rapid changes in technologies,
environment, working ways, and employees’ aspirations from their jobs, and management
styles. Further, effective training can result in increased competitiveness of the organization,
and greater employee satisfaction and career development.
4. Training matches individual’s abilities with job and organizational requirements. It turns new
employees into productive insiders, contributing their best efforts towards higher productivity
and profitability, quicker organizational growth and change,
5. In industry training enhances three broad skills:
I) Motor or technical skills: skill in using the operating system (machines,
methods, men) in the desired directions in most efficient and effective manner
ii) Cognitive or decision-making skills: skill in comprehending and responding to surrounding
developments,
iii) Interpersonal or human relation skills: skill in interacting with people in groups.
6. Training in an organization serves at least three functions:
Maintenance function: making sure that a new employee knows how to do his new job
satisfactorily.
Motivational function: improving the employee’s confidence and willingness to perform his job
more efficiently and learn new skills easily. and
Socialization function: helping an employee to get familiarized with his co-workers, supervisors
and people in other department in the same organization.
8. Training involves learning and learning follows a learning curve. It takes place in bursts and
plateaus. In the beginning trainees take time to pick up, then pick up learning with zeal and
then plateau (relax) for sometime, and then sees a sudden spurt and again a plateau and
sudden spurt.
Methods of Training
Every organization wants its employees to work with complete efficiency. But is it so easy? No,
is the right answer. It is because of the fact that the changes in the environment are taking so
rapidly that working with the same set of skills is almost impossible.
It creates the concept of enhancing the skills and expertise of the workers. In other words, the
changing environment creates the demand for changing and developing skills in the workers or
training them.
In this article, we will look at the various Training Methods under 2 major heads viz, On the Job
Training and Off the Job Training.
Methods of Training
1. On-the-Job Training Methods
(a) Job Rotation
There are various jobs in all organizations. Each job or work requires a different set of skills in
the workforce. In order to develop the workforce in all the sectors and zones of the
organization, this method is used.
In this method, a worker gets an opportunity to work on different posts with a different set of
responsibilities without any increase in the pay scale. Hence, it is also known as ‘lateral
movements’.
(b) Job Instructions
There are various steps to accomplish a  particular task. In this method of training, a worker is
guided by a supervisor or a trainer who tells him/her about the exact steps for the
accomplishment of the work. Moreover, new works are being taught to the workers by the
supervisor.
(c) Coaching
There is a need for both theoretical as well as practical development of the worker in any
organization. In order to do so, most of the organizations opt for this method of training.
In this method, the company provides the worker with a coach who trains him. Also, the trainer
provides him regular feedbacks.
(d) Committee assignments
Under this method of training, the organization organizes a meeting or seminar of workers
where they get a real life problem of the organization.
The organization asks them to take it as an assignment and try to solve it with their wits. Hence,
it leads to the generation of teamwork, leadership qualities, etc. among all the workers in the
organization.
2. Off-the-Job Training Methods
(a) Vestibule Training Method
Vestibule Training Method is a very famous means of training the employees especially the
manual workers. If the company starts to train the workers in the factory or the workplace itself
then there are chances of mishappening with the machinery of the factory.
In this method, similar tools and machinery are arranged outside the organization. Hence, this
allows the workers to enhance their skills by working with the same tools and machinery.
(b) Case Study Method
Generally, case study deals with an issue which a business confronts and provides an
opportunity for workers to come out with a solution.
This provides them the opportunity to analyze the case and come out with effective solutions.
This method can enhance the critical and creative thinking of an employee.
(c) Incident Method
Under this method, firstly the organization prepares a list of series of real incidents. Then they
ask the employees to state their reaction to the incident or the situation.
Later, everyone sits and decide a common solution to the incident on the basis of the individual
as well as group decisions.
(d) Conferences
Whenever several people meet to discuss any particular topic or subject, that is known as a
‘Conference’. Each worker analyzes and discusses various problems related to the topic.
Moreover, this method enables each worker to express their respective viewpoints.
Difference between Training and Development
Training is a short term process utilising a systematic and organised procedure by which non-
managerial persons learn technical knowledge and skills for a definite purpose.
Development is a long term educational process utilising a system and organisational procedure
by which managerial persons learn conceptual and theoretical knowledge for general purpose.
Training refers only to instructions in technical and mechanical operations while development
refers to philosophical and theoretical educational concepts.
Training is designed for non-managers while development involves managerial personnel.
Training and development differ in four ways:
(i) What is learnt?
(ii) Who is learning?
(iii) Why such learning takes place?
(iv) When does learning occur?
Difference # Training:
1. Focus – Focus of Training is on imparting skills to meet current job requirements.
2. Prerequisites – Training needs are dependent on lack or deficiency in skills.
3. Span – Training is a narrower and specific to job related skills.
4. Orientation – Meeting Organizational goals is the key objective of Training and may not
include development.
5. Rationale – Training is aimed at improving job related efficiency and performance, and helps
in removing performance deficiencies.
Difference # Development:
1. Focus – Focus of Development is on facilitating learning for future job necessities.
2. Prerequisites – Development depends on personal drive and ambition backed by desire to
achieve high aims.
3. Span – Development is a broader concept as it encompasses personality development also.
4. Orientation – Employee Development is the key focus and includes training wherever
necessary specifically aimed at enhancing competence of employees.
5. Rationale – Development aims at overall personal effectiveness including job efficiencies for
achieving greater stability, flexibility and capacity for growth in an organization.

Training Evaluation – Levels: Pre-Training Evaluation, Intermediate Training Evaluation

and Post-Training Evaluation
Training segment has to evolve criteria for evaluating the impact of training on employees.
Generally four different criteria are used to evaluate training programme namely reaction of
trainees, knowledge acquired, behaviour modification and other job performance parameters
like reduced accidents, increased productivity, lowered absenteeism leaping sales etc.
1. Pre-Training Evaluation:
In this stage, an evaluation is made in the beginning of the training programme in order to
understand the expectations of the trainees from the training programmes and the extent to
which they have understood its objectives. This step enables the training segment to modify the
training curricula in such a way that the objectives of the training programme are aligned to
those of the trainees.
2. Intermediate Training Evaluation:
Training and development segment wants to ensure that training is progressing as expected.
Mid-course corrections can be made in the event of deviation from the envisaged objectives.
For example, if trainees perceive that a training programme is aimed at building communication
skill is more theory-oriented, rather than practice-oriented, the feedback may be useful to
modify the instruction method. Thus, it serves as a verifying tool.
3. Post-Training Evaluation:
The criteria used for assessing the impact of training programme include Reaction, Learning,
Behaviour and Results (RLBR).
a. Reactions:
This measures the degree of satisfaction of trainees with the training programme, namely
subject matter and content of training programme, the environment, methods of training etc.
The outcome of evaluation of reaction may be useful in further strengthening the areas the
participants find it more useful and in modifying the areas they find it not useful. Negative
reactions may dampen the spirit of participation in future training programmes. However,
positive reactions may not provide complete information about the effectiveness of the
programme.
b. Learning:
It measures the degree to which trainees have acquired new knowledge, skill or competencies.
The trainer has to measure the knowledge and skill level of trainees in the beginning of the
programme. It is supposed to be the baseline or standard. Again the level of knowledge and
skills obtained at the end of training is measured and compared against the standard. Thus pre
and post training comparison helps to assess the improvement level.
c. Behaviour:
Similarly, a comparison of pre and post training behaviour may reveal the impact of training on
behaviour modification. Yet, unfortunately, much of what is learnt during training cannot be
used on the job owing to lack of resources or conducive environment. In such a case, one
cannot say that the training is ineffective. It follows that when training environment is similar to
actual work environment, such a climate facilitates transfer and application of learning.
d. Results:
Generally, it is difficult to measure precisely the impact of training on business performance
which depends on several other factors like economic climate, marketing, size of investment,
etc. However, certain measures like productivity, sales volume and profit, etc., may be
compared before and after the training episode. Any improvement may be partially attributed
to the training imparted. Besides, return on investment, cost benefit analysis and bench-
marking are other methods to assess the value of training.

HUMAN RESOURSE DEVELOPMENT

Human Resource Development (HRD) is the process of helping people to acquire

competencies and skills so as to ensure their usefulness to the organisation in terms of
both present and future organizational conditions. It also helps the employees to
understand their own capabilities better so that they can best utilise them and also fulfill
their expectation both professional and personal.

Human Resource Development (HRD) is a recent new systematic approach to

proactively deal with issues related to individual employees, teams and the total
organisation.

The scope of HRD includes:

(i) Recruiting the employees within the dimensions and possibilities for developing
human resources.

(ii) Selecting those employees having potentialities for development to meet the present
and future organisational needs.

(iii) Analysing, appraising and developing performance of employees as individuals,

members of a group and organisations with a view to develop them by identifying the
gaps in skills and knowledge.

(iv) Help the employees to learn from their superiors through performance
consultations, performance counselling and performance interviews.

(v) Train all the employees in acquiring new technical skills and knowledge.

(vi) Develop the employees in managerial and behavioural skills and knowledge.
(vii) Planning for employees’ career and introducing developmental programmes.

(viii) Planning for succession and develop the employees.

(ix) Changing the employees’ behaviour through organisation development.

(x) Employee learning through group dynamics, intra and inter team interaction.

(xi) Learning through social and religious interactions and programmes.

(xii) Learning through job rotation, job enrichment and empowerment.

(xiii) Learning through quality circles and the schemes of workers’ participation in the
management.

Human Resources Development (HRD) – Features

(i) HRD is a systematic and planned approach for the development of individuals in
order to achieve organisational, group and individual goals.

(ii) HRD is a continuous process for the development of technical, managerial,

behavioural and conceptual skills and knowledge.

(iii) HRD develops the skills and knowledge not only at the individual level, but also at
dyadic level, group level and organisational level.

(iv) HRD is multi-disciplinary. It draws inputs from Engineering, Technology, Psychology,

Anthropology, Management Commerce, Economics, Medicine, etc.

(v) HRD is embodied with techniques and processes. HRD techniques include
performance appraisal, training, management development, career planning and
development, organisation development, counselling, social and religious programmes,
employee involvement /workers’ participation, quality circles, etc.

(vi) HRD is essential not only for manufacturing and service industry but also for
information technology industry.

HRD has been developed as a discipline and it studies in different universities in

postgraduate levels. In 1965, HRD has been studies at Washington University. Therefore
many universities have introduced courses in specific HRD methodology such, as
communications or human services. It mainly applied to the behavioural science.
The writing of Gordon Lippit, Warren Schmidt and Robert Blake are greatly contributed
particularly in the development of the paradigm. There is increased emphasis on a
systems approach to HRD. Leonard Silver and Hughes and Robert mager are
contributed particularly in pushing for adoption of specific behavioural objectives in
framing objective HRD modules.

HRD is specialised and technical field with is increasing use of modem science and
technology. Its working is essentially centralized. There is stress on individualized
instruction.

HRD is a profession, a specialised activity. It vendors are employed by organisations to

plan and administer training programmes through more significance areas of
organisational practice viz. organisational design, change, planning and development Its
scope has progressed and moved from micro to macro concern.

Concept of HRD

The concept of Human Resource assumes that human beings are a great asset to an
organization. They can contribute a great deal to the achievement of organisational
goals. This positive view of people working in the organisations as an asset with
unlimited potential is the core of the concept of the human resource system.

HRD is a process of helping people to acquire competencies. HRD is needed by any

organisation that wants to be dynamic and growth-oriented or to succeed in a fast-
changing environment. Organisations can become dynamic and grow only through the
efforts and competencies of their human resources

Four Objectives of Human Resources Development are : (A) To Provide A

Comprehensive Platform For The Development Of Human Resources In The
Organisation (B) To provide a climate for employees to discover, develop, and use
their knowledge for the betterment of organisation (C) To retain, attract and
motivate the talented employees (D) To facilitate systematic generation of
information.

(A) To provide a comprehensive platform for the development of Human

Resources In the organisation:

Every HRD programmed starts with providing a framework within the organisation so
that employees develop on their own-on the job.
Employees would be given freedom to express their feeling with the superiors. The
superiors also respect the feelings of employees and suggest them (not in a critical
tone) so that they develop.

(B) To provide a climate for employees to discover, develop, and use their
knowledge for the betterment of organisation:

Another basic objective of HRD programmer is to create a work climate in the

organisation whereby the employees contribute their best in the organisation. Every
employee, in an HRD programmer, is given full freedom to exhibit his skills, talents and
knowledge for the benefit of enterprise. Innovative ideas and schemes would be
encouraged and appreciated in the organisation.

(C) To retain, attract and motivate the talented employees:

An organisation concluding HRD programme has the tendency of attracting and

retaining the talented employees.

People would get an impression that organisation is providing a convenient platform to

fully stretch their capacities and the talented people would get motivated when their
intelligence and knowledge get recognized and acknowledged by the organisation.
Organisations lacking in HRD programmes would least motivate the productive and
effective employees.

(D) To facilitate systematic generation of information:

An HRD programme facilitates the organisation to get access to information on human

resources for planning, development, placement, career planning and succession
planning.

What is employee development?

At a very high-level, employee development is a process of working with employees to

improve, enhance, refine and hone existing skills, and to also develop newer ones, in
support of the organization’s mission and goals.

Inherent in this definition is the following finer points of interest:

 Employee development isn’t just about developing organizational L&D strategies

 It’s more than just implementing mandatory employee training

  It goes way beyond meeting with employees annually to discuss their
shortcomings and highlighting improvement needs

When done right, even though employee development requires investment (time, effort
and financing) from the company, those investments will more than pay off over the
longer-term.

For instance, sometimes letting go of an employee with limited skills, or developing

those skills to the organization’s standards, will both cost money. However, if those
development efforts result in longer-term employee retention, that’s a win-win situation
for everyone concerned – thanks to a well-thought-out employee development strategy.

In the above scenario, what has employee development done?

 It has avoided the costly (and sometimes protracted) process of hiring a

replacement for an outgoing employee

 It has preserved a lot of “sunk capital” already invested in that employee in terms
of his/her organizational experience and expertise

 It allows HR professionals and L&D experts to build upon (rather than build from
scratch) organization culture (different from technical experience and expertise)
already inculcated into that employee

All-in-all, further developing an employee results in getting human assets up and

running, to organizational standards, much more efficiently than onboarding or
indoctrination training of freshly hired employees would.

Benefits and importance of employee development

A carefully thought-out employee development strategy is important at multiple levels.

And when well executed, it can accrue multiple benefits to all parties concerned,
including employees, HR managers, and the broader organization.

Some of these benefits include:

1. Performance Improvement

For companies to remain competitive in their niche, the organization must continue to
outperform the competition. Employee development can help the organization meet –
and even exceed – performance expectations.
2. Better handle unexpected situations

Today's business environment is all about constant change. And that change not only
brings challenges (for the workforce), but if handled properly, it also opens previously
unexpected opportunities. It is therefore vital for the workforce to be able to handle
ever-evolving situations quickly and effectively.

Adaptable employees are great at improvising solutions where employees with less-

developed skills would simply accept the status quo. One of the benefits of having a
well-defined employee development program is that it can equip employees to better
handle the unexpected.

3. Learning culture inside an organization help attract new employees and improve
loyalty

HR professionals can attest to the fact that it’s not just enough to advertise job
vacancies – it’s equally important for prospective employees to want to apply for those
posts. If the latter is absent, companies will not attract the best and the brightest to help
them remain competitive..

Helping develop employee talent, including through tactics such as personalized

development plans, creates a highly attractive working environment. According to the
study such organizations, that have a mature learning culture, are three-times more
likely to use that fact as a recruitment tool. And implementing a robust employee
development program is the first step in that direction.

4. Save money via retaining employees

Investing in in-house employee skills development programs is important to ensure that

the workforce can do what they must do to “keep the ship afloat”. However, employee
development can also be a big money-saver in the longer-term.

5. Help grow potentially good employees into great leaders

If an organization is to grow, survive and thrive in the long-term, it needs to build a

continuous stream of would-be-leaders. Unfortunately, leadership skills rarely come
from attending Ivy League institutions or going on weekend leadership workouts –
though that helps.

6. Improve employee engagement and motivation with good training

Having a workforce that’s fully committed and engaged with the organization at every
level is vital for success. Driving employee engagement, so that they remain motivated
to the company’s mission, is a function of various factors, such as a good working
environment, employee recognition and appreciation, frequent communication and
great training.

Studies by the Dale Carnegie institute found that a highly engaged workforce can lead
to exceptional productivity improvements – as high as 202%. In fact, 85% of
leaders believe that employee engagement is a strategic priority.

A well-defined employee engagement program can balance all the critical employee
motivational factors, including training and skills development, to deliver the benefits of
a fully-motivated workforce across the company.

7. This gives the company flexibility to expand, innovate and compete more robustly
within its niche

To be a true market leader in one's niche, it is important for companies to be nimble,

flexible and accommodative to the needs of their customers and partners. Having a
well-balanced workforce, that has the skills to innovate and compete for new business
opportunities, is one benefit that robust employee development plans offer to
organizations. Such programs not only develop existing skills but can be used to
deliver longer-term competitiveness by instilling new skills that might be needed in the
future.

In summary, therefore, a well-trained, dynamic and highly motivated workforce is crucial

to any organization. And the best way to raise employees to such standards is to invest
in their ongoing development. Such employees not only offer financial benefits to the
organization, in terms of profitability and performance improvements, but they help
with employee morale and retention.

MANAGING CAREER PLANNING

The steps in career development are:

(1) Identifying career needs.

(2) Developing career opportunities.

(3) Integration of employees needs with career opportunities.

(4) Regular monitoring.

Step # 1. Identifying Career Needs:

Some large organizations have assessment centres or conduct career development

workshops wherein a group of employees are brought together to undergo
psychological testing, simulation exercises, and depth interviews. This process helps the
employee to make a decision regarding career goals and the steps to be taken to put
efforts to attain these goals. The HR manager also plays an important role of providing
information and assistance in making decisions about the career needs of the employee.

Step # 2. Developing Career Opportunities:

Career opportunities are identified through job analysis. The manager should identify
career path for employees in the organization. He/she should discuss with the
employees what jobs are available in the organizational hierarchy and at the same time
find where the employee would want to go up in the organization in future. The
employees should be provided information regarding job postings that are available in
the organization and, for future reference, what requirements they will have to fulfill to
achieve the promotion which they aspire.

Step # 3. Integration of Employee Needs with Career Opportunities:

It is necessary to align the needs and aspirations of the employees with career
opportunities in order to ensure right people will be available to meet the organizational
manpower requirements. Therefore, emphasis is placed on the training, on- and off-the-
job, counselling and coaching by supervisor, and planned rotation in positions of
varying functions and in different locations. The process is pursued further with the help
of periodic performance appraisals. Training and counselling will be a wasteful exercise
if the employee does not make progress along his/her career path.

The two important techniques in this stage of career development are:

(a) Management by objectives

(b) Career counselling.

Under ‘management by objectives’, the employee sets his/her development goals and
also an action plan to achieve those goals. Steps are taken by the line managers to
integrate personal goals with the organizational goals.
In the case of counselling, the manager discusses the strengths and weaknesses of the
employee. This helps the employee to identify areas of development so that he/she can
meet future challenges of his/her job.

Step # 4. Regular Monitoring:

It is necessary to regularly monitor the progress of the employee towards his/her career
development plans and see that the support is being provided to develop those career
plans. If there is a discrepancy, steps should be taken to reassign work as necessary to
ensure that career development plans are met. In situations where career opportunities
are not available due to influence of technology and economic factors, the organization
should redesign jobs or make career shifts.

Elements of Career Planning Programs

Though programs differ, four distinct elements of career planning programs emerge.
They include (1) individual assessments of abilities, interests, career needs, and goals; (2)
organizational assessments of employee abilities and potential; (3) communication of
information concerning career options and opportunities with the organization; and (4)
career counseling to set realistic goals and plan for their attainment. Each of these
elements is discussed in greater detail below.

Individual Assessments

Individual assessment of abilities, interests, career needs, and goals is basically a process
of self-exploration and analysis. Individuals are frequently guided by self-assessment
exercises.

The self-assessment process is basically viewed as an individual responsibility; however,

organizations can aid in this process by providing the employee with materials and
opportunities for self-exploration and analysis.

A variety of self-assessment materials are available commercially, but a number of

organizations, including IBM, Xerox, General Motors, and General Electric, have
developed tailor-made workbooks for employee career planning purposes.

Individual career planning exercises can be done independently by employees or in

workshops sponsored by the organization. Workshops have the advantage of
combining a number of career planning elements including self-assessment,
communication of organizational career and development opportunities, and one-on-
one counseling to ensure that career goals are realistic.
Organizational Assessments

A key issue in career counseling sessions is whether an employee's goals are realistic in
terms of organizational possibilities and organizational assessments of employee
abilities and potential. Accurate assessments of employee abilities and potential are
important to both the organization and the individual.

Organizations have several sources of information for making assessments of employee

abilities and potential. First is selection information, including ability tests, assessment
center test, interest inventories, and biographical information such as education and
work experience. Second is current job history information, including performance
appraisal information, records of promotions and promotion recommendations, salary
increases, and participation in various training and development programs.
Organizations have traditionally relied on performance appraisal data as the primary
basis for assessing employee potential.

Career Information within an Organization

Before realistic goals can be set, an employee need information about career options
and opportunities. This includes information about possible career directions; possible
paths of career advancement; and specific job vacancies. In organizations with informal
career planning programs, employees learn about career options and opportunities
from their supervisors within the context of developmental performance appraisal
interviews. Organizations with more established career planning programs make greater
use of workbooks, workshops, and even recruiting materials to communicate career
options and opportunities. Career paths have been defined as logical progressions
between jobs or from one job to a target position. They can be either traditional or
behavioral.

Traditional career paths are based on past patterns of actual movement by employees.
They tend to be limited to advancement within a single function or organizational unit,
such as purchasing, sales, or customer relations. Years of service to the organization
largely determine the rate at which advancement can occur. For example, a salesman
might expect to advance to the position of account supervisor after five years, to sales
supervisor after 10, to district manager after 15, and to regional manager after 25 years
of service.

More flexible patterns of employee career movement are described by behavioral career
paths, which are based on analysis of similarities in job activities and requirements.
Where similarities exist, jobs can be grouped into job families, or clusters. Thus, all jobs
involving similar work activities and levels of required skills and abilities form one job
cluster, regardless of job title. Focusing on job similarities across functions and
organizational units brings to light new career options for employees and greater
flexibility for the organization in utilizing its available human resources. One
organization, for example, was able to shift a number of its sales personnel to
purchasing positions when sales declined in one major product line and opportunities
became available in the purchasing department. This shift was undertaken when a job
analysis showed behavioral similarities between the two previously distinct functions.

Career Counseling

It is in counseling sessions, typically with supervisors and managers in developmental

performance appraisal interviews, that most employees explore career goals and
opportunities in the organization. Supervisors and managers need accurate assessments
of employee abilities and potential, as well as information about career options and
opportunities in the organization. HR professionals may be involved in some informal
career counseling activities, but basically their role is to support career counseling
activities of supervisors and managers. This means providing supervisors and managers
with needed information as well as with the necessary training to function effectively as
counselors.

In career counseling sessions, employees seek answers to the following kinds of

questions:

1. What are my skills and what are the possibilities for developing them or learning
new ones?

2. What do I really want for myself insofar as work is concerned?

3. What's possible for me, given my current abilities and skills?

4. What's really required for certain jobs?

5. What training will be required if I choose to pursue a certain career objective?"

When counselors are equipped to help employees find the answers to such questions,
realistic career goals can be set. Next, development strategies must be devised.

What Is Succession Planning?

Succession planning is a strategy for passing on leadership roles—often the ownership

of a company—to an employee or group of employees. Also known as "replacement
planning," it ensures that businesses continue to run smoothly after a company's most
important people move on to new opportunities, retire, or pass away.

Succession planning can also provide a liquidity event enabling the transfer of
ownership in a going concern to rising employees.

Benefits of Succession Planning

There are several advantages for both employers and employees to having a formalized
succession plan in place:

 Employees know that there is a chance for advancement and possibly ownership,
which can lead to more empowerment and higher job satisfaction.

 Knowing that the company is planning for future opportunities reinforces career
development among employees.

 Management's commitment to succession planning means that supervisors will

mentor employees to transfer knowledge and expertise.

 Management keeps better track of the value of employees so that positions can

be filled internally when opportunities arise.

 With succession planning, leadership and employees are better able to share
company values and vision.

 With Baby Boomer business owners and leadership retiring in huge numbers, a
new generation of leaders will be needed.

 Shareholders of publicly traded companies benefit from proper succession

planning, such as the case when the next candidate for CEO is involved in
business operations and is well respected years before the current CEO retires.
Also, if investors observe a well-communicated succession plan, they won't sell
the company's stock when the CEO retires.
PERFORMANCE APPRAISAL PROCESS
The Performance Appraisal process involves the following steps :
(1)Establish the Standards of Performance.
(2)Communicate these standards to employees.
(3)Measure the actual performance.
(4)Compare actual performance with the standards established.
(5)In case of variation, initiate corrective action.
(6)Communicate the rating to the employee.
(7)Discuss the feedback with the employee.
(8)Conduct post-appraisal Interview.
(9)Initiate corrective action if required.
Methods of Performance Appraisal
TRADITIONAL METHODS
(1) Ranking Method
(2)Paired Comparison Method
(3) Forced Distribution
(4) Forced Choice Method
(5)Check List Method
(6)Critical Incident Method
(7)Graphic Rating Scale
(8)Essay Method
(9)Field Review Method
(10)Confidential Report

MODERN METHODS
(1)MBO
(2)BARS
(3)Assessment Centers
(4)360O Appraisal
(5)Cost Accounting Method
Performance Appraisal Methods: Traditional and Modern Methods!
Each method of performance appraisal has its strengths and weaknesses may be suitable for
one organisation and non-suitable for another one. As such, there is no single appraisal method
accepted and used by all organisations to measure their employees’ performance.
All the methods of appraisal devised so far have been classified differently by different authors.
While DeCenzo and Robbins’^ have classified appraisal methods into three categories: absolute
methods, relative methods and objective methods; Aswathappa has classified these into two
categories past-oriented and future-oriented.
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Michael R Carrell et. al. have classified all appraisal methods into as many as six categories:
rating scales, comparative methods, critical incidents, 6ssay, MBO and combination methods.
Rock and Levis” have classified the methods into two broad categories: narrow interpretation
and broad interpretation. Beatty and Schneier have categorised various methods of appraisal
into four groups: comparative methods, absolute methods, goal setting, and direct indices.
A more widely used classification of appraisal methods into two categories, viz., traditional
methods and modem methods, is given by Strauss and Sayles”. While traditional methods lay
emphasis on the rating of the individual’s personality traits, such as initiative, dependability,
drive creativity, integrity, intelligence, leadership potential, etc.; the modem methods, on the
other hand, place more emphasis on the evaluation of work results, i.e., job achievements than
the personal traits! Modem methods tend to be more objective and worthwhile. The various
methods included in each of the two categories are listed in Table 28.4.

In the discussion that follows, each method under both categories will be described briefly.
Traditional Methods:
Ranking Method:
It is the oldest and simplest formal systematic method of performance appraisal in which
employee is compared with all others for the purpose of placing order of worth. The employees
are ranked from the highest to the lowest or from the best to the worst.
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In doing this the employee who is the highest on the characteristic being measured and also the
one who is L lowest, are indicated. Then, the next highest and the next lowest between next
highest and lowest until all the employees to be rated have been ranked. Thus, if there are ten
employees to be appraised, there will be ten ranks from 1 to 10.
However, the greatest limitations of this appraisal method are that:
(i) It does not tell that how much better or worse one is than another,
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(ii) The task of ranking individuals is difficult when a large number of employees are rated, and
(iii) It is very difficult to compare one individual with others having varying behavioural traits. To
remedy these defects, the paired comparison method of performance appraisal has been
evolved.
Paired Comparison:
In this method, each employee is compared with other employees on one- on one basis, usually
based on one trait only. The rater is provided with a bunch of slips each coining pair of names,
the rater puts a tick mark against the employee whom he insiders the better of the two. The
number of times this employee is compared as better with others determines his or her final
ranking.
The number of possible pairs for a given number of employees is ascertained by the following
formula:
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N (N-1)/2
Where N = the total number of employees to be evaluated. Let this be exemplified with an
imaginary example.
If the following five teachers have to be evaluated by the Vice Chanceller of a University:
(K), Mohapatra (M Raul (R), Venkat (V), and Barman (B), the above formula gives 5 (5 -1) / 2 or
10 pairs.
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These are:
Thus, the pairs so ascertained give the maximum possible permutations and combinations. The
number of times a worker is considered better makes his/her score. Such scores are
determined for each worker and he/she is ranked according to his/her score. One obvious
disadvantage of this method is that the method can become unwieldy when large numbers of
employees are being compared.
Grading Method:
In this method, certain categories of worth are established in advance and carefully defined.
There can be three categories established for employees: outstanding, satisfactory and
unsatisfactory. There can be more than three grades. Employee performance is compared with
grade definitions. The employee is, then, allocated to the grade that best describes his or her
performance.
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Such type of grading is done is Semester pattern of examinations and in the selection of a
candidate in the public service sector. One of the major drawbacks of this method is that the
rater may rate most of the employees on the higher side of their performance.
Forced Distribution Method:
This method was evolved by Tiffen to eliminate the central tendency of rating most of the
employees at a higher end of the scale. The method assumes that employees’ performance
level confirms to a normal statistical distribution i.e., 10,20,40,20 and 10 per cent. This is useful
for rating a large number of employees’ job performance and promo ability. It tends to
eliminate or reduce bias.
It is also highly simple to understand and easy to apply in appraising the performance of
employees in organisations. It suffer from the drawback that improve similarly, no single grade
would rise in a ratings.
Forced-Choice Method:
The forced-choice method is developed by J. P. Guilford. It contains a series of groups of
statements, and rater rates how effectively a statement describes each individual being
evaluated. Common method of forced-choice method contains two statements, both positive
and negative.
Examples of positive statements are:
1. Gives good and clear instructions to the subordinates.
2. Can be depended upon to complete any job assigned.
A pair of negative statements may be as follows:
1. Makes promises beyond his limit to keep these.
2. Inclines to favour some employees.
Each statement carries a score or weight, which is not made known to the rater. The human
resource section does rating for all sets of statements— both positive and negative. The final
rating is done on the basis of all sets of statements. Thus, employee rating in this manner
makes the method more objective. The only problem associated with this method is that the
actual constructing of several evaluative statements also called ‘forced-choice scales’, takes a
lot of time and effort.
Check-List Method:
The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater.
In this method, a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’ are
prepared by the HR department (see Figure 28-2). The check-list is, then, presented to the rater
to tick appropriate answers relevant to the appraisee. Each question carries a weight-age in
relationship to their importance.

When the check-list is completed, it is sent to the HR department to prepare the final scores for
all appraises based on all questions. While preparing questions an attempt is made to
determine the degree of consistency of the rater by asking the same question twice but in a
different manner (see, numbers 3 and 6 in Figure 28-2).
However, one of the disadvantages of the check-list method is that it is difficult to assemble,
analyse and weigh a number of statements about employee characteristics and contributions
From a cost stand point also, this method may be inefficient particularly if there are a number
of job categories in the organisation, because a check-list of questions must be prepared for
each category of job. It will involve a lot of money, time and efforts.
Critical Incidents Method:
In this method, the rater focuses his or her attention on those key or critical behaviours that
make the difference between performing a job in a noteworthy manner (effectively or
ineffectively). There are three steps involved in appraising employees using this method
First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared.
Second, a group of experts then assigns weightage or score to these incidents, depending upon
their degree of desirability to perform a job. Third, finally a check-list indicating incidents that
describe workers as “good” or “bad” is constructed. Then, the check-list is given to the rater for
evaluating the workers.
The basic idea behind this rating is to apprise the workers who can perform their jobs
effectively in critical situations. This is so because most people work alike in normal situation.
The strength of critical incident method is that it focuses on behaviours and, thus, judge’s
performance rather than personalities.
Its drawbacks are to regularly write down the critical incidents which become time-consuming
and burdensome for evaluators, i.e., managers. Generally, negative incidents are positive ones.
It is rater’s inference that determines which incidents are critical to job performance. Hence,
the method is subject to all the limitations relating to subjective judgments.
Graphic Rating Scale Method:
The graphic rating scale is one of the most popular and simplest techniques for appraising
performance. It is also known as linear rating scale. In this method, the printed appraisal form is
used to appraise each employee.
The form lists traits (such as quality and reliability) and a range of job performance
characteristics (from unsatisfactory to outstanding) for each trait. The rating is done on the
basis of points on the continuum. The common practice is to follow five points scale.
The rater rates each appraisee by checking the score that best describes his or her performance
for each trait all assigned values for the traits are then totaled. Figure 28-3 shows a typical
graphic rating scale.

This method is good for measuring various job behaviours of an employee. However, it is also
subjected to rater’s bias while rating employee’s behaviour at job. Occurrence of ambiguity in
design- mg the graphic scale results in bias in appraising employee’s performance.
Essay Method:
Essay method is the simplest one among various appraisal methods available. In this method,
the rater writes a narrative description on an employee’s strengths, weaknesses, past
performance, potential and suggestions for improvement. Its positive point is that it is simple in
use. It does not require complex formats and extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In the absence of any
prescribed structure, the essays are likely to vary widely in terms of length and content. And, of
course, the quality of appraisal depends more upon rater’s writing skill than the appraiser’s
actual level of performance.
Moreover, because the essays are descriptive, the method provides only qualitative
information about the employee. In the absence of quantitative data, the evaluation suffers
from subjectivity problem. Nonetheless, the essay method is a good start and is beneficial also
if used in conjunction with other appraisal methods.
Field Review Method:
When there is a reason to suspect rater’s biasedness or his or her rating appears to be quite
higher than others, these are neutralised with the help of a review process. The review process
is usually conducted by the personnel officer in the HR department.
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The review process involves the following activities:
(a) Identify areas of inter-rater disagreement.
(b) Help the group arrive at a consensus.
(c) Ensure that each rater conceives of the standard similarity.
However, the process is a time-consuming one. The supervisors generally resent what they
consider the staff interference. Hence, the method is not widely used.
Confidential Report:
It is the traditional way of appraising employees mainly in the Government Departments.
Evaluation is made by the immediate boss or supervisor for giving effect to promotion and
transfer. Usually a structured format is devised to collect information on employee’s strength
weakness, intelligence, attitude, character, attendance, discipline, etc. report.
Modern Methods:
Management by Objectives (MBO):
Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem; Peter F. Drucker propounded a new
concept, namely, management by objectives (MBO) way back in 1954 in his book.
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The Practice of management. The concept of MBO as was conceived by Drucker, can be
described as a “process whereby the superior and subordinate managers of an organization
jointly identify its common goals, define each individual’s major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and
assessing the contribution of each its members”.
In other words, stripped to its essentials, MBO requires the manager to goals with each
employee and then periodically discuss his or her progress toward these goals.
In fact, MBO is not only a method of performance evaluation. It is viewed by the Practicing
managers and pedagogues as a philosophy of managerial practice because .t .s a method by
wh.ch managers and subordinates plan, organise, communicate, control and debate.
An MBO programme consists of four main steps: goal setting, performance standard, compari-
son, and periodic review. In goal-setting, goals are set which each individual, s to attain. The
superior and subordinate jointly establish these goals. The goals refer to the desired outcome
to be achieved by each individual employee.
In performance standards, the standards are set for the employees as per the previously
arranged time period. When the employees start performing their jobs, they come to know
what is to be done, what has been done, and what remains to be done.
In the third step the actual level of goals attained are compared with the goals agreed upon.
This enables the evaluator to find out the reasons variation between the actual and standard
performance of the employees. Such a comparison helps devise training needs for increasing
employees’ performance it can also explore the conditions having their bearings on employees’
performance but over which the employees have no control.
Finally, in the periodic review step, corrective measure is initiated when actual performance
deviates from the slandered established in the first step-goal-setting stage. Consistent with the
MBO philosophy periodic progress reviews are conducted in a constructive rather than punitive
manner.
The purpose of conducting reviews is not to degrade the performer but to aid in his/her future
performance. From a motivational point of view, this would be representative of McGregor’s
theories.
Figure 28.4 present the MBO method of performance appraisal presently used by an
engineering giant i.e., Larsen and Turbro Limited.

Limitation of MBO:
MBO is not a panacea, cure for all organisational problems.
As with other methods, it also suffers from some limitations as catalogued below:
(i) Setting Un-measurable Objectives:
One of the problems MBO suffers from is unclear and un-measurable objectives set for
attainment. An objective such as “will do a better job of training” is useless as it is un-
measurable. Instead, “well have four subordinates promoted during the year” is a clear and
measurable objective.
(ii) Time-consuming:
The activities involved in an MBO programme such as setting goals, measuring progress, and
providing feedback can take a great deal of time.
(iii) Tug of War:
Setting objectives with the subordinates sometimes turns into a tug of war in the sense that the
manager pushes for higher quotas and the subordinates push for lower ones. As such, goals so
set are likely to be unrealistic.
(iv) Lack of Trust:
MBO is likely to be ineffective in an environment where management has little trust in its
employees. Or say, management makes decisions autocratically and relies heavily on external
controls.
Behaviourally Anchored Rating Scales (BARS):
The problem of judgmental performance evaluation inherent in the traditional methods of
performance evaluation led to some organisations to go for objective evaluation by developing
a technique known as “Behaviourally Anchored Rating Scales (BARS)” around 1960s. BARS are
descriptions of various degrees of behaviour with regard to a specific performance dimension.
It combines the benefits of narratives, critical incidents, and quantified ratings by anchoring a
quantified scale with specific behavioural examples of good or poor performance. The
proponents of BARS claim that it offers better and more equitable appraisals than do the other
techniques of performance appraisal we discussed so far.
Developing BARS typically involves five steps:
1. Generating Critical Incidents:
Critical incidents (or say, behaviours) are those which are essential for the performance of the
job effectively Persons who are knowledgeable of the job in question (jobholders and/or
supervisors) are asked to describe specific critical incidents of effective and ineffective
performance. These critical incidents may be described in a few short sentences or phrases
using the terminology.
2. Developing Performance Dimensions:
The critical incidents are then clustered into a smaller set of performance dimensions, usually
five to ten. Each cluster, or say, dimension is then defined.
3. Reallocating Incidents:
Various critical incidents are reallocated dimensions by another group of people who also know
the job in question. Various critical incidents so reallocated to original dimensions are clustered
into various categories, with each cluster showing similar critical incidents. Those critical
incidents are retained which meet 50 to 80% of agreement with the cluster as classified in step
4. Scaling Incidents:
The same second group as in step 3 rates the behaviour described in each incident in terms of
effectiveness or ineffectiveness on the appropriate dimension by using seven to nine points
scale. Then, average effectiveness ratings for each incident are determined to decide which
incidents will be included in the final anchored scales.
5. Developing Final BARS Instrument:
A subset of the incidents (usually six or seven per cluster) is used as a behavioural anchor for
the final performance dimensions. Finally, a BARS instrument with vertical scales is drawn to be
used for performance appraisal, as in Figure 27-5.
How BARS is developed can be exemplified with an example of grocery checkout clerks working
in a large grocery chain.
A number of critical incidents involved in checking out of grocery can be clustered into seven
performance dimensions:
1. Knowledge and Judgment
2. Conscientiousness
3. Skill in Human Relations
4. Skill in Operation of Register
5. Skill in Bagging
6. Organisational Ability of Check stand Work
7. Skill in Monetary Transactions
8. Observational Ability
Now, a BARS for one of these performance dimensions, namely, “knowledge and judgment”
can be developed, as in Figure 28-5. Notice how the typical BARS is behaviourally anchored with
specific critical incidents.

BARS method of performance appraisal is considered better than the traditional ones because it
provides advantages like a more accurate gauge, clearer standards, better feedback, and
consistency in evaluation. However, BARS is not free from limitations.
The research on BARS indicates that it too suffers from distortions inherent in most rating
scales. The research study concluded that “it is clear that research on BARS to date does not
support the high promise regarding scale independence In short, while BARS may outperform
conventional rating techniques, it is clear that they are not a panacea for obtaining high
interrater reliability”
Assessment Centres:
The introduction of the concept of assessment centres as a method of performance method is
traced back in 1930s in the Germany used to appraise its army officers. The concept gradually
spread to the US and the UK in 1940s and to the Britain in 1960s.
The concept, then, traversed from the army to business arena during 1960s. The concept of
assessment centre is, of course, of a recent origin in India. In India, Crompton Greaves, Eicher,
Hindustan Lever and Modi Xerox have adopted this technique of performance evaluation.
In business field, assessment centres are mainly used for evaluating executive or supervisory
potential. By definition, an assessment centre is a central location where managers come
together to participate in well-designed simulated exercises. They are assessed by senior
managers supplemented by the psychologists and the HR specialists for 2-3 days.
Assessee is asked to participate in in-basket exercises, work groups, simulations, and role
playing which are essential for successful performance of actual job. Having recorded the
assessee’s behaviour the raters meet to discuss their pooled information and observations and,
based on it, they give their assessment about the assesee. At the end of the process, feedback
in terms of strengths and weaknesses is also provided to the assesees.
The distinct advantages the assessment centres provide include more accurate evaluation,
minimum biasedness, right selection and promotion of executives, and so on. Nonetheless, the
technique of assessment centres is also plagued by certain limitations and problems. The
technique is relatively costly and time consuming, causes suffocation to the solid performers,
discourages to the poor performers (rejected), breeds unhealthy competition among the
assessees, and bears adverse effects on those not selected for assessment.
360 – Degree Appraisal:
Yet another method used to appraise the employee’s performance is 360 – degree appraisal.
This method was first developed and formally used by General Electric Company of USA in
1992. Then, it travelled to other countries including India. In India, companies like Reliance
Industries, Wipro Corporation, Infosys Technologies, Thermax, Thomas Cook etc., have been
using this method for appraising the performance of their employees. This feedback based
method is generally used for ascertaining training and development requirements, rather than
for pay increases.
Under 360 – degree appraisal, performance information such as employee’s skills, abilities and
behaviours, is collected “all around” an employee, i.e., from his/her supervisors, subordinates,
peers and even customers and clients.
In other worlds, in 360-degree feedback appraisal system, an employee is appraised by his
supervisor, subordinates, peers, and customers with whom he interacts in the course of his job
performance. All these appraisers provide information or feedback on an employee by
completing survey questionnaires designed for this purpose.
All information so gathered is then compiled through the computerized system to prepare
individualized reports. These reports are presented to me employees being rated. They then
meet me appraiser—be it one’s superior, subordinates or peers—and share the information
they feel as pertinent and useful for developing a self-improvement plan.
In 360 – degree feedback, performance appraisal being based on feedback “all around”, an em-
ployee is likely to be more correct and realistic. Nonetheless, like other traditional methods,
this method is also subject to suffer from the subjectivity on the part of the appraiser. For
example, while supervisor may penalise the employee by providing negative feedback, a peer,
being influenced by ‘give and take feeling’ may give a rave review on his/her colleague.
Cost Accounting Method:
This method evaluates an employee’s performance from the monetary benefits the employee
yields to his/her organisation. This is ascertained by establishing a relationship between the
costs involved in retaining the employee, and the benefits an organisation derives from
Him/her.
While evaluating an employee’s performance under this method, the following factors are
also taken into consideration:
1. Unit wise average value of production or service.
2. Quality of product produced or service rendered.
3. Overhead cost incurred.
4. Accidents, damages, errors, spoilage, wastage caused through unusual wear and tear.
5. Human relationship with others.
6. Cost of the time supervisor spent in appraising the employee

Everything you need to learn about the types and forms of compensation provided to employees
in an organization. Compensation is what employees receive in exchange for the services
rendered in an organization.
The term ‘compensation’ refers to all forms of financial returns and tangible benefits that
employees receive as part of the employment relationship.
In the era of globalization, where the business environment has become increasingly complex
and challenging, structuring an effective compensation package to attract and retain talent is
an important function of organizational effectiveness.
ADVERTISEMENTS:
Compensation may achieve several purposes assisting in recruitment, job performance, and job
satisfaction.
In other words we can say that Compensation is the process of providing adequate, equitable
and fair remuneration to the employees.
Some of the types of compensation given to employees are:-
1. Financial Compensation 2. Non-Financial Compensation 3. Primary Compensation 4.
Incentive compensation 5. Job Evaluation 6. Wages and Salary Administration 7. Incentives 8.
Bonus 9. Fringe Benefits 10. Social Security Measures.
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Additionally, there are some types of compensation which are particularly prevalent to the
Indian Industries. They are:-
1. Basic Pay 2. Dearness or Cost of Living Allowance 3. Incentive Payments 4. Performance-
Based Remuneration 5. Bonus 6. Fringe Benefits and Miscellaneous Cash Allowances.

Types and Forms of Compensation Provided to Employees in an Organization

Types of Compensation – Classified as Financial and Non-Financial Compensation
Compensation is what employees receive in exchange for the services rendered in an
organization. The term ‘compensation’ refers to all forms of financial returns and tangible
benefits that employees receive as part of the employment relationship. In the era of
globalization, where the business environment has become increasingly complex and
challenging, structuring an effective compensation package to attract and retain talent is an
important function of organizational effectiveness.
Compensation refers to as a wide range of financial and non-financial rewards given to
employees for their services rendered to the organization. It is paid in the form of wages,
salaries and employee benefits such as paid vacation, insurance, maternity leave, free traveling
facility, retirement benefits, etc.
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Compensation can be classified into two categories:
1. Financial Compensation
2. Non-Financial Compensation
Type # 1. Financial Compensation:
Financial compensation is most popular and important compensation that is given in the form
of money. It is the most important motivational factor that satisfies employees’ basic needs like
food, clothing, etc.
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It is further categorized into two parts:
I. Direct Compensation:
Direct compensation means compensating employees by paying them money in the following
forms:
a. Wages-Wages means remuneration paid in cash for the work performed by an employee.
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b. Bonus- Bonus means extra cash paid to an employee for exceeding his performance or on
completion of specified project or target.
Other financial incentives that are directly given to employees in the form of cash.
II. Indirect Compensation (Fringe Benefits):
Dessler refers to indirect compensation as the indirect financial and non- financial payments
employees receive for continuing their employment with the company which are an important
part of every employee’s compensation. Other terms such as fringe benefits, employee
services, supplementary compensation and supplementary pay are used.
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Armstrong says indirect compensation or employee benefits are elements of remuneration
given in addition to the various forms of cash pay. They also include items that are not strictly
remuneration such as annual holidays.
Management uses it ostensibly to facilitate its recruitment effort or influence the potential of
employees coming to work for a company, influence their stay or create greater commitment,
raise morale, reduce absenteeism in general and improve the strength of the organization by
instituting a comprehensive programme in this area.
According to Chhabra, indirect or supplementary compensation involves ‘fringe benefits’
offered through several employee services and benefits such as housing, subsidized food,
medical aid, creches and so on. It involves rewards provided by organizations to employees for
their membership, attendance or participation in the organization.
Because of the increasing costs of fringe benefits, some people also label them as ‘hidden
payroll.’ Benefits currently account for almost 40 per cent of the total compensation costs for
each employee. The basic purpose of fringe benefits or supplementary compensation is to
attract and maintain efficient human resources within the organization and to motivate them.
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Types of Indirect Compensation:
Below are some of the more popular indirect compensations offered by today’s organizations.
a. Social Security:
This is a federally administered insurance system. According to law, both employer and
employee must pay into the system, and a certain percentage of the employee’s salary is paid
up to a maximum limit. How much is paid by employer and employee is calculated on the
average monthly wage (weighted towards the later years). It is provided mainly to give financial
security to employees when they retire.
b. Workers’ Compensation:
It is meant to protect employees from loss of income and to cover extra expenses associated
with job-related injuries or illness. The laws generally provide for replacement of lost income,
medical expenses, rehabilitation of some sort of death benefits to survivors, and lump-sum
disability payments.
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c. Retirement Plans:
Retirement and pension plans, which provide a source of income to people who have retired,
represent money paid for past services. Private plans can be funded entirely by the organization
or jointly by the organization and the employee during the time of employment.
One popular form of pension plan is the defined-benefit plan. Under this plan, the employer
pledges to provide a benefit determined by a definite formula at the employee’s retirement
date. The other major type of retirement plan is the defined contribution plan, which calls for a
fixed or known annual contribution instead of a known benefit.
d. Paid Holidays:
These comprise Christmas Day, New Year’s Day, Independence Day, Labour Day, etc. One
relatively new concept is the floating holiday, which is observed at the discretion of the
employee or the employer.
Another relatively new concept is referred to as personal time-off or personal days. Under this
concept, organizations give employees a certain number of days with pay to attend to personal
affairs. Normally these days can be taken at the employee’s discretion.
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e. Paid Vacations:
Typically, an employee must meet a certain length-of-service requirement before becoming
eligible for paid vacation. The time allowed for paid vacations generally depends on the
employee’s length of service.
Unlike holiday policies that usually affect everyone in the same manner, vacation policies may
differ among categories of employees. Most organizations allow employees to take vacation by
the day or week but not in units of less than a day.
f. Other Benefits:
Organizations may offer a wide range of additional benefits, including food services, exercise
facilities, health and first-aid services, financial and legal advice, and purchase discounts. The
extent and attractiveness of these benefits vary considerably among organizations. For
example, purchase discounts would be especially attractive to employees of retail store or an
airline.
Type # 2. Non-Financial Compensation:
Non-financial compensation refers to compensating employee not in form of money but in
some other forms that stimulate employees’ morale and also improve his performance.
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It can be in the following forms:
I. Job security
II. Recognition
III. Participation
IV. Pride in job
V. Delegation of responsibility
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VI. Other incentives

Types of Compensation – Non-Monetary Forms of Compensation: Primary and Incentive

Compensation
Good compensation plans, well administered have a salutary effect on the entire enterprise.
Employees are happier in their work, co-operation and loyalty are higher, amount of output is
up, and quality is better. In the absence of such plans compensation is determined subjectively
on the basis of haphazard and arbitrary decisions. This creates several iniquities which are
among the most dangerous sources of friction and low morale in an enterprise.
Although there can be both monetary and non-monetary forms of compensation prevailed in
an enterprise, yet it is the former which is the most basic element by which individuals are
attracted to an organisation persuaded to remain, and induced to engage in behaviour
beneficial to the company.
Let us discuss the administration of monetary compensation in two parts:
1. Primary compensation, and
2. Incentive compensation.
1. Primary Compensation:
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The primary monetary compensation is basic pay in the form of wages or salaries. In popular
usage a distinction is drawn between these two words. The word ‘wage’ is used to denote
payments to hourly-rated production workers and the word salary is used to denote payments
to clerical, supervisory and managerial employees. For our purpose, however, this distinction is
meaningless because roughly the same problems are involved in the administration of both
wage and salary policies.
I. Basis of Time:
The oldest and most common system of paying employees is on the basis of time, i.e., rate per
hour, per day, per week, per month or per year. Under this system no consideration is given to
the quality or the amount of output. The employer buys the time of the worker, i.e., the worker
is guaranteed a definite payment for a specified period of working.
Use of time rates for salaried employees is almost universal. Time basis is more satisfactory
when units of output are not distinguishable and measurable and employees have little control
over the quality of output or when there is no clear-cut relation between effort and output as
on some machine- paced jobs; work delays are frequent and beyond the employee’s control;
quality of work is especially important; supervision is good and the supervisors know what
constitutes “a fair day’s work”, and competitive conditions and cost control do not require
precise advance knowledge of labour costs per unit of output.
The merits of the system are as under:
i. It is simple to understand. Workers can easily calculate their remuneration.
ii. It is liked by trade unions because it does away with differences of payments and assures a
guaranteed income for a given period of work.
iii. It helps in maintaining the quality of output because the worker is not tempted to increase
his speed to produce sub-standard units to earn more.
iv. It helps in maintaining the machines and equipment in good condition by avoiding damage
to them which would otherwise result if the speed of operations is unduly increased by workers
in order to increase production.
v. It does not cause employees to overwork them and hence it results in fewer accidents and
better employee health.
This can be the only satisfactory system where the units of output are not distinguishable or
measurable or there is no clear-cut relationship between the effort and output of a worker, as
is true in the case of most of the indirect workers, like office employees and executives.
Following are the demerits of this system:
i. As this system does not distinguish between efficient and inefficient workers, there is no
incentive for workers to improve their efficiency.
ii. As all the workers are paid equal remuneration irrespective of their quantity of output, the
more efficient among them are tempted either to reduce their speed and efficiency or to leave
the organisation.
iii. As this system provides security to the workers, they are tempted to shirk work which would
lead to loss to the employer.
iv. In order to make the labourers work without wasting their time, the employer is obliged to
appoint personnel for supervision and this increases his cost of production.
II. Real Wages:
Wages can be expressed in two ways: nominal and real. When they are expressed in terms of
money paid to the worker they are called nominal wages. But when they are expressed in terms
of their purchasing power with reference to some base year they are called real wages.
These wages are arrived at by making adjustment in the nominal wages for the rise or fall in the
cost of living index. Thus, if the nominal wage of a worker in 1988 was Rs.400 p.m., and in 1998
it is Rs.900 p.m. but if the living in 1998 has become thrice costly as in 1988, the real wage of
the worker in 1998 is Rs.300 only.
There are three requisites of a sound primary compensation structure:
i. It should be internally equitable;
ii. It should be externally competitive; and
iii. It should pay individuals on the basis of their performance.
A description of these requisites now follows:
i. Internal Equity:
Internal equity means that there should be a proper relationship between the wages and
salaries of various ‘positions within the enterprise. If, for example, the salary of a foreman,
though above the average rate in the community, is lower than that of his subordinates, the
foreman is not being paid fairly.
There is inequity in the rates. In other words, the relative wages of an employee are almost as
important for him as his absolute wages. Unfair differentials in pay lower his morale and often
result in high turnover. However, one important implication of the pursuit of equity in pay is
that it loses its incentive and reward properties and becomes merely fair compensation, just
one part of the psychological contract.
ii. Externally Competitive:
Once the wages have been made internally equitable, management’s next task is to compare
them with those being paid in the community for comparable jobs. The wages and salaries of
workers must be in alignment with wages and salaries other organisations are paying at similar
levels.
If this external alignment or comparability is lacking the organisation will not be able to retain
its capable employees or attract employees from outside. The need to achieve external
alignment is highest in times of full employment when due to shortage of labour a new worker
can choose among employers and when older employees can go to jobs elsewhere.
To achieve external alignment the management must first know what average rates of its key
jobs are prevailing in the community. It can then fix its own wage level at this average level or it
may decide a higher or a lower level of wages for itself. In either case the internal relationship
among jobs must remain undisturbed.
iii. Individual Pay Determination:
In the final step, management has to decide whether all individuals in jobs of the same level
should be paid the same pay or different pay and how this should be determined.
There are four basic approaches to the determination of individual pay:
(a) The single rate approach,
(b) The merit approach,
(c) The automatic approach, and the
(d) Informal approach.
(a) Single Rates Approach:
When employee performance does not vary significantly on the job because everyone is
required to work at about the same pace (e.g., in simple office jobs) single rates are frequently
paid to employees on jobs. If there are any pay differences in such jobs employees may
consider these as favours.
(b) Merit Approach:
If differences in individual performance and output are important to a company then some
basis for compensating employees for these differences should be established. Merit rating is a
management practice designed to gear the pay of employees to actual differences in work
accomplishments. Merit rating systems assume that performance can be observed with
reasonable accuracy even when it cannot be objectively measured.
(c) The Automatic Approach:
Under this approach both the amount of the pay increase and the period of review are usually
predetermined. In this approach since no consideration is shown to worker’s individual
performance or merit he does not have enough incentive to put in greater effort.
(d) The Informal Approach:
Sometimes individual pay decisions are made on an informal basis without formal guides or
controls. This is most incorrect because this creates iniquities and confusion among employees
regarding what is expected of them. Lack of company-wide standards may also result in pay
decisions being influenced by personal favouritism.
The above three requisites are complementary because each reflects different set of factors in
the total situation. Internal equity motivates an employee to progress to jobs of higher skills
and responsibility. Externally competitive rate prevents him from leaving the organisation.
2. Incentive Compensation:
The fundamental basis for any incentive compensation programme is simple – It should
equitably and consistently recognise and compensate employees for superior performance.
Otherwise, employees may treat bonuses merely as an entitlement, rightfully expecting their
bonuses to be paid simply because they show up to work each day and put in eight hours.
If the bonus programme ultimately treats unequal employees equally, the ability to use the
bonus as a motivational tool is severely compromised. Giving ample rewards and recognition to
star performers has the benefit of providing a role model for other employees. As a result,
standards of performance are elevated and morale is strengthened.
A second premise of a well-crafted incentive compensation programme is that it must direct
individual behaviour toward achieving common company goals. To many people, money is a
motivator, pure and simple. To others, it is simply a form of recognition for a job well done.
Regardless, it can and should be used to induce desired behaviour toward carefully crafted
corporate objectives.
A third premise of an effective incentive programme is that it should be designed to affect
favourable change within your organisation. People, by nature, are fearful of and resistant to
change. Incentive compensation can be used as a “carrot” to induce desired organisational
change.
A fourth premise of a thoughtfully designed incentive programme is that it should allow a
substantial portion of compensation to be a variable cost. Ideally, the plan should reward
results rather than actions. In other words, a manager who consistently works 14-hour days
should not necessarily be rewarded for his work ethics.
Only if the employee achieves clearly defined results, such as meeting schedules, should they
be rewarded. Therefore, if a portion of an individual’s compensation is tied to their results, the
more successful the company. As a result, what was a fixed expense (salary) is broken into an
expense with both variable and fixed components.
Naturally, the fixed and variable components of any employee’s compensation will vary
depending on the type of employee your company needs. A high variable component will tend
to attract risk-takers who will expect a larger reward for the amount of risk they take.
Conversely, a compensation plan with a high salary, or fixed component, will tend to attract
more conservative employees who value the security and stability of their position.
Every organisation needs a mixture of both of these employees. For example, most companies
probably would not want an aggressive risk taker as a controller, conversely, a conservative,
security-conscious manager may not be what is needed to maximise profits. Therefore, the
overall compensation programme must equitably reward the contributions of both.
Finally, the programme should have some degree of flexibility in order to meet the unique
needs of both your company and employees. Clearly, the programme should recognise the
contributions of different groups of employees. For example, the efforts of your controller and
sales manager may be equally vital to your company’s success, yet the bonus programme
should be tailored to reward them based on the unique contributions of their individual
positions.
The controller might be rewarded based on average age of accounts receivable and the
timeliness and accuracy of job cost reports, whereas the sales manager might be rewarded
based on sales, and new business opportunities identified. Additionally, the performance of
employees within a given classification may vary as to their relative impact on your company’s
success. The programme must be designed so that individuals in similar positions are rewarded
commensurate with their contribution.
Types of Compensation – Related to Workers (Job Evaluation, Wages and Salary
Administration, Incentives, Bonus, Fringe Benefits and Social Security Measures
“Worker’s compensation is really a worker’s right, rather than a benefit.” “At the most basic
level, we would expect that there is a strong relationship between GDP levels and actual
compensation levels in the different markets across the region. In the more wealthy countries,
we expect higher compensation levels in the less wealthy countries.”
Compensation is a systematic approach for providing monetary value to employees in exchange
for work performed. Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction. In other words we can say that Compensation is the process
of providing adequate, equitable and fair remuneration to the employees. It includes job
evaluation, wage and salary administration, incentives, bonus, fringe benefits, social security
measures, etc.
1. Job Evaluation:
It is the process of determining relative worth of jobs:
i. Select suitable job evaluation techniques
ii. Classify jobs into various categories
iii. Determining relative value of jobs in various categories
2. Wages and Salary Administration:
This is the process of developing and operating a suitable wage and salary programmes.
It covers:
i. Conducting wage and salary survey
ii. Determining wage and salary rates based on various factors.
iii. Administering wage and salary programmes
iv. Evaluating its effectiveness
3. Incentives:
It is the process of formulating, administering and reviewing the schemes of financial incentives
in addition to regular payment of wages and salary.
It includes:
i. Formulating incentive payment schemes
ii. Helping functional managers
iii. Review them periodically to evaluate effectiveness
4. Bonus:
It includes payment of statutory bonus according to the Payment of Bonus Act, 1965, and its
latest amendments.
In India the employees drawing above certain compensation are not covered under the Bonus
Act. However, the employer pays them suitable lump sum variable amount depending upon
their level in the organisation which is called ex gratia. This is not compulsory on the part of the
employer but acts as an incentive to the employee.
5. Fringe Benefits:
These are the various benefits at the fringe of the wage. Management provides these benefits
to motivate the employees and to meet their life time contingencies.
These benefits include:
i. Disablement benefit
ii. Housing facilities
iii. Educational facilities to employees and their children
iv. Canteen facilities
v. Recreational facilities
vi. Conveyance facilities
vii. Credit facilities
viii. Legal clinic
ix. Medical, maternity and welfare facilities
x. Company stores
6. Social Security Measures:
Management provides social security to their employees in addition to the fringe benefits.
These measures include:
i. Workmen compensation to those workers (or their dependents) who met with an accident
ii. Maternity benefits to women employees
iii. Sickness benefits and medical benefits
iv. Disablement benefits/allowance
v. Dependent benefits
vi. Retirement benefits like provident fund, pension, gratuity, etc.
A lot of thinking and comparison with competitive organisations goes into fixing the
compensation of employees particularly for middle management and above levels by the
management. Some organisation pays certain amount annually to key executives which are not
a part of the regular pay and allowances. By doing this the incentive acts to deliver enhanced
performance but also ensure the loyalty of the key executive to remain with the company.

Types of Compensation – Prevalent in the Indian Industries: Basic Pay, Dearness

Allowance, Incentive Payments, Performance-Based Remuneration, Bonus and a Few Others
The basic types of compensation prevalent particularly in the Indian industries are:
(1) Basic pay,
(2) Dearness or cost of living allowance,
(3) Incentive payments,
(4) Performance-based remuneration,
(5) Bonus,
(6) Fringe benefits and miscellaneous cash allowances.
Type # 1. Basic Pay:
Basic pay universally constitutes the most important component of compensation. However,
there are variations in the manner in which basic pay is determined and paid. It may be on
daily, weekly or monthly basis. In India, under the Minimum Wages Act, 1948, both the central
and state governments have fixed minimum daily rates of wages for a large number of sweated
employments.
In the U.S.A., U. K. and France, there has been the practice of fixing hourly rates of wages for
several categories of workers. In the organised sectors in India, the practice of prescribing
monthly basic rates of wages under wage scales with provision of annual increments is widely
prevalent.
Basic wages are significant for workers for a variety of reasons. Generally speaking, most other
cash allowances made available to workers, such as dearness allowance, house rent allowance,
city compensatory allowance, medical allowance and so on, are linked with the quantum of
basic wages. Besides, contributions to social security funds such as provident and pension
funds, gratuity and certain cash allowances are often linked to basic wages.
The quantum of basic pay is also taken into account in determining the scales of certain fringe
benefits, such as housing accommodation, and travelling and leave travel allowances. Overtime
payments for additional hours worked are also usually based on basic pay.
Type # 2. Dearness or Cost of Living Allowance:
Dearness allowance or cost of living allowance, separate and distinct from basic pay, has been
an important component of compensation in industrial and governmental employments in
India and a number of Asian countries. The basic purpose behind the provision of dearness
allowance is to offset the rise in prices of consumption goods and to protect the real wages
from being encroached by price rise.
Starting during the Second World War period on a temporary and experimental basis, the
system has become a permanent feature of the wage structure in Indian industries and
governmental and semi-governmental employments.
In general, the quantum of dearness allowance payable to industrial workers as well as
government and semi-government employees is linked with the fluctuations in the Consumer
Price Index Numbers for industrial workers worked out by Labour Bureau, Ministry of Labour,
and Government of India, which has been engaged in the task since 1946.
The specific schemes for the determination of D.A. have considerably varied from time to time.
In its earliest form, flat rates on a graduated basis without any linkage to CPI numbers were
prevalent. Subsequently, calculation of D.A. came to be made with reference to rise or fall in
the CPI numbers calculated by either the central or state governments.
Initially, the percentage of neutralisation for the rise in prices was higher in low wage brackets
tapering off gradually when wages rose. Later, a more or less consistent formula providing for
neutralisation for rise in prices on a common percentage basis emerged for government and
semi-government employees. However, the industrial establishments have their own separate
schemes generally worked out on the basis of negotiations.
In many countries such as the U.S.A. and Australia, there are schemes of automatic revision of
basic rates of pay when prices rise above the specified level. Many collective agreements in the
U.S.A. contain escalator clauses to avoid frequent bargaining for revision of wage rates.
Type # 3. Incentive Payments:
In a number of industrial undertakings, employees are in receipt of incentive payments. These
incentive schemes are generally directly related to the quantum, and in some cases, to the
quality of goods produced by individual employees or a group of them. The specific schemes
vary from organisation to organisation, and with different sets of employees in the same
organisation.
There are schemes, such as the straight piece-rate system, in which the earnings of employees
vary in the same proportion as increase in output. In many schemes, incentive payments are
lower than the proportion of increase in output. There are also schemes in which incentive
payments are higher in proportion to the increase in output. In a number of schemes, incentive
payments vary in different proportions at different levels of output. Performance-based
remuneration described below may also be considered incentive payment.
Type # 4. Performance-Based Remuneration:
During more recent years, especially after the onset of globalisation and competition, many
categories of employees, particularly managerial and supervisory personnel, have been
receiving performance- based remuneration.
Such a remuneration is worked out on the basis of the outcome of performance appraisal of
individual employees, which takes into account the level of their performance in such areas as
extent of improvement in the quantity and quality of products or services, acquisition of skills
and capabilities, regularity of attendance, relationship with co-employees, capacity to face
challenging situations and extent of commitment to work.
The specific schemes of performance appraisal vary from organisation to organisation and
different sets of personnel in the same organisation. Based on performance appraisals,
individual employees are allotted specific grades, and are remunerated and given inducements
based on their performance. Performance appraisal also constitutes key to decisions in other
areas of HRM such as promotion, transfer, demotion and even separation.
Type # 5. Bonus:
Employees in a large number of industrial establishments in India have been in receipt of profit-
sharing bonus. Initially, the practice of giving bonus to industrial workers started on an ad hoc
basis primarily at the discretion of employers. However, during the course of time, it became a
major bone of contention between employers and workmen, often resulting in industrial unrest
and work stoppages.
Many disputes on the question of bonus came up for decision by industrial tribunals and even
Supreme Court. In view of the mounting and regular unrest over the question, the Payment of
Bonus Act was enacted in 1965. The Act specifies in some detail the formula for the calculation
of bonus, and prescribes both the minimum and maximum bonus payable to specified
categories of workers.
Type # 6. Fringe Benefits and Miscellaneous Cash Allowances:
Apart from wages and salaries, incentive payments, dearness allowance and bonuses,
employees are often in receipt of several types of indirect compensation or fringe benefits,
both in cash and kind.
These include housing facilities and house rent allowance, city compensatory allowance, leave-
travel facilities, medical facilities and allowances, educational facilities and allowances for the
children of employees, social security benefits such as sickness benefit, provident fund, gratuity
and pension, concessional availability of electricity and food-grains, transport facilities, supply
of uniforms and so on.
The nature and scale of fringe benefits vary widely from organisation to organisation. To the
employer, they are a part of labour cost. In many organisations, they constitute a substantial
portion of labour cost, surpassing even the wage bill.
Many of these fringe benefits are made available to employees voluntarily by the employers;
many have been the outcome of collective agreements and many others have been statutorily
imposed. Many employers, owning large-scale industrial establishments and also those having
their establishments in remote and isolated areas, provide housing accommodation to their
employees and have also established well-equipped hospitals and dispensaries.
Gary Dessler and Biju Varkkey have preferred to keep various forms of compensation into two
main categories—direct financial payments such as wages, salaries, incentives, commission and
bonuses, and indirect financial payments such as employer-paid insurance and leave travel
concessions. Joseph J. Martocchio has classified seven types of monetary or core compensation
in the context of practices in the U.S.A.
These are as follows – hourly pay, annual salary, cost of living adjustments, seniority pay, merit
pay, incentive pay and person-focused pay, pay-for-knowledge and skill-based pay. Practices in
regard to forms of compensation or their combinations vary from organisation to organisation
depending on a set of internal and external factors.