D A V INSTITU TE O F M A N A G E M E N T

FARIDABAD
Ch apt er : 1
H u m a n Capital M a n a g e me n t

1.1 I N T R O D U C T I O N

An organization is made up of four resources, namely men, material, money

and machinery. Of these, the first one id living one, i.e. human resource and
other three are non-living i.e.non human. It is the human/people that make
use of non human resources. Hence, people are the mo st significant
resources in an organization. It is ma n w h o ma k es all the difference in
organizations. L.F.Urwick had remarked that “business houses are made or
broken in the long run not by markets or capitals, patents or equipments, but
by men”. According to Peter F.Drucker, “ man, of all the resources available
to man, can grow and develop.”

The main objective of this chapter is to present a perspective for hu man

capital management in the Indian context. Accordingly the meaning,
objectives, scope and functions become the subject matter of this chapter.

Before we define HRM, it seems pertinent to first define the term “human
resources.” In com m on parlance, human resources mean people. O R
Personnel means the persons employed. Personnel management is the
management of people employed.

Organization may be a manufacturing firm, a business concern, an

insurance company, a governmental agency, social organizations, hospital, a
university and even families. It may be small or large, simple or complex.
An Organization is a human grouping in which work is done for the
accomplishment of some specific goals, or missions.

1.2 M E A N I N G & DEFINITION O F H U M A N R E S O U R C E

MANAGEMENT

1.2.1 Hu man Resource Management means:

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“T h e ma n a g e me n t of h u m a n resources is v i ewe d as a syst e m in wh i ch
participants seeks to attain both individuals of group goals”.

If a n a n aly sis is m a d e o f this d e finitio n it w i ll b e se e n that p e rson n el

management involves procedures and practices through which human
resources are managed (i.e. organized and directed) towards the attainment
of the individual, social and organizational goals. By controlling and
effectively using manpower resources, management tries to produce goods
and services for the society.
1.2.2 Definitions :
1.2.2a Hu man Resource Management involves all management decisions
and practices that directly affect or influence the people, or human resources,
who work for the Organization. An organization’s emp loyees enable an
Organization to achieve its goals, and the man agemen t of these h u man
resources is critical to an organization’s success.

1.2 .2b A ccord ing to P ro cess S y stem s V ie w H u man R e so urce

Management means:

“ Human Resource Management is the systematic planning, development,

and control of a network of inter related process affecting and involving all
members of an Organization”.

Key Terms used in this definition:

Process: Process is an identifiable flow of interrelated events mo v ing

towards some goal, consequence and end. An example of the human
resource management is the staffing process, a flow of events that results in
the continuous filling of positions within the Organization. These events
include such activities as recruiting applicants, making hiring decisions, and
managing career transitions such as transfers and promotions.
Flow: Flow implies mo v eme nt through time and in the direction of a
result;
Inter-related: implies interaction within the process and between
events; Goal and Consequence (Purpose): suggest a human objective;
Events: are activities, happenings or change;
End: implies some conclusion or consequence that may not necessarily
be sought or planned by man.

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Syste m: Syst em is a particular set of procedures or devices designed to
control a process in a predictable way. For e.g. Staffing System of an
Organization.

As a process it includes:
Human Resource
Planning; Job and Work
Design;
Staffing;
Training and Development;
Performance Appraisal and
Review; Compensation and Reward;
Employee protection and
representation; Organization
Improvement.

1.2.2c “Human Resource Management is the planning, organizing, directing

and controlling of the procurement, development, compensation, integration,
maintenance and separation of human resources to the end that individual,
organizational and societal objectives are accomplished".
E d war d Flippo
This definition is a comp rehensive and covers both the management
functions and the operative functions. The purpose of all these functions is to
assist in the accomplishment of basic objectives.

1.2.2 General Definition:

“Personnel Management is the recruitment, selection, development,

utilization of and accommodation to human resources by organizations. The
human resources of an organization consists of all individuals regardless of
their role, who are engaged in any of the organizations activities”.

1.3 Three aspects of Hu man Resource Management:

Welfare Aspect: concerned with working conditions and amenities such

as canteens, crèches, housing, personal problems of workers, schools and
recreations;
Labor or Personnel Aspect: concerned with recruitment, placement of
employees, remuneration, promotion, incentives, productivity etc.;

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 Industrial Relations Aspect: concerned with trade union negotiations,
settlement of industrial disputes, joint consultation and collective
bargaining.

1.4 Difference between Personnel Management and Hu man Resource

M an ag e me n t
Table: 1

Dim ensions PM HRM

Nature of relations Pluralist Unitarist or neo-unitarist
Perception of conflict Conflict is Conflict is pathological
institutionalized
Contract Emphasis on compliance Beyond contract commitment
Role of procedures Rules dominated Culture and values dominated
Planning perspective Adhoc, reactive Integrated, proactive
Acceptability of Acceptable Non desirable
unions
Level of trust Low High
Key relation Labour management Customer
Management’s Role Transactional Transformational
Basis of job design Division of labour Teams
Key people PM/IR specialist Line people and general mangers
Skills acquisition Training and Learning Organization
Development
Reward Management Standardized job Performance related
evaluation

1.5Characteristics of H u ma n Resource Management

1. H u m an Resource M an ag e ment is concerned with managing people at

work. It covers all levels of personnel, including blue collared employees
and white collared employees;
2. It is concerned with employees, both as individuals as well as group;
3. Human Resource Management is concerned with helping the employees
to develop their potentialities and capacities to the maxi mu m possible
extent, so that they may derive great satisfaction from their jobs;

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4. It is a major part of the general management function and has roots and
branches extending throughout and beyond each Organization;
5. Human Resource Management is of a continuous nature;
6. Hu ma n Resource M a nageme nt attemp ts at getting the willing co-
operation of the people for the attainment of the desired goals.

H R M can be of full value to an Organization only when it is consistently

throughout out and applied at all levels and to all management functions; in
corporate policies, in the systems, procedures and in employment practices,
etc. this integrative aspect of HRM is, therefore, of vital importance.

Personnel
Administratio
Employee n
Relations HRM

Industrial
Relations

Fig, 1

1.6 Objectives of Hu man Resource Management

Objectives are pre-determined ends or goals at which individual or group
activity in an Organization is aimed. Objectives can be divided in to two
parts:
1.6.1 Primary Objectives:
H R M ’ s main goal is the creation of a workforce with the
ability and motivation to accomplish the basic organizational
goals;
They relate to the satisfaction of the personal objectives of
the members of an Organization through monetary and non
monetary devices;
They relate to the satisfaction of community and social
objectives, such as serving the customers honestly,
promoting a higher standard of living in the community,
bringing comfort and happiness to the society, protecting
women and children and providing for aged personnel;
To utilize human resource effectively;

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 To establish and maintain a productive and self respecting
relationship among all members of an Organization;
To establish and maintain an adequate organizational
structure;
T o bring about ma x i mu m individual development of the
members of an Organization;
to maintain a high morale and better human relations inside
an Organization by sustaining and improving the conditions
which have been established so that employees may stick to
their jobs for a longer period;

1.6.2 Secondary Objectives:

The secondary objectives aim at achieving the primary
objectives economically, efficiently and effectively.

1.7 Functions of Hu man Resource Management

According to different authors HRM functions can be divided in to different

categories. Some of the categories are as follows:
1. Gen e ral and Specific functions;
2. Personnel administration an d Industrial relations functions.
3. M a n a gerial an d Op er ative function s

1.7.1 General and Specific functions:

General Functions:
To conduct personnel research;
To assist in the programmes of personnel administration;
To develop appraisal plans;
To launch education and training programmes;
To develop a competent work force;
To establish and administer varied personnel services delegated to
personnel department.
Specific Functions:

Employment;
Safety;
Wage and
salary; Benefit
Schemes;
Community relations and

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 Advice and counseling the employees.

1.7.2 Personnel Administration and Industrial Relations Functions:

Personnel Administration:
These functions relate to the function of managing people from the lower to
the upper level of the Organization and embraces policy determination as
well as implementation of policies by the personnel at the lower levels;

Industrial Relations Functions:

These functions relate to interactions between the ma n age men t and the
representatives of the unions. Such functions involve all activities of
e mployer e mployee relationship, such as Organization of the union
members, negotiations of contracts, collective bargaining, grievance
handling, disciplinary actions, arbitration etc- the purpose of all these being
to prevent conflict between two parties.

1.7.3 Managerial and Operative Functions;

Managerial Functions:
Management is Personnel administration. It is the development of the people
and not the direction of the things. Managing people is the heart and essence
of being a manager. Thus, a Human Resource Manager is a manager and as
such he performs the basic functions of management.

Inputs Planning Organizing Directing Controlling

Human and Determination Development Stimulation Assurance that
Economic of short to of the Orgn. and directed action
Resources long range Structure motivation of is taking place
interacting plans to according to Organization according to
with accomplish predetermined personnel predetermined
environment Organization plans according to plans.
al changes objectives predetermined
lans

Outputs
Goods and
services needed
b y the
Feedback of significant deviations from planned performance organization
customers

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 (Managerial Functions)

Fig: 2

Operative Functions:
These functions are concerned with the activities specifically dealing with
procuring, developing, compensating and maintaining an efficient work
force. These functions are also known as service
functions. Procurement Function;
Development
function; Compensating
function; Integrating
function;
Maintenance function.

Managerial Functions:

Planning: Is a predetermined course of action. Planning is a hard job, for

it involves the ability to think, to predict, to analyze and to control the
actions of its personnel and to cope with a com p lex, dyn a mic fluid
environment. They bridge the gap from where we are to where we want
to go. T h e two i mportant features of planning are research and
forecasting. The task of forecasting personnel needs in relation to
changes in production or seasonal variations an d the leveling out of
differences in the production extremely important, both for employees
and for management. Therefore, planning and decision making has to be
undertaken mu ch in advance of an action so that unforeseen or
anticipated problems and events may be properly handled. This as also
stressed by the saying: “ Good managers make things happen”.
Organizing: A n Organization is a me a n s to an end. It is essential to
carry out the determined course of action. Complex relationships exist
between the specialized departments and the general departments as
many top managers are seeking the advice of personnel manager. Thus,
Organization establishes relationship among the employees so that they
can collectively contribute to the attainment of company goals.
Directing: Direction is an i mportant ma n agerial function in building
sound industrial 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

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HRM
 Political T rad e
Unions

F inance O rg n . S tru ctu re

Econom ic Social & Religious

The environment furnishes the macro context and the Organization is the
micro unit. The external environment is comprised of those factors, which
affect an organization’s human resources from outside the Organization.
Important among them are:
Economic;
Social;
Political;
Governmental;
Legal;
Technological;
Manpower in the country;
Tradition and culture;
Customers;
Other organizations;
Trade Unions in other organizations.

1.8.1 Internal Environment:

The internal environment also affects the job of a personnel manager. The
internal environmental factors include Organization objectives, policies,
organizational structure, and the functional areas of the Organization with
which the personnel manager works continuously like finance, marketing
and production. Impact of internal environment factors is profound as they
frequently and closely interact with HRM function in an Organization.

1.8.2 External Environment:

The influence of external environment on H R M is also equally important,

though the severity is comparatively less. People are essentially self-
managing. In other words, while people manage other resources, themselves
manage personnel. People themselves decide about the nature, time, and
place of their employment. And people react to the changing conditions and

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to the techniques of management unlike money, material and machine. The
changes includes in the external environment are:
Technological obsolescence;
Cultural and social changes;
Changes in the policies of govt.;
Politics and the like.

W ith the result, the work environment changes thereby affecting their
productivity level.

Considering the complexities and the challenges in the H R M now and in

near future management has to develop sophisticated techniques and
efficient specialists to among the personnel on sound lines

1.9 Functional Areas/ Scope of Hu man Resource Management

1. Organizational planning, development and task specification;

2. Stfing an d E mp l o y m ent;
3. Training and Development;
4. Compensation, Wage and Salary administration;
5. Motivation and Incentives;
6. Employee services and Benefits;
7. Employee records;
8. Labor and Industrial Relations;
9. Personnel Research and Personnel Audit.

1.10 Role of H R Practitioner

The coordination and integration of activities in an organization just not

happen, it has to be worked out. People tend to head off in different
directions- to go their own sweet way. They will jot necessarily cooperate
with one another. Thus, to begin with, the H R manager should have three
main objectives in mind:
1. T o gain the co mmitment and cooperation of all the me mbers in his
work group;
2. To get the group into action to achieve agreed objectives;
3. T o m a k e the best u se of the skills, e n ergies a n d talents of all the
members.

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In the modern era, the personnel manager typically performs a variety of the
roles, such as a role of a conscience, of a counselor, a mediator, a company
spokesman, a problem solver and a change agent. He performs many roles as
per needs of the situation. Such as:
I. T h e co nscience role is that of h u ma nitarian w h o r e minds the
management of its moral and ethical obligations to its employees;
II. The personnel manager plays the role of a counselor to whom the
employees frequently go for consultation and with wh o m they
discuss their marital, health, mental, physical and career
problems;
III. A s a m e diator, he plays the role of a peace ma k er, offerin g to
settle the disputes that may arise among individuals or groups.
He acts a liaison and communicating link between an individual
and a group and between labour and management;
IV. The personnel a manger has always been a frequent spokesman
for or representative o f the c o mp a n y b ecau se he has a better
overall picture of his co mpany’s operation, since he deals
intimately with many key organizational activities and functions;
V. The personnel manager also acts as a problem solver with respect
to the issues that involves h u man resources man ag emen t and
overall long range organizational planning;
VI. He works as a change agent within the organization because he is
best suited to introduce and implement ma jor institutional
changes. He takes initiative for installing organizational
development programmes and convinces the top management of
their need. It is h e w h o alerts the top man ag e me n t regarding
managerial obsolescence in his organization;
VII. The personnel manager plays many other roles as well. Any
matter which need someone’s attention and which no body wants
to deal with is, often handled by the personnel department. Such
activities ma y be peripheral but i mp ortant and crucial to the
efficient and effective operation of an organization.
It has been now fully recognized that the basic role of the personnel manager
if “the ma n a g e me n t o f the ma n p o w e r resources.” S u c h ma n a g e me n t is
concerned with “leadership” both in-group and individual relationship, and
labour ma nageme nt relations. It effectively describes the process of
planning, and directing the application, development and utilization is now
considered as one of the four main functions, viz. finance, production,
marketing, and human relations.

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 The ideal personnel manager is not a “decision maker” but a counselor not
“collector of responsibilities” but an “advisor” to help the management make
more reliable personnel decisions. In any organization it is these “line man”
who determine the “personnel climate” for the entire organization. If the
personnel ma n can meet the challenge of “staff role” he would make the
effective contribution to industry.

Personnel R ole W elfare R ole A d m inistrative Fire Fighting/Legal

Role Role
Advisory: Research in Time keeping Grievance handling
advising personnel and
management on organizational
effective use of problems
human resources
Manpower Managing Salary and wage Settlement of
planning: services- administration disputes
Recruitment, canteens,
selection etc. transport etc.
Training and Group Human engineering: Handling
development of dynamics: man machine disciplinary actions
line man group relationship
counseling,
motivation,
leadership,
communication
etc.
Measurement and - - Collective bargaining
assessment of
individual and
group behavior
- - - Joint consultation

Table 2

1.11Evaluating H R Function

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Organizations can promote human excellence by offering a potential site for
the flowering most forms of human excellence. Within an organization, if
there is meritocracy, people compete for promotion and other rewards on the
basis of g o o d w o r k rather than o n the basis of “pull.” Recognition an d
rewards for creative ideas, discoveries, inventions, innovations etc. promote
creative excellence. The human resource development movement in industry
is aimed at facilitating organizationally useful individual growth and
develop ment. The mo re an organization pro motes individual or team
excellence, the more the organization itself is likely to excel because the
work of any organization is dependent on the work of its individual
members and employee groups.

The human factor across all organizations comprises three basic elements:

1. The people themselves who work in the organization; the skills

and capabilities they possess and their attitude towards the
company;
2. The management style prevalent in the organization, which
usually stems from the top. The style may be aggressive,
authoritarian, democratic or laissez faire and each type has a
different impact on the way people work as individuals or in
groups;
3. The organizational climate i.e. the work atmosphere in the
company, as determined by the degree of interpersonal
cooperation, the types of conflict resolution, the a mo unt of
trustworthiness, the prevalent organizational politics etc.;
The quality of H RM practices prevalent in a particular organization can be
rated by scrutinizing the following factors:

1.11.1Organization Climate:
1. Do people feel they are giving enough responsibility?
2. Do people know what is expected of them in the shape of objectives
and standards of performance?
3. Do people see themselves being fairly rewarded for their work and
feel that promotion policies are fair?
4. Do the employees feel that they belong to a worthwhile company and
are valuable members of working teams?
5. Is there adequate feedback to people on their performance, whether it
is good, bad or indifferent?
6. Is there sufficient to challenge in their jobs?

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 7. Are people given enough support by their managers or supervisors in
the shape of guidance or help?

1.11.2 Type of Management Style:

1. Does it tend to be Autocratic?

2. Does it tend to be Task centered or people centered?
3. Do managers tend to be distant or cold or approachable and friendly?
4. Do managers tend to be hard or soft on people?
5. T h u s, an a ma l g a m a tio n of all the factors throw s s o me light as an
indicator of the quality of HRM practiced in an organization.

P E R S O N N E L POL I CI E S

The dictionary meaning of “policy” is a “planned action” and that “plan”

is a policy. Policy making and planning are, therefore, synonymous. “A
policy,” says Flippo, “is a man made rule of pre-determined course of
action that is established to guide the performance of work toward the
organization objective it is a type of standing plan that serves to guide
subordinates in the exe cution of their tasks.” Ac c ord ing to Calho o n,
personnel polices constitute guides to action. They furnish the general
standards or base on which decisions are reached. Their genesis lies in an
organization’s values, philosophy, concepts and principles.” “Policies are
statements of the organization over all purpose and its objective in the
various areas with which its operation are concerned –personnel finance
production marketing and so on.”

AI M S A N D OB JE CT I VE O F P E R S O N N E L POLICIES

The aims of personnel policies should be/are:

1. T o enable an organization to fulfill or carry out the main objective

which have been laid down as the desirable minima of general
employment policy;

2. To ensure that its employees are informed of these items of policy and
to secure their cooperation for their attainment;

3. To provide such condition of employment and produces as will enable

all the employees to develop a sincere sense of unity with the

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 enterprise and to carry out their duties in the most willing and
effective manner;

4. To provide an adequate, competent and trained personnel for all levels

and types of management; and motivated them;

5. T o protect the co mmo n interest of all the parties and recognize the
role of trade union in the organization.
6. T o provide for a consultative participation by e mployee in the
management of an organization and the framing of condition for this
participation, which, however shall not take place in technical,
financial or trading policy;

7. T o provide an efficient consultative service which aims at creating

mutual faith among those who work in the enterprise;

• By developing management leadership which aims is bold and

imaginative and guide by moral values;
• By effectively delegating the human relation aspects of
personnel function of line managers by enforcing discipline on
the basis of cooperative understanding and humane application
of rules and regulation; and
• By providing for a happy relationship at all levels

. 8. T o establish the conditions for mutual confidence and avoid

confusion misunderstanding between the management and the workers, by
developing suggestion plans, joint management councils, work committees,
etc., and by performance appraisal discussion;

9.To provide security o f e mp l o y men t to workers so that m a y not b e

distracted by the uncertainties of their future;

10. T o provide an opportunity for growth within the organization to

person wh o are willing to learn and undergo training to improve their
future prospects.

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 11. To provide for the payment of fair an adequate wages and salary to
the workers so that their healthy cooperation may be ensure for efficient
working of the undertaking;

12. T o recognize the work and acco mplish ment of the employees b y
offering non-monetary incentives rewards;

13. To create a sense of responsibility on the part of those in authority, for

the claims of employees as h u ma n being, w h o should be guaranteed
protection of their fundamental rights and offered enough scope for
developing their potential.

ESSENTIAL CHARACT ERSTI CS OF A S O U N D P E RSONNEL

POLICY

The main features of a good personnel policy are:

1. The statement of any policy should be definite, positive, clear and easily
understood b y anyone in the organization so that what it proposes to
achieve is evident.

2. It should be written in order to preserve it against loss to stimulate careful

consideration before its formulation and to prevent the promulgation of
numerous, differing and temporary oral policies from multiple sources.

3. It must be reasonably stable but not rigid, i.e., it should be periodically

revised, evaluated, assessed and revised and should, therefore, be in tune
with the challenge of changes in the environment and should have built in
resilience for adjustment from time to time.

4. It must be supplementary to the over-all policy of an organization, for if

departmental policy were made such as to come into conflict and violet
the company policy, it would be tantamount to insubordination. Peter
drucker has observed: “the policies of an enterprise have to be balanced
with the kind of reputation an enterprise wants to build up with special
reference to the social and human needs, objectives and value.”

5. It should be indicate that the management knows that workers prefer to

deal with the management on an individual basis.

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6. It should recognize the desire of many workers for recognition as groups
in many of their relationships.

7. It sho u ld be for mulated wi th d u e regard for the interests of all the

concerned parties-the employers, the employees and the public
community.

8. It should be the result of a careful analysis of al the available facts.

9. It must provide a two-way com munication system between the

management and the employees so that the latter are kept informed of the
latest developments. In the organization and the employers are aware of
the action and reaction of employees on particular issues.

10.It should be consistent with public policy, i.e., with the spirit rather than
the letter o f the l aw, so that the intensions a n d settled co u r se o f a n
organization are appreciated in terms of public opinion from the
standpoint of national, economic and social justice for the employees and
for the community at large.

11.All interested parties should generally know it.

12.It must have not only the support of the management but also the co-
operation of employees at the shop floor level and in the office.

13.Before evolving such a policy, trade unions should be consulted in

14.Matters of industrial relations; and the role of trade unions should be

restricted only to this area.

15.It should be progressive and enlightened, and must be consistent with

professional practice and philosophy.

16.It must make a measurable impact, which can be evaluate and qualified
for the guidance of all concerned, especially in the field of the three ‘R’s
of personnel management viz., recruitment, retainment and retirement.

17.It should be uniform throughout the organization, though, in the light of

local conditions, slight variation may be permitted in specific policies
relating to staffing compensation, benefits and services.

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18.It should have a sound base in appropriate theory and should be
translable into practices, terms and peculiarities of every department of
an enterprise.

19.Except in rare cases, policies should not prescribed detailed procedures.

H U M A N R E S O UR CE P L ANNI NG

I N T R O DUCT I ON

Planning is thought prior to action

Planning has been visualized as a thought proper to action, embracing a

scheme of action involving the determination of the strengths and
weaknesses in the choice of the best course of action from the standpoint of
strategy and programmes.

The term “Plan” is defined as a forecast of future attainment and forms a

written statement of what will be the outcome of this action specifying a
time period ranging from one year to five years.

Meaning of Hu ma n Resource Planning:

Is both a process and a set of plans. It is the process used by organisations

for assessing the supply and demand for future human resources. In addition,
an effective H R plan also provides the mechanisms that will be used to
eliminate any gaps that may be exist between supply and demand. Thus HR
planning is process that is used to determine the number of employees to be
recruited in to the organisation or the phased out of it.

Human Resource Planning as a process involving the following activities:

1. Forecasting of future human resource requirements;

2. Task of inventorying present resources and assessing the extent to which
these resources are optimally utilized;
3. Anticipation of human resources problem, and
4. Planning of necessary human resource programme.

M anpo wer Planning Provides information in three dimensions:

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 The estimated manpower requirements (including expectations of
manpower utilization);
The analysis of the external manpower market situation,&
The resulting estimate of m anpower availability fro m the two
dimensions.

Strategies for M anpo wer Planning

Manpower planning involves the application of a set of 9 strategies:

1. Collect, maintain and interpret relevant information regarding human

resources;
2. Report periodically manpower objectives, requirements and existing
employment and allied features of manpower;
3. Develop procedures and techniques to determine the requirements of
different types of manpower over a period of time from the standpoint of
organizational goals and modify these goals, if they mak e unrealistic
demands for human resources;
4. Develop measures of manpower utilization as a component of forecasts
of manpower requirements along with –if possible- independent
validation;
5. Employ- if suitable- techniques leading to effective allocation of wo rk
with a view to improving manpower utilization;
6. Conduct research to determine factors hampering the contribution of the
individuals and groups to the organization with a view to modifying or
removing these handicaps;
7. D evelop and e mploy me thods of economi c assessme nt of huma n
resources reflecting its features as inco me generator and cost and
accordingly improving the quality of decisions influencing manpower;
8. Evaluate the procurement, promotion and retention of the effective
human resources in the context of the forecast requirements of the
enterprise; &
9. Analyze the dynamic process of recruitment , promotion and loss to the
organization and control these processes and organization structure with a
view to encouraging the max i mu m individual and group performance
without involving excessive costs.

Reasons for Hu ma n Resource Planning

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All organizations perform human resource planning, either formally or
informally. The major reasons for employment planning are:

More effective and efficient use of human resources:

Hu man resources planning should precedes all other H R M
activities. Careful analysis of all HRM activities shows that their
effectiveness and efficiency, which result in increased productivity, depend
on human resource planning.
More satisfied and better developed employees:
E mployees w h o work for organizations that use good h u man
resource planning systems have a better chance to participate in planning
their o wn careers and to share in training and development experiences.
Thus they are likely to feel their talents are important to the employer, and
they have a better chance to utilize those talents;
More effective equal employment opportunity planning:
The govt. has increased its demands for equal employment opportunities.In
sum, effective h u man resource planning ensures that H R M activities and
programme will be built on a foundation of good planning. Proper planning
should cut do wn on the number of surprises that occur involving hu man
resource availability, placement and orientation.

The H R Planning Process

HR Planning involves four distinct phases or stages:

Situation analysis or environmental scanning;

Forecasting human resource records;
Human resource supply analysis;
Action plan development.

Situation analysis and Environmental scanning:

The first stage in HR Planning is where the HRM function and

strategic planning initially interact. The strategic plan mu st adapt to
environmental circumstances, and the HRM function is one of the primary
mechanisms that an organization can use during the adaptation process. For
e.g. rapid changes in the technological environment can force an

22
organization to quickly identify and hire employees with n ew skills that
previously weren’t needed by the organization.
Without an effective H R plan to support the recruitment and
selection
functions in the organization, it will be impossible to move fast enough to
stay competitive. Thus, organizations are becoming more dependent on an
ability to gather relevant information about their environment and to react to
this information.

Forecasting future demand for employees:

Th e next phase of an f e ctive H R Planning process is
estimating not only how many but what kinds of employees will be needed
in the future. Forecasting yields these advanced estimates or calculations of
the organization’s staffing requirement. Although there are many
quantitative tools to help with forecasting, it is a process that involves a
great deal of human judgment. In addition, many successful H R planners
also rely heavily on their “gut instincts” about future conditions. For e.g.,
planners at Unilever attribute much of their global successes to such
instincts.

Analysis of the supply of current Employees:

T h e third p h ase o f H R P l anning id d esign ed to an s we r the
question “H o w man y and what kind of employees do I currently have in
ter ms of the skills and training necessary for the future?” It should be
obvious that this phase of H R Planning involves mu ch more that simply
counting the number of current employees in the organisation.
The major tool used to assess the current supply of employees
is the Skill Inventory. It is a list of names, certain characteristics and skills
of the people working for the organisation. It provides a way to acquire these
data and makes them available where needed in an efficient manner.

Action decisions in Hu man Resource Planning:

After the HR Planning system has analyzed both the supply of
and demands for future workers, these two forecasts are compared to
determine what, if any, action should be taken. Wh enever there is a
discrepancy between these two estimates, the organization needs to choose a
course of action for elimination the gap.
No matter how good the HR Planning system is, an exact match
between supply and demand forecasts is rare. Even when overall estimates
are similar, there are frequently important gaps in certain subgroups. These

23
 data become inputs to facilitate decisions about training, pro motion,
demotion and similar decisions.

Action decisions with a shortage of employees:

When employment specialists comparing demand to supply
find the supply of workers is less than the demand, several possibilities are
open to the organization. If the shortage is small and employees are willing
to work overtime, it can be filled with present employees. If there is shortage
of highly skilled employees, training and promotions of present employees,
together with the recruitment of lower skilled workers, are possibilities.

Action decisions in surplus conditions:

When comparison of employee demand and supply indicates a

surplus, the alternative solutions include attrition, early retirements,
demo tions, layoffs, and terminations. E mp loyee decisions in surplus
conditions are some of the most difficult decisions managers must make,
because the employees who are considered surplus are seldom responsible
for the conditions leading to the surplus. A shortage of raw material such as
fuel, or a poorly designed or marketed product can cause an organization to
have a surplus of employees.
Fig. 1: Hu man Resource Planning Process

Strategic M a n a g e me nt H u m an Resource H u m an Resource

Decisions D e ma n d Supply

Technological Forecasts; Annual Employment Existing Employment

Economic Forecasts; Requirements; Inventory;
Market Forecasts; Numbers; After Application of
Organisational Planning; Skills; Expected Loss and
Investment Planning; Occupational Categories.
Attrition rates.
Annual Operating Plans.

Variances End
If None:

If surplus If Shortage

24
 Decisions: Decisions:
La off etc. Overtime etc.

End End

In short, Human Resource Planning is a process by which the management

of an organization ensures that it has the right number and kind of people at
the right places and at the right times to successfully achieve its overall
objectives. Human Resource planning differs from Manpower Planning in
the sense that the former is primarily concerned with the human aspects of
people, the latter mainly concentrates on the power of the people.

Long Answer Type Questions

1. What do you understand by Human Resource Planning? Explain with

suitable illustrations the process of Manpower Planning.
2. Discuss the problems faced in Human Resource Planning. How can
these problems be overcome?
3. “The Human Resource Planning is becoming more and more
important and complex with organizations are becoming more global
”. Comment.
4. Wh at do you mean by Personnel Policy? Explain the objectives
behind implementation of Personnel Policies in an organization?
5. Explain various features of Personnel Policies of an organization.

6. W h at is m e an t b y the t er m H u m an R e s o u rce? W h a t d o es H u m a n
Resource Management mean?
7. Wh a t is the difference between Hu ma n Resource Management and
Personnel Management?
8. Elucidate the role and functions of an effective Human Resource
Manager?
9. W rite a short note on the various H R M Programmes which could be
implemented in the organizational set up?

25
 10.Enlist some key organizational indicators, which could highlight the
practice of favorable HRM policies in the work set up?
11.Discuss the issues impending on future HR managers.

----------------------------------------------------------------- -------------

Human Resource Management

Unit 2

Job Analysis

Job Analysis is one of the most important functions of Hu man Resource

Manager. Performance Appraisal, Job Designing, Personnel selection,
employee training, career development and planning are among the many
activities that depends upon the information gathered in the job analysis.

K e y terms:

Job: A job may be defined as “a collection or aggregation of tasks, duties

and responsibilities which as a whole is regarded as a regular assignment to
individual employees”. Putting in different words the meaning of a job can
be described as a pocket containing differentiated set of total workload in an
organization.

Position: Position is collection of tasks and responsibilities regularly

assigned to a person.

It is to be noted that job is impersonal and position is personal.

26
Today, however, the word job has many mutations depending upon how,
when and by whom it is used. It is often used interchangeably with the terms
like position and tasks. Before proceeding with a detailed discussion on “job
Analysis” it would be fruitful to familiarize ourselves with terms that form
specific job attributes.

Fig. Relationship among the different job components: 9

8
7
6
5

4
3
2
1
1 – Micro Motion
2 – Elements
3- Tasks
4- Duties
5- Positions
6- Job
7- Job Family
8- Occupation
9- Career

Micro M ot ion : T h e simplest unit of wo r k is the micro motion. A micro

motion involves a vary elementary move ment such as reaching different
work performed in an organization can be traced from a micro motions to an
occupation grasping, positioning and releasing an object. It is the mo s t
elementary unit in to which a job can be broken down.

Elements: An element is alignment of two or more micro motions to make a

basic movement like picking up an object.

A task is congregation of elements to constitute an activity for a specific

purpose like preparing a lecture. T wo or more related tasks performed in
carrying out specific job responsibilities are referred to as duty.

27
A position constitutes specific duties and tasks group together. In an
organization there may be one or more person assigned a position. A position
constitutes the whole unit of work assignment

Job: When positions are combined they create a job.

A job family is a group of two or more jobs that either call for similar
worker characteristics or contain parallel work tasks as determined by job
analysis.

Occupation: A grouping of similar jobs or job families across organizations

is termed as occupation.

A Career represents a sequence of positions, jobs or occupations that a

person has over his or her working life.

Having familiarized oneself with the basic conceptual framework which acts
as foundation stone for the knowledge on job analysis, we shall now proceed
with a step-by-step discussion of the main topics.

Job Analysis
Job Analysis is a written record of actual requirements of the job
activities.

Definitions:

“Job Analysis is the process of determining and reporting pertinent

information relating to the nature of a specific job.”
Bayers and Rue

It is the determination of tasks, which comprise the job of the skills,

knowledge, abilities, and responsibilities required of the holder for the
successful job performance. Putting it in other words it is the process of
getting information about the job incumbent’s skills, education and training
to carry out the job effectively and terms on time for completion,
performance standard.

It is procedure by which pertinent information is obtained about a job, i.e. it

is detailed and systematic study of information relating to the operations and
responsibilities of a specific job.

28
A job analysis results in two important documents:
• Job Description;
• Job Specification.

Job Description:

Job description is written record of the duties, responsibilities and

requirements of particular jobs. It is concerned with the job itself and not
with the work. It is a statement describing the job in such terms as its title,
location, duties, working conditions and hazards. In other words, it tells us
“What to be done, and h o w it is to be done and why.” It is a standard of
function, in that it defines the appropriate and authorized contents of a job.

Job Specification:

Job specification is a standard of personnel and designates the qualities

required for an acceptable performance. It is a written record of the
requirements sought in an individual worker for a given job. In other words,
it refers to a summary of the personnel characteristics required for a job. It is
a statement of the mini mu m acceptable human qualities necessary for the
proper performance of a job.

Purpose and Uses of Job Analysis

Job Analysis is not useful but an essential part of organizational strategies to

serve the following purposes:

• Organization and Manpower Planning: It is helpful in organization

planning, for it defines labour needs in concrete terms and coordinates
the activities of the work force, and clearly divides duties and
responsibilities;
• R ecruit ment and Selection: B y indicating the specific jo b
requirements of each job (i.e. the skills and knowledge), it provides a
realistic basis for the hiring, training, place me nt, transfer and
promotion of personnel. “Basically, the goal is to match the job
requirements with a worker’s aptitude, abilities and interests”. It also

29
 helps in charting the channels of promotion and in showing lateral
lines of transfer;
• W a g e an d Salary Administration: B y indicating the qualification
required for doing a specified job and the risks and hazards involved
in its performance, it helps in salary and wage administration. Job
analysis is used as a foundation for job evaluation;
• Job Re-Engineering: Job An alysis provides information, wh ich
enables us to change jobs in order to permit their being managed by
personnel with specific characteristics and qualification.
• E mp l o yee Training an d M an ag emen t Develop ment : Job Analysis
provides the necessary information to the management of training and
development programmes. It helps to determine the content and
subject matter of in training courses. It also helps in checking
application information, interviewing, weighing test results, and in
checking references.
• Performance Appraisal: It helps in establishing clear cut standards
w h ich ma y be comp ared with the actual contribution of each
individual;
• H e alth and Safety: It provides an opp ortun ity for identifying
hazardous conditions and unhealthy environmental factors so that
corrective measures may b taken to minimize and avoid the possibility
of accidents.
• E mp loyee Orientatio n: E ffective job orientation cannot be
accomplished without a clear understanding of the job requirements.
The duties and responsibilities of a job must be clearly defined before
a new employee can be taught how to perform the job.
• Utilizing Personnel: Job An alysis infor mation can help both
employees and managers, pinpoint the root of a problem if employee
functions are not adequate.
In su m, it m a y b e noted that job analysis is a systematic procedure for
securing and reporting the information, which defines a specific job.

Steps in Job Analysis/Process

T h e ma jor steps to be follo w ed in carrying out job analysis in an
organization can be described as follows:

Step 1: Studying job vis a vis the organization: Review the available
Background information through organization workflow or process

30
 charts. Studies the job inter relationships. Often, a restructuring,
down
sizing, merger, or rapid growth will initiate this review.

Step 2: Selection of uses of job analysis information : Be selective

regarding the future uses of job analysis. The employee or the
manager may request a job analysis to determine the appropriate
compensation, but they also be interested in formally documenting
changes in recruitment, placement and training for a particular job.

Step 3: Identify the “job” to be analyzed: it is always advisable to

choose flow representative and key positions for job analysis, thus
avoiding unnecessary time and financial expenditure.

Step 4: collection of Job Analysis data: manager should consider using a

number of different methods of data collection because it is
unlikely that any one method will provide all the necessary
information needed. Three of the most popular form of data
collection is:
• Observation of tasks and behavior with the job incumbent i.e. both
physical and mental activities;
• Interviews;
• Questionnaires and checklists;

Step 5: Develop a Job Description: Highlight the major tasks, pertaining to

effective job performance through the written description;

Step 6: Develop a Job Specification: Transcript the information obtained

after step 4 highlight what personal qualities, trait, skills, background
is necessary for optimal job performance.

Job Performance
Observation Degree of
Interview interaction
Critical incident technique with
Data Collection methods Questionnaires personal
Diary method
Training material
Dictionary of occupation

31
Step 7: Review and update of information: If no major changes have
occurred in the organization, then a complete review of all jobs
should be performed every three years.

Contents of Job Analysis

A job Analysis provides the following information:

1. Job Identification;
2. Significant characteristics of a job;
3. What the typical worker does;
4. Which materials and equipment of a worker uses;
5. How a job is performed;
6. Required personnel attributes;
7. Job relationship.

It is obvious from the foregoing that a job analysis is usually a clear

indication of a job description and job specification.

Recruitment

Successful hu man resource planning should identify our human resource

needs. On ce w e k n o w these needs, w e still want to do something about
meeting them. The next step in the acquisition function, therefore, is
recruitment. This activity makes it possible for us to acquire the number and
types of people necessary to ensure the continued operation of the
Organisation.

32
Recruiting is the disco v ering of p o tential can d idates for actual or
anticipated organizational vacancies or from other perspective, it is a linking
activity- bringing together those with jobs to fill and those seeking jobs.
“ Recruitment a process to discover the sources of manpower to meet the
requirements of the staffing schedule and to employ effective measures for
attracting that manpower in adequate numbers to facilitate effective selection
of an efficient working force”
Yoder & others

“It is a process of searching for prospective employees and stimulating and

encouraging them to apply for jobs in an Organisation. It is often termed
positive in that it stimulates people to apply for jobs to increase the “hiring”
ratio i.e. the no. Of applicants for a job.”
Flippo

Technically speaking, the function of recruitment precedes the selection

function and it includes only finding, developing the sources of
prospective employees and attracting them to apply for jobs in an
organization, whereas the selection is the process of finding out the most
suitable candidate to the job out of the candidates attracted (recruited).

Objectives of recruitment:

♦ To attract people with multi dimensional skills and experience that suit
the present and future organizational strategies;
♦ To induct outsiders with a new perspective to lead the company;
♦ To infuse fresh blood at all levels of the Organisation;
♦ To develop an organizational culture that attracts competent people to the
company;
♦ To search or head hunt/ head pouch people whose skills fit the company’s
values;
♦ To devise methodologies for assessing psychological traits;
♦ To seek out non-conventional development grounds of talent;
♦ To search for talent globally and not just with in the company;
♦ To design entry pay that competes on quality but not on quantum;
♦ To anticipate and find people for positions that does not exist yet.

33
 Fig. 1:Recruiting and other Human Resource Management activities

Human Recruiting Job Selection

Resource Applications
Planning

Which provides
new employees
for

♦ Orientation;
♦ Training/
Development;
♦ Etc.

Factors affecting Recruitment

There are a nu mber of factors that affect recruitment. These are broadly
classified in to two categories:
1. Internal Factors;
2. External Factors.

External Factors: The external factors include supply of and demand for
human resources, employment opportunities and /or unemp loyme nt rate,
labour market conditions, political and legal requirement and govt. Policies,
social factors, information systems etc.
External factors:
Socio economic factors;
Supply and demand
factors; Employment rate;
Labour market conditions;
Political, legal and governmental factors;

34
 Information systems.

Internal Factors: The internal factors include the company’s pay package
including salary, fringe benefits and incentives, quality of work life,
organizational culture, career planning, growth opportunities, size of the
company, company’s product and services, company’s growth rate, role of
trade unions and cost of recruitment.

Internal factors:
Company’s pay package;
Quality of worklife;
Organizational culture;
Career planning and
growth; Company’s size;
Company’s products and services;
Geographical spread of the company’s operations;
Company’s growth rate;
Role of trade unions;
Cost of recruitment;
Company’s name and fame.

In te rn a l E n viron m en tal
E x tern al E nv iron m en tal
Influences: Influences:
♦ S t r at eg y;
♦ T h e u ni on ;
♦ Goals;
♦ G o v t. Requirements,
♦ Organization al Culture;
regulations and laws;
♦ Economic conditions; ♦ Nature of the task;

HRM activities:
Effectiveness
♦ E qual employment People
Criteria:
opportunities;
♦ Jo b analysis;
Abilities;
Performance;
Attitudes
♦ Recruitment; Satisfaction;
Preference
♦ Planning; Absenteeism;
s
♦ S el ect i o n ;
Turnover;
Organisation End Scrap rates;
♦ Training and development; Results; Grievance
♦ C a re e r planning and Competitive
35 rates; Accident
development; products; rates.
♦ Benefits and services; Competitive
services
 Sources of Recruitment

Recruitment is more likely to achieve its objectives if recruiting sources

reflect the type of position to be filled. Sources are those where
prospective employees are available like employment exchanges while
techniques are those, which stimulate the prospective employees to
apply for jobs like nomination by employees, advertising, promotion etc.
Certain recruiting sources are mo re effective than others for filling
certain types of jobs are.
The sources of recruitment are broadly classified in to internal
sources and external sources.

Internal Sources: are the sources within organizational pursuits. It includes

(a) Present permanent employees; (b) present temporary/ casual employees;
(c) retrenched or retired employees; (d) dependents or deceased, disabled,
retired and present employees; (e) Promotions; (f) Transfers.
Present Permanent Employees: Organizations consider the candidates
from this source for higher-level jobs due to: (1) availability of most
suitable candidates for jobs relatively or equally to the external source,
(2) to me et the trade unions demands; (3) to the policy of the
Organisation to motivate the present employees.
P r e sent t e m p orary or C a s u al e m p lo ye es: O r ganizations fin d this
source to fill the vacancies relatively at lower levels o wi n g to the
availability of suitable candidates or trade and pressures or in order to
motivate them on the present job.
Retrenched o r R e tire d employees: Generally a particular
Organisation retrenches the employees due to lay-off. The Organisation
takes of the candidates for employment from the retrenched employees
due to obligation, trade union pressure and the like. Sometimes the
organizations prefer to re employ their retired employees as a token of
their loyalty to the Organisation or to postpone some inter personal
conflicts for promotion etc.

36
 Dependents of Deceased, Disabled, R e tire d an d P resent
E mployees: S o me organizations with a view to developing the
commitment and loyalty of build up image provide employment to the
dependent(s) of deceased, disabled and present employees. Such
organizations find this source as an effective source of recruitment.
Promotions: M ost of the internal candidates would be stimulated to
take up higher responsibilities and express their willingness to be
engaged in the higher level jobs if management gives them the
assurance that they will be promoted to the next higher level.
Transfers: Employees will be stimulated to work in the new sections
or places if management wishes to transfer them to the places of their
choice.

W h y do organizations prefer Internal Source?

Internal recruitment can be used as a technique of motivation;
Morale of the employees can be improved;
Suitability of the internal candidates can be judged better than the
external candidates as “known devils are better than unknown angles”;
Loyalty, commitment, a sense of belongings and security of the present
employees can be enhanced;
Employee’s psychological needs can be met by providing an opportunity
for advancement;
E mp loyees econo mic needs for pro motion, higher income can be
satisfied;
Cost of selection can be minimized;
Cost of training, induction, orientation, period of adaptability to the
Organisation can be reduced;
Social responsibility towards employees may be discharged;
Stability of employment can be ensured.

W h y organizations don’t prefer internal sources?

It often leads to inbreeding and discouraging new blood from entering in
an Organisation;
There are possibilities that internal source may “dry up”, and it may be
difficult to find the requisite personnel from within an Organisation;
Since the learner does not know more than the lecturer does, no
innovations worth the n a me can be made. Therefore, o n jobs whi ch
require original thinking (such as advertising, style designing and basic
research), this practice is not followed;

37
 As promotion is based on seniority, the danger is that really capable
hands may not be chosen. The likes and dislikes of the management may
also play an important role in the selection of personnel.

External Sources: External Sources are those sources, wh ich are

outside the organizational pursuits. These sources include: (1) Campus
Recruitment; (2) Private Employment Agencies/ Consultants; (3) Public
Employment Exchanges; (4) Professional Associations; (5) Data Banks;
(6) Casual Applications; (5) Similar Organizations; (6) Trade Unions;
(7) Advertisements; (8) Employee Referrals.
Ca mpus Recruitment: different types of organizations like
industries, business firms, service organizations, social or religious
organizations can get inexperienced candidates of different types
from various educational institutions like colleges and universities
imparting education in science, commerce, arts, engineering and
technology, agriculture. Medicines from the training institutes. Most
of the universities and institutes i mp arting technical education in
various disciplines provide facilities for campus recruitment and
selection.

Fig.3 process of Campus Recruitment:

F o r m ma n p o we r Identify campuses to recruit on

Conduct pre-placement Tasks Secure place in the queue on

each campus

Check application form of

Conduct written test for Interview intensively for

knowledge competence

Cross check for Identify suitable candidates

38
 Stay in touch with those who Make job offers
accept

Advice through Provide support Continue

final year’s to ease stress informal
specialization interaction

Employment Agencies: These agencies or consultants perform the

recruitment function on the behalf of a client company by charging fee.
Line mangers are relieved from recruitment functions so they can
concentrate on their operational activities and recruitment functions are
entrusted to a private agency or consultants. These agencies are also
called Executive Search Companies .
Public E mp l o y m ent A g e n cies: T h e govt. set up Public E mp l o y men t
exchanges in the country to provide information about vacancies to the
candidates and to help the organizations in finding out suitable
candidates. Public sector and private sector industries have to depend on
public employment exchanges for the specified vacancies.
Professional Or g a nizations: Professional organizations maintain
comp lete data of their me mb ers and provide the same to various
organizations on requisition. They also act as an exchange between their
members and recruiting firms in exchanging information, clarifying
doubts etc.
Data Banks: The management can collect the bio data of the candidate
from different sources like employment exchanges, educational Training
Institutes, candidates etc. and feed them in the computer. It will become
another source and the company can get the particulars as and when they
need.
Casual Applicant: Depending upon the image of the Organisation, its
prompt response, participation of the Organisation in the local activities,
level of unemployment, candidates apply casually for the jobs through
mail or hand over the applications in Personnel Department. This would
be a suitable source for temporary and lower level jobs.
Trade Unions: Generally, unemployed or underemployed persons or
employees seeking change in employment put a word to the trade union
leader with a view to getting suitable employment due to latter’s intimacy
with management.

39
 Similar Organizations: Generally, experienced candidates are available
in organizations producing similar products or are engaged in similar
business. The management can get most suitable candidates from this
source. This would be the most effective source for executive positions
and for newly established organizations or diversifies or expanded
organizations.
Advertising: Advertising is widely accepted technique of recruitment,
though it mostly provides one-way communication. It provides the
candidates in different sources, the information about the job and
company and stimulates them to apply for jobs. It includes advertising
through different media like newspapers, magazines of all kinds, radios,
television etc.
Employee referrals: Friends and relatives of present employees are also
a good source from which employees may be drawn. Wh en the labour
market is very tight, large employers frequently offer their employee’s
bon uses or prizes for any referrals that are hired and stay wi th the
company for a specific length of time.

Modern sources or techniques of Recruitment:

WALK IN: The busy organizations and the rapid changing companies do
not find time to perform various functions of recruitment. Therefore, they
advise the potential candidates to attend for an interview directly and
without a prior application on a specified place. The suitable candidates
among the interviewees will be selected for appointment after screening
the candidates through tests and interviews.
Consult In: The busy organizations encourage the potential job seekers
to approach them personally and consult them regarding the jobs. The
companies select the suitable candidates from among such candidates
through the selection process.
Head Hunting: The companies request the professional organizations to
search for the best candidates particularly for the senior executive
positions. T h e professional organizations search for the most suitable
candidates and advise the company regarding the filling up of the
positions. headhunters are also called search consultants.
Body shopping: Professional organizations and the hi tech training
institutes develop the pool of human resources for the possible
employment. The prospective employers contact these organizations to
recruit the candidates. Otherwise, the organizations themselves approach
the prospective e mployees to place their huma n resources. These

40
 institutions are called body shoppers and these activities are known as
body shopping.
Business Alliances: Business alliances like acquisitions, mergers, and
takeovers help in getting human resources. In addition, the companies do
also have alliances in sharing their human resources on ad-hoc basis.
T ele Rec ruit ment: The technological revolution in the Tele
communication helped the organizations to use Internet as a source of
recruitment. Organizations advertise the vacancies through the W orld
W ide W eb (www) Internet. The job seekers send their applications
through e-mail or Internet.

In short: successful and effective recruitment programme necesseciates to

have certain attributes such as:
A well defined recruitment policy;
A proper organizational structure;
A well laid down procedure for locating potential job seekers;
A suitable method and technique for tapping and utilizing these
candidates;
A continuous assessment of effectiveness of recruitment programme
and incorporation of suitable mod ifications from time to time to
improve the effectiveness of the programme;
A n ethically sound and fool proof practice telling an applicant all
about the job and its position, the firm to enable the candidate
judiciously decide whether or no to apply and join the firm, if
selected.

SELECTION

Selection procedure is concerned with securing relevant information

about an applicant. The objective of the selection decision is to choose
the individual who can most successfully perform the job from the pool
of qualified candidates.

41
The selection procedure is the system of functions and devices adopted
in a given company to ascertain whether the candidate’s specifications
are matched with the job specifications and requirements or not.
The selection procedure cannot be effective until and unless:
1. Recru itment’s of the job to be filled, have been clearly specified (Job
analysis, etc.
2. Employee specifications (physical, mental, social, behavioral, etc.)
have been clearly specified;
3. C an d idates for screening have b een attracted.

SELECTION PROCEDURE

T here is no standard selection process that can be followed by all

companies in all the areas. Companies may follow different selection
techniques or methods depending upon the size of the company, nature
of the business, kind and no. Of persons to be employed, govt.
regulations to be followed etc.

Application Form

Written Examination

Preliminary Interview

Group Discussion

42
 Tests

Final Interview

Medical Examination

Reference Checks

Line Manager’s Decisions

Application Form: Also known as application blank. This technique is

widely accepted for securing information from the prospective
candidates. It can also be used as a device to screen the candidates at the
preliminary stage. Information is generally required on the following
items in the application forms:
a) Personal background information;
b) Educational attainments;
c) W ork experiences;
d) Salary;
e) Personal details;
f) References.
Written Examination: The organizations have to conduct examination
for the qualified candidates after they are screened on the basis of the
application blanks so as to measures the candidate’s ability in
arithmetical calculations, to know the candidates attitude towards the job,
to measure the candidate’s aptitude, reasoning, knowledge in various
disciplines, general knowledge and English language.
Preliminary Interview: The Preliminary interview is to solicit necessary
in formation from the prospective applicants and to assess the applicant’s
suitability to the job. This step is useful as a process of eliminating the
undesirable and unsuitable candidates.
Group Discussions: The technique of group discussion is used in order
to secure further information regarding the suitability of the candidates
for the job. Group discussion is a method where groups of the successful

43
 applicants are brought around a conference table and are asked to discuss
either a case study or a subject matter.
Tests: T h e next stage in the selection process is conducting different
tests. The objective of tests is to solicit further information to assess the
employee suitability to the job. The important tests are:

• Aptitude T est:
a) Intelligence test
b) M e c hanical T est
c) Psych o m otor T est
d) Clerical T est
• Achievement Test:
a) Job K n o wledge T est;
b) W ork S a mple T est.
• Situational T est:
a) G r ou p Discussion;
b) In B ask et.
• Interest T est:
• Personality T est:
a) O b jective T est;
b) Projective T est.
• Aptitude T ests: These tests measure whether an individual has the
capacity or latent ability to learn a given job if given adequate training.
Aptitudes can be divided in to general and mental ability or intelligence
or specific aptitudes such as mechanical, clerical, manipulative capacity
etc. These are:
1. Intelligence Tests: These tests in general measure intelligence quotient
of a candidate. In detail th ese tests m easures capacity for
comprehension, reasoning, word fluency, verbal comprehension,
numbers, memory and space.
2. Mechanical T ests: T h ese tests m e asure the capacities of spatial
visualization, perceptual speed and knowledge of mechanical matter.
3. Psycho meter Tests: These tests measure abilities like manual dexterity,
motor ability and eye hand coordination of candidates.
4. Clerical Aptitude: Measure specific capacities involved in office work,
ite ms of this test include spelling, comp utation, comp rehension,
copying, word measuring etc.
• Achievement Tests: These tests are conducted when applicants claim to
kno w some thing as these tests are concerned with wh at one has

44
 accomplished. These tests are more useful to measure the value of
specific achieve ment wh en an O rganisation wishes to e mploy
experienced candidates. These are:
1. Job Knowledge T est: Un der this test a candidate is tested in the
knowledge of a particular job.
2. Work Sample Test: Under this test a portion of the actual work is given
to the candidate as a test and the candidate asked to do it.
• Situational Test: This test evaluates a candidate in a similar real life
situation. In this test the can d idate is ask ed either to co pe wi th the
situation or solve critical situation of the job.
1. Group Discussion: This test is administered through group discussion
approach to solve a problem under which candidates are observed in the
areas initiating, leading, proposing valuable ideas, conciliating skills, oral
communicating skills, co-ordination and concluding skills.
2. In Basket Test: The candidate in this test is supplied with actual letters,
telephone and telegraphic message, reports and requirements by various
officers of the O r ganisation, adequ ate info r matio n about the job and
Organisation. The candidate is asked to take decisions on various items
based on the in basket information regarding require ments in the
memoranda.
• Interest Tests: These tests are inventories of the likes and dislikes of
candidates in relation to work, job, occupations, hobbies and recreational
activities.
• Personality T ests: T h ese tests pro v e d eep ly to disco v er clu es to an
individual’s value system, his emotional reactions, and maturity and
characteristic mood.
1. Objective T est: mo st personality tests are objective tests as they are
suitable for group testing and can be scored objectively.
2. Projective tests: Candidates are asked to project their own interpretation
of certain standard situations basing on ambiguous pictures, figures etc.,
under these tests
Final Interview: Final Interview is usually followed by testing. This is
the mo st essential step in the process of selection. In this step the
interviewer matches the information abstained about the candidate
through various means to the job requirements and to the information
obtained through his own observation during interview.
Types Of Interview:

Type Type of questions Usual applications

45
 A predetermined Useful for valid results,
Structured checklist if questions, especially when dealing
usually asked of all with large number of
applicants. applicants.
Unstructured Few, if any, planned Useful when the
questions. Questions are interviewer tries to
made up during the probe personal details of
interview. the candidate to analyze
why they are not right
for the job.
Mixed A combination of A realistic approach that
structured and yields comparable
unstructured questions, answers plus in depth
which resembles what, insights.
is usually done in
practice.

Behavioral Questions limited to Useful to understand

hypothetical situations. applicant’s reasoning
Evaluation is based on and analytical abilities
the solution and under modest stress.
approach of the
applicant.
Stress A series of harsh, rapid- Useful for stressful jobs,
fire questions intended such as handling
to upset the applicant. complaints.

Medical Examination: C ertain jobs require certain physical qualities

like clear vision, perfect hearing, unusual stamina, tolerance of hard
working conditions, clear tone etc. Medical examination reveals whether
or not a candidate possesses these qualities.
Reference Checks: After completion of the final interview and medical
examination, the personnel department will engage in checking
references. Candidates are required to give the names of reference in their
application forms. In case the reference check is from the previous
employer, information for the following areas may be obtained. They are:
job title, job description, period of employment, pay and allowances,

46
 gross emoluments, benefits provided, rate of absence, willingness of the
previous employer to employ the candidate again etc.
Fi n al d ec ision b y the line m a n ag er co n cer n ed : T h e line m a n ag er
concerned has to make the final decision whether to select or reject the
candidate after soliciting the required information through different
techniques. A true understanding between the line ma nagers and
personnel mangers should be established to take proper decisions.
Employment: Thus, after taking the final decision the Organisation has
to intimate the decision to the successful as well as unsuccessful
candidates. The Organisation sends the appointment orders to the
successful candidates either immediately or after sometime depending
upon the time schedule.

Placement

W h e n once the candidate reports for duty, the Organisation has to place
him initially in that job for which he is selected. Immediately the
candidate will be trained in various related jobs during the period of
probation of training or trial. T he Organisation, generally, decides the
final placement after the initial training is over on the basis of
candidate’s aptitude and performance during the training/probation
period. Probation period generally ranges between six months and two
years. If the performance is not satisfactory, the Organisation ma y
extend the probation or ask the candidate to quit the job .If the
employee performance during the probation period is satisfactory, his
services will be regularized and he will be placed permanently on a job.

Fig. 6: Employee Placement Process

Collect data about the employee

Construct the employee’s profile

Match between sub group profile and individual’s profile

Compare sub-group profile to job family profile

Match between job family profiles and sub-group profiles

Assign the individuals to job family

47
Assign the individual to specific job after further counseling
and assessment

Placement is “the determination of the job to which an accepted

candidate is to be assigned and his assignment to that job. It is a
matching of what the supervisor has reason to think he can do with the
job demands (job requirements), it is a matching of what he imposes (in
strain, working conditions) and what he offers in the form of pay roll,
companionship with others, promotional possibilities etc. It is not easy
to match all factors to the new employee who is still unknown to many.
So the new employee is placed as a probationer until the trial period is
over.

INDUCTION
Introducing the n ew employee wh o is designated as a probationer to the
job, job location, surroundings, Organisation, organizational
surroundings, various employees is the final step of employment
process. This process is important because of the high turnover rate
among the new employees compared to that among senior employees.
This is mainly because of the problem of adjustment and adaptability to
the n ew surroundings and environment. further absence of information,
lack of knowledge about n ew Organisation, cultural gap, and behavioral
variations, different levels of technology, variations in the requirements
of the job and the Organisation also disturb the new employee.
Induction is necessary as the newcomer feel insecure, shy,
nervousness and disturbing. This situation leads to instability and
turnover.

“Induction is the process of receiving and welcoming an employee when he

first joins a company and giving him the basic information he needs to settle
down quickly and happily and start work”.

Lecture, handbook, film, group seminar are used to impart the

information to new employees about the environment of the job and the
Organisation in order mak e new employee acquaint himself with the
following heads:
1. A b o u t the co m p an y;
2. A b o ut the d e p artm e nt;
3. A b o u t th e superiors, su bo rdinates;

48
Objectives of Induction:
I. Putting the new em ployee at his ease;
II. Creating interest in his job and the co mpany;
III. Providing basic informatio n about w orking arrangem e nts;
IV. Indicating the standards of perfo r mance and behavior expected o f
h i m. M a k i n g t he e m p l o y e e feel that h i s job, h o w e v e r s mal l , is,
meaningful, that he is not a cog in the vast wheel;
V. Infor ming hi m about training facilities;
VI. Creating the feeling of social security;
V I I. M i nim izing the reality sho ck w h ich w o uld b e caused d u e to
i n c o m patibilit y c a u s e d b e t w e e n t h e e mp l o y e e e x p e c tatio n s a n d
actually w h at the co m p an y pro v ides/offers regarding pay ,
b en e fits, status, wo r k i n g co n d itions, resp o n s ibility, o p p o rtun ity
for growth, innovations, creative ideas etc.
Advantages of Induction
I. First i mpression ma tters a good deal and results in less turnover;
II. N e w c o m er a d justs h i m s elf to the w o r k q u ickly , a n d it sav e s the
time of the supervisor;
III. Reduces e mployee dissatisfaction and grievances;
IV. Develop a sense of belongings and commitment.

In general, productivity forms a measure of the output of

g o o d s an d services to the input of labour, material a n d
machinery. The more productive a sector, the better its
competitive position will be, as its unit cost will be lower.
With the increase in productivity, earnings will improve,
raising the standard of living. Improving productivity does
not mean working harder. Rather it means working
effectively. It means getting more out of what is put in. It is
doing better with what one has.

Dismissal

Dismissal is a termination of service of an employee as a punitive measure.

Th is ma y occur either on account of unsatisfactory performa nce of
misconduct. Persistent failure on the part of employee to perform up to the
expectations or specified standard is considered as unsatisfactory

49
performance. Willful violation of rules & regulation by the employee is
treated as misconduct.

Dismissal is a drastic step seriously impairing the earnings and image of an

employee. Therefore, dismissal as a measure should be resorted to with great
care and caution. It must be justifies an d duly supported b y the just and
sufficient cause. Before an employee is dismissed, he must be served
advance notice to explain his position. the reasons for dismissal must be
clearly made known to the employee.

T RA I NI NG
Training is the act of increasing the knowledge and skill of an individual for
doing a particular job. In the present scenario training is increasingly viewed
as a means of fostering the growth of the individual employee but as an
integrated part of organizational growth.
Training is a process of learning a sequence of programmed behaviour. It is
application of knowledge. It gives people an awareness of the rules and
procedures to guide their behavior. It attempts to improve their performance
on the current job or prepare them for an intended job. Development is a
related process. It covers not only those activities, which improve job
performance, but also those, which bring about growth of the personality;
help individual in the progress towards maturity and actualization of their
potential capacities so that they become not only good employees but better
man and women.

Definition Of Training:
“Training is the act of increasing the knowledge and skills of an employee
for doing a particular job.”
Edwin.
B.Flippo

50
“Training is the organized procedure by which people learn knowledge and
\or skill for definite purpose”.
Dale
S.Beach
It is the training that bridges the gap between Job requirements and
employees present specifications. Training is a process by which attitudes,
skills and abilities of employees to perform specific jobs are increased.
Thus, it can be concluded that training is a process that tries to improve
skills or add to the existing level of knowledge so that the employee is better
equipped to do his present job, or to mould hi m to be fit for a higher job
involving higher responsibilities. In other words, training is a learning
experience that seeks a relatively permanent change in an individual that will
improve his/her ability to perform his job.

Distinction between training and development

Training is a short-term process utilizing a systematic and organized
procedure by which non-managerial personnel learn technical knowledge
and skills for a definite purpose. Development is a long-term educational
process utilizing a systematic and organised procedure by which managerial
personnel learn conceptual and theoritical knowledge for general purpose.
Training refers only to instruction in technical and mechanical
operations, while development refers to philosophical and theoretical
educational concepts. Training is designed for non-mangers while
development is designed for managerial personnel.
Training and development differs in four ways:

“What” is

learned; “Who” is

learning;

51
 “Why” such learning takes

place; “When” learning occurs.

L earning D im ensions T raining D evelopment

Who? Non Managerial Personnel Managerial Personnel
What? Technical and Managerial Theoretical and
operations Conceptual ideas
Why? Specific job related General knowledge
When? Short Term Long Term

Objectives Of Training
The primary purpose of training is to establish a sound relationship
between the worker and his job –the optimum man task

relationship. To upgrade skills and prevent obsolescence.

To develop healthy and constructive

attitude To prepare employees for future

assignments

The Focus Of Training Is On Three Broad

Objectives: To bring about attitudinal change.

To bring about quality to be the very top of

agenda. To savagely cut waste.

Importance And Benefits Of Training

Training is important to develop the employees and

make them suitable for the job. Training constitutes
significant part of management control. Benefits of
training to following are:

52
Organization Level: -

It leads to improve profitability

It improves the job knowledge, skills and morale of the work force
It helps in organizational development and preparation of guidelines
for work
It enhances quality of work and appropriate climate for
growth It supports in improving organizational communication

Individual L ev el : -

It help in encouraging and achieving self development

It provides a sense of growth in learning
It increases job satisfaction and recognition
It helps the individual in effective problem solving

A Model Training Program Should Encompass The Following Points:

M anagement overall responsibility right fro m planning stage to

successful implementation.

The comp anies approach to the training function, which would

include guidance for design and execution as well as dissemination of
relevant information to all employees.

Provision for annual or periodic surveys in order to ensure that

training are need based and development oriented.

Identification of priority area since resources are always scarce and

programs must be prioritized according to felt needs.

Identification O f Training N e e d s

53
 Organizational Analysis: - It involves a study of entire organization
in ter ms of analysis of objectives, utilization of resource,
environmental scanning and organizational climate analysis.

Task/Role Analysis: - It involves a careful study of jobs within in an

organization in a further effort to define specific content of training. It
requires systematic collection of data about the job, role or position
and what type of behavior, skill, and knowledge the jobholder must
have to perform certain specified tasks.
M an po w er An alysis: - It is conducted through appropriate
observation, supervisory evaluation. This analysis is undertaken to
know about the specific areas in which training is needed

DE SI GNI NG TRAI NI NG M E T H O D S

Training methods are means of attaining desired objectives set for a training
programme. In practice, a variety of training methods are employed for
achieving these objectives. But an organization cannot use all types of
training methods for the reason like cost involved and also their relevance to
organizational need hence, organization needs to select a method or mix of
methods to meet its training needs the choice of training met h od would
depend on a Varity of factors, such as purpose of training, nature of contents,
relevance to the participants, level of trainees, competence of
trainers/instructors, cost, etc.
Depending on the training result and the process employed to
attain these, the various training methods can broadly categorized into four
groups as under:

1. On- the job oriented methods

2. Off the job training methods

O n t h e j o b o r i e n t ed t r ai ning m e t h o d s . A s t h e n a m e itself d en o t es ,
methods include in this cluster are those whose main objectives are
centered around the job, i.e., learning on the job itself by a variety of

54
methods. The main methods, which fall into this category, are discussed
here under:

On the job training (OJT). O n the job training is probably the

most
Co mmon approach to training, which can range from relatively
unsophisticated “observe and copy” method to highly, structured
courses. In this method, the new employee is placed on a job and
taught the skills necessary to perform it a trainer or superior
teaches the employee. Since trainee learns by observing and
handling the job this is also termed as ‘observing, and copying’ or
‘learning by doing.’

J o b i n str u ct io n t r ai n in g ( JI T) . I n this m e t h o d , a trainer o r

supervisor gives instruction to an employee how to perform his
job. This method of training is appropriate for acquisition or
improvement of motor skills and routine and repetitive
operations.

Coaching: this is similar to the JIT .in this method, the superior
teaches or guides the new employee about the knowledge and
skills of a specifically defined job. The superior points out the
mistakes committed by the new employee and then also gives
suggestions to improve upon.

Job rotation: in this method, a trainee moves from one job to

another and from one department to another. This type of
training method is more appropriate for developing
multiskilling, operational flexibility, providing satisfaction from
routine jobs and broadening the overall perspective of the
trainee.

Vestibule training: this is a system in which employees learn

their jobs on the equipment they will be using, but the training
is conducted awa y fr o m the actual wo r k floor. This type of
training is commonly used for training personnel of clerical and
semi-skilled grades.

55
OF THE JOB TRAINING METHOD: -

Role-play: this is just like acting out a given role as in stage

play. In this method of training, the trainees are required to
enact defined roles on the basis of oral or written description
of particular situation.

C a s e me t h o d : the case is an actual ev ent o r situation o n

organizational problems, which is a written description for
discussion purpose. Trainees are asked to analyses the event
or circumstances with an objective to identifies problems,
trace out the causes for it and find out the solution to solve
the problems.

Management games: the g ame is devised on the model of

business situation. Then, trainees are divide into groups who
represent the management of competing companies. They
m ak e d ecisio n s just like these are m a d e in real life
situations. Decisions made by the groups are evaluated and
the likely implications of the decisions are fed back to the
groups.

In basket exercise: this is also called ‘in tray’ me t h o d of

trainin g . T h is is built arou nd the ‘inco m ing m a il’ of
manager. The trainees is presented with a pack of papers and
files in tray containing administrative problems and are
asked to take decision on these within a specified time limit.
The decision taken by the trainees are comp ared with
another. The trainees are provided feedback on their
decisions.

Lectures: lecture is by far the most co mmonl y used direct

method of training. In this method the trainer provides
knowledge to the trainees usually from prepared notes.
Notes are also given to the trainees. This method is found
more appropriate in simulations where some information is
required to b e shared to a large n u mb e r of audience and
which does not require more participation from audience. It
is a low cost method. The major limitation of this method is

56
 that it dose not provide for active involvement of the
trainees.

Conferences/seminars : in this method, the trainer delivers a

lecture on the particular subject, which is followed by
queries and discussions. The conference leader must have
the necessary skills to lead the discussion in a meaningful
way without losing sight of the topic or theme. This method
is used to help employees develop problem-solving skills.
P r o g r a m m e d instruction s : this is the recently d ev el op ed
technique based on the principle of positive reinforcement
developed by B.F.Skinner. This technique is used to teach
nonmotor and behavioral skills. T h e subject matter to be
learned is prepared and condensed into logical sequence
fro m mo re comp lex. The trainer m onitors trainee’s
independent progress through the programme. The trainee
gets instant feedback on his learning however; this method is
expensive and time consuming also.
Sensitive training: sensitive training is also k n o w n b y a
Varity of names such as t-groups, laboratory training and
encounter groups. (The “T” is for training.)The objective of
sensitive training is to increase participants’ insights into
their behavior and the behavior of others by encouraging an
open expression of feelings in the trainer guide T-group.
This approach is useful for understanding people’s behavior particularly
when they are involved in inter personal relationships. Development of
positive thinking, improvement in inter-personal relationships, proper
motivation of people and organizational development are some of the
important benefits of transactional analysis as a technique of training.
Conclusion:

To conclude, each method of training has some strengths and weaknesses.

Given the purpose of a training programme, the level of participants the
competence of trainers, etc., the appropriate met hod has to be chosen to
impart training.
MANAGEMENT DEVELOPMENT
While drawing a distinction between training and development in previous chapter, we introduced in brief, the concept of
development/ based on that concept, we elaborate it in more detail.

57
The term “development” implies overall develop ment in a person.
Accordingly, Management development means not only improvement in
job performance, but also improvement in knowledge, personality,
attitude, behaviorism of an executive, etc. It means that
executive/management development focuses more on the executive’s
personal growth.
M a nageme nt D evelop ment is a systematic process of gro wth and
development by which managers develop their abilities to manage.
Management Development is concerned with improving the performance
of the managers by giving them opportunities for growth and
development.
Definition:
“Executive /Management Development includes the process by which
managers and executives acquire not only skills and competency in their
present job but also capabilities for future managerial tasks on increasing
difficulty and scope. ” Flippo.
“Any activity designed to improve the performance of existing managers
and to provide for a planned gro wth of managers to meet future
organizational requirements is called management development.”
S.B.Bhudiraja

T echniques Of Management Development

There are mainly two techniques of management development, one is the
formal training and the other is through the on the job experience.

58
 On-The-Job Techni ue - -

Coaching Job Under Multiple

Case method Incident Role-playing In basket Business Sensitivity

Simulation Grid training Conference Lectures

On The Job Techniques

1 Coaching: In coaching the trainee is place under a particular supervisor

who acts as an instructor and teaches job knowledge and skills to the trainee.
2. Job Rotation: The transferring of executive s from job to job and from
department to department in a systematic manner is called job rotation.
3. Under Study: An under study is as person who is in training to assure at a
future ti me, the full resp o n sibility of the p o sitio n currently held b y his
superior.
4 Multiple Management: M u ltiple management is a system in which
permanent advisory committees of managers study problems of the company
and make recommendations to higher management.

Off-The Job Technique

1. The Case Study: Cases are prepared on the basis of actual business
situations that happened in various organizations.

2. Incident Method: This method was developed by Paul Pigors. It aims

to develop the trainee in the area of intellectual ability, practical

judgment and social awareness.

59
3. Ro le Playing: A problem situation is simu lated by asking the

participants to assume the role of particular person in the situation.

4. In Basket Method: The trainees are first given background

information about a simulated company, its products, key personnel,
various memoranda and all data pertaining to the firm. The trainee has
to understand all of this and make notes of it.

5. Sensitivity Training: The main objective of sensitivity training is the

“Development of awareness of and sensitivity of behavioral patterns

of oneself and others”.

6. Simulation: Under this technique the situation is duplicated in such a

way that it carries a closer resemblance to the actual job situation.

7. Managerial grid: It is a six-phase programme lasting fro m three to

five years. It stats with upgrading managerial skills, continues to

group improvement, improves inter group relations, goes into
corporate planning, develops implementation method and ends with
an evaluation phase.

8. Conference: A conference is a meeting of several people to discuss

thee subject of common interest.

9. L ectures: It is the simplest technique. T h e lacquerer organizes the

material and gives it to a group of trainees in the form of talks.

60
 Objectives of Executive/Management Development
1. Improve the performance of mangers at all levels;
2. Identify the persons in the organization with the required potential and
prepare them for higher position in future;
3. E n sure availability of required n u mb er of executives m a n gers
succession wh o can take over in case of contingencies as and when
these arise in future;
4. Prevent obsolescence of executives by exposing the m to the latest
concepts and techniques in their respective areas of specialization;
5. Replace elderly executives who have risen from the ranks by highly
competent and academically qualified professionals;
6. Improve the thought process and analytical abilities;
7. Provide opportunities to executives to fulfill their career aspirations;
8. Understand the problem of human relations and improve human
relations skills.

CONCE PTS A N D ARE AS OF M A N A G E M E N T D E V E L O P M E N T

PROGRAMMME
General administration
Q 1: How to decide overall company strategy?
Q 2: How to evaluate capital expenditure proposals?
Q 3: How to improve the flow of information needed to control the
organization?
Q4: How to launch a new project?

61
Marketing & Sales
Q 1: How to forecast demand?
Q 2: How to generate new product ideas?
Q 3: How to launch a new product?
Q 4: How to determine the profitability of a product or product line?
Q 5: How to improve product design?
Production
Q 1: How to remove factory bottleneck?
Q 2: How to improve product quality and reliability?
Q 3: How to cope with complex mixes? Such as several factories, delivery to
man y customers, or several products fro m man y raw materials available
from many different sources, or several products profitability made by
several process, etc.
Q 4: How to cut labour cost?
Q 5: How to improve labour relations?
H u ma n Resource
Q 1: How to improve training methods?
Q 2: How to bring order and equality into wages and salary schemes?
Q 3: How to recruit the right number of the right type of people?
Purchasing
Q 1: How to check quality and reliability of raw materials?
Q 2: How to cut down the cost of purchasing holding stocks?
Research
Q 1: How to reduce the time taken to complete research?

CAREER MANAGEMENT
Introduction

62
Car eer M a n a g e m e n t : A career is all the jobs that are h eld during o n es
working life. Edwin B. Flippo defines career as a sequence of separate but
related work activities that provides continuity and, order and meaning in a
person’s life.

Career management focuses on career goals and it is the process of

designing and implementing goals, plans and strategies to enable the
organization to satisfy employee needs while allowing individuals to achieve
their career goals.

Following are the key ingredients for career management, which focuses on
the process of implementing organizational career planning.

Top management support.

Coordination of other human resource

activities. Involvement of superiors.

Use of human resource managers as consultants.

Periodic skill assessment.

Realistic feedback about career progress.

Equal access and open enrollment.

Focus on psychological success rather than

advancement. Flexibility for individual needs.

Climate setting for career

development. Small Pilot Programmes.

Periodic programme assessment.

63
Career management involves both organizational actions and individuals’
initiatives to ensure that when the career plans developed by the
organizational requirements and individuals aspirations undergo
unanticipated changes, they are managed appropriately on a continuing
basis.

Categories for Career M an ag ement

There are three major categories to undertake career management.

T o select a field of employment and employer: - On e cannot man ag e
his career unless one has a long-range objective and the first point is to
think in terms of where you ultimately want to be. Other important point
is to view your potential employer and position in terms of long-range
career goals.
To know where you are: - To be aware of the opportunities available to
you in the current position and to carefully and honestly posses current
performance.
Plan your exit: - To leave the current organization on good terms and not
under questionable circumstances.

Career management is complementary to management development and

it is concerned with planning and shaping the path, which people take in
their career progression within the organization. The underlying
assumption of career management is that, in the context of management
succession, the organization should be alert to provide able people with
training, guidance and encourageme n t to enabler them to fulfill their
potential.

64
 HR APPROACHES TO IMPROVING COMPETENCIES
Following are the approaches, which help in improving competencies among
the employee of the organization.
1. Incentives. The term in incentives means an inducement, which

rouses of, stimulates one to action in a desired action. An incentive

has a motivational power, and may be broadly grouped into
(a) Financial incentives: - Common use of money as incentive are

in form of wages and salaries, bonus, retirement benefits,

medical reimbursement, etc. money plays a significant role in
satisfying physiological and security/ social needs.
(b) Non-Financial Incentive: - the follo wing non – financial

incentives could be effectively used-

i. Appreciation of work Done
ii. Competition
iii. Knowledge of result
iv. Worker’s participation In Management:
v. Opportunity for Growth
vi. Suggestion System
vii. Job Enrichment
2. M an ag e me n t B y Objectives ( M B O ) : - M an ag e me n t b y Objective

can simply b e defined as a p r o gr a mme that enco mpasses specific

goals, anticipatively set for an explicit time period, with feed back on
goal progress.

3. T raining: - T rainin g is a pro c ess o f learnin g a seq u en ce of

programmed behavior. It is application of knowledge. It gives people

an awareness of the rules and procedures to guide their behavior. It is

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 used to teach the employee the most efficient and effective ways of
performing their job. Also used for better quality of their working.
4. Off the job techniques: - Many Techniques could be very effectively

used for the purpose and these are: -

a) The C ase Study
b) Role Play
c) In-Basket M ethod
d) Sensitivity Training
(already explained in previous chapter on Training and Development)

SUCCESSION PLANING
M ean ing:
Organizations run on eternal basis. T h e survival and thrive of any
organization on continuous basis requires a succession of person to fill key
position. This is done through “ succession planning.”

Succession planning can be defined as an executive inventory report

indicating what individuals are ready to move into higher positions in the
organization. In an organization, position at higher levels fall vacant due to
various reasons like retirement, resignation, promotion, transfer, death etc.
Therefore, the very purpose of succession planning is to identify, groom,
develop and make the people ready to occupy higher levels job as and they
fall vacant.

SOURCES
1. I n ter n al S o u rce s;
2. E x ternal S o u rces.

1. INT E R N A L S O U R C E S: S uccession fro m internal sources is

advantageous to the organization as well as to the internal employees.
This is so because while organization can buy employees loyalty and
commitment, employees feel belongings and shared feelings and
development along with the organizations. In order to groom internal
employees to assu mes higher responsibility in future, som e
professionally run large organization ask their managers and

66
 supervisors to identify the internal employees having potentialities to
replace them in jobs should the need arise.

2. E X T E R N A L S O U R C E S : Succession through outside talent in

certain cases like w h e n c o m petent and qualified are not available
internally, when major expansions, diversification and growth plans
are in offering. Experiences suggest that complete dependence on
either internal or external sources is not advisable to any organization
what is often advisable in this regard is judicial balance between the
two sources should be maintained

The succession planning involves the following core activities:

i. An alysis of the demand for executives, managers and

professional by level, function and skills.
ii. A udit of existing executives and inventory of likely
future supply from both internal and external sources.
iii. Planning individual career paths based on objective
estimates of future needs and drawing on reliable
appraisal and assessment of potential.
iv. Undertaking career counseling in the context of future
requirements of executives and managers.
v. Accelerated promotion scheme w ith development
targeted against the future needs of the organization.
vi. T raining and develop ment activities to groo m people
for future roles.
vii. Planned recruitment to fill short-term vacancies and
provide people for development to meet future needs.
viii. T h e actual process b y w h ich jobs are filled inclu d es
recruitment procedure internal appointment procedure,
methods of assessments, internal search mechanism and
often use of computer based information systems

Socialization
Concepts of socialization:

In simple words socialization is the process of adaptation. Different thinkers

have defined socialization differently. For example, Feldoman, has defined
socialization as “acquisition of wo rk skills and abilities adoption of

67
appropriate role behavior and adjustment to the norms and value of the work
group.”

In the opinion of M a n e n an d Schein, “socialization can b e

conceptualized as a process made up of three stage: pre- arrival, encounter
and metamorphosis.”
Thus socialization can be defined as a process of adaptation that
takes place as individual attempt to learn the values and nor ms of wo r k
roles.

PHASES O F SOCIALISATION PROCESS

The socialization process involves the following three phases:

i. Pre- arrival
ii. Encounter
iii. Metamorphosis

Pre- arrival: the pre- arrival phase explicitly recognizes that all the n e w
recruits arrive the organization with a set of values attitudes expectation and
learning. in other word pre arrival refers to all the learning that occurs before
a new member joins the organization.

Encounter: upon entry into organization, the n ew me mb er enters the

encounter stages. The role-playing starts here. The me mber’s starts
comparing expectation, the image of the organization, which he had formed
during pre arrival phase with reality. If expectation and reality concur the
encounter is smooth. But seldom it concurs. When the two differ, stress and
frustration set in what follows thereafter is mental process of adjustment. In
the process of adjustment. In the process of adjustment the individual tries to
replace his/her own values and norms with those of the organization. At the
other extreme, the me mb er simply cannot reconcile to those values and
norms of the organization and gets disillusioned and quits the job.

Metamorphosis: I n this stage, the m e mb e r master the skills required to

adjust with the organization norms and values. This is a stage going through
changes. Hen ce, this is called metamorphosis stage. This is of course a
voluntary process and a conscious decision, which enables the new member
to become compatible with the organization. This signals the completion of
socialization process.

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 MANAGING ORGANISATIONAL RENEWAL

You’ve just taken over as CEO of a company; what aspects of that company
can you change / there are several, including its strategy, culture, structure
tasks, tech n o logies, and the attitudes an d skills of its p eople. All such
changes will require the support and expert advice of the HR department.

S T RA TEGIC C H A N G E : Organization change often starts with

strategic change, a change in the firm strategy, mission and vision.
Strategic change may require other changes for instance in the firm
production technology, structure and culture.

CUL T U RAL C H A N GE: Implementing a strategic change often

requires changing the culture the firm’s shared values and aims. For
example, it created a new set of “heroes ”, individuals and teams who
were publicly congratulated whenever their behavior reflected n ew
values of quality, teamwork. and customer focus.

H R plays an important role in changing culture. For example one expert

advocates five “ primary embedding mechanisms “ to change a company’s
culture, each of which requires HR support and advice:
1. Make it clear to your employees what you pay attention to measure
and control.
2. React appropriately to critical incidents and organizational crises.
3. D e lib e rately role m o d el, teach and co ach the v a lues yo u w a nt to
emphasize
4. C o m mu n icate your priorities by the w a y you allocate rewards and
status.
5. Make your HR procedures and criteria consistent with the values you
espouse.

STRUCURAL CHANGE: Organizing redesigning the organizations

departmentalization, coordination span of control, reporting relationship
or centralization of decision-making is relatively direct and quick method
of changing an organization.

69
 T A S K R E D E S I N G : T he task and authority assigned to individual
and teams within the organization are often changed as well.

TECHNOLOGICAL CHANGE: Technological changes are

modification to the work method the organization uses to accomplish
its tasks. T h ey ma y include new production technologies, new
selection and screening procedures and new performance appraisal
techniques.

CHANGE IN PEOPLE ATTITUDES A ND SKILLS: Sometimes the employees

themselves must change. Techniques such as lecture conferences and on-the –
jo b training a n d often u s e d to p ro v id e n e w o r presen t e mp l o y e e s w i t h the
skills they need to perform their job adequately

A 10- STEP PROCESS F OR M AN AG I N G ORGANIS AT I ON

RENEWAL

1. Establishing a sense of urgency

2. Mobilizing commitment to change through joint diagnosis of business
problems
3. Create a guiding coalition
4. Develop a shared vision
5. Communicate the vision
6. Enable employees to facilitate the changes
7. Generate short term win
8. Consolidate gains and produce more change
9. Anchor the new ways of doing things in the company’s culture
10.Minorities progress and adjust the visions as required.

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 Review and Discussion questions

1. Briefly describe the concept of job analysis, and explain the job
analysis process.
2. From the Human Resource Manager points of view, what are the uses
of job analysis?
3. Define recruitment. Bring out the factors which effect recruitment?
4. W h a t are the various sources of recruitment? Discuss their relative
merits and demerits?
5. If you were a personnel officer in a scientific institution and asked to
recruit scientists, which source of recruitment yo u will use for this
purpose and why?
6. Wh at are the key attributes that make a recruitment programme
effective?
7. W h a t do you mea n by training? H o w will you identify the training
needs in an organization?
8. What are the objectives of training? Explain the need for training in an
industrial organization?
9. “Training programmes are helpful to avoid personnel obsolescence ”
Discuss.
10.Explain the various methods of training.

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 11.Write short notes on:

Management

Games; Case Study;

Vestibule

Training; Sensitivity

Training;

Transactional Analysis.

12. W hat do you m ean b y executive developm e n t? W hat are its

objectives?
13.Discuss the methods of Executive Development. Which one you
consider the most suitable for developing middle level managers and
why?
14.“Y ou cannot develop managers. People either have the ability to
manage or they don’t.” Do you agree or Dis-agree? Discuss.

15.“Career Development is a waste of money for a company. All is does

is raise employee’s expectations and then, frustrated, they quit.” Do
you agree or disagree? Discuss.
16.What type of information would you seek from human resource
department to help you develop your own career plan if you were just
starting with a large multinational corporation?

----------------------------------------------------------------------------- ---------------

72
 Unit III
HU MAN RESOURCE DEVELOPMENT

HRD implies that the organization wants to enhance the overall capabilities of its
employees to develop their potential in directions best suited to them.

Basic Concepts Of HRD:

The belief that every person has potential which can be utilized for better productivity or
services has enabled to establish a process of converting this potential into reality. In this
process the human being is continuously helped to acquire knowledge and skill and to
change to the organizational culture.
Therefore the basic concepts of HRD are:
• To acquire capability to meet present and future job specification.

73
 • To develop an organizational climate to bring about team spirit and group
dynamism.

ORGANISATIUONA HUMAN JOB

L DEVELOPMENT RESOURCE ENRICHMENT E
X
TRAINING C
E
L
L
HUMAN ORGANISATIONAL JOB E
SATISFACTION N
RESOURCE INPUT CLIMATE C
E

There are efforts being made to synchronies three basic elements of HRD:
• Education

• Training

• Development

To fulfill desired objectives. Training and education can be appraised immediately by

simple question answer approach but development evaluation needs ability to predict the
long term results.
A realistic and long-term HRD plan appears to be difficult but if planned properly, funded
adequately and supervised minutely, implementation of H R D practice helps the
organization to grow fast.

Facts About HR D:

It is with belief that under certain circumstances people are capable of improving
their capability.

It is the process of helping people to acquire competencies.

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 In an organizational context H R D “…is a process by which employees of an
organization are helped in a continuous and planned way to acquire or sharpen
capabilities.

HRD develops an organizational culture in which supervisor-subordinate

relationships, team work, collaboration among units are strong and contribute to
the professional well being, motivation and pride if employees.

Employees are continuously helped to acquire new competencies through a

process of planning, feedback, training etc.

Wh y H R D Is Needed?

It is required for continuous development of competencies.

T o avoid a saturation po int in ter ms of growth of an e m ployee by

enhancement of competencies.

To improve the service and effectiveness of employees.

Benefits Of HR D

Unlike education, training in HRD not only develops the competence of the individuals
but also develops his/her latent potential for the total effectiveness of the organization.
The benefits from HRD are therefore man y. Some of them are:
It helps employee to diagnose his/her own strengths and weaknesses.

It develops creativity in employees.

75
 It helps employee to develop himself/her in a given organizational climate to
improve not only his/her performance but that of the organization.

It develops trust and openness amongst employees thus enriches interpersonal

relationships.

It creates environment for realistic feedback and guidanc e from superiors.

It provides long term & short term development op portunities.

It smoothens the career development plans.

It helps organizations to use available h u man resource for future challenging

responsibilities after developing them.

It enables an overall develop m ent of personality of e m ployees and the

organizations.

Systematic Representation O f Linkages Between H R D Instruments, Processes,

Outcomes And Organizational Effectiveness.
HRD M echanism s or HRD Processes & HRD H R D Ou tcomes V ariables Organization al Effectiveness
Subsystems or Instruments Climate V ariables Dimensions
• HRD Department • Role clarity • More Competent • Higher Productivity

• Professional • Planning of People • Growth &

Appraisals development by • Better Developed Diversification
• Review every employee roles • Core Reduction
Discussions, • Awareness of • Higher Job • More Profiles
feedback competencies commitment & job • Better Image
• Counseling involvement
required for job
sessions • More Problem
performance

76
 • Role analysis • Practice Solving
exercises Organizations • Better Utilization
• Potential • More Trust of Human
development • Collaboration & Resources
exercisers Team Work • Better
• Training • Authentic Organizational
communication •
Health
Openness
policies • More Teamwork,
• Risk taking
• Job Rotations Synergy and
• Value Generation
• OD exercises Respect of each
• Clarification Of
•
other
Rewards
Norms & Standards
• Job enrichments • Increased
programs Communication
• Other mechanisms • More Objective
rewards
• Generation of
objective, Data on
employee etc

Other Factors
Other Factors Other Factors
Environment, Technology,
Resource Availability,
Personnel Policies, Top Environment,
History Nature of Business
Management styles, Inve- etc
stment on HRD, Top Ma-
nagement Commitments,
History, Previous Culture,
Line Manager’s Interest
etc.

Features Of H R D In An Organization

Founded on the belief that people are capable of growth and management has to
create an environment of growth.

This belief is to be manifested in managerial practices and in the behavior of

managers and supervisors who are the k ey agents of HRD in the organization.

77
For operational purposes large Organizations focus on HRD, generally the areas
concern are Recruitment, raining, Appraisal, planning etc.

78
L E AR NI N G A N D D E V E L O P M E N T

Definition of Learning: An y relative permanent change in behavior that occurs as a

result of experience.

Learning is a kind of action, and it takes place through number of development methods
undertaken by the organizations. There are four important points in terms of learning and
development.

Learning involves a change in behavior and opens a way for development.

Any temporary change in behavior due to fatigue or any reason is not a part of
learning.

Learning is totally based on some form of practice or experience.

There must be practice or experience must be reinforced in order for learning to

occur

The most effective and quick method of Learning is Learning on the job, this is been
referred as on the job training. In this me thod the trainee has direct personal
responsibility.

Facts About Learning And Development:

Learning if it is adopted to the real needs is enforced it creates a long-term impact.

The technique of on the job training is very useful in the case of leaning and
Development in teaching skills at the work place or the desk or in the laboratory.

79
 The focus is mainly on imparting practical inputs in order to convert it into a more
fruitful training.

Characteristics A nd Principles O f Learning An d Development:

It requires purposeful activity.

It is a Problem solving process.

Learning and development go hand in hand.

Friendly competition stimulates learning and development..

Early Successes increases the chances for ef ective learning and

d3evelopment.

Benefits Of On The Job Training In Order To Highlight The Relevance Of Learning And
Development:

The trainee learns effectively as he experiences the same problem, which he will
be facing on the job.

Learns to locate the fault and corrects error.

Confidence in speed and senses of productiveness, and gets positive and

reinforcive support.

Benefits Of Job Rotation Method In Order To Highlight The Relevance Of Learning And
Development.

It is a effective method to develop small number of people in various jobs by

rotation.

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It is mainly used for management development methods where managers are
exposed to handle the situation of other departments.

S u c h a exp o su re g iv es y o u the o pportun ity of acting in a service role with

increased knowledge and sensitivity.

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 PERSONAL DEVELOPMENT PLANNING

Survival, Growth and Effective existence of an organization require a succession of

people to fill various important jobs. Personal Development planning focuses on for main
steps
Individual Needs

Vision linked with needs.

Action plan to achieve the vision.

Results focusing on maintaining the change.

Following are the points to highlight Personal Development

Planning: To first of all identify individuals interest, skills and

potential.

To identify life goals and career goals.

To develop a written plan (including schedule to achieve individual goals)

Seeking and obtaining the best first.

Communicating to management the individual career plan.

To seek Counseling from the manager and from the HR organization.

To evaluate the internal and external opportunities.

To making known yourself and your accomplishments.

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Advantages Of Personal Development Planning

It helps the individual to have the knowledge of various career opportunities.

To select the career which is suitable to ones life style.

To satisfy individuals’ esteem needs.

To improve the individual employees performance on the job.

To increase the level of Job Satisfaction.

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 T R A I N I NG

Training is the act of increasing the knowledge and skill of an individual for dong a
particular job. In the present scenario training is increasingly viewed as a means of
fostering the growth of the individual emplo yee but as an integrated part of organizational
growth.

Definition Of Training:
Dale S.Beach defines training as “---the organized procedure by which people learn
knowledge and \or skill for definite purpose”.

It is the training that bridges the gap between Job requirements and employees present
specifications.

Objectives Of Training

The primary purpose of training is to establish a sound relationship between the

worker and his job –the optimum man task

relationship. To upgrade skills and prevent

obsolescence.

To develop healthy and constructive attitude

To prepare employees for future assignments

The Focus Of Training Is On Three Broad

Objectives: To bring about attitudinal change.

To bring about quality to be the very top of agenda.

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 To savagely cut waste.

I m p o r t a n c e A n d B e n e f i t s O f Train i n g:
Training is important to develop the employees and make them suitable for the job .
Training constitutes significant part of management control. Benefits of training to
following.

Organization Level: -

It leads to improve profitability

It improves the job knowledge, skills and morale of the work force

It helps in organizational development and preparation of guidelines for

work It enhances quality of work and appropriate climate for growth

It supports in improving organizational communication

Individual L ev el : -

It help in encouraging and achiving self development

It provides a sense of growth in learning

It increases job satisfaction and recognisition

It helps the individual in effective problem solving

A Model Training Program Should Encompass The Following Points:

Management overall responsibility right from planning stage to successful

implementation.
The companies approach to the training function which would include guidance
for design and execution as well as dissemination of relevant information to all
employees.

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 Provision for annual or periodic surveys in order to ensure that training is need
based and development oriented.
Identification of priority area since resources are always scarce and programs
must be prioritized according to felt needs.

Identification O f Training N e e d s

Organizational Analysis: - It involves a study of entire organization in terms of

analysis of objectives, utilization of resource, environmental scanning and
organizational climate analysis.

Task/Role Analysis: - It involves a careful study of jobs within in an organization

in a further effort to define specific content of training. It requires systematic
collection of data about the job, role or position and what type of behavior, skill,
and knowledge the job holder must have to perform certain specified tasks.

Manpower Analysis:- It is conducted through appropriate observation,

supervisory evaluation. This analysis is undertaken to know about the specific
areas in which training is needed

Training Techniques

Job instruction training

Coaching

Programmed learning

Job rotation

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Lecture

Conference

Laboratory training

Role Playing

Case study

In basket

87
 MANAGEMENT DEVELOPMENT

Management Development is a systematic process of growth and development by

which managers develop their abilities to manage. Man agement Development is
concerned with improving the performance of the managers by giving them
opportunities for growth and development.

Techniques Of Management Development

There are mainly two techniques of management development, one is the formal
training and the other is through the on the job experience.

Im ortant Techni ues O f M ana ement Develo ment

- - - -

Coaching Job Under Multiple

Case method Incident Role-playing In basket Business Sensitivity

Simulation Grid training Conference Lectures

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On The Job Techniques

1 Coaching: In coaching the trainee is place under a particular supervisor who acts as an
instructor and teaches job knowledge and skills to the trainee.

2. Job Rotation: The transferring of executive s from job to job and from department to
department in a systematic manner is called job rotation.

2. Under Study: An under study is as person who is in training to assure at a future time,
the full responsibility of the position currently held by his superior.

3 Multiple Management: Multiple management is a system in which permanent advisory

committees of managers study problems of the company and make recommendations to
higher management.

Off-The Job Technique

10. The Case Study: Cases are prepared on the basis of actual business situations that
happened in various organizations.

11. Incident Method: This method was developed by Paul Pigors. It aims to develop
the trainee in the area of intellectual ability, practical judgment and social
awareness.

12. Role Playing: A problem situation is simulated by asking the participants to

assume the role of particular person in the situation.

13. In Basket Method: The trainees are first given background information about a
simulated company, its products, key personnel, various memoranda and all data
pertaining to the firm. The trainee has to understand all of this and make notes of
it.

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14. Sensitivity Training: The main objective of sensitivity training is the
“Development of awareness of and sensitivity of behavioural patterns of oneself
and others”.

15. Simulation: Under this technique the situation is duplicated in such a way that it
carries a closer resemblance to the actual job situation.

16. Managerial grid: It is a six-phase programme lasting from three to five years. It
stats with upgrading managerial skills, continues to group improvement, improves
inter group relations, goes into corporate planning, develops implementation
method and ends with an evaluation phase.

17. Conference: A conference is a meeting of several people to discuss thee subject of

common interest.

18. Lectures: It is the simplest technique. The lacquerer organizes the material and
gives it to a group of trainees in the form of talks.

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 CONCE P T S A N D A RE A S OF M A N A G E M E N T O F
MANAGEMENT DEVELOPMENT PROGRAMMME

General administration
Q 1: How to decide overall company strategy?
Q 2: How to evaluate capital expenditure proposals?
Q 3: How to improve the flow of information needed to control the organization?
Q4 : How to launch a new project?

Marketing & Sales

Q 1: How to forecast demand?
Q 2: How to generate new product ideas?
Q 3: How to launch a new product?
Q 4: How to determine the profitability of a product or product line?
Q 5: How to improve product design?

Production
Q 1: How to remove factory bottleneck?
Q 2: How to improve product quality and reliability?
Q 3: H o w to cope with complex mixes? Such as several factories, delivery to man y
customers, or several products from many raw materials available from many different
sources, or several products profitability made by several process, etc.
Q 4: How to cut labour cost?
Q 5: How to improve labour relations?

Human Resource
Q 1: How to improve training methods?
Q 2: How to bring order and equality into wages and salary schemes?
Q 3: How to recruit the right number of the right type of people?

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Purchasing
Q 1: How to check quality and reliability of raw materials?
Q 2: How to cut down the cost of purchasing an holding stocks?

Research
Q 1: How to reduce the time taken to complete research?

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 CAREER MANAGEMENT

Career Management: A career is all the jobs that are held during ones working life.
Edwin B. Flippo defines career as a sequence of separate but related work activities that
provides continuity and, order and meaning in a person’s life.

Career man ag e men t focuses o n career goals and it is the process of designing an d
implementing goals, plans and strategies to enable the organization to satisfy employee
needs while allowing individuals to achieve their career goals.

Following are the key ingredients for career management, which focuses on the process
of implementing organizational career

planning. Top management support.

Coordination of other human resource activities.

Involvement of superiors.

Use of human resource managers as consultants.

Periodic skill assessment.

Realistic feedback about career progress.

Equal access and open enrollment.

Focus on psychological success rather than advance ment.

Flexibility for individual needs.

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 Climate setting for career development.

Small Pilot Programmes.

Periodic programme assessment.

Career management involves both organizational actions and individuals’ initiatives to

ensure that when the career plans developed by the organizational requirements and
individuals aspirations undergo unanticipated changes, they are managed appropriately
on a continuing basis.

There are three major categories to undertake career management.

To select a field of employment and employer : - On e cannot manage his career

unless one has a long-range objective and the first point is to think in terms of where
you ultimately want to be. Other important point is to view your potential employer
and position in terms of long-range career goals.

To know where you are: - To be aware of the opportunities available to you in the
current position and to carefully and honestly posses current performance.

Plan your exit: - To leave the current organization on good terms and not under
questionable circumstances.

Career management is complementary to management development and it is

concerned with planning and shaping the path, which people take in their career
progression within the organization. The underlying assumption of career
manag ement is that, in the context of management succession, the organization
should be alert to provide able people with training, guidance and encouragement to
enabler them to fulfill their potential.

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 HR APPROACHES TO IMPROVING COMPETENCIES

Following are the approaches, which help in improving competencies among the
employee of the organization.
5. Incentives. The term in incentives means an inducement, which rouses of,
stimulates o n e to action in a desired action. A n incentive has a motivational
power, and may be broadly grouped into
(a) Financial incentives: - Common use of money as incentive are in form of
wages and salaries, bonus, retirement benefits, medical reimbursement,
etc. money plays a significant role in satisfying physiological and security/
social needs.
(b) Non-Financial Incentive: - the following non – financial incentives could
be effectively used-
i. Appreciation of work Done
ii. Competition
iii. Knowledge of result
iv. Worker’s participation In Management:
v. Opportunity for Growth
vi. Suggestion System
vii. Job Enrichment

6. Management By Objectives (MBO): - Management by Objective can simply be

defined as a programme that encompasses specific goals, anticipatively set for an
explicit time period, with feed back on goal progress.

7. Training: - Training is a process of learning a sequence of programmed behavior.

It is application of knowledge. It gives people an awareness of the rules and
procedures to guide their behavior. It is used to teach the employee the most
efficient and effective ways of performing their job. Also used for better quality of
their working.

95
8. Off the job techniques: - Many Techniques could be very effectively used for the
purpose and these are: -
e) The Case Study
f) Role Play
g) In-Basket Method
h) Sensitivity Training

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 Human Resource Management

Unit IV

Performance Appraisal

Once the employee has been selected, trained & motivated. , He is then
appraised for his performance .Performance appraisal is the step where
the management finds out how effective it has been at hiring and
placing employees .If any problems are identified steps are taken to
communicate with the employees & to remedy them.

Definitions
It is defined “ as a process of evaluating the performance of a job in terms of
its requirement.”

According to Heyel “ It is process of evaluating the performance &

qualifications of the employees in terms of requirement of the job for which
he is employed for purposes of administration including placement,
selection for promotions providing financial rewards & other actions which
require differential treatment among the members of the group as
distinguished from actions affecting all me mbers equally.

“Process of estimating or judging the value, excellence, qualities or status of

some object, person or thing.”

The Evaluation Process

The process of performance appraisal follows a set pattern, which is periodically

appraised by his superiors. The process of evaluation begins with establishment of
performance standards .At the time of designing a job & formulating a job description
performance standards are usually developed for the position. These standards set should
not b e v agu e but should b e clear .The next thing is that these standards should b e
communicated to the employees for the employees left to themselves & for making
communication effective feedback is necessary from the subordinate to the manager.
The third step is measurement of the performance, to determine the actual
performance is that, it is necessary to acquire information about it .The
sources used for measuring the performance can be through personal
observation, statistical reports etc .The fourth step is the comparison of the
actual performance with the standards. The next step is the results of are
discussed periodically with the employees, where plus points & weak points

97
are discussed .The final step is initiation of corrective action wh ere
necessary.

Establish performance standards

Communicate performance expectations to employees

Measure actual performance

Compare actual performance with standards

Discuss the appraisal with employee

If necessary, initiate corrective action

Methods of Performance Appraisal

Traditional methods:

1. Straight R a n k ing M e t h o d : It is old est & sim plest m eth o d of

performance appraisal by which the man & his performance is
considered as entity by the rater .The whole man is compared to with
the whole man .The relative position of each man is tested in terms of
his numerical rank .It may also be done by ranking a person on his job
performance against that of another me mb er of competitive group
placing him as number

2. Paired Comparison Technique :In this each employee is co mpared

every trait all other persons in pairs one at a time .In this judgments is
simpler than the ordinary ranking method.

3. Man-to-Man Comparison Method: This technique was used by the

USA army during the First World War. In this method certain factors

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 are selected for the purpose of analysis (such as leadership,
dependability & imitative) the scale of man is also created for each
selector.

4. Grading Method: In this method the rater considers certain features

& marks the carefully according to a scale. They select the features
like analytical ability, cooperativeness, dependability, self-expression,
job knowledge, judgment, leadership & organizing ability etc.

5. G r a p h i c M e t h o d :
T h i s is the m o st c o m m o n ly u s e d m e tho d o f
perfor mance Ap praisal .In it one of the each person is rated o n a
continuous scale. These factors are e mployee characteristics &
employee contribution which includes qualities such as initiative,
leadership, cooperativeness, dependability, industry, attitude

6. F orced C h o ice Des cription m e thod : in this ranking m e thod it

attempts to correct a rater’s tendency to give consistently high or
consistently low ratings to all the employees. This method uses
objective reporting & minimum subjective ratings.

7. Free Essay Method: Under this supervisor make s a free form, open
ended appraisal of an employee in his own words & puts down his
impression about the employee .He take into account of these factors
like relationship with fellow supervisors, job knowledge & potential,
employee characteristics & attitudes, physical conditions,
development needs for future.

MODERN METHODS

1. Management B y Objectives: It is potentially a powerful philosophy

of managing and an effective way of operationalising the evaluation
process. It is defined as “ a p rocess w hereby the superior &
subordinates managers of an organization jointly identify its common
goals, define each individuals major areas responsibility in terms of
results expected of him & use these measures as guides for operating
the unit & assessing the contributions of each of its members.

2. Assessment Center method: The assessment center concept was

initially applied to military situations in the Germany army in the

1930 .The purpose of this method was and is to test candidates in a

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social situations using a number of assessors & a variety of procedures.

The most important feature of the assessment centre is job related

simulations. These simulations involve characteristics that

Managers feel are important to the job success. The evaluators observe

& evaluate participants as they perform activities commonly found in

these higher levels of jobs.

3. 360 degree perfo r ma nce appraisal: T h e ap praisal m a y be any

person who has thorough knowledge about the job done by contents to
be appraised, standards of contents & who observes the employee
while performing a job .He should asses the performance without bias
.The appraiser are supervisors, peers, subordinates employees
themselves users of service. Performance appraisal by all the parties is
called 360-degree appraisal.

4. H u m an Asset Accounting method: The h u man asset accounting

method refers to activity devoted to attaching money estimates to the
value of a firm’s internal human organization & it’s external customer
goodwill .If a well trained e mployee leaves a fir m the huma n
organization is worthless& if they join the company the human assets
are increased.

5. B e h aviorally A n c h o r e d Rat in g S c a les: T h is a n e w a p praisal

technique which has been recently developed .It provides better
results as compare to other techniques .The BARS is usually consist
of five steps.

(a) Generate critical incidents: Person with knowledge of the job

to be appraised are asked to describe specific illustrations of
effective performance behaviour
(b) Develop performance Dimensions: These people then cluster
the incidents into small set of performance dimensions. Each
cluster must be defined.
(c) Reallocate Incidents: A n y group of people w h o also the job
then reallocate the original critical incidents. They are given
clusters definition’s & critical& asked to redefine each incident
to the dimension
(d) Scale of Incidents: The second group is generally asked to rate
the behaviour described in the incident as to how effectively or

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 ineffectively it represents performance on the appropriate
dimensions.
(e) Dev elop Final Instrument: Subsets of incidents are used as
behaviour anchors for the performance dimensions.

IMPORTANCE OF PERFORMANCE APPRAISAL

Performance appraisal provides systematic judgment to back up salary

increases, transfers, demotion or terminations
They are means of telling subordinates how he is doing & suggesting
needed changes in the behaviour attitudes, skills, and job knowledge.
They let him know where he stands with the boss.
T h e superior u ses t h e m as a b ase for co aching & counseling the
individual.
It provides adequate feedback to each individual for his or her
performance.
It plays a vital role in identifying training & development needs & to
evaluate the effectiveness of training & development programmes.

360 D E G R E E F E E D B A C K
Introduction
This attempt to update the traditional employee appraisal process is one of
the fashionable techniques of the mid 1990s, fitting in with other newts
tools called team management, employee empowerment and total quality
management.

In 360 degree feedback the appraisal should may be done by any person
w h o has thorough knowledge about the job done by the contents to be
appraised, standards of contents & who observes the employee while
performing the job .The appraiser should be capable of deciding what is
important & what is relatively less important. He should assess the
performance without bias .The appraisers are supervisors, peers,
subordinates employees themselves users of services & consultant.
Performance appraisal by all these parties is called 360-degree feedback.

Definition

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360-degree feedback, as the term implies, brings together formal appraisals
from everybody that the person being assessed comes into contact with—
line managers, subordinates, colleagues, peers, and even outsiders such as
clients. An other name for it is multi-source feedback and a variant is
upward feedback, in which subordinates appraise their supervisor’
performance. Th ough it is frequently intimidating or dispiriting for the
person concerned, some studies indicate that such feedback can be helpful
in changing behaviour and improving performance. Ho w ever, others
suggest that the technique shows little or no improvement over more
traditional methods and has the disadvantage that results need skilled
interpretation.

They say 360-degree feedback should be regarded as an organizational

process rather than a mechanical tool.

F E AT URES O F 360-DEGREE F E E D BA CK

• 360-degree feedback is an assessment process used to improve

managerial effectiveness by providing the manager with a more
complete assessment of their effectiveness, and their performance and
development needs.
• The process involves obtaining feedback from the manager's key
contacts, normally:
o The manager him/herself
o Subordinates
o Peers
o Manager
o Customers
o Suppliers
• Feedback is normally gathered by means of a questionnaire, which
asks participants to rate the individual according to observed
behaviors - usually managerial or business-specific competencies.
• The 360-degree process will not suit all companies. You should assess
h o w well it would fit with your current culture before launching a
scheme and a pilot scheme is worth building into your programme.
• C o m mu n icating the sche me , it's purpose and benefits to all those
involved will be a key factor in reducing the participants' fears and
gaining their commitment to any new scheme.
• Presenting the results of the appraisal to managers in a constructive
way is critical to the success of the process. All feedback, positive and

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 critical, should be presented, with the aim of highlighting and acting
on areas for development.
• R esults can be aggregated to give you som e feedback on
organizational strengths and weaknesses in relation to your business
objectives and training strategy.

A -- What is a 360° assessment?

It's a full-circle overview of a person's performance on the job. Instead
of a single evaluation from the boss, a person receives feedback from
many workplace sources. Sometimes 360°s are called multi-source or
multi-rater assessments.
T h e boss still gives input, but peers and direct reports (people w h o
report to the participant) also get involved in the evaluation process.
The person participating in a 360° gets to rate his or her performance,
too. Applying their individual observations and experiences, everyone
involved brings different perspectives to the assessment.
For participants, the feedback fr o m mu l tiple wo r k associates is highly
motivating. Used as a springboard for professional growth, the assessment
can make a powerful impact on an individual's career and a company's
success.
The 360° assessment process is designed as an ongoing process that can be
used at key intervals, usually annually, to mo nitor the progress of
professional growth.

B -- How does the Checkpoint 360° system work?

1. The participant and his or her boss, peers and direct reports fill in surveys.
Responses of the peers and direct reports are kept entirely anonymous.

The standard Checkpoint survey has 70 items and takes approximately 15

m inutes to co m plete. It covers co m p etencies in the areas of
Communications, Leadership, Adaptability, Relationships, Task
Management, Production, Development of Others and Personal
Development.

2. Results from all of the surveys are co mp iled in a confidential feedback

report. Graphs and charts relate the data in a detailed, easy-to-understand
format. The report presents a balanced picture of perceptions about a
person's skills.

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3. Participants u se the information fr o m the feedback report to establish
goals and ongoing action plans, aimed at better utilizing their strong points
and improving their weaker skills. They can use the 360° process before
and after training opportunities to measure their effectiveness and measure
gains.

C -- Why should a company implement a 360° process?

The process leads to better job performance, as participants use the 360° to
sharpen their skills. As a consequence, productivity in the workplace
increases, and a company enjoys more success.
Groups have found that the 360° process is an excellent method for
establishing specific training needs.
When a business has a clear objective to accomplish or a specific mission
to carry out, a 360° assessment can be a valuable tool. It can help everyone
to focus on skills consistent with the company's goals and to target their
development plans to fit the direction the business is taking.
If a business is struggling in a particular area, a 3 60° syste m can help
identify the skills requiring attention. Participants can then make the
chances necessary to remove obstacles to success.

D -- What are the advantages of a 360° feedback system?

Everybody involved in the process benefits:

Participants get a fairer, well-rounded i mpression of h o w their
work is viewed by others. Applying this valuable information, they
can take steps to continuously improve their effectiveness on the job.
Bosses get an overall perspective about a person's skills and,
consequently, develop a more accurate, on-target training plan for
each individual.
P eer s a n d Direct Rep o r t s g et a n oppor tuni t y to shar e concerns,
which helps them contribute to constructive changes in their work
environment. At the same time, they can confirm positive behaviors
that do not need attention.
T e a m me mb e r s can use the information to identify and prioritize
team development needs. The process can improve their teamwork,
increasing their ability to solve problems together.

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 T h e organization can develop appropriate skills to consistently
reflect comp any values. Continuous progress can be achieved
through periodic reevaluations using the 360° system.

E -- How do companies use the 360° results?

Most businesses initially use the 360° feedback for employee development.
Some begin by using it for development planning and then expand to use
the 360° system for appraisal and pay decisions. Later, they may also use it
in promotion and succession planning.
Wh en the initial use is for development only, everyone has a chance to
become familiar with the process and make any necessary adjustments. It
also allows time to build trust in the value of the 360°. For uses other than
development, specific legal guidelines must be followed.

When implementing a 360° system, its use must be taken into account . For
instance, companies will need to have a policy about who sees the 360°
survey results. When the feedback will be used solely for development, the
participant might be the only person to see the report. If the results will be
used for performance management, both the participant and his or her boss
will review the report.

Employee Compensation

One of the most difficult functions of H R M is that of determining rates of

monetary compensation. Not only it is one of the most complex duties, but it
is also one of the mo st significant to both the organisation and the
employees.

Wage & salary refers to the establishment & implementation of the sound
policies & practices of the employees compensation . It includes such as
such areas as job evaluation , surveys of wage & salary, analysis of relevant
organizational problems ,development & maintenance of wage structure,
profit sharing & incentives etc. The basic purpose of wage & salary
administration is to establish & maintain an equitable wage & salary
structure .The secondary objectives to establishment & maintenance of an
equitable labour –cost structure .The co mpensation is mainly concerned
with the financial aspects of the needs ,motivation & rewards. Managers

105
Must analyse the needs of the employees so that reward can be designed to
satisfy some needs.

Definition:

Compensation:
Compensation may be defined” as money received in the performance of
work , plus man y kinds of benefits & services that organization provides
their employees .” Money is included under direct compensation while
benefits come under Indirect Compensation. may consist of life ,accident &
health insurance ,employer’s contribution to retirement ,pay for vacation or
illness .
Wages:
Wag es are defined as the remuneration paid for the services of labour in
production, periodically to an employees /worker. These are generally refers
to hourly rate or daily rate paid to such groups as production & maintenance
employees (Blue Collar).

Salary:
Salary on the other hand refers weekly or monthly rates paid to the weekly
or monthly rates paid to clerical, administrative & professional employees
(White collar workers)

AIMS OF COMPENSATION MANAGEMENT

As far as the organisation is concerned, employee compensation programs

are designed to do three things:

To attract capable employees to the organisation

To motivate them toward superior performance, and
To retain their services over an extended period of time.

The aims of wage and salary administration are numerous and sometimes
conflict with each other. The main objectives of w age and salary
administration are:

1. To acquire qualified competent personnel: Candidates decide upon their

career in a particular organisation mostly on the basis of the maount of
remuneration the organisation offers. So the organisation should aim at

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 payment of salaries at that level, where they can attract competent and
qualified people.
2. T o secure internal and external equity: Internal equity does mean
payment of similar wages for similar job within the organisation.
External equity implies paymen t of similar wag es to similar jobs in
comparable organisations.
3. To retain present employees: The organisation must keep the wage level
at the competitive level, in order to prevent such quits.
4. To ensure desired behaviour: Good compensation reinforce desired
bahaviour like performance, loyalty, accepting new responsibilities and
changes etc.
5. Control costs: T o keep labour and administrative costs in line with the
ability of the organisation to pay.
6. Co mp ly with Legal regulations: A sound wage and salary syste m
considers the legal challengers imposed by government and ensures the
employer’s compliance.
7. To pay according to the content and difficulty of the job and in tune with
the effort and merit of employees.
8. T o facilitate pay roll administration of budgeting and wage and salary
control.
9. To simplify collective bargaining procedures and negotiations.
10.To promote organisation feasibility.

PRINICPLES Of WAGE & SALARY ADMINISTRATION

T h e r e a r e s e v e r a l p r i n c i p l e s o f w a g e a n d s a l a r y p l a n s , p o l i ci e s a n d
practices. T h e important of t hem are:
1. There should be definite plan to en sure that differences in p ay for
jobs are based upon difference in job requirements.
2. T h e g e n er a l level o f w a g es a n d salaries s h o u ld b e reaso n a b ly in
line with that prevailing in the labour market.
3. Wage and salary plans and policies should be sufficiently flexible.
4. Job evaluation must be done scientifically.
5. W age and salary administration plans must always be consistent with
overall organisational plans and programmes.
6. W age and salary administration plans and progra mmes should be in
conformity with the social and economic objectives of the country like
attainment of equality in income distribution and controlling
inflationary trends.

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 7. W age and salary administraion plans and programmes should be
responsive to the changing local and national conditions.
8. These plans should be simplify and expedite other administrative
processes.

ELEMENTS/INGREDIENTS OF A GOOD WAGE PLAN

Basic elements of good wage plan are as follows:
1.Should be easily understandable;
2.Easy Computation;
3.Capable of motivating E mployees;
4. S h o u l d p r o v i d e r e mu n e r a t i o n a s s o o n as e m p l o y e e s h a v e m a d e
efforts; 5.Should be relatively stable;

FACTORS AFFECTING WAGE AND SALARY ADMINISTRATION IN AN

ORGANISATION

1. Th e organization ability to pay: T h e first i mp ortant factor which

determines the pay rate is the as the companies with good sales & high
profits have the ability to pay higher wages to the employees as compare
to any other small scale company .

2. Supply & D e ma n d Force of labour : T h e labour mark et conditions or

supply & demand forces at the national ,regional & local levels because
if the demand for certain skills is high & supply is low the price to be
paid for these skills will be high & similarly if demand for skill is low &
supply of manpower is more than salary paid will be low .

3. Prevailing Market Rate: The next factor is the prevailing market rate or
kno wn as going ma rket rate or comp arable wage .It includes the
competition demand ,then the government laws & judicial decision ,trade
union encourages this practice so that people have equal pay ,equal work.

4. T h e C o st of living: Th e C o st of living is the usually regarded as

automatic minimum pay criterion & it is based on the increase or
decrease in an acceptable cost of living index .When the cost of living
increases ,workers & trade union demands adjusted wages.

5. The Living wages : It means that the wages paid should be adequate to
enable employees to maintain himself & his family at a reasonable level
of existence .

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6. Productivity : It is the another criteria measured in the terms of output
per man hour . Technological improvement, better organization &
management the development of better methods of production by labour
& management ,greater skill by labour are responsible for the increase in
productivity .
7. Trade Un ion Bargaining P o w er : T h e trade unions play an important
role ,generally the stronger & powerful the trade union, the higher wages,
As a strike or threat of strike is the mo st p o werful w eapon used by
them .

8. J o b R e q u i r em ent s
: T h e m o r e difficult a jo b is mo r e h i g her is th e
w a ges. A s the jobs are graded according to the relative skill ,fort
,responsibility & job condition required .

9. Managerial Attitudes : The managerial attitudes plays an i mp role like

top management desires to improve or maintain morale & to attract high
caliber employees to reduce turnover& to provide high living standard .

10. Psychological & Social Factors: These deter mine in a significant

measure how hard a person will work for the compensation received or
what pressure he will exert for his hike in co mpensation .Wages as a
measure of success in life ,people may feel secure or have an inferiority
complex .

WAGE CONCEPTS

Minimum Wage: must provide not merely for the bare sustenance of life but for the
preservation of the efficiency of the workers by providing some measure o f education,
medical requirements and amenities. This is the wage established according to the
provisions of the law.

Living Wage: It represents a standard of living, which provides not merely for bare
physical sustenance but decency, protection against illness, requirements of essential
social needs and some insurance against important misfortunes;

Fair Wage: The wage, which is decided according to the productive contribution of the
work done by him.

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 COMPONENTS OF THE COMPENSATION SYSTEM

Jobs offered by an organization vary in terms of their values. Job value is ascertained by
job evaluation. Jon evaluation is a systematic method of appraising the value of each job
in relation to other jobs in an organization. We have already discussed the job evaluation
method of in the previous chapter on job evaluation.

Once all the jobs are assigned values, then these are placed in a grade, or say, a rate per
job. These grades are arranged in an hierarchical order starting with lower to higher jobs.
Thus, job and salary structure consist of the various salary grades and their different
levels of single jobs or group of jobs.
Basic
Wage/Salary;
Dearness Allowance;
House Rent Allowance;
City Compensatory Allowance;
Conveyance
Allowance; Leave Travel
Concession; Education
Subsidy;
Bonus (Profit bonus /Incentive Bonus);
Medical;
Provident Fund;

Pension;
Overtime;
Fringe benefits;
Social security benefits.
In case of executives, various reimbursements are also made as part of their salaries.
These are:
Company leased
accommodation; Servant salary
reimbursement;
Company maintained car;
Driver salary reimbursement;
House maintenance
reimbursement; Children
education;
Scholarship to the children;
Electricity, water, gas charges reimbursement;
Insurance
premium;
Hospitalization;
Office maintenance at residence;
Household furniture and appliances;
Holiday homes;
Interest free loans for house building & many more.
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In short, 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 to requ ired
skill in an organization. The whole administration of wage and salary payment is based
upon three principles, namely, external equity, internal equity and individual equity.

Job Evaluation

I n t ro d u ct i o n

Job evaluation is the output provided by job analysis. As seen earlier, job
analysis describes the duties of a job, authority relationships, skills required,
conditions of work, and additional relevant information. Job evaluation on
the other hand, uses the information in job analysis to evaluate each job-
valuing its components and ascertaining relative job worth. It involves, in
other words, a formal and systematic comparison of job relative to another,
so that a wage or salary hierarchy results. So it is a process by which job in
an organization are evaluated.

If job values are not properly studied, it is very likely that jobs would not be
properly priced, i.e., high valued jobs may receive less pay than low valued
jobs. W h en e m ployee realizes that this is happening, they become
dissatisfied. They may leave the organization, reduce their efforts or perhaps
adopt other modes of behavior detrimental to the organization.

Definition- “Bureau of labour statistics, USA “Job evaluation is evaluation

or rating of jobs to determine their position in job hierarchy. The evaluation
may be achieved through assignment of points or use of some other
systematic method of essential job requirement such as skills, experience
and responsibility”.

According to ‘Kimball and Kimball’ “Job evaluation is an effort to

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

According to ‘Wendell French’ “Job evaluation is the process of

determining the relative worth of the various jobs within the organization, so
that different wages may be paid to jobs of different worth”.

Objectives o f Jo b Evalu ation

11
 To secure and maintain complete, accurate and impersonal
description of each distinct job;
Provides standard procedure for determining the relative worth
of each job
For promotion and transfer
To ensure wages are paid to all qualified employees for like
work;
To consider fair and accurate consideration of all employees for
advancement and transfer;
To provide information for ‘work organization, employees’ selection,
placement, training and numerous other similar problem;

Pro ced u re for Jo b Evalu ation

Step 1: Analyze & prepare job description- this require a preparation of

job discription and also a analysis of job requirement for successive
performance.

Step 2: Select and prepare job evaluation plan- Means job must be
broken into small components i.e it should involve the selection of
factors, elements needed for the performance of all jobs for which
money is paid, determining their value and preparing return
instructions for evaluation.

Step 3:Classify Jobs: This Requires grouping for arranging jobs in a correct
sequence in terms of value to the firm and relating them to money
terms in order to ascertain their relative value.

Step 4:Install the programme: This involves explaining it to employees

and putting it into operations.

Step 5:Maintain the programme: Jobs cannot continue without updating

new jobs and job changing in obedience to changing conditions and
situations.

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 ADVANTAGES OF JOB EVALUATION

a. Job evaluation is a logical and, to some extent, an objective

method of ranking jobs relative to one another. It may help in
remov ing inequalities in existing wage structures and in
maintaining sound and consistent wage differentials in a plant
or industry.
b. In case of n e w jobs, the metho d often facilitates fitting them
into existing wage structure.
c. The method may lead to greater uniformity in wage rates, thus
simplifying wage administration.
d. The me thod helps in remo ving grievances, arising out of
relative wages; and improves labour management relations and
workers morale.
e. The information collected in the process of job description and
analysis be also used for the improvement of selection, transfer
and promotion procedure on basis of comparative job
requirements.
f. The method replaces many accidental

LIMITATIONS OF JOB EVALUATION

These are:
1) T h o ugh m a n y w a ys of applying the job evaluation techniques are
available, rapid changes in technology and in the supply and demand
of particular skills have given rise to the problem of adjustment. These
need to be probed.
2) Substantial differences exist between job factors and the factors
emphasized in the market. These differences are wider in cases in
which the average ay offered by a comp any is lower than the
prevalent in other co mp ani es in the s a me industry or in the s a m e
geographical area.
3) A job evaluation frequently favours groups dferent from those,
which are favoured from the market. ‘Kerr and Fisher’ observes, “the
jobs which tends to rate high as compared with the market those of
janitor, nurse and typist, while craft rates are relatively low. Weaker
groups are better served by an evaluation plan than by the market; the
former places the emphasis not on force but on equity”.

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 4) Job factors fluctuate because of changes in production, technology,
information system, and division of factors and such other factors.
Therefore the evaluation of the job today is made on the basis of job
factors and does not reflect the time job factor in future.
5) Job evaluation takes a long time to install, requires specialized
technical personnel, and may be costly.
6) A large number of jobs are called ‘red circle jobs’. Some of these may
be getting more and other less than the rate determined by job
evaluation.

JOB EVALUATION METHODS / SYSTEMS

There are four basic, traditional system of job evaluation:

(1) The ranking system,
(2) The grading or job classification system;
(3) The point system;
(4) The factor comparison system.

The first two systems are popularly k n o wn as non-analytical o r non-quantitative o r

summary systems, because they utilize non-quantitative methods of listing jobs in order
to difficulty and are, therefore, simple. The last two systems are called the analytical or
quantitative systems, because they use quantitative techniques in listing the jobs.

1) T H E R A N KI N G S Y S T E M

Mechanism: Under this system, all jobs are arranged or in order of their importance from the simplest to the hardest, or in the
reverse order, each successive job being higher or lower than the previous job in the sequence. It is not necessary to have job
description

Generally speaking, the following five steps are involved in the system:

Step 1: Preparation of job description, particularly when the ranking of the

job is done by different individuals and there is a disagreement among them.

Step 2: Selection of raters, jobs may be usually ranked by department or in

clusters. This eliminates needs for directly comparing factory jobs and
clerical jobs. Most organization uses a committee of raters.
Step 3: Selection of rates and key jobs, usually a s eries of key jobs or bench-
mark jobs (10 to 20 jobs, wh ich include all ma jor departments and
functions) are first rated; then the other jobs are roughly co mpar ed with
these key job to establish a rough rating.

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Step 4 : Ranking of all jobs. Each job is than compared in details with other
similar job to establish its exact rank in the scale. For this each rater must be
given a set of ‘index card’, each of which contains a brief description of
jobs. These jobs are than ranked from ‘lowest to highest’ or from ‘highest to
lowest’ are ranked first and than the next highest and next lowest and so
forth until all the cards have been ranked.

Step 5: Preparation of job classification from the rating: The total ranking is
divided into an appropriate number of groups or classifications, usually 8 to
12. All the jobs within a single group or classification receive the same wage
or range of rates.

Merits of Ranking M ethod of Job Evaluation:

1. The system is simple, easily understood, and easy to explain to

employees. Therefore, it is suitable for small organizations with clearly
defined jobs.
2. It is far less expensive to put into effect than other systems, and requires
little effort for maintenance.
3. It requires less time, fewer forms and less work, unless it is carried to a
detailed point used by company.

Demerits:
1. As there is no standard for an analysis of the whole job position
different bases of comparison between rates occur. The process is
initially based on judgment and tends to be influenced by a variety of
personal biases.
2. The system merely produces a a job order and does not indicate yo
what extent it is more important than the one below it.
3. Specific job requirements are not normally analysed separately.

2) JOB CLASSIFICATION OR GRADING METHOD

Under this system, a number of pre-determined grades or classifications are

first established b y a co mmi ttee a n d than the various jobs are assigned
within each grade or class. Grade descriptions are the result of basic job
infor mation w h ich is basically arrived fro m the job analysis. After
formulating and studying job description and job specifications, jobs are

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grouped into classes or grades which represent different pay levels ranging
from low to high.

Steps:
The following 5 steps are generally involved:
1. The preparation of job descriptions, which gives us basic job
information usually derived from a job analysis.
2. The preparation of job descriptions, so that dferent levels or grades
of job may be identified.
3. Selection of grades and key jobs. About 10 to 20 jobs are selected,
which include all the major department and functions and cover all the
grades.
4. Grading the key jobs. Key jobs are assigned to an appropriate grade
levels and their relationship to each other studied.
5. Classification of all jobs. Jobs are classified by grade definitions. All
the job in the same grade receive the same wage or range of rates. For
example, menials may be put into one class, clerks in another, junior
officers in other class, and the top executive in high class.

Merits:
1. This method is simple to operate and understand, for it does not take
much time or require technical help.
2. The use of fully described job classes meets the need for employing
systematic criteria in ordering jobs to their importance. Since many
workers think of job in, or related to, cluster or groups, this method
makes it easier for them to understand rankings.
3. If an organization consists of 500 people holding to different jobs, the
jobs might be broken up into perhaps 5 classes, arranged in order of
importance from high to low, and described class by class.
4. The grouping of jobs into classifications makes pay determination
problems administratively easier to handle. Pay grades are determined
for, and assigned to, all the job classifications.
5. It is used in important government and operates efficiently, but it is
rarely used in an industry.

Demerits

1. Although it represents an advance in accuracy over the ranking

method, it still leaves mu c h to be desired mu c h because personal

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 evaluations by executives establish the major classes, and determine
into which classes each job should be placed.
2. Since no detailed analysis of a job is done, the judgment in respect of
a whole range of jobs may produce an incorrect classification.
3. It is relatively difficult to write a grade description. The system
become difficult to operate as the number of job increases.
4. It is difficult to know how much of a job’s rank is influenced by a man
on the job.
5. The syste m is rather rigid and unsuitable for a large organization or
for very varied work.

3) THE POINT SYSTEM

This method is the most widely used type of job evaluation type. It requires
a identifying number of compensable factors and than determining degree to
which each of these factor is present in the job. Once the degree to which
each factor is determined, the corresponding number of points of each factor
are added and an overall point value is obtained.

Steps : This system requires a detailed examination of the jobs. The Steps in
these method followed are:

Step 1: The jobs have to be determined first which are to be evaluated. They
are usually clustered. The jobs, which require (1) similar activities, (2) the
same workers characteristic or traits and work on the same kind of materials
(say wood or metal are placed in the same cluster or family).

Step 2: For the purpose, a pre-determined number of factor are arbitrarily

selected b y raters. T h e n u mb e r of factors u sed varies a great deal fr o m
company to company.
The common factors are: Education and training; experience; physical skills
and effort; planning for the supervision of others; external contacts, internal
contacts; confidential information and working conditions.
Step 3: The next step is to break down each factors into degrees or levels,
and to assign a point value each level or degree.

Step 4: Determination of relative values or weighs to assign each factor. For

each job or cluster of jobs some factors are more important than others. For
example for executives, “the mental requirements” factor would carry more

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weight than “physical requirements”. The opposite might be true of “factory
jobs”.

Step 5: The next step is to assign money values to points. For this purpose,
points are added to give the total value of a job; its value of a job is
translated into terms of money with a pre-determined formula.

4) THE FACTOR COMPARISON METHOD

Under this system, jobs are evaluated by means of standard yardstick of

value. It entails deciding which jobs have more of compensable factors than
others. The evaluation committee selects some’ key’ or benchmark jobs for
which they are clearly understood job description and counterparts in other
organizations and for which the pay rates are such as agreed upon and are
acceptable to both management and table.

Steps involved:

Step 1: Clear-cut job descriptions are written an d job specifications are

preferably in terms of compensable factors. The people specifications are
generally provided with a set of definitions which have been used in each of
the compnsable factor selected.
Step 2: Selecting of key jobs: Such jobs are those jobs which represent the
job under study; and for which pay is determined to be standard or reference
points and for which there is no controversy between management and the
employees.
Step 3: Ranking of key jobs: Several different me mb ers of the job
evaluation com m ittee rank the key job on each of five factors (mental
requirements, physical requirements, skill requirements and working
conditions).
Step 4: Valuing the factors: The basic pay for each ‘key’ job is allocated to
each factor.
S t e p 5: C o m p a r i n g all j o b w i t h e a c h jobs: A l l t h e o t h er jo b s ar e t h a n
compared with the key jobs, factor by factor, to determine their relative
importance and position in the scale of jobs.
Step 6: Establishing the monetary units value for all jobs: monetary values
are assigned to each factory of every key job.

Merits:

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 1. It is a systematic, quantifiable method for which detailed step by step
instructions are available.
2. Jobs are compared to other job to determine a relative value.
3. It is a fairly easy system to explain to employees
4. There are no limits to the value, which may be assigned to each factor.
5. The plan does not require a translation from points to money.
6. The reliability and validity of the system are greater than the same
statistical measures obtained from group standardized job analysis
plans.

Demerits:
1. It is costly to install, and so me what difficult to operate for any one
who is not acquainted with the general nature of the job evaluation
techniques.
2. W age level change from time to time, and there minor inconsistencies
may be brings in order to bring all the job in alignment.
3. M o ney rates, w h e n used as a basis of ratin g , tend to influence the
actual rate more than the abstract rate.
4. The system is complex and cannot be explained to, and understood by
every day non-supervisory organizational employees.

O n c e a job is evaluated, or say ranked, the n ext step is to convert this

measurement in to salary bracket. In other words, it implies simply breaking
up the total salary structure in to sun divisions corresponding to the number
of classes of job arrived at through job evaluation. However, several other
factors also need to be looked in to before a right type of salary structure is
evolved.
Establishing Pay Equity
People h ave n o basic or instinctive n eed for mo n ey, a co mmo d i t y that is
i mportant only if it can satisfy other needs. Organizations frequently
overestimate the value workers place on monetary rewards. The equity
theories can help explain employees’ reaction to compensation system.

EQUITY:

Employees wanted to be treated fairly.

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Equity is the balance between the inputs an individual brings to a job and the
outco me he or she receives fro m the it. An e mployee input includes
experience, education, special skills, effort and time worked. Outcomes
include pay benefits, achievement, recognition and any other rewards.

Individuals use a complex process to determine what is fair. Inputs are

continually compared with outcomes-the individual’s special skills and efforts
are weighed against the pay and recognitions given by the organization.
However inputs and outputs are in different units, and are hard to compare to
each other directly.

However, inputs and outcomes are in different units, and are hard to compare to each
other directly. Thus, equity theory suggests that individuals determine whether they
are being fairly treated by comparing their own input/outcome ratio to the
input/outcome ratio of someone else. This other person may be in the same job or in
other jobs, in the company or outside the company, in the same industry or outside the
industry sense of inequity arises when the comparison process uncovers an imbalance
between inputs and outcomes of the employees compared with others.

Equity Theory

My rewards (outcomes) = Other’s Rewards = Equity

My contributions (Inputs) Other’s Contribution

My rewards < Other’s Rewards = Inequity

My contributions Other’s Contribution (under-reward)

Action to Restore Equity fro m Under-Reward Equity:

1. Person could ask for a raise.
2. Persons could reduce contribution (work harder).
3. Person could try to get other to increase contribution (work harder).
4. Last resorts: Quit or choose another comparison other.

My rewards > Other’s Rewards = Inequity

My contributions Other’s Contribution (over-reward)

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Action to Restore Equity from Over-Reward Equity
1. Person could increase contributions (work harder or longer, cultivate
additional skills).
2. Persons could ask for a pay cut.
3. Person could attempt to get other a raise.
4. Person could attempt to get other to reduce his or her contribution.
5. Last resorts: Quit the job or choose another comparison other.

DESIGNING EQUITABLE COMPENSATION SYSTEM

Internal Equity:

It refers to the relationships among jobs within a single organization.

Internal equity exists when the pay differentials between different jobs
within the organization an d perceived as fair - neither too large nor too
small.

External Equity:

It refers to the comparisons of similar jobs in different organizations (for

example, the pay received by presidents of various electrical manufacturing
firms.

Individual Equity:

It refers to comparisons among individuals in the same job with the same
organization

There are accepted procedures for establishing internal, external and

individual with an organization.

METHODS FOR ESTABLISHING INTERNAL EQUITY

1. Job Evaluation methods:

The major purpose of job evaluation is to determine the relative worth of the
jobs within an organization. A systematic comparison can define an internal

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job hierarchy that ranks jobs in terms of their relative contribution to the
organizational objectives.

The five most frequently used job evaluation methods are

1. Job ranking
2. Job grading or classification
3. The point method
4. Factor comparison
(Already explained)

Establishing External Equity

Methods of Establishing External Equity:

1. Wage and Salary surveys: - to establish a competitively priced wage

structure, organizations typically rely on wage and salary survey data
collected from other organizations. The survey process involves
identifying the jobs to be included, selecting the organizations to be
surveyed, and then actually collecting the data. The data then must be
interpreted so that w ag e rates can be set within the context of the
organization’s pay policy.

2. Identifying K e y Jobs: - in practice, employers do not seek market

data on all jobs. Instead, they gather survey information only for key
jobs, which generally have the following characteristics: -
a.) The job content is relatively stable over time.
b.) The jobs occur frequently, both in the organization and in the
surveyed organizations.
c.) The jobs can be defined quite precisely.
d.) The jobs are performed in a similar manner in most
organizations.

Key jobs should span the range of position to be included in the

Wage structure. For example, it would not be desirable to identify
Only entry-level positions as key jobs. Jobs at the middle and upper
levels also need to be included. Moreover, jobs need to be carefully
defined.

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 3. Selecting Organizations to Survey:-Identifying organizations to
survey can be important. Organizations to covered in a wage survey
typically include those that
Employ workers with the same skills.
Are within geographic distances that would make employees willing
to commute or relocate, and
Are in the same or similar industry.
However, the considerations that go into selecting a set of organizations to
be surveyed vary for different jobs.

4. Collecting Data: - rather than running their own wage survey, many
organizations obtain the results of surveys undertaken by industry
associations, professional associations, government agencies, or
consulting firms. Numerous annual surveys cover a wide choice of job
families and industries. At local levels, chapters of Society for Human
Resource Management or Chambers of Co mmerce often undertake
surveys for their membership. For a company that wants to collect and
analyze its o w n data, it is i mportant to obtain information o n the
characteristics of the responding organization, as well as on both
direct and indirect compensation. The organizational information is
needed to judge the comparability of the competitor in terms of size,
products, and financial condition. It is also crucial to know the types
and amounts of benefits offered as well as incentives and hourly pay.
O f the three s u m ma r y measures, the med i an is the most useful in
setting wage ranges. The mean can easily become distorted if a few
workers are paid at extreme rates. The median is not the subject to
such distortion.
5. Pay Level Policy: - once an organization has completed an internal
job evaluation and obtained wage survey data, it needs to translate this
information into pay rates for each class of jobs. This process involves
appropriate interpretation of survey results, the merging of the job
evaluation w ith the survey data, and consideration of the
organization’s pay level policy.

Establishing Individual Equity

As mentioned earlier, jobs evaluated as having nearly the same value are
usually combined into a single wage grade. A single wage may be selected
for each grade and paid to every person whose job falls in the grade. More

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commonly, however, a range of pay rates is set for each grade. When a range
is set, the issue of individual equity becomes salient, and the organization
must have a system for determining where in the range the compensation of
each employee should be.

Steps in designing Individual Equity:

Designing pay ranges: The range associated with a pay grade sets the
upper and lower bonds of possible compensation for individuals
whose jobs fall in the grade.
Setting Individual pay: Individual equity requires that r ewar ds to
employees be allocated fairly across individuals performing the same
jobs. The two commonly used approaches to determine how workers
are placed and progress through the pay ranges are seniority and
me r it. A n ewer met h o d bases incr e ments o n the n u mb e r of skills
mastered.

In short, equity concern centers on setting the pay of individuals within a

wage grade. Typical bases for this decision include seniority, merit, and skill.
Merit pay system has the potential to motivate high performance, but they
are difficult to administer in a way that employees perceive as fair.

EMPLOYEES BENEFITS & SERVICES

Management is concerned w ith attracting & keeping employees, whose

performance meets at least minimum levels of acceptability ,& at keeping
absenteeism & turnover to tolerable levels .The provision of benefits &
services are important in maintaining the employees & reducing the
turnover & absenteeism low .

The financial incentives are paid to specific employees whose performance

whose work is above standard. On the other hand the employees benefits &
services are provided to all the employees based on their membership in the
organization.

A c c o r d i n g t o t h e E m p l o y e e F e d e rati o n o f I n d ia h a s d e f i n e d F r i n g e
Benefits
“Fringe Benefits includes payments for non working time ,profits & bonus
,legally sanctioned payments on social security schemes ,worker’s
compensation ,welfare & contribution made by the workers under such

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voluntary schemes for the post retirement ,medical ,educational ,cultural &
recreational needs of the workmen .”

According to the C o c k ma n “ T h o se benefits wh i ch are provided b y the

employer to or for the benefit of the employees & which are not in the form
of wages ,salaries & time related payements.”

Features of Fringe Benefits

1) W ages are directly related to the work done & paid regularly usually
weekly monthly & benefits which a worker enjoys in addition to the
wages or salary he receives.
2) B e n e fits are n o t giv en to w o r k ers for an y sp ecific jobs they h av e
performed but are offered to them to stimulate their interest in their
work & to make their job more attractive & productive for them.
3) Fringe represents a labour cost for the emplo yer , it is basically an
expenditure incurred
4) Fringe is never a direct reward geared to the output, effort for merit of
an employees not on the basis of hard work or long hours of work but
on the basis of length of services ,his sickness ,sex the hazard of life .
5) The fringe benefit is enjoyed by all .
6) Fringe benefit mu st constitute a positive cost to the e mp loyer &
should be incurred to finance an employee benefit.

OB JE C T I VE S O F F R I N G E B E N E F I T S

To create & improve sound industrial relations.

To Boost up employee morale
To motivate the employees by identifying & satisfying their
unsatisfied needs.
To provide qualitative work environment
To protect health & safety of the employees
To promote employees welfare by providing welfare measures like
recreation facilities.

C O V E R A G E / S C O P E O F BE N E F I T S

1) E mp l oyee Security P a y ments:

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 (a) E mp loyers Contribution stipulated in legal enactment: old age,
survivor, disability health
(b) Payments under the workmen’s compensation Act.
(c) Supplemental unemployment benefits
(d) Accident insurance
(e) Pensions
(f) Contribution to the saving plans & health & welfare benefits.

2) P a y m ent for the ti me n ot wo rk ed:

(a) Rest Period: Among the office jobs the breaks popularly known
as rest break or coffee break are allowed during the day to the
workers
(b) Holidays: Holidays which includes Christmas ,New Years, Holi
,Diwali on which the employees have to be paid & they do not
have to work.
(c) Vacation : Paid vacations vary from 15 days to 1month in a year
.
(d) Sick Leave : This is provided to the employees when is out on
illness
(e) Severance Pay : This provides one time payment to an employee
when he is terminated
(f) Leave of A bsence: These are generally educational leave
provided to managers or management trainees during training
period .
(g) Pension Programmes
(h) Insurance

( C) Bonus & Awards :These consist of financial amenities & advantages as

holidays ,over time & shift premium ,attendance bonus, Diwali bonus etc.

E M P L O Y E E S S E RV I CE S

In addition to the above fringe benefits, organization provides a wealth of

service that employees find desirable .These services are usually provided
b y the org a niza tio n at n o co s t to the e mp l o y ees .These services are
provided at the discretion of the management & are generally are concern
to trade union.

These services mainly include:

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 1) Services related to the type of work performed, including subsidies for
the purchase & upkeep clothing, uniforms
2) Eating facilities cafeteria, lunch rooms, canteens, lunch rooms
3) Transportation facilities including parking & bus services
4) C h ildcare facilities, comp rising nurseries, day care centers for
children.
5) Housing services including company owned housing projects.
6) Financial & legal services including sponsoring of loan funds.
7) Recreational social & cultural programmes including athletics, beauty,
social clubs , parties ,picnics .
8) Educational services
9) Medical services
10)Flexitime

POTENTIAL APPRAISAL

E v a l u atin g w h a t a p e r s o n c a n p e r fo r m o r d o is c a l l e d ‘ p o t e n t i a l a p p r a i s a l o r
evaluation.’ Potential refers to the abilities present but not currently utilized. It is a
latent capacity in a person to discharge a responsibility.

“People are like icebergs. W h at yo u see above the surface

(performance) is only a small part. A large part of the attributes n eed ed
to p erfo r m e x cellen tly in future job, w h ich I call p o tential is n o t
immediately visible. It is hidden below surface.”

Potential represents latent capacities and qualities in a person, which

manifest while performing the job.

W H Y POTENTIAL EVALUATION?

The objectives of potential evaluation are to:

1. Promote an employee to higher levels of jobs involving higher order
or responsibility, which the employee can effectively discharge
without being over burden and stretched.
2. Assist the organization to allocate jobs among employees as per their
capabilities so that organizational responsibilities are discharged
effectively.

A potential employee is characterized by the following attributes:

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 1. Ability to foresee future opportunities.
2. Consistency in approach and performance.
3. Responsive to condition whatever comes in the way.
4. Person with high level of integrity.
5. Broader vision and micro perception.

H O W T O E V A L U A T E E M P L O Y E E P OT E NTI AL?

The potential of employees can be evaluated by following the following

steps:
1. D e ter m ination of role dim e n sion: the pro c ess of p o tential
evaluation starts with determining the role dimension of the employee
whose potential is to be evaluated. Job description and job
specification help determine the role dimensions. The former provides
information about the responsibilities involved in a job, while the later
provides information on attributes the jobholder should possess.
2. Determination of mechanism: having determined the role dimension
a mechanism to evaluate these attributes in an employee is evolved.
Obviously, the mechanism should be appropriate to appraise the
potential of employee by a designated appraiser.
3. Linking potential with other elements: in order to evaluate potential
in a meaningful manner, other elements of human recourse
management such as feedback, counseling, training, job rotation, etc.
should also be lined with it.

PAY FOR PERFORMANCE

Pay for perform ance syste m involves re w arding the e mployees

acco r d i n g to their p er fo r man ce, o r results ach i e v ed o r contribution to
o r g a n i z at i o n ’ s p e r f o r m a n c e a s i n d i v i d u al s o r a s a p ar t o f a g r o u p . It
involves a shift in focus fr o m remuneration mo d el s based o n the worth
of jobs and employee skills to their performance.

Designing a performance linked reward systems is conditioned by a variety

of factors such as the nature of business, type of technology, the attitude of
unions and human resource management strategies of the organization.

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This system reduces labour cost, result in increase in real wages and
motivate performance. They provide a method of absorbing cost escalation
on account of pay increases and thus help in sustaining competitiveness of
the organization.

Forms and Choice of Performance Linked Reward System

There are several types of Performance linked reward schemes. Generally

these are designed to share with or distribute to employees as individuals
groups or a collectivity productivity gains, profit improvement or financial
results of enterprise performa nce. Such schem e s fall into the broad
categories:
1. Schemes based on individual or small group performance including
piece rates, traditional merit pay and sales commission.
2. Incentive schemes which may relate pay to profits on the basis of pre
determined formula.
3. Bonus schemes based on contribution to productivity and profitability
according to a predetermined formula with gains sometimes
distributed a mo ng the individual e mp loyees o n the basis of mer it
rating.
4. Productivity bargaining.
5. Employee strike options plan (ESOP)
6. Competency based pay.
1. Merit Incentive Pay
The merit incentive pay scheme provides another method of recognizing and
rewarding differential performance. This method could particularly be
suitable for office staff. The scheme essentially involves the following steps:
a) The determination of result oriented merit rating procedures,
b) The identification of job and their relative importance
c) The formulation of scale of reward and
d) The communication of the basis of monetary reward.

Under a system of merit increments, there is no prompt relationship

b e t w e e n r e w a r d a n d effort. T h e q u a n t u m o f r e w a r d at a po int o f t i me
will be considered inadequate.
Additional cost on the form of enhanced allowances is built for the company
on per manent basis. E m ployees continue to benefit fro m their best
performance even if it remains below standard in the future.
E mployees getting merit awards cannot visualize a proportionate
relationship between their performance and rewards. The basis of

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determining the quantum cannot be explained to employees wh o are not
given such awards. This m a y evoke jealousy an d friction and m a y thus
jeopardize cooperation and goodwill.

2.Incentive schemes
Output based incentive scheme are appropriate where tasks are repetitive
and measurable
These involve the following steps:
1. Selecting the objectives
2. Determining the parameters of performance in accordance with the
objective
3. Determining the norms or base values or benchmark values for each
parameter
4. Determining performance reward relationship
5. Fixing the relative importance of the selected parameters that is, their
weightings.
6. Designing information and procedure formats.
7. Determining the maximu m payable incentive amount (incentive
opportunity) and payment period.
8. Formulating a communication and review scheme

These are, however, not suitable for technology and service activities,
which require information sharing problem solving and team work.
Productivity gain or profit sharing or employee stock option plan (ESOP)
may be suitable types for such activities

3. Group incentive and productivity gain sharing.

Under the productivity gain sharing schemes productivity gains are

shared in accordance to an agreed pre-determined formula. Profit sharing
gives a share of profit. Sometimes, the quantum of bonus is determined
on the basis of profit as well as productivity improvements according to
pre determined benchmark value for each of them.

Productivity bargaining

Productivity bargaining can provide yet another method of improving

productivity and linking wage increase to such improvements.
Productivity bargaining, however dose not mean an incentive scheme or

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 wage increase in return for assurance and promise from union in return
for achieving production targets. This method implies:
a) A detailed analysis of the firms operations
b) The identification of cost reduction possibilities
c) Estimation of savings in cost
d) The development of a system of indexing wages increase with cost
reduction actually realized over time.

The climate for productivity bargaining has never been more

favorable than n o w it is for managements to take initiative and
build this approach in their collective bargaining relationship with
unions.

Long-term incentive (ESOP)

Long term incentive in the form of employee stock options schemes are operated both
to improve long-term incentives and to reduce fixed cost.

ESOP envisages employee participation in and ownership of company equity. This plan
is intended to provide an incentive to the employees to improve the all round
performance and growth of the company and share its prosperity. The plan usually
involves allotments of equity shares according to laid down procedure and subject to
governmental regulations, laws and rules. The employees benefit in the form of enhanced
market value of his share and capital gains, which in turn depend on company and
employee performance .several software and high tech organization such as infosys have
conceived and designed such plans .

Competency based pay

The competency is a critical determinant of performance. Therefore there is

an increasing interest in offering monetary incentive for acquiring
competencies required for higher performance on the present job or the next
job. Such comp etency ma y for instance include values, attitude and
behavioral characteristics, which influence performance.
In designing a performance linked reward scheme, choice of an

appropriate scheme should be considered as critical. The choice will be

determined by a Varity of factors such as nature of the organization, the

nature of technology, the nature of profits the nature of markets, the human

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resource strategy and business objective. For reviewing an incentive scheme

and designing an appropriate scheme.

ISSUES AND TRENDS

1. Level of education
2. Trade union
3. Organization culture
4. Package of monetary and non monetary incentives
5. Rewarding good performance
6. Performance pay and performance management
7. Caveats

Questions for Discussions

1. W h at d o yo u m e an b y P erfor mance A p praisal? Di scuss the

three purposes Performance Appraisal can meet.
2. Discuss the various steps involved in Performance Appraisal
system?
3. “Perfor mance Ap praisal is not merely for appraisal but is for
accomplishment and improvement of performance”. Discuss.
4. Discuss a 360-degree appraisal with its merits and demerits.

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5. W h at do you me an by fringe benefits? W h at is the rationale
behind offering benefits to the employees?
6. Appreciate the need for and significance of Fringe Benefits.
7. W h at is meant by remuneration /compensation? W hat are the basic
objectives and principles of wage and salary administration?
8. Wha t do you mean by wage structure? Outline the components of wage
and salary administration.
9. Explain wage determination process in detail.
10.What is Job Evaluation? W h at are the objectives of Job
Evaluation?
11.Discuss the advantages of Job Evaluation? Does job evaluation
have any limitations? What are these?
12.Briefly explain the various methods of Job Evaluation.
13.“Job Evaluation is the ranking of job not the job holder.”
Discuss.
14.What are the three elements of compensation equity? W h y is
each important?
15.Wh at does equity theory says about the way individuals
evaluate and respond to their pay level?

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