DIRECTORATE OF DISTANCE & ONLINE EDUCATION

UNIVERSITY OF JAMMU
M.COM SECOND SEMESTER (NON CBCS)
HUMAN RESOURCE MANAGEMENT
(Core Course)

Course: MCOMC253 Maximum Marks: 100 Marks

Credit : 4 External : 80 Marks
Time : 3:00 Hrs. Internal : 20 Marks

(Syllabus for the examination to be held in May 2023, 2024, 2025)

COURSE OBJECTIVES
1. To help the students in understanding the evolution of Human
Resource Management, basic concepts, recent roles and trends,
management concepts and practices for better HR management.
2. To develop and analyze the future human resource requirements and
design action plan for the same.
3. To understand the mechanism of wages and salary administration
and Grievances redressal at work place.
4. To enlighten the students about the concept and scope of industrial
relations and ways to analyze the co-operation and conflict.
COURSE OUTCOMES
After the completion of this course, the students will be able to:
1. apply the basic concepts and models of human resource management
at work place;
2. demonstrate a basic understanding of different tools of forecasting
and planning human resource needs as well as formalize, design, and
evaluate various recruitment, selection and placement policies;
3. design compensation plan for various levels and develop system for
the management of the same;

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4. apply various industrial relations approaches for managing workplace
conflicts as well as industrial disputes and devising mechanism for
their redressal;
5. use labour officer for education employees about their rights.

UNIT-I: INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

(HRM)

HRM- Features, functions, principles and challenges; General

Evolution of HRM, evolution of HRM in India; HRM models-
Harvard model, Guest Model, Michigan Model and Warwick Model;
H R Policies-Specific and overall HR policies; Qualifications of HR
professionals; Jobs in HRM; code of ethics of society for HRM; Personnel
management V/S HRM.

UNIT-II : PROCUREMENT, TRAINING & APPRAISAL

Human resource planning- Process and factors affecting human

resource planning; Job analysis-Job description & job specification;
Recruitment- Process and sources of recruitment; Select ion;
Placement; Orientation; Promotion & transfers; Absenteeism; Employee
training; Performance appraisal – Approaches, evaluation process,
methods and ethics of appraisal.

UNIT-III: COMPENSATION & GRIEVANCE REDRESSAL MECHANISM

Job evaluation-Need, process and techniques; Wage & Salary

administration- Wage concepts, wage determination process, factors

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 affecting wage & salary structure, principles of wage administration;
Broad Banding-Concept and process; Incentives – Monetary and non-
monetary incentives; Group incentives; Grievance Redressal – Causes,
need, machinery & guiding principles.

UNIT-IV: INDUSTRIAL RELATIONS & LABOUR WELFARE

Approaches of industrial relations; Industrial disputes –causes

machinery for settlement of industrial disputes- Conciliation, arbitration,
adjudication; Conflict resolution-Collective bargaining, workers’
participation in management & workers’ empowerment; Labour welfare
– Features, need, types & approaches; Labour welfare officer –
Qualification, functions & duties.

BOOKS RECOMMENDED

1. Cascio, W and Nambudiri, R. Managing Human Resources, Tata McGraw

Hill Education Pvt. Ltd., New Delhi

2. Gary Dessler, G. Human Resource Management, Pearson, India.

3. P. Subha Rao, P.S. Human Resource Management, Himalaya Publishing

House, New Delhi.

4. C.B., Memoria, S.and Gankar, S.V. Dynamics of Industrial Relations. Himalaya

Publishing House, New Delhi.

5. Armstrong.M. Armstrong's Handbook of Human Resource Management.

Kogan Page Publishers, UK

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NOTE FOR PAPER SETTING

The paper consists of two sections. Each section will cover the whole of
the syllabus without repeating the question in the entire paper.

Section A:

It will consist of eight short answer questions, selecting two from each
unit. A candidate has to attempt any six and answer to each question shall be
within 200 words. Each question carries four marks and total weightage to this
section shall be 24 marks.

Section B:

It will consist of six essay type questions with answer to each question
within 800 words. One question will be set atleast from each unit and the candidate
has to attempt four. Each question will carry 14 marks and total weightage shall
be 56 marks

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 MODEL QUESTION PAPER
HUMAN RESOURCE MANAGEMENT
Time : 3.00 hours M. Marks : 80
SECTION A
Attempt any six questions. Each question carries four marks. Answer to each
question should be within 200 words.

1. Define HRM and discuss its main characteristics .

2. HRM and Personnel management are two different but interchangeable

concepts How would you differentiate between these two?

3. Explain the main components of HR planning.

4. Write notes on: a) Absenteeism b) Labour turnover.

5. Explain the guiding principles for a sound grievance redressal mechanism.

6. Explain the concept of broad banding in wages and salary administration.

7. What are quality circles ? How these can be made efficient ?

8. Explain the approaches to labour welfare.

SECTION B

Attempt any four questions. Each question carries 14 marks. Answer to each
question should be within 800 words.

1. Trace evolution of HRM in detail. Being an HR manager what qualification

you should possess. Discuss .

2. Explain merits and demerits of the internal and external resources of

recruitment.

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3. Explain different approaches to performance appraisal. Also discuss
performance appraisal ethics.

4. Explain wages and salary administration process in detail. What factors affect
wages and salary structure?

5. Explain different methods of workers participation in management in India. Why

it has not been successful here?

6. Explain the causes of industrial disputes. What are different ways of settling
these disputes ?

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 HUMAN RESOURCE MANAGEMENT

CONTENTS

UNIT LESSON TITLE PAGE

NO. NO. NO.

I 1 HRM- Features and functions 1-40

2 General Evolution of HRM 41-55

3 HRM Models 56-68

4 HR POLICY -Jobs in HRM and Qualification 69-85

of HR Professionals

5 Code of Ethics of Society for HRM 86-96

II 6 Human Resource Planning (HRP) 97-106

7 Job Analysis, Job Description & Job Specification 107-121

8 Recruitment and Selection 122-143

9 Placement, Orientation, Promotion, 144-162

Transfer, Absenteeism

10 Employee Training and Performance Appraisal 163-204

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 CONTENTS
UNIT LESSON TITLE PAGE
NO. NO. NO.

III 11 Job Evaluation 205-227

12 Wage & Salary Administration 228-252

13 Broad Banding 253-264

14 Incentives 265-281

15 Grievance Redressal 282-293

IV 16 Industrial Relations and labour welfare 294-313

17 Industrial Disputes 314-330

18 Conflit Resolution - Collective Bargaining 331-349

19 Workers’ Participation in Management 350-372

20 Labour Welfare 373-395

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Lesson No. 1 INTRODUCTION TO HUMAN Unit-I
Semester-II RESOURCE MCOMC253
MANAGEMENT (HRM )
HRM- FEATURES AND FUNCTIONS

STRUCTURE

1.1 Introduction

1.2 Objectives

1.3 Concept and features of HRM

1.4 Functions of HRM

1.4.1 Managerial Functions of HRM

1.4.2 Operative Functions of HRM

1.5 Principles of HRM

1.6 Challenges faced by HRM

1.7 Summary

1.8 Glossary

1.9 Self Assessment Questions

1.10 Lesson End Exercise

1.11 Suggested Readings

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1.1 INTRODUCTION
In today’s competitive Business environment, human capital management
is critically important to remain viable in the global marketplace. Organizations
may replicate processes, materials and structures of other successful organizations,
but only the talent of an organization makes it unique and distinguishes it from
all its competitors. As a result, HR (Human Resource) plays a pivotal role in the
world because people are truly the only thing that differentiates one business
from another.
1.2 OBJECTIVES
After studying this lesson, you should be able to understand :
(i) the concept of HRM
(ii) functions of HRM
(iii) principles of HRM
(iv) responsibilities and competencies of HR manager
1.3 CONCEPT OF HRM
Human Resource Management (HRM) is the strategic approach to the effective
and efficient management of people in a company or organisation so that they
help their business gain a competitive advantage. It is designed to maximise
employees performance in service of an employer’s strategic objectives.

Human Resource management helps to bridge the gap between employee’s

performance and the organisation’s strategic objectives. So the most accepted
definitions of HRM are :

Definitions :
1. “HRM is planning, or ganizing, direct ing, cont rolling of
procurement, development, compensation, integration, maintenance and
separation of human resources to the end that individual, organizational and
social objectives are achieved.” Edwin B. Flippo

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 2. “HRM is a managerial perspective, which argues the need to establish
an integrated series of personnel policies to support organizational
strategy.” Buchanan and Huczynski
3. “HRM is a strategic approach to managing employment relations,
which emphasizes that leveraging people’s capabilities are critical to achieving
competitive advantage, this being achieved through a distinctive set of integrated
employment policies, programmes and practices.” Bratton and Gold

4. “HRM is a distinctive approach to employment management, which seeks to

achieve competitive advantage through the strategic deployment of a highly
committed and capable workforce, using an array of cultural, structural and
personnel techniques.” Storey

Although there is no consensus on the definition or the characteristics of HRM,

it can be concluded from the above definitions that HRM is a combination of
people-oriented management practices that views employees as assets, not costs;
and its main aim is to create and maintain a skilful and committed workforce to
gain competitive advantage.

FEATURES OF HRM
Human Resource Management is a process of bringing people and
organizations together so that the goals of both are achieved. The various
features of HRM include:
 Human Resource Management is Management of People in the
Organisation
Human resource management is concerned with people dimension of
management. It is all about people at work; both as individuals and groups.
Hence, it manages different people such as worker/labour, supervisors,
managers, departmental heads and other related top managers too.
Therefore, human resource management is defined as the management of
human resource and their commitment towards work.

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 Harmonious Relations
It tries to build and maintain cordial relations between people working at
various levels in the organization e.g., between superior and subordinate,
among fellow-workers and between management and employees.
 Human Resource Management is a Continuous Process
Human resource management is not a short affair; rather it is an ongoing
process of managing people and their competencies. It is continued till the
dissolution of an organization. All the processes involved in HRM should
run continuously.
 Human Resource Management is a Dynamic Function
The principles and practices of HRM should not be rigid. Rather they
should be dynamic. It means HRM is a dynamic function whereby the
procedures and practices are influenced by the environmental factors.
Employees should gain an updated knowledge and ability to work in the
changing environment.
 Human Resource Management is a Universal Function
It is pervasive in nature as it is present in all enterprises. HRM is a universal
function in the sense that it is applicable in all types of organizations. The
principles and practices are applied irrespective of size, nature, scope and
purpose of the organization.
 Human Resource Management is a Strategic Approach
HRM is taken as strategic approach for organizational development.
It helps to mobilize human resource in the organization in order to achieve
the stated goals and objectives strategically. All the activities of
management are arranged in such a way that they are interconnected
with efficient and effective utilization of human resources according to
change in organizational strategy. It helps an organization meet its goals
in the future by providing for competent and well-motivated employees.
It tries to help employees develop their potential fully.
 Integration of Goals
Usually there is a difference between organizational goal and individual
goal. An employee wants to satisfy his/her individual goal first. But

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 managers want to accomplish organizational goals before something else.
Hence, HRM practices and principles help in integrating individual and
organizational goal into a framework. As a result of which, employees
are motivated towards higher level work performance for achievement
of organizational goal.
 Human Resource Management Is Future-oriented
HRM is future oriented behaviour in the sense that it helps in assessing
human resource requirement for future. It helps in determining future goals
and objectives of the organization and it employees the people to get the
job done in future period of time.
 Human Resource Management is Multidisciplinary
It is a multidisciplinary activity, utilizing knowledge and inputs drawn from
multiple disciplines such as psychology, economics, etc.

1.4 FUNCTIONS OF HRM

Functions of HRM can be divided into managerial and operative functions.
The detailed explanation is as under:

1.4.1 Managerial Functions of HRM

Managerial functions of personnel management involve planning,
organizing, directing, and controlling. All these functions influence the
operative functions. These are discussed as under:

a) Planning: Planning is such a crucial function for an organization that

is the key to all other managerial functions. The steps involved in planning are:
• Establishing goals and objectives to be achieved.
• Developing rules and procedures
• Determining plans and forecasting techniques.
b) Organising: Once the plans are formulated, the next step is to organize
the men and material in order to accomplish those plans. Organising is a
process through which the firm establishes its structure and determines the

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 authority, responsibility and accountability of each member in relation to
the job. Thus, organising involves
• Giving each member a specific tasks.
• Establishing departments and divisions.
• Establishing channels of authority and communication.
• Creating a system to coordinate the works of the members.

c) 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.
Tapping the maximum potentialities of the people is possible through
motivation and command. Thus, direction is an important managerial
function in building sound industrial and human relations besides securing
employee contributions. Co-ordination deals with the task of blending
efforts in order to ensure successful attainment of an objective. The
personnel manager has to co-ordinate with various managers at different
levels as far as personnel functions are concerned. Personnel management
function should also be co-ordinated with other functions of management
like management of material, machine and money.

d) Co-ordi nat ion: Co -o rdinat ion is t he unificat ion, int egr at io n,

synchronization of the efforts of group members so as to provide unity
of action in the pursuit of common goals. According to Mooney and
Reelay, “Co-ordination is orderly arrangement of group efforts to provide
unity of action in the pursuit of common goals”. According to Charles
Worth, “Co-ordination is the integration of several parts into an orderly
hole to achieve the purpose of understanding”. The role of HR manager
is one of central communicator. He is responsible for staying current
with government legislation, procedures, and requirements. HR managers

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 also coordinate personnel activities, a duty often referred to as functional
control. Organizational objectives will be achieved only if group activities
in the enterprise are co-ordinated effectively.

e) Controlling: It is the act of checking, regulating and verifying whether

everything occurs as per the standards set and plans adopted. The
performance of employees is regularly reviewed to find out whether it is
according to the standards or not. If the performance is low then steps
are taken to improve it in future.

1.4.2 Operative Functions of HRM

These functions are related to the procuring, developing, compensating,
integrating and maintenance of work force for attaining organisational
goals. These functions are also known as service functions and are
discussed as under:

Procurement Function: It is concerned with procuring and employing

with necessary skills, knowledge and aptitude. It includes the following:
a) 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 help in identifying the nature, levels and
quantum of human resources.
 Providing the guidelines, plans and basis for job design and for all
operative functions of HRM.
b) Human Resources Planning: It is a 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

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 needs of the organization and which would provide satisfaction for the
individuals involved. It involves
1. Estimation of present and future requirement and supply of human
resources basing on objectives and long range plans of the organization.
2. Calculation of net human resources requirement based on present
inventory of human resources.
3 Taking steps to mould, change, and develop the strength of existing
employees in the organization so as to meet the future human resources
requirements.
 Preparation of action programs to get the rest of human resources from
outside the organization and to develop the human resources of existing
employees.
c) 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.
 Striking a balance between internal and external sources.
d) 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 appraising. This function includes:
 Framing and developing application blanks.
 Creating and developing valid and reliable testing techniques.
 Formulating interviewing techniques.
 Checking of references.
 Setting up medical examination policy and procedure.
 Line manager’s decision.

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 Sending letters of appointment and rejection.
 Employing the selected candidates who report for duty.
e) Placement: It is the process of assigning the selected candidate with the
most suitable job in terms of job requirements. It is matching of employees
specifications with job requirements. This function includes:
 Counselling the functional managers regarding placement.
 Conducting follow-up study, appraising employee performance in order
to determine employee’s adjustment with the job.
 Correcting misplacements, if any.
f) Induction and Orientation: Induction and orientation are the techniques
by which a new employee is rehabilitated in the changed surroundings 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 has to work
such as peers, supervisors and subordinates.
 Mould the employee attitude by orienting him to the new working
and social environment.
g) Compensation: Compensation is one of many human resource (HR)
tools that organizations use to manage their employees. For an
organization to receive its money’s worth and motivate and retain
skilled employees, it needs to ensure that its compensation system is
not an island by itself. Not only is it important for an organization to
link compensation to its overall goals and strategies, it is important
that its compensation system aligns with its HR strategy. Compensation
function includes:

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  Job Evaluation: Job evaluation is a systematic way of determining
the value/worth of a job in relation to other jobs in an organization.
It tries to make a systematic comparison between jobs to assess their
relative worth for the purpose of establishing a rational pay structure.
According to Kimball and Kimball, “Job evaluation represents an
effort to determine the relative value of every job in a plant and to
determine what the fair basic wage for such a job should be.”
 Salary Administration: A large measure of the Compensation team’s
expertise surrounds salary administration or the review of salaries
across the organization (Actual compensation issues such as pay
cheque enquiries, deductions, or changes to personal or employment
information). The goal of the salary administration program is to
provide an equitable and systematic means of compensating various
categories of employees in relation to their assigned duties and
responsibilities and, as much as possible, recognize differences in
individual performance levels. Further, salary administration practices
and compensation levels should be competitive with those in similar
organizations for comparable job categories.

h) Development: It is a process of improving, moulding, changing and

developing the skills, knowledge, creativity based on present and future
requirements, both, at individual and organisational level. It includes
appraisal system, career system, training and succession planning.
 The performance appraisal is the process of assessing employee
performance by way of comparing present performance with already
established standards which have been already communicated to
employees, subsequently providing feedback to employees about their
performance level for the purpose of improving their performance as
needed by the organisation.
 Career planning is an individual’s lifelong process of establishing
personal career objectives and acting in a manner intended to bring

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 them about. It is a deliberate process of becoming aware of self,
opportunities, constraints, choices, and consequences; identifying
career-related goals; and “career pathing” or programming work,
education, and related developmental experiences to provide the
direction, timing, and sequence of steps to attain a specific career goal.
 Success on Planning Training and development function gives
employees the skills and knowledge to perform their jobs effectively.
In addition to providing training for new or inexperienced employees,
organisations often provide training programmes for experienced
employees whose jobs are undergoing change. Large organisations
often have development programmes which prepare employees for
higher level responsibilities within the organisation. Training and
development programmes provide useful means of assuring that
employees are capable of performing their jobs at acceptable levels.
i) Maintenance: Maintenance of human resources encompasses HRM
activities related to employee benefits, safety and health, and worker-
management relations. Employee benefits are non-incentive-oriented
compensation, such as health insurance and free parking, and are often
used to transfer non-taxed compensation to employees. The three major
categories of benefits managed by HRM managers are: employee services,
such as purchasing plans, recreational activities, and legal services;
vacations, holidays, and other allowed absences; and insurance, retirement,
and health benefits. To successfully administer a benefits program, HRM
professionals need to understand tax incentives, retirement investment plans,
and purchasing power derived from a large base of employees.

Human resource maintenance activities related to safety and health usually

entail compliance with laws that protect employees from hazards in the
workplace. HRM managers must work to minimize the company’s
exposure to risk by implementing preventive safety and training programs.
They are also typically charged with designing detailed procedures to

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 document and handle injuries.

Maintenance tasks related to worker-management relations primarily

entail: working with labour unions, handling grievances related to
misconduct such as theft or sexual harassment, and devising systems to
foster cooperation. Activities in this arena include contract negotiation,
developing policies to accept and handle worker grievances, and
administering programs to enhance communication and cooperation.

Functions of HRM

Fig. 1.1 Functions of HRM

1.5 PRINCIPLES OF HRM

Human resources management is guided by very important aspects. These

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 aspects are essential for any business to succeed. Principles of Human
Resources Management have been well summarised in 10C’s.

 Comprehensiveness: This involves the proper management of all aspects

of the people you are working with bearing in mind that human resources
is the most valuable resource your firm has. This means that the financial,
health, transportation, tools and anything employees need to work should
be well taken care of.
 Cost-effectiveness: Companies should ensure that they remunerate their
employees in such a way that organisation is able to sustain it.
 Control: Firms should be able to take charge of their employees and ensure
that productivity and quality is achieved and maintained. Control should
be exercised carefully so that it does not seem like tyranny.
 Coherence: All the steps taken by a firm in the management of human
resources must be in line with the mission and vision of the firm. Human
Resources managers should direct their focus on what the company needs
and employee abilities.
 Communication: It is very important in every organization. Through
communication, firms can ensure there is flow of information that is
necessary for efficiency.
 Creativity: It is key if a firm is to be efficient in human resources
management. Firms should adopt new ways of human resources
management as long as it fits their companies.
 Competence: It is an organization’s responsibility to ensure that its
employees are skilled to do their duties. Because the competence of a
firm depends on that of its employees, firms should do everything to increase
employee capabilities for example, by training them.
 Credibility: Firms must ensure that they remain the best brand to most of
their clients by maintaining their credibility. They should put in place
strategies that ensure all employees have a clear sense of direction to a
common goal.
 Change Management: It is inevitable for businesses. The fastest business
to embrace change in management of their human resources is better placed

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 to produce better results.
 Commitment: Every organization has objectives which they intend to
meet both for themselves and for their clients. To meet these goals, firms need
committed staff therefore it is the firms responsibility to keep ITS employees
motivated so as to ensure they are committed to the organizations course.
Besides these there some other principles of HRM, which are as under:-

 Remain objective when faced with

1. Focus on the situation, issue,
challenging behaviours
or behaviour, not on the
 Step back and look at the big picture
person
when analyzing a situation
 Avoid letting personality differences
keep you from dealing wit h a
problem
 Ensure expectations are clear and
consistently applied
 Make decisions based on facts
 Consider the points of view of others

 Create an atmosphere of acceptance,

2. Maintain the self-confidence
approval and respect
and self-esteem of others
 Openly express confidence in others
 Recognize accomplishments and ideas
 Encourage people to express their
ideas
 Encourage people to use and expand
their abilities
 Consider the impact of rank and
power and how to mitigate any
negative impact

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  Approach others with a positive
3. Maintain good working attitude and communicate support
relationships  Use every interaction as an
opportunity to build respectful
relationships
 Acknowledge problems openly,
honestly and objectively
 Deal with conflicts as they arise
 Share information

4. Take initiative to make things  Continually ‘survey’ the department/

better centre for ways to make things better
 Look for opport unit ies for
improvement
 Ask for input and feedback from
others
 Stay informed and alert to changes
that will affect staff
 Take risks and stay open to creative
solutions to problems
 Know when to ask for and when to
offer help to others

5. Lead by example  Model the behaviours you expect

others to practice
 Follow through on your commitments
 Admit your mistakes
 Remain calm and positive
 Challenge yourself and others to try
new ways of doing things

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  Uphold ethical standards of the
6. Think beyond the moment University
 Deal with problems and issues as they
arise.
 Weigh the risks, benefits and potential
impact of your decisions before taking
action on them
 Set objectives that motivate action
 Plan ahead

Table1: Basic Principles and Related Behaviours

1.6 CHALLENGES FACED BY HRM

Professional organizations such as the Society for Human Resource
Management (SHRM) and the Human Resource Planning Society
(HRPS) conduct ongoing studies on the most pressing competitive
issues facing firms. By seeking the input of chief executives and HR
managers, these organizations keep a finger on the pulse of major trends.
The top trends, or challenges, they name today include those outlined
in the sections that follow.
1. Challenge : Responding Strategically to Changes in the Marketplace
Given the pace of commerce, organizations can rarely stand still for
long. In today’s highly competitive environments in which competition
is global andinnovation is continuous, being able to adapt has become
the key to capturing Opportunities and Overcome Obstacles as well
as the very survival of organizations. As one pundit put it, “No change
means chance.” Successful companies, says Harvard Business School
professor Rosabeth Moss Kanter, develop a culture t hat just keeps
moving all the time.
Consider what happened to the parts suppliers for U.S. automakers
when the bankruptcy of General Motors, Chrysler, and Ford looked

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 imminent in 2008–2009. Most of the suppliers sold exclusively to the
three automakers. As a result, they had to rapidly find other markets,
products to make for those markets, and ways to sell them—all of which
required significant human resources changes and challenges.
2. Challenge : Competing, Recruiting, and Staffing Globally

The strategies companies are pursing today increasingly involve one or

more elements of globalization. The integration of world economies and
markets has sent businesses abroad to look for opportunities as well as
fend off foreign competitors domestically. Consumers around the world
want to be able to buy “anything, anytime, anywhere,” and companies
are making it possible for them to do so. Want to buy a Coke in Pakistan?
No problem. Coca-Cola has an elaborate delivery system designed to
transport its products to some of the remotest places on the planet. In
fact, the company has long generated more of its revenues abroad than
it does in the U.S. But globalization is not of interest only to large firms
like Coca-Cola. While estimates vary widely, approximately 70 to 85
percent of t he U.S.economy today is affect ed by int ernat ional
competition, including small companies. About 10 percent of what
Americans produce every year dollar-wise is sold abroad. According to
the Small Business Administration, nearly 97 percent of all U.S. exporters
are small companies. These firms employ about half of all the private
sector employees in the nation. On the flip side, since the 1970s, every
year, American citizens and businesses have purchased more goods and
services abroad—including labour—than they have sold. Partnerships
and mergers are two other ways companies both large and small are
globalizing. Coca-Cola has tried to expand in China by partnering with
that nation’s largest juice maker. Spring Hill Greenhouses, a small firm in
Lodi, Ohio, partners with florists through associations such as FTD and
Teleflora to work with lily and tulip growers in the Netherlands and rose
growers in Colombia to serve customers around the world.
As a result of globalization, the national identities of products are blurring

17
 too. BMW has traditionally been a German brand, but now the automaker
builds cars in the United States, China, and elsewhere. Likewise, you
probably think of Budweiser as an American beer, but would it surprise
you to know that the maker of Budweiser (Anheuser-Busch) is owned
by a Belgian company called InBev? Like many other companies,
Anheuser-Busch InBev is now looking for factories and brands in China
to purchase in order to expand its sales. Numerous free-trade agreements
forged between nations in the last half century have helped quicken the
pace of globalization. The first major trade agreement of the twentieth
century was made in 1948, following World War II. Called the General
Agreement on Tariffs and Trade (GATT), it established rules and guidelines
for global commerce between nations and groups of nations. Although
the Great Recession temporarily caused a sharp drop in the amount of
world trade, since GATT began world trade has literally exploded,
increasing nearly thirty times the dollar volume of what it once was. This
is three times faster than the world’s overall output has grown during the
same period. GATT paved the way for the formation of many major trade
agreements and institutions, including the European Union in 1986 and
t he Nort h American Free Trade Agreement (NAFTA) in 1994,
encompassing the United States, Canada, and Mexico. The World Trade
Organization (WTO), headquartered in Lausanne, Switzerland, now has
more than 150 member countries, and new free-trade agreements seem
to be forged annually.
3. Challenge : Setting and Achieving Corporate Social Responsibility
and Sustainability Goals
Globalization has led to an improvement in people’s living standards in
the last half century. As a result of free trade, Americans are able to buy
products made abroad more cheaply. Conversely people in low-wage
countries that make those goods and services are becoming wealthier
and are beginning to buy American-made products. Nonetheless,
globalization stirrs fierce debate—especially when it comes to jobs. Since
the turn of the century, millions of U.S. jobs—both white and blue collar—

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have been exported to low-wage nations all around the world. Some
people worry that free trade is creating a “have/have not” world economy,
in which the people in developing economies and the world’s environment
are being exploited by companies in richer, more developed countries.
This has sparked anti-free-trade protests in many nations. Concerns such
as these, coupled with corporate scandals over the years, including the
use of sweatshop labour in third-world countries, risky lending tactics
that fuelled a worldwide banking crisis, and a class action lawsuit alleging
Walmart discriminated against hundreds of thousands of female employees
over the years, have led to a new focus on corporate social responsibility,
or good citizenship. In a recent survey, the Chronicle of Philanthropy
found that 16 percent of companies were making more donations of
products and services and that 54 percent of companies were encouraging
more employees to volunteer their time.11 Companies are learning
(somet imes t he hard way) t hat being socially responsible bot h
domestically and abroad can not only help them avoid lawsuits but also
improve their earnings. For example, researchers at the Boston College’s
Centre for Corporate Citizenship found that as a company’s reputation
improved, so did the percentage increase in the number of people who
would recommend that firm. Nearly two-thirds of the members of the
80-million strong millennial generation (people born in the 1980s and
1990s) consider a company’s social reputation when deciding where to
shop, and 9 out of 10 of them say they would switch brands based on
their perceptions of a company’s commitment to social responsibility.
Moreover, prospective workers are saying corporate responsibility is
now more important to their job selection. Sustainability is closely related
to corporate social responsibility. Sustainability refers to a company’s
ability to produce a good or service without damaging the environment
or depleting a resource. Achieving complete sustainability is nearly
impossible, but companies are making strides to reduce their “carbon
footprints.” Those that are not are finding themselves under pressure
from consumers and groups determined that they do. Consider what

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 happened to Hewlett-Packard (HP). After HP broke a promise to
eliminate toxic materials in its computers by 2009, Greenpeace activists
painted the words “Hazardous Products” on the roof of the company’s
headquarters in Palo Alto, California. Meanwhile, a voicemail message
from Star Trek actor William Shatner was delivered to all of the phones
in the building. “Please ask your leader [HP CEO Mark Hurd] to make
computers that are toxin free like Apple has done,” Shatner said in the
recording. The stunt and publicity it generated worked. HP got the
message and later delivered on its promise.
One of HR’s leadership roles is to spearhead the development and
implementation of corporate citizenship throughout their organizations,
especially the fair treatment of workers.
4. Challenge : Advancing HRM with Technology
Advancements in information technology have enabled organizations to
take advantage of the information explosion. Computer networks and
“cloud computing” (Internet computer services and data storage) have
made it possible for nearly unlimited amounts of data to be stored,
retrieved, and used in a wide variety of ways. Collaborative software
that allows workers anywhere anytime to interface and share information
with one another electronically—wikis, document-sharing platforms such
as Google Docs, online chat and instant messaging, web and video
conferencing, and electronic calendar systems—have changed how and
where people and companies do business. For example, Boeing Satellite
Systems has a “lessons learned” site on its intranet where people from
all areas of the company can store the knowledge they have and others
can access it. Executives at Boeing estimate the measure has reduced
the cost of developing a satellite by as much as $25 million.
The Internet and social media are also having an impact. Social media
networking has become the new way to find employees and check them
out to see if they are acceptable candidates. Companies are hiring firms
such as Social Intelligence, which combs through Facebook, LinkedIn,

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 Twitter, Flickr, YouTube and “thousands of other sources” to create
reports about the “real you”—not the “you” you have presented in your
resume. HR managers are also grappling with whether or not to develop
blogging and social media policies, and whether or not to establish rules
about the amount of time employees can spend online or install software
that cuts them off after a certain amount of time.
5. Challenge : Containing Costs While Retaining Top Talent and
Maximizing Productivity
For years, most human resources managers have been under pressure to
cut labour costs. When the Great Recession hit, stretching a company’s
labour dollars while gaining productivity from workers became an
even bigger priority. Organizations take many approaches to lowering
labour-related costs, including carefully managing employees’ benefits,
downsizing, outsourcing, off shoring, furloughing employees, and
engaging in employee leasing in an attempt to enhance productivity.
Labour costs are one of the largest expenditures of any organization,
particularly in service- and knowledge-intensive companies. As a result,
most firms closely monitor employee pay and benefit programs. The
biggest HR concern presently has, when it comes to benefits, is sky-
rocketing health care costs and complying with the nation’s new health
care reform laws. In many industries health care costs are now
approaching 30 percent of total compensation. One trend is for firms to
shift employees to high-deductible plans. Employees pay lower premiums,
but they have to pay a certain amount of money, even for basic care,
before their insurance will begin picking up the tab. Another approach is
to offer employees incentives to get healthy—for example, by quitting
smoking, losing weight, or exercising. According to research by the
University of Pennsylvania’s Center for Health, at least one-third of
companies offer or plan to offer their employees incentives for activities
such as these. Some companies offer money, prizes, vacation trips, lower
health premiums, or refund the cost of weight loss programs.

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 Downsizing: As you probably know, downsizing was used extensively
by firms during the Great Recession, causing the U.S. unemployment
rate to jump up to about 10 percent. (In some states it was higher: 15
percent in Nevada and over 12 in percent California and Michigan. By
contrast, in North Dakota, it was a little over 4 percent). Downsizing
does not just take a toll on those who lose their jobs. Employees who
are “lucky” enough to keep their jobs often feel guilty they have been
retained, mourn the loss of their co-workers, and worry that they will be
the next to go. These people, who are generally the firm’s best performers,
also usually end up picking up the work their former co-workers used
to do for the same salary. When the economy improves or they see a
chance, they tend to head for the door.

How do firms continue to encourage employees to work hard for the

company in the face of such insecurity? More than one executive has
concluded that you do not get dedicated and productive employees if, at
the first sign of trouble, you show them that you think they are expendable.
To approach downsizing more intelligent ly, companies such as
Continental Airlines and Dial Corporation have made special efforts to
reassign and retrain employees for new positions when their jobs are
eliminated.

The results of working hard to retain an organization’s talent are

measurable as well. A Watson Wyatt study showed that companies with
excellent recruiting and retention policies provide a 1.4 percent higher
return to shareholders compared to those that do not.

 Furloughing: An alternative to downsizing is furloughing. When a

company furloughs employees, it asks them to take time off for either no

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 pay or reduced pay. Some companies are utilizing creative furlough
strategies to avoid downsizing and losing talent to competitors. Instead
of laying off people, the consulting firm Accenture instituted a voluntary
sabbatical program known as “Flexi-leave.” Employees got 20 percent
of their salaries and continued benefits for 6–12 months, and their stock
options remained in place. The workers could take other jobs during their
sabbaticals, as long as they did not work for a competitor

Although furloughs might sound preferable to downsizing, they have their

drawbacks, too, say some human resources experts. Costs are not cut
as significantly as they would be with downsizing because employees
generally retain their benefits while they are furloughed. Employees who
are not furloughed often end up with more work and feel resentful, and
product and service quality as well as innovation suffer as a result of the
higher workloads. And, as with downsizing, furloughing employees can
hurt a company’s recruiting efforts when the public discovers it has
resorted to such a measure.

More diligent workforce planning is a better solution, says John Sullivan, an

HR expert and consultant. Business revenues seldom fall off overnight.
Sullivan says the best managers look for warning signs and develop a process
that pinpoints skills the company no longer needs, low-impact jobs, and
poor performers in advance of a crisis. Instead, part-time or contract
employees can be hired and their hours of service adjusted as needed.

 Outsourcing: Over the past twenty-five years, the employment relationship

between companies and employees has shifted from relationship based to
transaction based. Fewer people are working for one employer over the
course of their lifetimes, and as we have explained, the Internet has created

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 a workforce that is constantly scanning for new opportunities. In addition,
more people are choosing to work on a freelance, or contract, basis or to
work part-time, especially women and senior citizens. Outsourcing is evidence
of this trend. Companies hire accounting firms to take care of their financial
services. They hire advertising firms to handle promotions, software firms to
develop data-processing systems, and law firms to handle their legal issues.
Maintenance, security, catering, payroll (and in small companies, sometimes
entire HR departments) are outsourced to increase the organization’s
flexibility and lower its overhead costs. The interest in outsourcing has been
spurred on by executives who want to focus their organization’s activities
on what they do best. In fact, some management experts predict companies
will one day strip away every function not regarded as crucial. Even now,
many firms are outsourcing what would seem to be their core functions.
Drug companies such as GlaxoSmithKline are outsourcing their research
and development functions to smaller firms that can more cheaply and nimbly
create new products for them. Procter & Gamble outsources a major portion
of its product development.

 Employee Leasing: As an alternative to downsizing, outsourcing, off

shoring, and furloughing, many companies, especially small ones, have
decided to sign employee leasing agreements with professional employer
organizations (PEOs). A PEO—typically a larger company—takes over
the management of a smaller company’s HR tasks and becomes a co-
employer to its employees. The PEO performs all the HR duties of an
employer—hiring, payroll, and performance appraisal. Because PEOs
can co-employ a large number of people working at many different
companies, they can provide employees with benefits that small
companies cannot afford, such as 401(k) and health care plans, workers’

24
 compensation, and even adoption assistance. In addition, many PEOs
offer their employees flex-time, job sharing, part-time employment,
consulting arrangements, seasonal work, and on-call work. The value of
employee leasing lies in the fact that an organization can essentially maintain
its working relationships with its employees but shift some employment
costs to the PEO, in return for a fee.

 Productivity Enhancements: The results of pure cost-cutting efforts such

as downsizing, furloughing, outsourcing, and employee leasing can be
disappointing, however, if managers use them as simple solutions to
complex performance problems. Overemphasizing labor costs misses the
broader issue of improving a firm’s productivity. Employee productivity
is the result of a combination of employees’ abilities, motivation, and
work environment and t he t echnology they use t o work. Since
productivity can be defined as “the output gained from a fixed amount of
inputs,” organizations can increase their productivity either by reducing
their inputs (the cost approach) or by increasing the amount that
employees produce by adding more human and/or physical capital to the
process. Companies such as Sout hwest Airlines, Nucor, and the
manufacturing and technology firm Danaher achieve low costs in their
industries not because they scrimp on employees but because they are
the most productive.

Many companies are finding that providing work flexibility is a good

way to improve the productivity and motivation of valuable employees,
especially when giving them larger benefit packages is not an option.
For example, when gasoline prices skyrocketed in 2008, most companies
could not afford to automatically increase employees’ pay because they
were facing higher transportation costs themselves for the goods and

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 services they had to buy. But some companies let employees either
telecommute or, or like the state of Utah did, let employees work ten
hours per day, four days a week.

6. Challenge : Responding to the Demographic and Diversity Challenges

of the Workforce

Almost half of organizations reported that the biggest investment

challenge facing organizations over the next ten years is obtaining human
capital and optimizing their human capital investments. It is due to
changes in the demographic makeup of employees, such as their ages,
education levels, and ethnicities.

To forecast trends to support the strategies of their organizations, HR

managers frequently analyze the capabilities of different demographic groups
and how well each is represented in both fast-growing and slow-growing
occupations. Women, for example, are fairly well represented in fast-growing
occupations such as health services but are also represented in some slow-
growth occupations such as administrative jobs and computer and financial
records processing jobs. Blacks and Hispanics have been heavily
concentrated in several of the slow-growth and declining occupations. The
U.S. labour force also grew more slowly in the last decade than it did in the
previous one, a trend that is projected to continue

To accommodate shifts such as these, find qualified talent, and broaden their
customer bases, businesses know it is absolutely vital to increase their efforts
to recruit and train a more diverse workforce. And with a more diverse
workforce comes more diverse expectations on the part of employees for

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 their employers to meet.

7. Challenge : Adapting to Educational and Cultural Shifts Affecting

the Workforce

Over the years, the educational attainment of the U.S. labour force has
risen dramatically. Education also helps a person stay out of the ranks of
the unemployed. For example, in 2010, the unemployment rate of people
aged twenty to twenty-four hit 17 percent. But those in the same age
range with college degrees fared better. The unemployment rate for them
was a little over 9 percent. Despite the fact the educational attainment of
the labour force has risen in general, American students’ math and science
test scores lag behind those of students in China, Japan, Singapore, India
Finland, and several other nations. The U.S. Department of Education
has found that less than half of all high school seniors can handle
mathematics problems involving fractions, decimals, percentages,
elementary geometry, and simple algebra. And between 45 and 50
percent of adults in the United States have only the limited reading and
writing abilities needed to handle the minimal demands of daily living or
job performance. Businesses now spend billions of dollars on basic skills
training for their employees. As David Kearns, the renowned former CEO
of Xerox Corporation and ardent education advocate, said, “The
American workforce is in grave jeopardy. We are running out of qualified
people. If current demographic and economic trends continue, American
business will have to hire a million new workers a year who can’t read,
write, or count.” As the baby boomers retire, the problem will likely
worsen. HR departments may have to offer higher compensation
packages to attract qualified candidates, and recruiting and selection

27
 systems will have to function much more competitively.

 Cultural and Societal Changes Affecting the Workforce: The

attitudes, beliefs, values, and customs of people in a society are an
integral part of their culture. Naturally, their culture and society affect
their behaviour on the job and the environment within the organization,
influencing their reactions to work assignments, leadership styles, and
reward systems. Cultural and societal changes are ongoing. HR policies
and procedures therefore must be adjusted to cope with these changes.

 Employee Rights: Laws affecting employee rights are continually

changing. In this book we will discuss the major laws affecting companies
today. Among them are laws granting employees the right to equal
employment opportunities ; union representation if they desire it ; a safe and
healthful work environment; unemployment and health care benefits as
required by law, and the regulation of pension plans by the government ;
equal pay for equal work; and so on.

 Privacy Concerns of Employees: HR managers and their staff

members, as well as line managers in positions of responsibility, generally
recognize the importance of discretion in handling all types of information
about employees. In addition to implementing privacy policies, most companies
try to limit the use of Social Security numbers on time sheets, log-in sheets,
and other employment forms. Companies also restrict access to employee
files, conduct background checks on employees who have access to others’
files, and contract with outside firms specializing in identity theft to prevent the
abuse of employee information. Globalization has added another twist to privacy
compliance. For example, EU countries prohibit the transfer of personal data

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 to countries with inadequate data protection laws.

 Changing Attitudes toward Work: Employees today are less likely to

define their personal success only in terms of financial gains. Many
employees, especially younger ones, believe satisfaction in life is more
likely to result from balancing their work challenges and rewards with
those in their personal lives. Though most people still enjoy work and
want to excel at it, they tend to be focused on finding interesting work
and are more inclined to pursue multiple careers. In fact, in a survey of
more than 3,000 workers, 86 percent said work fulfilment and work-life
balance were their top priorities. Only 35 percent said being successful
at work and moving up the ladder were their top priorities. People also
appear to be seeking ways of living that are less complicated but more
meaningful. These new lifestyles cannot help having an impact on the
way employees must be motivated and managed. Consequently, HRM
has become more complex than it was when employees were concerned
primarily with economic survival.

 Balancing Work and Family: Even though new Census Bureau figures
show couples postponing marriage and parenthood, balancing work and
family continues to be a major concern for firms and their employees.
Employees are already working more hours than they have at any time
since 1973, and increasingly employees are tethered to their companies
around the clock via communication technologies. Complicating the task
is the fact that today’s families are also more diverse. They can consist
of two-wage-earner families, single-parent families, families headed by
same-sex couples, and families in which multiple generations of adults
are living under one roof. Competitive organizations are finding it
advantageous to provide employees with more family-friendly options.

29
 Those options include telecommuting, flexible work hours, day care, elder
care, part-time work, job sharing, parental leave, adoption assistance,
spousal involvement in career planning, and assistance with family
problems. About 57 percent of Fortune 500 companies, for example,
provide same-sex partner health insurance benefits, as do some states
for their employees.

Companies with programs such as these calculate that accommodating

their employees’ individual needs and circumstances is a powerful way
to attract and retain top calibre people.

CHALLENGES FACED BY HRM

Human resource professionals have been facing various types of challenges in the
recent past few years, and the present era is shaping up to be a continuation of many
of those issues - with a few new ones thrown in because of Covid-19. Let us have a
look at the eight biggest challanges at mentioned below:
1. Engaging the Workforce
2. Attracting Talent to the Enterprise
3. Managing Relationships
4. Training and Development Strategies
5. Talent Retention
6. Diversity in the Workplace

7. Embrace Inevitable Change

1. Engaging the Workforce

Employee engagement has been an ongoing matter of concern for HR

professionals for decades. Engagement metrics were trending upward in the
early part of the pandemic, covid-19 driven by an increase in transparency

30
 and communication, but those gains have been tough to hang on to as the
conversation has shifted towards if or when people will return to work in
offices. fully wheather it is going to be online or offline mode or hybrid mode.

We address those challenges by investing in intentional, deliberate

communications to help team members see what role they play in driving the
business forward and in achieving the company's mission, vision, and values.
Connecting daily work to the business strategy helps employees feel more
invested, accomplished, and engaged in their work.

2. Attracting Talent to the Enterprise

Talent acquisition is among the highest priority human resource challenges at

present. U.S. unemployment is hovering at historical lows, and many
organizations are finding it tough to fill their open roles in a timely fashion
during the labor reshuffling that's commonly referred to as the Great Resignation.

Competitive compensation and employee benefits packages are essential in

attracting talent to the organization. However, to really compete, we need to
dig deeper and offer meaningful experiences and a greater sense of purpose
to the employees.

An employer’s brand can help convey that purpose and attract people who
are motivated by it. we don't need to create a company culture that pleases
everyone. This would be impossible and would leave us with a watered-down
brand that appeals to virtually no one. Instead, we should narrow our focus
and develop an employer brand based on our most valued and unique elements.

A focused employer brand that doesn't back down from its values may not
attract candidates who disagree with or simply aren't passionate about those
values. But that's OK: We only need it to be attractive to the people whose
values align with ours.

If we haven't already defined our employer brand, now's the time. If one have
documented it, we should make time to review it and think about new ways to

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 bring it to life. Identify what we want from company culture to be based on
our mission, vision, and values.One should assess one’s company culture as
it is now to determine whether it's where one wants it to be. One should set
goals for filling in the gaps, such as building up your DEI ( Diversity, Equity &
Inclusion) efforts to foster a greater sense of belonging for all employees.

3. Managing Relationships

In 2023, workplace relationships are more important than ever. Supporting

healthy relationships is one of major challenges faced by HR at present times.
Companies are finally settling into their long-term hybrid or remote working
models, so it has a significant impact on how employees interact with each
other. Work models in the new economy are powered by the relationships
fostered between managers and individual team members and their peers.

Healthy work relationships build trust in the workforce and empower

employees to work together more effectively, even if they don't see each other
or work together often. i.e. through video conferencing/online mode.

In remote and hybrid work environments, we have to be intentional about

building relationships. HR team can help set communication cadences for
departments and teams, which drives relationships and builds awareness of
everyone's different roles and how they intersect. Regular communication drives
stronger relationships and helps employees learn more about how they work
together and can help each other in achieving organisational goals.

The more the employees know each other and understand each other's work,
the better they can perform their jobs. For example Knowing the next stage of
a project, helps individual contributors refine their own work. Employees need
to trust their colleagues to deliver what's needed to keep projects on track.

4. Training and Development Strategies

Rapid upskilling and reskilling is becoming the norm in the new economy.
However, the world of work is evolving more quickly than static learning

32
 management systems can keep up.

In 2023, HR professionals need to identify new solutions for training programs

and continuing professional development. An effective training and development
strategy must account for rapidly changing technical skills and long-term
transferable skills.

Technical skills have a short half-life in a swiftly changing workplace, so one

should not invest all of one’s limited learning resources in technical training.
one should Incorporate technical training in the flow of work as much as
possible. Technical training in the flow of work also makes it easier to update
training to match one’s actual needs. It's good approach to technically train
the workforce which will them am edge over their competitors.

Transferable skills have greater longevity and are cumulative because

employee can build on adjacent skills. These include "soft" skills such as
critical thinking, emotional and social intelligence, and communication.
Transferable skills are especially important as a foundation for leadership
development in the current economy. Leaders today and in the future need to
be able to keep projects on track by supporting employees and removing
roadblocks to their success. That requires good two way communication,
empathy, awareness etc. by the superiors towards their subordinates.

HR can be extremely useful in predicting skills gaps and helping employees

see a path forward for training and development in the organisation

5. Talent Retention

Workers have more options for employment than they had in decades, earlier.
So every HR professional must take care to retain the current workforce - or
risk losing them to an extremely competitive talent market.

The first step to improve employee retention is to find out why employees are
leaving in the first place. Exit interviews can provide insight into what employees
liked best about working at the organization - and what they found lacking.

33
 With this knowledge, HR professionals can develop plans to address the factors
that are driving employee turnover and try to retain maximum number of
employees in the organisation.

If turnover occurs frequently in the first few months of the employee life cycle,
for example, that could indicate new employees didn't feel prepared to perform
the full scope of their duties, HR managers could mitigate this through better
communication during the hiring process and more effective, engaging
onboarding processes.

Employees leaving at later stages can be more challenging to deal with. They
may be leaving because they feel like they've reached the limit of their potential
at your company, for instance. To address to this challenge, require top officials
reworking of internal mobility and career paths to give employees more options
for growth in the organisation.

6. Diversity in the Workplace

Diversity means practice of including people from a range of different social

& ethnic backgrounds, different genders, age, race, Language, Sexual
orientation, Religion, Physical abilities and disabilities, culture, geographical
orientation. Diversity remains a hot-button issue in human resources, with many
organizations still struggling to build DEI goals into the broader strategic plan.
Below mentioned are the challanges that can arise with diverse workforce
(employees)

(i) Communication Issues : Language & communication barriers are ever

present in companies with diverse workforce.

(ii) Gender Equality : Workforce including females throw more challanges to

HR in the form of Motherhood/Maternity Leave/Sabbatical Leave posting at
comfortable geographical locations etc.

(iii) Physical & Mental disabilities : Often disabled employees have difficult
time while working in the organisation due to non availability of wheel chair ramps.

34
 (iii) Generalization Gaps : By 2025 millennials will make up 75 % of workforce.
Employee may have difficulties while cap & up with different culture of young
generations are bringing into the organisation.

7. Embrace Inevitable Change

The work of the world is not returning to the way things it was before the
pandemic Covid-19. One of the greatest Human Resource challenges in 2023
is coming to the terms with the new reality so HR team can begin developing
long-term plans that account for change and agility.

For the past two years, companies have been in bad shape trying to return to
the normal functioning of the office. But that's not how organizations operate
anymore. Employees have experienced flexible and remote work arrangements
and have come to expect that from their work experience. And in a tight labor
market, one can't afford not to listen to what employees need.

Beyond larger, strategic HR issues, HR teams also need to implement changes

to employment laws and regulations in at present , especially at the state level.
for example Many states are currently updating paid family and medical leave
laws and HR teams must prepare for changing compliance requirements.

Organisations should Develop business and people plans that can accommodate
this pace of change. In a fast-paced work environment, we must be able to
flex with change without breaking. In business planning meetings, one should
consider a variety of scenarios that could affect one’s business model and
work processes. One should Develop alternative or contingent plans for
addressing these scenarios as they arise so that you aren't caught off-guard.

8. Employee Health and Well-Being

Employee’s well-being remains among the top HR issues at present times.

After the major disruptions of 2020, due to covid-19 employers began to
recognize the need for customized benefit plans to address individual employees'
most pressing issues. Companies are offering better, more varied benefits,

35
 including child and elder care benefits, and expanding coverage to mental
health services as many employees are working from home.
1.7 SUMMARY
HRM is a combination of people-oriented management practices that
views employees as assets, not costs; and its main aim is to create and maintain
a skilful and committed workforce to gain competitive advantage. HR manager
performs managerial as well as operative functions. Managerial functions of
p er s o nne l ma nag e ment invo lve pla nning , o r ga nizing , d ir e c t ing ,
and controlling. All these functions influence the operative functions. Principles
of Human Resources Management can be well summarised in 10Cs i.e.,
comprehensiveness, cost-effectiveness, control, coherence, communication,
creativity, competence, credibility, change management and commitment.

1.8 GLOSSARY

 Competence: Competence can be defined as the ability to perform

a particular activity to a prescribed standard. Competence is an acquired
personal skill that is demonstrated in an employee’s ability to provide a
consistently adequate level of performance in a specific job function.

 Human resources: The funct ion dealing with the management

of people employed within the organization.

 Human resource management: The formal structure within an

organization responsible for all the decisions, strategies, factors,
principles, operations, practices, functions, activities and methods
related to the management of people.

 Managerial functions of HRM: The managerial functions are the

basic functions performed by the HR managers in their capacity as
managers or heads of their own departments. Managerial functions
involve planning, organizing, directing, and controlling. All these
functions influence the operative functions.

36
 O perat i ve Fu nct ion s: The o perat ive funct ions o f per so nnel
management are related to specific activities of personnel management
viz . , pr o cur eme nt , d evelo p ment , co mpensat io n, int egr at io n,
maintenance and human relations.

 Strategic Approach to HRM: The strategic approach to human

resources management is a developing process that is formed, and
which changes according t o events within t he organization and
environment.

 Downsizing: It is the planned elimination of jobs.

 Outsourcing: It simply means hiring someone outside the company to

perform business processes that were previously done within the firm.

 Furloughing: When a company furloughs employees, it asks them to

take time off for either no pay or reduced pay.

 Workforce Diversity: Employees with different cultural background.

1.9 SELF ASSESSMENT QUESTIONS
Q1. Why is the task of an HR/personnel manager often likely to be more
difficult than that of any other manager?

Q.2. What do you consider to be the essentials of a good HR manager?

Q.3. What personal attributes do you consider should be possessed by an
HR/personnel manager if he or she is to be successful?
Q.4. Differentiate between Managerial and operative functions of HRM.
Q.5. Explain the terms: outsourcing, change management and downsizing.
Q.6. What are the challenges of HRM in present scenario of competitive
market?

37
1.10 LESSON END EXERCISE
Answer the following questions:

Fill in the blanks :

Q1. ………….. covers union-management relations, joint consultations,

collective bargaining, grievance & disciplinary procedures, settlement of
disputes, etc.

(a) Personal Aspect of HRM

(b) Welfare Aspect of HRM
(c) Industrial Relations Aspect of HRM
(d) All of the above

Q2. Explain the 10 Cs of HRM principles.

—————————————————————————————
—————————————————————————————
—————————————————————————————

—————————————————————————————

Q2. How can we separate the individual from his or her behaviour?

—————————————————————————————
—————————————————————————————
—————————————————————————————

—————————————————————————————

Q3. How do maintaining good working relationships help us at the workplace?

—————————————————————————————
—————————————————————————————

38
 —————————————————————————————

—————————————————————————————

Q4. Which are more important functions-managerial or operative for HR

manager?

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________
Q5. Highlight the challenges faced by HRM

—————————————————————————————

—————————————————————————————

—————————————————————————————

—————————————————————————————

—————————————————————————————

Q6. What is outsourcing?

—————————————————————————————

—————————————————————————————

—————————————————————————————

—————————————————————————————

—————————————————————————————

39
1.11 SUGGESTED READINGS
 Becker, B E, Huselid, M A, Pickus, P S and Spratt, M F (1997). HR as
a source of shareholder value: research and recommendations, Human
Resource Management, Spring, 36 (1), pp 39–47
 Khan, Saleena and Chahar, Bhawna(2010). Future of HR management
in Indian scenario: Issues & Challenges, Asian Journal Of Management
Research, Online Open Access Journal
 Walton, R E (1985b) Towards a st rat egy of elicit ing employee
commitment based on principles of mutuality, in (eds) R E Walton and
P R Lawrence, HRM Trends and Challenges, Harvard Business School
Press, Boston, MA
 Gary Dessler: HRM, Prentice Hall
 Michael Armstrong: Armstrong’s Handbook of HRM Practices, Kogan
Page Publisher
 P. Suba Rao: Essentials of HRM and Industrial Relations, Himalaya
Publication
 Pareek, Udai and Rao T. V.: Designing and managing human resource
systems, Oxford &IBH

**********

40
Lesson No. 2 Unit-I
Semester-II MCOMC253

GENERAL EVOLUTION OF HRM

STRUCTURE

2.1 Introduction

2.2 Objectives

2.3 General Evolution of HRM

2.4 Evolution of HRM in India

2.5 Summary

2.6 Glossary

2.7 Self Assessment Questions

2.8 Lesson End Exercise

2.9 Suggested Readings

41
2.1 INTRODUCTION
Key principles and practices associated with HRM date back to the
beginning of mankind. Mechanisms were developed for the selection of tribal
leaders, for example. More advanced HRM functions were developed as early
as 1000 and 2000 B.C. Employee screening tests have been traced back to 1115
B.C. in China. The terminology used to describe the role and functions of workers
has evolved from “personnel” to “industrial relations” to “employee relations” to
“human resource management.”
Because of continuous changing socio-economic, technological and
political conditions, the human resource managers of the future shall have to
face more problems in the management of human resources. The human resource
managers of today may find themselves obsolete in the future due to changes in
environment if they do not update themselves.
2.2 OBJECTIVES
This lesson will enable the students to understand :
(i) how HRM has evolved over a period of time throughout the world as well
as in India.
(ii) challenges faced by HRM.

2.3 GENERAL EVOLUTION OF HRM

Looking at the historical context can help us to understand how human resource
management has developed into a profession and how it is continuing to increase in
importance. It has passed through the following phases during its evolution:
a) The late nineteenth century
Wherever people have needed to be employed there has been some form
of people management. Although, it has only been in recent years, a
consistent view has emerged on how to develop people. At the end of the
nineteenth century many workers were employed in the manufacturing
sectors, where they had to put in long hours and conditions were often

42
harsh. The welfare state did not exist and no work could mean destitution.
However, even in such unenlightened times some employers did value their
workers and took on a paternalist role for their employees. Such famous
names as Cadbury, Rowntree and Bournville, (all chocolate manufacturers)
and Lever (a soap manufacturer), all took their employees welfare very
seriously and established the provision of health and education as part of
their role as a responsible employer. These enlightened employers tended
to be Quakers and were some of the first employers to employ welfare
officers. The welfare officers were often women and were concerned not
only with visiting sick employees but also with supervising moral welfare.
Pressures were also coming from an emerging labour movement and trades
unions were gaining infuence with a campaign for ‘industrial betterment’.

The 1900s also saw the development of personnel management as a

professional body, with the formation of the Welfare Workers’ Association,
a forerunner to the CIPD. Human resource management, as we know it
today, also developed from a range of theories from sociologists,
psychologists, and management and organisational behaviourists. One of
the earliest can be traced back to the United States in the early 1900s
with the development of ‘time and motion’ studies, which would find the
‘one best way’ of performing a task. The father of what became known as
scientific management was Frederick Taylor. Taylor replaced haphazard
rules of thumb with precise measure principles. He was one of the first to
emphasise the prediction of behaviour and encouraged the use of training
and other management techniques to infuence work outcomes. Taylor
identified the skills needed for a particular job and would hire and train
workers to perform to the required standards. Employees were rewarded
with a ‘differential piece rate’ pay system that rewarded work output. Many
managers took on the ideas of Taylor, often without the pay incentives.
Although Taylor publicised his ideas as a success, the reality was threats
of industrial action, redundancies and disgruntled management.

43
b) Fordism
The USA was also leading t he way in developing lar ge-scale
industrialisation with car manufacturers such as Henry Ford. Ford
continued with the scientific management approach and developed an
assembly line where the workers were allowed a minimum amount of
time to complete a task before the car moved to the next stage in the
production process. Employees unable to keep up were fired; this led
to a high level of absenteeism as well as high employment turnover. To
counteract the high staff turnover Ford introduced ‘the five dollar day’
bonus, which would double workers’ wages. However, the bonus was
payable only to employees whose moral and work ethic was seen as
appropriate both at home and at work. Management control was also
increased, through the use of job evaluation and a pay system that was
matched to the difficulty or status of the job. Workers had to be with
the company six months to qualify for the scheme and young people
under 21 and women were not eligible. With mass production the role
of managing people became a science and managers were expected to
have not only technical expertise but also managerial ability. In the UK,
however, reliability and the ability to impose discipline were seen as
far more important than technical knowledge.
c) The human relations movement
The human relations movement began to grow in the 1920s with Elton
Mayo and the famous Hawthorne experiments. This shifted the view of
people management away from the mechanistic principles of scientific
management and towards a behavioural approach of satisfying the social
needs of workers. The results of the Hawthorne approach taught managers
that concern for people did not mean lower production, but the reverse.
This was seen as an anti-Taylor perspective as it argued against Taylor’s
‘One Best way’, although it agreed with Taylor’s idea of sufficient rest
breaks for workers. Research in the UK was also emerging from the
National Institute of Industrial Psychology (NIIP). It investigated methods

44
 of work and its relation to fatigue and concluded that fatigue, was not only
psychological but also physiological. The resulting research, by what
became known as t he human relat ions school and ot her work
psychologists, identified the importance of the human factor of work. They
discovered that people were more effective if they were allowed a say in
how to perform tasks and that social relations were often more important
than money in maintaining morale.
d) The First World War
The war years of 1914–18 saw major developments in personnel
management. The Munitions of War Act 1915 passed to ensure a sufficient
supply of labour to munitions’ factories made the provision of welfare
services compulsory. This led to a large increase in the number of welfare
officers, many of whom were men as it was considered more appropriate
from them to oversee the welfare of boys. However, women were also
being recruited in large numbers to replace the men sent to the trenches.
This led to some bitter disputes with trades unions, which saw craftsmen’s
jobs being ?lled by unskilled women. It led to the government having to
enter into discussion and consultation with the unions (Cannel, 2004).
Another development was the role of ‘labour officers’ needed to assist in
the recruitment, selection, discipline and industrial relations on the shop
floor of unionised workers. Labour officers also had to interpret the many
government directives concerning the employment of civilians in wartime
and aspects concerning discipline and dismissal. Many Labour Officers
were male and came from an engineering and works management
background (Evans, 2003).
e) Between the wars
The engineering industries developed the role of the personnel manager,
and job titles such as ‘labour manager’ or ‘employment manager’ became
more common. Their role was to handle recruitment, dismissal, absence
and pay. Pay negotiations were becoming more common and officials
appointed by employers’ federations negotiated national pay rates with

45
 the unions. The inter-war years also saw the emergence of the title
‘personnel manager’, in companies such as Marks & Spencer. The
personnel manager dealt with many of the functions of the human resource
that we know today. However, senior management more often dealt with
any industrial relations problems. Personnel was not the only name to
change: the Worker’s Welfare Association, after evolving through several
name changes, finally became the Institute of Labour management in 1931,
and eventually the Institute of Personnel Management (IPM) in 1945.
f) The Second World War
The 1939–45 war saw more government regulations introduced to regulate
employment and increase morale in a bid to boost the war effort. The role
of the welfare and personnel manager was seen by government as a vital
part of the drive to greater efficiency. Strikes were also made illegal and
productivity improvements became part of a joint consultation and
negotiation between unions and the government. By the end of the war the
personnel profession had expanded and had approximately 5300
practitioners; many of the HRM practices in use today can trace their
origins back to the war years.
g) The Post-War Years
Wit h t he post -war years came a t ime of economic boom, wit h
manufacturing at its peak. Unemployment was low and personnel
practices such as planning, recruitment and selection became important
aspects of the personnel manager ’s role. During the war much of the
personnel role had been to implement government rules, and the emerging
personnel profession tended to be very bureaucratic and based on
function (Cannel, 2004). Industrial relations also took on a new role.
During the war years negotiations were centralised and often government
led. With large companies now developing their own employment policies,
negotiations became more and more decentralised with local shop
stewards and local bargaining. Official and unofficial strikes became
damaging to the economy and the UK became notorious for its poor

46
 industrial relations. Eventually, a report by Lord Donovan in1968
criticised employers, managers and unions for their failure to negotiate
and failure to plan for industrial relations strategies. Much of the criticism
of the failure of industrial relations was directed at the failure of employers
to give personnel management a high priority. The higher profile of
personnel today can partly be seen as a response to the criticism made
by Donovan (Cannel, 2004).
The 1960s also saw the introduction of new legislation, such as contracts
of employment, training and redundancy payments. The 1970s saw the
introduction of equal opportunities legislation and employment protection,
but there were also attempts to control trades union activity. The economy
was also in decline and personnel departments were not only expected to
implement the new legislation, but also directives on pay regulations to
curb the spiralling inflation. New techniques needed to be developed to
improve performance and much of the work done by social scientists,
management and organisational behaviour theorists in the USA such as
Herzberg’s theory of motivation, found their way into the personnel
departments.
h) Social Issues Era (1963–1980)
This period witnessed an unprecedented increase in the amount of labour
legislation that governed various parts of the employment relationship, such as
prohibition of discriminatory practices, occupational health and safety,
retirement benefits, and tax regulation. As a result, the personnel department
was burdened with the additional responsibility of legislative compliance that
required collection, analysis, and reporting of voluminous data to statutory
authorities. For example, to demonstrate that there was no unfair discrimination
in employment practices, data pertaining to all employment functions, such as
recruitment, training, compensation, and benefits, had to be diligently collected,
analyzed, and stored. To avoid the threat of punitive damages for non-
compliance, it was necessary to ensure that the data were comprehensive,
accurate, and up-to-date. So, it became essential to automate the data

47
collection, analysis, and report generation process.
It was about this time that personnel departments were beginning to be
called Human Resources Departments and the field of human resource
management was born. The increasing need to be in compliance with
numerous employee protection legislations or suffer significant monetary
penalties made senior managers aware of the importance of the HRM
function. In other words, effective and correct practices in HRM were
starting to affect the “bottom line” of the firms, so there was a significant
growth of HR departments, and computer technology had advanced to
the point where it was beginning to be used. As a result, there was an
increasing demand for HR departments to adopt computer technology
to process employee information more effectively and efficiently. This
trend resulted in an explosion in the number of vendors who could assist
HR departments in automating their programs in terms of both hardware
and software.
Simultaneously, computer technology was evolving, and delivering
better productivity at lower costs. These technology developments
and increased vendor activity led to the development of a comprehensive
management information system (MIS) for HRM. The decreasing costs
of computer technology versus the increasing costs of employee
compensation and benefits made acquisition of computer-based HR
systems (HRIS) a necessary business decision. However, the personnel
departments were still slow in adopting computer technology, even
though it was inexpensive relative to the power it could deliver for the
storage and retrieval of employee information in MIS reports. So,
the major issue at this time in the historical development of HRIS
was not the need or capabilities of technology but how to best
implement it.
Another factor was the booming economy in most industrialized countries.
As a result, employee trade unions successfully bargained for better
employment terms, such as healthcare and retirement benefits. As a result,

48
 labour costs increased, which put pressure on personnel managers to
justify cost increases against productivity improvements. With the
increased emphasis on employee participation and empowerment, the
personnel funct ion t ransformed into a “prot ector” rather than a
“caretaker” functions, shifting the focus away from maintenance to
development of employees. Thus, the breadth and depth of HRM
functions expanded, necessitating the need for strategic thinking and
better delivery of HR services.
i) Cost-Effectiveness Era (1980 to the Early 1990s)
With increasing competition from emerging European and Asian
economies, U.S. and other multinational firms increased their focus on
cost reduction through automation and other productivity improvement
measures. As regards HRM, the increased administrative burden
intensified the need to fulfil a growing number of legislative requirements,
while the overall functional focus shifted from employee administration
to employee development and involvement. To improve effectiveness and
efficiency in service delivery, through cost reduction and value-added
services, the HR departments came under pressure to harness technology
that was becoming cheaper and more powerful.
In addition, there was a growing realization within management that people
costs were a very significant part of their budgets. Some companies
estimated that personnel costs were as high as 80% of their operating
costs. As a result, there was a growing demand on the HRM function to
cost justify their employee programs and services. In one of the first books
to address this growing need to cost justify the HRM function. Cascio
(1984) indicated that the language of business is dollars and cents and HR
managers need to realize this fact.
j) Technological Advancement Era and Emergence of Strategic HRM
(1990 to Present)
The economic landscape underwent radical changes throughout the

49
1990s with increasing globalization, technological breakthroughs
(particularly Internet-enabled Web services), and hyper-competition.
Business process reengineering exercises became more common and
frequent, with several initiatives, such as right sizing of employee
numbers, reducing the layers of management, reducing the bureaucracy
of organizational structures, autonomous work teams, and outsourcing.
Firms today realize that innovative and creative employees who hold the
key to organizational knowledge provide a sustainable competitive
advantage because unlike other resources, intellectual capital is difficult to
imitate by competitors. Accordingly, the people management function has
become strategic in its importance and outlook and is geared to attract,
retain, and engage talent. These developments have led to the creation of
the HR or workforce scorecard as well as added emphasis on the return
on investment (ROI) of the HR function and its programs.
The increased use of technology and the changed focus of the HRM
function as adding value to the organization’s product or service led to
the emergence of the HR department as a strategic partner. With the
growing importance and recognition of people and people management
in contemporary organizations, strategic HRM (SHRM) has become
critically important in management thinking and practice. SHRM derives
its theoretical significance from the resource-based view of the firm
that treats human capital as a strategic asset and a competit ive
advantage in improving organizational performance.
Reflecting the systems view, Becker and Huselid (2006) stressed the
importance of HR structure— the “systems, practices, competencies,
and employee performance behaviours that reflect the development and
management of the firm’s strategic human capital”—for organizational
performance. Context is a crucial element in SHRM, and therefore,
researchers increasingly emphasize the “best-fit” approach to SHRM as
opposed to the “best-practice” approach. The success of SHRM is
contingent on several factors, such as national and organizational culture,

50
 size, industry type, occupational category, and business strategy.
Accordingly, Becker and Huselid (2006) argued that “it is the fit between
the HR architecture and the strategic capabilities and business processes
that implement strategy that is the basis of HR’s contribution to
competitive advantage”.
Therefore, in determining the strategic fit between technology and HR, it
is not the strategy per se that leads to competitive advantage but rather
how well it is “implemented” taking into account the environmental realities
that can be unique to each organization and, indeed, between units and
functions of the organization
2.4 EVOLUTION OF HRM IN INDIA

The evolution of HRM can be traced back to Kautilya’s Artha Shastra,

where he recommended that government must take active interest in public
and private enterprise. He said that government must provide a
proper procedure for regulating employee and employee relation. In the
medieval times there were examples of kings like Allaudin Khilji, who
regulated the market and charged fixed prices and provided fixed salaries
to their people. This was done to fight inflation and provide a decent
standard of living during the pre independence period of 1920 the trade
union emerged. Many authors, who have given the history of HRM, say
that HRM started because of trade union and the First World War. The
Royal commission in 1931 recommended the appointment of a labour
welfare officer to look into the grievances of workers. The Factory Act
of 1942 made it compulsory to appoint a labour welfare officer if the
factory had 500 or more than 500 workers. The international institute of
personnel management and National Institute of Labour Management were
set up to look into problems faced by workers to provide solutions to
them. The Second World War created awareness regarding workers
rights and 1940’s to 1960’s saw the introduction of new technology to

51
 help workers. The 1960’s extended the scope of human resource beyond
welfare. Now it was a combination of welfare, industrial relation,
administration together it was called personnel management. With the
second 5 year plan, heavy industries started and professional management
became important. In the 70’s the focus was on efficiency of labour while
in the 80’s the focus was on new technology, making it necessary for
new rules and regulations. In the 90’s the emphasis was on human values
and development of people and with liberalization and changing type of
working people became more and more important there by leading to
HRM, which is an advancement of personnel management.
The role of HRM can be summarised as below:
 The collective bargaining role – centred on dealing with trades unions and
the development of industrial relation’s strategies.
 The implementer of legislation role – implying understanding and implementing
a growing amount of legislation.
 The bureaucratic role – implementing a series of rules about behaviour at
work, dealing with recruitment, managing absence, and so on.
 The social conscience of business role, or ‘value champion’ – a residue from
the welfare worker function.
 Strategic Role- aligning the HR practices with organisational capabilities to
achieve organisational goals.
Presently HR plays the following Role in the Indion Context :-
1. Investing in talent (i.e. employee experience, Happiness at work & Employee
wellness.)
2. Use of technology in HR.
3. Bracing for Diversity
4. Great Emphasis on Employee Development.
5. Motivating the workforce.

52
6. Managing People
7. Trust factor
8. Work-Life Balance
9. Competency Development
10. Bridging the demand-Supply gap.
HRM has started focussing more on development aspects of Human
Resources. HRM emphasises on a harmonious balance between
employee demands and organisational Requirements.
Development of HRM in India has now occupied a centre stage and
its growing at on apt pace with the Industry.
2.5 SUMMARY
HRM dates back to the beginning of mankind. In late nineteenth century Cadbury,
Rowntree and Bournville, (all chocolate manufacturers) and Lever (a soap
manufacturer), all took their employees welfare very seriously and established the
provision of health and education as part of their role as a responsible employer.
Taylor replaced haphazard rules of thumb with precise measure principles. He
was one of the first to emphasise the prediction of behaviour and encouraged the
use of training and other management techniques to influence work outcomes.
The human relations movement began to grow in the 1920s with Elton Mayo and
the famous Hawthorne experiments. The results of the Hawthorne approach taught
managers that concern for people did not mean lower production, but the reverse.
The inter-war years also saw the emergence of the title ‘personnel manager’, in
companies. The role of the welfare and personnel manager was seen by government
as a vital part of the drive to greater efficiency. In seventies Herzberg’s theory of
motivation, found the way into the personnel departments. The between 1960-
1980 witnessed an unprecedented increase in the amount of labour legislation that
governed various parts of the employment relationship, such as prohibition of
discriminatory practices, occupational health and safety, retirement benefits, and
tax regulation. In between 1980 and 1990, there was a growing realization within
management that people costs were a very significant part of their budgets. As a
53
 result, there was a growing demand on the HRM function to cost justify their
employee programs and services. In one of the first books to address this growing
need to cost justify the HRM function. Cascio (1984) indicated that the language
of business is dollars and cents and HR managers need to realize this fact. The
economic landscape underwent radical changes throughout the 1990s with
increasing globalization, technological breakthroughs (particularly Internet-enabled
Web services), and hyper-competition. Firms today realize that innovative and
creative employees who hold the key to organizational knowledge provide a
sustainable competitive advantage because unlike other resources, intellectual capital
is difficult to imitate by competitors.

HRM also faces host of challenges viz., globalisation, diversity of work

force, dynamic markets etc.

2.6 GLOSSARY
 Fordism: The era governed by Henry Ford. He continued with the
scientific management approach and developed an assembly line where
the workers were allowed a minimum amount of time to complete a task
before the car moved to the next stage in the production process.
Employees unable to keep up were fired; this led to a high level of
absenteeism as well as high employment turnover. To counteract the high
staff turnover Ford introduced ‘the five dollar day’ bonus, which would
double workers’ wages.

 Reengineering: It has been described as “the fundamental rethinking and

radical redesign of business processes to achieve dramatic improvements in
cost, quality, service, and speed.

2.7 SELF ASSESSMENT QUESTIONS

Q1. Is diverse workforce an advantage for business organisations or the reverse?
Explain.

Q2. How personnel management has evolved in India?

54
2.8 LESSON END EXERCISE

Q1. Identify the historical developments and their impact on HRM.

—————————————————————————————
—————————————————————————————
—————————————————————————————
—————————————————————————————

Q2. Explain the Evolution of HRM in the postwar years.

—————————————————————————————
—————————————————————————————
—————————————————————————————
—————————————————————————————

2.9 SUGGESTED READINGS

 Chan, Alvin (2013). The Challenges of Human Resource Management,
available at: http://EzineArticles.com/
 Fleming, S. (1998), From Personnel Management to HRM: A Case Study
of the Irish civil service, MBS unpublished, Dublin: UCD
 Fowler, A. (1992). How t o St ruct ure the Personnel Depart ment ’,
Personnel Management Plus, Vol. 3(1) pp. 22-23.
 Fleming, Sile. From Personnel Management t o HRM: Key Issues
and Challenges, CPMR Discussion Paper 16, available at : ht t p: //
www.ipa.ie/pdf/cpmrCPMR_DP_16_Personne Management _to_
HR_%20KeyIssues_Challenges.pdf
 Scott Snell and George Bohlander: HRM, Thomson, South Western
 Shashi K. Gupta and Rosy Joshi: HRM, Kalyani Publishers
***********

55
Lesson No. 3 Unit-I
Semester-II MCOMC253

HRM MODELS
STRUCTURE

3.1 Introduction

3.2 Objectives

3.3 HRM Models

3.3.1 Harvard Model

3.3.2 Guest’s Model

3.3.3 Michigan Model

3.3.4 The Warwick Model

3.4 Summary

3.5 Glossary

3.6 Self Assessment Questions

3.7 Lesson End Exercise

3.8 Suggested Readings

56
3.1 INTRODUCTION
The question is not either local or global but as Beaman (2003) and Hock(1993)
have talked about “How do you build a “chaordic” organisation. An organisation that
thrives on the border between “chaos” and “order, that is adaptive to changing conditions,
controlling at the centre while empowering at the periphery, leveraging worldwide learning
capabilities, that transcend geographic and divisional borders?” For building such an
organisation we have to look into the way we manage our human resources. Different
models have been put forth from time to time that guide us towards optimal use of the
precious asset i.e. the human resources, in an organisation. In a benchmark survey by
The Hackett Group (2007), companies that had adopted an HR shared-services model
reported reduction in process costs by as much as eighty percent. In adopting an
organisational model for HR the danger is that we believe there is a one size fits all
approach. We look for, one model that meets all needs, or look at external best practice
in admired companies to decide what model to apply. The problem is that every
organisation faces a unique set of challenges in terms of scale, culture, maturity, strategy,
market, sector, geography, customer needs etc. Each organisation needs to look at its
own context and develop a model that meets its own different challenges.

3.2 OBJECTIVES
This lesson will help you to understand :

(i) knowledge about different HRM Models put forth by different authors
(ii) how the concept has changed with the introduction of these models

3.3 HRM MODELS

3.3.1 Harvard Model
Beer et al. (1984) proposed that long-term consequences (both benefits
and costs of human resource policies) should be evaluated at three levels:
individual, organizational and societal. The Harvard Map or Model outlines four
HR policy areas:
 Human resource flows - recruitment, selection, placement, promotion,
appraisal and assessment, promotion, termination, etc.
57
  Reward systems - pay systems, motivation, etc.
 Employee influence - delegated levels of authority, responsibility, power etc.
 Work systems - definition/design of work and alignment of people.

These in turn should be analyzed using the four Cs viz.,

(i) Commitment
(ii) Congruence
(iii) Competence
(iv) Cost effectiveness

The Harvard model (Beer, Spector, Lawrence, Quin Mills and Walton,
1984) works as a strategic map to guide all managers in their relations with
employees and concentrates on the human or soft aspect of HRM. It strives at
employee commitment not control. It also works on the premise that employees
needed to be congruent, competent and cost effective. Human resource flows
into the organisation are used for recruitment, selection; with in the organisation
by placement, promotion, out of the organisation as termination pay. The reward
system was organised to attract and motivate so as to retain employees. More
so, employee influence was tailored on controlled authority and decision making.
Jobs were also defined and not based on tasks as with classical approaches.

The advantages of such a system lay on the premise that high employee
commitment lead to better job performance. Also as selection criteria were based
on competence, it also embraced the element of suitability and flexibility. Using
the best employees fit for certain jobs led to effectiveness and reward system,
aimed at attracting and motivating, held performance appraisal not evaluation
as its tool.

However, this system could be criticised by resource based perspective

of labour and the argument that soft HRM like the Harvard model may conflict
with business focus of the organisation and also distort cost minimisation and
profit maximisation.

58
 Shareholder Interests:

 Shareholder
 Management
HRM Policy Choices: HR Outcomes: Long Term
 Employees
Consequences:
 Government Employee Influences, Commitment,
 Union
Individual
Human Resource Congruence,
Well-being,
Flow,
Competence, Organisational
Situational Factors:
Reward System,
Cost Effectiveness,
 Workforce Work System. Effectiveness.
Characteristics Societal Well-
 Business being
Strategies &
Conditions
 Labour Market
Union
 Task Technology
 Laws &Social

Fig 3.1: Harvard model of HRM

Source: Beer et al. (1984)

3.3.2 Guest’s Model of HRM

Guest (1987) extended the Harvard model’s four HR policy choices of
employee influence, human resource ?ow, reward systems and work systems to
a total of seven. These seven policy areas, which included: organisational job
design; policy formulation and implementation and management of change;
recruitment, selection and socialisation; appraisal training and development;
manpower flows; reward systems and communication systems. The correct policy
choices will lead to HR outcomes of commitment, competence and cost-
effectiveness, and result in the long-term consequences of individual well-being,
organisational effectiveness and societal well-being.
David Guest’s comparative model works on the premise that a set of
integrated HRM practices will result to superior individual and organisational
performance. It advocates a significant difference of HRM from personnel
management. It holds that HRM strategies like differentiation, innovation, the

59
focus on Quality and cost reduction will lead to practices like better training,
appraisal, selection, rewards, job designs, involvement, and security leading to
more quality outcomes; commitment and flexibility. It will then affect performance,
which in turn will increase productivity. There will also be limited absences, labour
turnover, and conflict or customer complaints.

HRM Strategies HRM HRM Behaviour Performance Financial

Practices Outcomes Outcome s Outcom es Outcomes

Selection
Differentiation
Training Commitment Effort / High job
(Innovation)
Motivation performance
Appraisal
High
Rewards Quality problem- Profits
Co-
Job Design solving
Focus (Quality) operation
Involvement Flexibility/ Successful Return on
Adaptability change Inve stment
Status and
Involvement Low turnover
Security
Cost Low absence
(Cost - Organisation
Reduction) Low
al grievance
Citizenship level

High cost-
effectiveness

Fig. 3.2: Guest’s Model of HRM

Source: Guest (1987).

3.3.3 Michigan Model of HRM

Storey (2001) identified the ‘hard’ model of HRM as proposed by Fombrun
et al.(1984), also referred to as the Michigan model. The ‘hard’ model of HRM
emphasises that employees should be treated as a means of achieving the organisation’s
goals. This means that employees are a business resource and successful organisations
are those that best deploy their human resources.

60
 ‘Hard’ HRM assumes that increasing performance will be the manager’s
main reason for improving HRM. Fombrun et al. (1984) argue that the
external environment of increased competition and market instability will
necessitate HRM strategies be designed to achieve the goals of the
organisation. Fombrun et al.(1984) also argued that organisations exist
to accomplish a mission or achieve objectives, and strategic management
takes into account three interconnected issues of mission and strategy,
organisation’s structure and human resource systems.
 Mission and strategy: This refers to the organisation’s reason for being.
The mission articulates the organisation’s fundamental purpose and
defines the nature of the business. It is there to unify human and other
resources. Organisations exist to achieve a mission and managers need
to think strategically about how people are managed and deployed to
this end.
 Organisation structure: This refers to the requirements and tasks
needed to achieve the organisation’s goals. These include accounting
systems and communication networks, as well as the personnel required
at the different levels and the tasks to be accomplished.
 Human resource management systems: These establish the need for
people to be recruited and developed, which in turn will enable them to
achieve the organisational goals and maintain performance.
Some other Interconnected issues are :-
4. The external context : The external environment influences the external
context of the organisation. An organisation would not be effective if it ignored
the external context of politics, economics, society and technology. In London
and the south-east of England, there is a shortage of key workers, such as
nurses and teachers and many workers have been employed from abroad to
fill the vacancies. For organisations, this means a review of policies to ensure
that new workers’ needs are considered. On the practical side, new
aspects of training may have to be delivered to meet language needs. To

61
 do this an organisation needs to operate as an open system, which can change
to meet the needs of its external environment. Katz and Kahn (1966)
identify open systems as those that interact with the environment; this
makes them complex and difficult to control.
 The political context: The political context not only refers to the type of
government in power at the time, but also whether the country is democratic
or not. In the UK the political context changes depending on which political
party is in power. In the past, the Conservative Government has tended to
favour the employer over the employee; an example of this was the removal
of the minimum wage. Traditional Labour Governments have focused on
the employee and have had close links with the unions. With New Labour
the lines have become somewhat blurred: although they have reintroduced
the minimum wage, they have also formed close links with industry by
encouraging public/private partnerships. With every change of government
the HR practitioner needs to identify the impact on the organisation and
the HR department.
 The social context: The social context refers to the culture, politics,
leadership and management style that influence the organisation. The
example of Enron in the opening vignette is an example of how culture,
politics, leadership and management style can influence an organisation.
An HR manager must be able to identify the culture within which the
organisation operates. This means she or he needs to recognise and
understand the values the organisation is trying to promote. However, they
also need to understand the culture and society from which their employees
are recruited.
An HR manager should not underestimate the importance of the societal
context of business as, in many instances, businesses have foundered due
to a lack of understanding of the culture. Examples are Euro Disney Paris,
whose lack of understanding of European culture and its failure to embrace
all things American, had a serious impact on business, or Wal-Mart in
Argentina, which failed to understand how the Argentines liked to shop,

62
 and could not understand why business was not booming in its bright and
shiny new supermarkets.

The Michigan model recognises the external and internal forces of HRM
as a triangle. Management decides the mission and strategy, it designs
the organisational structure to meet the strategy and mission, and
integrates and organises HRM to fit in with the structure and to fulfil the
mission and strategy. The mission, strategy, organisational structure and
human resource management cannot operate in isolation. They also need
to respond to the external forces of politics, economics and culture. Once
these have been taken into account, managers can begin to design the
human resource system.

Political Forces

Missi on &
Strategy

Economic Cultural
Forces Forces
Firm

Organisation Human
Resource
Structure Manag em ent

Fig. 3.3: Strategic management and environmental pressures

Source: Fombrun et al. (1984)

This approach is based on the assumption that there is a set of best HRM
practices that are universal in the sense that they are best in any situation,

63
 and that adopting them will lead to superior organizational performance. A
number of lists of ‘best practices’ have been produced, the best known of
which was produced by Pfeffer (1998a), namely:
1. employment security;
2. selective hiring;
3. self-managed teams;
4. high compensation contingent on performance;
5. training to provide a skilled and motivated workforce
6. reduction of status differentials;
7. sharing information
Delery and Doty (1996) identified seven strategic HR practices, which are
related to overall organizational performance:
1. The use of internal career ladders,
2. Formal training systems,
3. Results-oriented appraisal,
4. Performance-based compensation, employment security,
5. Employee voice and
6. Broadly defined jobs

3.3.4 The Warwick Model

This model was developed by the Centre for Strategy and Change at
Warwick University in the early 1990s. Developed from the Harvard model,
it emphasises an analytical approach to human resource management. It
also recognises the impact of the role of the HR function on the human
resource strategy content. The researchers who developed the model,
Hendry and Pettigrew, focused their research on mapping the context;
identifying an inner (organisational) context and an external (environmental)
context. It takes into account the importance of organisational learning in

64
 the formation of strategy and thereby incorporates Mintzberg’s model of
emergent strategy formation rather than a purely top down rational
planned approach. The five elements of the Warwick model are:
 Outer context (the external environment)
 Inner context (internal factors)
 Business strategy content
 Human resource management context
 Human resource management content.

Fig. 3.4 The Warwick Model of Human Resource Management

65
3.4 SUMMARY
Different models of HRM have been put forth by different authors.
Harvard model works on the premise that employees needed to be congruent,
competent and cost effective. Guest (1987) extended the Harvard model. He
viewed that the correct policy choices will lead to HR outcomes of commitment,
competence and cost-effectiveness, and result in the long-term consequences
of individual well-being, organisational effectiveness and societal well-being.
The ‘hard’ model/Michigan Model of HRM emphasises that employees should
be treated as a means of achieving the organisation’s goals. This means that
employees are a business resource and successful organisations are those that
best deploy their human resources.

3.5 GLOSSARY
 The Harvard Model: The Harvard Model was postulated by Beer et
al., (1984) at Harvard University. This model emphasizes more on the
human’s soft side of HRM.

 Th e M i ch i gan / M at ch i n g M od el: T he Michigan mo d el w as

propounded by Fombrun Tichy and Devanna (1984) at the Michigan
Business School. It emphaizes more on “tight fit” between the HR
strategy and the buisness strategy.

 The Guest Model: The Guest model was propounded by David Guest
in 1987.This model is a fusion of aspects that resemble both a hard and
a soft approach of HRM.

 The Warwick Model: This model was developed by the Centre for
Strategy and Change at Warwick Universit y in the early 1990s.
Developed from the Harvard model, it emphasises an analytical
approach to human resource management.

 Soft HRM: Soft HRM stresses the ‘human’ aspects of HRM. Its
concerns are with communication and motivation. People are led rather
than managed.

66
 Hard HRM: Treats employees simply as a resource of the business (like
machinery & buildings) there is strong link with corporate business
planning – what resources do we need, how do we get them and how
much will they cost

3.6 SELF ASSESSMENT QUESTIONS

Q1. What is the difference between Harvard and Michigan models of human
resource management?

Q2. Discuss the applicability of the Harvard and Warwick models in the
development of human resource management policies.

Q3. Which approach HR department should follow while designing HR

policies?

Q4. Explain in brief about the Models of HRM.

3.7 LESSON END EXERCISE

Q1. Differentiate between Hard and soft HRM models.
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
Q2. Is Michigan Model is better than Harvard Model? Give reasons in
support of your answer.
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________

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3.8 SUGGESTED READINGS
 Beer, M., Spector, B., Lawrence, P. R., Mills, D.Q., Walton, R. E. (1984),
A Conceptual View of HRM. In Managing Human Assets. Free Press,
New York
 Boxall, P F (1996). The strategic HRM debate and the resource-based
view of the firm, Human Resource Management Journal, 6 (3), pp 59–75
 Boxall, P (1999) Human resource strategy and competitive advantage: a
longitudinal study of engineering consultancies, Journal of Management
Studies, 36 (4), pp 443–463
 Boxall, P F and Purcell, J (2003) Strategy and Human Resource
Management, Palgrave Macmillan, Basingstoke.
 Guest, D E and Hoque, K (1994) Yes, personnel management does make
the difference, Personnel Management, November, pp 40–44
 Guest, D E and King, Z (2004) Power, innovation and problem solving:
the personnel managers’ three steps to heaven?, Journal of Management
Studies, 41 (3), pp 401–423
 Storey, J (1992b). HRM in action: the truth is out at last, Personnel
Management, April, pp 28–31
 Ulrich, D and Brockbank, W (2005a). The HR Value Proposition, Harvard
Press, Cambridge, MA.
 Wright, P M, Snell, S A and Jacobsen, H H (2004) Current approaches to
HR strategies: inside-out versus outside-in, Human Resource Planning,
27 (4), pp 36–46
 P Suba Rao: Personnel and HRM, Himalaya Publishing House
 K. Aswathapa: Human Resource and Personnel Management, Tata
McGraw Hills
 Casio, Wyane F.: Managing Human Resources, McGraw Hill
********
68
Lesson No. 4 Unit-I
Semester-II MCOMC253

HR POLICIES - JOBS IN HRM AND QUALIFICATION

OF HR PROFESSIONALS
STRUCTURE

4.1 Introduction

4.2 Objectives

4.3 Jobs in HRM

4.3.1 Career Paths in HR: Generalist vs. Specialist

4.4 Qualifications of HR Professionals

4.5 HR Policy

4.5.1 Specific and Overall HR Policies

4.6 Summary

4.7 Glossary

4.8 Self Assessment Questions

4.9 Lesson End Exercise

4.10 Suggested Readings

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4.1 INTRODUCTION
HR professionals have evolved from the behind-the-scenes administrative
role of the 20th century to active involvement in shaping corporate policy.
Senior management recognizes the significant contributions of HR to their
organization’s bottom line and overall success. This shift continues in the
profession. To a more significant extent than ever before, many HR roles are
consequently focused equally on contributing strategically and functionally to
manage the organization’s talent. This part of the lesson highlights the various
pathways you may choose in order to pursue the career in HR that best meets
your needs. It is also important to note that HR professionals often progress to
higher levels in an organization and a career in HR can lead to a position as CEO.

4.2 OBJECTIVES
This lesson will help you to undestand :
(i) enhance your knowledge about different HR policies available in HR area.
(ii) it will also provide you information about the qualifications required for this.

4.3 JOBS IN HRM

One can consider human resource management as a career choice. Not
only do HR professionals contribute to business viability and success through
the strategic management of human capital, but the profession itself continues
to increase its stature as a career choice, pursued by many in today’s ever-
changing, competitive marketplace. In fact, in 2007, Money magazine and
Salary.com researched hundreds of jobs and ranked Human Resource Manager
as number four on its list of the Top Ten Best Jobs in America based on a
variety of factors, including job growth in the next decade, earnings potential,
creativity and flexibility.

HR is a key component of any organization’s senior management team.

Though the human resources department is widely known for conducting
interviews, explaining company benefits, managing employee relations, providing
career development advice and helping hiring managers with performance and

70
productivity expectations, the profession has a much larger role in business today.
HR professionals have evolved from the behind-the-scenes administrative role of
the 20th century to active involvement in shaping corporate policy. Senior
management recognizes the significant contributions of HR to their organization’s
bottom line and overall success. This shift continues in the profession. To a more
significant extent than ever before, many HR roles are consequently focused equally
on contributing strategically and functionally to manage the organization’s talent.
This part of the lesson highlights the various pathways you may choose in order to
pursue the career in HR that best meets your needs. It is also important to note that
HR professionals often progress to higher levels in an organization—and a career in
HR can lead to a position as CEO.
4.3.1 Career Paths in HR: Generalist vs. Specialist
Deciding how to choose between an HR generalist and HR specialist career
often depends not only on your personal preferences, but also upon the
nature and size of the organization. This section describes the generalist
and specialist roles to help you decide which path to follow.
 The Generalist: HR generalists have a broad spectrum of responsibilities:
staffing the organization, training and developing employees at all levels,
managing a diverse workforce, maintaining a fair and equitable
compensation program, developing personnel policies and procedures,
planning ways to meet the human resource needs of the future, and ensuring
that internal policies and programs conform to all laws that affect the
workplace. Entry-level generalist positions are often titled human resource/
personnel assistant and support the work of the whole department.
Examples of generalist job titles include HR business partner; HR generalist;
HR department or branch manager; chief HR officer; people services
specialist or manager.
 The Specialist: Larger organizations require specialists with technical
knowledge and skills in specific areas of human resource management.
The five most common areas of specialization are described here. Entry-

71
level positions often fall within these specialties. Opportunities in these
areas are more likely to be found in larger organizations. Below explained
are some of the specialist roles:
a) Workforce Planning and Employment: The typical entry-level
positions are often called interviewer or recruiter. The work
includes implementing the organization’s recruiting strategy,
interviewing applicants, administering pre-employment tests, etc.
assisting wit h conducting background invest igations, and
processing transfers, promotions and terminations. Examples of
job titles in this specialty area are chief talent manager or officer;
recruiter; recruitment and retention specialist or manager; staffing
specialist or manager.
b) HR Development: The typical entry-level position may be a
training or orientation/on-boarding specialist. The work consists
of conducting training sessions, administering on-the-job training
programs, evaluating training programs and maintaining necessary
records of employee participation in all training and development
programs. Such training responsibilities may involve specific fields
such as sales techniques or safety programs. Career planning and
counseling are becoming increasingly important activities in this
field, as are responsibilities for human resource planning and
organizational development. Examples of job titles in this specialty
area are trainer; employee development specialist or manager;
leadership development specialist or manager; organizational
development (OD) specialist or manager.
c) Total Rewards: Ent ry-level positions are typically salary
administrators, compensation analysts and benefits administrators.
Responsibilities in compensation include analyzing job duties,
writing job descriptions, performing job evaluations and job
analysis, and conducting and analyzing compensation surveys.
Benefits professionals may develop detailed data analysis of benefits

72
 programs, administer benefits plans and monitor benefits costs.
They may be responsible for oversight of vendors or partners to
whom these functions have been outsourced. Example job titles in
this specialty area are compensation and administrative services
specialist; benefits analyst; compensation specialist or manager.
d) Employee and Labour Relations: Entry-level positions include
labor relations specialist, plan personnel assistant or employee
relations specialist. In union environments, these positions involve
interpreting union contracts, helping to negotiate collective
bargaining agreements, resolving grievances and advising
supervisors on union contract interpretation. In non-union
environments, employee relations specialists perform a variety of
generalist duties and may also deal with employee grievances,
employee involvement or engagement programs and other
employee relations work. Examples of titles in this specialty area
are performance management specialist, manager or director;
employee advocate; and manager of labor relations.
e) Risk Management: Safety specialists’ responsibilities include
developing and administering health and safety programs,
conducting safety inspections, maintaining accident records, and
preparing government reports in order to maintain compliance
obligations under the law. Security specialists are responsible for
maintaining a secure work facility to protect the organization’s
confidential information and property, and the well-being of all
employees. Employee assistance program counsellors and medical
program administrators also work within this function. Examples
of titles in this specialty area are safety officer; risk management
specialist or manager.
Other specialists’ responsibilities don’t fall neatly into one
functional area. Human resource information systems (HRIS)

73
 specialists manage the computerized flow of information and
reports about employees, their benefits and programs. Some
specialists manage global HR, a growing specialty area, while
others concentrate on organizational development and meeting
the organization’s needs for workers in the future. Still, others
pursue HR consultancy or teaching HR in an academic setting.
Many options are available, depending on the area of HR that interests
you most.
Changing specialties within HR can also enhance career development
possibilities; at some point in your HR career, you may wish to pursue
another area of interest within the field.
Jobs in Human Resource Management
Qualified candidates are likely to find many advantageous and lucrative careers in human
resources. If one is planning about a career in this field, here are some jobs that one might
want to consider:
1. Human resources assistant :The main task of a human resources assistant
is to support HR managers and other executives with various administrative duties.
That includes writing job descriptions for employee recruitment, checking references,
scheduling interviews and sending employment contracts. They maintain employee
records related to work performance, absence, grievance, payroll processing,
compensation and termination. Additionally, they keep the work calendar for the
HR management, arrange meetings and interviews, coordinate training and HR events
and write HR reports.

2. Recruitment coordinator: Many companies go for recruitment coordinators

by finding qualified candidates for available work positions. The recruitment
coordinator generally works with HR executives to identify job openings and write
job descriptions. They source candidates through applications, databases, online
job sites, social media platforms and professional networking sites. They screen
candidates, schedule and assist with job interviews and submit recruitment process
reports to the management.

74
3. Human resources coordinator: Human resources coordinators undertake
various administrative duties for a company’s human resources department. They
work with HR managers to handle recruitment, employee orientation, employee
training and employee records. They also review employee performances, process
payroll and prepare HR activity reports. Additionally, they resolve conflicts, schedule
meetings, arrange interviews and oversee HR events. As part of their work, they
research and stay updated on HR trends and best practices in the industry.

4. Recruiter: Recruiters work with a company’s human resources department

to identify its recruitment needs and assist with the hiring process. Along with writing
job descriptions and posting job advertisements, they source and screen candidates
and interview the shortlisted ones for available job positions. They negotiate employee
salaries and benefits, prepare work contracts and provide recruitment reports to
the company management. To be effective in their work, recruiters stay updated on
job requirements and current labour laws.

5. Human resources generalist: Human resources generalists are

professionals responsible for the internal and external human resource matters of a
company. They handle recruitment processes, staff training and employee relations.
They also develop company policies and guidelines, undertake regulatory compliance
and maintain employee databases. Along with preparing HR activity reports, they
monitor budgets and payrolls and keep up with HR best practices.

6. Employee relations manager: An employee relations manager is

responsible for handling various issues related to employees and company
management relations to maintain a harmonious work environment. Along with
processing employee complaints, employee relations managers investigate the
situations and offer counselling when appropriate. Their understanding of mediation
and negotiation can help them find effective ways to resolve workplace conflicts
and sensitive issues. They gather and analyse employee feedback and develop best
practices and programs for improving employee relations.

7. Human resources manager: Human resources managers undertake the

management of a company’s recruitment process. They screen candidates, interview

75
the shortlisted ones, hire staff and make onboarding and training arrangements. They
also maintain department records, review performances and wages and ensure
workplace health and safety compliance. HR managers act as mediators between
executives and employees, take disciplinary actions and resolve disputes.

8. Labour relations specialist: The role of a labour relations specialist involves

negotiating and bargaining with the union on behalf of the company management. Using their
understanding of labour laws, economics and wage data, labour relations specialists can
draft specific proposals and regulations to facilitate collective bargaining. They assist and
advise the executive managers during the bargaining meetings and prepare labour proposals
and contracts. They also implement and manage labour relations programs. Additionally,
they address employee grievances, handle disputes and take disciplinary actions.

9. Recruitment manager: Recruitment managers, also known as recruiting managers,

work with recruitment agencies and companies to supervise hiring operations. They are
responsible for finding qualified candidates, scheduling and conducting interviews and making
hiring decisions. In their work, they use recruitment software, manage recruitment databases,
forecast hiring needs, implement effective recruiting practices and comply with labour laws.
They also prepare reports for the company management and network at industry events to
cultivate professional relationships.

10. Director of human resources: Also known as “HR directors,” directors of human
resources are responsible for overseeing the human resources department of a company.
They supervise employee recruitment, design training programs, maintain employee records,
handle employee relations and assess staff requirements. They manage budgets, develop
compensation plans, implement HR strategies to meet business goals and ensure compliance
with legal regulations.

In larger firms, the human resource department provides such specialized assistance.
Figure 4.3 shows human resource management jobs in one organization. Typical position
include compensation and benefits manager, employment and recruiting supervisor supervisor,
training specialist, and employee relations executive. other Examples of HRM job duties
include:
1. Recruiters : Maintain contacts within the community and perhaps travel extensively
to search for qualified job applicants.

76
2. Equal employment opportunity (EEO) representatives or affirmative action
coordinators: Investigate and resolve EEO grievances, examine organizational practices
for potential violations, and compile and submit EEO reports.
3. Job analysts: Collect and examine detailed information about job duties to prepare
job descriptions.
4. Compensation managers: Develop compensation plans and handle the employee
benefits program.
5. Training specialists: Plan, organize, and direct training activities.
6. Labor relations specialists: Advise management on all aspects of union- management
relations.
Human Resource Department Organization Chart Showing Typical HR Job Titles

FIGURE 4.3

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 Many big employers are taking a new look at how they organize their human
resource function. For example, J. Randall MacDonald, IBM's former senior vice
president of human resources, saw that the traditional human resource organization
divides HR activities into separate “silos” (as in Figure 4.3) such as recruitment,
training, and employee relations. MacDonald took a different approach. He split
IBM's 330,000 employees into three segments for HR purposes: executive and
technical, managers, and rank and file. Now separate human resource management
team, (consisting of recruitment, training, and pay specialists, for instance) focus on
each employee segment. Each team ensures the employees in each segment get the
specialized testing, training, and rewards they require. One survey found that 44%
of the large firms they surveyed planned to change how they organize and deliver
their HR services. Most plan to use technology to institute more “shared services”
or “transactional” arrangements. These will establish centralized HR units whose
employees are shared by all the companies’ departments to obtain advice on matters
such as discipline problems. The shared services HR teams offer their services through
intranets or centralized call centers; they aim to provide managers and employees
with specialized support in day-to-day HR activities (such as changing benefits plans).
You may also find specialized corporate HR teams within a company. These assist
top management in top-level issues such as developing the personnel aspects of the
company's long-term strategic plan. Embedded HR teams have HR generalists (also
known as “relationship managers” or “HR business partners”) assigned to functional
departments like sales and production. They provide the selection and other
assistance the departments need. Centers of expertise are basically specialized
HR consulting firms within the company. For example, one center might provide
specialized advice in areas such as organizational change to all the company's various
units.
Small firms (say, those with less than 100 employees) generally don't have
the critical mass required for a full-time human resource manager (let alone an HR
department). The owner and his or her other managers (and perhaps the firm’s
office manager) handle tasks such as placing help-wanted ads and signing employees
on. Gaining a command of the techniques in this book should help you to manage a
small firm's human resources more effectively.

78
 Important Trends and Their Consequences for HR Management

Consequences for Human

Important Trends
Resource Management

Workforce Diversity Trends HR and Performance

Technology and workforce HR and Performance and Sustainability
HR and Employee Engagement
Trends Consequences for HR and the Manager’s HR Philosophy
Globalization and Competition HR HR and Strategy
Management Sustainability and Strategic
Trends Human Resource Management
Economic Challenges HR and Human Resource
Competencies
Economic and Work force HR and the Manager’s Skills
Projections The HR Manage’s Competencies
Hr and Ethics
HRCI Certification

4.4 QUALIFICATIONS OF HR PROFESSIONALS

Given the wide range of responsibilities for which HR managers are held
accountable, they need a wide range of skills, abilities and qualifications. HR
managers interact with every level of the hierarchy within the organization, from
the executive-level decision makers to department managers and production
staff. Therefore, their qualifications are broad and encompassing. They should
be able to justify the budget allocations as easily as they monitor workplace
investigations and resolve conflict among the workforce. To sum up an HR
manager must have following qualifications:

  Education: Academic credentials haven’t always been required for

human resources managers. However, as the 1980s version of personnel

79
 administration evolved into human resources management, employers
seek HR managers with formal education and academic credentials.
With increasing competition f or positions, you will find tha t the majority
of HR roles will expect you to hold a degree in HR Management,
Psychology, or a business-related subject. Some HR managers have two-
or four-year degrees in HR management, and some senior-level managers
have graduate or professional degrees, such as MBAs and law degrees.
Following are the education qualifications an HR Manager may require

a) MBA from HR stream

b) Post Graduate Diploma in HR
c) Masters in Personnel Management & Industrial Relations
 Certification: The growing movement toward HR certification
means higher numbers of HR managers with Senior Professional Human
Resources certification from the SPHR certifying body, the Human
Resources Certification Institute. In its 2010 study of more than 1,500
HR professionals, the HRCI discovered that more employers are
requiring HR certification and that more than half of employers in the
United States and more than three-quarters of employers globally place
a high value on HR certification. There are four HR certifications: PHR is
Professional Human Resources, SPHR is Senior Professional Human
Resources, GPHR is Global Professional Human Resources and PHR-CA
is for certified PHRs whose work focuses on California employee law.

 Experience: For some HR managers, experience has been the

best teacher, and many seasoned HR managers have several years’
experience in different areas of the HR department. When an HR manager
has taken advantage of these professional development and learning
opportunities, he may have begun working as a coordinator and then
moved up to an HR generalist or an HR specialist before transitioning
into a management role.

80
  Core Competencies: Overall, the best-qualified HR managers must have a
combination of education, certification and experience, as well as core
competencies that enable their effective performance. They are involved in
both strategy formulation and implementation; therefore, they should have good
communication skills. Some aspects of HR are best learned by doing, such as
processing new hire paperwork, developing affirmative action plans and
outreach methods to improve recruitment and selection processes. Additional
core competencies of effective HR managers include analytical and critical
thinking skills and the ability to influence others and manage change.

HRCI Certification

Many HR managers use certification to show their mastery of modern human

resource management knowledge. The HR Certification Institute (HRCI) is
an independent certifying organization for human resource professionals (see
www.hrci.org). Through testing, HRCI awards several credentials, including
Professional in Human Resources (PHR), and Senior Professional in Human
Resources (SPHR). The evidence to date generally suggests a positive
relationship between human resource managers’ competence as reflected by
PHR or SPHR certification, and the human resource managers’ effectiveness.
Managers can take an online HRCI practice quiz by going to www.hrci.org
and clicking on Exam Preparation and then on Sample Questions.

4.5 HR POLICY
Human resource policy defines the philosophies and values of the organization on
how people should be treated and these philosophies and values help to derive the principles
upon which managees are expected to act when dealing with human resource matters.
Human resource policy provides continuous guidelines on the approach on organization
intends to adopt in managing its people. The specific guidelines about various matters
concerning employment and state of the intent of the organization on different aspects of
Human resource such as recruitment, selection, compinsatin, promotion training etc. are
provided to human resource manager through human resource policy. The organization
practices the rules and guideliness mentioned in human resource policy in hiring, training,
assessing and rewarding the members of their work force (Armstrong, 2012)
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 The characteristics of human resource policy are:-
1. It should present the principles that will guide the organization’s actions and reflect
a faith in ethical values of employees.
2. It must be reasonably stable but not rigid.
3. It must provide two-way communication system between management and
employees.
4. It should be consistent with public policy.
5. It should be definite so that it is easy to understand. It should be stated in clear,
definite and easily understood terms.
6. It should be formulated after considering long range plans and needs of the
organization.

4.5.1 Specific and Overall HR Policies

(a) Specific Human Resources Policy:
There are different aspects associated with management of Human
resources with in an organization. If there are different policies for different
areas. If peoples interest, sulk policies are known as specific human
resource policies. This policy is area or criteria specific. It covers the
guidelines relating to a specific human resource matter. The areas covered
by specific human resource policy are:
1. Age and Employment
2. AIDS
3. Bullying
4. E-mails and the Internet
5. Discipline
6. Employee Development
7. Equal opportunity
8. Grievances
9. Health and Safety
10. Managing diversity

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 11. Employment
12. Promotion
13. Reward
14. Sexual Harassment
15. Substance abuse
16. Work Life balance
17. Managing Diversity
18. Redundancy
b) Overall Human Resource Policy
The overall human resource policy defines how the organization fulfills its
social responsibilities for its employee and sets its attitude towards them.
It is an expression of its values or beliefs regarding how people should be
treated (Armstrong, 2012). The following values are expressed in overall
human resource policy.
1. Equity : It is concerned with fair and equal treatment for all
employees ignoring biases and personal differences.
2. Organizational learning : This value is related to the organizations
which believe in need to promote the learning and development of all
members in the organization.
3. Performance through people : The overall human resource policy
focuses on developing the performance of the employees by creating culture
of continuous improvement.

4. Quality of Work life : This aspect is related with increasing

responsibility and autonomy and reducing stress and monotony of the
work life.

5. Working Condition : The working condition deals with maintaining

safe, healthy, practicable and pleasent working condition.

Thus, overall human resource policy provide general guidelines about every
human resource related components of the organisation while specific human
resource planning deals with the detail guidelines regarding management

83
component. All the specific policies of an organization combined together forms
the overall human resource policy. The policies aim on maintaining consistency
and discipline in carrying out the human resource functions.

4.6 SUMMARY
HR is a key component of any organization’s senior management team.
Though the human resources department is widely known for conducting
interviews, explaining company benefits, managing employee relations,
providing career development advice and helping hiring managers with
performance and productivity expectations, the profession has a much larger
role in business today. The HR can play the general as well as specialist roles
with appropriate educational qualifications and experience.

4.7 GLOSSARY
 HR Policy: It defines the philosophies and values of the organization
on how people should be treated. It provide continuous guidelines
on the approach and organization intends to adopt in managing its people.

 Generalist Role: HR generalists have a broad spectrum of responsibilities: staffing

the organization, training and developing employees at all levels, managing a diverse
workforce, maintaining a fair and equitable compensation program, developing
personnel policies and procedures, planning ways to meet the human resource needs
of the future, and ensuring that internal policies and programs conform to all laws that
affect the workplace.

 Specialist Role: Larger organizations require specialists with technical knowledge

and skills in specific areas of human resource management. The five most common
areas of specialization are workforce planning, Human Resource development,
total rewards, industrial relations and risk management.

4.8 SELF ASSESSMENT QUESTIONS

Q1. Give the importance of personnel management as a profession.
Q2. Enumerate the qualifications of personnel manager.

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4.9 LESSON END EXERCISE

Q1. Explain the specialist role of personnel manager.

_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

Q2. Discuss the scope of personnel management as a career.

_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

Q3 Explain the difference between General and Overall HR Policies.

_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4.10 SUGGESTED READINGS
 Susan M. Heathfield (2013). How to Prepare for a Career in Human
Resources? Available at: About.com Guide
 Human Resources Qualifications. Available at:
http://www.cipd.co.uk/cipd-training/qualifications/human-resources/
 P. Subha Rao : Essential of HRM and Industrial Relations
 Shashi K. Gupta and Rosy Joshi: HRM, Kalyani Publishers

85
Lesson No. 5 Unit-I
Semester-II MCOMC253

CODE OF ETHICS OF SOCIETY FOR HRM

STRUCTURE

5.1 Introduction

5.2 Objectives

5.3 Code of Ethics of Society for HRM

5.4 Personnel Management V/S HRM

5.5 Summary

5.6 Glossary

5.7 Self Assessment Questions

5.8 Lesson End Exercise

5.9 Suggested Readings

86
5.1 INTRODUCTION
A code of ethics offers an invaluable opportunity for a responsible
organization to further its positive public identity. This can lead to a more
supportive environment and an increased level of public confidence and trust
among important stakeholders.
5.2 OBJECTIVES
After reading this lesson you will be able to understand :
(i) different ethical practices an HR manager should follow by use of code
of ethics
(ii) you shall also be able to differentiate between personnel management
and HRM.

5.3 CODE OF ETHICS OF SOCIETY FOR HRM

Ethucs means the standards someone uses to decide what his or her conduct
should be a code of ethics offers an invaluable opportunity for a responsible organization
to further its positive public identity. This can lead to a more supportive environment and
an increased level of public confidence and trust among important stakeholders. As the
world’s largest human resource management association, the Society for Human Resource
Management (SHRM) has a responsibility to set and support ethical standards for the
human resource profession. “The purposes of the Society is to promote the use of
sound and ethical human resource management practices in the profession…to be the
voice of the profession on human resource management issues …to facilitate the
development and guide the direction of the human resource profession …and to establish,
monitor and update standards for the profession.” Original Code of Ethics was first
developed in 1972 and was last modified in 1989 to reflect the change of name from the
American Society for Personnel Administration to Society for Human Resource
Management. This Code of Ethical and Professional Standards in Human Resource
Management is one part of an overall ethics initiative undertaken by Society for HRM.
The Code is supplemented by resources and services which SHRM members can use
to promulgate ethics programs within their own organizations or chapters. Following
are the contents of Code of Ethics of society for Human Resource Management:

87
a) Professional Responsibility
Core Principle: As HR professionals, we are responsible for adding
value to the organizations we serve and contributing to the ethical success
of those organizations. We accept professional responsibility for our
individual decisions and actions. We are also advocates for the profession
by engaging in activities that enhance its credibility and value.
Intent
 To build respect, credibility and strategic importance for the HR profession
within our organizations, the business community, and the communities in
which we work.
 To assist the organizations we serve in achieving their objectives and
goals.
 To inform and educate current and future practitioners, the organizations
we serve, and the general public about principles and practices that help
the profession.
 To positively influence workplace and recruitment practices.
 To encourage professional decision-making and responsibility.
 To encourage social responsibility.
Guidelines
1. Adhere to the highest standards of ethical and professional behaviour.
2. Measure the effectiveness of HR in contributing to or achieving
organizational goals.
3. Comply with the law.
4. Work consistent with the values of the profession.
5. Strive to achieve the highest levels of service, performance and social
responsibility.
6. Advocate for the appropriate use and appreciation of human beings as
employees.
7. Advocate openly and within the established forums for debate in order
to influence decision-making and results.

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b) Professional Development
Core Principle: As professionals we must strive to meet the highest
standards of competence and commit to strengthen our competencies
on a continuous basis.
Intent
 To expand our knowledge of human resource management to further our
understanding of how our organizations function.
 To advance our understanding of how organizations work (“the business
of the business”).
Guidelines
1. Pursue formal academic opportunities.
2. Commit to continuous learning, skills development and application of
new knowledge related to both human resource management and the
organizations we serve.
3. Contribute to the body of knowledge, the evolution of the profession
and t he growt h of individuals t hrough t eaching, research and
dissemination of knowledge.
4. Pursue certification such as CCP, CEBS, PHR, SPHR, etc. where
available, or comparable measures of competencies and knowledge.
c) Ethical Leadership
Core Principle: HR professionals are expected to exhibit individual
leadership as a role model for maintaining the highest standards of ethical
conduct.
Intent
 To set the standard and be an example for others.
 To earn individual respect and increase our credibility with those we
serve.

89
 Guidelines
1. Be ethical; act ethically in every professional interaction.
2. Question pending individual and group actions when necessary to ensure
that decisions are ethical and are implemented in an ethical manner.
3. Seek expert guidance if ever in doubt about the ethical propriety of a
situation.
4. Through teaching and mentoring, champion the development of others
as ethical leaders in the profession and in organizations.
d) Fairness and Justice
Core Principle: As human resource professionals, we are ethically
responsible for promoting and fostering fairness and justice for all
employees and their organizations.
Intent
 To create and sustain an environment that encourages all individuals and
the organization to reach their fullest potential in a positive and productive
manner.
Guidelines
1. Respect the uniqueness and intrinsic worth of every individual.
2. Treat people with dignity, respect and compassion to foster a trusting
work environment free of harassment, intimidation, and unlawful
discrimination.
3. Ensure that everyone has the opportunity to develop their skills and new
competencies.
4. Assure an environment of inclusiveness and a commitment to diversity in
the organizations we serve.
5. Develop, administer and advocate policies and procedures that foster
fair, consistent and equitable treatment for all.
6. Regardless of personal interests, support decisions made by our
organizations that are both ethical and legal.
7. Act in a responsible manner and practice sound management in the
country(ies) in which the organizations we serve operate.

90
e) Conflicts of Interest
Core Principle: As HR professionals, we must maintain a high level of
trust with our stakeholders. We must protect the interests of our
stakeholders as well as our professional integrity and should not engage
in activities that create actual, apparent, or potential conflicts of interest.
Intent
 To avoid activities that are in conflict or may appear to be in conflict with
any of the provisions of this Code of Ethical and Professional Standards in
Human Resource Management or with one’s responsibilities and duties as
a member of the human resource profession and/or as an employee of any
organization.
Guidelines
1. Adhere to and advocate the use of published policies on conflicts of interest
within your organization.
2. Refrain from using your position for personal, material or financial gain or
the appearance of such.
3. Refrain from giving or seeking preferential treatment in the human resources
processes.
4. Prioritize your obligations to identify conflicts of interest or the appearance
thereof; when conflicts arise, disclose them to relevant stakeholders.
f) Use of Information
Core Principle: HR professionals consider and protect the rights of
individuals, especially in the acquisition and dissemination of information
while ensuring truthful communications and facilitating informed
decision-making.
Intent
 To build trust among all organization constituents by maximizing the open
exchange of information, while eliminating anxieties about inappropriate
and/or inaccurate acquisition and sharing of information

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 Guidelines
1. Acquire and disseminate information through ethical and responsible means.
2. Ensure only appropriate information is used in decisions affecting the
employment relationship.
3. Investigate the accuracy and source of information before allowing it
to be used in employment related decisions.
4. Maintain current and accurate HR information.
5. Safeguard restricted or confidential information.
6. Take appropriate steps to ensure the accuracy and completeness of
all communicated information about HR policies and practices.
7. Take appropriate steps to ensure the accuracy and completeness of
all communicated information used in HR-related training.
5.4 PERSONNEL MANAGEMENT V/S HRM
HRM has a long history of growing from a simple welfare and
maintenance function to that of a board level activity of the companies.
In recent years, the focus on people management from human capital/
intellectual capital perspective is also shaping firmly. However, the
hard fact is that this growth can be generally witnessed in management
literature and rarely in pract ice. Peripheral observat ion of people
management in organization can mislead the observers since, hardly
there could be any organization that is yet to rename its old fashioned
title of industrial relations/personnel/welfare/administration department
into HRM department. But, in practice, these organizations continue
t o handle t he people management act ivit ies the way they had been
handling earlier. The reasons for this could be many and varied. Among
them, t he potential reason is lack of clear understanding about t he
differences between personnel/IR and HRM.
Professor John Storey highlighted differences in 27 areas of people
management in 1992 in his boo k t it led Develo pment s in t he
Management of Human Resources. These differences are illustrated
in the Table given below:

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Dimensions Personnel HRM
Management
Beliefs and assumptions
1. Contract Careful delineation Aim to go beyond
of written contracts contract
2. Rules Importance of 'Can-do' outlook;
devising clear Impatience with 'rule'
rules/mutually
3. Guide to management Procedures Business-need'
action
4. Behaviour referent Norms/custom and Values/mission
practice
5. Managerial task vis-a-vis Monitoring Nurturing
labour
6. Nature of relations Pluralist Individulist
7. Conflict Institutionalized De-emphasized
Strategic aspects
8. Key relations Labour management Customer
9. Initiatives Piecemeal Integrated
10. Corporate plan Marginal Central
11. Speed of decision Slow Fast
Line management
12. Management role Transactional Transformational
leadership
13. Key managers Personnel/ IR General/business/line
specialists managers
14. Communication Indirect Direct
15. Standardization High (e.g. 'parity' an Low (e.g. 'parity' not
issue) seen as relevant)
16. Prized management skills Negotiation Facilitation

93
Key levers
17. Selection Separate, marginal Integrated, key task
task
18. Pay Job evaluation Performance-related
(fixed grades)
19. Conditions Separately Harmonization
negotiated
20. Labour-management Collective Towards individual
bargaining contracts contracts
21. Thrust of relations with Regularized through Marginalized (with
stewards facilities and exception of some
training bargaining for change
models)
22. Job categories and Many Few
grades
23. Communication Restricted flow Increased flow
24. Job design Division of labour Teamwork
25. Conflict handling Reach temporary Manage climate and
truces culture
26. Training and Controlled access to Learning companies
development courses
27. Foci of attention for Personnel Wide ranging cultural,
interventions procedures structural and personnel
strategies
5.5 SUMMARY
As an HR professional, we must adhere to ethical practices at work place,
which shall be guided by code of ethics of Society for HRM. These codes
guide towards professional responsibility, development, leadership, fairness
& justice, use of information etc. Professor John Storey has highlighted
differences in 27 areas of people management pertaining to beliefs and
assumptions, strategic aspects, line management and key levers.

5.6 GLOSSARY
 Code of Ethics: A guide of principles designed to help professionals conduct
business honestly and with integrity.

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5.7 SELF ASSESSMENT QUESTIONS
Q1. How important are the external environment drivers in terms of their impact
on business ethics?
Q2. How important are the internal practices and programs for ensuring an
ethical corporate culture?
Q3. How important are the practices and programs like transparency, corporate
social responsibility, access to organization’s ombudsman, access to
organization’s ethics helpline for an organization’s customers?

5.8 LESSON END EXERCISE

Q1. How important are the following reasons to run a business in an ethical
manner today?
Rank on 5 point scale: 1 for strongly disagree and 5 for strongly agree.
 Protection of brand and reputation
 The right thing to do
 Customer trust and loyalty
 Investor’s confidence
 Public acceptance/recognition
 Litigation/indictment avoidance
 Positive impact on financial results
 Employee retention and performance
 Supplier/partner trust
 Potential regulatory interference
 Competitive/marketplace advantage
Q2. Examine the differences between personnel management and HRM.
______________________________________________________
_________________________________________________________

95
 _________________________________________________________
_________________________________________________________
_________________________________________________________
5.9 SUGGESTED READINGS
 SHRM Code of Ethics. http://www.shrm.org/about/Pages/code-of-
ethics.aspx
 Code of Ethics Toolkit: A Guide to Developing Your Organization’s Code
of Ethics. http://www.shrm.org/about/Documents/organization-coe.pdf
 George Bohlander and Scott Snell: Principles of Human Resource
Management
 Garry Dessler: Human Resource Management
 David Goss: Principles of Human Resource Management

***********

96
Lesson No. 6 PROCUREMENT, TRAINING Unit-II
Semester-II AND APPRAISAL MCOMC253

HUMAN RESOURCE PLANNING (HRP)

STRUCTURE

6.1 Introduction

6.2 Objectives

6.3 Concept, Process of Human Resource Planning

6.4 Factors affecting Human Resource Planning

6.5 Summary

6.6 Glossary

6.7 Self Assessment Questions

6.8 Lesson End Exercise

6.9 Suggested Readings

97
6.1 INTRODUCTION
Organizations need to know how many people and what sort of people
they should have to meet present and future business requirements. This is the
function of human resource planning, or workforce planning as it is sometimes
called, especially in the public sector. The purpose of this chapter is to describe
how human resource planning works, bearing in mind that it is not as straightforward
as it was presented when the notion of ‘manpower planning’ became popular in
the 1960s and 70s.

As defined by Bulla and Scott (1994), human resource planning is ‘the

process for ensuring that the human resource requirements of an organization are
identified and plans are made for satisfying those requirements’.

Reilly (2003) defined workforce planning as: ‘A process in which an

organization attempts to estimate the demand for labour and evaluate the size,
nature and sources of supply which will be required to meet the demand.’

6.2 OBJECTIVES

After going through this lesson, you should be able to discuss :

1. process of Human Resource Planning

2. Factors affecting Human Resource Planning (HRP)

6.3 CONCEPT, PROCESS OF HUMAN RESOURCE PLANNING

Human resource planning is basically a process of identifying the right

person for the right job at the right time and at the right cost. Human resource
Planning is the first step in the process of recruitment and selection of employees
after a job analysis has been complet ed. From a broad organizat ional
perspective, HR planning intends to achieve better customer satisfaction,
quality enhancement aid improved employee motivation.

98
 We may define the human resource planning as a process of identifying
and then matching the human resource requirements and availability in order to
determine the future HR activities of the organization on the basis of overall
organizational objective.

The main focus of human resource planning is on choosing the required

number and types of personnel for appropriate jobs in a cost-effective way the
following are its characteristics.

1. HR planning aims at fulfilling corporate strategies and goals through

effective utilization of human resource. As such, it is effectively aligned
with the business strategies of the organization.

2. It is not a solitary act; rather, it is a process involving a series of related

activities carried out on a continuous basis.

3. It not only meets the short-term HR requirements of an organization but

also determines its long-term strategies and future direction from the HR
perspective.

4. It is a logical and efficient decision making activity involving systematic

analysis of data gathered in a scientific manner. Thus, it is neither a
haphazard nor an adhoc activity.

5. It emphasizes both the quantitative (number of personnel) and the

qualitative (nature of personnel) dimensions of human resource at every stage.

99
PROCESS OF HR PLANNING
The steps in a general HR Planning Process are :-
Setting organizational
Objectives and strageties

Scanning the environment

Preparing an in-house skill
and competency inventory

 
HR forecasting -need HR forecasting estimation
assessment of availability

• Developing HR Plans
and programmes
• Recruitment/ Reduction

Fig. 6.1: Process of HRM Planning

i) Setting organizational objectives and Strategics:- The first step in

the HR planning process is the consideration of organizational objectives and
strategies. The organizational strategy along with the mission and vision statement
clearly expresses the future intent of the organization. The examination of the
organization strategy would provide a clear indication about the future HR
requirements of the firm. Thus, HR plans are guided by the overall organizational
objectives and strategies.
ii) Scanning the Environment :- Organizations undertake environmental
scanning to identify the changes in the external environment. This also helps in
analysing the impact of those changes on the organizational present and future

100
activities Environmental Scanning involves collection of information in the form
of statements, actions and responses of people associated with the environment.
iii) Preparation of In-house skills and competency Inventory :- In the
next phase of HR Planning, the organization must assess the present strength of
its Labour force by preparing a skill inventory. A compilatin of skills,
competencies and qualifications of the entire work force is described as a skill
inventory. Its preparation may involve the determination of the sum of the
employees, experience, knowledge, education and skills levels. Actually, the
quality and size of skill inventory of an organization will influence its business
strategy and HR Plans decisively.
HR forecasting - Need Assessment : The success of HR Plans depends on
the accuracy & Consistency of the HR forecasts that are needed to implement
the organizational strategics. These forecasts involve estimating the future
requirements of the organization in terms of the nature and number of people.
The information gathered through external environmental scanning and internal
skill assessments are used to predict the future HR requirements of the
organization.
HR forecasting-Estimation of Availability : In HR forecasting of the
employee availability, four scenarios are possible :
i) getting a sufficient number of employees from internal sources.
ii) combining both sources to get adequate number and
iii) failing to get the required numbers of suitable employees from these
sources.
On the basis of the outcome of the HR forecasting, the organization will
determine its future HR activities.
Developing HR Plans and Programmes : Once the organization completes
the process of forecasting HR requirements and availability, the next step is its
comparison. The estimated HR needs are matched with the estimated HR
availability to identify the skill shortage or surplus. Comparisons of the HR

101
availability with the requirements help the organization in determining the viability
of the strategic business plans. The outcome of such comparisons would be
either the recruitment of more employees or a reduction of the existing workforce.

6.4 FACTORS AFFECTING HUMAN RESOURCE PLANNING

The most carefully laid human resource plans can be affected by internal
and external change anytime, so forecasting and flexibility are essential for
effective planning and adapting as required. In order to do this, HR managers
must be aware of what’s going on within the company, the industry and the
wider market in relation to the factors that influence change. Following factors
can affect the HRP:
 Organizational Factors:
(a) The type of organization : It is an important consideration
because it determines the production process involved, number
and type of staff needed, and the supervisory and managerial
personnel required. Manufacturing organizations are more
complex in this respect than those that render services.
(b) Organizational growth Cycles and planning : It can have
considerable influence on HRP. Need for planning is felt when
the organization enters the growth stage. Internal development of
people also begins to receive attention in order to keep up with
the growth.
(c) Time Horizon : Yet another major factor affecting personnel
planning is the time horizon. On one hand, there are short-term
plans spanning six months to one year. On the other hand, there
are long-term plans which spread over three to twenty years. In
general, the greater the uncertainty, the shorter is the plan’s time
horizon and vice versa.
(d) Type and quality of Information: The information used to
forecast personnel needs originates from a multiple of sources. A

102
 major issue in personnel planning is the type of information which
should be used in making forecasts. The quality and accuracy of
information depends upon the clarity with which the organisational
decision makers have defined their strategy, organisational
structure, budgets, production schedules and so forth.
(e) Nature of Jobs to be filled: Personnel planners must consider
the nature of jobs being filled in the organization. Job vacancies
arise because of separations, promotions and expansion strategies.
It is easy to employ shop floor employees but lot of sourcing is
necessary for employing managerial personnel.
 Political Factors: From a shift in local public opinion to a change in
government or even a new industrial world superpower entering the
market, politics influence how much funding is available, how much tax
must be paid, minimum wage rates, how markets are controlled and the
quality and quantity of staff available for hire. When planning ahead, you
need to consider likely changes to markets, budgets and availability of
suitable applicants as a result of recent or anticipated political influences.
For example, if a change of government is possible in the coming year,
understand the new administration’s priorities in relation to markets,
industries and businesses.
 Economic Factors: How much money is available for salaries, training
and equipment is the most immediate concern in human resource planning.
However, external economics plays an equally critical role. For example,
people don’t have as much money to spend in an economic downturn
and tend to be much more selective in what they buy or services they
use. This means some industries, such as those producing luxury items
or non-essential services, sell less and may even have to lay off some
staff. This, in turn, makes the local economy even more difficult. Building
economic factors into the human resources plan helps to predict how
many employees you will need and you can pay.

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 Social Factors: Several social factors may influence your HR planning,
but you need to take into account equalities and diversity in particular.
Where there is a clear discrepancy of one social group, it is a good idea
to build in ways of opening up new opportunities. For example, if there
are few Hispanic people in your company compared to numbers in the
wider community, determine why this is the case and what can be done
to redress the balance. Try holding a recruitment event in the area or
conducting a survey of locals and if they would consider a job at your
company and if not, why not.
 Technological Factors: New technology brings new skills requirements,
so companies always need to be aware of proficiencies and training needs
when planning human resources. New products and services also may
require recruiting highly skilled employees or training existing employees
to meet the need. Make sure HR managers are aware of new equipment
or knowledge be needed so they can build the required skills, and most
likely salary enhancements, into the plan.
 Legal Factors: Employment law is the most significant sector of the legal
system that affects human resource planning, and it changes all the time. In
most cases, there is plenty to time to implement changes to policy, as the
law can take awhile to take effect. Keep yourself up to date, and have an
employment law specialist available to consult if necessary. Employment
law changes must be reflected in company policy and implemented on the
ground by supervisors and managers, so you may need to incorporate
another training need into the human resources plan.
 Environmental Factors: Environmental factors might include where your
business is located in relation to finding sufficient appropriate staff or
changes to the environment that mean a need for more or fewer employees.
A simple example of environmental factors affecting human resource
planning is the consideration of how your employees get to work safely
during extreme weather; your plan may need to include the possibility of

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 telecommuting in order to keep everything going.
6.5 SUMMARY
HRP is a process in which an organization attempts to estimate the demand
for labour and evaluate the size, nature and sources of supply which will
be required to meet the demand. Human resource planning is an integral
part of business planning. It ensures that the organization has the number
of people with the right skills needed to meet forecast requirements. HRP
involves scenario planning, demand forecasting, supply forecasting,
forecasting future requirements and action planning.

6.6 GLOSSARY
 Demand forecasting: Demand forecasting is the process of estimating
the future numbers of people required and the likely skills and competences
they will need.

 Human resources planning: It is the process for ensuring that the human
resource requirements of an organization are identified and plans are made
for satisfying those requirements

 Environmental Scanning: Organization undertake environmental scanning

to identify the changes in the external environment.

 Hard human resources planning: The former is based on quantitative

analysis to ensure that the right number of the right sort of people is available
when needed.

 Soft human resources planning: It is focused on creating and shaping

the culture of the organization so that there is a clear integration between
corporate goals and employee values, beliefs and behaviours.

6.7 SELF ASSESSMENT QUESTIONS

Q1. What do you mean by Human Resource Planning? Elaborate the steps
involved in Human Resource Planning
Q2. “As organisations become more global, HRP becomes more important and

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 complex.” Explain
Q3. Define HRP. Explain different features of HRP.
Q4. Discuss the importance of HRP.
6.8 LESSON END EXERCISE
Q1 ……….. strives to have right number & right kind of people at the right
place and at the right time.
(a) Human Resource Acquisition
(b) Human Resource Planning
(c) Human Resource Development
(d) Human Resource Planning
6.9 SUGGESTED READINGS
 P.Reilly: Guide to Workforce Planning in Local Authorities, Employers’
Organization for Local Government, London
 Quinn Mills, D (1983) Planning with people in mind, Harvard Business
Review, November–December,
 Bulla, D N and Scott, P M (1994) Manpower requirements forecasting:
a case example, in (eds) D Ward, T P Bechet and R Tripp, Human
Resource Forecasting and Modelling, The Human Resource Planning
Society, New York
 P Suba Rao: Personnel and HRM, Himalaya Publishing House,
 C.B. Memoria & SV Gankar: Personnel Management, Himalaya
Publishing House.
 K. Aswathapa: Human Resource and Personnel Management, Tata
McGraw Hills

******

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Lesson No. 7 Unit-II
Semester-II MCOMC253

JOB ANALYSIS, JOB DESCRIPTION &

JOB SPECIFICATION
STRUCTURE

7.1 Introduction

7.2 Objectives

7.3 Concept & Process of Job Analysis

7.4 Job Description

7.5 Job Specification

7.6 Summary

7.7 Glossary

7.8 Self Assessment Questions

7.9 Lesson End Exercise

7.10 Suggested Readings

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7.1 INTRODUCTION
Human capital management in organizations virtually always requires
an in-depth understanding of the work that people do in that organization.
The process by which this understanding is developed is job analysis.
7.2 OBJECTIVES
This lesson will provide our learners a clear understanding of :
(i) job analysis and its application in the organisation
(ii) different methods applied for job analysis
(iii) the outcomes of job analysis i.e., job description and job specification

7.3 CONCEPT & PROCESS OF JOB ANALYSIS

Job analysis is primary tool in personnel management. In this method, a
personnel manager tries to gather, synthesize and implement the information
available regarding the workforce in the concern. A personnel manager has to
undertake job analysis so as to put right man on right job.

In a more comprehensive and detailed definition, Harvey (1991) defined

job analysis as ‘‘the collection of data on (a) ‘job-oriented’ behaviour, such
as job tasks and work procedures; (b) more abstract ‘worker-oriented’
behaviour, such as decision making, supervision, and information
processing; (c) behaviours involved in interactions with machines,
materials, and tools; (d) methods of evaluating performance, such as
productivity and error rates; (e) job context, such as working conditions
and type of compensation systems; and (f) personnel requirements, such
as skills, physical ability, and personality traits.’’

Job analysis is a detailed and systematic study of jobs to know the nature
and characteristics of the people to be employed on various jobs. It involves
collection of necessary facts regarding jobs and their analysis. Some of the
definitions of job analysis are given here under to understand the meaning of the
term more clearly.
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 According to Michael J.Jucuis, “job analysis refers to the process of
studying the operations, duties and organizational aspects of jobs in order to derive
specifications or as they are called by some job descriptions.

According to Edwin B. Flippo, “Job analysis is the process of studying

and collecting informations relating to the operations and responsibilities of specific
job.”

According to John A. Shbins, “Job analysis is the methodical compilation

& study of work data in order to define and characterise each occupation in such
a manner as to distinguish it from all others”.

According to S.P. Robbins & D.A. De Cenzo, “Job analysis is the

systematic exploration of activities”.
The study of above definitions reveals that Job analysis is a process by which
job, duties and responsibilities are defined and the information of various factors relating
to jobs are collected and compiled to determine the work conditions, nature of work,
qualities of persons to be employed on job, position of the job, opportunities available
and authorities and privileges to be given on the job etc.
i) Job identification
ii) Nature of the job
iii) operations involved in doing the job
iv) Materials and equipment required to do the job.
v) Personnel qualities required to do the job.
vi) Relation of the job with other jobs in the organisation.
A careful examination of the data collected and classified suggests that
some data relates to the job and some concerns the individuals doing the
job. The requirements of the job are called job description the qualities
required from the job holder are termed as job-specification. Thus, job

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 description and job specification are two products of job analysis.
Applications of Job Analysis
A variety of important reasons support conducting job analysis in the
workplace. These include recruitment, candidate selection, employee
training and development, performance management, and litigation
protection. Each of these will be briefly reviewed.
 Recruitment:The first external application of job analysis is in
recruitment, when the job description becomes the basis for recruiting
applicants. In beginning to fill a vacant job, the recruiter needs to know
the job responsibilities as well as the skills and other characteristics
required of candidates. Not only is it necessary for the recruiter to
know these things, but candidates need to know the kind of job for
which they are applying. The need for a job description should be
obvious to all.
  Candidate Selection: In our experience, candidate selection accounts
for most job analysis. Employers need to know in some detail the work
activities involved in each job vacancy and, most importantly, the
knowledge, skills, and abilities—the competencies—required to fill that
job successfully. While most employers maintain files of job descriptions,
there is widespread understanding that many, if not most, of these job
descriptions are dated and need to be redone, especially for jobs deemed
to be critically important.
 Employee Training and Development: Once a current job analysis
becomes available, the competency of current employees in that job
becomes apparent. Employees without a high level of the identified
necessary competencies will be less productive than they otherwise
should be. For example, if a new applicant tracking system is introduced
in the HR function, someone has to be hired to manage that system. But,
implicit in that decision, is the question of the competency of the existing

110
 HR staff to use that new system. Without knowing the answer to that
question, the positive impact of the introduction of this new system will
be less than intended. Thus, the job analysis used for the new hire should
lead to an analysis of the competencies of the existing staff, and a training
and development program should be instituted to produce the necessary
competencies.
The job analysis can impact on the individual training and development
level as well. It is rare that even those candidates who are the best fit
developed through the job analysis are a perfect fit. The selection
process should have identified both the candidate’s strengths—those that
led to the selection—and weaknesses—those that need to be addressed
by some training and development process. This might be part of a
supervisory or mentoring process or by some actual training, either on
thejob or somewhere else.
 Performance Management: Another important use of job analysis is
in performance management. Job analysis play an important role in
developing or modifying compensation systems and in performance
appraisal. Determining the various levels of performance on a given job
is an essential aspect of every job analysis. The knowledge of what
constitutes an outstanding level of performance, an average level, and a
borderline level is a critical aspect of performance management and
should be the basis for setting pay and bonuses, the need for training
and development, and for virtually all other aspects of the HR function.
Job analyses have been used not only to set pay levels but also to help
determine whether different jobs require different requirements or effort,
or involve different working conditions. In either case, such differences
merit different pay scales. Jobs that involve equivalent factors, however,
should lead to equal pay.

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  Litigation Protection: Still another use of job analyses is to reduce an
organization’s exposure to litigation based on allegations of discriminatory
hiring practices. In order to ensure that all individuals are treated fairly
in the workplace, including in hiring, pay, training, and other conditions
of employment, we need to base all of our decisions on job-related
qualifications. The only way to be able to do this is through the use of
job analyses. For example, if we wish to hire a plumber, we need to
ascertain that applicants can run pipe and have a license to do so,
requirements based on the job analysis. Simply stated, if we are to hire
people based on the qualifications to perform a job, we first must
determine what those requirements for doing that job are—and conducting
a job analysis is the only legal way to do this.
Elements of a Job Analysis
Traditional job analysis has four typical components:

 A description of the work activity (WA) or tasks involved in doing the job;

 The knowledge, skills, and abilities (SKA) or competencies necessary

to perform the job;

 Data on the range of job performance; and

 The characteristics of the workplace.

The data contained in these four components provide the basis for drafting
the job description, which should provide an integrated narrative picture
of the job and what is required to fill that job successfully.

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PROCESS OF JOB ANALYSIS
Step 1 - Determining the purpose of Job analysis

Step 2 - Gathering background information about the job

Step 3 - Choosing representative jobs for analysis.

Step 4 - Collecting the relevant job information.

Step 5 - Reviewing gathered information

 
Step 6 - Job description Job specification
statement statement
Table 7.1
1. Determining the purpose of Job Analysis :- The first step in the Job
analysis process is the determination of the end use of the Job analysis. Job
analyais is has relevance for almost all HR activities of an organization However,
an organization may conduct a Job analysis is for specific purpose like hiring
the employees or determining their remuneration. Depending upon the purpose
of the analysis the organization may focus specifically on certain aspects of the
Job that are considered important.
2. Gathering Background information about the Job: It is essential for
an organization to review the background information about the job to know its
relative importance in the organization while doing so the job analysis should focus
on identifying information relating to all the important elements of the job.

3. Choosing Representative Jobs for Analysis:- Often, organization

choose only a few jobs for analysis all of them. This is done because many jobs
are similar in nature and have similar characteristics. Besides, organization may
find it time- consuming and costly to analyse all their jobs. As a result, it becomes
113
essential for an organization to identify the representative jobs from a group of
identical jobs.
4. Collecting Relevant Job Information : In this step, information
pertaining to various aspects of the job is collected specifically the information
about the duties, level of responsibility, authority, accountability content and
content of the job, desired employee behaviour critical knowledge, knowledge
skills and abilities (KSA) and training requirements are gathered’. These pieces
of information can be gathered by contacting the present and previous
employees of the job, the supervisors and the mangers.
5. Reviewing the information gathered : At this stage, the collected data
is carefully analysed and then a job analysis report is prepared for the job being
reviewed Generally, the specific job holders and their immediate supervisors are
included in such an analysis process. The opinion of the employee performing the
job is as certained to verify the correctness and completeness of the Job analysis
report. In case the employee or supervisor paints out incompleteness or
discrepancies in the report supplementary information could be collected.
6. Developing a job description and job specification : This is the final
stage in the process of Job analysis. The two essential document of the firm,
namely the job description and job specification are prepared on the basis of the
job analysis report. A job description is a written statement containing information
about the duties, responsibilities, accontablities, working conditions and risks
associated with the job, Briefly it is a summary of the various features of a job.
A job specification is a statement that provides information from the job
holder’s perspective. It usually contains information about the eligibility conditions
required for a job holder in terms of educational qualifications, experience,
knowledge, sketls, personal qualities, aptitude and the background required for
getting the job done.

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Job Analysis
Date ______________________ Title ______________________
Prepared By ________________ Department _______________

Job Title : Reports to :

Education/Experience Required

Goals/Objectives of Position

Knowledge/Skills Required

Physical Requirements

Special Problems/Hazards

Table : 7.2

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7.4 JOB DESCRIPTION
According to cycle E. Witt, “Job description is a document that specifies
the tasks, duties and responsibilities of the job and should certainly be relevant
and accurate”.

Job Description is an organized factual statement of job contents in the

form of duties and responsibilities of a specific job. The preparation of job
description is very important before a vacancy is advertised. Job description
includes basic job-related data that is useful to advertise a specific job and
attract a pool of talent. It tells in brief the nature and type of job. This type of
document is descriptive in nature and it constitutes all those facts which are
related to a job. It is the enumeration and description of each operation in a job
and responsibilities involved in performing are also outlined. It lists out required
materials, tools, equipment and machinery for each job. The purpose of Job
description is to identify a job. It is served by providing an identifiable descriptive
title to each job. Job description implies recording of the following data
concerning each job being analysed.

 Title/ Designation of job and location in the concern.

 Principal duties to be performed and responsibilities involved are outlined
 Operations involved in each job are listed in proper sequence.
 Requisite materials, equipment, machinery and tools etc. are listed.
 Conditions of work, i.e. surroundings, the time of work etc. are stated.
 Relations of various related jobs are indicated.
 Mental and physical abilities for performing each operation are listed.
 The kind of training and the length of experience required are also
indicated.
 Wages payable along with other fringe benefits are stated in detail.
 The nature of authority- responsibility relationships.

 Necessary qualifications required for the job.

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  Relationship of that job with other jobs in a concern.

 Hazards

Advantages of Job Description:

 It helps supervisors in assigning work to the subordinates so that he can
guide and monitor their performances. It helps in recruitment and
selection procedures.
 It assists in manpower planning.
 It helps the supervisors It is also helpful in performance appraisal.
 It is helpful in job evaluation in order to decide about rate of
remuneration for a specific job.
 It also helps in chalking out training and development programmes.

7.5 JOB SPECIFICATION

According to R.Harvey and M. Wilson, “Job specification is the process
of inferring the human trait requirements presumed to be necessary for successful
job performance”.
Job Specification/employee specifications is a statement, which tells us
minimum acceptable human qualities, which helps to perform a job. Job
specification translates the job description into human qualifications so that a job
can be performed in a better manner. Job Specification gives detailed information
about any job including job responsibilities, desired technical and physical skills,
conversational ability and much more. Job specification helps in hiring an
appropriate person for an appropriate position. Job Specification is prepared on
the basis of Job Description. The contents are:
1. Job title and designation
2. Educational qualifications for that title
3. Physical and other related attributes
4. Physique and mental health
5. Special attributes and abilities

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 6. Maturity and dependability
7. Relationship of that job with other jobs in a concern.
Advantages of Job Specification
 It is helpful in preliminary screening in the selection procedure.
 It helps in giving due justification to each job.
 It also helps in designing training and development programmes.
 It helps the supervisors for counselling and monitoring performance of
employees.
 It helps recruiting team of an organization understand what level of
qualifications, qualities and set of characteristics should be present in a
candidate to make him or her eligible for the job opening.
 Job specification helps candidates analyze whether they are eligible to
apply for a particular job vacancy or not.
 It helps in job evaluation.
 It helps the management to take decisions regarding promotion, transfers
and giving extra benefits to the employees.

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 Table 7.3 : EXAMPLES OF JOB SPECIFICATION
JOB SPECIFICATION OF ASSISTANT LIBRARIAN
Job Title  Assistant Librarian
Qualification Master Degree in Library & Information Science with at least
55% marks
Experience  Minimum 2 years experience in reputed Library in education
field
Special attributes:
 Well versed in computerized environment like MS Word, Acrobat Writer,
familiar with Lotus Notes
 Good interpersonal skills and communicational skills
 Physical attributes:
 Should have good physique with minimum height 165 cms and weight 65
kgs.
 Job Profiles:
 Looks after overall functioning of the library
 Establishes and plans information services.
 Establishes and plans user education programme.
 Develops and administers policies pertaining to services and staff
 Monitors and develops on-going services.
 Looks after circulation services
 Manage PHL Libraries
 Circulate Library updates
 Provide reference to staff
 Assists Librarian in the location of materials and for compilation of
Bibliographies
 Maintenance of issue records, charging and discharging books

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  Accessioning of books, registration of Periodicals
 Inter-Library Loan work
 Shelving of books and periodicals
Reporting to Librarian

7.6 SUMMARY
Job analysis is primary tool in personnel management. In this method, a
personnel manager tries to gather, synthesize and implement the information
available regarding the workforce in the concern. A personnel manager has to
undertake job analysis so as to put right man on right job. There are five different
methods of collecting job analysis data. They are (1) self-reports; (2) direct
observations; (3) interviews; (4) document reviews: and (5) questionnaires
and surveys.
Job description and job specification are two integral parts of job analysis.
They define a job fully and guide both employer and employee on how to go
about the whole process of recruitment and selection. Both data sets are
extremely relevant for creating a right fit between job and talent, evaluate
performance and analyze training needs and measuring the worth of a particular.
7.7 GLOSSARY
 Job Analysis: The systematic process of gathering and examining and
interpreting data regarding the specific tasks comprising a job.
 Job Description: A written description of a job which includes
information regarding the general nature of the work to be performed,
specific responsibilities and duties, and the employee characteristics
required to perform the job.
 Job Specification: It is a statement of minimum acceptable human
qualities, which helps to perform a job.
 Job Title: specific name given to a particular job which is used to
distinguish that job from other jobs within the organization.

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 Organization chart: A graphic representation outlining how authority
and responsibility are distributed within an organization.

7.8 SELF ASSESSMENT QUESTIONS

Q1. What do you understand by job analysis? What are its elements?
Q2. What are the by-products of job analysis? Explain.
Q3. Distinguish between job description and job specification.

7.9 LESSON END EXERCISE

Fill ups :
Q1. ………. is the process of describing & recording aspects of jobs &
specifying the skills & other requirements necessary to perform the job.
(a) Job Specification
(b) Job Description
(c) Job Analysis
(d) Job Evaluation
Choose the correct ones :
Q2. Identify from the following different methods of collecting job analysis data:
(a) Self-reports
(b) Direct observations
(c) Interviews
(d) Document reviews
(e) Questionnaires and surveys
(f) All
7.10 SUGGESTED READINGS
 Fine, S.A. 1989. Functional Job Analysis Scales: A Desk Aid. Milwaukee,
WI: Sidney
 Harvey, R. J. & Wilson, M. A. (2000). Yes Virginia, There Is An Objective
Reality In Job Analysis, Journal of Organizational Behaviour, 20, 829-854.

121
Lesson No. 8 Unit-II
Semester-II MCOMC253

RECRUITMENT AND SELECTION

STRUCTURE
8.1 Introduction

8.2 Objectives

8.3 Concept of Recruitment

8.4 Process of Recruitment

8.5 Sources of Recruitment

8.5.1 The internal sources of recruitment

8.5.2 The external sources of recruitment

8.6 Difference between Recruitment and Selection

8.7 Concept of Selection

8.8 Selection Process and Selection Test

8.9 Summary

8.10 Glossary

8.11 Self Assessment Questions

8.12 Lesson End Exercise

8.13 Suggested Readings

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8.1 INTRODUCTION
In this lesson we will examine the important role of recruitment and
selection within the process of leading, managing and developing people.
Recruitment and selection is pivotal in this regard in certain important respects.
At the most basic level our focus in this book is on people management within
the employment relationship. Those charged with recruiting people to posts in
work organisations take a crucial ‘gatekeeper’ role; only those people selected
for employment can be led, managed and developed. So in the most fundamental
sense the decision to employ (or not) underpins the whole area of managing
people. Issues associated with exclusion from the workplace also highlight the
need for professionalism, fairness and ethical behaviour on the part of those
engaged in this activity.

8.2 OBJECTIVES
After reading this lesson, you should be able comprehend :
(i) the potential importance of recruitment and selection in successful people
management and leadership;
(ii) identify aspects of recruitment and selection which are needed to avoid
critical failure factors;
(iii) understand recruitment and selection policies and procedures, which
are said to be associated with high performance, commitment and
successful organisational outcomes and appreciate the links between
recruitment and selection and other activities.

8.3 CONCEPT OF RECRUITMENT

According to Edwin B. Flippo, “Recruitment is the process of

searching the candidates for employment and stimulating them to apply
for jobs in the organisation”. Recruitment is the activity that links the employers
and the job seekers. Recruitment of candidates is the function preceding the
selection, which helps create a pool of prospective employees for the organisation
123
so that the management can select the right candidate for the right job from this
pool. The main objective of the recruitment process is to expedite the selection
process. Few definitions of recruitment are as under:

“It is a process of finding and attracting capable applicants for

employment. The process begins when new recruits are sought and ends
when their applications are submitted. The result is a pool of applications
from which new employees are selected.”

“It is the process to discover sources of manpower to meet the

requirement of staffing schedule and to employ effective measures for
attracting that manpower in adequate numbers to facilitate effective
selection of an efficient working force.”
Recruitment is actually a two way traffic. It is a linking function, joining
together those with jobs to fill and those seeking jobs. The best results in
recruitment would come only when there is a ‘fet’ between organisational
recruitment effort and a candidate’s job search efforts.
Recruitment is really demanding a job and requires serious attention from
top management. Simply spending millions on recruitment through newspaper
ads and hiring employment agencies - is not enough. The company should get
talent at any cost to stay ahead of competition.
According to Michael Armstrong, “Recruitment means attracting
candidates, which is primarily a matter of identifying, evaluating and using the
most appropriate source of applicant”.

In setting out a similar distinction in which recruitment activities

provide a pool of people eligible for selection, Foot and Hook (2005, p 63)
suggests that:

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8.4 PROCESS OF RECRUITMENT
Steps in the Recruitment process:

Human Resources Planning


Determination of Strategy

Evaluation of Sources of recruitments

Implementation of recruitment
methods and strategies

Feedback and control

Table : 8.1

1. Human Resources Planning: The first step in the process of recruitment

is the framing of human resources plans in time with the organizational
objectives. Human resources plans clearly estimate the level and kinds of
human resources required to ensure the accomplishment of the strategic
plans of the organization. Human Resource Planning involves the
estimation of how many qualified persons are necessary to carry out the
assigned activities (Personnel demand), how many people will be available
(internal supply), and what must be done to ensure that the Personnel
Supply equals the personnel demand at an appropriate point in the future
(the recociliation process). Thus, the first step is the estimation of the
future HR requirements of the organisation and a decision to meet the
personnel demand with an adequate supply through recruitment.
2. Determination of the Strategy:- The second step in the process of
recruitment is the determination of strategy for choosing the candidates.
It may include, among others, the development of different sources of
recruitment, the prefrences to be followed, the recruitment method to be
used and the series of activities to be undertaken.
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3. Evaluation of the Sources of Recruitment :- Once the strategy is
finalized the next step is the evaluation of each source of recruitment.
There are two important sources of recruitment in every firm, namely
internal and external. Internal sources include, among others, the existing
employees, the former employees and employee referrals, while the
external sources refers to all sources other than internal ones.
4. Implementation of Recruitment Methods and strategies: Having
evaluated the various source of recruitment, the next stage is the
finalization of the sources and the actual implementation of strategies.
Regardless of whether the organization decides to recruit from internal
or external sources, the recruitment method and strategy must be
implemented in accordance with all relevant laws and regulation.
5. Feedback and control : As recruitment is a continuous process, it is
essential to evaluate it to enhance its effectiveness. The quality of the
applicant pool is an indicator of the efficacy of the recruitment process.
If the process discourages the potentially qualified individuals from
applying, limits the size of the applicant pool or results in inferior
applicants becoming the employees of the organizations there is a need
for a change in the recruitment process.

8.5 SOURCES OF RECRUITMENT

8.5.1 The internal sources of recruitment are:-
 Promotions: Promotion means to give a higher position, status, salary and
responsibility to the employee. So, the vacancy can be filled by promoting
a suitable candidate from the same organisation.
 Transfers: Transfer means a change in the place of employment without
any change in the position, status, salary and responsibility of the employee.
So, the vacancy can be filled by transferring a suitable candidate from the
same organisation.
 Internal Advertisements: Here, the vacancy is advertised within the
organisation. The existing employees are asked to apply for the vacancy.

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 So, recruitment is done from within the organisation.
 Retired Managers: Sometimes, retired managers may be recalled for a
short period. This is done when the organisation cannot find a suitable
candidate.
 Recall from Long Leave: The organisation may recall a manager who
has gone on a long leave. This is done when the organisation faces a problem
which can only be solved by that particular manager. After he solves the
problem, his leave is extended.
 Dependents of Deceased, Disabled, Retired and Present Employees:
Some organizations function with a view to developing the commitment
and loyalty of not only the employee but also his family members.
Merits of Internal Sources
 It is time saving, economical, simple and reliable.
 There is no need of induction training because the candidate already knows
everything about the organisation, the work, the employee, the rules and
regulations, etc.
 It motivates the employees of work hard in order to get higher jobs in
the same organisation.
 It increases the morale of the employees and it improves the relations in
the organisation.
 It reduce executive turnover.
 It develops loyalty and a sense of responsibility.
Demerits of Internal Sources
 It prevents new blood from entering the organisation. New blood brings
innovative ideas, fresh thinking and dynamism into the organisation.
 It has limited scope because it is not possible to fill up all types of
vacancies from within the organisation.

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  The position of the person who is promoted or transferred will be vacant.
 There may be bias or partiality in promoting or transferring persons from
within the organisation.

 Those who are not promoted will be unhappy.

 The right person may be promoted or transferred only if proper confidential
reports of all employees are maintained. This involves a lot of time, money
and energy.

8.5.2 The external sources of recruitment are:-

1. Employment at Factory Level: This a source of external recruitment
in which the applications for vacancies are presented on bulletin boards
outside the Factory or at the Gate. This kind of recruitment is applicable
generally where factory workers are to be appointed.
2. Management Consultants: Management consultants are used for
selecting higher-level staff. They act as a representative of the employer.
They make all the necessary arrangements for recruitment and selection.
In return for their services, they take a service charge or commission.
3. Public Advertisements: The Personnel department of a company
advertises the vacancy in newspapers, the internet, etc. This advertisement
gives information about the company, the job and the required qualities
of the candidate. It invites applications from suitable candidates. This
source is the most popular source of recruitment. This is because it gives
a very wide choice. However, it is very costly and time consuming.
4. Campus Recruitment: The organisation conducts interviews in the
campuses of Management institutes and Engineering Colleges. Final year
students, who’re soon to graduate, are interviewed. Suitable candidates
are selected by the organisation based on their academic record,
communication skills, intelligence, etc. This source is used for recruiting
qualified, trained but inexperienced candidates.

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5. Recommendations/ Referrals: There are certain people who have
experience in a particular area. They enjoy goodwill and a stand in the
company. There are certain vacancies which are filled by recommendations
of such people such as existing managers or from sister companies.

6. Employment Exchange: There are certain Employment exchanges which

are run by government. Most of the government undertakings and
concerns employ people t hrough such exchanges. Now-a-days
recruitment in government agencies has become compulsory through
employment exchange.

7. Employment Agencies: There are certain professional organizations

which look towards recruitment and employment of people, i.e. these
private agencies run by private individuals supply required manpower to
needy concerns.

8. Labour Contractors: These are the specialist people who supply

manpower to the Factory or Manufacturing plants. Through these
contractors, workers are appointed on contract basis, i.e. for a particular
time period. Under conditions when these contractors leave the
organization, such people who are appointed have to also leave the concern.

9. Deputation Personnel: The organisation may also recruit candidates who

are sent on deputation by the Government or Financial institutions or by
holding or subsidiary companies.

10. Job Portals: A job portal is essentially a medium which helps bring
employers and job seekers together. Most prospective candidates use
internet to find out what is new in the job market. Catching them on to
spot an online recruitment are much better than through print or electronic
media. Naukri.com, monsterindia.com or timesjobs.com are popular portals
and they offer attractive packages to recruiters. Amazing progress in
technology allows the employers to computerized resume scans , hold
online interviews and conduct psychometric tests and cut the recruitment

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 cycle by 50%.“Job Alerts” tool permits employer to drop job ad in suitable
candidate’s mail box directly, thus ensuring focused targeting. Candidates
also can update their resumes online without any difficulty.

11. Organizational Websites : There is an increasing trend of companies to

set up their own websites for attracting candidates. Apart from brand
building, these offer the employee to have a better understanding of the
organizational culture, before applying online. Many companies like ICICI
have a separate career website.

12. Social / Business Networking Sites : Apart from business networking

sites like linkedin.com, recruiters are using social networking sites like
facebook.com, orkut.com etc. to reach out to potential employees. This
is a great tool to reach “non-active” job seekers; especially in senior roles.
These sites protect the confidentiality of these candidates as they are not
essentially job portals. Candidates can further use this as a positioning
tool by providing exclusive information, which normally does not form a
part of resume.

13. Recruiting Firms: There are two types of recruiting firms generally
classified according to the level of positions handled. Placement firms are
used for junior level, mass, semi-skilled positions. Executive search firms
focus on professional openings. Typically they specialize in a particular
industry or role. Recruiter must check the credentials of the firm ask for
references and ensure firm is competent to handle the job before selection.

14. Niche recruiters: ‘Specialized recruiters’ exist to seek staff with a

very narrow specialty. Because of their focus, these firms can very often
produce superior results due to their ability to channel all of their
resources into networking for a very specific skill set. This specialization
in staffing allows them to offer more jobs for their specific demographic,
which in turn attracts more specialized candidates from that specific
demographic over time building large proprietary databases. These niche

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 firms tend to be more focused on building ongoing relationships with
t heir candidat es as t he same candidates are placed many times
throughout their careers. Niche firms also develop knowledge on
specific employment trends within their industry of focus (e.g. the energy
industry) and are able to identify demographic shifts such as aging and
its impact on the industry.

15. Job Fairs / Exhibitions: A job or Career fair is an exposition for employers
to meet prospective job seekers. They usually consist of organization
booths or tables where resumes can be collected. Sometimes an initial
interview or screening is also arranged. These are exploited by IT/ITES
sectors as well as hospitality, construction and retail industries. With new
technology online job fairs are becoming common as they have larger reach
and may be less costly.
16. Expatriate Hiring: It refers to hiring people from outside the parent
country. The last decade has witnessed an increase in the number of
expatriate executives across sectors such as retail, telecom and aviation,
which required efficiencies in the systems and processes and best business
practices. Organizations chose to recruit expatriates due to non-availability
of talent in the country. Reliance, Vodafone and Jet Air recruited expatriates
for key positions.
17. Outsourcing: Some organizations recently started developing human
resource pool by employing the candidates for them. These organizations
do not utilize the human resources; instead they supply HRs to various
companies based on their needs on temporary or ad-hoc basis.
18. Poaching/Raiding: “Buying talent” (rather than developing it) is the latest
mantra being followed by the organisations today. Poaching means
employing a competent and experienced person already working with
another reput ed company in the same or different industry; t he
organisation might be a competitor in the industry. A company can attract
talent from another firm by offering attractive pay packages and other
terms and conditions, better than the current employer of the candidate.

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 But it is seen as an unethical practice and not openly talked about. Indian
software and the retail sector are the sectors facing the most severe brunt of
poaching today. It has become a challenge for human resource managers to
face and tackle poaching, as it weakens the competitive strength of the firm.
Advantages of External Sources
 It encourages young blood with new ideas to enter the organisation.
 It offers wide scope for selection. This is because a large number of
suitable candidates will come for the selection process.
 There are less chances of bias or partiality.
 Here there is no need to maintain confidential records.
Disadvantages of External Sources
 Frustration among existing employees-Recruitment from outside may
cause dissatisfaction and frustration among the existing employees who
aspire for the jobs by promotion or transfer. This is likely to strain the
relations between management and the employees.
 High expense—The process of recruitment of candidates from outside
involves considerable expense in the form of advertising for vacancies,
screening and selection.
 Time consuming-External recruitment takes more time than the internal
recruitment since the enterprise has to publicise about the vacancies, or
otherwise contact the sources and wait for their response.
 Lack of certainty—The prospective candidates from outside may or may
not be good for the enterprise. There is no guarantee that the enterprise
will be able to attract suitable applicants even after advertisement, and
other steps.

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8.6 DIFFERENCE BETWEEN RECRUITMENT AND SELECTION

S.No. Points Recruitment Selection

1. Meaning It is a process of finding It is the process of short

and attracting qualified listing Candidates
applicant for the job. assembling and their final
hiring decisions.

2. Stage Recruitment is the initial Selection is the final

Stage. Process.

3. Time It begins when new It begins after the

Recruits are sought and applications are Received
ends when their and ends when hiring
applications are decision are made.
Received.

4. Approach The Process of The Process of

Recruitment is positive Selection is negative
approach. approach.

5. Level Generally lower level Middle and top level

Managers deals with Managers deals with
Recruitment. Selection Process.

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8.7 CONCEPT OF SELECTION
According to David A. Decenzo, “Selection is a managerial decision-
making process to predict which job applicants will be successful if hired”.

According to Thomas H. Stone, “selection is the process of differentiating

between applicants in order to identify (and hire) those with a greater livelihood
of success in a job.

Selection is the process of picking individuals with requisite qualification

and competence to fill jobs in organization. It involves predicting which
candidates will make the most appropriate contribution to the organisation -
now and in the future. Selection is the process of gathering information about
applicants for a position and then using that information to choose the most
appropriate applicant. Stone has provided a more formal definition of selection
as follows: “Selection is the process of differentiating between applicants in
order to identify (and hire) those with a greater likelihood of success in a
job”. Selection process assumes and rightly so, that there are more number of
candidates available than the number of candidates actually selected. These
candidates are made available through recruitment process.

Aims of the selection process

 Gather as much relevant information as possible

 Organise and evaluate the information

 Assess each candidate in order to: - Forecast performance on the job,

and give information to applicants, so that they can judge whether or not
they wish to accept an offer of employment.

8.9 SELECTION PROCESS AND SELECTION TEST

Let us all go through the process of selection that involves a number of
steps. The basic idea is to collect maximum possible information about the
candidates to ascertain their suitability for employment. Below is a
discussion of the various steps:

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1. Initial Screening: At this stage of the process, the screening should be
based on the quantitative criteria. The quantitative criteria are those items
which enable a clear yes/no answer (or points assignment) based on each
candidate’s application materials and other submitted documents (e.g.,
does this person have the appropriate degree?). It often helps to set up
a spreadsheet with the quantitative criteria listed in columns and the
applicants in rows. Another option is to focus on skill sets. As you and
your selection committee review the job application, focus on three or
four skills that you want to address in interviews. The steps involved in
initial screening are:
The initial screening reviews application materials to determine if minimum
qualifications for the position have been met.
(i) The hiring supervisor or search committee will initiate the
preliminary screening unless it is requested for HR to conduct the
initial screening.
(ii) Applications and resumes are evaluated solely on qualifications
that are stated in the job announcement.
(iii) Applications that meet the minimum qualifications are included in
subsequent screening reviews.
(iv) The search committee secretary will send non-selection letters to
applicants who did not meet the minimum qualifications and are
eliminated at Stage One.
2. Screening Interviews: Screening interviews are used to:
To verify information provided on resume or application blank and are
usually very short (approximately 30 minutes or so).
If the screening effort is successful, those applicants that do not meet
minimum required qualifications will not move to the next stage in the
selection process. Companies utilising expensive selection procedures
put more effort in screening to reduce the cost.

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3. Application Blank /Review of Applications: After passing t he
preliminary interview the candidate is asked to fill the standard application
form. It is a formal record of an individual’s application for employment.
The application form generally consists of the information about the age,
qualification, experience etc. of the candidate on the basis of which the
interviewer gets the idea about the candidate and this information also
helps in formulating questions.Application forms are a good way to quickly
collect verifiable and fairly accurate historical data from the candidate.
It involves following steps:
(i) Only applicants who meet the minimum qualifications are
reviewed at this stage.
(ii) A fair screening process ent ails reviewing an applicant’s
qualifications compared with the qualifications specified in the
job announcement.
(iii) A screening matrix or other agreed upon method of screening is
useful and necessary to the committee’s formal charge to evaluate
application materials objectively and fairly.
(iv) In general, only submitted application documents are referenced
in the evaluation process. Occasionally, search committee
members or the hiring supervisor or others may have personal
knowledge of the applicant. In such instances, the relationship
with and knowledge of the candidate should be disclosed.
(v) The committee will review and evaluate application materials
consistently.
(vi) Applications are ranked or prioritized according to the screening
criteria review established by the committee and top candidates
are identified for interview.
(vii) Once application materials have been reviewed and finalists
identified, the search committee secretary may send letters of
non-selection to applicants eliminated at this stage or the

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 committee may elect to retain some applications for possible
further consideration.
4. Selection Tests: Many organizations hold different kinds of selection
tests to know more about the candidates or to reject the candidates who
cannot be called for interview, etc. Selection tests normally supplement
the information provided in application forms. Such forms may contain
factual information about candidates. Selection tests may give information
about their aptitude, interest, personality etc, which cannot be known
by application forms.
Types of Test
(a) Achievement Test: It is also called performance test or trade
test. Achievement is concerned with what one has accomplished.
When candidates claim that they have done certain things and
know these, the achievement test may be conducted to measure
how well the candidates know these. A candidate’s knowledge
may be measured through his answers to certain questions or
his performance at a practical test. For example, a typing test
may measure the typing performance of a typist in terms of
speed, accuracy and efficiency. Performance test may be
administered for selecting employees at operative level as well
as junior management level

(b) Intelligence Test: Intelligence test tries to measure the level of

intelligence of a candidate. This test generally includes verbal
comprehension, word fluency, memory, inductive, reasoning,
number facility, speed of perception, spatial, visualization, etc. The
scores on the test are usually expressed numerically as Intelligence
Quotient (IQ), which can be calculated as follows IQ = Mental
age x 100 Actual age It means that the IQ is derived by converting
actual age into mental age and multiplying it by 100 in order to
facilitate comparison. Higher is the figure; higher is the level of
intelligence. Intelligence test is designed on the basis of age groups.

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 Thus, each age group may have different intelligence tests. The
basic idea behind intelligence test is that if the organization is able
to get people with higher intelligence, its training and learning
process will be easier because intelligent employees learn faster
than dull employees.

(c) Personality Test: The personality test is administered to predict

performance success for jobs that require dealing with people,
or jobs that are essentially supervisory or managerial in character.
Dimensions of personality such as interpersonal competence,
dominance-submission, ext r oversion-int r o ver sio n, self-
confidence, leadership ability, patience, and ambition can be
measured through personality tests. Personality test is essentially
a projective test because it projects the personality of the
individual who may be employed by the organization. Among the
most widely used personality test is Thematic Apperception Test
(TAT) and its more improved version Thematic Evaluation of
Management Potential (TEMP).

(d) Aptitude test: It is used for measuring human performance

characteristics related to the possible development of proficiency
on specific jobs. These basic characteristics can be thought of as
aptitudes. As such, aptitude test measures the latent or potential
characteristics to do something provided proper environment and’
training are provided to the individuals. This test is more valid
when the applicants have no experience or very little experience
along the lines of the jobs. Specific tests have been developed
for jobs that require clerical, mechanical, spatial relationships,
and manual dexterity, abilities and skills. However, aptitude test
does not measure motivation. Since on-the-job motivation is found
to be more important than aptitude for the job, aptitude test is
supplemented by interest tests.

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 (e) Interest Test: Interest test is designed to discover a person’s
area of interest, and to identify the kind of jobs that will satisfy
him. It is assumed that a person who is interested in a job can do
much better than the person who is not interested. Interest test
generally measures interest in outdoor activities, mechanical,
computational, scientific, persuasive, artistic, literary, musical,
clerical, social services, etc

The above discussion shows that different tests are used for
different purposes. Each of them has the usefulness and limitations
in specified areas. Therefore, a combination of tests should be
used for selection purpose. Moreover, these tests should be related
with the nature of posts to be filled up.

8.9 SUMMARY
Recruit ment is the activity t hat links the employers and the job
seekers. Recruitment of candidates is the function preceding the selection,
which helps create a pool of prospective employees for the organisation so
that the management can select the right candidate for the right job from this
pool. The main object ive of t he recruit ment process is to expedit e the
selection process. Recruitment and selection can play a pivotally important
role in shaping an organisation’s effectiveness and performance, if work
organisat ions are able to acquire workers who already possess relevant
knowledge, skills and aptitudes and are also able to make an accurat e
prediction regarding their future abilities. If we accept this premise, recruiting
and selecting staff in an effective manner can both avoid undesirable costs –
for example those associated with high staff turnover, poor performance and
dissatisfied customers – and engender a mutually beneficial employment
relationship characterised, wherever possible, by high commitment on both
sides. Recruitment process starts with identification of vacancy and ends with
selection of best available candidate for the post. There two sources of
recruitment viz., internal and external. Selection is the process of picking

139
individuals wit h requisite qualificat ion and competence to fill jobs in
organization. It involves predicting which candidates will make the most
appropriate contribution to the organisation - now and in the future. It involves
initial screening, initial screening interview, application blank or application
form, selection tests, interviews, checking the references, medical examination,
final employment decision/approval of the authority and placement of the
candidate on the right job.

8.10 GLOSSARY
 Physical ability test: A t est inst rument used t o det ermine an
individual’s ability to perform the functions or tasks of a job where
physical strength or endurance is required.

 Physical examination: A medical examination performed by a

company physician or an independent physician to ascertain whether
or not an individual is able to perform the physical requirements of a
particular job.

According to David A. Decenzo, “Selection is a managerial decision-

making process to predict which job applicants will be successful if hired”.

 Pre-employment testing: The practice of issuing tests to potential

employees on a pre-employment basis in order to det ermine an
applicant’s suitability for a certain position. These tests may include, but
are not limited to, drug and alcohol tests, medical examinations, skills
tests, physical agility tests, honesty/integrity tests or personality tests.

 Psychological test: A written, visual or verbal assessment administered

to determine cognitive and emotional skills.

 Recruitment: The practice of soliciting and actively seeking applicants

to fill recently vacated or newly created positions using a variety of
methods (i.e., internal job postings, advertising in newspapers or
electronic job boards/sites, utilizing search firms, or listing position with
trade and professional associations, etc).

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 According to David A. Decenzo, “Selection is a managerial decision-
making process to predict which job applicants will be successful if hired”.

 Reference checking: The process of verifying information supplied by

applicants on an application or resume.

 Screening: Usually the first step taken during the interviewing process,
involving reviewing prospective candidate applications/resumes, verifying
information supplied by the candidate, conducting interviews and
examining test results.

 Selection process: Any step, combination of steps or procedure used

as a basis for any employment decision, including, but not limited to,
informal or casual interviews, un-scored application forms, paper and
pencil tests, performance tests, training programs, probationary periods
and physical, education and work experience requirements, as well as
the decision-making process used in determining whether or not to hire
or promote.

8.11 SELF ASSESSMENT QUESTIONS

Q1. What are new trends in recruitment?

Q2. Differentiate between recruitment and selection

Q3. Elaborate different tests used during selection process. Which one is best
and why?

Q4. Recruitment is a positive process. Discuss.

8.13 LESSON END EXERCISE
Q1. Due to higher costs ………. are usually employed to fill senior
management & executive level roles.
(a) Niche Recruiters

(b) Head-hunters

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 (c) In-house Recruitment

(d) Employment Exchanges

Q2. ………… are specialized recruiters that seek staff with very narrow
speciality.

(a) Traditional Agencies

(b) Head-hunters

(c) In-house Recruitment

(d) Niche Recruiters

8.14 SUGGESTED READINGS

 Bratton, J., and Gold, J. (2007) Human Resource Management: Theory
and Practice, 4th Edition, Houndmills: Macmillan.

 E. B . Fillipo (1980). Personnel Management, McGraw Hill

 Foot , M., and Hook, C., (2005), Introducing Human Resource

Management, Fourth Edition, England, Prentice Hall

 Billsberry, J. (2000) Finding and keeping the Right People, London,

Prentice-Hall

 Cowling, A.G. and Mailer, C.J.B (1981). Managing Human Resources,

London, Edward Arnold.

 Ludlow, R. and Panton, F. (1991). The Essence of Successful Staff

Selection, London, Prentice-Hall.

 Ray French and Sally Rumbles : Recruitment and Selection, in Garry

Rees and Ray French (eds): Leading, Managing and Developing People,
CIPD, available at: http://www.cipd.co.uk/NR/rdonlyres/01F95685-
76C9-4C96-B291-3D5CD4DE1BE5/0/9781843982579_sc.pdf

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 R. L. Compton, William J. Morrissey, Alan R. Nankervis, Bill Morrissey
(2009). Effective Recruitment and Selection Practices, CCH Australia
Ltd. Available at: books.google.co.in/books?isbn=1921485779

**********

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Lesson No. 9 Unit-II
Semester-II MCOMC253

PLACEMENT, ORIENTATION, PROMOTION,

TRANSFER, ABSENTEEISM

STRUCTURE

9.1 Introduction

9.2 Objectives

9.3 Placement

9.3.1 Principles of Placement

9.3.2 Process of Placement

9.4 Concept of Orientation /Induction

9.4.1 Objectives of Orientation

9.4.2 Advantages of Orientation

9.4.3 Types of Orientation

9.5 Promotion

9.5.1 Advantages of Promotion

9.5.2 Types of Promotion

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 9.5.3 Principles of Promotion

9.6 Transfer

9.6.1 Reason / Objectives for Transfer

9.6.2 Types of Transfer

9.7 Absenteeism

9.7.1 Causes of Absenteeism

9.7.2 Preventive Measures

9.8 Summary

9.9 Glossary

9.10 Self Assessment Questions

9.11 Lesson End Exercise

9.12 Suggested Readings

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9.1 INTRODUCTION
Selection process is followed by right placement of new employee as well as
his orientation. These two help the employee to get introduced to the job as well as
organisation. The job demand – person integration help to establish role clarity.
Promotion and transfer help the organisation to adjust its HR requirements as well as
meet the employee’s demand of growth and advancement. But there are negative
processes also like, absenteeism, separation or turnover, which needs management’s
attention to the organisation productive and effective.
9.2 OBJECTIVES
This lesson will improve your knowledge :
(i) about placement, induction, promotion, transfer
(ii) absentieesm, turnover & employee separation
9.3 PLACEMENT
After a candidate has been selected he should be placed on a suitable job
placement is actual posting of an employee to a specific job. It involves assigning a
specific rank and responsibility to an employee. It is an important human resource activity.
If neglected, it may create employee adjustment problems leading to absenteeism,
turnover, accidents poor performance etc. The employee will also suffer seriously. He
may quit the organization in frustration, complaining bitterly about everything. Proper
placement is therefore, importants to both the employee and the organization.
After the employee is hired and orient ed, he/she must be placed in
his/her right job. Placement is understood as the allocation of people to the
job. It is assignment or re-assignment of an employee to a new or different
job. Placement includes initial assignment of new employees and promotion,
transfer or demotion of present employees. The placement is arising out of
promotion, transfer, demotion. Assignment of new employee t o a job
apparently seems to be simple t ask. The employer advert ises invit ing
applications from candidates for a specific post. The advertisement contains
job description and job specifications in detail. When a candidate has been
selected, it is logical that individual is placed in a position that was advertised
earlier. But the task of placement is not that simple it appears. We are entering
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the age when applicant s must be considered for several jobs rather t han
one. From the managerial perspective, the task is to understand and capitalize
on each person’s individually. Since, human att ributes vary along many
relatively independent ability, interest, biographical sketch and the personality
dimensions, a person’s individuality is best viewed as his/her unique profile
of scores on a variety of individual measures. Once we establish the unique
profile for each individual, people and jobs can be matched optimally within
the constraints set by available jobs and available people. If the number of
individuals is large in relation to the available jobs, only the best qualified
persons can be selected and placed. On the other hand, when more jobs are
available, optimal placement is possible. Thus the number of people and the
number of jobs determine the placement process in any organization.
9.3.1 Principles of Placement
A few basic principles should be followed at the time of placement
of a workers on the job. This is elaborated below:
1. Principle of Job first, Man next: should be placed on the job according
to the requirements of the job. The job should not be adjusted according
to the qualifications or requirements of the man. Job first, man next, should
be the principle of the placement.

2. Principle of Qualification: The job should be offered to the person

according to his qualification. This should neither the higher nor the lower
than the qualification.
3. Principle of Working Conditions: The employee should be made
conversant with the working conditions prevailing in the organization and
all things relating to the job. He should also be made aware of the
penalties if he commits the wrong.
4. Principle of Loyalty and Co-operation: While introducing the job to
the new employees, an effort should be made to develop a sense of loyalty
and cooperation in him so that he may realize his responsibility better
towards the job and the organization.

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 5. Principle of Timely Preparation: The placement should be ready before
the joining date of the newly selected person.
6. Principle of Transfer: The placement in the initial period may be
temporary as changes are likely after the completion of training. The
employee may be later transferred to the job where he can do better.

9.3 PROCESS OF PLACEMENT

Collect Details of the employee

Construct his/her profile

Match between sub-group profile and

employee’s profile

Compare sub-group profile to job family profile

Match between family profile and sub-group

profile

Assign the individual to job family

Assign the individual to specific job after

further counselling and assessment

Figure 9.1: Employee Placement Model

Source: Wayne F. Casio and Elios M. Award (1981), Human resource

Management: An Information System Approach, p 265

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9.4 CONCEPT OF ORIENTATION /INDUCTION
“Orientation is the process of planned introduction of employees to their
jobs, their co-workers, and the organization”.
–Robert L. Malthis

“Orientation is a procedure for providing new employees with basic

background information about the firm”.
–Gary Dessler
Orientation is defined as those activities and experiences that are planned,
implemented, and evaluated for either new employees or for those employees
changing roles. Orientation is a means by which new staff members are
introduced to the philosophy, goals, procedures, role expectation, physical
facilities and special services in a specific setting (Abnrzzese & Quinn-O’Neal,
1 992). E. B. Fillipo defined new employee orientation as the induction process
you use for welcoming a new employee into your organization, make them
feel at home and generate a feeling of belongingness to the organisation.
According to the University of Minnesota, employee orientation is the first step
toward building a bright future and successful relationship with those beginning
their employment. Once an employee is selected and placed on an appropriate
job, the process of familiarizing him with the job and the organization is known
as induction.
Induction is the process of receiving and welcoming an employee when
he first joins the company and giving him basic information he needs to settle
down quickly and happily and stars work. In short, during Orientation employees
are made aware about the mission and vision of the organization, the nature of
operation of the organization, policies and programmes of the organization. The
nature of Orientation program varies with the organizational size, i.e., smaller
the organization the more informal is the Orientation and larger the organization
more formalized is the Orientation programme.

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 A formal induction/orientation programme should provide following
information:
 Brief history and operations of the company.
 The company’s organization structure.
 Policies and procedure of the company.
 Products and services of the company.
 Location of department and employee facilities.
 Safety measures.
 Grievances procedures.
 Benefits and services of employee.
 Standing orders and disciplinary procedures.
 Opportunities for training, promotions, transfer etc.
 Suggestion schemes.
 Rules and regulations.
9.4.1 Objectives of Orientation: -
 To help the new comer to overcome his shyness and overcome
his shyness nervousness in meeting new people in a new environment.
 To give new comer necessary information such as location of a
café, rest period etc.
 To build new employee confidence in the organization.
 It helps in reducing labor turnover and absenteeism.
 It reduces confusion and develops healthy relations in the
organization.
 To ensure that the new comer do not form false impression and
negative attitude towards the organization.
 To develop among the new comer a sense of belonging and loyalty
to the organization.

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9.4.2 Advantages of Orientation: -
 Induction helps to build up a two-way channel of communication
between management and workers.
 Proper induction facilitates informal relation and team work a
mong employee.
 Effective induction helps to integrate the new employee into the
organization and to develop a sense of belonging.

 Induction helps to develop good relation.

 A formal induction programme proves that the company is taking
interest in getting him off to good start.
 Proper induction reduces employee grievances, absenteeism and
labor turnover.
 Induction is helpful in supplying information concerning the
organization, the job and employee welfare facilities.

9.4.3 Types of Orientation

1. General -Idea Orientation : This may also be called overview
or summary orientation. In this type, some general information about
the organization is provided to the employees. For instance, the
information about the common policies and procedures, rules and
regulations like the timings, attendance and discipline is provided the
organization may also provide information about emoleuments like pay
particulars, incentive schemes and benfits to the new employees.

2. Job-Specific orientation:- The purpose of this orientation is to

inform the employees about the various aspects of the job and other
things related to it. For instance, the details of the duties, responsibilities
and accountabilities associated with the job, and the specific safety and
other measures required in the performance of the job are provided.
The HR department normally organize these orientations for the new
employees by involving the supervisors or managers of the concerned
department.
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 3. Traditional and Modern Orientation: Based on its purposes
and content. Orientation may also be classified into traditional orientation
and modern orientation. When the organization employ the general and
oft-repeated materials to orient employees, it may be called traditional
orientation.The modern orientation programmes aims at increasing the
team spirit, enhancing productivity and achieving better employee
satisfaction and retention.

9.5 PROMOTION
Promotion is defined as giving higher position to the employee, which
carries high status more responsibilities and higher status. Promotion means
advancement of employee in terms of pay and status also improvement in
working conditions. According P. Subba Rao “Promotion is the reassignment
of a higher level job to an internal employee (which is supposed to be assigned
exclusively to internal employees) with delegation of responsibilities and
authority required to perform that higher job and normally with higher pay”
Promotion refers to upward movement of an employee from current
job to another that is higher in pay, responsibility and/or organizational level.
Promotion brings enhanced status better pay, increased responsibility and
bet ter working condition t o a promot ee. There can of course be “dry
promotion” where a person is moved to a higher level job without increase in
pay. Hence it can act as motivational tool. Promotion on the other hand has
in-built motivational value, as it elevates the status and power of an employee
with in an organisation.
Promotions are used to fill the positions which are more important to fill
rather than the present position of employee. It can be filled by external
recruitment but employees having eligibility and experience must be appointed
for their motivation. Also it will decrease labour turn over as external recruitment
costs more. Also increase in salary and status will increase job satisfaction.
9.5.1 Advantages of promotion:
 Present employees if promoted can handle the process products

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and problems easily as they are already connected to organization but
new incumbent may take some to adjust him or may not adjust himself at all.
 The cost of training the insiders for the higher position is nearly
nil hence no extra training cost.
 Employees will give their best as they know that reward of giving
good performance is sure.
 High morale of the employees is achieved.
9.5.2 Types of Promotions
Promotion is of three types. They are:
 Vertical promotion: Under this type of promotion, employee is
moved to the next higher level, in the organizational hierarchy with
greater responsibility, authority, pay and status.
 Up gradation: Under this Promotion, the job is upgraded in the
organizational hierarchy. Consequently, the employee gets more salary,
higher authority, responsibility.
 Dry promotion: Under this Promotion, the employee is moved
to the next higher level in the organizational hierarchy with greater
responsibility without any change in the salary

9.5.3 Principles of Promotion

 Every organization should satisfy clearly its policy regarding
promotion based on its corporate policy
 Systematic line of promotion channel should be incorporated
 It should provide equal opportunities for promotion in all categories
of jobs, departments and regions of an organization
 It should contain clear cut norms and criteria for judging merit,
length of service, potentiality etc
 Appropriate authority should be entrusted with the task

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9.6 TRANSFER
Transfer is defined as “the moving of employee from one job to
another. It may involve a promotion, demotion or no change in job status
other than moving from one job to another.” It refers to the shifting of
employees form one job to another within the same organization where salary,
responsibilities and category of the new job and the previous job are almost
same. Transfer of an employee can be done in other department of the same
plant or office or to the same department of plant or office located in other
region/city.
9.6.1 Reasons / Objectives for Transfer
 Variation in the volume of work: Transfers are necessary due
to variation in the volume of work in different department/ sections.
Shortage of employees or increase in the work load in one department
leads to transfer of employees.
 Providing training to employee: Transfers are made for
providing opportunities to employees for training and development.
 Satisfy the personal need of employee: Transfers are necessary
satisfy the personal needs (Personal Difficulties) of the employees. They
include family problems, sickness, and education of children and so on.
Such transfers take place especially among female employees.
 Meeting mutual need of employees: Transfers are, sometimes,
made in order to meet the mutual needs of to employees. It is a type of
mutual exchange and is usually accepted by the management.
 Meeting Organizational needs: Transfers are necessary to meet
the organizational needs developed out of expansion programmes or
fluctuation in work requirements or changes in the organizational structure
or dropping of existing product lines. For example, experienced workers
and supervisors are transfer to new plants/ factories in order to manage
the work smoothly.

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 Solution to poor performance: Transfers are sometimes made
when the worker fail to perform his job efficiently. He is transferred to
and new place or post and is given an opportunity to improve his
performance at a new place. Here, transfer is treated as a deter alternative
to outright dismissal.
 Avoiding fatigue and monotony: Transfers are made of avoiding
fatigue and monotony of work. The productivity of an employee may
decline due to monotony of his or her job. To break his monotony, the
employee is transferred.
 Removing poor personal relations: The relations between the
workers and his supervisor may not be smooth and cordial. This may
affect the work of department. One method to solve the problem is to
transfer the worker that department. This transfer may be necessary for
removal of the incompatibilities between the worker and his/her boss or
between one worker and the other.
 Providing relief and to punish employees: Transfers may be
made in order to give relief to employees who are over burdened or are
working under heavy risk or tension over a long period. Similarly,
transfers are made as a disciplinary action for serious mistakes on the
part of employees. This practice is widespread mainly in government
offices and police department.
9.6.2 Types of Transfer
 Production Transfer: When the transfers are being made for
filling the position in such departments having lack of staff, from the
departments having surplus manpower it is called production transfer. It
prevents the layoffs form the organization. Also it is good to adjust existing
staff rather than to hire the new one.
 Remedial Transfer: Remedial transfer refers to rectification of
wrong selection or placement of employees. If the employee can adjust

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 himself in the given job he can be transferred to the job where he can
use his skills and abilities accordingly.
 Versatility Transfer: Such transfers are done to increase the
versatility in the employees so that he can work different kind of jobs.
This is done by transferring employee to different jobs closely related in
same department or process line.. This is used as a training device. It
helps employee to develop him and he is equipped for the high responsibility
jobs as he is having knowledge of the whole process.

 Shift Transfer: In many multi-shifts jobs such as Call centres

employees are transferred from one shift to another due to their personal
reasons like health problem or evening college for higher studies or any
family problems.

9.7 ABSENTEEISM
Absenteeism is a habitual pattern of absence from a duty or obligation.
Traditionally, absenteeism has been viewed as an indicator of poor individual
performance, as well as a breach of an implicit contract between employee and
employer; it was seen as a management problem, and framed in economic or
quasi-economic terms. More recent scholarship seeks to understand absenteeism
as an indicator of psychological, medical, or social adjustment to work.

Absenteeism refers to unauthorized absence of the worker from his

job. Absenteeism can be defined as failure of employees to report for work
when they are scheduled to work. Employees who are away from work on
recognized holidays, vacations, approved leaves of absence, or leaves of
absence allowed for under the collective agreement provisions would not be
included.

In these days, when the needs of the country require greater emphasis
upon increase of productivity and the economic and rational utilization of time
and materials at our disposal, it is necessary to minimize absenteeism.

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Recent surveys indicate the following trends in absenteeism:

 The higher the rate of pay and the greater the length of service of
the employee, the fewer the absences.

 As an organization grows, there is a tendency towards higher rates

of absenteeism.

 Women are absent more frequently than men.

 Single employees are absent more frequently than married

employees.

 Younger employees are absent more frequently than older

employees but the latter are absent for longer periods of time.
 Unionized organizations have higher absenteeism rates than non-
union organizations.
9.7.1 Causes of Absenteeism
 Employee’s Attitude: This is probably the main cause of misused
absenteeism at the workplace. An employee’s work attitude will provide
hints on the level of commitment he or she has towards their work. If
employees have good work attitude, they will not take leaves unless
necessary and they will plan their leaves well in advance so that proper
delegation of duties can be arranged before that. On the other hand,
should the employee have poor work attitude, then chances are they will
misuse leaves entitlements and may even have other issues like discipline
and integrity.
 Length of Employment: Surveys have shown that the longer the
employee is attached to the organization, the lesser unplanned leaves
taken, though there are exceptional cases. This is most likely due to the
fact that organizations would have gotten rid of employees who indulged
in absenteeism much earlier in their career. Also, level of position too

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plays an important factor with the more senior employees being less likely
to log in many missing workdays. In short, it is usually the junior
employees and the new hires who tend to take unplanned leaves.
 Work Pressure: Naturally, it goes without saying that when the
work pressure goes up, absenteeism rate too will go up. Sometimes,
employees in trying to avoid stressful situations eg difficult meetings,
would coincidently report in “sick “ or having “family commitments” on
that day. It is obviously an excuse to take the day off in order not to
face such pressures. Relationship with Superiors
 Working relationships: What are the working relationships like
in the office? Are the heads of department putting too much pressure on
their staff or are the managers demanding beyond what was expected
from their subordinates? In recent surveys, it was a surprise that a high
number of employees cite “poor relationship with superiors” as the main
reason why they choose to stay away from work. Employees, especially
junior positions would rather not report to work in a bid to avoid
confrontation with their demanding bosses or as an act of defiance.
 Job Satisfaction: Besides salary, the other pulling factor why
people seek employment is because of job satisfaction. This is also the
reason why people change jobs or work environment. Some employees
prefer doing the same thing over and over again and will not seek new
responsibilities, while others find it boring to perform monotonous
functions. But in both cases, absenteeism will occur when their level of
satisfaction is lower than what they would accept in their daily work.
It is therefore extremely important to have absenteeism tracked and
controlled and in order to do this; employers must address the needs of
their employees. Employees are not to be treated as slaves and at the
same time, leaves are not to be abused. There should be mutual respect

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 between both parties in order to have a workable solution.
9.7.2 Preventive Measures
One can use these training materials to help teach the supervisors:
 Adopting a systematic approach.
 Creating and coordinating project team
 Administering clear tasks and responsibilities
 Ensuring the support of senior and line management
 Involving employees actively
 Involving the personnel department, company medical service or
external guidance
Besides these following steps should be taken when dealing with absenteeism
 Verbal Warning: Meet with the employee face to face and talk
to them about the problem. Advise the employee that his/her attendance
record must improve and be maintained at an improved level. Then let
them know that further disciplinary action will be the result. Offer any
counselling or guidance that an employee may need only to certain
circumstances. Give further verbal warnings as required. Do checks on
the employees attendance and make note of noticeable changes. If
absenteeism continues then proceed to a written warning.
 Written Warning: Meet with the employee again. Show the
employee the record that you have been keeping track of, that there has
been no noticeable (or sufficient) improvement. Give the employee a
chance to give their reason for the lack of improvement. If you do not
like the reasoning then issue a written warning. Insure the employee is
aware of why this warning was given. Then have to copies made, one
will go to the employee and the other will go into the employees’ files. If
warnings are not good enough then you may proceed to suspension.
 Suspension (only aft er consult ing wit h t he appr opriat e
supervisors): If the absenteeism persists, after the next interview period

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 and immediately following an absence, t he employee should be
interviewed and advised that he/she is to be suspended. The length of
the suspension will depend on how server the problem has become and
the explanation of the employee. The final step, which should only be
the resort is dismissal.
 Dismissal (only after consulting with the appropriate supervisors):
Dismissals should only be considered when all of the above steps and
procedures have been met. The employee, upon displaying no satisfactory
improvement, would be dismissed on the grounds of his/her unwillingness
to correct his/her absence record.
9.8 SUMMARY
The chapter entails the entry of employee in the organisation and ends
with his separation. Placement helps in placing the right employee at the right
job, which is the foremost requirement i.e. matching the role demand with
personal competence of the employee. Induction process helps to introduce
the employee to t he organisation, where he is provided information about
the organisation as well as his job. Promotion brings a raise in status, salary
and ho st of ot her benefit s. Tr ansfers help t o sat isfy organisat ional
requirements at different places and also bring change for the employees.
Further separations can be in the form of resignation or termination of services
by the employer.The processes described in this article are just the general
outline that must be followed in case of any separation and not any industry
or company specific processes. Based on the employment laws applicable
in the countries that they are operating in, companies can choose to be more
stringent or lenient approach.

9.9 GLOSSARY
 Orientation : “Orientation is the process of planned introduction of
employees to their jobs, their co-workers, and the organization”.

 Induction: Programs designed to introduce and acclimate newly hired

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 employees into the organization.

 Promotion: Career advancement within an organization, which includes

increased authority, level of responsibility, status and pay.

 Seniority: Status determined by the length of time an employee has

worked for a specific employer, department or position within the
organization.

 Suspension: A form of disciplinary action resulting in an employee being

sent home without pay for a specified period of time.

 Termination: Separat ion from employment due to a volunt ary

resignation, layoff, retirement or dismissal.

 Transfer: Moving an employee from one position, shift or department

to another within the organization.

 Turnover: Describes changes in the work force resulting from voluntary

or involuntary resignations.

9.10 SELF ASSESSMENT QUESTIONS

Q1. What does induction involve?

Q2. Explain different types of employee separations.

Q3. Explain the employee placement model.

Q4. Explain different types of promotions. What principles should be kept in

mind while promoting the employees?

Q5. What are the reasons for the transfer of an employee.

9.11 LESSON END EXERCISE

Q1. Explain the causes of employee attrition.
Q2. Did the younger staff really lacked dedication and failed to appreciate the

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 career opportunities provided by the firm?
9.12 SUGGESTED READINGS
 Wayne F. Casio and Elios M. Award (1981), Human resource Management:
An Information System Approach, Reston, VA: Reston.
 Rao, P Subha (2009). Personnel and Human Resource Management,
Himalaya Publication House
 Mem oria, C.B. and Gankar, S. V. (2002). Personnel Management,
Himalaya Publication House

***********

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Lesson No. 10 Unit-II
Semester-II MCOMC253
EMPLOYEE TRAINING
AND PERFORMANCE APPRAISAL

STRUCTURE
10.1 Introduction
10.2 Objectives
10.3 Performance appraisal
10.3.1 Concept
10.3.2 Advantages
10.4 Approaches and Methods of Performance Appraisal
10.4.1 Traditional Methods
10.4.2 Modern Methods
10.5 Performance Appraisal Process
10.6 Ethics of Performance Appraisal
10.7 Employee Training
10.7.1 Objectives of Training
10.8 Methods of training
10.9 Training Process
10.10 Summary
10.11 Glossary
10.12 Self Assessment Question
10.13 Lesson End Exercise
10.14 Suggested Readings

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10.1 INTRODUCTION
Performance appraisal (PA) systems are lightning rods for controversy.
Some think they are indispensable. Others argue that they are ineffective at
best and actually operate in most cases to the organization’s detriment. Among
the critics is quality guru W. Edwards Deming (1986), who labelled performance
appraisal systems a “Deadly Disease” in organizations, and claimed that they
“leave people bitter, crushed, bruised, battered, desolate, despondent, dejected,
feeling inferior, some even depressed, unfit for work for weeks after receipt of
rating, unable to comprehend why they are inferior.” Advocates, however, argue
that PA systems are useful and necessary. Dick Grote (2005), a consultant,
who worked extensively in this area, argued that employees are hungry for
feedback on how they are doing and where they stand, and that organisations
and managers owe that to their employees. Jack Welch (2001), the long time
and highly acclaimed former CEO of General Electric, says that it is actually a
form of false kindness to withhold from poor performers information about their
supervisors’ assessments of them. Others may simply observe that everyone’s
performance is appraised, whether it happens formally or informally – and that
a good case can be made for bringing the process out into the open so people
will be aware of how it is done, when it is done, and what the results are.

10.2 OBJECTIVES
After studying this chapter you should be able to :

(i) discuss the difference between performance management and

performance appraisal

(ii) identify the necessary characteristics of accurate performance

management tools, purposes for performance appraisals.

(iii) you will generate knowledge about the commonly used performance
measurement methods and forms and identify some of the common
problems with the performance appraisal process

(iv) you will also be able to identify training needs of the employee and
different methods of employee training.
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10.3 PERFORMANCE APPRAISAL (PA)
10.3.1 Concept

“Performance appraisal” is a systematic evaluation of present and potential

capabilities of personnel and employees by their superiors, superior’s superior
or a professional from outside the organisation . It is a process of estimating or
judging the value, excellent qualities or status of a person or thing. Some of the
commonly accepted definitions of Performance appraisal are:

According to Edwin Fli ppo, “Perform ance Appraisal i s t he

systematic, periodic and impartial rating of an employee’s excellence, in
matters pertaining to his present job and his potential for a better job.”
Ac cord i n g t o D al e Bea ch , “P er f orm an c e Ap prai sal i s t h e
system atic evaluation of the individual with regards to his or her
performance on the job and his potential for development.”

“Performance appraisal” has been identified as one of the most complex

phenomenon of man-management activities. It is often a difficult and emotion
laden process. Performance appraisal has become part of organisational life.
Every organisation has some procedure for evaluating the performance of its
personnel including both the quantitative and qualitative aspects of job
performance. Performance here refers to the degree of accomplishment of the
tasks the makeup an individual’s job. It indicates how well an individual is
fulfilling the job demands. Often the term is confused with effort, which means
performance is always measured in terms of results.

According to R.Wayne Mondy, “Performance appraisal is a formal system

of review and evaluation of individual or team task performance”.
According to Gary Dessler “Performance appraisal means evaluating an
employee’s current and/or past performance relative to his or her performance
standard”.

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 The Three -Step Performance Appraisal Cycle

10.3.2 Advantages
It is said that performance appraisal is an investment for the company
which can be justified by following advantages:
 Promotion: Performance Appraisal helps the supervisors to chalk out
the promotion programmes for efficient employees. In this regards,
inefficient workers can be dismissed or demoted in case.
 Compensat ion: Perfor mance Appr aisal helps in chalking out
compensation packages for employees. Merit rating is possible through
performance appraisal. Performance Appraisal tries to give worth to a
performance. Compensation packages which includes bonus, high salary
rates, extra benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than seniority.

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 Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and programmes.
It helps to analyse strengths and weaknesses of employees so that new
jobs can be designed for efficient employees. It also helps in framing
future development programmes.
 Selection Validation: Performance Appraisal helps the supervisors to
understand the validity and importance of the selection procedure. The
supervisors come to know the validity and thereby the strengths and
weaknesses of selection procedure. Future changes in selection methods
can be made in this regard.
 Communication: For an organization, effective communication between
employees and employers is very important. Through performance
appraisal, communication can be sought for in the following ways:
a. Through performance appraisal, the employers can understand
and accept skills of subordinates.
b. The subordinates can also understand and create a trust and
confidence in superiors.
c. It also helps in maintaining cordial and congenial labour
management relationship.
d. It develops the spirit of work and boosts the morale of employees.
 Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be
determined if the targets are achieved. This very well motivates a person
for better job and helps him to improve his performance in the future.

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10.4 APPROACHES AND MEHODS OF PERFORMANCE
APPRAISAL
APPROACHES TO PERFORMANCE APPRAISAL

Generally speaking three approaches are used in making pertormance

appraisal:

(a) A causal, unsystematic, and often haphazard appraisal : This

method was commonly used in the past, but now it has given place to a
more formal method, the main basis being seniority or quantitative
measures of quantity and quality of output for the rank-and-file
personnel.

(b) Th e tradit ional and highly systemati c measu rement of (i)

employee’s characteristics, and (ii) employee’s contributions, or both.
It evaluates all the performances in the same manner, utilising the same
approach, so that the ratings obtained of separate personnel are
comparable.

(c) The behavioural approach, emphasising mutual goal-setting:

According to McGregor, in the traditional approach, the supervisor is
placed in the position of “Playing Gods.” He judges and at times
criticizes the personal worth of his men. Therefore, emphasis has been
laid upon providing mutual goal-setting and appraisal of progress by
both the appraiser and the appraises. This approach is based on the
behavioural value of fundamental trust in the goodness, capability and
responsibility of human being.

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Following are the methods used by the organizations for Performance
Appraisal of their employees:
Performance Appraisal Methods

Traditional Methods Modern Methods

Ranking BARS
Forced Distribution MBO
Paired Comparison Assessment Centres
Confidential Report Human Resource Accounting
Essay Appraisal 360 - Degree feedback
Critical Incident Peer Appraisals
Checklists Rating commitees
Rating Scale Self Ratings Appraisal by
subordinates
10.4.1 Traditional Methods
a) Ranking : The ranking system requires the rater to rank his
subordinates on overall performance. This consists in simply putting a
man in a rank order. Under this method, the ranking of an employee in a
work group is done against that of another employee. The relative position
of each employee is tested in terms of his numerical rank. It may also be
done by ranking a person on his job performance against another member
of the competitive group.
Advantages of Ranking
 Employees are ranked according to their performance levels.
 It is easier to rank the best and the worst employee.

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Limitations of Ranking
 The “whole man” is compared with another “whole man” in this
method. In practice, it is very difficult to compare individuals possessing
various individual traits.
 This method speaks only of the position where an employee stands
in his group. It does not test anything about how much better or how
much worse an employee is when compared to another employee.
 When a large number of employees are working, ranking of
individuals become a difficult issue.
 There is no systematic procedure for ranking individuals in the
organization. The ranking system does not eliminate the possibility of
snap judgements.
b) Forced Distribution
This is a ranking technique where raters are required to allocate a certain
percentage of rates to certain categories (eg: superior, above average,
average) or percentiles (eg: top 10 percent, bottom 20 percent etc).
Both the number of categories and percentage of employees to be allotted
to each category are a function of performance appraisal design and
format. The workers of outstanding merit may be placed at top 10
percent of the scale, the rest may be placed as 20 % good, 40 %
outstanding, 20 % fair and 10 % fair.
Advantages of Forced Distribution
 This method tends to eliminate raters bias
 By forcing the distribution according to pre-determined percentages,
the problem of making use of different raters with different scales is avoided.

Limitations of Forced Distribution

 Use of this method in salary administration may lead low morale,

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low productivity and high absenteeism.
 Employees who feel that they are productive, but find themselves
in lower grade(than expected) feel frustrated and exhibit over a period
of time reluctance to work.
c) Checklists and Weighted Checklists
In this system, a large number of statements that describe a specific job
are given. Each statement has a weight or scale value attached to it.
While rating an employee the supervisor checks all those statements that
most closely describe the behaviour of the individual under assessment.
The rating sheet is then scored by averaging the weights of all the
statements checked by the rater. A checklist is constructed for each job
by having persons who are quite familiar with the jobs. These statements
are then categorized by the judges and weights are assigned to the
statements in accordance with the value attached by the judges.

Simple Checklist (Yes/No)

 Is employee regular Y/N

 Is employee respected by subordinate Y/N
 Is employee helpful Y/N
 Does he follow instruction Y/N
 Does he keep the equipment in order Y/N

Weighted Checklist (Performance Rating Scale 1-5)

Weights
 Regularity 0.5
 Loyalty 1.5

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 Willing to help 1.5
 Quality of work 1.5
 Relationship 2.0

Advantages of Checklists and Weighted Checklists

 Most frequently used method in evaluation of the employees
performance.
Limitations of Checklists and Weighted Checklists
 This method is very expensive and time consuming
 Rater may be biased in distinguishing the positive and negative questions.
 It becomes difficult for the manager to assemble, analyze and
weigh a number of statements about the employees’ characteristics,
contributions and behaviours.
d) Paired-Comparison
A performance appraisal that measures the relative performance of employees
in a group is known as paired comparison method. This is a method of
performance evaluation that results in a rank ordering of employees to come
up with a best employee. This type of approach measures the relative
performance of employees in a group. The concept can be illustrated with the
help of the following example. If the following five students Ashok (A), Bina
(B), Chitra (C), Dinesh (D), Eillen (E) have to be evaluated for the best student
award, the total number of comparison would be = 10
 A with B
 A with C B with C
 A with D B with D C with D
 A with E B with E C with E D with E
The number of times a student gets a better score, would be the basis for
selecting the Best Student. This method is not appropriate if a large number

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 of students are required to be evaluated.

e) Rating Scale
Rating Scales Method is commonly used method for assessing the
performance of the employees and well-known traditional method of
performance appraisal of employees. Many corporations and companies
example in the country India, telecommunications company likely airtel and
US IT companies like Dell Corporation are using this method for evaluating
the employees and subsequently take decisions on concerned employee.
Depending upon the job of employee under this method of appraisal traits
like attitude, performance, regularity, accountability and sincerity etc. are
rated with scale from 1 to 10. 1 indicates negative feedback and 10
indicates positive feedback as shown below.
Attitude of employee towards his superiors, colleagues and customers

1 2 3 4 5 6 7 8 9 10

Extremely poor Excellent

Regularity in the job

1 2 3 4 5 6 7 8 9 10

Extremely poor Outstanding

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FIGURE : One Item from an Appraisal Form Assessing Employee Performance
on Specific Job- Related Skills

f) Essay Appraisal

This traditional form of appraisal, also known as “Free Form method”

involves a description of the performance of an employee by his superior.
The description is an evaluation of the performance of any individual
based on the facts and often includes examples and evidences to support
the information. A major drawback of the method is the inseparability of
the bias of the evaluator.

Under this method, the rater is asked to express the strong as well as
weak points of the employee’s behaviour. This technique is normally used
with a combination of the graphic rating scale because the rater can
elaborately present the scale by substantiating an explanation for his
rating. While preparing the essay on the employee, the rater considers
the following factors:

 Job knowledge and potential of the employee;

 Employee’s understanding of the company’s programmes, policies,

objectives, etc.;

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 The employee’s relations with co-workers and superiors;

 The employee’s general planning, organizing and controlling ability;

 The attitudes and perceptions of the employee, in general.

Advantages

 This method is advantageous in at least one sense, i.e., the essay

provides a good deal of information about the employee and also reveals
more about the evaluator.

Limitations

 It is highly subjective; the supervisor may write a biased essay.

The employees who are sycophants will be evaluated more favourably
than other employees.

 Some evaluators may be poor in writing essays on employee

performance. Others may be superficial in explanation and use flowery
language which may not reflect the actual performance of the employee.
It is very difficult to find effective writers nowadays.

 The appraiser is required to find time to prepare the essay. A

busy appraiser may write the essay hurriedly without properly assessing
the actual performance of the worker. On the other hand, appraiser takes
a long time, this becomes uneconomical from the view point of the firm,
because the time of the evaluator (supervisor) is costly.

g) Critical Incidents

This technique of performance appraisal was developed by Flanagan and

Burns. The manager prepares lists of statements of very effective and
ineffective behaviour of an employee. These critical incidents or events
represent the outstanding or poor behaviour of employees on the job.
The manager maintains logs on each employee, whereby he periodically
records critical incidents of the workers behaviour. At the end of the

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rating period, these recorded critical incidents are used in the evaluation
of the workers’ performance. An example of a good critical incident of a
sales assistant is the following:

July 20 – The sales clerk patiently attended to the customers’ complaint.

He is polite, prompt, and enthusiastic in solving the customers’ problem.

On the other hand the bad critical incident may appear as under:

July 20 – The sales assistant stayed 45 minutes over on his break during
the busiest part of the day. He failed to answer the store manager’s call
thrice. He is lazy, negligent, stubborn and uninterested in work.

Advantages

 This method provides an objective basis for conducting a thorough

discussion of an employee’s performance.

 This method avoids recency bias (most recent incidents get too
much emphasis).
Limitations
 Negative incidents may be more noticeable than positive incidents.
 The supervisors have a tendency to unload a series of complaints
about incidents during an annual performance review session.
 It results in very close supervision which may not be liked by the
employee.
 The recording of incidents may be a chore for the manager
concerned, who may be too busy or forget to do it.
h) Confidential Report System
Confident ial report system is well known method of performance
appraisal system mostly being used by the Government organisations.
In this method of appraising system, subordinate is observed by his
superiors regarding his performance in the job and on his duties done.

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Thereafter Superior writes confidential report on his performance,
mainly on his behaviour in the organisation and conduct and remarks
if any. Confidential reports will be kept confidential and will not be
revealed to anyone and finally confidential reports will be forwarded
to the top management officials for taking decision against person on
whom confidential report has made. Confidential reports are the main
criteria for promoting or transferring of any employee mainly in the
government sector. All governmental organisations example judiciary,
police Department and other government departments in the India are
using confidential reports method as a tool to know about the employee
and to take any decision connecting to him.
The superior, who appraises their subordinate’s performance, behaviour
and other key issues will be kept in the form of writing on paper, which
is called as confidential report. Confidential report should not be sent
openly on a paper, it must be kept in a sealed cover to send it to
decision-making authorities. Only authorised persons are allowed to
open t he sealed covers, which consist of confident ial report s.
Confidential reports shall not be handed over in loose sheets to the
subordinates.
Key factors assessed in Confidential Report writing
 Character and conduct of an employee
 Absenteeism of an employee
 Knowledge of an employee
 His nature and quality of work
 Punctuality of employee
 Unauthorised absenteeism or leave without permission
 Behaviour of an employee with colleagues, superiors and with public
 Ability of supervision and controlling
 His/her integrity and honesty

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 If any complaints against employee

10.4.2 Modern Methods

Below mentioned are the modern methods of Performance Appraisal :
a) Behaviourally Anchored Rating Scales (BARS)

Behaviourally Anchored Rating Scales (BARS) is a relatively new

technique which combines the graphic rating scale and critical incidents
method. It consists of predetermined critical areas of job performance
or sets of behavioural statements describing important job performance
qualit ies as good or bad (e.g. t he qualit ies like int er-personal
relationships, adaptability and reliability, job knowledge etc). These
statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged against the

desired behaviour by recording and comparing the behaviour with BARS.
Developing and practicing BARS requires expert knowledge.

A behaviourally anchored rating scale is an employee appraisal system

where raters distinguish between successful and unsuccessful job
performance by collecting and listing critical job factors. These critical
behaviors are categorized and appointed a numerical value which is used
as the basis for rating performance.

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Table 10.1: An Example of Behaviourally Anchored Rating Scale (BARS)

Performance Points Behaviour

Extremely good 7 Can expect trainee to make valuable suggestions
for increased sales and to have positive
relationships with customers all over the
country.
Good 6 Can expect to initiate creative ideas for
improved sales.
Above average 5 Can expect to keep in touch with the customers
throughout the year.
4 Can manage, with difficulty, to deliver the
goods in time.
Below average 3 Can expect to unload the trucks when asked by
the supervisor.
Poor 2 Can expect to inform only a part of the
customers.
Extremely poor 1 Can expect to take extended coffee breaks and
roam around purposelessly

Advantages:
 Job behaviours describe employee performance in a better way.
 More objective
 More acceptances due to participation of managers and employees
Disadvantages
 Scale independence may not be valid/ reliable.
 Behaviours are activity oriented rather than result oriented
 Very time consuming for generating BARS.
 Each job will require creating separate BARS scale.

c) Management by Objectives

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The definition of MBO, as expressed by its foremost proponent, Dr. George
S. Odiorne, “Management by objectives is a process whereby the
superior and subordinate managers of an organisation jointly
identify its common goals, define each individual’s major areas
of responsibility in terms of the results expected of him, and use
these measures as guides for operating the unit and assessing the
contribution of each of its members.”
Much of the initial impetus for MBO was provided by Peter Drucker
(1954) and by Douglas McGregor (1960). Drucker first described
management by objectives in 1954 in the Practice of Management.
Drucker pointed the importance of managers having clear objectives that
support the purposes of those in higher positions in the organisation.
McGregor argues that by establishing performance goals for employees
after reaching agreement with superiors, the problems of appraisal of
performance are minimised. MBO in essence involves the setting out
clearly defined goals of an employee in agreement with his superior. The
key features of management by objectives are as under:
 Superior and subordinate get together and jointly agree upon the
list the principal duties and areas of responsibility of .the individual’s job.
 The subordinate sets his own short-term performance goals or
targets in cooperation with his superior.
 They agree upon criteria for measuring and evaluating performance.
 From time to time, as decided upon, the superior and subordinate
get together to evaluate progress towards the agreed-upon goals. At
those meetings, new or modified goals .are set for the ensuing period.
 The superior plays a supportive role. He tries, on a day-to-day
basis, to help the subordinate achieve the agreed upon goals. He counsels
and coaches.
 In the appraisal process, the superior plays less of the role of a
judge and more of the role of one who helps the subordinate attain the

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organisation goals or targets.

MBO is, thus, a method of mutual goal-setting, measuring progress

towards the goals, taking action to assure goal attainment, feedback,
and participation. It is a result oriented philosophy, enabling an employee
to measure progress toward a goal which the employee often has helped
to set. In the goal-setting phase of MBO, a superior and subordinate
discuss job performance problems and a goal is agreed upon. Along with
mutual goal-setting, a major component of MBO is the performance
review session between the superior and subordinate, which takes place
regularly to evaluate progress towards specified goals.

d) Assessment Centres

An assessment centre typically involves the use of methods like social/

informal events, tests and exercises, assignments being given to a group
of employees to assess their competencies to take higher responsibilities
in the future. Generally, employees are given an assignment similar to
the job they would be expected to perform if promoted. The trained
evaluators observe and evaluate employees as they perform the assigned
jobs and are evaluated on job related characteristics.

The major competencies that are judged in assessment centres are

interpersonal skills, intellectual capability, planning and organizing
capabilities, motivation, career orientation etc. assessment centres are
also an effective way to determine the training and development needs
of the targeted employees.

Nearly 30% companies seek assessment centre services while moving

an employee from executive position to managerial position. 20%
companies said they use the centre’s services when seeking a position
on senior management level.

As per t he TJinsite, the premium research website promoted by

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TimesJobs.com survey, more than 80% of the surveyed employers
predict an increased use of assessment centres in near future because
of their expertise and unbiased in assessing an individual fit and biggest
limitation comes from the lack of skilled assessors to perform the
assessment task effectively.
e) Human Resource Accounting
Human Resource Accounting is a method to measure the effectiveness
of personnel management activit ies and the use of people in an
organization. HRA is the process of Assigning, budgeting, and reporting
the cost of human resources incurred in an organization, including wages
and salaries and training expenses.
Human resources are valuable assets for every organization. Human
resource accounting method tries to find the relative worth of these assets
in the terms of money. In this method the Performance appraisal of the
employees is judged in terms of cost and contribution of the employees.
The cost of employees include all the expenses incurred on them like
their compensation, recruitment and selection costs, induction and training
costs etc whereas their contribution includes the total value added (in
monetary terms). The difference between the cost and the contribution
will be the performance of the employees. Ideally, the contribution of
the employees should be greater than the cost incurred on them.
f) 360 degree feedback
360 degree feedback is also known as multi-rater feedback or multi-
dimensional feedback or multi-source feedback. It is a very good means
of improving an individual’s effectiveness (as a leader and as a manager).
It is a system by which an individual gets a comprehensive/collective
feedback from his superiors, subordinates, peers/co-workers, customers
and various other members with whom he interacts. The feedback form
is in a questionnaire format, which contains questions that are significant
to both individual as well as organization from performance aspect. It is

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filled by anonymous people. The number of people from whom feedback
is taken can range from 6 - 20. The individual’s own feedback is also
taken, i.e., he self-rates himself and then his rating is compared with
other individuals ratings. Self ratings compel the individual to sit down
and think about his own strengths and weaknesses.

The primary aim of a 360 degree feedback is to assist an individual to

identify his strengths and build upon them, to recognize priority fields of
improvement, to encourage communication and people’s participation at
all levels in an organization, to examine the acceptance of any change by
the employees in an organization and to promote self-development in an
individual. It must be noted that the assessment of individual by other
people is subjective. A 360-degree feedback is challenging, promoting
and analytical. It should not be regarded as ultimate and concluding. It is
a beginning point. Self-assessment is an ongoing process.

360 degree feedback provides a comprehensive view of the skills and

competencies of the individual as a manager or as a leader. The individual
gets a feedback on how other people perceive and assess him as an
employee. 360 degree feedback is beneficial to both an individual as
well as organization. It leads to pooling of information between individual
and other organizational members. It encourages teamwork as there is
full involvement of all the top managers and other individuals in the
organization. It stresses upon internal customer satisfaction. It develops
an environment of continuous learning in an organization. Based on a
360 degree feedback, the individual goals and the group goals can be
correlated to the organizational strategy, i.e., the individual and the group
can synchronize their goals with the organizational goals.

The feedback must be confidential so as to ensure its reliability and

legitimacy. The feedback must be accepted with positivity and an open-
mind. The effectiveness of the feedback must be evaluated and analyzed
on a regular basis.

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 FIGURE : Online 360-Degree Feedback

360 Degree Feedback Survey Demo

Advantages of 360 Degree Feedback

 360 degree feedback is more impartial and objective than a one-

to-one assessment of employee traits.
 It concentrates and stresses upon internal customer satisfaction
 It broadens the scope for employees to get various says for
enhancing their job role, performance, and views.

 It can act as a supplement and not replacement to the conventional

appraisal system.
 It can be motivating for the employees who undervalue themselves.
 It encourages teamwork.
 It is more credible as various people give almost same feedback

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from various sources.
 It brings into limelight the areas of employee development as it
identifies strength and weaknesses of employees, which can be worked upon.
 It creates an environment of trust and loyalty in the organisation
g) Peer Appraisals
In any case, relying only on supervisors’ ratings is not always wise. For
example, an employee's supervisor may not understand or appreciate
how customers and colleagues who interact with the employee rate his
or her performance. Further more, there is always some danger of bias
for or against the employee. If so, managers have several options.

With more employees working in teams, appraisal of an employee by his

or her peers—peer appraisal—is popular. Typically, an employee due
for an annual appraisal chooses an appraisal chairperson,The latter then
selects one supervisor and three peers to evaluate the employee's work.

h) Rating Committees

Some companies use rating committees. A rating committee is usually

composed of the employee’s immediate supervisor and three or four other
supervisors.

Using multiple raters is advantageous. It can help cancel out problems

such as bias on the part of individual raters.

i) Self-Ratings

Some employers obtain employees’ self-ratings, usually in conjunction

with supervisors’ ratings. The basic problem, of couge, is that employees
usually rate themselves higher than do their supervisors or peers.

j) Appraisal by Subordinates

Many employers have subordinates rate their managers, usually for

developmental rather than for pay purposes. Anonymity affects such

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upward feedback. Managers who get feedback from subordinates who
identify themselves view the upward feedback process more positively
than do managers who get anonymous feedback. However, subordinates
prefer giving anonymous responses, and those who must identify
themselves tend to give inflated ratings.

k) "Crowd" Appraisals

More employers are using social media—based appraisals to let everyone

in the company (the "crowd") appraise each other. Workforce Rypple
(http://work.com/) is one such “social performance management
platform.” Basically, it supplements traditional appraisals. Employees and
managers use it to set goals, and to provide feedback and recognition.

Which Option Is Best?

While this section does not contain an exhaustive list, it provides examples
of each major method of performance appraisal. Determining the best

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 appraisal method or form to use depends on the objectives of the
organization. A combination of the methods and forms is usually superior
to any one used by itself. For developmental objectives, the critical
incidents, MBO, and narrative methods work well. For administrative
decisions, a ranking method based on the evaluative methods and
especially graphic rating scale or BARS forms works well. Remember
that the success of the performance appraisal process does not just lie
in the formal method or form used once or twice a year. It depends on
the manager’s human relations skills in ongoing critical incidents coaching,
and on effective measures of performance that are accurate so that
everyone knows why they are rated at a given level (evaluative), as well
as how to improve (develop) for the next assessment.

10.5 PERFORMANCE APPRAISAL PROCESS

The performance appraisal process can be summarised as under:

Establishing performance standards

Communicating the standards

Measuring the Actual Performance

Comparing actual performance with

desired performance:

Feedback

Taking corrective actions

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 Establishing performance standards: The first step in the process of
performance appraisal is the setting up of the standards which will be used to as
the base to compare the actual performance of the employees. This step requires
setting the criteria to judge the performance of the employees as successful or
unsuccessful and the degrees of their contribution to the organizational goals
and objectives. The standards set should be clear, easily understandable and in
measurable terms. In case the performance of the employee cannot be measured,
great care should be taken to describe the standards.

 Communicating the standards: Once set, it is the responsibility of

the management to communicate the standards to all the employees of the org
anization. The employees should be informed and the standards should be
clearly explained to the employees. This will help them to understand their
roles and to know what exactly is expected from them. The standards should
also be communicated to the appraisers or the evaluators and if required, the
standards can also be modified at this stage itself according to the relevant
feedback from the employees or the evaluators.
 Measuring the Actual Performance: The most difficult part of the
Performance appraisal process is measuring the actual performance of the
employees that is the work done by the employees during the specified period
of time. It is a continuous process which involves monitoring the performance
throughout the year. This stage requires the careful selection of the appropriate
techniques of measurement, taking care that personal bias does not affect the
outcome of the process and providing assistance rather than interfering in an
employees work.

 Comparing actual performance with desired performance: The actual

performance is compared with the desired or the standard performance. The
comparison tells the deviations in the performance of the employees from the
standards set. The result can show the actual performance being more than the
desired performance or, the actual performance being less than the desired
performance depicting a negative deviation in the organizational performance.
It includes recalling, evaluating and analysis of data related to the employees’

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performance.

 Feedback: The result of the appraisal is communicated and discussed

with the employees on one-to-one basis. The focus of this discussion is on
communication and listening. The results, the problems and the possible solutions
are discussed with the aim of problem solving and reaching consensus. The
feedback should be given with a positive attitude as this can have an effect on the
employees’ future performance. Performance appraisal feedback by managers
should be in such way helpful to correct mistakes done by the employees and
help them to motivate for better performance but not to de-motivate. Performance
feedback task should be handled very carefully as it may leads to emotional outburst
if it is not handing properly. Sometimes employees should be prepared before
giving them feedback as it may be received positively or negatively depending
upon the nature and attitude of employees.

 Decision-making/Taking corrective actions: The pur pose of

conducting employee performance appraisal is for making decisions about
employees without any bias by the HR manager. Decision-making by HR
managers about employees rewarding, promotions, demotions, transfers and
somet imes suspensions/dismissal of employees are depended upon t he
employee performance appraisal. The decision taken by HR manager should
match exactly with performance appraisal results of employees to avoid grievance
or disturbances in between them, as they affects overall performance of the
organisation.

10.6 ETHICS OF PERFORMANCE APPRAISAL

Every manager should be concerned wit h et hics, otherwise he
may encounter several problems in appraising performance of subordinates.
Essential ethics of an effective appraisal system for managers are :

1. Reliability and Validity: Appraisal system should provide consistent,

reliable and valid information and data which can be used to defend the
organization-even in legal challenges. If two appraisers are equally
qualified and competent to appraise an employee with the help of same

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 appraisal technique, their ratings should agree with each other. Appraisals
must also satisfy the condition of validity by measuring what they are
supposed to measure.

2. Job Relatedness: The appraisal t echnique should measure the

performance and provide information in job related areas.

3. Standardization: Appraisal forms, procedures, administration of

techniques, ratings, etc should be standardized as appraisal decisions
affect all employees of the group. Practical Viability: The techniques
should be practically viable to administer, possible implement and
economical regarding cost aspect. Legal Sanction: It should have legal
compliance with the legal provisions concerned of the country.

4. Training Appraisers: Because appraisal is important and sometimes

difficult, it would be useful to providing training to appraiser’s viz., some
insights and ideas on rating, documenting appraisals and conducting
appraisal interviews.

5. Open Communication: Most employees want to know how well they

are performing on the job. A good appraisal system provides the needed
feedback on a continuing basis. Managers should clearly explain their
performance expectations to their subordinates in advance of the
appraisals period and try to improve their performance in future.

6. Employee Access to Results: Employees should receive adequate

feedback on their performance. Employees’ performance can be improved
only if they are also accessible to review the results of their appraisal.

7. Due Process: Formal procedures should be developed to enable

employees to pursue their grievances and having them addressed
objectively, who disagree with the appraisal results.

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10.7 EMPLOYEE TRAINING

Training is the process of assisting a person for enhancing his efficient

and effect iveness at work by improving and updating his professional
knowledge, by developing skills relevant t o his work, and cultivating
appropriate behaviour attitude towards work and people. Training could be
design either for improving present capabilities at work or for preparing
a person for assuming higher, responsibilities in future which would call
for additional knowledge and superior skills.

Training according to Wayne Cascio “consists of planed programs

undertaken to improve employee knowledge, skills, attitude, and social
beh aviour so t hat th e perform an ce of t he organ izati on i m proves
considerably.”

“It is concerned with the knowledge, skill attitude, techniques &

experiences which enable as individual to m ake his m ost effective
contribution to the combined effort of the team of which he is a member”

“Training is the formal and systematic modification of behaviour

through learning which occurs as a result of education, instruction,
development and planned experience”

“Training is a method whereby people get hold of abilities to aid in

the accomplishment of organizational objectives. It occupies planned
learning activities premeditated to develop an employee’s performance at
her/his recent job.”

10.7.1 Objectives of Training

 Improving quality of work force: Training and development
help companies to improve the quality of work done by their employees.
Training programs concentrate on specific areas. There by improving
the quality of work in that area.

 Enhance employee growth: Every employee who takes

development program becomes better at his job. Training provides

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 perfection and required practice, therefore employee’s area able to
develop them professionally.

 Prevents obsolescence: Through training and development the

employee is up to date with new technology and the fear of being thrown
out of the job is reduced.
 Assisting new comer: Training and development programs greatly help
new employees to get accustomed to new methods of working, new
technology, the work culture of the company etc.
 Bridging the gap between planning and implementation: Plans made
by companies expect people to achieve certain targets within certain
time limit with certain quality for this employee performance has to be
accurate and perfect. Training helps in achieving accuracy and perfection.
 Health and safety measures: Training and development program clearly
identifies and teaches employees about the different risk involved in their
job, the different problems that can arise and how to prevent such problems.
This helps to improve the health and safety measures in the company.
10.8 METHODS OF TRAINING
There are different methods of training for operating personnel. Training
these workers becomes important because they handle equipment worth
crores of rupees.some of the training methods are as under:
a) On the job training method
In this method workers who have to be trained are taken to the factory,
divided into groups and one superior is allotted to every group. The
supervisor trains the subordinates with the help of following techniques:
1. Demonstration / instruction : It is process of practical showing the
trainee how to do the job. The demonstration step gives trainees the
opportunity to see and hear the details related to the skill being taught.
Those details include the necessary background knowledge, the steps
or procedure, the nomenclature, and the safety precautions. The

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 repetition step helps the average and slow learners and gives the trainees
an additional opportunity to see and hear the skill being taught. The
performance step gives all trainees the opportunity to become proficient.
In short, this method is recommended because it leaves nothing to chance.
2. Coaching: - A more intensive method of training that involves a close
working relationship between an experienced employee and the trainee.
It refers to actually teaching a job to a junior. The senior person who is
the coach actually teaches his junior regarding how the work must be
handled and how decisions must be taken, the different techniques that
can be used on the job, how to handle pressure. There is active
participation from the senior.
3. Job rotation: - Job Rot at ion is a management approach where
employees are shifted between two or more assignments or jobs at regular
intervals of time in order to expose them to all verticals of an organization.
It is a pre-planned approach with an objective to test the employee skills
and competencies in order to place him or her at the right place. In addition
to it, it reduces the monotony of the job and gives them a wider experience
and helps them gain more insights.
4. Projects: – In this the employees join a project team, which gives them
exposure to other parts of the business and allow them to take part in
new activities. Most successful project teams are “multi-disciplinary”
5. Under study: - In this method of training a junior is deputed to work
under a senior. He takes orders from the senior, observes the senior,
attends meetings with him, learns about decision making and handling of
day to day problems. The method is used when the senior is on the verge
of retirement and the job will be taken over by the junior.
b) Apprenticeship training
In this method both theory and practical session are conducted.
The employee is paid a stipend until he completes training. The
theory sessions give theoretical information about the plant layout,

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 the different machines, their parts and safety measures etc. The practical
sessions give practical training in handling the equipment. The apprentice
may or may not be continued on the job after training.
c) Vestibule training
In this method of training in an atmosphere which is very similar to the
real job atmosphere is created. The surroundings, equipment, noise level
will be similar to the real situation. When an employee is trained under
such conditions he gets an idea about what the real job situation will be
like. Similarly when he actually starts doing the job he will not feel out of
place. This method is used to train pilots and astronauts. In some places
graphics are also used to create the artificial surroundings. This method
involves heavy investment.
d) Simulation
Simulation involves creating atmosphere which is very similar to the
original work environment. The method helps to train manager handling
stress, taking immediate decisions, handling pressure on the jobs etc.
An actual feel of the real job environment is given here.
d) Classroom method
The classroom method is used when a group of managers have to be
trained in theoretical aspects. The training involves using lectures, audio
visuals, case study, role play method, group discussions etc. The method
is interactive and provides very good results.
 Lectures: Lectures are a common training method in classrooms, and
the format is quite simple. For lectures, a professor presents information
to his students while the students take notes and absorb the information.
This style of training is typically found at the high school and college
levels and is more effective with adult learners. It can be challenging for
this training style t o be successfully implemented in an elementary
classroom, for instance, as it requires students to pay attention to the
teacher for a long, uninterrupted amount of time. Once young students

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 start to tune out of the lecture, the training method is no longer effective
for conveying the information.
 Group Discussions: Some teachers find it advantageous to let students
lead the lessons, as it forces students to participate and focus on the
course material. In this classroom structure, group discussions prevail
and lectures fall by the wayside. The teacher will present a topic to be
discussed and allow students to take over from there, providing the group
with guided questions and prompts along the way. Students can speak
from experience, theorize or formulate arguments depending on what
the topic is about. Group discussion training methods are effective at all
ages, but keep in mind that younger students will require more guidance
and direction from a teacher than adult students.
 Conference: This method involves discussions on specific topics. The
experts from different fields give presentation or lecture on specific
topics. The trainees can ask their doubts to these experts and understand
how problems can be solved on the job.
 Case Study: The case study is a method, which provides descriptive
situations to stimulate trainees to make decisions. The purpose of the
case method is to make trainees apply what they know, develop new
ideas to manage a situation or solve a problem. The focus is more on the
approach the trainee uses rather than on the solution. As a training tool,
the case study method can be used to develop decision-making skills,
enhance team spirit, better communication and interpersonal skills and
strengthen the analytical skills of trainees.
e) Computer Based Training
 Programmed instruction: It is a Computer-based training that
comprises of graphics, multimedia, text that is connected to one another
and is stored in memory. It is the procedure of guiding the participants
strategically through the information in a way that facilitates the most
effective and efficient learning. It provides the participant with content,

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 information, asks questions, and based on the answer the trainee goes
to the next level of information i.e. if the trainee gives the correct answer;
one branch moves the trainee forward to the new information. And if
the trainee gives the wrong answer then different branch is activated,
taking the trainee back to the review relevant information in more
elaborate manner.
This method allows the trainees to go through the content according to
the individual speed, and capability. Those trainees, who respond better,
move through the content rapidly. Programmed Instruction also comes
in Printed form i.e. books, Tape, Interactive Video and other formats
 Virtual Reality is a training method that puts the participant in 3-D
environment. The three dimensional environment stimulates situations
and events that are experienced in the job. The participant interacts with
3-D images to accomplish the training objectives. This type of environment
is created to give trainee the impression of physical involvement in an
environment. To experience virtual reality, the trainee wears devices, like
headset, gloves, treadmills, etc. Virtual Reality provides trainees with an
understanding of the consequences of their actions in the work
environment by interpreting and responding to the trainees’ actions
through its accessories:
a) Headset provides audio and visual information
b) Gloves provide tactile information
c) Treadmill is used for creating the sense of movement
d) Sensory devices transmit how the trainees are responding in the
virtual workplace to the computer. This allows the virtual reality
( VR) syst em t o r espo nd by changing t he envir onment
appropriately.
 Intelligent tutoring system (ITS) is a computer system that aims to
provide immediate and customized instruction or feedback to learners,
usually without intervention from a human teacher. ITSs have the common

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 goal of enabling learning in a meaningful and effective manner by using a
variety of computing technologies. There are many examples of ITSs
being used in both formal education and professional settings in which
they have demonstrated their capabilities and limitations. Intelligent
tutoring systems consist of four basic components based on a general
consensus amongst researchers:
(i) The domain model (also known as the cognitive model or expert
knowledge model) is built on ACT-R theory which tries to take into
account all the possible steps required to solve a problem. More
specifically, this model “contains the concepts, rules, and problem-solving
strategies of the domain to be learned. It can fulfill several roles: as a
source of expert knowledge, a standard for evaluating the student’s
performance or for detecting errors, etc.”
(ii) The student model can be thought of as an overlay on the domain model.
It is considered as the core component of an ITS paying special attention
to student’s cognitive and affective states and their evolution as the
learning process advances. As the student works step-by-step through
t heir problem solving process t he syst em engages in a process
called model tracing. Anytime the student model deviates from the domain
model the system identifies, or flags, that an error has occurred.
(iii) The tutor model accepts information from the domain and student models
and makes choices about tutoring strategies and actions. At any point in
the problem-solving process the learner may request guidance on what
to do next, relative to their current location in the model. In addition, the
system recognizes when the learner has deviated from the production
rules of the model and provides timely feedback for the learner, resulting
in a shorter period of time to reach proficiency with the targeted
skills. The tutor model may contain several hundred production rules that
can be said to exist in one of two states, learned or unlearned. Every
time a student successfully applies a rule to a problem, the system

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 updates a probability estimate that the student has learned the rule. The
system continues to drill students on exercises that require effective
application of a rule until the probability that the rule has been learned
reaches at least 95% probability. .Knowledge tracing tracks the
learner ’s progress from problem to problem and builds a profile of
strengths and weaknesses relative to the production rules.

(iv) The user interface component “integrates three types of information

that are needed in carrying out a dialogue: knowledge about patterns of
interpretation (to understand a speaker) and action (to generate
ut t er ances) wit hin dialo gues; do main kno wledge needed fo r
communicating content; and knowledge needed for communicating intent”

Examples of Intelligent tutoring system in corporate training and

industry:

“SHERLOCK” is used to train Air Force technicians to diagnose

problems in the electrical systems of F-15 jets. The ITS creates faulty
schematic diagrams of systems for the trainee to locate and diagnose.
The ITS provides diagnostic readings allowing the trainee to decide
whether the fault lies in the circuit being tested or if it lies elsewhere in
the system. Feedback and guidance are provided by the system and
help is available if requested.

The Cardiac Tutor’s aim is to support advanced cardiac support

techniques to medical personnel. The tutor presents cardiac problems
and, using a variety of steps, students must select various interventions.
Cardiac Tutor provides clues, verbal advice, and feedback in order to
personalize and optimize the learning. Each simulation, regardless of
whether the students were successfully able to help their patients, results
in a detailed report which students then review.

CODES: Cooperative Music Prot otype Design is a Web-based

environment for cooperative music prototyping. It was designed to

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 support users, especially those who are not specialists in music, in creating
musical pieces in a prot ot yping manner. The musical examples
(prototypes) can be repeatedly tested, played and modified. One of the
main aspects of CODES is interaction and cooperation between the music
creators and their partners.
10.9 TRAINING PROCESS
The steps of Training Process are as under:
a) Organizational Objectives and Strategies
The first step in the training process is assessment of organisational
objectives and strategies. What business are we in? At what level of
quality do we wish to provide this product or service? Where do we
what to be in the future? Only after answering these and other related
questions that the organisation must assess the strength and weakness of
its human resources.
b) Needs Assessment
Needs assessment diagnoses present problems and future challenge to
be met through training and development. Needs assessment occurs at
two levels i.e. group level and individual level, an individual obviously
needs training when his or her performance falls short or standards that
is when there is performance deficiency. Inadequate performance may
be due to lack of skills or knowledge or any other problem.
c) Training and Development Objectives
Once training needs are assessed, training and development goals must
be established. Without clearly-set goals, it is not possible to design a
training and development programme and after it has been implemented,
there will be no way of measuring its effectiveness. Goals must be tangible,
verifying and measurable. This is easy where skilled training is involved.

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d) Conducting Training Activities
Where is the training going to be conducted and how?
 At the job itself.
 On site but not the job for example in a training room in the
company.
 Off site such as a university, college classroom hotel, etc.

e) Designing training and development program:

Designing t he t raining programme depends upon: Who are the

trainees? Who are the trainers? What met hods and t echniques?
What is the level of training? What are the principles of learning?
Where to conduct the program?

f) Implementation of the training programme:

Program implementation involves actions on the following lines:

 Deciding the location and organizing training and other facilities
 Scheduling the training programme.
 Conducting the programme.
 Monitoring the progress of the trainees.
g) Evaluation of the Results:

The last stage in the training and development process is the evaluation
of the results. Since huge sums of money are spent on training and
development, how far the programme has been useful must be judge/
determined. Finally, a feedback mechanism is created in order to identify
the weak areas in the training program and improve the same in future.
For this purpose, information relating to class room, food, lodging etc.
are obtained from participants. The obtained information, then, tabulated,
evaluated, and analyzed in order to mark weak areas of training programs
and for future improvements. Evaluation helps determine the results of
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 the training and development programme. In the practice, however
organisations either overlook or lack facilities for evaluation.

10.10 SUMMARY
Performance appraisal” is a systematic evaluation of present and
potential capabilities of personnel and employees by their superiors, superior’s
superior or a professional from outside. It helps in promotion, training and
development and motivation of employees. There are traditional and modern
methods of PA. Small organisations usually employ traditional methods,
whereas large organisations take help of modern methods. A good PA should
not consist of any kind of biases and should be based upon already set standards
against which the actual performance of employees should be evaluated and
needed training should be provided to the employee.

10.11 GLOSSARY
 Behaviourally anchored rating scale (BARS): An appraisal that
requires raters t o list important dimensions of a part icular job and
collect information regarding the critical behaviours that distinguish
bet ween successful and unsuccessful performance. These critical
behaviours are then categorized and appointed a numerical value used
as the basis for rating.

 Ethics: A philosophy principle concerned wit h opinions about

appropriate and inappropriate moral conduct or behaviour by an
individual or social group.

 Feedback: Positive or negative information provided to an individual

in the form of coaching or counselling regarding his or her performance
or behaviour.

 Forced-choice: In test construction, used to define multiple-choice tests

or questionnaires requiring the appraiser to choose an answer from a
collection of possible answers. Also refers to a performance appraisal

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 strategy where the appraisal is divided into several sections, and the
rater is then provided with a few performance descriptors for each section
and asked to select the most and least characteristic statement.
 Forced distribut ion: An appraisal rat ing met hod int ended t o
prevent rater errors by requiring the rater to force ratings into a bell
shaped curve.
 Halo/horn effect: A form of appraiser bias, occurring when he/she
rates or judges an individual based on the individual’s positive or
strongest traits, allowing their overall perception of the person to
overshadow any negative traits. Referred to as the “halo effect” when
it works in the candidate’s favour or the “horn effect” when it works
against the candidate
 Performance appraisal: A periodic review and evaluation of an
individual’s job performance.
 Performance standards: The tasks, functions or behavioural
requirements established by the employer as goals to be accomplished
by an employee.
 Training aids: Any form of audio or visual materials used for training
purposes.
  Training and development: A process dealing primarily with transferring
or obtaining knowledge, attitudes and skills needed to carry out a specific
activity or task.
  Training needs analysis: A method used to determine what people
need to learn and which training programs may be beneficial. The result
of the analysis is a training needs report identifying training needs and
the interventions needed to reduce key performance gaps.
10.12 SELF ASSESSMENT QUESTIONS
Q1. Differentiate between On-The-Job-Training & Off-The-Job-Training.
Q2. What is training? What are the different methods of training program

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 within the organisation?
Q3. “Performance appraisal is a tool to measure efficiency and performance
of the employee.” Analyze the statement.
10.13 LESSON END EXERCISE
Q1. From the head of reward to the HR director: ‘Why don’t we use the
outcome of our 360- degree feedback system to contribute to the annual
appraisal rating and through that to performance-related pay decisions?’
Draft your response.

Q2. ………...does not require face to face interaction with the trainer.
(a) Virtual Reality
(b) Coaching100
(c) Case Studies
(d) Role Playing
Q3. Which of the following is the traditional method for imparting training?
(a) Demonstration
(b) Discussion
(c) Lecture
(d) Coaching
Q4. Which of the following is a component in the Intelligent Tutorial System
(ITS)?
(a) A Trainee Model
(b) A Training Session Expert
(c) A user Interface
(d) All

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10.14 SUGGESTED READING
 Deming, W. E. (1986). Out of the Crisis, Cambridge, Massachusetts: MIT.
 Culbert, S. A. (2010). Yes, everyone really does hate performance
reviews. Wall Street Journal.
 Culbert, S. A. (2008). Get rid of the performance review! It destroys
morale, kills teamwork and hurts the bottom line; And that’s just for
starters. Wall Street Journal.
 Longenecker, C. O., Sims, H. P., & Gioia, D. A. (1987). Behind the
mask: The politics of employee appraisal. Academy of Management
Executive, 1, 183-193.
 Grote, D. (2005). Forced Ranking: Making Performance Management
Work. Boston: Harvard Business School.
 Welch, J. with Byrne, J. A. (2001). Jack: Straight from the Gut. New
York, NY: Warner Business Books
 Armstrong, M (2006) Performance Management, 3rd edn, Kogan Page,
London
 Pareek, Udai and Rao, T.V (2006). Designing and Managing Human
Resource Systems, Oxford and IBH

************

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Lesson No. 11 COMPENSATION AND Unit-III
Semester-II GRIEVANCE REDRESSAL MCOMC253
MECHANISM

JOB EVALUATION

STRUCTURE

11.1 Introduction

11.2 Objectives

11.3 Need of job evaluation

11.4 Job evaluation process

11.5 Job evaluation techniques

11.6 Summary

11.7 Glossary

11.8 Self Assessment Questions

11.9 Lesson End Exercise

11.10 Suggested Readings

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11.1 INTRODUCTION
Job evaluation is a formal process for determining the relative value of jobs
based on job content, with emphasis on such factors as skill, effort, responsibility and
working conditions. Job evaluation may contrast with or complement market pricing,
which uses the labour market to set the worth of jobs. Job evaluation may contrast
with or complement market pricing, which uses the labour market to set the worth of
jobs. A key benefit of market pricing is its emphasis on external competitiveness;
however, a big drawback is insufficient and/or unreliable market data for all the jobs
in the organization. Accordingly, job evaluation in some form even a simple one, such
as slotting is needed to supplement a market pricing approach to the valuation of
work. A key benefit of job content evaluation is internal consistency. Another is utility
all jobs can be evaluated based on content.

11.2 OBJECTIVES
After reading this lesson you shall be able to learn about :
1. job evaluation
2. job evaluation process
3. techniques
4. need of job evaluation
11.3 CONCEPT & NEED OF JOB EVALUATION
Job evaluation is a systematic way of determining the value/worth of a job in relation
to other jobs in an organization. It tries to make a systematic comparison between jobs to
assess their relative worth for the purpose of establishing a rational pay structure. It is a
mechanism for establishing agreed differentials within organisations. It is a way of systematically
assessing individual jobs objectively, while avoiding prejudice or discrimination. Job evaluation
does not determine grades or pay levels, but does produce a hierarchy of jobs.

Dale Yoder defined Job evaluation as a practice, which seeks to

provide degree of objectivity in measuring the organisation value of the
jobs within an organisation and among similar organisations.

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 Edwin E. Flippo viewed job evaluation as a systematic and orderly
process of determining the worth of the job in relation to other jobs.

Kimball and Kimball referred to job evaluation as an effort to

determine the relative value of every job in a plant to determine what the
fair basic wage for such a job should be.

Above definit ions reveal that job evaluat ion is a process of finding
out the comparat ive/relative wort h of various jobs in an organisation, for
determining the wages to be paid for performing them. It is a technique that
rat es t he job and not t he employee. It takes into account t he demands of
jobs in terms of abilities and efforts. The important charact erist ics of job
evaluation are as under:
 It evaluates the jobs and not the employees
 Its standards are relative and not absolute.
 It is based on information provided through job analysis.
 It is carried by group of people.
 It does not fix pay scales but only provides basis for evaluating a
rational wage structure.

Need of Job Eval\uation

The primary objective Need of Job evaluation is to find out the value
of work, but this value which varies from time to time and from place
to place under the influence of certain economic pressures, not least
of which is the worth of money itself. Nevertheless, the value of work
at a specific time and place is absolute, governed by supply and demand,
and related to the value of all other work. The aim of job evaluation is
not to create a rate, but to discover what that rate is at that time and in
that place. Another aim of job evaluation is to supply bases for wage
negotiations founded on facts rather than on any vague ideas. Wages
are always under pressure of one kind or another and some wages are
influenced more than the others by such pressures -resulting in anomalies

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 in rates of pay. It is the function of job evaluation to reveal these
anomalies, rather than create them. When job evaluation is used in the
design of a wage structure, it helps in rationalising or simplifying the
system by reducing number of separat e and different rates. The
technique of job evaluation can also be used to determine not only what
the job is worth but also the value of each of the aspects such as the
skill and responsibility levels. Such information could be useful for
devising measure for improving labour productivity
Assumptions in Job Evaluation
Job evaluation is based on certain basic postulat es. It assumes
the following:

a) The work must have some intrinsic worth when judged against certain
criteria, but whatever this worth may be it will not necessarily be the same
as the wage. Implicit in this assumption is that these criteria can be
identified, specified and quantified. These criteria are in terms of the
human characteristics or qualities that are required to do the work
satisfactorily.
b) It is logical to pay the most for jobs which contribute most to attaining the
organisational objective(s).
c) The enterprise goals are better served and furthered by installing and
maintaining a job-cum-pay structure based on relative job worth.

d) People ‘feel fair’ if two men at the opposite ends of the conveyor belt
(one putting on the raw material and the other unloading the finished
article) get the same pay. Hence wages must be based on relative worth
of job. The ‘relative worth of jobs’ is not easy to gauge. By far, the most
important element in job price is the content factor. The content factor
consists of duties and responsibilities of the post, the difficulty level (s)
encountered by the incumbents, demands that are made by the post on
job holder in terms of mental, intellectual, physical and environmental

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 requirement for discharge of the duties attached to the post. These
obviously are central points related to the post and, hence, are basic to
the determination of the base rate for the job. Pay or salary structure
may thus be seen to consist of the following:
 The job rate, which is relat ed to the importance of the job, the
responsibilities involved in it, skill levels and pattern of experience
needed for adequate job performance, and the mental and physical
demands made on the job incumbent.
 Special or personal allowances connected with long service, skill scarcity,
and compensation for personal or social inconvenience.
 Fringe benefits, holidays with pay, pensions, life insurance, car, etc.
 Payments associated with reward according to performance (payment by
result scheme, merit rating or profit sharing schemes, share of production
plan, etc.)
11.4 JOB EVALUATION PROCESS
Job evaluation plans have been in use for approximately 75 years in the
public and private sectors. There are many variations to the design a job
evaluation plan. However, they all basically follow the same approach,
which is to value each job in a defined group of jobs based on a common
set of generic factors. The first step is to set of decisions that an
organization is required to make when installing a job evaluation plan is
to determine which jobs in the organization will be covered by the plan
and what factors will be used in the job evaluation process. Table 11.1
lists factors that are frequently used in job evaluation plans. The factors
are selected depending upon the type of jobs to be evaluated.

The second step in the job evaluation process is to collect information

about each job to be evaluated. This can be done using a job analysis

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 questionnaire, job descriptions, observation and int erviews with
employees and supervisors.

Step three in the process is to systematically rate each job based on the
job evaluation factors selected. The points assigned for each of the factors
are totalled for each job. Table 11.2 illustrates how the factors are
subdivided by degrees. The degrees define the extent that the factor is
found in the job. Table 11.3 illustrates the evaluation of a job.

The forth step is to select the benchmark jobs from the jobs that have
been evaluated. The benchmark jobs are those jobs commonly found
in most organizations and are typically included in salary surveys. The
benchmark jobs connect the internal pay structure with the external
labour market.
A technique to visualize the relationship between the internal structure
and the market is to plot each of the benchmark jobs using the
benchmark’s total job evaluation points as the X axis and the average
market rate as the Y axis. A line of best fit can be developed from the
plot. This line can be used as a guide to determine the number of grades,
the midpoints for each pay grade, and which jobs should be grouped in
the same grade.

Table 11.1 : Examples of Job Evaluation Factors

Skill : Education, Experience, Communication

Efforts: Mental Effort, Problem Solving, Concentration and Complexity

Responsibility: Financial Responsibility, ,Supervision, Freedom to Act,

Decision-making, Contacts with others and Operational Latitude

Working Conditions: Mental Demand, Physical Effort, Visual Demand

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 Table11.2: Point Value of Each Factor
Degrees
Factors 1 2 3 4
Education 15 30 45 60
Experience 10 20 30 40
Problem Solving 20 40 60 80
Impact 18 36 54 72
Physical Effort 5 10 15 20
Table 11.3 Evaluation of a Job
Job Title Education Experience Problem Impact Physical Total
Solving Effort
Field
Assistant 30 20 20 36 15 121

11.5 JOB EVALUATION TECHNIQUES/METHODS

The next step in the job evaluation process is to select or design a
technique of evaluating jobs. Four basic methods have traditionally been
mentioned. These are ranking, classification, factor comparison, and
the point plan methods. These four basic methods are pure types. In
practice there are numerous combinations. Also, there are many ready-
made plans as well as numerous adaptations of these plans to specific
organisation needs.

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 Types of Job Evaluation Methods

(Non
Non-Analytical Methods Analytical Methods
Analytical (Quantitative)
Methods
Quantitative)

Ran kin g C lassificatio n Paired Internal Factor Point

Method Method Comparison Benchmarking Com parison Method
Ranking Method

a) Ranking Method :
Perhaps the simplest method of job evaluation is the ranking method.
According to this method, jobs are arranged from highest to lowest, in
order of their value or merit to the organization. Jobs also can be arranged
according to the relative difficulty in performing them. The jobs are
examined as a whole rather than on the basis of important factors in the
job; and the job at the top of the list has the highest value and obviously
the job at the bottom of the list will have the lowest value.
Jobs are usually ranked in each department and then the department
rankings are combined to develop an organizational ranking. The following
table is a hypothetical illustration of ranking of jobs.

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 Table11.4 : Array of Jobs according to the Ranking Method

Rank Monthly salaries(Rs.)

1. Accountant 10,000
2. Accounts clerk 7,000
3. Purchase assistant 5,000
4. Machine-operator 4,000
5. Typist 3,500
6. Office boy 2,000

Advantages
 Easy to understand and administer.
 Best suited for a small organization
 Sets a better rate than the arbitrary rate based purely on judgment and
experience.
Disadvantages
 The classification is in general terms and only an overall assessment
is possible.
 In a complex industrial organisation, it is not possible to be familiar with
all the jobs and thus general descriptions will not enable correct assessment
of the relative importance of all the jobs.
 The grading is very much influenced by the existing wage rates.
 It does not indicate the degree of difference between jobs, but only
indicates that one job is more or less important than another one
b) Classification Method :
According to this method, a predetermined number of job groups or job
classes are established and jobs are assigned to these classifications.
This method places groups of jobs into job classes or job grades. Separate

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 classes may include office, clerical, managerial, personnel, etc. Following
is a brief description of such a classification in an office.
Developing a job classification system requires following steps:
 Obtain Job Information: Classification, like all other job evaluation
methods, must start with job analysis. A description is developed for
each job. Sometimes key jobs are analysed first and their descriptions
used in developing grade descriptions; then the other jobs are analyzed
and graded.
 Select Compensable Factors: Job descriptions are reviewed to distil
factors that distinguish jobs at different levels. This is often done by
selecting key jobs at various levels of the organisation, ranking them,
and seeking the factors that distinguish them. Obviously, the factors must
be acceptable to management and employees.
 Determine the Number of Classes: The number of classes selected
depends upon tradition, job diversity, and the promotion policies of
the organisation. Organisations tend to follow similar other organisations
in this decision. Those favouring more classes argue that more grades
mean more promotions and employees approve of this. Those favouring
fewer classes argue that fewer grades permit more management flexibility
and a simpler pay structure. Obviously, diversity in the work and
organisation size increases the need for more classes.
 Develop Class Descriptions: This refers to defining classes in sufficient
detail to permit raters to readily slot jobs. Usually this is done by
describing levels of compensable factors that apply to the jobs in a class.
Often, titles of benchmark jobs are used as examples of jobs that fall
into a grade. Writing grade descriptions is more difficult if one set of
classes is developed for the entire organisation, than if separate class
hierarchies are developed for different occupational groups. More
specific class description eases the task of slotting jobs, but also limits
the number of jobs that fit into a class. A committee is usually assigned
the writing of class descriptions. It is often useful to write the descriptions

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 of the two extreme grades first, then those in the middle.

 Classify Jobs: The committee charged with writing grade descriptions

is often also assigned the task of classifying jobs. This involves comparing
job descriptions with class descriptions. The result is a series of classes,
each containing a number of jobs that are similar to one another. The
jobs in each class are considered to be sufficiently similar to have
the same pay. Jobs in other classes are considered dissimilar enough to
have different pay. Classification systems have been used more in
government organisations than in private ones. Most are designed to
cover a wide range of jobs and are based on the assumption that jobs
will be relatively stable in content. Although classification tends to
produce more defensible and acceptable job structures than ranking,
it may substitute flexibility for precision. It is easy to understand and
communicate, but its results are non-quantitative. Following are some of
the advantages and disadvantages of this method:

Advantages
 Comparatively simple and easily administered.
 It takes into account all the factors that a job comprises.
 Since written job descriptions are used evaluation of jobs tend to be more
accurate than under ranking system.
Disadvantages
 Classification is in general terms and only an overall assessment is possible.
 It is very difficult to make comprehensive class specifications for
a complex organisation. The specifications tend to overlap and it is
difficult to decide which class a particular job belongs, and
 Placing jobs in classes is very much influenced by the existing wage rates
 It is difficult to write all-inclusive descriptions of a grade.
 When individual job descriptions and grade descriptions do not match

215
 well, the evaluators have the tendency to classify the job using their
subjective judgments.
 The method oversimplifies sharp differences between different jobs and
different grades.

Table 11.5: Example of Job Classification

Class I - Executives: Further classification under this category may be

Office manager, Deputy office manager, Office superintendent,
Departmental supervisor, etc.
Class II - Skilled workers: Under this category may come the Purchasing
assistant, Cashier, Receipts clerk, etc.
Class III - Semiskilled workers: Under this category may come
Stenotypists, Machine-operators, Switchboard operators, etc.
Class IV - Semiskilled workers: This category comprises Daftaris, File
clerks, Office boys, etc.

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c) Paired comparison ranking :
Paired comparison ranking is a statistical technique used to provide a
more sophisticated method of whole-job ranking. It is based on the
assumption that it is always easier to compare one job with another than
to consider a number of jobs and attempt to build up a rank order by
multiple comparisons. The technique requires the comparison of each
job as a whole, separately, with every other job. If a job is considered
to be of a higher value than the one with which it is being compared it
receives two points; if it is thought to be equally important, it receives
one point; if it is regarded as less important, no points are awarded. The
scores are added for each job and a rank order is obtained.

The advantage of paired comparison ranking over normal ranking is

that it is easier to compare one job with another rather than having
to make multiple comparisons. But it cannot overcome the fundamental

217
 objections to any form of whole-job ranking – that no defined standards
for judging relative worth are provided and it is not an acceptable method
of assessing equal value or comparable worth. There is also a limit to the
number of jobs that can be compared using this method – to evaluate 50
jobs requires 1,225 comparisons. Paired comparisons are occasionally
used analytically to compare jobs on a factor by factor basis.

d) Internal benchmarking :

Internal benchmarking means comparing the job under review with any
internal job that is believed to be properly graded and paid (an internal
benchmark) and placing the job under consideration into the same grade
as that job. It is what people often do intuitively when they are deciding
on the value of jobs, although it is not usually dignified in job evaluation
circles as a formal method of job evaluation. The comparison is made on
a whole-job basis without analysing the jobs factor by factor. It can be
classified as a formal method if there are specific procedures for
preparing and setting out role profiles and for comparing profiles for the
role to be evaluated with standard benchmark role profiles.

e) Factor Comparison Method :

A more systematic and scientific method of job evaluation is the factor

comparison method. Though it is the most complex method of all, it is
consistent and appreciable. Under this method, instead of ranking
complete jobs, each job is ranked according to a series of factors. These
factors include mental effort, physical effort, skill needed, supervisory
responsibility, working conditions and other relevant factors (for
instance, know-how, problem solving abilities, accountability, etc.). Pay
will be assigned in this method by comparing the weights of the factors
required for each job, i.e., the present wages paid for key jobs may be
divided among the factors weighed by importance (the most important
factor, for instance, mental effort, receives the highest weight). In other
words, wages are assigned to the job in comparison to its ranking on

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 each job factor. The steps involved in factor comparison method may be
briefly stated thus:

 Select key jobs (say 15 to 20), representing wage/salary levels across

the organization. The selected jobs must represent as many departments
as possible.
 Find the factors in terms of which the jobs are evaluated (such as skill,
mental effort, responsibility, physical effort, working conditions, etc.).
 Rank the selected jobs under each factor (by each and every member of
the job evaluation committee) independently.
 Assign money value to each factor and determine the wage rates for
each key job.
 The wage rate for a job is apportioned along the identified factors.
 All other jobs are compared with the list of key jobs and wage rates are
determined.
Advantages
 Analytical and objective in nature

 Reliable and valid as each job is compared with all other jobs in terms of
key factors.
 Money values are assigned in a fair way based on an agreed rank order
fixed by the job evaluation committee.
 Flexible as there is no upper limitation on the rating of a factor.
Disadvantages

 Difficult to understand, explain and operate.

 Its use of the same criteria to assess all jobs is questionable as jobs differ
across and within organizations.

 Time consuming and costly.

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f) Point Method

This method is widely used currently. Here, jobs are expressed in terms
of key factors. Points are assigned to each factor after prioritizing each
factor in the order of importance. The points are summed up to determine
the wage rate for the job. Jobs with similar point totals are placed in
similar pay grades. The procedure involved may be explained thus:

1. Select key jobs. Identify the factors common to all the identified jobs
such as skill, effort, responsibility, etc.

2. Divide each major factor into a number of sub factors. Each sub factor
is defined and expressed clearly in the order of importance, preferably
along a scale. The most frequent factors employed in point systems are:

3. Skill (key factor): Education and training required, Breadth/depth of

experience required, Social skills required, Problem-solving skills, Degree
of discretion/use of judgment, Creative thinking.

4. Responsibility/Accountability: Breadth of responsibility, Specialized

responsibility, Complexity of the work, Degree of freedom to act, Number
and nature of subordinate staff, Extent of accountability for equipment/
plant, Extent of accountability for product/materials;

5. Effort: Mental demands of a job, Physical demands of a job, Degree of

potential stress.

6. The educational requirements (sub factor) under the skill (key factor)
may be expressed thus in the order of importance.

7. Find the maximum number of points assigned to each job (after adding
up the point values of all sub-factors of such a job). This would help in
finding the relative worth of a job. For instance, the maximum points
assigned to an officer’s job in a bank come to 540. The manager’s job,
after adding up key factors + sub factors’ points, may be getting a point
value of, say 650 from the job evaluation committee. This job is now
priced at a higher level.
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 8. Once the worth of a job in terms of total points is expressed, the points
are converted into money values keeping in view the hourly/daily wage
rates. A wage survey, usually, is undertaken to collect wage rates of certain
key jobs in the organization. Let’s explain this:
Table 11.6: Conversion of Job Grade Points into Money Value
Point range Daily wage rate (Rs) Job grades of key bank officials

500-600 300-400 1. Junior accountant

600-700 400-500 2. Accountant
700-800 500-600 3. Manager I Scale
800-900 600-700 4. Manager II Scale
900-1,000 700-800 5. Manager III Scale

Advantages

 The methodology underlying the approach contributes to a minimum of

rating error.
 The graphic and descriptive types of rating scales used have been accepted
as most reliable and valid. Agreement among rates is usually quite close
 Compensable factors are not limited to any particular number. These
factors, which the parties decide as important can be used.
 Job classes, which are the aim of all job evaluation systems, are easily set
up. Job classes are simply determined in terms of arbitrary point ranges or
on agreed point range.
Disadvantages:
According to Decenzo and Robbins, “the key criteria must be carefully
and clearly identified, degrees of factors have to be agreed upon in terms
that mean the same to all rates, the weight of each criterion has to be
established and point values must be assigned to degrees”. This may be
too taxing, especially while evaluating managerial jobs where the nature
of work (varied, complex, novel) is such that it cannot be expressed in

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 quantifiable numbers. This method has following disadvantages
 It is difficult to develop a point rating scheme. Defining factors and their
degrees in such a fashion that all the raters will have the same meaning
needs considerable amount of skill.
 Assigning proper weightage to each factor and then assigning point values
to each degree without being unfair to either easy or difficult jobs, requires
careful and detailed study.
 The point factor system is difficult to explain. The concept of factors,
degrees relative to weights and points and relating points to money value,
cannot be easily interpreted to employees. If the workers do not understand
the system clearly, it may have adverse effect.
 Point rating scheme is certainly a time consuming process. Collecting job
descriptions, defining degrees and factors, allocating degrees to each factor
of each job, co-relating them with points and then ultimately with money
value unanimously by evaluation committee is a long process. Considerable
clerical work is also involved in preparing the job descriptions, final table
of jobs evaluated, degrees assigned and points scored.

Computerized Job Evaluation :

Using quantitative job evaluation methods such as the point method can be time-
consuming. Accumulating the information about “how much” of each compensable
factor the job contains is a tedious process. The evaluation committees must debate
the level of each compensable factor in each job. They then write down their
consensus judgments and compute each job’s point values or rankings.

Computer-aided job evaluation streamlines this process. Most of these

computerized systems have two main components.” There is, first, a structured
questionnaire.This contains items such as “enter total number of employees who
report to this position” Second, such systems may use statistical models. These
allow the computer program to price jobs more or less automatically, by assigning
points.

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11.6 SUMMARY
The job evaluation is a set of systematic procedures to determine the
relative worth of jobs within the organisations. Job evaluation is the process of
analysing and appraising the content of jobs, set in the family of other jobs, so
as to put them in a suitably evolved rank order which can then be utilised for
installation of an acceptable wage structure in an organisation. The primary
objective of job evaluation is to find out the value of work, but this value which
varies from time to time and from place to place under the influence of certain
economic pressures. Another aim of job evaluation is to supply bases for wage
negotiations founded on facts rather than on any vague ideas. The technique of
job evaluation can also be used to determine not only what the job is worth but
also the value of each of the aspects such as the skills and responsibility levels.
The next step in the job evaluation process is to select or design a method
of evaluating jobs. Four basic methods have traditionally been mentioned. These
are: ranking, classification, factor comparison, and the point plan methods.
Depending on its needs and ethos, an organisation to develop a method that
may combine the features of two or more than two methods, chosen method
should secure t he sat isfact ion of all concerned, namely management ,
the employees and the unions.

It could be claimed that every time a decision is made on what a job

should be paid a form of job evaluation is needed. Job evaluation is therefore
unavoidable, but it should not be an intuitive, subjective and potentially biased
process. The aim is to develop an appropriate scheme that functions analytically,
fairly, systematically, consistently, transparently and, so far as possible,
objectively, without being bureaucratic, inflexible or resource-intensive.

11.7 GLOSSARY
 Analytical: A method of job evaluation which involves assessing the worth
of a job by dividing it into factors.

 Factors: The main elements or characteristics of a range of jobs which

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 can be defined and assessed. Factors are divided into levels.

 Factor levels: A set of agreed criteria to allow the factor to be broken

down into elements.

 Factor plan: The combined number of factors against which jobs will be
evaluated.

 Job analyst: A person appointed to list the various tasks and requirements
of a job and to prepare job descriptions in a consistent manner and format.

 Job Classification: A hierarchical structure of jobs, usually arranged into

classes or pay grades according to some form of job evaluation.

 Job Description: A document that outlines the most important features of the
job including the general nature of the work performed, key responsibilities,
and employee characteristics (e.g., skills, experience, education, etc.) required
to perform the job.

8. Job Evaluation: A formal process to determine the relative value to be

placed on various jobs within the organization. The end result of job
evaluation consists of an assignment of jobs to a hierarchy of grades.

9. Job Family: Jobs involving work of the same nature, but requiring different
skill and responsibility levels. For example, Accountant is a job family;
Accountant III is a job (skill/responsibility level) within that family.

10. Job Grade: One of the classes, levels, or groups into which jobs of the
same or similar value are grouped for compensation purposes. Usually, all
jobs in a grade have the same pay range: maximum, minimum, and midpoint.

11. Job Title: A label for a job that uniquely identifies it.

12. Non-analytical: A method of job evaluation which involves assessing a

job as a whole without considering factors separately.

13. Rank order: The hierarchical relationship of jobs to each other.

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14. Salary: Compensation paid by the week, month, or year (rather than
per hour). Generally applies to non-production, non-routine or supervisory
jobs that are exempt from the provisions of the FLSA, but some non-
exempt jobs are salaried as well.

15. Weighting: The process of differentiating between factors to reflect their

importance relative to other factors.

11.8 SELF ASSESSMENT QUESTIONS

Q1. What do you mean by Job Evaluation? Discuss in detail the methods of Job
Evaluation.

Q2. Explain the recent developments in job evaluation.

Q3. What are the assumptions of job evaluation?

11.9 LESSON END EXERCISE

Q1. Briefly explain, what are the job evaluation methods being followed in
your organisation or any organisation you are familiar with. Give reasons
for using these methods.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q2. An individual hired for a position finds out that the work he was asked
to do was not the work he was hired to do. Is it possible?

_________________________________________________________

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 _________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q3. What is the process of describing & recording aspects of jobs &
specifying the skills & other requirements necessary to perform the job.

(a) Job Specification

(b) Job Description

(c) Job Analysis

(d) Job Evaluation

11.10 SUGGESTED READINGS
 Bradley, Kat herine, (1979), Job Evaluat ion: Theory & Practice,
Northants. British Institute of Management.

 Dessler, Gary (2000), Human Resource Management (8th Ed), New

Delhi: Pearson Education.

 Elizur, Dove. (1987), Systematic Job Evaluation and Comparative Worth,

Hemspshire.
 Job evaluation: considerat ions and risks, available at : ht t p://
www.acas.org.uk/media/pdf/9/t/job-evaluation-considerations-risks-
accessible-version-July-2011.

 Michael Armstrong and Angela Baron(2002): Job Evaluation Hand

Book,CIPD London

 Thomas, H. (1988), Fair Pay: The Managerial Challenge of Comparable

Job Worth and Job evaluation, London Jossey-Bass.

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 Thomson, George, F. (1980), Job Evaluation: Objectives and Methods,
London Institute of Personnel Management.

 Trieman, Donald, J. (1980), Job Evaluation: Analytical Review, New

York, National Academy of Sciences.

 Walker J. Morris,(1973), Principles and Practice of Job evaluation,

London, Heinemann Halley Court

********

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Lesson No.12 Unit-III
Semester-II MCOMC253

WAGE & SALARY ADMINISTRATION

STRUCTURE

12.1 Introduction

12.2 Objectives

12.3 Meaning of Wages and Salary, Wage Concepts

12.4 Objectives wage and salary administration

12.5 Principles of wage and salary administration

12.6 Factors affecting Wage and Salary structure

12.7 Wage Determination Process

12.8 Types of Wages, Theories of Wages

12.9 Summary

12.10 Glossary

12.11 Self Assessment Questions

12.12 Suggested Readings

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12.1 INTRODUCTION
As money is the prime need for human beings to meet their basic needs, everyone
tries to earn as much money as possible A clerk earning less than a driver may have a
vague grievance, but when he earns less than another clerk of comparable qualifications
and experience, he will show his unhappiness more bitterly. This shows that people
have the tendency to compare themselves with others who are in a similar profession
and/or with similar qualifications. In India the question of wages assumes paramount
importance because of acute poverty, large scale unemployment and a high population.
No fixed norms and means are followed in fixing wages and salaries, so a lot of ad-
hocism and expediencies are found in fixing wages. The compensation has to be viewed
from economic, psychological, legal and growth points of view.

12.2 OBJECTIVES
After going through this lesson, you will be able to :

(i) differentiate between different concepts regarding wages and salary

(ii) It will also enhance their knowledge about factors affecting salary and
wages administration as well as the process of wages and salary
administration.

12.3 MEANING OF WAGE AND SALARY ADMINISTRATION,

WAGE CONCEPTS
Wage and Salary Administration is the group of activities involved in the
development, implementation and maintenance of a pay system It can also be
called the ongoing process of managing a wage and salary structure.

According to D.S. Beach “Wage and salary administration refers to

the establishment and implementation of sound policies and practices for
employee compensation. It includes such areas as job evaluation, surveys of
wage and salaries, analysis of relevant organizational problems, development
and maintenance of wage structure, establishing rules for administrating
wages, wage payment incentives, profit sharing, wage changes and adjustments,
supplementary payments, control of compensation costs and other related items.”

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 Indian Labour Organization (ILO) defined the term wage as “the
remuneration paid by the employer for the services of hourly, daily, weekly
and fortnightly employees, whereas salary is defined as the remuneration
paid to the clerical and managerial personnel employed on monthly or
annual basis”

 Wage: It is paid to blue-collar workers-paid daily, weekly or monthly-

paid for the jobs, which can, to some extent, be measured in terms of
money’s worth

 Salary: Paid to white collar workers-paid monthly-paid to employees

whose contribution cannot be easily measured

 Compensation: a comparative term- includes wage and all other

allowances and benefits like allowances, leave facilities, housing, travel
and non-cost such as recognition, privileges and symbols of status

WAGE CONCEPTS

While evolving wage policy, three concepts of wages are generally

considered namely : (i) Minimum Wage, (ii) Living Wages and (iii) Fair Wages.
These capacity of employees to pay and the broadly based on the needs of the
workers, general economic conditions prevailing in a country.

(i) Minimum Wages: Minimum wage in a count ry is fixed by t he

government in consultation with business organisations and trade unions.
The law relating to the minimum wage either states definitely the wage
considered to the minimum or the determination of the wage left to an
administrative commission which from time to time determines the
minimum wage according to the varying economic conditions, e.g.,
variation in the price level should be compensated with the variation in
the wage rates because the prime aim of the minimum wage low is just to
cover “minimum living cost.” The authority entrusted with the task of
fixing of minimum wage should consider such factors as local economic
conditions, transportation cost and the size of the units in the industry in

230
 fixing minimum wages.The Government of India passed a Minimum Wage
Act in 1948 under which farm labourers were to be paid a minimum
wage between 66 paisa and Rs. 1.50 per day, keeping in view local
costs and standards of living. Since conditions in various parts of the
country were different, the law allowed different rates of wages to be
fixed in a poor country such as India. In practice, it was very difficult to
enforce minimum wages effectively. Fortunately, the recent inflationary
situation had pushed up the rural wages much above the minimum wages
fixed by law.

Minimum wages legislation is supposed to have the following benefits:

 These laws prevent unscrupulous employers from exploiting ignorant

persons who possess very little bargaining power.
 These abolish the competition of the lower strata of workers with the upper
grades and tend to prevent depressing of wages.
 The productivity of industry is increased by foreign employers to use the
most efficient production methods and the most modern equipment, in order
lo enable employees to earn the living wage. But at the same time, the
workers are stimulated to increase his efficiency in order to hold his job.
 Employers with high standards are protected against underselling by
competitors with low standards.
But some critics of the minimum wage assert that it is impossible for a
group of men to control the wages of labour by law because wages depend
upon the supply and demand of labour. Minimum wages are a heavy burden
to the society because persons unable to earn a living wage will be
unemployed whereas earning of small wage is preferred to idleness or
living on charity. However, basically, minimum wage laws are not wrong if
they are wisely framed and applied. It is perfectly feasible to fix a minimum
wage and forbid employment below that figure. Some industries that cannot
profitably pay the wages fixed may be forced to wind up because of the
financial burden. But, then, what is the use of an industry if it cannot even

231
 pay a living wages to its workers and it is better to dispense with it.
Industries that can pay a living wage should, if necessary be forced to do
so. The difficulties to be encountered are rather those of practical operation.
The administration of the modern industry is very tedious due to the
complexity of the wage system. However, if the wage limit is fixed at the
very lowest minimum, the risk is slight.
(ii) Living Wages: Living wages has been defined differently by different
people in different countries. The best definition is given by Justice Higgins
which reads “Living wage is a wage sufficient to ensure the workman food,
shelter, clothing, frugal comfort, provision for evil days etc. as regard for
the skill of an artisan, if he is one”. According to Fair Wages Committee
Report: “The living wage should enable the male earner to provide himself
and his family not merely the basic essentials of food, clothing and shelter
but a measure of frugal comfort including education for the children,
protection against ill-health, requirement of essential social needs and
measures of insurance against old age.” Thus living wages means the
provision for the bare necessities plus certain amenities considered
necessary for the wellbeing of the workers in terms of his social status.
Article 43 of the Constitution of India states that the state shall endeavour
to secure by suitable legislation or economic organisation or in any other
way to all workers a living wage, conditions of work ensuring a decent
standard of life and full enjoyment of pleasure and social and cultural
opportunities. Thus, Government of India has adopted as one of the
directives of the principle of slate policy to ensure living wages.
(iii) Fair Wages: A fair wage is something more than the minimum wages. Fair
wage is a mean between the living wage and the minimum wage. While the
lower limit of the fair wage must obviously be the minimum wage, the upper
limit is the capacity of the industry to pay fair wage compares reasonably
with the average payment of similar task in other trades or occupations
requiring the same amount of ability. Fair wage depends on the present
economic position as well as on its future prospects. Thus the fair wages
depends upon the following factors:

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  Minimum Wages
 Capacity of the industry to pay
 Prevailing rates of wages in the same or similar occupations in the same
or
 Neighbouring localities
 Productivity of labour
 Level of national income and its distribution.
 The place of the industry in the economy of the country.
12.4 OBJECTIVES OF WAGE AND SALARY ADMINISTRATION
A sound plan of wage and salary administration seeks to achieve the following
objectives:
 To establish a fair and equitable compensation offering similar pay for
similar work.
 To attract competent and qualified personnel.
 To retain the present employees by keeping wage levels in tune with
competitive units.
 To keep labour and administrative costs in line with the ability of the
organization to pay.
 To improve motivation and morale of employees and to improve union
management relations.
 To project a good image of the company and to comply with legal needs
relating to wages and salaries.
 To establish job sequences and lines of promotion wherever applicable.
 To minimize the chances of favouritism while assigning the wage rates.
12.5 PRINCIPLES OF WAGE AND SALARY ADMINISTRATION
The following principles should be followed for an effective wage and
salary administration:

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1. Wage policy should be developed keeping in view the interests of all
concerned parties viz., employer, employees, the consumers and the society.
2. Wage and salary plans should be sufficiently flexible or responsive to
changes in internal and external conditions of the organization.
3. Efforts should be made to ensure that differences in pay for jobs are
based on variations in job requirements such as skill, responsibility, efforts
and mental and physical requirements.

4. Wage and salary administration plans must always be consistent with

overall organizational plans and programmes.
5. Wage and Salary administration plans must always be in conformity with
the social and economic objectives of the country like attainment of
equality in income distribution and controlling inflation, etc.
6. These plans and programmes should be responsive to the changing local
and national conditions.
7. Wage and salary plans should expedite and simplify administrative
process.
8. Workers should be associated, as far as possible, in formulation and
implementation of wage policy.
9. An adequate data base and a proper organizational set up should be
developed for compensation determination and administration.
10. The general level of wages and salaries should be reasonably in line with
that prevailing in the labour market.
11. There should be a clearly established procedure for hearing and adjusting
wage complaints. This may be integrated with the regular grievance
procedure, if it exists.
12. The workers should receive a guaranteed minimum wage to protect
them against conditions beyond their control.
13. Prompt and correct payments to the employees should be ensured and

234
 arrears of payment should not accumulate.
14. The wage and salary payments must fulfil a wide variety of human needs
including the need for self actualization.
15. Wage policy and programme should be reviewed and revised periodically
in conformity with changing needs. For revision of wages, a wage
committee should also be preferred to the individual judgement however
unbiased of a manager.
12.6 FACTORS AFFECTING WAGE AND SALARY STRUCTURE
The wages and salary is an important factor affecting the labour
management relations. Workers are very much concerned with the rates
of wages as their standard of living is linked to the amount of remuneration
they get. Managements, however, do not come forward to pay higher
wages because cost of production goes up and profits decrease to that
extent. A number of factors, thus, influence the remuneration payable to
the employees. These factors can be categorized into (a) External Factors
and (b) Internal Factors, Psychological & social factors, Government
legislation, Trade unions bargaining power, Cost of living, Demand & Supply

Economy

Trade unions
Labour Market bargaining power
Wage policy
of the
organisation
fac ee
s
tor
ate loy

Ability
rel mp

Cost of Living Remuneration to Pay

d
E

Government
Mgt. legislation
Job
Technological Strategy Requirements
Development
Psychological &
Prevailing Social factor
Market Rates

Figure 12.1

235
a) External factors influencing Wage and Salary Administration

1. Labour Market : The labour market conditions or demand and supply

forces operate at the national and local levels and determine organizational
wage structure. When the demand of a particular type of labour is more
and supply is less then the wages will be more. On the other hand, if
supply of labour is more and demand on the other hand is less then persons
will be available at lower wage rates also. In the words of Mescon, “the
supply and demand compensation criterion is very closely related to the
prevailing pay, comparable wage and on-going wage concepts since, in
essence all of these remuneration standards are determined by immediate
market forces and factors.”
2. Cost of living: The wage rates are directly influenced by cost of living
of a place. The workers will accept a wage which may ensure them a
minimum standard of living. Wages will also be adjusted according to
price index number. The increase in price index will erode the purchasing
power of workers and they will demand higher wages. When the prices
are stable then frequent wage increases may not be undertaken.
3. Trade unions bargaining power: The wage rates are also influenced
by the bargaining power of trade unions. Stronger the trade union higher
well be the wage rates. The strength of a trade union is judged by its
membership, financial position and type of leadership. Union’s last
weapon is strikes which may also be used for getting wage increases. If
the workers are disorganised and disunited then employers will be
successful in offering low wages.
  Government legislation: To improve the working conditions of workers,
government may pass legislation for fixing minimum wages of workers.
This may ensure them a minimum level of living. In under developed
countries bargaining power of labour is weak and employers try to exploit
workers by paying them low wages. In India, Minimum Wages Act, 1948
was passed to empower government to fix minimum wages of workers.

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 5. Psychological and social factors: Psycholo gical t he level of
compensation is perceived as a measure of success in life. Management
should take into consideration the psychological needs of the employees
while fixing the wage rates so that the employees take pride in their work.
Sociologically and ethically, the employees want that the wage system
should be equitable, just and fair. These factors should also be taken
into consideration while devising a wage programme.
6. Economy: Economy also has its impact on wage and salary fixation.
While it may be possible for some organizations to thrive in a recession,
there is no doubt that economy affects remuneration decisions. A
depressed economy will probably increase the labour supply. This, in
turn, should lower the going wage rate.
7. Technological development: With the rapid growth of industries, there
is a shortage of skilled resources. The technological developments have
been affecting skills levels at faster rates. Thus, the wage rates of skilled
employees constantly change and an organization has to keep its level up-
to the mark to suit the market needs.
8. Prevailing market rates: No enterprise can ignore prevailing or
comparative wage rates. The wage rates paid in the industry or other
concerns at the same place will form a base for fixing wage rates.
If a concern pays low rates then workers leave their jobs whenever they
get a job somewhere else. It will not be possible to retain good workers
for long.
b) Internal factors influencing Wage and Salary Administration
1. Wage policy of the organisation: The organisation may have a policy to
fix the wages externally competitive and internally compatible, i.e. they
pay according to the competition and maintain equity among various
employees in the company. Sometimes the company may have a wage
policy that it should be above the industry average or below it or
comparable to it

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2. Ability to pay: The ability to pay of an enterprise will influence wage
rates to be paid. If the concern is running into losses then it may not be
able to pay higher wage rate. A profitable concern may pay more to attract
good workers. During the period of prosperity, workers are paid higher
wages because management wants to share the profits with labour.
3. Job requirements: Basic wages depend (Simple task by unskilled workers
Complex task – by few people – High pay) largely on the difficulty level,
and physical and mental effort required in a particular job. The relative
worth of a job can be estimated through job evaluation. Simple, routine
tasks that can be done by many people with minimum skills receive
relatively low pay. On the other hand, complex, challenging tasks that can
be done by few people with high skill levels generally receive high pay.
4 Management strategy: The overall strategy which a company pursues
should determine to remuneration to its employees. Where the strategy
of the organization is to achieve rapid growth, remuneration should be
higher than what competitors pay. Where the strategy is to maintain and
protect current earnings, because of the declining fortunes of the
company, remuneration level Higher than competitors needs to be average
or even below average.
5 Employee Related Factors: Following employees related factors interact
to determine his/ her remuneration:
(i) Performance or productivity: It is always rewarded with a pay
increase. Rewarding performance motivates the employees to do better
in future.
(ii) Seniority: Unions view seniority as the most objective criteria for
pay increases whereas management prefer performance to affect pay
increases.
(iii) Experience: Makes an employee gain valuable insights and is generally
rewarded.
(iv) Potential: Organization do pay some employees based on their

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 potential. Young managers are paid more because of their potential to
perform even if they are short of experience.

12.7 WAGE DETERMINATION PROCESS

Steps involved in determining wage and salary rates are as follows:
a) Job Analysis: A job analysis describes the duties, responsibilities,
working conditions and interrelationships between the job as it is and
the other jobs with which it is associated. Job descriptions are crucial in
designing pay syst ems, for t hey help to identify import ant job
characteristics. They also help determine, define and weigh compensate
factors (factors for which an organization is willing to pay-skill,
experience, effort and working environment). After determining the job
specifications, the actual process of grading, rating or evaluating the job
occurs. A job is rated in order to determine its value in relation to all the
other jobs in the organization which are subject to evaluation. The next
step is that of providing the job with a price. This involves converting the
relative job values into specific monetary values or translating the job
classes into rate ranges.
b) Conduct the Salary Survey: Compensation or salary surveys play a
central role in pricing jobs. Virtually every employer, therefore, conduct
at least an informal survey. Employers use salary surveys in three ways (i)
Survey data are used to price bench mark jobs that anchor the employer’s
pay scale and around which the other jobs are slotted, based on their
relative worth to the firm (ii) Some Jobs (generally 20% or more) of an
employer’s position are usually priced directly in the market place (rather
than relative to the firm’s benchmark jobs), based on a formal or informal
survey of what competitive firms are paying for comparable jobs (iii)
Surveys also collect data on benefits like insurance, sick leave and vacations
to provide a basis for decisions regarding employee benefits.
Salary surveys can be formal or informal. Informal telephone surveys
are good for quickly checking on a relatively small number of easily
identified and quickly recognized jobs. Such as when a company’s HR

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 manager wants to confirm the salary at which to advertise a newly open
cashier ’s job. In formal surveys, most firms either use the results of
packaged surveys available from the research bodies, employer ’s
associations, government labour bureaus etc. or they participate in wage
surveys and receive copies of results or else they conduct their own.
These surveys may be carried out by mailed questionnaire, telephone,
or personal interviews with other managers and personnel agencies. Wage
and salary surveys provide many kinds of useful information about
differences in wage levels for particular kinds of occupations. This can
have a great influence on an organizations compensation policy.
c) Group Similar Jobs into Pay Grades: After the results of job analysis
and salary surveys have been received, the committee can turn to the
task of assigning pay rates to each job, but it will usually want to first
group jobs into pay grades. A pay grade is comprised of jobs of
approximately equal difficulty or importance as determined by job
evaluation. Pay grading is essential for pay purposes because instead of
having to deal with hundreds of pay rates, the committee might only have
to focus on say 8 or 12.
d) Price Each Pay Grade: The next step is to assign pay rates to pay
grades. Assigning pay rates to each pay grade is usually accomplished
with a wage curve. The wage curve depicts graphically the pay rates
currently being paid for jobs in each pay grade, relative to the points or
rankings assigned to each job or grade by the job evaluation. The purpose
of wage curve is to show the relationship between (i) the value of the job
as determined by one of the job evaluation methods and (ii) the current
average pay rates for the grades. If there is reason to believe that the
present pay rates are substantially out of step with the prevailing market
pay rates for those jobs, bench mark jobs within each grade are chosen
and priced via a salary survey. The new market based pay rates are then
plotted on the wage curve. The steps involved in pricing jobs with a
wage curve are:
Find the average pay for each pay grade, since each of the pay grades

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 consists of several jobs.
Plot the pay rates for each pay grade. Then fit a line, called a wage line
through the points just plotted. This can be done either free hand or by
using a statistical method.
Price the jobs. Wages along the wage line are the target wages or salary
rates for the jobs in each pay grade.
e) Fine-Tune Pay Rates: Fine tuning involves correcting out of line rates
and developing rate ranges described as under
 Developing Rate Ranges: Most employers do not pay just one rate
for all jobs in a particular pay grade. Instead, they develop rate ranges
for each grade so that there might be different levels and corresponding
pay rates within each pay grade. The rate range is usually built around
the wage line or curve. One alternative is to arbitrarily decide on a
maximum and minimum rate for each grade. As an alternative, some
employers allow the rate range for each grade to become wider for the
higher pay ranges reflecting the greater demands and performance
variability inherent in these more complex jobs. There are several benefits
of using rate ranges for each pay grade. Firstly, the employer can take a
more flexible stance with respect to the labor market. It becomes easier
to attract experienced, higher paid employees into a pay grade where
the starting salary for the lowest step may be too low to attract such
experienced personnel. Secondly, Rate ranges can also allow the
employer to provide for performance differences among employees within
the same grade or between those with different seniorities.
 Correcting out of Line Rates: The average current pay for a job may
be too high or too low relative to other jobs in the firm. If a rate falls well
below the line, a pay rise for that job may be required. If the rate falls well
above the wage line, pay cuts or a pay freeze may be required. Underpaid
employees should have their wages raided to the minimum of the rate range
for their pay grade, assuming the organization wants to retain those
employees and has the funds to do so. This can be done immediately or in

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 one or two steps.
f) Wage Administration Rules:
The development of rules of wage administration has to be done in the
next step. It is considered advisable in the interests of the concern and
the employees that the information about average salaries and ranges in
the salaries of group should be made known to the employees concerned;
for secrecy in this matter may create dissatisfaction and it may also vitiate
the potential motivating effects of disclosure. Finally, the employee is
appraised and the wages fixed for the grade he is found fit.

Job Analysis Wage Legislation

Wage Surveys &

Job Description Job Evaluation Relevant Wage Structure
& Specification Organisational
Problems

Rules of
Administration

Performance Differential Employee

Wage Payment
Standards Appraisal

Figure 12.2 : Wage and Salary Administration Process

12.8 TYPES OF WAGES, THEORIES OF WAGES

Determination of reasonable wages is a difficult task for the management
and so they should give adequate attention to this area. However, different types
of wage payment can be divided into three parts:

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 Time wage
 Piece wage
 Wage incentive plan
(1) Time wage: In this type the worker is given remuneration according to
time. This type of remuneration may be per hour, per day or per month
or per year. There exists no relationship between the quantum of work
and the wage. This type is in operation in all industries in India. This plan
is very simple to understand. The worker works after due thinking and
with convenience. However it encourages the tendency of prolonging or
delaying the work unnecessarily. Moreover, it is very difficult to measure
the productivity of the workers under this type of plan.
(2) Piece Rate System: In this type of plan, a worker gets remuneration
according to his output irrespective of the time he takes in finishing his
job. Here, the payment of remuneration is related to work and not to
time. Under this type, the workers are encouraged to earn more and
more. The more the output is, the more the remuneration is. The workers
are also at liberty for their job with interest and they need not be
supervised. However, this type of wage payment is not suitable for
commodities of artistic taste. Moreover, the quality of goods goes down.
(3) Wage incentive Plan: This type of wage payment is the combination of
two types the above referred. Efforts have been made here to obtain the
advantages of both these types while avoiding their disadvantages.
This includes:
a) Halsey Premium Scheme: Under this scheme if a worker gives an
output more than the fixed standard job, he is given about 33% to 50%
of the remuneration for that job as bonus. Here a standard of output is
fixed and a standard of time is also fixed for the completion of that job
before hand. If the job of fixed standard is completed with the standard
time fixed for the purpose, the worker gets his fixed wages. But, if he
completes the job before the fixed standard time and, thereby, saves

243
 some time, he gets a fixed percentage of his wages for the time so saved
as bonus.
b) Rowan Premium Scheme: This plan is an improvement upon Halsey
Plan. Under this plan, premium is that proportion of the wages for the
time taken which the time saved bears to the standard time. The credit
of this incentive premium method goes to Rowan of Scotland. The
worker is paid wages at normal rates for the duration he has worked
and is paid extra money in the form of premium on the basis of the time
he has saved. Under this scheme, the standard work and the standard
time both are fixed. The wages for the time saved will increase in the
same percentage that is equal to the proportion the time saved bears
to standard time. The premium for the time saved cannot be more than
the total standard wages. Thus, a worker cannot get cleverly wages
more than needed.

c) Taylor’s Plan: Taylor plan is based on wages per unit. In other words,
a worker is paid wages in accordance with his output. Higher price
rate is fixed for the workers who give production over and above the
standard workload fixed. The lower rate is fixed for the workers who
give production below the standard workload fixed.

d) Merrick Plan: This plan is somewhat a modified form of Taylor’s plan.

This plan offers three grade piece rates than the two offered in the
Taylor’s plan.
(i) First limit is for new workers and is very low.
(ii) Second limit is for workers with average efficiency.
(iii) Third limit is for very efficient workers.
e) Gantt Plan: This is also a modified form of Taylor plan. In it, wages are
fixed on the basis of time. On the other hand, the efficient workers are
given wages per unit. Thus, the workers who give more output get their
wages at enhanced rates.

244
f) Emerson Plan: This plan is a combination of Taylor, Merrick and Gantt
plans. However, a slight modification in these plans has been made
and different rates of bonus have been fixed under this plan. The amount
of bonus increases with the increase in efficiency. These percentages are
as under:
(i) 1% bonus on 67.5 efficiency.

(ii) 10% bonus on 90% efficiency.

(iii) 20% bonus on 100% efficiency.

(iv) 20% + 30% extra on bonus on efficiency more than 100%.

g) Profit-Sharing Scheme: Under this scheme, workers are given a certain

percentage of profits as bonus. But it suffers from one defect. Suppose,
there is no profit in a particular year, the workers will also not be given
the bonus for that very year. The workers think that they have been
deceived by the employers and therefore, clash with them on this very
issue. This assumes the form of worker-management unrest and has its
bad effect on the production. This scheme is undoubtedly a new and
better scheme. But, the trade unions misuse the scheme.

h) Scanlon Plan: Workers in a Scanlon Plan receive monthly or quarterly

bonuses that are directly tied t o improvements in efficiency. The
Scanlon Plan is the brainchild of the late Joseph N. Scanlon, who
devised a system in which the people who actually do t he work and
know it best , can have t he opportunity t o find ways to do it more
efficient ly, and to be rewarded if indeed more efficiency results.
Workers in a Scanlon Plan receive monthly or quarterly bonuses that
are direct ly t ied to improvement s in efficiency. To illust rate (a bit
simplist ically), t he normative cost of labour in a t ypical month t o
manufacture a product is $40,000. If suggestions from employees are
adopted that reduce the labour costs to $38,000, the bonus distributed
for one mont h is $2,000.

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THEORIES OF WAGES
Different methods of wage payment are prevalent in different industries
and in various countries. There may be payment by time or payment by results,
including payment at piece rates.

Wages are fixed mainly as a result of individual bargaining, collective

bargaining or by public or State regulation. How wages are determined has been
the subject of several theories of wages. The main elements in these theories may
be summed up as follows:

1. Subsistence Theory

This theory, also known as 'Iron Law of Wages," was propounded by

David Ricardo (1772-1823). This theory (1817) states that: "The labourers are
paid to enable them to subsist and perpetuate the race without increase or
diminution." The theory was based on the assumption that if the workers were
paid more than subsistence wage, their numbers would increase as they would
procreate more; and this would oring down the rate of wages. If the wages fall
below the subsistence level, the number of workers would decrease – as many
would die of hunger, malnutrition, disease, cold, etc. and many would not marry,
when that happened the wage rates would go up.

2. Wages Fund Theory

This theory was developed by Adam Smith (1723-1790). His basic

assumption was that wages are paid out of a pre-determined fund of wealth
which lay surplus with wealthy persons – as a result of savings. This fund could
be utilised for employing labourers for work. If the fund was large, wages would
be high; if it was small, wages would be reduced to the subsistence level. The
demand for labour and the wages that could be paid them were determined by
the size of the fund.

3. The Surplus Value Theory of Wages

This theory owes its development to Karl Marx (1818-1883). According

246
to this theory, the labour was an article of commerce, which could be purchased
on payment of 'subsistence price.' The price of any product was determined
by the labour time needed for producing it. The labourer was not paid in
proportion to the time spent on work, but much less, and the surplus went over,
to be utilised for paying other expenses.

4. Residual Claimant Theory

Francis A. Walker (1840-1897) propounded this theory. According to

him, there were four factors of production/business activity, viz., land, labour,
capital and entrepreneurship. Wages represent the amount of value created in
the production which remains after payment has been made for all these factors
of production. In other words, labour is the residual claimant.
5. Marginal Productivity Theory
This theory was developed by Phillips Henry Wicksteed (England) and
John Bates Clark (USA). According to this theory, wages are based upon an
enterprenuer's estimate of the value that will probably be produced by the last or
margincl worker. In other words, it. assumes that wages depend upon the demand
for, and supply of, labour. Consequently, workers are paid what they are
economically worth. The result is that the employer has a larger share in profit as
has not to pay to the non-marginal workers. As long as each additional worker
contributes more to the total value than the cost in wages, it pays the employer to
continue hiring; where this becomes uneconomic, the employer may resort to
superior technology.
6. The Bargaining Theory of Wages
John Davidson propounded this theory. Under this theory, wages are
determined by the relative bargaining power of workers or trade unions and of
employers. When a trade union is involved, basic wages, fringe benefits, job
differentials and individual differences tend to be determined by the relative strength
of the organisation and the trade union.

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7. BEHAVIOURAL THEORIES
Many behavioural scientists - notably industrial psychologists and
sociologists like Marsh and Simon, Robert Dubin, Eliot Jacques have presented
their views or wages and salaries, on the basis of research studies and action
programmes conducted by them. Briefly such theories are:
(i) The Employee's Acceptance of a Wage Level: This type of thinking
takes into consideration the factors which may induce an employee to stay on with
a company.
The size and prestige of the company, the power of the union, the wages and
benefits that the employee receives in proportion to the contribution made by him
- all have their impact.
(ii) The Internal Wage Structure: Social norms, traditions, customs prevalent
in the organisation and psychological pressures on the management, the prestige
attached to certain jobs in terms of social status, the need to maintain internal
consistency in wages at the. higher levels, the ratio of the maximum and minimum
wage differentials, and the norms of span of control, and demand for specialised
labour all affect the internal wage structure of an organisation.
(iii) Wage and Salaries and Motivators: Money often is looked upon as
means of fulfilling the most basic needs of man. Food, clothing, shelter, transportation,
insurance, pension plans, education and other physical maintenance and security
factors are made available through the purchasing power provide by monetary
income– wages and salaries. Merit increases, bonuses based on performance,
and other forms of monetary recognition for achievement are genuine motivators.
However, basic pay, cost of living increases, and other wage increase unrelated to
an individual’s own productivity typically may fall into maintenance category.

Wage Policy in India

According to section 3 of the Minimum wages Act 1948 “The Appropriate

Government” will fix minimum wages. The Appropriate Govt. can include local, state
and central Govt. This section sets the rate according to hours, days, months or any
other wage period may be prescribed.

248
 Wage policy refers to all systematic efforts of the government in relation to
national wage and salary system. It includes order, legislations, and so on to regulate
the levels or structures of wages and salaries with a view to achieving economic and
social objectives of the government. Specifically, the objectives of wage policy are:
1. To obtain for the workers a just share of the fruits of economic
development.
2. To set minimum wages for workers whose bargaining position
is weak.
3. To bring about a more efficient allocation and utilisation of human
resoures through wage and salary differentials.
4. To abolish malpractices and abuses in wage and salary payments.
The first step towards the evolution of a wage policy was the enactment
of the Payment of Wages Act. 1936. The main objective of the Act is to prohibit
any delay or withholding of wages legitimately due to the employees. The next
step was the passing of the Industrial Disputes Act 1947, authorising all the
state governments to set up industrial tribunals which would look into disputes
relating to remuneration. Another notable development that led to the evolution
of wage policy was the enactment of the Minium Wages Act, 1948. The purpose
of the Act is the fixation of minimum rates of wages to workers in sweated
industries such as woollen,carpet making, flour mills, tobacco manufacturing,
oil mills, plantations, qualfying, mica, agriculture, and the like. The Act was
amended several times to make it applicable to more and more industries. Then
came the Equal Remuneration Act, 1976, which prohibits discrimination in
matters relating to remuneration on the basis of religion, region or sex.
The Constitution of India committed the government to evolve a wage
policy. Successive five-year plans have also devoted necessary attention to
the need for a wage policy. Following the recommendations of the First and
Second Plans, the Government of India constituted wage boards for important
indust ries in the country. A wage board is a t ripart it e body comprising
representations from the government, owners, and employees. Technically
speaking, a wage board can only make recommendations, and wage policies

249
are normally implemented through persuasion.
In spite of legislat ions, t ribunals, and boards, disparities in wages
and salaries still persist.

12.9 SUMMARY
It may be noted that in India, the term ‘wage’ is applied in relation to
blue collar (factory workers) and ‘salary’ in relation to white collar employees.
The main objective of wage and salary administration is to establish and maintain
an equitable wage and salary system to obtain, retain, and motivate people of
required skill in an organisation. Wage determination process includes job
analysis, conduct of salary survey, group similar jobs into pay grades, price
each pay grade, fine-tune pay rates and wage administration rules. Types of
wage payment include time wage, piece wage and wage incentive plan. In order
to protect the interest of workers, the legislations enacted by the Government
of India are Payment of Wages Act, 1936; Minimum Wages Act, 1948; Payment
of Bonus Act, 1965.

12.10 GLOSSARY
 Differential Pay: Compensation added to an employee’s base salary as a
result of conditions of employment, such as a shift differential.

 Equal Pay: Payment of like wages to employees who are doing

substantially equal work, which requires substantially equal skill, effort,
and responsibility, and which is performed under similar working
conditions.

 Incentive Compensation: A reward that compensates an employee for high

performance or for achievement above and beyond the defined normal job
requirements.

 Salary: Paid to white collar workers-paid monthly-paid to employees whose

contribution cannot be easily measured

 Wage: It is paid to blue-collar workers-paid daily, weekly or monthly-paid

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 for the jobs, which can, to some extent, be measured in terms of money’s worth

 Wage And Salary Administration: Procedures used for planning and

administering organization-wide compensation programs for all levels of
employees.

12.11 SELF ASSESSMENT QUESTIONS

Q1. “Money is motivating factor” justify this statement in your comment.

Q2. Discuss the wages and salary admini9stration process.

Q3. Discuss various wage incentive plans. Which one is best and why?

12.12 LESSON END EXERCISE

Q1. Explain and differentiate among minimum wage, living wage and fair wage.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

Q2. What are the factors affecting wage and salary administration?

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q3. Discuss in detail the wage determination process.

_________________________________________________________

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 _________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q4. Explain the various wage incentive plans.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

12.13 SUGGESTED READINGS

 David, W. Belcher: Wages and Salary Administration, Prentice Hall.

 Lawrence, S. Aft: Wage and salary administration: a guide to job evaluation,

Reston Pub. Co., Indiana University.

 Rock, Milton L.: Handbook of wage and salary administration, Volume 1,

McGraw- Hill.

 Memoria, C.B. & Gankar, S.V.: Human Resource Management, Himalaya

Publication

 Michael V.P.: Human Resource Management and Human Relations,

Himalaya Publication

 Aswathappa, K: Human Resource Management, Tata McGraw Hill

**********

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Lesson No.13 HUMAN RESOURCE Unit-III
Semester-II MANAGEMENT MCOMC253
BROADBANDING
STRUCTURE

13.1 Introduction

13.2 Objectives

13.3 Concept of BroadBanding

13.4 Advantages of broadbanding

13.5 Disadvantages of broadbanding

13.6 Process of broadbanding

13.7 Summary

13.8 Glossary

13.9 Self Assessment Questions

13.10 Lesson End Exercise

13.11 Suggested Readings

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13.1 INTRODUCTION
Broad banding has been a recognized practice of corporate compensation
professionals since roughly 1990. Organizations that implemented broadband
structures sought to improve the administration of the salary program subsequent
to downsizing initiatives that created flatter organizations. In flat hierarchies, greater
emphasis tends to be placed on career development as opposed to job promotion.
Today, broad banding still refers to collapsing a company’s job-worth hierarchy
into fewer, wider salary ranges. This is done to manage pay delivery in a manner
that recognizes career growth in light of fewer promotional opportunities and
company pay practices that are closely tied to competitive levels.

13.2 OBJECTIVES
This lesson will help you to understand :
(i) provide you an insight into new system of managing the pay structure i.e.
broad banding
(ii) you shall also be able to enumerate its advantages and disadvantages
(ii) it will also highlight the process of broad banding
13.3 CONCEPT OF BROAD BANDING
Broad banding is the combination of a number of related job classifications
into a single pay bond, for which a Broad range of Compensation levels is allowed.
This approch gives management a wider pay range within which to pay employees.
Broad banding reduces the number of levels or layers within a company. This is the
best face saving way for an organisation to collapse Salary Ranges and Supporting
delayering. This flattens an organizational Structure and Reduces the hierarchy.
Broad banding is used by Payroll Departments in Human Resource
Management.

The basic advantage of broadbanding is that it injects greater flexibility

into employee compensation. Broadbanding is especially sensible where firms
flatten their hierachies and organise around self-managing team. The new, broad
salary bands can include both supervisors and subordinates and can also
facilitate moving employees slightly up on down along the pay scale without
254
accompanying promotional raises or emotional pay cuts. For example, the
employee who needs to spend time in a lower-level job to develop a certain
skill set can receive higher-than-usual pay for the work, a situation which is
impossible under traditional pay systems.

One expert argues that traditional quantitative evaluation plans actually

reward unadapatability. The argument here is that being slotted into a job that is
highly routine, as defined by a compensable factor such as “know-how”.

Broad banding is a compensation management response to changing business

conditions. In broadband salary structures, employers reward employees who demonstrate
substantial capability improvements with a salary progression in lieu of promotions that
penetrate more deeply into the banded range over time. Whereas the design characteristics
of traditional structures emphasize internal and external equity, broad banding focuses
employees on the changing needs of the organization and helps them experience an internal
culture. In a broadband pay structure, the numbers of salary grades are consolidated into
fewer, but broader, pay ranges. In broad banding, the spread of the pay ranges is wider
and there is less overlap with other pay ranges.

Broad banding evolved because organizations want to flatten their hierarchies and
move decision-making closer to the point where necessity and knowledge exist in
organizations. In flattened organizations, fewer promotional opportunities exist so the broad
banding structure allows more latitude for pay increases and career growth without
promotion.

Broadband pay structures encourage the development of broad employee skills,

because non-managerial jobs are appropriately valued and skill development is rewarded.
Additionally, a broadband pay structure is not as sensitive to changing market pricing
conditions, so they cost less to administer and manage over time. They also provide serious
non-promotional income opportunities for employees.

Broadbanding means collapsing salary grades into just a few wide levels or
bands, each of which contains a relatively wide range of jobs and pay levels. Figure
illustrates this. Here we consolidated the company’s previous six pay grades into two
broad grades or “broadbands.”

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 A company may create broadbands for all its jobs, or for specific groups such
as professionals. The pay rate range of each broadband is relatively large, since it
ranges from the minimum pay of the lowest grade the firm merged into the broadband
up to the maximum pay of the highest merged grade. Thus, for example, instead of
having 10 salary grades, each of which contains a salary range of $15,000, the firm
might collapse the 10 grades into three broadbands, each with a set of jobs such that
the difference between the lowest- and highest-paid jobs might be $40,000 or more.
There is thus a much wider range of pay rates. You can move an employee from job to
job within the broadband more easily, without worrying about the employee’s moving
outside the relatively narrow rate range associated with a traditional narrow pay grade .

FIGURE : Broadbanded Structure and How It Relates to

Traditional Pay Grades and Ranges

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13.4 ADVANTAGES OF BROAD BANDING
Following are the Advantages of broad banding:
 Streamlines Hierarchy: Sometimes an organization has become too
hierarchical for the strategic direction of the company; finding it has
become too slow to react, taking too much time to get information from
the top down and even less effective at getting messages from the lower
rungs up to the ears of senior management. Broad banding reduces the
number of levels or layers within a company. This is the best face-saving
way for an organization to collapse salary ranges and supporting de-
layering. This flattens an organizational structure and reduces the hierarchy.

 Facilitates Internal Movement: Whether we like it or not, some great

person-to-job matches just do not happen because of the way a job has
been classified or positioned with an assigned salary band. If that new
position is not a lateral or at a higher rung, most rational people will not
seriously consider a transfer that results in a demotion. That is just not a
positive step for their career development. With broad banding, more
internal movement is facilitated, because the probability increases that
one’s current job and alternate position are within the same enormous
range of pay. This makes pay take a back seat and puts forward other
attributes of a position, encouraging internal mobility and potentially more
developmental assignments.

 Puts Added Trust in Management: With broad banding, managers

have great latitude to pay what they want to an employee. This absolutely
can reduce the push-pull between the hiring manager and the human
resources organization. Now the issue of pay shifts to the control of the
hiring manager and the challenge of “Does one have enough money in
the current budget?” or not. The perception of HR as a regulating gate
keeper to preserve the salary structure diminishes. Managers are
entrusted with greater autonomy.

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13.5 DISADVANTAGES OF BROAD BANDING
Following are the Disadvantages of broad banding:
 No Awareness of External Market Rates: Traditional salary structures,
when done right, give current information to your management team about
what market rates. With broad banding, if a manager wants to pay at the
market midpoint, they are left baffled and guessing. There is no midpoint
in a broad band. That also means the compa-ratio tool cannot be used.

 May Lead to Inequities: Broad banding’s flexibility and trust in

management may or may not be warranted. In a broad banding system,
it is relatively easy to have two people with the same responsibilities
have earnings that are thousands and thousands of dollars apart. Broad
banding weakens t he linkage bet ween salary growt h and skill
development for the next higher-level, since it is so far off as to not be a
motivator.

 Lack of Cost Controls: It certainly may call into question why have
salary bands at all if they are so wide. You need to evaluate if your other
cost control training and measures are strong enough to hand over this
much authority and autonomy to your managers. Moving to broadbanding
may require thinking through other incentives that had previously been
tied to salary grades, such as bonuses or stock.

 Promotions: In my opinion the absolute worst thing about broad banding

is the severe reduction in opportunities for promotions. Fewer salary
bands lead to fewer opportunities to climb to the next band; meaning
fewer promotions to celebrate with family and friends. Think seriously
before you minimize this great motivational tool. If you are committed to
moving to broad banding, yet this is of concern to you, keep an eye on
your turnover rates and conduct exit interviews to monitor the pulse of
why your talent is moving to your competitors.

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13.6 PROCESS OF BROAD BANDING
The Process of Broad banding involves the following steps :
1. Identify the characteristics of a broadband framework for managing
salaries, and differentiate it from a more traditional salary structure or
schedule
2. Reasons to Move to broad banding :
(i) Evaluate the possible reasons for moving to broad banding in light of
your organization’s needs
(ii) Lead a discussion of the pros and cons of broad banding in your
organization
3. Readiness for Banding :
(i) Assess how the managers and employees in your organization will react
to the prospect of switching to a broad banding salary program
(ii) Plan an initiative to study your organization’s readiness for broad banding
4. Designing a broad banding Structure :
(i) Differentiate between broad grades and career bands and assess which
would be the best fit for your organization
(ii) Identify the primary design options for broad banding structures and the
pros and cons for the options
5. Managing Pay in a broad banding Environment :
(i) Identify the primary pay delivery models used in broad banding
(ii) Identify the organizational factors and other issues involved in selecting
a pay delivery model
(iii) Explain the use of market data in pay delivery under broad banding
6. Managing and Controlling Salary Costs :
(i) Understand how such issues as promotions, internal equity, seniority and
consolidation of job titles will be impacted by implementation of broad
banding

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 (ii) Develop methods to control salary costs under broad banding

7. Establishing a Design Team :

Develop a structure and tasks for a design team to be used in designing,
implementing and gaining organizational buy-in for a broad banding pay
structure
8. Communicating the New Program :
(i) Evaluate the possible involvement by key managers and employees in
the program design process
(ii) Discuss with senior management the need to invest in a communications
campaign to “sell” the new program
(iii) Develop a strategy for keeping employees informed as the project
progresses
9. The New Role for Managers :
(i) Define the new program management accountabilities for managers
(ii) Develop a training program to help them understand and accept their
new role, and to make effective salary management decisions
(iii) Develop a communications initiative to help them explain the new program
to their people
10. The New Role for HR :
(i) Define the new salary management accountabilities for HR specialists
(ii) Plan and conduct a communications campaign to help the HR staff
understand and accept their redefined role
(iii) Develop an administrative procedures guidebook to document the new
role responsibilities
(iv) Develop a training program for HR to help them make the role transition
11. The Future :
(i) Develop a better understanding of trends affecting wage and salary
programs, along with the latest trends and concepts

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 (ii) Determine if any of the emerging ideas is compatible with your
organization’s values and needs.
Traditional Structure Broadband Structure

Range 1

Range 8 Band 3

Range 7

Range 6

Range 5
Band 2

Range 4

Range 3

Range 2 Band 1

Range 1

Figure 13.1: Comparison of traditional and broadband structures

13.7 SUMMARY
It is your call whether broad banding is a t ool for use in your
organization or not. Broad banding is a very effective tool to reduce salary
grades or job classifications, but it definitely has its drawbacks. Broadband

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pay plan rules must support, and not lead, agencies’ missions, goals, and
objectives. Any discretionary funds used for pay above the statutory pay raises
should be strategically linked to the agencies’ missions, goals, and objectives.
Pay is an important communication tool. Agencies must communicate their pay
goals to the affected managers and employees. To the extent affected employees
are unionized, this communication must be delivered in a manner that meets
state government’s obligation to bargain in good faith. No single pay strategy is
right for every state agency or work unit. Different work units, agencies, and
bargaining units will require different strategies. All broadband pay plan rules
must contain a means for measuring and recording their success in achieving the
desired goals. Finally, keep in mind that pay covers only a small area of job
satisfaction. Several other factors, including the nature of work, relationships,
and opportunities etc. are key to retaining good employees.

13.8 GLOSSARY
 Traditional pay Structure: Typically has range spreads of 20% to 40%
and midpoint progressions of 5% to 10%

 Market-based pay Structure: Typically has range spreads of 30% to

80% and midpoint progressions of 10% to 15%

 Broad band: Typically have range spreads of 80% to 200% (with no

defined midpoints)

 Step structure: Typically has range spreads of 20% to 40% and midpoint
progressions of 5% to 10% with defined points (steps) within the ranges.

13.9 SELFASSESSMENT QUESTIONS

Q1. “Eligibility for company compensation programs often is tied to the salary
range assignment for an employee’s job”. Explain

_________________________________________________________

_________________________________________________________

_________________________________________________________

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 _________________________________________________________

_________________________________________________________

Q2. Explain the process of broad banding.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q3. Draw a comparison of traditional pay structure and broad band pay structure.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

13.10 LESSON END EXERCISE

Q1. What types of systems/tools are being currently used to communicate
salary ranges to internal customers (e.g., managers, recruiters, HR
business partners)? (Tick which ever applies)
 Email
 Enterprise system (e.g., Oracle, PeopleSoft, SAP)
 Company intranet
 Internally developed syst em (e.g., custom designed within your

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 organization)

 Social media
 Relational database application (e.g., Microsoft Access)
 Other
13.11 SUGGESTED READINGS
 Heathfield, Susan M. ”Broadbanding”. Available at:
http://humanresources.about.com/od/glossaryb/g/broadbanding.htm

 Auxillium West. ”Broadbanding”. Available at:

http://www.auxillium.com/broadbn2.shtml
 “Best practices for designing salary structures”

http://kenexa.com/Portals/0/Downloads/
Best%20Practices%20for%20Designing%20Salary%20Structures.pdf

 WorldatWork Staff (May 2000). Broadbanding: White Paper available

at: http://www.worldatwork.org/waw/adimLink?id=17194

 Beverly Dunlap: The Compensation Handbook: Critical Tools for

2013. Available at htt p://www.kenexa.com/Portals/0/Downloads/
P r o d u c t s / T he % 2 0 Ke n e xa % 2 0 C o mp e n s a t i o n% 2 0 H a n d bo o k -
Critical%2 pay Structure 0Tools%20for%202013.pdf

**********

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Lesson No.14 Unit-III
Semester-II MCOMC253
INCENTIVES
STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 Conceptual Analysis
14.3.1 Incentives
14.3.2 Total Rewards
14.3.3 Allowances
14.4 Principles of designing incentive/reward system
14.5 Types of Incentives
14.5.1 Monetary Incentives
14.5.2 Non-Monetary Incentives
14.6 Incentives across generations
14.7 Difference between Monetary and Non-Monetary Incentives
14.8 Group Incentives
14.9 Summary
14.10 Glossary
14.11 Self Assessment Questions
14.12 Lesson End Exercise
14.13 Suggested Readings

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14.1 INTRODUCTION
Almost all of the human motivations can serve as incentive—anxiety,
worries, fear, hope, prestige, money, security and so on—are all actual or
potential incentives in our daily life. An incentive is something that motivates an
individual to perform an action.

14.2 OBJECTIVES
This lesson provides an overview of incentive/reward management. After
going through the lesson :
(i) you will be able to generate knowledge about different types of incentives,
the concept of total reward and allowances
(ii) this is followed by a description of the monetary and non-monetary
incentives.

14.3 CONCEPTUAL ANALYSIS

14.3.1 Incentives
According to Earnest Ditcher, “Incentive is a stimulus or a reason
for producing action.” Almost all of the human motivations can serve
as incentive—anxiety, worries, fear, hope, prestige, money, security and
so on—are all act ual or pot ent ial incent ives in our daily life.
An incentive is something that motivates an individual to perform an
action. The study of incentive structures is central to the study of all
economic activity (both in terms of individual decision-making and in
terms of a deal bro it’s a deal).

According to Dale Yoder, “Incentives relate earnings to productivity

and may use premiums, bonuses or a variety of rates to compensate
for superior performance.”

Burack and Smith defined it as, “A plan or programme to motivate

individual/group performance. It is most frequently build upon
monetary rewards but may also include a variety of non-monetary
rewards or prizes”
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 An incentive plan has the following important features:

 An incentive plan may consist of both monetary and non-monetary results.

 The timing, accuracy and frequency of incentives are the very basis of an
incentive plan.

 The plan should be properly communicated to the employees.

14.3.2 Total Reward

As defined by Manus and Graham (2003), total reward ‘includes all types
of rewards – indirect as well as direct, and intrinsic as well as extrinsic’.
Each aspect of reward, namely base pay, contingent pay, employee
benefits and non-financial rewards, which include intrinsic rewards from
the work itself, are linked together and treated as an integrated and
coherent whole. Total reward combines the impact of the two major
categories of reward: 1) transactional rewards– tangible rewards arising
from transactions between the employer and employees concerning pay
and benefits, and 2) relational rewards – intangible rewards concerned
with learning and development and the work experience

14.3.3 Allowances
Allowances are paid in addition to basic pay for special circumstances
(such as living in
London) or features of employment (overtime, shifts or working unsocial
hours). They may be determined unilaterally by the organization but they
are often the subject of negotiation.

The main types of allowances are:

Location allowance: London and large town allowances to compensate

for higher costs of living.

Overtime payments: most manual workers are eligible for paid overtime
as well as many staff employees up to management level. Higher-paid

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 staff may receive time off in lieu if they work longer hours. Typically,
organizations that make overtime payments give time and a half as an
overtime premium from Monday to Saturday, with double time paid on
Sundays and statutory holidays. Some firms also pay double time from
around noon on Saturday. Work on major statutory holidays such as
Christmas Day and Good Friday often attracts higher overtime premiums.

Shift payments are made at rates that usually vary according to the
shift arrangement. A premium of, say, one-third of basic pay may be
given to people working nights, while those on an early or late day shift
may receive less – say, one-fifth of basic pay.

Working conditions allowances may be paid where the work is

unpleasant.

Subsistence allowances may be paid for accommodation and meals

when working away from home. Stand-by and call-out allowances may
be made to those who have to be available to come in to work when
required.

14.4 PRINCIPLES OF DESIGNING INCENTIVE/REWARD SYSTEM

Guiding principles define the approach an organization takes to dealing
with reward. They are the basis for reward policies and provide guidelines
for the actions contained in the reward strategy. They express the reward
philosophy of the organization – its values and beliefs about how people
should be rewarded. Members of the organization should be involved in
the definition of guiding principles which can then be communicated to
everyone to increase understanding of what underpins reward policies
and practices. However, employees will suspend their judgement of the
principles until they experience how they are applied. What matters to
them are not the philosophies themselves but the pay practices emanating
from them and the messages about the employment ‘deal’ that they get
as a consequence. It is the reality that is important, not the rhetoric.

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 Following principles should be given due consideration in designing of
reward/incentive system:

 Develop reward policies and practices which support the achievement

of business goals.

 Provide rewards which attract, retain and motivate staff and help to
develop a high performance culture.

 Maintain competitive rates of pay.

 Reward people according to their contribution.

 Recognize the value of everyone who is making an effective contribution,

not just the exceptional performers.

 Allow a reasonable degree of flexibility in the operation of reward

processes and in the choice of benefits by employees.

 Devolve more responsibility for reward decisions to line managers.

14.5 TYPES OF INCENTIVES

Managers are constantly searching for ways to create a motivational
environment where associates (employees) to work at their optimal levels
to accomplish company objectives. Workplace motivators include both
monetary and non-monetary incentives. Monetary incentives can be
diverse while having a similar effect on associates. One example of
monetary incentives is mutual funds provided through company pension
plans or insurance programs. Because it has been suggested that
associates, depending on their age, have different needs pertaining to
incentives, traditional incentive packages are being replaced with
alternatives to attract younger associates.

14.5.1 Monetary Incentives

Perhaps in the modern times, financial incentives are more dominant.
Before you get to business, you know that it is always about profit.

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 Employment is all about salary and remuneration. It is true that sometimes
people do voluntary jobs for some reasons other than financial ones.
But ultimately, the main reason why human beings do business or work
at all in modern days is money. The purpose of monetary incentives is to
reward associates for excellent job performance through money.
Monetary incentives include profit sharing, project bonuses, stock options
and warrants, scheduled bonuses (e.g., Christmas and performance-
linked), and additional paid vacation time. Traditionally, these have helped
maintain a positive motivational environment for associates.

 Bonus Pay: In order for a bonus pay plan to work, you need to set
goals that employees believe can be reached. Before creating a bonus
pay incentive program, run metrics on the department to which you are
looking to give the incentive. For example, if you want to offer an incentive
to the accounts payable department, analyze how many invoices are
processed in an average month, and then base the incentive on exceeding
that average. According to the Distance Learning Centre, employees must
feel the incentive is attainable for it to work. Employees must also not
feel that they will be penalized if they do not reach the incentive marks.

 Profit Sharing: A profit sharing incentive plan can encompass many

aspects of the company for the entire year. Make employees aware of
the factors that affect profit, such as sales revenue, employee productivity
and conservation of resources to lower overhead costs. When the year
is over, determine a percentage of the profit that can be paid to the
employees as a reward for helping the company achieve a profit.

 Stock Incentives: You can offer shares in the company as incentives,

as opposed to paying out an immediate cash reward. Make sure you
discuss your stock incentive plan with the stock regulatory bodies to
keep your plan in line with the law.

 Retirement Incentive: Rather than paying an incentive directly to the

employee, you can offer to add it to the employee’s 401(k) retirement

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 account instead. According to the Internal Revenue Service, a company
that sponsors a 401(k) program can claim the cost of doing that as a
deduction on its federal taxes. The employee gets the added benefit of
tax-free dollars in her retirement account, beyond what the employee
contributes and what the company matches.

 Vacation Incentive: Unscheduled employee time off can sometimes be

a problem for employers. To help reduce the use of sick days and
personal days, offer an additional vacation day for each quarter in which
the employee does not call in to work.

 Prizes: Vacations and prizes are often good incentives, because you can
work with your vendors to help pay for those incentives. For example, if
one of your vendors is a television manufacturer, you can discuss the
possibility of offering one of its television sets as a sales incentive.

 Commissions: Commissions are the most common forms of incentive

plans in most industries. Salespeople earn a percentage of every sale
they close. Commission plans can vary in their details and spread the
percentage points over a variety of factors. For example, a company
can pay 5 percent commission for every lead generated by a salesperson
and an additional 5 percent when the sale is closed. Salespeople can
work on a straight commission basis, receiving pay only from sales or on
a salary plus commission incentive plan.

Problems with Monetary Incentives

Alfie Kohn (1993) argues that monetary incentives encourage compliance

rather t han risk-taking because most rewards are based only on
performance. As a result, associates are discouraged from being creative
in the workplace.

Another argument Kohn presents is that monetary incentives may be

used t o circumvent pr oblems in t he wo rkplace. Fo r example,
incentives to boost sales can be used to compensate for poor anagement.

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 Employers also may use monetary incentives as an extrinsic rather
than an intrinsic motivator. In other words, associates are driven to do
things just for the monetary reward versus doing something because it is
the right thing to do. This can disrupt or terminate good relationships
between associates because they are transformed from co-workers to
competitors, which can quickly disrupt the workplace environment
(Kohn, 1993).

14.5.2 Non-Monetary Incentives

Money is not the only motivator, the employees who have more of esteem
and self actualization need active in them get satisfied with the non-
monetary incentives only. The incentives which cannot be calculated in
terms of money are known as non-monetary incentives. Generally people
working at high job position or at high rank get satisfied with non-monetary
incentives. The common means or ways of non-monetary incentives are:

1. Status: Status refers to rank, authority, responsibility, recognition

and prestige related to job. By offering higher status or rank in the organization
managers can mot ivat e employees having esteem and
self- actualization need active in them.

2. Organizational climate: It refers to relations between superior/ subordinates.

These are the characteristics which describe and organization. These
characteristics have direct influence over the behaviour of a member. A positive
approach adapted by manager creates better organizational climate whereas
negative approach may spoil the climate, Employees are always motivated in
the healthy organizational climate.

3. Career advancement: Managers must provide promotional opportunities to

employees. Whenever there are promotional opportunities employees improve
their skill and efficiency with the hope that they will be promoted to high level.
Promotion is a very big stimulator or motivator which induces people to perform
to their best level.

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4. Job enrichment/ assignment of challenging job: Employees get bored by
performing routine job. They enjoy doing jobs which offer them variety and
opportunity to show their skill. By offering challenging jobs, autonomy to perform
job, interesting jobs, employees get satisfied and they are motivated. Interesting,
enriched and challenging job itself is a very good motivator or stimulator.

5. Employee’s recognition: Recognition means giving special regard

or respect which satisfies the ego of the subordinates. Ego-satisfaction is a very
good motivator. Whenever the good efforts or the positive attitudes are show
by t he subordinat es t hen it must be recognized by
the superior in public or in presence of other employees. Whenever
if there is any negative attitude or mistake is done by subordinate then
it should be discussed in private by calling the employee in cabin. Examples of
employee’s recognition are congrat ulat ing employee for
good performance, displaying the achievement of employee, giving certificate of
achievement, distributing mementos, gifts etc.

6. Job security: Job security means life time bonding between employees and
organization. Job security means giving permanent or confirmation letter. Job
security ensures safety and security need but it may have negative impact. Once
the employees get job secured they lose interest in job. Of example government
employees do not perform efficiently as they have no fare of losing job. Job
security must be given with some terms and conditions.

7. Employee’s participation: It means involving employee in decision

making especially when decisions are related to workers. Employees follow the
decision more sincerely when these are taken in consultation with them for example
if target production is fixed by consulting employee then he will try to achieve
the target more sincerely.

8. Autonomy/ employee empowerment: It means giving more freedom to

subordinates. This empowerment develops confidence in employees. They use
positive skill to prove that they are performing to the best when freedom is given

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 to them.

One Survey of 235 Managers found that the most used rewards to motivate
employees (top-down, from most used to least) are :
• Employee Recognition
• Gift certificates
• Special events
• Cash rewards
• Merchandise incentives
• Email/Print Communications
• Training Programme
• Work /Life Benefits
• Variable pay
• Group travel
• Individual travel
• Sweepstakes
14.6 INCENTIVES ACROSS GENERATIONS
Research suggests that desired monetary incentives differ for associates
based on career stage and generation. Surveys by the American
Association of Retired Persons (AARP) have shown that most workers
will work past retirement age if offered flexible schedules, part-time
hours, and temporary employment (Nelson, 1999).
The generations covered in the AARP surveys include “Mature Workers”
(those born between 1930 and 1945), “Baby Boomers” (those born
between 1946 and 1963), “Generation X’ers” (those born between 1964
and 1981), and “Generation Y’ers” (those born after 1982). The
information presented in Table 1 lists non-monetary incentives that are
important to each generation covered in the surveys (Nelson, 1999).

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 Table 14.6: Non-monetary incentives desired by different generations
of associates
Mature Workers Baby Boomers Generation X'ers Generation Y'ers
Flexible Retirement Flexible work Flexible work
schedules planning schedules schedules
Flexible
Professional Professional
Part-time hours retirement
development development
options
Temporary hours Job training Feedback Feedback
Sabbaticals Tangible rewards Tangible rewards
Work
Work environment
environment
Attentive
employers
Source: http://www2.inc.com/search/16431.html (Nelson, 1999).

FIGURE : Relative Importance of Employer Costs for Employee

Compnsation March 2011, June 2013

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14.7 DIFFERENCE BETWEEN MONETARY AND NON-MONETARY
INCENTIVES
Motivating employees can be challenging for any business owner or
manager. In some industries, monetary rewards are enough to get the
most out of employees, while in other industries, other types of
incentives may be more effective. Differences between monetary and
non-monetary incentives are simple to distinguish, in some respects,
but their impacts on an employee’s performance can be somewhat
more difficult to measure. Following are the some of the points of
difference between the two:
1. Types: One of the primary differences between monetary and non-
monetary incentives is in the type of reward they offer. As the name
implies, a monetary incentive is a money-based reward given when
an employee meets or exceeds expectations. Monetary incentives can
include cash bonuses, stock options, profit-sharing and any other
type of reward that increases an employee’s compensation. Ballentyne
et al. (2012), at the University of Florida, contend that non-monetary
awards tend to come with the promise of an opportunity. Opportunities
can include time off from work, flexible work schedules or even positive
changes in the work environment.
2. Purpose: The purpose of monetary and non-monetary incentives are
similar. Only slight differences may exist between the two in what they
are designed to accomplish. A monetary incentive is generally awarded
for a job well done and is often something that the employee can strive
for. These are usually offered in the form of some type of bonus. However,
the purpose of a non-monetary incentive is to generally reward the
employee after the fact of doing a good job. This may not always be the
case for every type of non-monetary incentive, but these rewards are
not generally something the employee works toward.
3. Effectiveness: Both monetary and non-monetary incentives can be
effective in the workplace, but to varying degrees. Monetary incentives

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 tend to be more effective when the employee is actually motivated by
cold, hard cash or additional forms of payment that increase his total
compensation. However, non-monetary incentives can be just as effective
in motivating employee behaviour. Citing Bob Nelson, the so-called “guru
of thank you,” Sherry Ryan indicates that one of the most important
rewards that workers report receiving is simply praise and recognition
from the people they work for. This is noted as being just as effective as
any types of monetary incentives.

 Problems: Another difference between monetary and non-monetary

incentives are the potential problems associated with each. Both may
prove to be effective motivators in certain contexts, but as Andrew
Ballentine, Nora McKenzie, Allen Wysocki and Karl Kepner at the
University of Florida note, the performance-based monetary award tends
to encourage compliance rather than creativity and innovation. In other
words, the employee acts in a way that allows him to receive the monetary
award, rather than thinking outside the box. His motivation is to make
the money and not necessarily to improve the company or gain additional
praise from his employer.

14.8 GROUP INCENTIVES

The discussion till now has covered incentive schemes for individual direct
workers. A fundamental assumption common to all individual schemes is that
the output of each worker can be accurately measured. But in some cases, for
example, in the grinding and welding works in the electrical industry, the
operations are performed by the group as a whole, and the contribution of each
worker in the group cannot be accurately measured. In such cases, the group-
incentive scheme is followed. Group incentives are as common as individual
plans in industrial establishments.

Any individual scheme which has already been discussed may be applied
to a group of workers. But the most common is the piece-work system. The
total earnings of a group are first determined in accordance with the incentive

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method which is followed, and the earnings are then distributed among the
members of the group on some equitable basis. If the group consists of members
with equal skills, the earnings are divided equally among them. When the members
are of unequal skill, the earnings of the group may be divided among the members
in proportion to their individual time-rates, or according to specified percentages,
or in some cases among only a certain number of members of the group.

Some of the advantages of group incentives are:

1. Better co-operation among workers,

2. Less supervision,
3. Reduced incidence of absenteeism,
4. Reduced clerical work, and
5. Shorter training time.
The disadvantages are:
1. An efficient worker may be penalised for the inefficiency of the
other members in the group,
2. The incentive may not be strong enough to serve its purpose, and
3. Rivalry among the members of the group defeats the very purpose
of team work and co-operation.
14.9 SUMMARY
Monetary and non-monetary incentives vary in their roles, effectiveness,
and appropriateness, depending on the type of incentive. Alfie Kohn (1993)
argues that incentives actually hamper associates and companies by decreasing
associates’ motivation, interest, and job satisfaction. This is just the opposite
of what incentives were created to do. Incentives must take into account the
workers for whom they were created. A balance between monetary and non-
monetary incentives should be used to satisfy the diverse needs and interests
of associates.
Creating a balance sheet is a simple exercise that can be used for
evaluating incentive programs. On one side of the balance sheet list all the

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incentive programs (both monetary and non-monetary) of your organization.
On the other side list all the outcomes (whether desired or not) that can be
attributed to these incentives. Areas of improvement would be those outcomes
identified as undesirable.
14.10 GLOSSARY
 Incentive Compensation: A reward that compensates an employee for high
performance or for achievement above and beyond the defined normal job
requirements.

 Internal Equity: A standard that fairly establishes a pay level that

corresponds to each job’s relative value to the organization.
 Monetary Incentives: The purpose of monetary incentives is to reward
associates for excellent job performance through money. Monetary
incentives include profit sharing, project bonuses, stock options and
warrants, scheduled bonuses (e.g., Christmas and performance-linked),
and additional paid vacation time.
 Non- Monetary Incentives: The incentives which cannot be calculated
in terms of money are known as non-monetary incentives e.g. status,
recognition, growth opportunities, empowerment etc.

14.11 SELF ASSESSMENT QUESTIONS

Q1. What is Incentive? Describe its advantage and disadvantage.

Q2. Explain the problems associated with monetary rewards.

14.12 LESSON END EXERCISE

Q1. What points should be kept in mind while designing reward/incentive system?
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
Q2. Differentiate between monetary/extrinsic and non-monetary/intrinsic incentives
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
Q3. What kinds of incentives are desired by different generation of employees?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
14.13 SUGGESTED READINGS
 Andrew Ballentine, Nora McKenzie, Allen Wysocki, and Karl Kepner (2012),
“The Role of Monetary and Non-Monetary Incentives in the Workplace as
Influenced by Career Stage” available at: http://edis.ifas.ufl.edu.
 Ballantyne, D., Christopher, M., & Payne, A. (1995). “Improving the
Quality of Services Marketing: Service Redesign is the critical link”.
Journal of Marketing Management, 11, 7-24.
 Kohn, Alfie. (1993). Why incentive plans cannot work. In Kerr, S. Boston
(Ed.) Ultimate Rewards: A Harvard Business Review Book, Harvard
Business School Press.
 Lewis, Jared (2013), “Differences between monetary and non-monetary
incentives” available at: http://smallbusiness.chron.com/differences-
between-monetary-nonmonetary-incentives-26139.html

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 Nelson, Bob. (1999). Incentives for all generations. Nelson Motivation Inc.
Available on the World Wide Web at http://www2.inc.com/search/16431.html.
 Campbell, Donald E.: Incentives: Motivation and the Economics of
Information, Cambridge University press.
 Fisher, John G.: How to Run Successful Incentive Schemes: A Manager’s
Guide, Kogan Page.
 Yoder, Dale: Personnel Management and Industrial Relations, Prentice-
Hall, inc.

************

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Lesson No.15 Unit-III
Semester-II MCOMC253

GRIEVANCE REDRESSAL
STRUCTURE
15.1 Introduction
15.2 Objectives
15.3 Conceptual Analysis of Grievance
15.3.1 Features
15.3.2 Objectives of a Grievance Handling Procedure
15.4 Need for a grievance procedure
15.5 The Benefits of a Grievance Handling Procedure
15.6 Causes of Grievance Redressal
15.7 Types of Grievances
15.8 Machinery and Guiding Principles of Grievance Redressal System
15.9 Grievance Handling Process/Machinery
15.10 Summary
15.11 Glossary
15.12 Self Assessment Questions
15.13 Lesson End Exercise
15.14 Suggested Readings

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15.1 INTRODUCTION
An employee will have certain aspirations and expectations which he
thinks must be fulfilled by the organization where he is working. When the
organisation fails to satisfy the employee’s needs, he develops a feeling of
discontent or dissatisfaction. Thus, grievance is caused due to difference between
employee expectation and management practices.

15.2 OBJECTIVES
This lesson will acquaint you with :
(i) the concept of grievance
(ii) its features
(iii) process of grievance redressal

15.3 CONCEPTUAL ANALYSIS OF GRIEVANCE

A “Grievance” is defined as any communication that expresses dissatisfaction
about an action or lack of action, about the standard of service/deficiency of service
of an organisation and/or any intermediary or asks for remedial action. A grievance
may be “any real or imagined feeling of personal injustice, which an employee has
concerning his employment relationship.” A grievance represents a situation in which
an employee feels that something unfavourable to him has happened or is going
to happen.

According to Michael J. Jesus the term “grievance” means “any discontent

or dissatisfaction, whether expressed or not and whether valid or not, arising
out of anything connected with the company that an employee thinks, believe or
even feels, is unfair, unjust, or inequitable,” This definition is very broad and
covers all kinds of dissatisfaction which an employee has while doing his job. A
grievance means any discontentment or dissatisfaction arising out of anything
related to the enterprise where he is working. It may not be expressed and even
may not be valid. It arises when an employee feels that something has happened
or is going to happen which is unfair, unjust or inequitable. Discontent or
dissatisfaction is not a grievance. They initially find expression in the form of a
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complaint. When a complaint remains unattended to and the employee concerned
feels a sense of lack of justice and fair play, the dissatisfaction grows and assumes
the status of grievance.

Beach defines grievances as “any dissatisfaction or feeling of injustice in

connection with one’s employment situation that is brought to the notice of the
management”.
To understand what a grievance is, you must clearly be able to distinguish
between dissatisfaction, complaint and grievance. Torrington (1987) provides
us with a useful categorization in this regard:
 Dissatisfaction: Anything disturbs an employee, whether or not the
unrest is expressed in words.
 Complaint: A spoken or written dissatisfaction brought to the attention
of the supervisor or the shop steward.
 Grievance: A complaint that has been formally presented t o a
management representative or to a union official.
15.3.1 Features
 Grievances exist in the minds of individuals
 It occurs when an employee feels t hat there has been an
infringement of his rights.
 A grievance refers to any form of discontent or dissatisfaction with
any aspect of the organisation. The dissatisfaction must arise out of
employment and not due to personal or family problems.
 The discontent can arise out of real or imaginary reasons. When
the employee feels that injustice has been done to him, he has a grievance.
The reasons for such a feeling may be valid or invalid, legitimate or
irrational, justifiable or ridiculous.
 The discontent must find expression in some form oral or written.
However, discontent per se is not a grievance. Initially, the employee may

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 complain orally or in writing. If this is not looked into promptly, the
employee feels a sense of lack of justice. Now the discontent grows and
takes the shape of a grievance.
15.3.2 Objectives of a Grievance Handling Procedure
Jackson (2000) lays down the objectives of a grievance handling
procedure as follows:
 To enable the employee to air his/her grievance
 To clarify the nature of the grievance.
 To investigate the reasons for dissatisfaction.
 To obtain, where possible, a speedy resolution to the problem.
 To take appropriate actions and ensure that promises are kept.
 To inform the employee of his or her right to take the grievance
to the next stage of the procedure, in the event of an unsuccessful
resolution.
15.4 NEED FOR A GRIEVANCE PROCEDURE
Grievance procedure is necessary for any organisation due to the following
reasons.
 Management can feel the pulse of the employees with regard to the policies
and practices of the organization.
 Employees get a chance to ventilate their feelings and let off steam through
an official channel.
 Certain problems of workers cannot be solved by first line supervisors,
for these supervisors lack the expertise that the top management has, by
virtue of their professional knowledge and experience.
 Morale of the employees will be high when their grievances are redressed
in a just manner.
 It keeps a check on the supervisor’s attitude and behaviour towards their
subordinates.

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  They are compelled to listen to subordinates patiently and sympathetically.
 Brings uniformity in handling grievances

 It develops faith among employees.

 Reduces personality conflicts

 It acts as a pressure valve.

 Provides judicial protection to the employees.

 Provides avenues to present the problems.

 Enables the parties to resolve differences in peaceful, orderly and

expeditious manner.

 Enables the parties to investigate and discuss the problem.

15.5 THE BENEFITS OF A GRIEVANCE HANDLING PROCEDURE

According to Jackson (2000), further benefits that will accrue to both
the employer and employees are as follows:

 It encourages employees to raise concerns without fear of reprisal.

 It provides a fair and speedy means of dealing with complaints.

 It prevents minor disagreements developing into more serious disputes.

 It saves employers time and money as solutions are found for workplace
problems.

 It helps to build an organisational climate based on openness and trust.

15.6 CAUSES OF GRIEVANCE REDRESSAL

 Salary and Wages: Wage fixation, overtime, bonus, wage revision etc. are
the most common causes cited by employees as the root cause of dissatisfaction.
Employees may feel that they are paid less when compared to others.

 Work Environment: Physical conditions of workplace, production

norms, defective tools and equipments, poor quality of materials, materials

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 not available in time, lack of recognition, unfair rules etc.

 Supervision: It relates to the attitude of the supervisor towards the

employee such as perceived notions of bias, favouritism, nepotism,
regional & ethnic feelings, recognition, harassment etc.

 Work group: Employee is unable to adjust with his colleagues, suffers

from feelings of neglect, victimization and becomes an object of ridicule
and humiliation etc.

 Miscellaneous: Issues relating to certain violations in respect of

promotions Safety methods- Transfer- Disciplinary Action- Work Life
Balance & Work Load Granting leaves- Over stay after the expiry of
leaves- Medical facilities etc

15.7 TYPES OF GRIEVANCES

A grievance may take any one of the following forms:

 Factual: A factual grievance arises when legitimate needs of employees

remain unfulfilled, e.g., wage hike has been agreed but not implemented
citing various reasons.

 Imaginary: When an employee’s dissatisfaction is not because of any

valid reason but because of a wrong perception, wrong attitude or wrong
information he has. Such a situation may create an imaginary grievance.
Though management is not at fault in such instances, still it has to clear
the ‘fog’ immediately.

 Disguised: An employee may have dissatisfaction for reasons that are

unknown to him. If he/she is under pressure from family, friends, relatives,
neighbours, he/she may reach the work spot with a heavy heart. If a new
recruit gets a new table and almirah, this may become an eyesore to
other employees who have not been treated likewise previously.

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1 5 . 8 MACHINERY AND GUDING PRINCIPLES OF GRIEVANCE
REDRESSAL SYSTEM
A good grievance redressal mechanism is a sine qua non of a well-
designed and functional Human Resource (HR) Management System.
In order to be successful, a grievance redressal system must possess
five attributes:

 Simplicity: It must be a procedurally simple mechanism which is easy to

use by every employee across the board. It is best to have a simple form
or an online drop down menu where an employee can effortlessly
submit a grievance or complaint. As one of my bosses used to say:
“Don’t ask people to pour their hearts out and write long-winded
sob-stories and essays – just give them a form to fill.” Yes, a well-
designed form can encapsulate the problem more objectively and
avoid communications mismatches.
 Accessibility: All employees must have easy access to the mechanism
and it should be quick and simple to lodge a grievance. In earlier days,
before the IT Boom and prior to the advent of Internet, there used to be
cards or forms which could be filled up and put in easily accessible drop
boxes which were located all over the workplace, canteens and shop-
floors. Nowadays, it can be an online system must be easily accessible
24/7 to all employees from their workplace and their homes as well. If
an employee has a grievance she (or he) must know where and how to
submit it and the procedure must be fast and easy.
 Effectiveness: The grievance redressal mechanism must be effective.
The system must work (and be seen to work) and there must be proper
monitoring, follow-up and feedback to the employees and all concerned
about the status and processing of the complaint. The grievance redressal
procedure must ensure that it is made unambiguously and clearly evident
to all employees that there is an honest and transparent effort to resolve
all grievances in a fair and just manner.

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 Efficiency: The redressal of grievances and resolution of complaints
must be done promptly and speedily in an efficient manner within
stipulated time frames so that employees develop faith in the system.
Remember – justice delayed is justice denied.

 Responsiveness: The grievance redressal mechanism must be user-

friendly and sensitive to the special needs of the employees. It must be
gender sensitized, culturally consonant and in harmony with the prevailing
environment.Most importantly, it must be modern and technologically
savvy and in sync with contemporary times. Whatever the nature of the
grievance or complaint, it must not be trivialized. Grievances must be
treated with utmost empathy and this fact must be evident to all the
employees. There must constant two-way communication between the
senior management and the complainant and an impression must be
made on employees that all grievances are taken seriously, treated
sympathetically and handled with genuine earnestness with the objective
of resolving them amicably, speedily and to the entire satisfaction of
all concerned.
 Non-Vindictive: An employee must be able to submit a complaint or
grievance for redressal without fear of retribution from higher management
or reprisal from those who is complaining against. Checks and balances
must be put in place in order to ensure that there is absolutely no
victimization or harassment of the employee who is submitting a grievance
or making a complaint or is a whistleblower. The system must be
absolutely non-punitive and there must not be the slightest perception or
even a shred of doubt in the mind of the employees that they will be
“punished” for making a complaint.

 Fair And Just: The grievance redressal mechanism must function without
fear or favour. There must be total transparency in the procedure and
justice must be done and justice must also be seen to be done in a free
and fair manner.

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15.9 GRIEVANCE HANDLING PROCESS/MACHINERY
Grievance Redressal Mechanism is part and parcel of the machinery of
any administration. No administration can claim to be accountable
responsive and user friendly unless it has established an efficient and
effective grievance redressal mechanism. In fact the grievance redressal
mechanism of an organization is the gauge to measure its efficiency and
effectiveness as it provides important feedback on the working of the
administration. The details of a grievance procedure/machinery may vary
from organisation to organisation. Here, a four phase model (Figure 1)
is suggested. The first and the last stages have universal relevance,
irrespective of the differences in the procedures at the intermediate
stages. The four stages of the machinery are briefly discussed here:

 The level at which grievance occurs: The best opportunity to redress

a grievance is to resolve it at the level at which it occurs. A worker’s
grievance should be resolved by his immediate boss, the first line
supervisor. The higher the document rises through the hierarchy, the more
difficult it is to resolve. Bypassing the supervisor would erode his
authority. When the process moves to a higher stage, the aggrieved
employee and the supervisor concerned may shift their focus to save
face by proving the other wrong. The substantive aspect of any of the
grievances may thus be relegated and dysfunctional aspects come to the
fore thus making it more difficult to settle the issue. In a unionized concern,
the first stage of the procedure usually involves three people: the
aggrieved employee, his immediate boss and the union representative in
the shop/ department. It is possible to involve the union in laying down
the framework of the grievance procedure and thereafter restrain union
involvement in the actual process, at least in the first two stages. The
choice depends on the top management attitude and orientation towards
the dynamics of union-management relations. Supervisory role needs to
be strengthened, with appropriate training in problem-solving skills,
grievance handling and counseling so that he can do much in reducing

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 the number of grievances that get passed to higher stages in the machinery.
Unrealistic policies and expectations and lack of commitment for equity
and fair play can cause problems in handling grievances at the lower
level. Inadequate delegation of authority may also inhabit a supervisor’s
effectiveness in handling grievances at this level.

 Intermediate Stage: If the dispute is not redressed at the supervisor’s

level, it will usually be referred to the head of the concerned department.
It is important that line management assume prime responsibility for the
settlement of a grievance. Any direct involvement by personnel
department may upset balance in line-staff relations. At the intermediate
level, grievance can be settled with or without union involvement.
Excessive reliance on supervisor at this stage can jeopardize the interests
of the employee and affect the credibility of the procedure

 Organisation Level: If a grievance is not settled at the intermediate

level also, it will be referred to the top management. Usually, a person
of a level not less than General Manager designated for the purpose
will directly handle the issue. By now, the grievance may acquire some
political importance and the top leadership of the union may also step
in formally, if the procedure provides for it and informally, if the
procedure prohibits it. At this level it is very difficult to reconcile the
divergent interests.

 Third Party Mediation: If the grievance has not been settled bi-
laterally within the organisation, it goes to a third party for mediation.
It could be conciliation, arbitration or adjudication or the matter may
even be referred to a labour court. At this stage, the parties concerned
lose control over the way the grievance is settled. In case of mediation
(conciliation or arbitration) the mediator has no authority to decide,
but in case of labour court or an adjudicator, the decision will be binding
on the parties, subject to statutory provisions for appeal to higher courts.

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15.10 SUMMARY
A grievance represent s a sit uation in which an employee feels that
something unfavourable t o him has happened or is going t o happen. A
grievance means any discontentment or dissatisfaction arising out of anything
related to the enterprise where he is working. It may not be expressed and
even may not be valid. It arises when an employee feels that something has
happened or is going t o happen, which is unfair, unjust or inequit able.
Grievance procedure is necessary for any organisation as it helps management
to feel the pulse of the employees with regard to the policies and practices
of the organization. Further, employees get a chance to ventilate their feelings
and let off steam through an official channel. There can be various causes of
employee grievance viz., salary, supervision, work environment etc. A good
grievance redressal mechanism must be simple, accessible, effect ive,
responsive, fair and justified.

15.11 GLOSSARY
 Grievance: A formal complaint or allegation by an employee or group
of employees made to unfair treatment or violation of a union contract.

 Grievance procedures: The process and guidelines to be followed by

employees, management or the union when resolving differences or
conflicts.

15.12 SELF ASSESSMENT QUESTIONS

Q1. Explain grievance redressal procedure.
Q2. Explain different types of grievances
Q3. Discuss the essentials of sound grievance handling procedure.

15.13 LESSON END EXERCISE

Q1. Draw Ladder system of grievance handling.

_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________

Q2. If you are CEO of an organisation, which grievance handling system

you will prefer: ( the suitable option )
 Open
 Ladder
15.14 SUGGESTED READINGS
 Beach D.S. (1965). Personnel: Management of People at Work,
Macmillan, New York.
 Davis, K. (1971). Human Relation at Work, McGraw-Hill, New York
 Yoder, Dale: Personnel Management and Industrial Relations, Prentice-
Hall, inc.
 Derek Torrington, Laura Hall (1987). Personnel Management, Prentice-
Hall International
 Raymond A. Noe, John R. Hollenbeck, Barry Gerhart, and Patrick M.
Wright. : HRM, McGraw Hill

 Wayne F. Cascio Managing Human Resources: Productivity, Quality of

Work Life, Profits, McGraw Hill

***********

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Lesson No.16 Unit-IV
Semester-II MCOMC253

INDUSTRIAL RELATIONS AND LABOUR WELFARE

STRUCTURE
16.1 Introduction
16.2 Objectives
16.3 Concept of Industrial Relations
16.3.1 Theoretical Perspective
16.3.2 Unitary Perspective
16.3.3 Features
16.3.4 Objectives
16.3.5 Importance
16.4 Causes of poor industrial relations
16.5 Suggestions to improve Industrial Relations
16.6 Approaches of Industrial Relations
16.7 Summary
16.8 Glossary
16.9 Self Assessment Questions
16.10 Activity
16.11 Suggested Readings

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16.1 INTRODUCTION
In simple terms Industrial Relations deals with the worker-employer
relation in any industry. Government has attempted to make Industrial Relations
healthier by enacting Industrial Disputes Act 1947 to solve the dispute and to
reduce the frequency of dispute. This in turn improves the relations. Such
activity generally includes the co-operation of employer and employees.
16.2 OBJECTIVES
Objective of this lesson is to initiate in to industrial Relations
Management. After reading this lesson you shall be able to :
(i) acquire knowledge about the concept of industrial relations
(ii) know about its features, importance and various approaches of industrial
relations
16.3 CONCEPT OF INDUSTRIAL RELATIONS
Industrial relation means the relationship between employers and
employees in course of employment in industrial organisations. However, the
concept of Industrial Relations has a broader meaning. In a broad sense, the
term Industrial Relations includes the relationship between the various unions,
between the state and the unions as well as those between the various employers
and the government. Relations of all those associated in an industry may be
called Industrial Relations.
According to International Labour Organisation, Industrial relations
comprise relationships between the state on one hand and the employer’s and
employee’s organisation on the other, and the relationship among the occupational
organisations themselves.
Dunlop defines an industrial relations system in the following way:
An industrial relations system at any one time in its development is regarded as comprised
of certain actors, certain contexts, an ideology, which binds the industrial relations system
together, and a body of rules created to govern the actors at the workplace and work
community. There are three sets of independent variables: the ‘actors’, the ‘contexts’
and the ‘ideology’ of the system. The components of industrial relations system are:

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a) Participants: The participants in the industrial relations sphere are
composed of duly recognised representatives of the parties interacting
in several roles within the system.

b) Issues: The power interactions of the participants in a workplace create

industrial relations issues. These issues and the consequences of power
interactions find their expression in a web of rules governing the behaviour
of the parties at a workplace.

c) Structure: The structure consists of all forms of institutionalised

behaviour in a system. The structure may include collective procedures,
grievances, and settlement practices. Legal enactments relevant to power
interactions may also be considered to be a part of the structure.

d) Boundaries: In systems analysis, it is possible to find an issue which

one participant is totally indifferent to resolving while, at the same time,
the other participant is highly concerned about resolution of the same.
These issues may serve to delimit systems boundaries.

16.3.1 Theoretical Perspective

Industrial relations scholars have described three major theoretical

perspectives or frame works that contrast in their understanding and
analysis of workplace relations. The three views are generally known as
unitarism, pluralist and radical. Each offers a particular perception of
workplace relations and will therefore interpret such events as workplace
conflict, the role of unions and job regulation differently. The radical
perspective is sometimes referred to as the “conflict model”, although this
is somewhat ambiguous, as pluralism also tends to see conflict as inherent
in workplaces. Radical theories are strongly identified with Marxist theories.
16.3.2 Unitary Perspective
In unitarism, the organization is perceived as an integrated and harmonious
system, viewed as one happy family. A core assumption of unitary approach
is that management and staff, and all members of the organization share

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the same objectives, interests and purposes; thus working together, hand-
in-hand, towards the shared mutual goals. Furthermore, unitarism has a
paternalistic approach where it demands loyalty of all employees. Trade
unions are deemed as unnecessary and conflict is perceived as disruptive.
From employee point of view, unitary approach means that:
 Working practices should be flexible. Individuals should be
business process improvement oriented, multi-skilled and ready to tackle
with efficiency whatever tasks are required.
 If a union is recognized, its role is that of a further means of
communication between groups of staff and the company.
 The emphasis is on good relationships and sound terms and
conditions of employment.
 Employee participation in workplace decisions is enabled. This
helps in empowering individuals in their roles and emphasizes team work,
innovation, creativity, discretion in problem-solving, quality and
improvement groups etc.
 Employees should feel that the skills and expertise of managers
supports their endeavours.
From employer point of view, unitary approach means that:
 Staffing policies should try to unify effort, inspire and motivate
employees.
 The organizat io n’s wider object ives sho uld be properly
communicated and discussed with staff.
 Reward systems should be so designed as to foster to secure
loyalty and commitment.
 Line managers should take ownership of their team/staffing
responsibilities.
 Staff-management conflicts - from the perspective of the unitary
framework - are seen as arising from lack of information, inadequate
presentation of management’s policies.

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 The personal objectives of every individual employed in the business
should be discussed with them and integrated with the organization’s needs.
Pluralistic-Perspective
In pluralism the organization is perceived as being made up of powerful
and divergent sub-groups - management and trade unions. This
approach sees conflicts of interest and disagreements between managers
and workers over the distribution of profits as normal and inescapable.
Consequently, the role of management would lean less towards
enforcing and controlling and more toward persuasion and co-
ordination. Trade unions are deemed as legitimate representatives of
employees. Conflict is dealt by collective bargaining and is viewed not
necessarily as a bad thing and if managed could in fact be channeled
towards evolution and positive change.Realistic managers should accept
conflict to occur. There is a greater propensity for conflict rather than
harmony. They should anticipate and resolve this by securing agreed
procedures for settling disputes.
The implications of this approach include:
 The firm should have industrial relations and personnel specialists
who advise managers and provide specialist services in respect of staffing
and matters relating to union consultation and negotiation.
 Independent external arbitrators should be used to assist in the
resolution of disputes.
 Union recognition should be encouraged and union representatives
given scope to carry out their representative duties
 Comprehensive collective agreements should be negotiated with unions
Marxist Perspective
The Marxist approach looks at industrial relations from a societal
perspective. It views industrial relations as a microcosm of the wider
capitalist society. The basic assumption of this approach is that industrial

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relations under capitalism are an everlasting and unavoidable source of
conflict According to this approach, industrial conflicts are the central
reality of industrial relations, but open conflicts are uncommon.15 The
Marxist approach views industrial disputes as a class struggle and
industrial relations as a politicized concept and an element of the class
struggle. As per the Marxist approach, the understanding of industrial
relations requires an understanding of the capitalized society, the social
relations of production and the mechanism of capital accumulation.
The Marxist approach views the power relationship between the two
classes, namely, the employer (capital) and the employee (labour), as
the crux of the industrial relations. Both classes struggle hard to
consolidate their respective positions so that they can have a greater
leverage over the other in the process of bargaining. The proponents of
this approach perceive that the employers can survive longer without
labour than the employees can without work. As far as theory is
concerned, the compensation payable to the employees is an outcome
of the power struggle. For instance, the employers seek to maximize
their profits by paying less compensation to the employees, while the
latter resist such attempts, and this resistance results in industrial conflicts.
However, the weakness of this theory is that it is narrow in approach as it
views industrial relations as a product or outcome of the industrial conflict.
16.3.3 Features
 Industrial relations are outcomes of employment relationships in
an industrial enterprise. These relations cannot exist without the two
parties namely employers and employees.
 Industrial relations system creates rules and regulations to maintain
harmonious relations.
 The government intervenes to shape the industrial relations through
laws, rules, agreements, terms, charters etc.

 Several parties are involved in the Industrial relations system. The main

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parties are employers and their associations, employees and their unions and
the government. These three parties interact within economic and social
environment to shape the Industrial relations structure.
 Industrial relations are a dynamic and developing concept, not a static
one. They undergo changes with changing structure and scenario of the
industry as and when change occurs.
 Industrial relations include both individual relations and collective
relationships.
16.3.4 Objectives
 To maintain industrial democracy based on participation of labour in
the management and gains of industry.
 To raise productivity by reducing tendency of high labour turnover
and absenteeism.
 To ensure workers’ participation in management of the company
by giving them a fair say in decision-making and framing policies.
 To establish a proper channel of communication.
 To increase the morale and discipline of the employees.
 To safeguard the interests of the labour as well as management by
securing the highest level of mutual understanding and goodwill between
all sections in an industry.
 To avoid all forms of industrial conflicts so as to ensure industrial
peace by providing better living and working standards for the workers.
 To bring about government control over such industrial units which
are running at a loss for protecting the livelihood of the employees.
16.3.5 Importance
 Uninterrupted Production: The most important benefit of
industrial benefits is that it ensures continuity of production. This means

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 continuous employment for all involved right from managers to workers.
There is uninterrupted flow of income for all. Smooth running of industries
is important for manufacturers, if their products are perishable goods
and to consumers if the goods are for mass consumption (essential
commodities, food grains etc.). Good industrial relations bring industrial
peace which in turn tends to increase production.

 Reduction in Industrial disputes: Good Industrial relations

reduce Industrial disputes. Strikes, grievances and lockouts are some of
the reflections of Industrial unrest. Industrial peace helps in promoting
co-operation and increasing production. Thus good Industrial relations
help in establishing Industrial democracy, discipline and a conducive
workplace environment.

 High morale: Good Industrial relations improve the morale of

the employees and motivate the worker workers to work more and better.

 Reduced wastage: Good Industrial relations are maintained on

the basis of co-operation and recognition of each other. It helps to reduce
wastage of material, manpower and costs.

 Contributes to economic growth and development.

16.4 CAUSES OF POOR INDUSTRIAL RELATIONS

 Economic causes: Often poor wages and poor working conditions are
the main causes for unhealthy relations between management and labour.
Unauthorised deductions from wages, lack of fringe benefits, absence of
promotion opportunities, faulty incentive schemes are other economic causes.
Other causes for Industrial conflicts are inadequate infrastructure, worn-out
plant and machinery, poor layout, unsatisfactory maintenance etc.

 Organisational causes: Fault y communicat ions syst em, unfair

practices, non-recognition of trade unions and labour laws are also some other
causes of poor relations in industry.

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3. Social causes: Uninteresting nature of work is the main social cause of
poor Industrial relations. Dissatisfaction with job and personal life culminates
into Industrial conflicts.
 Psychological causes: Lack of job security, non-recognition of merit
and performance, poor interpersonal relations are the psychological reasons
for unsatisfactory employer-employee relations.
 Political causes: Multiple unions, inter-union rivalry weaken the trade
unions. Defective trade unions system prevailing in the country has been one of
the most responsible causes for Industrial disputes in the country.
16.5 SUGGESTIONS TO IMPROVE INDUSTRIAL RELATIONS
 Sound personnel policies: Policies and procedures concerning the
compensation, transfer and promotion, etc. of employees should be fair and
transparent. All policies and rules relating to Industrial relations should be fair and
transparent to everybody in the enterprise and to the union leaders.
 Participative management: Employees should associate workers and
unions in the formulation and implementation of HR policies and practices.
 Responsible unions: A strong trade union is an asset to the employer.
Trade unions should adopt a responsible rather than political approach to
industrial relations.
 Employee welfare: Employers should recognise the need for the welfare
of workers. They must ensure reasonable wages, satisfactory working conditions,
and other necessary facilities for labour. Management should have a genuine
concern for the welfare and betterment of the working class.
 Grievance procedure: A well-established and properly administered
system committed to the timely and satisfactory redressal of employee’s
grievances can be very helpful in improving Industrial relations. A suggestion
scheme will help to satisfy the creative urge of the workers.
 Constructive attitude: Both management and trade unions should adopt
positive attitude towards each other. Management must recognise unions

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as the spokesmen of the workers’ grievances and as custodians of their interests. The
employer should accept workers as equal partners in a joint endeavour for good
Industrial relations.
 Creating a proper communication channel to avoid grievances and
misunderstandings among employees
 Education and training should be imparted to the employees, which
help in their career development, which inculcates a feeling among the employees that
management cares for them.
16.6 APPROACHES OF INDUSTRIAL RELATIONS
Indust rial conflict s are t he result s of several socio-economic,
psychological and polit ical factors. Various lines of t houghts have been
expressed and approaches used t o explain his complex phenomenon. One
observer has stated, “An economist tries to int erpret indust rial conflict in
t erms of impersonal market s forces and laws of supply demand. To a
politician, industrial conflict is a war of different ideologies – perhaps a
class-war. To a psychologist , indust rial conflict means t he conflict ing
interests, aspirations, goals, mot ives and percept ions of different groups
of individuals, operat ing within and reacting t o a given socio-economic
and political environment”.
 Psychological approach: The problems of IR have their origin in
the perceptions of the management, unions and the workers. The conflicts
bet ween labour and management occur because every group negat ively
perceives t he behaviour of t he ot her i.e. even t he honest int ent ion of the
other party so looked at with suspicion. The problem is further aggravated
by various fact ors like t he income, level of educat ion, communicat ion,
values, beliefs, cust oms, goals of persons and groups, prest ige, power,
st at us, recognit ion, securit y etc are host fact ors both economic and non-
economic which influence perceptions unions and management towards each
other. Industrial peace is a result mainly of proper attitudes and perception
of the t wo parties.

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 Sociological approach: G. Margerison, an indust rial sociologist ,
holds t he view t hat t he core of industrial relat ions is t he nat ure and
development of the conflict itself. Margerison argued that conflict is the basic
concept that should form the basis of the study of industrial relations. The
author criticised the prevalent approach to industrial relations, which was
more concerned wit h st udying t he resolut ion of industrial conflict t han
it s generation; with the consequences of industrial disputes t han on t heir
causes. According to this school of thought, there are two major conceptual
levels of industrial relations. One is the intra-plant level where situational
factors, such as job content, work task and technology, and interaction factors
produce three types ofconflict – distributive, structural, and human relations.
These conflicts are being resolved through collective bargaining, structural
analysis of t he socio-t echnical systems and man-management analysis
respect ively. The second level is out side t he firm and concerns wit h the
conflict not resolved at the intra-organisational level. Indust ry is a social
world in miniature. The management goals, workers’ attitudes, perception
of change in industry, are all, in turn, decided by broad social factors like
the culture of the institutions, customs, structural changes, status-symbols,
rat ionality, acceptance or resistance to change, t olerance et c. Industry is,
t hus inseparable from t he society in which it funct ions. Though t he main
function of an industry is economic, its social consequences are also important
such as urbanization, social mobilit y, housing and t ransport problem in
industrial areas, disintegration of family structure, stress and strain, etc. As
industries develop, a new industrial-cum-social pat tern emerges, which
provides general new relationships, institutions and behavioural pattern and
new t echniques of handling human resources. These do influence the
development of industrial relations.

However, this approach rejects the special emphasis given to rule

determination by the “systems and Oxford models”. In its place, it suggests
a method of inquiry, which attempts to develop sociological models of conflicts.

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 Human relations approach: In the words of Keith Davies, human
relations are “the integration of people into a work situation that motivates
them to work together productively, cooperatively and with economic,
psychological and social satisfactions.” According to him, the goals of human
relat ions are: (a) to get people to produce, (b) to cooperate through
mutuality of interest, and (c) to gain satisfaction from their relationships. The
human relations school founded by Elton Mayo and later propagated by
Roethlisberger, Whitehead, W.F. Whyte, and Homans offers a coherent view
of the nature of industrial conflict and harmony. The human relations approach
highlights certain policies and techniques to improve employee morale,
efficiency and job satisfaction. It encourages the small work group to exercise
considerable control over its environment and in the process helps to remove
a major irritant in labour-management relations.

Though tension is more direct in work place; gradually it extends to the

whole industry and sometimes affects the entire economy of the country.
Therefore, the management must realize that efforts are made to set right the
situation. Services of specialists in Behavioural Sciences (namely, psychologists,
industrial engineers, human relations expert and personnel managers) are used
to deal with such related problems. Assistance is also taken from economists,
ant hropologists, psychiatrists, pedagogists, etc. In resolving conflicts,
understanding of human behaviour – both individual and groups – is a pre-
requisite for the employers, the union leaders and the government – more so for
the management. Conflicts cannot be resolved unless the management learns
and knows what the basic needs of men are and how they can be motivated to
work effectively.

It has now been increasingly recognised that much can be gained by the
managers and the worker, if they understand and apply the techniques of human
relations approaches to industrial relations. The workers are likely to attain
greater job satisfaction, develop greater involvement in their work and achieve
a measure of identification of their objectives with the objectives of the

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organization; the manager, on their part, would develop greater insight and
effectiveness in their work.

But there was reaction against the excessive claims of this school of
thought in the sixties. Some of its views were criticised by Marxists, pluralists,
and others on the ground that it encouraged dependency and discouraged
individual development, and ignored the importance of technology and culture
in industry. Taking a balanced view, however, it must be admitted that the human
relations school has thrown a lot of light on cert ain aspects such as
communication, management development, acceptance of workplace as a social
system, group dynamics, and participation in management.

 The Oxford Approach: According to this approach, the industrial

relations system is a study of institutions of job regulations and the stress is on
the substantive and procedural rules as in Dunlop’s model. Flanders, the exponent
of this approach, considers every business enterprise as a social system of
production and distribution, which has a structured pattern of Conceptual
Framework of relationships. The “institution of job regulation” is categorised
by him as internal and “Employment Relations” as external – the former being
an internal part of the industrial relations system such as code of work rules,
wage structure, internal procedure of joint consultation, and grievance
procedure. He views trade unions as an external organisation and excludes
collective agreements from the sphere of internal regulation. According to him,
co llect ive bar gaining is cent r al t o t he indust r ial r elat io ns syst em.
The “Oxford Approach” can be expressed in the form of an equation:
r = f (b) or r = f (c)
where, r = the rules governing industrial relations;
b = collective bargaining;
c = conflict resolved through collective bargaining.
The “Oxford Approach” can be criticised on the ground that it is too
narrow to provide a comprehensive framework for analysing industrial relations
problems. It overemphasises the significance of the political process of collective

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bargaining and gives insufficient weight to the role of the deeper influences in
the determination of rules. Institutional and power factors are viewed as of
paramount importance, while variables such as technology, market, status of
the parties, and ideology, are not given any prominence. This narrowness of
approach constitutes a severe limitation.

 The System Approach: The system approach was developed by J. P.

Dunlop of Harvard University in 1958. According to this approach, individuals
are part of an ongoing but independent social system. The behaviour, actions
and role of the individuals are shaped by the cultures of the society. The three
elements of the system approach are input, process and output. Society
provides the cue (signal) to the individuals about how one should act in a
situation. The institutions, the value system and other characteristics of the
society influence the process and determine the outcome or response of the
individuals. The basis of this theory is that group cohesiveness is provided by
the common ideology shaped by the societal factors.

According to Dunlop, the industrial relations system comprises certain

actors, certain contexts, and an ideology, which binds them together and a
body of rules created to govern the actors at the workplace and work
community. The actors in the system are the managers, the workers and their
representatives, and the government agencies. The rules in the system are
classified into two categories: substantive rules and procedural rules. The
substantive rules determine the conditions under which people are employed.
Such rules are normally derived from the implied terms and conditions of
employment, legislations, agreements, practices and managerial policies and
directives. The procedural rules govern how substantive rules are to be made
and understood. Ultimately, the introduction of new rules and regulations and
revisions of the existing rules for improving the industrial relations are the
major outputs of the industrial relations system. These may be substantive
rules as well as procedural rules.” The context in the system approach refers
to the environment of the system which is normally determined by the
technological nature of the organization, the financial and other constraints

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that restrict the actors of industrial relations, and the nature of power sharing
in the macro environment, namely, the society.

 The Gandhian Approach: Gandhiji can be called one of the greatest

labour leaders of modern India. His approach to labour problems was
completely new and refreshingly human. He held definite views regarding fixation
and regulation of wages, organisation and functions of trade unions, necessity
and desirability of collective bargaining, use and abuse of strikes, labour
indiscipline, workers participation in management, conditions of work and living,
and duties of workers. The Ahmedabad Textile Labour Association, a unique
and successful experiment in Gandhian trade unionism, implemented many of his
ideas. Gandhiji had immense faith in the goodness of man and he believed that
many of the evils of the modern world have been brought about by wrong
systems and not by wrong individuals. He insisted on recognising each individual
worker as a human being. He believed in non-violent communism, going so far
as to say that “if communism comes without any violence, it would be welcome.”
Gandhiji laid down certain conditions for a successful strike. These are: (a) the
cause of the strike must be just and there should be no strike without a
grievance; (b) there should be no violence; and (c) non-strikers or “blacklegs”
should never be molested. He was not against strikes but pleaded that they
should be the last weapon in the armoury of industrial workers and hence should
not be resorted to unless all peaceful and constitutional methods of negotiations,
conciliation and arbitration are exhausted.

His concept of trusteeship is a significant contribution in the sphere

of indust rial relat ions. According to him, employers should not regard
themselves as sole owners of mills and factories of which they may be the
legal owners. They should regard themselves only as trustees, or co-owners.
He also appealed to t he workers t o behave as trustees, not to regard the
mill and machinery as belonging to the exploiting agents but to regard them
as their own, protect t hem and put to t he best use they can. In short , the
theory of trusteeship is based on the view t hat all forms of propert y
and human accomplishments are gifts of nature and as such, they belong not

308
to any one individual but to society. Thus, the trusteeship system is totally
different from other contemporary labour relat ions systems. It aimed at
achieving economic equality and the material advancement of the “have-nots”
in a capitalist society by non-violent means. Gandhiji realised that relations
bet ween labour and management can eit her be a powerful st imulus t o
economic and social progress or an important factor in economic and social
stagnation. According to him, industrial peace was an essential condition not
only for t he growt h and development of t he industry it self, but also in a
great measure, for the improvement in the conditions of work and wages. At
the same time, he not only endorsed the workers’ right to adopt the method
of collective bargaining but also actively supported it. He advocated voluntary
arbit ration and mutual settlement of disputes. He also pleaded for perfect
understanding between capital and labour, mutual respect, recognition of
equality, and strong labour organisation as the essential factors for happy
and constructive industrial relations. For him, means and ends are equally
important.
 Human Resource Management Approach: The term, human resource
management (HRM) has become increasingly used in the literature of personnel/
industrial relations. The term has been applied to a diverse range of management
strategies and, indeed, sometimes used simply as a more modern, and therefore
more acceptable, term for personnel or industrial relations management. Some
of the components of HRM are: (i) human resource organisation; (ii) human
r e so u r ce p la nning ; ( iii) huma n r e s o ur c e s ys t e ms ; ( iv) huma n
resource development; (v) human resource relationships; (vi) human resource
utilisation;(vii) human resource accounting; and (viii) human resource audit. This
approach emphasises individualism and the direct relat ionship between
management and it s employees. Quite clearly, therefore, it questions the
collective regulation basis of traditional industrial relations.

16.7 SUMMARY
The term “industrial relations” refers to the complexity of human
relationships, which emerge in work situations. The subject of industrial

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relations deals with certain regulated and institutionalised relationships in
industry. The employment relationship in any work situation provides the
setting for industrial relations. With this objective, the workers as a group
form trade unions, the employers form their own associations, and the state
pr o vides inst it ut io ns fo r t he r egu lat io n o f r elat io ns. T he fie ld o f
industrial relations has a multi-disciplinary base. It draws upon concepts from
the established Concept, Scope and disciplines in social sciences, such as
economics, sociology, and psychology. These Approaches to disciplines have
developed t heories of industrial relations, but t hey differ considerably
Industrial Relations in their theoretical framework and practical application.
The theorising in this field has developed in the direction of (a) environmental
or external theories, and (b) internalists or in-plant theories. The prominent
contribution to the industrial relations literature is the ‘systems’ approach
developed by John T. Dunlop who views industrial relations system as a sub-
system of society.

16.8 GLOSSARY
 Industrial Relations: It means the relationship between employers
and employees in course of employment in industrial organisations.

 Unitary Perspective: In it the organization is perceived as an integrated

and harmonious system, viewed as one happy family.

 Pluralistic-Perspective: In pluralism the organization is perceived as being

made up of powerful and divergent sub-groups - management and trade unions.
 Psychological approach: it states that conflicts between labour and
management occur because every group negatively perceives the behaviour
of the other i.e. even the honest intention of the other party so looked at
with suspicion.
 Sociological approach: this approach states that the management
goals, workers’ attitudes, perception of change in industry, are all, in
turn, decided by broad social factors like the culture of the institutions,
customs, structural changes, status-symbols, rationality, acceptance or

310
 resistance to change, tolerance etc. Industry is, thus inseparable from
the society in which it functions.

 The Oxford Approach: According to this approach, the industrial

relations system is a study of institutions of job regulations and the stress
is on the substantive and procedural rules.

 The System Approach: According to this approach, individuals are part

of an ongoing but independent social system. The behaviour, actions and
role of the individuals are shaped by the cultures of the society. The
three elements of the system approach are input, process and output.

 Human Resource Management Approach: This approach emphasises

individualism and the direct relationship between management and its
employees.

16.9 SELF ASSESSMENT QUESTIONS

Q1. Explain different perspectives of industrial relations.

Q2. Name the three components of system approach to industrial relations.

Q3. Explain the importance of industrial relations in present day complex

organisations.

16. 10 LESSON END EXERCISE

Q1. What do you understand by the term ‘industrial relations’?

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

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Q 2. Discuss the Dunlop’s approach to industrial relations.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Q 3. One of the most difficult attempts in industrial relations is to build up a theory

and to generalise on its activity that is highly dynamic. Discuss.

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

16.11 SUGGESTED READING

 Bain, G.S. & Clegg, H.A.(1974). “Strategy for Industrial Relations
Research in Great Britain”.British Journal of Industrial Relations. Vol.12
N0.1, pp.91-113

 Blain, N. & Gennard, J. (1970). “Indust rial Relat ions Theory:

A Critical Review” British Journal of Industrial Relations Vol. Viii N0. 3 pp.
389-392.

 Dunlop, J.T. (1958). Industrial Relations Systems. New York: Holt

 Flanders, A. (1965). Industrial Relations: What is Wrong with the System?
An Essay on Its Theory and Future. London: Farber & Farber.

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 Paul Blyton & Nicolas Bacon & Jack Fiorito & Edmund Heery(2010) The
SAGE Handbook of Industrial Relations, SAGE Publications Ltd

 Luthans, F. (1998). Organisational Behaviour (8thed.). New York: Irwin/

McGraw-Hill.

 Otobo, D. (2000). Industrial Relations: Theory and Controversies. Lagos:

Malthouse Press Ltd

 Rose, E.D. (2008). Employment Relations. (3rd ed).London: Pearson

Education Ltd.

 Salamon, M. (2000). Industrial Relations Theory and Practice. (4th ed).

London: Pearson Education Ltd.

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Lesson No.17 Unit-IV
Semester-II MCOMC253

INDUSTRIAL DISPUTES
STRUCTURE

17.1 Introduction

17.2 Objectives

17.3 Concept of Industrial Disputes

17.4 Principles Assigned By Courts for Judging The Nature Of Disputes

17.5 Forms/ Types of Industrial Disputes

17.6 Causes of Industrial Disputes

17.7 Mechinery of settling industrial disputes without state intervention

17.8 Mechinery of Settling Industrial Disputes with State Intervention

17.9 Machinery for the Settlement of Industrial Disputes in India

17.10 Summary

17.11 Glossary

17.12 Self Assessment Questions

17.13 Lesson End Exercise

17.14 Suggested Readings

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17.1 INTRODUCTION
Industrial disputes are conflicts, disorder or unrest arising between workers and
employers on any ground. Such disputes finally result in strikes, lockouts and mass
refusal of employees to work in the organization until the dispute is resolved. So it can
be concluded that Industrial Disputes harm both parties employees and employers and
are always against the interest of both employees and the employers.
17.2 OBJECTIVES
This lesson will enhance your knowledge about :
(i) industrial disputes
(ii) principles assigned by courts for judging the nature of disputes,
(iii) forms of industrial disputes and machinery for settlement of industrial
disputes
17.3 CONCEPT OF INDUSTRIAL DISPUTES
Definitions of Industrial Disputes
As per Patterson:
“Industrial strife constituent militant and organized protest against
existing industrial conditions, they are symptoms of industrial unrest in
the same way that boils are symptoms of disorder of body.”
Industrial Dispute Act, 1947
“Industrial Dispute means any dispute or difference between the
employees and employers or between employers and workmen or between
workmen and workmen, which is concerned with the employment or terms
of employment or with the conditions of labour of any person.”
From the above definitions, it may be concluded that an Industrial Dispute
means a conflict or unrest or dispute or any sort of difference between employees
and employers, which may relate with the employment or the terms of employment
or working conditions.
For a dispute to become Industrial Dispute there must be a dispute
difference between:

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  Employers and employees
 Employers and workmen
 Workmen and workmen

17.4 PRINCIPLES ASSIGNED BY COURTS FOR JUDGING

THE NATURE OF DISPUTES
The term Industrial Disputes has been interpreted differently in different
situations by courts. So the court has assigned some principles for judging the
natures of Industrial Dispute, these principles are as follows:
 The dispute must affect large number of workmen
 The dispute should be taken up by the Industry Union
 The parties involved in dispute must have direct interest
 The consulted demand must become grievance
 Workmen can raise Industrial Dispute himself under Section 2A of
Industrial Disputes Act -1947
17.5 FORMS/ TYPES OF INDUSTRIAL DISPUTES

FIGURE

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 The Industrial Dispute can arise in any of the following form given below:
Strikes, Lockouts and Gherao are the most common forms of Industrial
Disputes
We will explain them in detail below:
 Strike: “Strike means the termination or stopping the work by a group
of persons employed in any industry or a refusal to work under common
understanding or refusal to work by number of persons who are or have
been employed to continue their work or to accept employment.”
So from the definition of strike you can conclude that Strike can take
place only
a) When the work is terminated or the workman’s acting in combination
refuse to work.
b) A refusal to work or accept employment under a common understanding
of any number of persons will also result to a strike. If workers are
going on mass casual leave under common understanding this will also
result in strike.
c) The workmen on strike must be employed in an ‘industry’ which has not
been closed down.
d) Even when workmen cease to work, the relationship of employers and
employees is deemed to continue even though in a state of suspension.

Types of Strikes

 Stay-in, sit-down, pen-down strike: In all such cases, the workmen after
taking their seats, refuse to do work. All such acts on the part of the
workmen acting in combination, amount to a strike.

 Go-slow: Go-slow does not amount to strike, but it is a serious case of

is conduct.

 Sympathetic strike: Cessation of work in the support of the demands

of workmen belonging to other employer is called a sympathetic
strike. The management can take disciplinary action for the absence of
workmen. However, in Remalingam Vs. Indian Metallurgical Corporation,

317
 Madras, 1964-I L.L.J.81, it was held that such cessation of work will
not amount to a strike since there is no intention to use the strike against
the management.

 Hunger strike: Some workers may resort to fast on or near the place
of work or residence of the employers. If it is peaceful and does not
result in cessation of work, it will not constitute a strike. But if due to
such an fact, even those present for work, could not be given work, it
will amount to strike (Pepariach Sugar Mills Ltd. Vs. Their Workmen).

 Lightning or wildcat strike: A wildcat strike is an unofficial strike i.e.

a strike not sanctioned by the union. Such strikes occasionally occur in
violation of the no-strike pledge in collective bargaining agreements. In
such a situation union is obliged to use its best efforts to end the strike.
Such strikes are prohibited in public utility services under Section 22 of
the Industrial Disputes Act, 1947. Further, the standing order of a
company generally required for notice.

 Work-to-rule: Since there is a no cessation of work, it does not constitute

a strike.
 Lockout: Section 2(1) of the Industrial Disputes Act, 1947 defines
“lockout” to mean the temporary closing of a place of employment or
the suspension of work, or the refusal by an employers to continue to
employ any number of persons employed by him, lockout, thus, is the
counterpart of strike – the corresponding weapon the hands of employer
to resist the collective demands of workmen or to enforce his terms. It
has been held by the courts that the suspension of work as a disciplinary
measure does not amount to lockout. Similarly, temporary suspension of
work called lay-off is not lock-out.
 Gherao: Gherao means encirclement of the managers to criminally
intimidate him to accept the demands of the workers. It amounts to criminal
conspiracy under Section 120-A of the I.P.C. and is not saved by Sec. 17
of the Trade Unions Act on the grounds of its being a concerted activity.

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Consequences of Illegal Strikes and Lock-Outs:

1. P en al t y f or i l l egal s t ri ke s [ S ec . 26( 1) ] : Any w o r kman w ho

commences, continues or otherwise acts in furtherance of a strike which
is illegal, shall be punishable with imprisonment for a term which may
extend to 1 month, or with fine which may extend to Rs. 50, or with both.

2. P en alt y f or il l egal lock- ou t [ Sec. 26( 2): Any emplo yer who
commences, continues or otherwise acts in furtherance of a lock-out
which is illegal, shall be punishable with imprisonment for a term which
may extend to 1 month, or with fine which may extend to Rs. 1,000 or
with both.

3. Penalty for instigation, etc. [Sec. 27]: Any person who instigates or
incites others to take part in, or otherwise acts in furtherance of, a strike
or lock-out which is illegal, shall be punishable with imprisonment for a
term which may extend to 6 months, or with fine which may extend to
Rs. 1,000 or with both.

4. Penalty for giving financial aid for illegal strikes and lock-outs
[Sec. 28]: Any person who knowingly expends or applies any money
in direct furtherance or support of any illegal strike or lock-out shall
be punishable with an imprisonment for a term which may extend to 6
months, or with fine which may extend to Rs. 1,000 or with both.

17.6 CAUSES OF INDUSTRIAL DISPUTES

Some of the important causes of an industrial dispute are:-

1. Demand for higher wages and allowances.

2. Demand for payment of bonus and determination of its rate thereof.
3. Demand for higher social security benefits.
4. Demand for good and safer working conditions, including length of a
working day, the interval and frequency of leisure and physical work
environment.

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 5. Demand for improved labour welfare and other benefits. For example,
adequat e cant een, rest, recreation and accommodat ion facility,
arrangements for travel to and from distant places, etc.
6. Besides, poor personnel management; conflicting legislative measure
or government policies; and psychological factors such as denial of
opportunity to the worker for satisfying his/ her basic urge for self-
expression, personal achievement and betterment may also result in
labour problems.

17.7 MACHINERY OF SETTLING INDUSTRIAL DISPUTES

WITHOUT STATE INTERVENTION
There are two ways in which industrial disputes can be settled without
government’s intervention. These are:

 Collective bargaining

 Voluntary arbitration
 Collective bargaining: It is a type of negotiation used by employees
to work with their employers. During a collective bargaining period,
workers’ representat ives approach the employer and att empt to
negotiate a contract which both sides can agree with. Typical issues
covered in a labour contract are hours, wages, benefits, working
conditions, and the rules of the workplace. Once both sides have
reached a contract that they find agreeable, it is signed and kept in
place for a set period of time, most commonly three years. The final
contract is called a collective bargaining agreement, to reflect the fact
that it is the result of a collective bargaining effort. The parties often
refer to the result of negotiation as a Collective Bargaining Agreement
(CBA) / as a Collective Employment Agreement (CEA).
In the event of failure of negotiations, a likely resort to strike or lock-
out to force the recalcitrant party to come to terms. When collective
negotiations reach a deadlock, the parties themselves may call in third

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 persons to help them settle their disputes. The role of this third person is
to break the deadlock, to interpret the view point of one to the other,
and thereby to help the parties arrive at an agreement.
 Voluntary arbitration: It is he process in which the disputing parties
show willingness to go to an arbitrator (a third party) and submit to his
decision voluntarily agreement between workman and management,
Send copy to the Government and conciliation officer, publication of
agreement
In many cases an argument simply cannot be settled as both parties
disagree on their own grounds. They therefore enter into Voluntary
Arbitration, which involves appointing an independent party to assess the
situation and then make a decision based on the facts presented to them.
It is commonly viewed as less expensive and faster than resolving a dispute
in court. An arbitrator may be a single person or a panel.

At the time of submitting a dispute to arbitration, the parties may agree in

advance to abide by the award of the arbitrator and thus industrial peace
is maintained and the dispute is resolved. Sometimes, however, the parties
may agree to submit the dispute to an arbitrator but at the same time,
reserve their right to accept or reject the award when it comes.

17.8 MACHINERY OF SETTLING INDUSTRIAL DISPUTES WITH

STATE INTERVENTION
Industrial disputes are settled by the Government with help of following
machinery:
 Compulsory establishment of bipartite committees
 Establishment of Compulsory collective bargaining
 Conciliation and mediation
 Compulsory arbitration or adjudication
Detailed explanation of each is as under:

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 Compulsory establishment of bipartite committees: The primary
ideas behind the establishment of such bipartite committees are: Giving
encouragement to the parties concerned to settle and compose their
differences by themselves in order to avoid the direct intervention of a
third agency. Facilitating the composition of the differences at their
embryonic stages without causing work stoppage.
 Establishment of compulsory collective bargaining: The idea behind
such a policy is to force the parties to seek to settle their differences
through mutual negotiations and discussions before they decide to resort
strikes or lock-out. Where the parties themselves have set up a machinery
for collective bargaining and negotiation, the imposition of collective
bargaining by the state becomes unnecessary. But, if either or both the
parties resist the establishment of collective bargaining and the state feels
that collective bargaining helps the peaceful and democratic conduct of
industrial relations, it may impose collective bargaining compulsory. State
may encourage, and if necessary, force workers and employers to enter
into formal collective bargaining through their representatives. In India,
refusal to bargain collectively in good faith by the employer and the
recognized union has been included in the list of unfair labour practices
by an amendment of the Industrial Disputes Act in 1982. However, in
absence of making recognition of representative union by the employer
statutorily compulsory, this provision of the Industrial Disputes Act, 1947
does not havemuch significance.
 Conciliation and mediation; This is where the two parties in a dispute
are brought together and suggestions made, as to how the dispute can
be settled. Impartial third party helps the two parties to reach a mutually
acceptable settlement. Conciliator meets parties separately or together
to exchange information, clarify issues and settle misunderstandings.
Conciliator does not impose a solution but works with the parties to
enable them to come to an agreement. It is facilitated negotiation,
essential in public utility services, binding on parties to the disputes.

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  Compulsory arbitration or adjudication: Although the state has
devised methods for the peaceful settlement of industrial disputes, it is
clear that these do not guarantee a smooth end to disputes. The main
idea behind the imposition of compulsory arbitration is to maintain
industrial peace by requiring the parties to refrain from causing work-
stoppages and providing a way for settling the disputes. The two
principal forms of compulsory arbitration based upon the nature of
reference and nature of award: Compulsory reference but voluntary
accept ance of the award Compulsory reference and compulsory
acceptance of the award
17.9 MACHINERY FOR THE SETTLEMENT OF INDUSTRIAL
DISPUTES IN INDIA
(i) Works Committee: There is a Works Committee in factories employing
100 or more workers. The committee consists of equal number of
representatives of employer and employees. Representatives of employees
are selected in consultation with Registered Trade Union. The Works
Committee is the first step towards settlement of disputes.

(ii) Conc il ia ti on: Co nciliat io n r efer s t o t he pr o c ess by which

representatives of employees and employers are brought together before
a third party with a view to discuss, reconcile their differences and arrive
at an agreement through mutual consent. The third party acts as a
facilitator in this process. Conciliation is a type of state intervention in
settling the Industrial Disputes. The Industrial Disputes Act empowers
the Central & State governments to appoint conciliation officers and a
Board of Conciliation as and when the situation demands.

Conciliation officer: If dispute is not solved, it will be referred to

Conciliation Officer‘. He is appointed by Government to mediate disputes
between parties brought to his notice; enjoying the powers of a civil court.
He is supposed to give judgment within 14 days of the commencement
of the conciliation proceedings. The duties of a conciliation officer are:

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 To hold conciliation proceedings with a view to arrive at amicable
settlement between the parties concerned.

 To investigate the dispute in order to bring about the settlement between

the parties concerned.

 To send a report and memorandum of settlement to the appropriate

government.

 To send a report to the government stating forth the steps taken by him
in case no settlement has been reached at .

i) Board of conciliation: The Board is an adhoc in nature, tripartite body

having the powers of a civil court created for a specific dispute (when
the conciliation officer fails to resolve disputes within a time frame, the
board is appointed)

ii) Court of enquiry: In case the conciliation proceedings fail to resolve a

dispute, a court of enquiry is constituted by the government to investigate
the dispute and submit the report within six months.

iii) Arbitration: A process in which a neutral third party listens to the

disputing parties, gathers information about the dispute, and then takes
a decision which is binding on both the parties. The conciliator simply
assists the parties to come to a settlement, whereas the arbitrator listens
to both the parties and then gives his judgment. There are two types of
arbitration:
a) Voluntary Arbitration: In voluntary arbitration the arbitrator is
appointed by both the parties through mutual consent and the arbitrator
acts only when the dispute is referred to him.
b) Compulsory Arbitration: Implies that the parties are required to refer
the dispute to the arbitrator whether they like him or not. Usually, when
the parties fail to arrive at a settlement voluntarily, or when there is some
other strong reason, the appropriate government can force the parties to

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 refer the dispute to an arbitrator.
iv) Adjudication: It is the process of settling disputes compulsorily through
the intervention of a third party appointed by the Government. The
Industrial Disputes Act provides a three-tier adjudication machinery
consisting of:
a) Labour court
b) Industrial tribunal
c) National tribunal
a) Labour Court: The appropriate government may, by notification in the
official gazette constitute one or more labour courts for adjudication of
Industrial disputes relating to any matters specified in the second schedule
of Industrial Disputes Act. They are:

 Dismissal or discharge or grant of relief to workmen wrongfully dismissed.

 Illegality or otherwise of a strike or lockout.
 Withdrawal of any customary concession or privileges.
Where an Industrial dispute has been referred to a labour court for
adjudication, it shall hold its proceedings expeditiously and shall, within
the period specified in the order referring such a dispute, submit its report
to the appropriate government.

b) Industrial Tribunal: The appropriate government may, by notification

in the official gazette, constitute one or more Industrial Tribunals for the
adjudication of Industrial disputes relating to the following matters:

 Wages
 Compensatory and other allowances
 Hours of work and rest intervals

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  Leave with wages and holidays
 Bonus, profit-sharing, PF etc.
 Rules of discipline
 Retrenchment of workmen
 Working shifts other than in accordance with standing orders
It is the duty of the Industrial Tribunal to hold its proceedings
expeditiously and to submit its report to the appropriate government
within the specified time.

a) National Tribunal:
The central government may, by notification in the official gazette,
constitute one or more National Tribunals for the adjudication of
Industrial Disputes in Matters of National importance. Matters, which
are of a nature such that industries in more than one state are likely to be
interested in, or are affected by the outcome of the dispute. It is the duty
of the National Tribunal to hold its proceedings expeditiously and to
submit its report to the central government within the stipulated time.

Voluntary Methods Statutory Measures

Code of Tripartite Worker’s Collective I.D. Act, 1947 State Acts

Discipline Machinery Participation Bargaining

Labour Administration
(States & Central Levels)

Works Conciliation Voluntary Court of Enquiry Adjudication

Committee Arbitration

Conciliation Conciliation Labour Industrial National

Officers Board Court Tribunal Tribunal

Figure 17.1: Machinery for Prevention and Settlement of Industrial Disputes

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17.10 SUMMARY
Industrial disputes are conflicts, disorder or unrest arising between
workers and employers on any ground. Such disputes finally result in strikes,
lockouts and mass refusal of employees to work in the organization until the
dispute is resolved. So it can be concluded that Industrial Disputes harm both
parties employees and employers and are always against the interest of both
employees and the employers. There are different ways to address industrial
disputes e.g., collective bargaining, arbitration, conciliation and adjudication.
17.11 GLOSSARY
 Adjudication: It is the process of settling disputes compulsorily through
the intervention of a third party appointed by the Government.
 Arbitration: An alternative dispute resolution method that uses a neutral
third party (i.e. arbitrator) to resolve individual, group or labour-
management conflicts.
 Conciliation: Conciliation refers to the process by which representatives
of employees and employers are brought together before a third party
with a view to discuss, reconcile their differences and arrive at an
agreement through mutual consent.

 Gherao: Gherao means encirclement of the managers to criminally

intimidate him to accept the demands of the workers.

 Industrial Disputes: It means a conflict or unrest or dispute or any

sort of difference between employees and employers, which may relate
with the employment or the terms of employment or working conditions.

 Lockout: It means the temporary closing of a place of employment or

the suspension of work, or the refusal by an employer to continue to
employ any number of persons employed by him.

 Strike: It means the termination or stopping the work by a group of

persons employed in any industry or a refusal to work under common

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 understanding or refusal to work by number of persons who are or have
been employed to continue their work or to accept employment.

17.12 SELF ASSESSMENT QUESTIONS

Q1. What is an industrial dispute?
Q2. What are the different forms of disputes?

Q3. Outline the causes and consequences of industrial disputes.

Q 4: Under the Arbitration Act, does the arbitrator have to provide reasons for
the award? Choose the answer from the following options:

(a) An arbitrator must always provide reasons for the award.

(b) An arbitrator need never provide reasons for the award.

(c) An arbitrator need only provide reasons for the award when
specifically requested by the parties to do so.

(d) An arbitrator must always provide reasons for the award, unless
the parties have agreed that no reasons are to be given, or the
award is an arbitral award on agreed terms.
(e) An arbitrator must always provide reasons for the award, and
the only exception to this rule is in the case of an arbitral award
on agreed terms.

17.13 LESSON END EXERCISE

Q1 ——————— has judicial status

a) Conciliation

b) Arbitration

c) Adjudication

Q2 In —————————— decision is binding on both the parties

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 a) Conciliation

b) Arbitration

c) Adjudication

Q3. Penalty for illegal strikes [Sec.26(1)]

a) imprisonment for a term which may extend to 1 month, or with

fine which may extend to Rs. 50, or with both.

b) Imprisonment for a term which may extend to 2 month,

c) Imprisonment for a term which may extend to 2 month, or with

fine which may extend to Rs. 50, or with both.
Q4: Which of the following most accurately describes the enforceability of
an arbitral award?

(a) An arbitral award is not binding on the parties; they may choose to follow
it if they so wish.

(b) An arbitral award, unless set aside by a court of competent jurisdiction, is

enforceable in the same manner as a decree of a civil court.

(c) An arbitral award can only be enforced if there is a specific direction from a
court that it should be so enforced.

(d) An arbitral award can be enforced, but only upon an application by the
arbitrator to a court to do so.

(e) An arbitral award cannot be enforced in the case of commercial disputes.

17.14 SUGGESTED READINGS

 Arun Monappa, Industrial Relations, Tata Mc Graw Hill.

 Bhagoliwal TN, personal Management and Indust rial Relat ions,

Agra Publ.

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 Rastogi, J.L. (1962). Termination of employment, Indian Journal of
Social Work, 23(3), 253-260 ,

 The industrial disput es act, 1947. Available at: ht tp://pblabour.

gov.in/pdf/acts_rules/inustrial_disputes_act_1947.pdf

 Sinha, D. I1962) Frustrations in Industrial Work, Indian Journal of

Social Work, 23(2), 155-166

 Industrial Disputes Act, 1947 : Industrial Disputes (Bombay) Rules,

1957 with Industrial Disputes (Central) Rules, 1957, Labour Law Agency

 Mamoria, C. B and Mamoria, Satish and Gankar, S.V. Dynamics

of Industrial Relations in India, Himalaya

 Michael V P, HRM and Human Relations, Himalaya.

************

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Lesson No.18 HUMAN RESOURCE Unit-IV
Semester-II MANAGEMENT MCOMC253

CONFLIT RESOLUTION -- COLLECTIVE BARGAINING

STRUCTURE
18.1 Introduction

18.2 Objectives

18.3 Conceptual Analysis

18.4 Features of Collective Bargaining

18.5 Conditions for Successful Collective Bargaining

18.6 Negotiation Process

18.6.1 Pre-negotiation Phase

16.6.2 Negotiation Phase

18.7 The Agreement

18.8 Contract Administration

18.9 Summary

18.10 Glossary

18.11 Self Assessment Questions

18.12 Lesson End Exercise

18.13 Suggested Readings

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18.1 INTRODUCTION
Collective bargaining is specifically an industrial relations mechanism or
tool, and is an aspect of negotiation, applicable to the employment relationship.
In collective bargaining the union always has a collective interest since the
negotiations are for the benefit of several employees. Where collective bargaining
is not for one employer but for several, collective interests become a feature for
both parties to the bargaining process. In negotiations in non-employment
situations, collective interests are less, or non-existent, except when states
negotiate with each other. Further, in labour relations, negotiations involve the
public interest such as where negotiations are on wages which can impact on
prices. This is implicitly recognized when a party or the parties seek the support
of the public, especially where negotiations have failed and work disruptions follow.
Governments intervene when necessary in collective bargaining because the
negotiations are of interest to those beyond the parties themselves.

18.2 OBJECTIVE
This lesson will equip you with knowledge regarding
(i) collective bargaining concept
(ii) its features
(iii) prerequisites and process
18.3 CONCEPTUAL ANALYSIS
The term “collective bargaining” was first used in the middle of 1891 by
economic theorist Beatrice Webb. However, collective negotiations and
agreements had existed since the rise of trade unions during the 18th century.
The term collective bargaining itself was coined by a British labour historian
named Mrs. Sidney Webb in 1891 (Hoffer). The National Railway Act and the
National Labour Relations Act made it illegal for any employer to deny union
rights to an employee. Another step in this direction came in 1962 when President
John F Kennedy issued an executive order granting Federal employees the right
to unionize and collective bargain. Collective bargaining has even been
recognized internationally as a basic human right and in 2007 the Canadian

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Supreme Court ruled that “The right to bargain collectively with an
employer enhances the human dignity, liberty and autonomy of workers
by givin g them th e opportun ity t o inf luence the est ablishm ent of
workplace rules and thereby gain some control over a major aspect of
their lives, namely their work. ... Collective bargaining is not simply an
instrument for pursuing external ends ... rather [it] is intrinsically
valuable as an experience in self-government”. Even the Catholic Church
has asserted that it is imperative to protect workers’ rights including collective
bargaining. It is widely recognized that throughout history unionized employees,
both public and private, enjoy a living wage and benefits that they deserve while
not having to worry about unjust treatment, unfair labour practices, or termination
without cause

The ILO Right to Organize and Collective Bargaining Convention (No.

98), 1949 describes collective bargaining as: “Voluntary negotiation between
employers or employers’ organizations and workers’ organizations, with
a view to the regulation of terms and conditions of employm ent by
collective agreements.”

Collecti ve bargaining could also be defined as negotiations

relating to terms of employment and conditions of work between an
employer, a group of employers or an employers’ organization on the one
hand, and representative workers’ organizations on the other, with a view
to reaching agreement.

So, we can conclude that collective bargaining is a process of negotiations

between employers and a group of employees aimed at reaching agreements
that regulate working conditions. The interests of the employees are commonly
presented by representatives of a trade union to which the employees belong.
The collective agreements reached by these negotiations usually set out wage
scales, working hours, training, health and safety, overtime, grievance
mechanisms, and rights to participate in workplace or company affairs.

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18.4 FEATURES OF COLLECTIVE BARGAINING
There are several essential features of collective bargaining, all of which
cannot be reflected in a single definition or description of the process:
 It is not equivalent to collective agreements because collective bargaining
refers to the process or means, and collective agreement refers to the
possible result of bargaining.

 Collective bargaining may not always lead to a collective agreement.

 It is a method used by trade unions to improve the terms and conditions

of employment of their members.

 It seeks to restore the unequal bargaining position between employer

and employee.

 Where it leads to an agreement, it modifies, rather than replaces, the

individual contract of employment, because it does not create the
employer-employee relationship.

 The process is bipartite, but in some developing countries the State plays
a role in the form of a conciliator where disagreements occur, or where
collective bargaining impinges on government policy.

 It is flexible in nature. If the parties adopt rigid attitude, they will not be
able to reach any agreement.

 It is dynamic as it keeps on changing with changing times.

 It is continuous process. As soon as one agreement is signed, preparations

for other agreement get started.

 It is multidisciplinary as the parties involved must have knowledge of

economics, finance, applied psychology and sociology.

It is step towards industrial democracy as it makes employees aware of

their rights and they negotiate for the same with their employer.

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18.5 CONDITIONS FOR SUCCESSFUL COLLECTIVE BARGAINING
 Pluralism and the Freedom of Association: A pluralistic outlook
involves the acceptance within a political system of pressure groups (e.g.
religious groups, unions, business associations, political parties) with
specific interests with which a government has dialogue, with a view to
effecting compromises by making concessions. Pluralism implies a
process of bargaining between these groups, and between one and more
of them on the one hand and the government on the other. It therefore
recognises these groups as the checks and balances, which guarantee
democracy. It is natural that in labour relations in a pluralist society,
collective bargaining is recognised as a fundamental tool through which
stability is maintained, while the freedom of association is the sine qua
non because without the right of association the interest groups in a society
would be unable to function effectively. There can, therefore, be no
meaningful collective bargaining without the freedom of association
accorded to both employers and workers.

 Trade Union Recognition: The existence of the freedom of association

does not necessarily mean that there would automatically be recognition
of unions for bargaining purposes. Especially in systems where there is a
multiplicity of trade unions, there should be some pre-determined
objective criteria operative within the industrial relations system to decide
when and how a union should be recognised for collective bargaining
purposes. The accepted principle is to recognise the most representative
union, but what criteria is used to decide it and by whom may differ from
system to system. In some systems the issue would be determined by
requiring the union to have not less than a stipulated percentage of the
worker s in t he ent erprise or cat egory in it s membership. The
representativeness may be decided by a referendum in the workplace or
by an outside certifying authority (such as a labour department or an
independent statutory body). There could be a condition that once
certified as the bargaining agent, there cannot be a change of agent for a

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 prescribed period (e.g. one or two years) in order to ensure the stability
of the process.

 Observance of Agreements: Especially in developing countries where

there is a multiplicity of unions, unions are sometimes unable to secure
observance of agreements by their members. Where a labour law system
provides for sanct ions for breaches of agreements, t he labour
administration authorities may be reluctant to impose sanctions on
workers. Where there is frequent non-observance of agreements or
understandings reached through the collective bargaining process, the
party not in default would lose faith in the process.
 Support of Labour Administration Authorities: Support by the
labour administration authorities is necessary for successful collective
bargaining. This implies that they will:
(i) Provide the necessary climate for it. For instance, they should
provide effective conciliation services in the event of a breakdown
in the process, and even provide the necessary legal framework
for it to operate in where necessary, e.g. provision for the
registration of agreements.
(ii) Will not support a party in breach of agreements concluded
consequent to collective bargaining.
(iii) As far as is pract icable, secure observance of collect ive
bargaining agreements.
(iv) Provide methods for the settlement of disputes arising out of
collective bargaining if the parties themselves have not so
provided.
 Good Faith: Collective bargaining is workable only if the parties bargain
in good faith. If not, there will be only the process of bargaining without
a result viz. an agreement. Good faith is more likely where certain
attitudes are shared among employers, workers and their organizations
e.g. a belief and faith in the value of compromise through dialogue, in

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 the process of collective bargaining, and in the productive nature of
the relationship collective bargaining requires and develops. Strong
organizations of workers and employers contribute to bargaining in good
faith, because there would be some parity in the bargaining strength of
the two parties.
 Proper Internal Communicat ion: Bot h t he management and
union should keep their managers and members respectively well
informed, as a lack of proper communication and information can
lead to misunderstandings and even to strikes. Sometimes managers and
supervisors who are ill-informed may inadvertently mislead workers who
work under them about the current state of negotiations, the management’s
objectives and so on. In fact, it is necessary to involve managers in deciding
on objectives and solutions, and such participation is likely to ensure greater
acceptance - and therefore better implementation - by them.
 Strikes/ lockouts: Strikes and lockouts should be resorted to as last
measure. Before taking any decision, both the union and management
should conduct periodic discussions to avoid strikes and lockouts.
18.6 NEGOTIATION PROCESS
It consists of three phases:
 Pre-negotiation
 Negotiation
 Agreement
18.6.1 Pre-negotiation Phase
A party wishing to arrive at a satisfactory conclusion or arrangement
through collective bargaining should first identify the objectives of the
exercise. Some objectives common to employers are the following:
(i) Ensuring that the enterprise is not rendered uncompetitive
(ii) The need to keep wage increases below the level of productivity

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increases and/or within the inflation rate.
(iii) Guarantees of industrial peace during the period of operation of
the agreement
As far as possible managers should be consulted in det ermining
objectives; their priorities should be solicited, and they should be aware
of the company’s views in regard to objectives so that they could be
tested against the managers’ views.
It is insufficient to merely determine objectives. A tentative plan to achieve
these objectives, which can be modified during the course of the
negotiations, could be formulated. Such a plan should include the
company’s requests to the union. For instance, work reorganization to
increase productivity to absorb the cost increases consequent upon
collective bargaining may form part of the company’s plan. Negotiations
on the union’s demands are generally an ideal setting in which management
can achieve some of its objectives through agreement. In order to achieve
this, the management must be clear about its own priorities. If there is an
existing collective agreement, it would be a useful starting point. An
analysis should be made of how it has worked, its unsatisfactory features
from the company’s point of view should be identified, and the changes
necessary determined.

 Negotiating Team: The negotiating team, and the respective

roles of the members, should be determined before the negotiations.
Employers would find it useful to include in the team people from
different disciplines.

 Research and Study: The union’s demands should be carefully studied.

The following are some of the matters to which attention should be paid:

(i) Assess the economic impact of the demands on the company.

(ii) Make a comparative study, e.g. in a wage demand one should

ascertain comparative wage rates in the industry and in allied or

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 similar businesses, the minimum wage, if any, and the rates
applicable in other collective agreements.

(iii) Separate the demands which the company has no intention of

fulfilling or giving, either on a question of principle or due to
economic incapacity.

(iv) Prepare the company’s position in regard to the other demands,

e.g. the conditions on which the company may be prepared to
grant them or compromise on them.

(v) Identify the demands which may be of crucial importance to the

union or to the employees as the case may be. This is crucial to
success in negotiations because, without a proper assessment of
such demands, a negotiated settlement may not result or, if one
results, it may lack durability because it has not addressed the
main problems. The issues which may be of crucial importance
may not be the same in the case of both (union and employees)
as they may have differing interests. Having identified the crucial
demands the company should formulate its strategy in relation to
them e.g. the possibility of trading some of the company’s demands
in return for the union’s demands.
 Responding to the Union’s Requests: It is a matt er of
assessment in each situation as to whether the management should make
an initial response in writing to the union before negotiations commence.
Usually it is desirable that written positions stated before negotiations
commence should not contain a flat or blanket refusal. At this stage it is
preferable to couch a refusal in language 13which does not give the
impression of an out-of-hand rejection or a rejection without consideration
of the merits. Negative answers may sometimes be better given during
the negotiations because it affords greater opportunities for explanations
of the reasons for the negative answers. A rejection during negotiations
would more likely give the impression to the union and employees that

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such rejection was made only after negotiations and not before. It is
always useful from the point of view of reaching agreement on other
matters to first listen to the reasons adduced by the union for a demand
which the company does not propose to accept. A rejection during
negotiations also enables the employer to convince a union of at least
some of the reasons why the demand is not acceptable. It also prevents
a union from resorting to trade union action on the issue of a refusal to
negotiate, as distinct from rejection of the demands after negotiation.

 Inventing Options: Since negotiations may not proceed or take

place in the way a party may plan, a party should be able to provide
alternative options to what he, or the other party, expects. For example,
if it transpires that the wage increase sought is not acceptable, the
employer should be prepared with alternatives to cushion the impact
of an increase in excess of what it had planned to agree to.

 Strategy: A party to collective bargaining negotiations has to

formulate a st rategy for all stages of t he negot iation, including t he
pre-negotiation stage. Before negotiations commence, the strategy
should include matters such as;

(i) Options as referred to above

(ii) How much to offer while leaving room for further negotiation if
the offer fails. The offer should be sufficiently attractive so as not
to lead to a breakdown in negotiations.

(iii) How to link one’s requirements to the concessions one makes.

18.6.2 Negotiation Phase

 Who Commences: There is no inflexible rule as to who should
open t he negot iations. However, it is not unreasonable for t he
management to claim that if the union has initiated the negotiations, it
should first outline it s rationale and just ificat ion for doing so.

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Nevertheless, the management should make it clear at the outset that
agreement on any particular issue is subject to an overall settlement,
including its own expectations from the union.

 Man agement’s Reacti ons; In out lining t he emplo yer ’s

response, the following could be included:

(a) The context in which the employer is negotiating, such as the

business environment, and how this affects the employer’s position
in the negotiations.

(b) A judgement will have to be made about the stage at which the
union should be informed about the items on which the employer
will not make any concession. However, the impression should
not be created that the union will not be allowed an opportunity
to present its case.
(c) The basis on which the employer is prepared to negotiate. This
could include the employer’s objectives and expectations from a
collective agreement, and any unsatisfactory features in the existing
agreement (if there is one) which require to be rectified.
 Internal Communication: During the negotiations there should
be good internal communication between the company and its managers
abo ut t he sit uat io n at any given t ime. T his will help clar ify
misunderstandings and even eliminate disinformation especially where
employees, as happens in developing countries, seek information or
clarification from their managers.
 Notes of Discussion: Not es of t he discussion should be
maintained, and preferably issued and agreed on with the other party, to
avoid misunderstandings. Such notes could be useful in the event of
disputes and a breakdown in negotiations.
 Styles of Negotiation: It is an essential principle of negotiation
- indeed of human relations - that one’s style of negotiation may need to
be adapted to the style of the other party. The negotiator who adopts

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only one approach to negotiations may be puzzled when he finds that the
approach in question bears fruit in some cases but causes an adverse
reaction in other cases. The ability to allow the attitudes of the other
party or the facts or merits of the issue to fashion one’s own particular
style in a given negotiation requires a high degree of flexibility on the
part of the negotiator, an absence of a pre-conceived approach to
negotiation, and recognition of the fact that ultimately what matters is
one’s ability to secure one’s objectives through dialogue. However, this
should not be understood to mean that there should not be a principled
approach to negotiation. What it means is that often one has to take into
account even the idiosyncrasies of the other party and assess what form
of presentation is likely to appeal best to the person whom one is trying
to convince.
Some Basic Rules of Negotiations
 A negotiator should view negotiations as an exercise with both
sides walking towards each other, rather than away from each other.
This will enable the negotiator to keep in mind that the final objective is
a satisfactory agreement. It will also lead to a search for, or identification
of, common ground while also addressing the differences.

 A negotiator should be good at listening carefully to the other

party who will, otherwise, feel that disagreement with his position is due
to a lack of understanding. This is also necessary to encourage the other
party to listen to you. Some indication should be given to suggest that
the party has understood the other’s position. Body language often
communicates a party’s reactions.

 A party should build its case in a logical sequence and, as far as

possible, try to obtain agreement at each stage of the process. This will
narrow the areas of disagreement and facilitate focusing on those aspects.

 Counter proposals and conditions attached to concessions should

be indicated as early as possible, so that the basis on which a party is

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 prepared to agree or compromise is understood. Whenever possible,
invite the other party to look at the problem from t he opposite
perspective, e.g. a wage increase as an additional cost which, due to
competitive pressures, requires management to find ways to absorb it. It
is sometimes useful to ask the union for suggestions on how it can
cooperate to facilitate absorption of the increase.

 It is usually preferable to avoid taking up at the outset the position

that a particular item is not negotiable. It is more productive to request a
party to justify its claim, and then point out why that claim is unreasonable.
Taking up a non-negotiable position can lead to the perception that the
position has nothing to do with the merits and that the party is not willing
to listen.

 Skilful questioning is an effective way of compelling the other party

to justify its claim on the merits, and even shifting the other party to a
different point of view.

18.7 THE AGREEMENT

When agreement is reached one of the following two courses may be
adopted:

 Set out the agreement reached in a letter to the union and, on confirmation,
prepare a draft agreement.

 Alternatively provide the union with a draft agreement. This would be

the better course of action as the actual agreement reached will be clearer.
It also leaves less room for further negotiations between the time
agreement is reached and the draft agreement is approved.

Before the agreement is signed, the proper interpretation of clauses which

have the potential to result in problems of interpretation should be agreed
upon through, for example, an exchange of letters. Where there are
understandings which affect the interpretation of the agreement, they

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 should be reduced to writing (e.g. in a letter) before the agreement is
signed. But wherever possible, the agreement should be self-contained,
inclusive of definitions or interpretations. The contents of the agreement
would depend on what is agreed upon and on the subject matter.

The following examples are of some general application:

 The date of commencement of the agreement,

 Its duration - when it will terminate or may be terminated, and how it

can be terminated,
 A definition of terms which may otherwise be ambiguous,

 The procedure for settling disputes regarding interpretation, as well as

other disputes,

 This may also include the issue of trade union action and lock-out, i.e. in
what circumstances such action may or may not be permitted,

 The consequences in the event of breaches of the agreement and

 With regard to wages, exactly how conversion of employees’ wages to

the new scales is to be effected.

The signing of an agreement does not ensure its successful implementation.

Managers and supervisors should be acquainted with the agreement through
the most appropriat e means. A combination of written and oral
communication is often useful.

18.8 CONTRACT ADMINISTRATION

Agreement will be useful if they are executed properly. As observed by
Profs. Illiamson and Harries, “if anything is more important to industrial relations
than the contract itself, it is the administration of the contract”.

The specific nature and extent of contract administration varies from

contract to contract. Factors influencing the degree of contract administration
include the nature of the work, the type of contract, and the experience and

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commitment of the personnel involved. Contract administration starts with
developing clear, concise performance based statements of work to the extent
possible, and preparing a contract administration plan that cost effectively
measures all clauses of contract.

Post award orientation, either by conference, letter or some other form of

communication, should be the beginning of the actual process of good contract
administration. This communication process can be a useful tool that helps
employees and employer achieve a clear and mutual understanding of the contract
requirements, helps the unions/ employees to understand the roles and
responsibilities of the officials, who will administer the contract, and reduces future
problems. It is helpful to have a pre-meeting with applicable program officials
prior to the post award orientation conference so that there is a clear understanding
of their specific responsibilities and restrictions in administering the contract. Items
that should be discussed at the pre-meeting include such things as the authority of
representatives, who will administer the contract, quality control and testing, the
specific contract deliverable requirements, special contract provisions, the
procedures for monitoring and measuring performance etc..

Where appropriate, an alternative dispute resolution (ADR) technique

known as “partnering” should be discussed with the parties to help avoid future
contract administration problems. Partnering is a technique to prevent disputes
from occurring. It involves t and contractor management staff mutually developing
a “plan for success,” usually with the assistance of a neutral facilitator. The
facilitator helps the parties establish a non-adversarial relationship, define mutual
goals and identify the major obstacles to success for the project. Potential sources
of conflict are identified, and the parties seek cooperative ways to resolve any
disputes that may arise during contract performance. The process results in the
parties developing a partnership charter, which serves as a roadmap for contract
success. Many agencies have successfully used partnering on construction projects
and are now beginning to apply these principles in the automated data processing/
information resources management area.

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 Union Obligations for Contract Administration
 In return for the various rights that a union might be granted by contract
clauses, it is obligated to live up to the terms of the complete contract. In
particular, unions usually give up the right to strike over grievances and
instead must pursue orderly resolution of disputes over the application of
the contract through the grievance procedure. This includes respecting the
terms of any arbitration awards. Unions can be sued for violating a
collective bargaining agreement. Another union obligation, and a central
issue in contract administration for labour unions, is the duty of fair
representation. Further, union should educate their members about the
terms and conditions of agreement for its successful implementation. Union
leader should be ready to talk to management whenever required.

Prof. Campo has laid down t he following general principles for

administering the contract effectively;

 Cooperation between both the parties is essential. Both the parties should
have a tolerant attitude towards each other and have a spirit of
accommodation and goodwill.

 Proper procedure should be adopted for the redressal of grievances by

providing opportunity to exchange views.

 When a conference over the redressal of grievance reaches an impasse,

the grievance should be referred to arbitration.

 Both the parties should honour the commitment.

18.9 SUMMARY
Collective bargaining refers to negotiations relating to terms of
employment and conditions of work between an employer, a group of employers
or an employers’ organization on the one hand, and representative workers’
organizations on the other, with a view to reaching agreement. The collective
agreements reached by these negotiations usually set out wage scales, working

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hours, training, health and safety, overtime, grievance mechanisms, and rights
to participate in workplace or company affairs. Freedom of association, union
recognition, good faith between the parties involved, internal communication
are some of the pre-requisites for successful bargaining. The negotiation process
comprises three phases viz., Pre-negotiation, Negotiation and Agreement. The
contract administration is very important for its success and both parties should
honour the agreement in letter and spirit.

18.10 GLOSSARY
 Bargaining Unit: a group of employees in a firm, plant, or industry that
has been recognized by an employer or certified by a Labour Relations
Board as appropriate for collective bargaining practices

 Collective Bargaining: the negotiations that take place between a labour

union, collectively representing employees of a firm or industry, and the
employer or employer ’s association to arrive at a mutually acceptable
collective agreement

 Collective Agreement: a signed, written agreement between an

employer (or an employer’s organization) and the union representing a
grow pod the organization’s employees containing provisions outlining
the terms and conditions of their employment

 Good Faith Bargaining: the legal requirement that the parties negotiate
a collective agreement bargain honestly, fairly, and sincerely

 Bargaining Zone: the area defined by the bargaining limits (resistance

points) of each side in which compromise is possible, as in the attainment
of a settlement satisfactory to both parties

 Mutual Gains Bargaining: a win-win approach based on training in

the fundamentals of effective problem solving and conflict resolution in
which trainees are taught to take the interest of all stakeholders into

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 account so that the solutions developed are better and more permanent

18.11 SELF ASSESSMENT QUESTIONS

Q1 Explain “Collective bargaining is bi-partite agreement”
Q2. Discuss Different Phases of Collective bargaining.
Q3. What is significance of contract administration
18.12 LESSON END EXERCISE
Q1. What is the role of supervisor in Collective bargaining:

a) Negotiator
b) Observer
c) Communicator

Q2. Which of the following approach is usually followed for selecting

negotiation team:
a) Team
b) Individual
Q3. Who is responsible for contract administration:
a) Management
b) Union
c) Both

18.13 SUGGESTED READINGS

 Sriyan de Silva (1996) Collective Bargaining Negotiations, International
Labour Organisationact/Emp Publication.

 Edwin E Fillipo. Personnel Management, McGraw Hill

 Yoder Dale. Personnel Management and Industrial Relations

 Bhagoliwal TN, personal Management and Industrial Relations, Agra Publ.

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 Arun Monappa, Industrial Relations, Tata Mc Graw Hill.

 Michael V P, HRM and Human Relations, Himalaya Publication.

 Mamoria and Mamoria, Dynamics of Industrial Relations in India,

Himalaya Publication

***********

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Lesson No.19 Unit-IV
Semester-II MCOMC253

WORKERS’ PARTICIPATION IN MANAGEMENT

STRUCTURE
19.1 Introduction
19.2 Objectives
19.3 Workers’ Participation in Management (WPM)
19.3.1 Features of WPM
19.3.2 Objectives of WPM
19.3.3 Pre-requisites for Effective Participation
19.4 Levels of WPM, Workers’ Empowerment
19.5 Methods/Schemes of WPM
19.6 Workers’ Participation in Management in India
19.6.1 Reasons for failure of Workers participation Movement in India
19.6.2 Measures for making Participation effective
19.7 Summary
19.8 Glossary
19.9 Self Assessment Questions
19.10 Lesson End Exercise
19.11 Suggested Readings

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19.1 INTRODUCTION
Workers’ participation in management is an essential ingredient of
Industrial democracy. The concept of workers’ participation in management is
based on Human Relations approach to Management, which brought about a
new set of values to labour and management.
19.2 OBJECTIVES
After reading this lesson you shall be able to understand :
(i) the concept of workers participation in management
(ii) its features, objectives
(iii) and levels
(iv) It will also give you an insight into various ways of WPM as well as WPM
in India
19.3 WORKERS’ PARTICIPATION IN MANAGEMENT (WPM)
Traditionally the concept of Workers’ Participation in Management
(WPM) refers to participation of non-managerial employees in the decision-
making process of the organization. Workers’ participation is also known as
‘labour participation’ or ‘employee participation’ in management. In Germany
it is known as co-determination while in Yugoslavia it is known as self-
management. The International Labour Organization has been encouraging
member nations to promot e t he scheme of Workers’ Part icipat ion in
Management.
Definitions: According to Keith Davis, Participation refers to the
mental and emotional involvement of a person in a group situation, which
encourages him to contribute to group goals and share the responsibility
of achievement.
According to Walpole, Participation in Management gives the
worker a sense of importance, pride and accomplishment; it gives him the

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freedom of opportunity for self-expression; a feeling of belongingness with
the place of work and a sense of workmanship and creativity.
Clegg says, “It implies a situation where workers representatives
are, to some extent, involved in the process of management decision
making, but where the ultimate power is in the hands of the management”.
The concept of workers’ participation in management encompasses
the following:
 It provides scope for employees in decision-making of the organization.
 The participation may be at the shop level, departmental level or at the
top level.
 The participation includes the willingness to share the responsibility of
the organization by the workers.
19.3.1 Features of (WPM) Workers’ Participation in Management:
Participation means mental and emotional involvement rather than
mere physical presence.
Workers participate in management not as individuals but collectively
as a group through their representatives.
Workers’ participation in management may be formal or informal. In
both the cases it is a system of communication and consultation whereby
employees express their opinions and contribute to managerial decisions.
19.3.2 Objectives of (WPM) Workers’ Participation in Management
To establish Industrial Democracy.
To build the most dynamic Human Resources.
To satisfy the workers’ social and esteem needs.
To strengthen labour-management co-operation and thus maintain Industrial

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peace and harmony.
To promote increased productivity for the advantage of the organization,
workers and the society at large.
Its psychological objective is to secure full recognition of the workers.
19.3.3 Pre-requisites for Effective Participation
The pre-requisites for the success of any scheme of participative
management are the following:
There should be a strong, democratic and representative unionism for
the success of participative management.
 There should be mutually-agreed and clearly-formulated objectives
for participation to succeed.
There should be a feeling of participation at all levels.
Fourthly, there should be effective consultation of the workers by the
management.
Both the management and the workers must have full faith in the
soundness of t he philosophy underlying t he concept of labour
participation.
 Till the participative structure is fully accepted by the parties, legislative
support is necessary to ensure that rights of each other are recognised
and protected.
Education and training make a significant contribution to the purposeful
working of participative management.
Forums of participation, areas of participation and guidelines for
implementation of decisions should be specific and there should be
prompt follow-up action and feedback.

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19.4 LEVELS OF WORKERS’ PARTICIPATION IN MANAGEMENT
a. Information participation: It ensures that employees are able to receive
information and express their views pertaining to the matter of general
economic importance.
b. Consultative importance: Here workers are consulted on the matters
of employee welfare such as work, safety and health. However, final
decision always rests with the top-level management, as employees’ views
are only advisory in nature.
c. Associative participation: It is an extension of consultative participation
as management here is under the moral obligation to accept and implement
the unanimous decisions of the employees. Under this method the
managers and workers jointly take decisions.

d. Administrative participation: It ensures greater share of workers’

participation in discharge of managerial functions. Here, decisions already taken
by the management come to employees, preferably with alternatives for
administration and employees have to select the best from those for implementation.

e. Decisive participation: Highest level of participation where decisions

are jointly taken on the matters relating to production, welfare etc.

Worker’s Empowerment
Empowering workers refers to passing on authority and responstbility.
to workers or employees in the organisation Empowerment occurs,when power goes
to the employees who then experience a sense of ownership and control over
their Jobs.
Empowered individuals know that their jobs belong to them. Given a say on
how things are done, employees feel more responsible. When they feel responsible,
they show more initiative in their work, get more done, and enjoy the work more.

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 A Model of QC Process
Set-up Circle

Train Members

Select Problem Topic

Investigate Problem

Develop Solution

Present Suggestions to Management

Execute Solutions

Monitor Solution

Fig 20.1
(Source : Robert P. Bechio, Organisational Behaviour. The Dryden Press, 1995, P. 239)

Empowered individual is faciliated by a combination of factors, including

values, leadership actions, job structure, and reward systems, as illustrated in
above model.

Self-directed teams (another name for empowered teams) have the

following distinct features :

1. They are empowered to share various management and leadership

functions.

2. They plan, control and improve their own work processes.

3. They set their own goals and inspect their work.

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How to empower workers today ?
So, how do the companies/organisations do worker empowerment in the workplace.
The employers weave employee empowerment into the daily roles of our employes.
We make sure to enable, inspire and encourage individuals to take steps to improve
their work experience, increase their work engagement and help build an inclusive
culture.

How to empower employees in organisations :

Employees can be empowered through following steps :
1. Offer authority and ownership by handing out responsibility. Let an
worker take on a new project — and run with it. When we delegate different
(even small) tasks to an worker, it empowers her to get the job done, and
done well.

2. Make guidelines and best practices clear. When workers understand

the guidelines within which they should work which boundaries they can
push, they’re able to do their job more effectively and feel more supported.

3. Encourage communication Bosses should to increase levels of trust and

show that all ideas are welcome and valued.

4. Offer individual or team coaching Superiors bosses should try to identify

roadblocks, find solutions and then take action to achieve goals through
their employees.

5. Allow opportunities for growth. Employers should Foster internal

development and growth across departments with cross-department job
shadows and transitions. They should allow their subordinates to avail
opportunities for their growth and development .

6. Provide organizational support for workers to create and drive their own
development plans with their managers.

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19.5 METHODS/SCHEMES OF WPM
 Suggestion schemes: Participation of workers can take place through
suggestion scheme. Under this method workers are invited and encouraged to offer
suggestions for improving the working of the enterprise. A suggestion box is installed
and any worker can write his suggestions and drop them in the box. Periodically all
the suggestions are scrutinized by the suggestion committee or suggestion screening
committee. The committee is constituted by equal representation from the management
and the workers. The committee screens various suggestions received from the
workers. Good suggestions are accepted for implementation and suitable awards are
given to the concerned workers. Suggestion schemes encourage workers’ interest in
the functioning of an enterprise.

The suggestion schemes are increasingly used by progressive management.

Bosch, Bangalore, for instance, has the scheme in operation for the past three decades.
The suggestions flow from various levels, though main1y from the operators. The
ideas range from changes in inspection procedures to design changes, process
simplification, paper-work reduction, and the like. The company receives a few hundred
suggestions every year. Of those accepted, the benefit to the company could range
from marginal to substantial. The rewards to the employees are commensurate with
the benefits derived from the suggestions. Aviva Insurance Co. of India had instituted
I Save Campaign in November, 2008 to recognise a team or an employee for ideas
on savings or even innovatively tweaking things to manage company expenses. The I
Save Campaign generated 800 ideas from across functions. One employee by name,
Dinesh Arora, came up with an idea of reducing per unit cost of acquiring and training
a Financial Planning Advisor and saved the company a whopping Rs 1.14 crore per
month. And he got an individual award of Rs 25,000. Toyota, as told in the opening
case, is another example that benefited from suggestion schemes.

CASE STUDY
Adversity Turned into Opportunity

Ashok Leyland, India’s Second largest Truck maker, hasn’t excaped the effects

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of the harsh economic environment.That is a fact that hits any visitor to the company’s
oldest plant, in Ennore, near Chennai. The buzz associated with peak manufacturing
is missing. Machines lie idle. Production has been cut so that output is in sync with
sales, which dropped by nearly a third in 2008-09. In such a situation, conventional
wisdom would have decreed that the company lay off workers to cut costs. But Ashok
Leyland has kept them on, cutting man-days, but pretty much leaving salaries
untouched.

The move defies logic, but the company believes it has done the smart thing.
Because what the workers have been doing with their downtime has brought cheer to
Ashok Leyland like few other things since October 2008, when it decided to cut
poduction. The workers (or associates, as managers prefer calling them) are the ones
who have come up with innovations to improve productivity at the Ennore plant. Ask
managers what kind of innovations, and you would get 1,586 answers-that is the
number of improvements carried out at the plant over the last six months. Most of the
ideas, from simple ones, such as using trolleys to carry loads normally borne by humans,
to more complex ones like revamping a production process, are aimed at reducing
fatigue and wastage and improving efficiency.

Apart from keeping workers occupied during a lean period the- exercise alsi
promises long-term benefits for Ashok leyland. One of the improvements for instance,
pertains to a bottleneck in drilling holes for shafts in engine gears. Earlier, five high-
speed steel drills were used to bore 8.8 m holes in gear wheels, with a reamer being
used to finely drill each hole a further 0.2 mm and finish it. The drills took 18 minutes
to complete the process. At peak volume, only 44,000 units could be turned out,
whereas the company needed 70,000. One way of solving the problem was to buy
new equipment, but that would have cost Rs 65 lakh.

The workers faund that a single 9 mm carbide drill could perform the job of
the other five drills and twice as fast. The process naw takes eight minutes, and 75,000
units can be turned out at peak, volume, The cost af the component has also fallen by
Rs 30 thanks to savings an electricity and drill bits, among other things. The annual
saving works out to around Rs 21 lakh.

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 Another piece af engineering ingenuity is also delivering significant
savings. Workers manning furnaces figured out they could power two furnaces, instead
of one earlier, with a single generator. They also found that they needed to use only
two cooling towers for three furnaces, instead of three previously. That results in a
yearly saving of 423,000 units of electrical energy, which translates to about Rs 20
lakh.

Such operational improvements have also enabled capacity enhancement in

some processes at a time when the company has frozen major investments. These
innovations, alang with efforts to cost inventaries by Rs 7 crore and reduce defects,
are significant from a cost angle, at a time when Ashok Leyland’s turnover has fallen
sharply and profitability is under severe stress. Turnover stood at crore in the first
nine months of 2008-09; the full-year figure will be well shart of the Rs 7,729 crore
recorded in 2007-08.

It is not as if Ashok Leyland woke up to the idea of improvements

only because of the economic crisis. The move to involve workers in seeking process
improvements began in mid-2005 through Mission Gemba (which, in Japanese, implies
t he wo rkplace) . The ongoing wave of innovat io ns has
used that platform. “Such processes have always been in place”, says MS Sundarajan,
Deputy Co Quality Engineering, at the Ennore plant. He pointed out that in 2007,
about 1,900 improvement were undertaken. “But now, there is more focus”.

When the company decided to cut output six months ago, the team at its
Ennore plant was asked to put on their thinking cap more often. The idea paid off–
with time on their hands, the worked doubled the rate of improvements. One reason
the effort has succeeded so well, says a company spokesperson, is because the
approach is not top-down.
 Works committee: Under the Industrial Disputes Act, 1947, every
establishment employing 100 or more workers is required to constitute a works
committee. Such a committee consists of equal number of representatives from the
employer and the employees. The main purpose of this committee is to provide
measures for securing and preserving amity and good relations between the employer

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and the employees.

3. Functions: Works committee deals with matters of day-to-day functioning at

the shop floor level. Works committees are concerned with:

 Conditions of work such as ventilation, lighting and sanitation.

 Amenities such as drinking water, canteens, dining rooms, medical and
health services.
 Educational and recreational activities.
 Safety measures, accident prevention mechanisms etc.
 Works committees function actively in some organizations like Tata
Steel, HLL, etc but the progress of Works Committees in many
organizations has not been very satisfactory due to the following
reasons:
 Lack of compet ence and interest on the part of workers’
representatives.
 Employees consider it below their dignity and status to sit alongside
blue-collar workers.
 Lack of feedback on performance of Works Committee.
 Undue delay and problems in implementation due to advisory nature
of recommendations.
 Joint Management Councils: Under this system Joint Management Councils
are constituted at the plant level. These councils were setup as early as 1958. These
councils consist of equal number of representatives of the employers and employees,
not exceeding 12 at the plant level. The plant should employ at least500 workers.
The council discusses various matters relating to the working of the industry. This
council is entrusted with the responsibility of administering welfare measures,
supervision of safety and health schemes, scheduling of working hours, rewards for
suggestions etc.
Wages, bonus, personal problems of the workers are outside the scope of
Joint management councils. The council is to take up issues related to accident

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prevention, management of canteens, water, meals, revision of work rules, absenteeism,
indiscipline etc. the performance of Joint Management Councils have not been
satisfactory due to the following reasons:
 Workers’ representatives feel dissatisfied as the council’s functions
are concerned with only the welfare activities.
 Trade unions fear that these councils will weaken their strength as
workers come under the direct influence of these councils.
 Work directors: Under this method, one or two representatives of workers
are nominated or elected to the Board of Directors. This is the full-fledged and highest
form of workers’ participation in management. The basic idea behind this method is
that the representation of workers at the top-level would usher Industrial Democracy,
congenial employee-employer relations and safeguard the workers’ interests. The
Government of India introduced this scheme in several public sector enterprises such
as Hindustan Antibiotics, Hindustan Organic Chemicals Ltd etc. However the scheme
of appointment of such a director from among the employees failed miserably and the
scheme was subsequently dropped.
 Co-partnership: Co-partnership involves employees’ participation in
the share capital of a company in which they are employed. By virtue
of their being shareholders, they have the right to participate in the management of the
company. Shares of the company can be acquired by workers making cash payment
or by way of stock options scheme. The basic objective of stock options is not to
pass on control in the hands of employees but providing better financial incentives for
industrial productivity. But in developed countries, WPM through co-partnership is
limited.

 Joint Councils: The joint councils are constituted for the whole unit, in every
Industrial Unit employing 500 or more workers, there should be a Joint Council for
the whole unit. Only such persons who are actually engaged in the unit shall be the
members of Joint Council. A joint council shall meet at least once in a quarter. The
chief executive of the unit shall be the chairperson of the joint council. The vice-
chairman of the joint council will be nominated by the worker members of the council.

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The decisions of the Joint Council shall be based on the consensus and not on the
basis of voting.
In 1977 the above scheme was extended to the PSUs like commercial and
service sector organizations employing 100 or more persons. The organizations include
hotels, hospitals, railway and road transport, post and telegraph offices, state electricity
boards.
 Shop councils: Government of India on the 30th of October 1975 announced
a new scheme in WPM. In every Industrial establishment employing 500 or more
workmen, the employer shall constitute a shop council. Shop council represents each
department or a shop in a unit. Each shop council consists of an equal number of
representatives from both employer and employees. The employers’ representatives
will be nominated by the management and must consist of persons within the
establishment. The workers’ representatives will be from among the workers of the
department or shop concerned. The total number of employees may not exceed

Functions of Shop Councils:

 Assist management in achieving monthly production targets.

 Improve production and efficiency, including elimination of wastage of man

power.

 Study absenteeism in the shop or department and recommend steps to reduce

it.

 Suggest health, safety and welfare measures to be adopted for smooth

functioning of staff.

 Look after physical conditions of working such as lighting, ventilation, noise

and dust.

 Ensure proper flow of adequate two way communication between management

and workers.

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19.6 WORKERS’ PARTICIPATION IN MANAGEMENT IN INDIA
In 1920 Mahatma Gandhi had suggested that workers contributed labour
and brains, while shareholders contributed money to enterprise, and that both should,
therefore share in its prosperity. The influence of Mahatma Gandhi bore fruit and
for the first time Joint Consultation was adopted in the Cotton Textile Industry. The
first major step came during the enactment of Industrial Disputes Act, 1947. The
Industrial Policy Resolution had suggested that labour should be consulted in all
matter concerning industrial production.

The need for some form of worker involvement was felt in the mid-1950s
and 1960s, well after independence, and more by the Government than by the
employers, because of the need for rapid industrialization. Workers’ participation
in management came to India through government intervention. There was no urge
among unions for greater involvement in the management of industrial enterprises.
This is a characteristic feature of most participative schemes in the country, and has
had enduring effects on the functioning of the schemes themselves.

The introduction of works committees through the Industrial Disputes Act in

1947 was hailed by many as an encouraging measure for participation. But section
3 of this Act states that the works committee is meant “to promote measures for
securing and preserving amity and good relations between the employer and the
workmen and to that end comment upon matters of their common interest or concern
and endeavour to compose any material differences of opinion in respect of such
matters.” The objective was clear. The works committee was envisaged asan industrial
relations (IR) tool to resolve or reduce differences between managements and labour.
It was not a participative body at all, and was not meant to be so. From the point of
view of structure, the body had some participative pretensions. It was to be
introduced in all enterprises with 100 or more workmen and composed in such a
way that the number of representatives of workmen was not less than that of
management representatives. The workers’ representatives were to be elected for
two years by the workmen of the enterprise, and had to be workers. They could in
addition be unionists or union leaders.

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 If there was any doubt about its non-participative nature, the subsequent
clarifications removed them. When joint management councils (JMCs) were
proposed to be set up in the late 1950s, it was clarified that works committees
should deal with a small number of issues so as not to encroach on the jurisdiction
of the former or on the domain of collective bargaining. Three lists of issues were
prepared, one for JMCs, one for collective bargaining and one for works committees.
Works committees were allotted discussions on lighting, ventilation, temperature,
sanitation, drinking water, canteens, dining and rest rooms, medical and health
services, safe working conditions, administration of welfare funds, educational and
recreational activities, and encouragement of thrift and savings among workers.
There was some enthusiasm over the committees initially, but interest waned
as other forums came up. In many enterprises, workers were particularly excited
about the elections associated with them, and some unions treated the election
exercise as a means of verifying union strength and flexing their muscles. The National
Commission on Labour, 1969, recommended that the recognized union be given
the right to nominate worker representatives to the works committee. However, the
committees did serve some purpose.
Even if elections were not held regularly or the committees did not meet
often, they served as forums for airing workers’ grievances. They are now defunct
in most enterprises, but survive in pockets.
The first real scheme where some kind of participation was envisaged was
that proposing joint management councils. The Industrial Policy Resolution of 1956
stated that “in a socialist democracy, labour is a partner in the common task of
development and should participate in it with enthusiasm ... there should be joint
consultation, and workers and technicians should, wherever possible, be associated
progressively in management. Enterprises in the public sector have to set the example
in this respect”
In 1956, the government suggested at the annual labour conference that a
delegation should go to Europe and study how the system worked in countries
where many of the joint bodies were still active. The delegation reported back to

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the conference and proposed that JMCs be set up in all establishments employing
500 or more workers. The conference adopted this recommendation as a resolution
in 1958, which thereafter became applicable to industrial undertakings, since
employers and unions were a party to the resolution. The Third Plan desired that
the JMCs become a normal feature of the industrial system and integrate private
enterprises into a socialist order. The JMCs did get off to a good start in a few
instances where managements were not averse to the concept of sharing decision-
making with workers and state government officials had vision and initiative. But
these were few. With the growing inflation of the early and mid-1960s, the councils
gradually fell into disuse.

After the JMC experience, the Government decided to make a fresh attempt
at participation in public sector units (PSUs) at least. It announced in 1971 a scheme
for worker directors on PSU boards. One worker director was made mandatory
for each PSU, the representative being a nominee of the recognized union. The
implementation was as usual slow, however. Since most of the recognized unions in
the central PSUs were INTUC affiliates, it became easy to nominate the national
INTUC president or general secretary on most boards. The practice barely survived
into the 1990s. In the entire steel industry by then, the lone employee director was
in IISCO, West Bengal.

For the banks, statutory amendments in 1973 to the State Bank of India Act
1959 and the Banking Regulation Act 1969 provided for the appointment of one
workman (nonexecutive) director and one non-workman (officer/executive) director
in each bank. The working of the scheme was delayed by both managements of
various banks and by unions.

Unions protested against officer directors, contending that officers were in

any case represented. The controversy continued for many years till it was settled
by the Supreme Court in 1989. The most representative union was to submit a
panel of three names, one of which would be approved by the Reserve Bank of
India and appointed by the Government. Most of the nominations were cornered
by either INTUC or AITUC affiliates, since they were in the majority. But few

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incumbent workmen or bank staff members were appointed to the boards, since
union leadership in many cases was in the hands of retired employees. Ghosh and
Gupta (1992) found that while employees favoured elected representatives, the
unions favoured nomination by the majority union.

In 1975, one of the populist measures adopted by the Government was a

20-point programme, and workers’ participation was one of the points. A new
scheme of shop councils and joint councils was formulated in October that year.
This was applicable to all enterprises in manufacturing and mining employing 500 or
more people in the public, private and cooperative sectors. Accordingly, in 1976,
at the height of the Emergency, the constitution was amended (article 43A of the
directive principles) to include the introduction of workers’ participation as an
objective of state policy. The article states that the Government shall take steps by
suitable legislation, or in any other way, to secure the participation of employees in
the management of undertakings, establishments or other organizations engaged in
any industry. In 1977, the Shop Councils Scheme was extended by Government order
to service and commercial undertakings employing 500 or more.

When the Janata Party came to power in 1977, it appointed a committee

under Labour Minister Ravindra Verma to investigate statutory imposition of
participation. The Verma Committee in 1978 duly recommended a statute on
participation. This was hotly contested by employers’ organizations, and the controversy
led to inevitable delay. The fall of the Government in 1979 helped shelve the proposal
for statutory participation once more. In 1980, the new Government pre-empted any
move in this regard by appointing the Sachar Committee to go into the whole question
of company governance. Workers’ participation was one of the issues. The committee
did recommend compulsory participation, but with a provision that at least 51 per
cent of the total employees of an enterprise votes in favour of such participation.

Unable to make much headway on these controversies, the Government

announced on 31 December 1983 yet another scheme for shop councils and plant
councils. It was billed as a new comprehensive scheme for workers’ participation in
central PSUs, but excluded departmental undertakings such as the railways and
post and telegraphs. This scheme would ordinarily be two-tier, like the 1975 scheme

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but, if the Government so ordered, could be extended to the board level, with worker
directors. Hence, it could be referred to as a three-tier scheme. It was largely a
modified version of the 1975 scheme. For instance, representation of workers from
the shop floor would cover different categories such as skilled and unskilled, technical
and non-technical, supervisory categories and women, if they constituted 10 per
cent or more of the workforce. Unfortunately, it is very comprehensiveness caused
apprehension among even public sector managers. Virmani (1988) found in his
investigations that the scheme was not even circulated properly by the public sector
units (PSUs), and it was left to one of the major central union organizations to
circulate it among workers and unions. Bisht (1986) found in his study of PSUs that
in the early 1980s, the three-tier scheme was practised in just four PSUs and the
two-tier scheme in eight. His study also indicated that the representation system
was extremely varied. Office bearers of recognized unions were on the forums in
some PSUs, but in others representation was based on workers’ seniority, sectional
representatives from among workers or elected representatives in a few.
Instrumentation Ltd. opted for nomination by unions, and Neyveli Lignite
Corporation for a combination of union and management nominations. Outsiders
were also present as union representatives in Bharat Earth Movers Ltd.

The final step in the rather prolonged introduction of participation was taken
in 1990, when the new Government drafted a Participation of Workers in
Management Bill, and circulated it among chambers of commerce and major unions
for comments. The annual labour conference that year had an almost single-point
agenda – statutory participation. The structure of the participative scheme and the
issues were no different from those of the 1983 scheme. But a major improvement
was that persons representing “the workmen shall be elected by and from amongst
the workmen of the industrial establishments, by secret ballot or nominated by the
registered trade unions.” The term of the councils was extended to three years and
penal provisions for non-compliance added, as is common to most Acts.

Board-level participation was mandatory, and the number of workmen and

non-workmen would together constitute 25 per cent of the total board strength.
This was also an improvement on the existing worker director scheme. A monitoring

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agency to review the progress of implementation was included in the Act. This
scheme too suffered the sad plight of its predecessors, though, and before it could
be passed, the non-Congress government fell (this was a coalition of several
breakaway factions of erstwhile Congress groups and new state parties, and
supported by the leftist parties). Interestingly, the new Government did not formulate
any new schemes on participation, although the appropriate noises on workers’
participation were made in both the Eighth and Ninth Plan approach documents.
Obviously, the economic developments of 1991 and the new economic regime that
it ushered in were incompatible with socialist ideas of workers’ participation.

Since then, governments have come and gone but have generally been either
silent or inactive in the matter of workers’ participation, except marginally. For
instance, India and the European Union (EU) entered into a Joint Action Plan in
2006 for a policy dialogue and cooperation in the fields of employment and social
policy. In line with this plan, the Ministry of Labour and Employment signed a
memorandum of understanding (MoU) with the European Commission to strengthen
dialogue and exchange of views and information on issues of common interests
within the areas of employment. Social policy such as skills training and employment,
social security, occupational health and safety, workers’ participation in management
and other relevant issues were identified jointly.

The structured dialogue was to consist of exchange of experience, best

practice, views and information on topics of common interest, trends and policy
developments related to the above areas. As a part of this structured dialogue, it
was agreed to organize a joint seminar on mutually identified issues every year.
Accordingly, the first seminar on skill development and training was held in New
Delhi in November 2006. The second seminar on social security and social protection
was held in Lisbon, Portugal, in September 2007. The third seminar, on employment
relations and resolution of conflicts, held in New Delhi in September 2008, focused
on trends in employment relations and social dialogue, collective bargaining, workers’
participation in management and challenges, strategies and best practices in labour
dispute resolution. However, the background paper for the last seminar still cited
the history of participation in India up to the time of the 1990 Bill.

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 19.6.1 Reasons for failure of Workers participation Movement in India

Employers resist the participation of workers in decision-making. This is

because they feel that workers are not competent enough to take decisions.
 Workers’ representatives who participate in management have
to perform the dual roles of workers’ spokesman and a co-manager.
Very few representatives are competent enough to assume the two incompatible
roles.
 Generally Trade Unions’ leaders who represent workers are also active
members of various political parties. While participating in management they
tend to give priority to political interests rather than the workers’ cause.
 Schemes of workers’ participation have been initiated and sponsored
by the Government. However, there has been a lack of interest and initiative
on the part of both the trade unions and employers.
 In India, labour laws regulate virtually all terms and conditions
of employment at the workplace. Workers do not feel the urge to participate
in management, having an innate feeling that they are born to serve and
not to rule.
 The focus has always been on participation at the higher levels, lower
levels have never been allowed to participate much in the decision-making in
the organizations.
 The unwillingness of the employer to share powers with the workers’
representatives, the disinterest of the workers and the perfunctory attitude of
the government towards participation in management act as stumbling blocks
in the way of promotion of participative management.

19.6.2 Measures for making Participation effective

 Employer should adopt a progressive outlook. They should consider

the industry as a jointendeavour in which workers have an equal say. Workers
should be provided and enlightened about the benefits of their participation in
the management.
 Employers and workers should agree on the objectives of the industry.

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 They should recognize and respect the rights of each other.
 Workers and their representatives should be provided education and
training in the philosophy and process of participative management. Workers
should be made aware of the benefits of participative management.
 There should be effective communication between workers and
management and effective consultation of workers by the management in
decisions that have an impact on them.
 Participation should be a continuous process. To begin with,
participation should start at the operating level of management.
 A mutual co-operation and commitment to participation must be
developed by both management and labour.
 Modern scholars are of the mind that the old adage “a worker is a
worker, a manager is a manager; never the twain shall meet” should be replaced
by “managers and workers are partners in the progress of business”

19.7 SUMMARY
Workers’ participation in management implies mental and emotional
involvement of workers in the management of Enterprise. It is considered as a
mechanism where workers have a say in the decision-making. There are five levels
of WPM. There are different methods of WPM viz., works committees, joint
councils, shop councils, Work directors etc. Indian Govt. has tried to implement
WPM through various schemes but the initiative has not yielded good results.

19.8 GLOSSARY
 Industrial democracy: The involvement and empowerment of employees
in decision-making within the organization by such methods as joint labor-
management committees, work teams, quality circles, employee task
forces, etc.
 Joint/labour management committee: A panel comprised of
management and union representatives whose purpose is to address
problems, resolve conflicts and build on relationships.
 Resolution: The disposition of a disagreement or grievance through

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 alternative dispute resolution methods.
 Union Shop: A form of union security that requires employees to join
the union, within a certain time after they are hired or after a compulsory
unionism contract is executed, and to maintain their membership as a
condition of employment.
 Union: A formal organizat ion cert ified by t he Nat ional Labour
Relations Board and authorized to act on behalf of employees regarding
wages, benefits, working conditions, conditions of employment and
job security.
 Workers’ Participation in Management (WPM): It refers t o
participation of non-managerial employees in the decision-making process
of the organization. Workers’ participation is also known as ‘labour
participation’ or ‘employee participation’ in management.
19.9 SELF ASSESSMENT QUESTIONS
Q1. What do you understand by the concept of workers’ participation in
management? What are its objectives?
Q2. What are the different forms of workers’ participation in management?
Q3. Discuss the concept of workers’ participation in management in the
Indian context.

19.10 LESSON END EXERCISE

Q1. WPM is a form of: ( Tick the correct one)
a) Collective bargaining
b) Industrial democracy
c) Management technique

Fill in the blanks :

Q2. There are —— levels of participation.
a) 2
b) 3
c) 4

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 d) 5
Q3. For establishment of work committees, there should be at least ————
employees.
a) 25
b) 50
c) 75
d) 100
19.11 SUGGESTED READINGS
 Ratna Sen (1996) Workers’ management – some experiences in industrial
cooperatives (Kolkata, Subarnarekha).
 Ratna Sen (2009) “The evolution of industrial relations in West Bengal”,
ILO Asia-Pacific Working Paper Series.
 Ratna Sen ( 2010) Industrial Relations – Text and Cases, second edition
(Macmillan India).
 Ratna Sen (2012) Employee participation in India, Working Paper No.
40, Industrial and Employment Relations Department International Labour
Office,Geneva
 Virmani, B.R. (1988) Workers’ Participation in Management: Some
Experiences and Lessons (New Delhi, Macmillan).
 Virmani, B.R.; Voll, Klaus (1989) Workers’ Education (Vision Books).
Available at: http://www.medcindia.org/Draft_Labour_Policy 2010.pdf
 Bhagoliwal TN, personal Management and Industrial Relations, Agra
Publcation
 Arun Monappa, Industrial Relations, Tata Mc Graw Hill.
 Michael V P, HRM and Human Relations, Himalaya Publication
 Mamoria C. B. and Mamoria C.B., and Gankar, S.V. Dynamics of
Industrial Relations in India, Himalaya Publication

**********

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Lesson No.20 Unit-IV
Semester-II MCOMC253

LABOUR WELFARE
STRUCTURE
20.1 Introduction
20.2 Objectives
20.3 Concept of Labour Welfare
20.3.1 Features & Need of Labour Welfare
20.3.2 Objectives of Labour Welfare
20.3.3 Scope of Labour Welfare
20.3.4 Types of Labour Welfare
20.4 Principles of Labour Welfare
20.5 Approaches to labour welfare
20.6 Labour Welfare Officer
20.6.1 Qualifications of Labour Welfare Officer
20.6.2 Functions of Labour Welfare Officer
20.6.3 Duties of Labour Welfare Officer
20.7 Summary
20.8 Glossary
20.9 Self Assessment Questions
20.10 Lesson End Exercise
20.11 Suggested Readings

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20.1 INTRODUCTION
Industrial/labour welfare also refers to the Statutory and voluntary
efforts made for betterment of the labour. The importance of labour in
industrialisation and economic development has been recognised globally. In
global scenario need and importance of labour welfare has been increasingly
appreciated. Welfare basically means- wellness, health, happiness, cordial
relations, prosperity. It is a desirable state of existence involving the physical,
mental, moral and emotional stability. Labour welfare is the voluntary efforts
by the management.

20.2 OBJECTIVES
This lesson will help you to understand :
(i) the labour welfare concept
(ii) its objectives, need, principles as well as duties and responsibilities of
labour welfare officer

20.3 CONCEPT OF LABOUR WELFARE

Labour welfare is an important dimension of industrial relation. It
includes overall welfare facilities designed to take care of well being of
employees and to increase their living standard. It does not generally constitute
monetary benefits nor these are provided by employers alone, it can also be
provided by government , non government agencies and trade unions.
Industrialization, mechanisation and globalisation have increased importance
of labour welfare in industries.

According to Arthur James Todd:

“L abo ur wel f a re mean s anyt hi ng done f or t he comf ort and

improvement, intellectual and social, of the employees over and above the
wages paid which is not a necessity of the Industry.”

According to International Labour Organisation (ILO):

“Labour welfare may be understood and including such services

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facilities and amenities which may be established in vicinity of undertaking
to perform their work in healthy and congenial environment and to avail of
facilities which improve their health and bring high morale.”

Therefore, labour welfare is welfare applied to industrial labour. Labour

welfare is fundamentally deserved by every employee in the industry - it is the
right of every employee to live and think freely, and have their biological and
psychological demands fulfilled. Labour welfare is a humanitarian effort that
works to counterbalance the busy urban lifestyle, thus eliminating any
undesirable consequences.
Labour Welfare is an important facet of industrial relations, the extra
dimension, giving satisfaction to the worker in a way, which even a good wage
cannot. With the growth of industrailzation and mechanization, it has acquired
added importance. The worker, both in industry and agriclture, cannot cope
with the pace of mdern life with minimum sustenance amenities. He needs an
added stimulus to keep body and soul together. Employers have also realized
the importance of their role in providing these extra amenities. And yet, they
are not always able to fulfill workers’ demands however reasonable they might
be. They are primarily concerned with the viability of the enterprise. Labour
welfare, through it has been proved to contribute to efficiency in production,
is expensive. Each employer depending on his priorities gives varying degrees
of importance to labour welfare. It is because the government is not sure that
all employers are progessive minded and will provide basis welfare measures
that it introduces statutory legislation from time to time to bring about some
measure of uniformity in the basic amenities available to industrial workers.
Today, welfare has been generally accepted by employers. The state
only intervenes to ‘widen the area of applicability’. It is now accepted that it is
a social right.
The term ‘Labour Welfare’ has been defined in different ways. In a broad
sence, it means the adoptation of measures to promote the physical, social,
psychological and general wel being of the working people. According to Arther

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James Todd, “Anything done for the comfort and improvement, intellectual and
social well being of the employees over and above the wages paid, which is not
a necessity of the industry”.
According to Proud it refers to “the efforts on the part of the employers
to improve the conditions of employment in their own factories”.

Prof. Richardson includes under it “any arrangement of working

conditions which contribute to the workers health and safety, comfort, efficiency,
economic security, education and recreation”.
As mentioned earlier the Encylopedia of social science defines it as
“voluntary efforts of an employer to establish working and sometimes living and
cultural conditions of his employees beyond what is required by law the customs
of industry and conditions of the market”.

From our part we prefer to include under it “anything done for the
intellectual, physical, moral and econmic betterment of the workers over above
what is laid down by law or what is normally expected as part of the contractual
benefits”.

In 1947, ILO and Delhi Regional Conference defines welfare as, “such
services, facilities and amenities, which may be established in or in the vicinity
of undertakings to enable persons employed therein to perform his work in healthy
and congenial surroundings and to provide them with amenities conductive to
good health and good morals”.

The document which as submitted in theinternational social work

conference by the Latin American Countries in 1956 held in Munich describes
welfare as “ all kinds of services undertaken by the employer to promote the
physical, social cultural and living condition of the employees and their families”.
20.3.1 Features and Need of Labour Welfare
The basic features of labour welfare measures are as follows:
 Labor welfare includes various facilities, services and amenities
provided to workers for improving their health, efficiency, economic

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betterment and social status.
 Welfare measures are in addition to regular wages and other
economic benefits available to workers due to legal provisions and
collective bargaining · Labor welfare schemes are flexible and ever-
changing. New welfare measures are added to the existing ones from
time to time.
 Welfare measures may be int roduced by t he emplo yers,
government, employees or by any social or charitable agency.
 The purpose of labor welfare is to bring about the development
of the whole personality of the workers to make a better workforce.
 It is the work usually undertaken within the premises or in the
vicinity of the undertakings for the benefit of the employees and
members of their families.
 It is a broad term which covers social security along with
items like medical aid, creches, canteens, recreation, housing, adult
education etc
Need of Labour Welfare :
Compared to other countries there is more and greater need of labour
welfare in India due to deficiencies in Indian labour force.
The necessity of labour welfare work in India can easily be realised if
we look into the working conditions of the labour class in Indian
industries. Industrially India is backward country, and is in its
developing stage. The status of labour in industries in India is not
recognised. The principles of personnel man, industrial relations have
not been developed in India except in few big industrial unit s.
Commodity concept of labour still prevails in the country. The labour
management relations has not been much widened in India while in
western countries, the labour is regarded as the partner in the affairs
of the attitude of employers is sympathetic to workers in western
countries and they provide various welfare facilities as a measure to

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improve industial and better working conditions.
The working conditions in Indian industries are not satisfactory. The
workers have to work for long hours under unhealthy surroundings,
and have not remove the drudgery of their lives. They become easy
victims of drink, gambling and other vices, In the uncongenial
environment of urban industrial contented stable and efficient labour
force cannot be built up without an improvement in the conditions of
their life and work in industrial countries in India are poorer than the
workers in other western countries and as such they cannot be expected
to spend anything for their own welfare. Our land being illiterate
and generally blamed for being irresponsible and lazy, require a lot of
inducements and better working conditions. It is axiomatic that a high
standard of efficiency can be expected only from persons who are
physically fit and free from all worries and that is from persons who
are pro fed and clothed. Industrial harmony can only be maintained
when the workers feel that they are adequately remunerated for the
work and are treated the employer. Much of the irritations and frictions
which embitter industrial relations are due to the feeling that they are
not being received by the end properly. If the labourers are properly
behaved and certain amenities are supplied, they feel satisfied and find
no scope for resentment against employ been experienced in the Tata
Group of Industries. It is therefore said that the importance of welfare
work is greater in India than in the west.

Following are the important reasons why labour welfare work in India
assumes greater importance that in other countries.

(1) Lack of strong Trade Union Movement – In India trade union

movement is still in its infancy, and not strong enough to protect their
own interes Industrialised and developed countries. Workers are strongly
organised into trade unions. As the force of strong trade union is missing
in our country of labourers should be efficiently looked after by the

(2) Lack of literacy and education. In comparison to other

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countries, the percentage of educat ed workers is very low, and
consequently they are not to understand their own interests and interests
of employer and the society. Hence labour welfare is required more in India
than in other countries.

(3) Lack of Healthy Recreation. Workers do hot have healthy

recreation with the result that they indulge in crime and other wrongful
activities. Hence essential that recreation and entertainment of a healthy
kind be provided,

(4) Industrial Backwardness -From the viewpoint of industrial

backwardness Indian industries are far behind than other countries.
Industrial programme dependent upon the efficiency of labour. Welfare
measures motivate the workers and maintain their efficiency and
productivity.

(5) Problem of Absenteeism and Migration- Compared to workers

on their countries the Indian labourer is more restless and tendentious
towards from migration because life in the town does not provide for his
needs, and the atmosphere in general does not suit him. Level of wages
is far too low to compensate for the high prices of most commodities.
Hence, the labourer cannot comfortably settle down in one place. This
worker's migratory tenc curbed by providing him with adequate housing
improving the conditions in which he is required to work, and other
welfare work of a similar nature the worker establish a home in the town,
and he will not have to run frequently to the village for his family. Hence,
the problem of absentees in fact reduced? Recreation and cultural
facilities will prevent much indulgence in drug addiction and alcoholism,
crime and prostitution and other undesiration even more than this, the
percentage of absentees in factories will fall between employer and
employees for implementing the legislative provisions problems shall be
minimised through collective bargaining and industrial peace shall be

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promoted in the country without any force.
20.3.2 Objectives of Labour Welfare

 To provide social comfort to employees.

 To provide intellectual improvement of employees.
 To develop sense of responsibility and belongingness among
employees.
 To ensures that the working conditions for employees are of higher
standard.
 To build stable work force.
 To reduce absenteeism and labour turnover.
 To make employees lives good and worth living.
 To boost productivity and efficiency at the workplace.
 To provide healthy and proper working conditions.
 To ensure well being of employees and families.

20.3.3 Scope of Labour Welfare

Scope of Labour Welfare is very broad; however we have tried to include
some main aspects of it. The following list of labour welfare scope is not
exhaustive:
 Working Environment: Favourable working environment
enhances efficiency of workers and includes proper illumination, safety,
temperature, ventilation, sanitation, cleanliness and canteen facilities.
Workplace sanitation and cleanliness is very important for making
workplace favourable to workers. It includes the following
a) Proper ventilation, lighting, temperature, cleanliness, seating
arrangements etc.
b) Proper safety measures for workers should be there.
c) Sufficient urinals, lavatories and bathing facilities should be
provided and cleaned regularly.

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d) Proper gardening and cleanliness of open spaces.
e) Pure drinking water should be provided.
f) Subsidized canteen services should be provided.

 Health facilities: It includes the following:

a) Health centre should be provided within factory.
b) Ambulance service should be provided within factory in
case of any emergency.
c) Free medical check-up of workers and health and diet
counselling of workers.
d) Availability of Doctor inside the factory for emergency cases.
e) Women and child welfare work.
 Economic welfare programs: It includes the following:
a) Subsidized consumer goods including grains, vegetables, milk,
oil and other daily requirements.
b) Banking services and credit facilities.
c) Health insurance schemes.
d) Bonus and profit sharing schemes.
e) Transportation services in factory.
f) Labour welfare programs.
g) Factory council and labour arbitration council.
h) Social welfare departments.
 Recreation facilities inside the organisation
 Education and library services
 General welfare programs
 Housing facilities for workers

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 Family case work and counselling
20.3.4 Types of Labour Welfare

Major types of Labour welfare are : (1) Intra-mural Facilities (2)

Extra-mural Facilities (3) Statutory Facilities (4) Mutual Facilities
and (5) Voluntary

(1) Intra-mural Facilities

The facilities provided inside the factory are known as intra-mural

facilities. These facilities include activities relating to minimisation of
industrial fatigue, provision of safety measures like fencing and covering
of machines, good layout of the plant and machinery, sufficient lighting
conditions, provision of first aid appliances etc.

Provisions of such facilities are also obligatory in all industrial

establishments all over the world.

(2) Extra-mural Facilities

Facilities offered to the workers outside the factory are known as extra-
mural facilit ies. They include bet t er housing accommodat ions,
indoor and out door recreation sport s, educational facilit ies etc.
The provision of these facilities is voluntary. Earlier, due attention was
not given to the provision of extra-mural facilities to the workers but
now it is realised that these facilities are very important for the general
welfare and upliftment of the workers.

(3) Statutory Facilities

Under this category, welfare facilities are provided according to the

labour legislations passed by t he Government . The nature and
coverage of these facilities vary from country to country. Again these
facilities may be either intra-mural facilities or extra-mural facilities.

These facilities must be provided by all the employers and cannot

be ignored. Any contravention of t he statut ory provisions shall

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 render the employer punishable under the Act concerned.

The National Commission of Labour has divided all the statutory

measures under two distinct heads:
1. Facilities which have to be provided irrespective of the size of the
establishment e.g., drinking water.
2. Facilities which are to be provided subject to the employment of a
specified number of persons, e.g., creches.
(4) Mutual Facilities:
These facilities are usually outside the scope of the statutory facilities.
These activities are voluntarily undertaken by the workers themselves
for their own interest. As such the employer has no say in it.
(5) Voluntary:
The facilities which are voluntarily provided by the employers come under
this category. Hence these are not statutory. No doubt, the activities
under this category ultimately lead to increase in the efficiency of workers.

Intra Mural Facilities

These facilities are provided within the organization like :-
1. Canteen
2. Rest rooms
3. Creches
4. Uniform etc.
Extra-Mural Facilities
These facilities are provided outside the organization, like:-
1. Housing
2. Education
3. Child welfare
4. Leave travel facilities

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 5. Interest free loans
6. Workers cooperative stores
7. Vocational guidence etc.

20.4 PRINCIPLES OF LABOUR WELFARE

 Workers should always be paid their expected salaries. Labour welfare
should not be replaced by inadequate income or health benefits. Rather
labour welfare is a sum of adequate income, benefits and related entities.

 A nurturing and responsible environment must be created by the

industrial sector.

 The industry should aim toward increasing the overall efficiency of its
workforce. Efficiency is the key to a successful business. Efficiency can
be increased by the industry by ensuring that its workers are provided
with proper housing, education, training, and a well balanced diet.

 Industrial labour must be treated like human beings with wants and needs.
Labour in an industry must be respected as people, and not used as tools.

 Everyone in the industry should equally be aware of and accept the

concept of labour welfare.

 Welfare should not only encompass a person’s work life, but also his/
her life at home, educational institution, and community.

 Individuals involved in the creation and implementation of welfare

programs must use democratic values to make their decisions. The voice
of the majority must be considered. Furthermore, workers must be
involved in making decisions on welfare management.

 Everyone involved in welfare management must accept the full

responsibility and implement it. Labour unions, together must be involved
with the senior management, must take up the responsibility of labour

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 welfare. In addition, various committees must be assigned smaller tasks
and must be held responsible for

 Labour welfare programmes must be constantly reviewed and scrutinized.

All the parties involved must submit to the periodic reviews and offer
their honest opinions.

 Welfare schemes must be carried out at the correct time. Timeliness is
extremely important.

 Welfare schemes must be aimed at simple-minded individuals. All

individuals receiving welfare must be comfortable with the scheme and
must be able to help themselves if need arises.

 Welfare activities should be carried out at all levels in the organisation.

20.5 APPROACHES TO LABOUR WELFARE

Approaches to labour welfare give a clear idea about the attitudes, beliefs
and traditions applied by the labour welfare agencies. Many organisations
are becoming aware of the welfare facilities being provided to its
employees. Employers are establishing welfare standards voluntarily,
willingly an enthusiastically. Welfare benefits not only extended to self
but the society also. Many approaches have been designed in this
perspective, which are as under

 The Policing Approach: This theory is basically meant for making the
employees and the workers to avail the basic facilities needed e.g.
latrines, drinking water, enough rest and lunch intervals, etc. In this
approach the government has introduced the practices to control the
exploitation of workers by their management/ employer e.g. heavy work
load and less payments, very small time intervals, no freedom of speech,
etc. In case of non completion of the above, the management is liable to
get a severe punishment.

 The Religion Approach: This theory believes in two key approaches:

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 1) The Investment & 2) The Atonement (punishment). The Investment
theory explains the welfare benefits provided to the workers is the current
investment made for future progress. This approach stresses that fruits
of today’s deeds will be reaped tomorrow. Inspired by this, some
employers plan and open canteens and crèches. The atonement approach
says that the present disabilities of a man are result of his previous sins
so he needs to be atoned for that purpose.

 Philanthropic approach: This is a benevolent approach which has a

keen interest in “giving strategy”. This theory urges that good should be
done for human beings. Human nature is inherently self-centred, and
doing good deeds is a way to counter that quality. Industries provide
necessities for their employees based on goodwill. It includes provisions
for good conditions of work, day- care facilities for children, canteens,
washing facilities (for the employees). And rehabilitation of disabled
people, working boys/girls hostel facilities, donations to NGOs, rewards
to the educational institutions, etc. This theory is only encouraged for
the well being of internal and external environment.

 Paternalistic Approach: This theory is based on the idea that senior

industrial managers are educated and wise in their decisions. Thus,
industrial managers are responsible for the welfare of their labour, which
may be uneducated. This type of obligation is driven by moral, not
religious obligations. In this theory, the owner, occupier or the employer,
holds the funds of the Industry in a trust. This trust consists of board or
trust members, and any amount to be spent in favour of the employees
and the society is first discussed. It creates a good moral for the internal
and external environment. It is also known as the trusteeship theory of
labour welfare.

 The Placating Approach: The placating theory advocates timely

satisfaction of workers for their appeasement. As modern workers
become more bold and demanding, they are to be satisfied on a continual

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 basis. This theory mainly responds to the peaceful measures applicable
for the workers and employees. This theory enables the employees to
be pleased and oblige with the provided welfare benefits.

 Public Relations Approach: This theory works on the basis of goodwill

between employers and employees and the general public. Companies
advertise their labour welfare programmes and company benefits in hopes
of attracting qualified personnel. These programs improve relations
between everyone involved in the company as long as the welfare
advertisements are in place.

 Functional Approach: This theory states that a fully mentally and

physically satisfied worker is the most efficient. Industrial welfare is a
means to keep industrial workers content so they may work effectively.
This theory believes the high productivity/ outcome of employees, by
providing them the welfare benefits. It is also known as the efficiency
theory of labour welfare.

 Social Approach: This theory believes in well being of the society with
the employees. Various provisions related to the society are to be
established with this theory. Therefore this theory results in enhancing
the condition / state of the society.

20.6 LABOUR WELFARE OFFICER

Royal Commission on Labour recommended the appointment of Labour
Welfare officer to protect workers from the evils prevailing at work place. He
generally acts as spokes-person of labour and promotes amiable relations
between workers and management. Labour Welfare officer is being appointed
in any establishment wherein 500 or more workmen are employed on any-day
preceding 12 months. The intention behind his appointment is to minimize/end
the mal practices in jobber system. This appointment is made under The
Factories Act, 1948 and is approved by the state labour commissioner. The
post of labour officer was initiated to:
eliminate the malpractices of jobber system in recruitment of labour.
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develop and improve administration in mills.
serve as liaison with State Labour Commissioner

20.6.1 Qualifications of Labour Welfare Officer

Minimum Qualifications of Labourwelfare officer are :
 A University degree.
 Degree or Diploma in Social Sciences or Social Work or social
welfare from a recognised institute.
 Knowledge of local language is essential or language, which is
spoken by majority of working class.
 According to the legislation, he has to be a head of the department
in the organisation.

Who is Labour welfare officer?

Schedule 49 of the Factories Act 1948, provides that in every factorywherein

500 or more workers are ordinarily employed, the employershall appoint a
person who can act as an advisor, counsellor, mediatorand liaisoning between
the management and the labour, for improvingthe efficiency, productivity and
profitability of organization. Here,s/he iscalled Labour Welfare officer.

Professionally he or she should be Post Graduate in SocialScience,diploma

in Labour welfare, recognised by the StateGovernment, 3-5 years working
experience in Industrial Safety andfinally having hard working ability and sound
communication Skills.

Main objectives of this Position:

1. To eliminate the evils of the jobber system in the recruitment of labour

2. To develop and improve the labour administration in mills / factory.

3. To serve as a liaison with the State Labour Commissioner.Duties of Labour

Welfare officer:The Malaviya Committee’s Report on Labour Welfare in
1969,following the model rules framed under the Factories Act of 1948,
hasspecified thefollowing duties of welfare officers:
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 1. Supervision

2. Advice

3. Liaison

4. Counselling

20.6.2 Functions of Labour Welfare Officer

In actual practice, the welfare officer has been entrusted with the following
functions:

(a) Supervision of :

(i) Safety, health and welfare programmes; housing, recreation, and sanitation
services;

(ii) Looking after the working of the joint committee;

(iii) Grant of leave with wages; and

(iv) Redressal of workers’ grievances.

(b) Counselling Workers on:

(i) Personal and family problems;

(ii) Adjusting to work environment; and

(iii) Understanding rights and privileges.

(c) Advising the Management on Matters of:

(i) Formulating welfare policies;

(ii) Apprenticeship training programmes;

(iii) Meeting statutory obligations to workers;

(iv) Developing fringe benefits; and

(v) Workers’ education and use of communication media.

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(d) Establishing Liaison with Workers to:

(i) Understand the various limitations under which they work;

(ii) Appreciate the need of harmonious industrial relations in the plant;

(iii) Interpret company policies to workers; and

(iv) Persuade workers to come to a settlement in the event of a dispute.

(e) Establishing Liaison with the Management to:

(i) Appreciate the workers’ viewpoint on various matters;

(ii) Intervene on behalf of the workers in matters under the consideration of the
management;

(iii) Help different department heads to meet their obligations;

(iv) Maintain harmonious industrial relations in the plant; and

(v) Suggest measures for the promotion of the general well-being of workers.

(f) Working with the Management and Workers to:

(i) Maintain harmonious industrial relations in the plant;

(ii) Arrange a prompt redressal of grievances and speedy settlement; and

(iii) Improve the productivity and productive efficiency of the enterprise.

(g) Working with the Public to:

Secure a proper enforcement of the various provisions of the Acts as applicable

to the plant by

establishing contact with factory inspectors, medical officers and other inspectors;

i) To help workers to make use of community services.

ii) It is obvious that the duties and functions entrusted to a Welfare Officer range
from assisting the management in policy formulation and implementation to
supervising welfare programme, establishing contacts with workers and the

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 public, solving workers’ problems and grievances.

iii) The National Commission on Labour has stated, “the care of workers in all
matters affecting their well-being, both at the place of work and outside, puts
a special responsibility on the welfare officer. He should be a ‘maintenance
engineer on human side.’ In many cases, he also handles grievances and
complaints of workers relating to terms and conditions of service and domestic
and other matters which lie in the domain of personnel management. There is,
thus, virtually, no demarcation between personnel management functions and
welfare functions.”

iv) The Commission recommended that “in order to reduce the hierarchical hiatus
in the status of these two officers, there should be an interchange to encourage
professional functional mobility and to eliminate the functional monopoly as
well the hierarchical status problems.”

v) A Welfare Officer in India is a “multi-purpose personnel officer.” He is a

mainly concerned with welfare of the staff with a role of staff adviser or
specialist. He is expected to act as an adviser counsellor, mediator and a
liaison-man between the management and labour, i.e., to act as a “maintenance
engineer on the human side.”

20.6.3 Duties of Labour Welfare Officer

Some duties and responsibilities as prescribed under factory act 1948
these are:

 To act as a negotiating officer.

 To shape and formulate labour policy
 To establish contacts with outside public for proper enforcement
of various ‘Acts’ e.g. factory inspectors, medical officers etc.
 To deal with wages and employment.
 To prevent workers from anti-social activities.
 To bring about peaceful settlement.

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  To comply with provision of Factories Act.
 To promote relation between the management and workers.
 To encourage formation of committees.
 To secure provision of amenities.
 To help factory management in regulation of Leave policy.
 To secure welfare provisions.
 To advise factory management regarding formulation of labour
policies, welfare programmes, training programmes, fringe
benefits etc.
 To counsel workers in personal, family and work environment.

 Maintain the security for industrial health, Industrial peace and
resolving disputes.

 Arrangements for redressal of workers and securing their Interest,

grievance solving, etc.

 Analyzing the proper benefits for increasing the productivity and
overall growth.

 Working on various acts related to environment, society, plantation

and social responsibility.

20.7 SUMMARY
Labour welfare is an important dimension of industrial relation; labour
welfare includes overall welfare facilities designed to take care of well being of
employee’s and in order to increase their living standard. It does not generally
constitute monetary benefits nor these are provided by employers alone, it can
also be provided by government, non government agencies and trade unions.
Industrialization, mechanisation and globalisation have increased importance of
labour welfare in industries. The importance of labour in industrialization and
economic development has been recognised globally. In global scenario need
and importance of labour welfare has been increasingly appreciated.

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 Labour Welfare officer is being appointed in any establishment wherein
500 or more workmen are employed on any-day preceding 12 months. The
intention behind his appointment is to minimize/end the mal practices in jobber
system. According to the Factories Act, 1948 section 49(2) it is the State Govt.
who is to prescribe the duties, qualification & condition of service of officers
employed under sub section (1) of section 49 of this Act.

20.8 GLOSSARY
 Labour Welfare officer: He is appointed in any establishment wherein
500 or more workmen are employed on any-day preceding 12 months.
The intention behind his appointment is to minimize/end the mal practices
in jobber system.

 Labour welfare: It refers to the Statutory and voluntary efforts made
for betterment of the labour.

 Philanthropic approach: This theory urges that good should be done
for human beings.

 Public Relations Approach: This theory works on the basis of goodwill
between employers and employees and the general public.

 The Placating theory: The placating theory advocates timely satisfaction of
workers for their appeasement.

 The Policing Approach: This theory is basically meant for making the
employees and the workers to avail the basic facilities needed.

20.9 SELF ASSESSMENT QUESTIONS

Q1. What are the duties of labour welfare officer?

Q2. Explain different approaches of labour welfare.

Q3. What is the purpose of labour welfare?

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20.10 LESSON END EXERCISE
Q1. Tick the right Option:
A labour Welfare officer is supposed
a) to act as a negotiating officer.
b) to shape and formulate labour policy
c) to establish contacts with outside public for proper enforcement of
various ‘Acts’ e.g. factory inspectors, medical officers etc.
d) to deal with wages and employment.
e) all

Q2. Objectives of Labour Welfare are

a) to provide social comfort to employees.
b) to provide intellectual improvement of employees.
c) to develop sense of responsibility and belongingness among employees.
d) to ensures that the working conditions for employees are of higher
standard.
e) to build stable work force.
f) to reduce absenteeism and labour turnover.
g) to make employees lives good and worth living.
h) all
Q3. According to the Factories Act, 1948 section 49(2) it is the State Govt.
who is to prescribe the duties, qualification & condition of service of officers
employed under sub section
a) 1
b) 2
c) 3
d) 4

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Q4. This approach is basically meant for making the employees and the workers
avail the basic facilities needed:
a) Policing
b) Paternalistic
c) Public Relations
d) Functional
e) Social
20.11 SUGGESTED READINGS
 Ratna Sen (2009) “The evolution of industrial relations in West Bengal”, ILO
Asia-Pacific Working Paper Series.
 Ratna Sen ( 2010) Industrial Relations – Text and Cases, second edition
(Macmillan India).
 Ratna Sen (1996) Workers’ management – some experiences in industrial
cooperatives (Kolkata, Subarnarekha).
 Karnik V.B. (1974) Indian Labour: Problems and Prospects.
 Karnik V.G. (1999) Human Resource Management for Business
Prosperity, Labour Law Agency, Bombay.
 Moorthy M.V. Principles of Labour Welfare, New Delhi - Asia Publishing
House, 1961.
 Arun Monappa, Industrial Relations, Tata Mc Graw Hill.
 Michael V P, HRM and Human Relations, Himalaya Publication
 Mamoria C. B. and Mamoria C.B., and Gankar, S.V. Dynamics of
Industrial Relations in India, Himalaya Publication

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