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Essentials of HRM

S. No Reference No Particulars Slide


From-To
1 Chapter 1 Introduction to Human Resource Management 4-17

2 Chapter 2 Human Resource Planning 18-41


3 Chapter 3 Job Analysis and Job Design 42-65
4 Chapter 4 Recruitment and Selection 66-89
5 Chapter 5 Induction and Orientation 90-103
6 Chapter 6 Competency Mapping and Assessment Centres 104-127

7 Chapter 7 Training and Development 128-151


8 Chapter 8 Human Resource Development 152-175
9 Chapter 9 Career Planning and Succession Planning 176-199
10 Chapter 10 Performance Management 200-223
11 Chapter 11 Compensation and Rewards 224-247
12 Chapter 12 HR Audit and Accounting 248-261
Course Introduction

• Human resource can be defined as people who are employed in an organisation


and are responsible for carrying out operations.

• Human Resource Management (HRM) is a comprehensive process of acquiring,


developing, motivating, and maintaining a pool of efficient employees. The main
aim of HRM is to ensure the right people with the right skills for the right job
position in an organisation.

• The key functions of HRM include recruiting people, training them, appraising
their performance, motivating them, ensuring their health and safety, managing
workplace communication, and so on.

• Effective HRM encourages employees to work efficiently towards accomplishment


of organisational goals and objectives.
Chapter 1: Introduction to
Human Resource
Management
Chapter Index
S. No Reference No Particulars Slide
From-To

1 Learning Objectives 6

2 Topic 1 Human Resource Management 7-10


(HRM)

3 Topic 2 Functions of HRM 11

4 Topic 3 Challenges in HRM 12

5 Topic 4 Personnel Management 13

6 Topic 5 Strategic Management and 14


HRM

7 Let’s Sum Up 15
• Explain human resource management

• Define the functions of HRM

• List the challenges of HRM

• Explain personnel management

• Relate strategic management and HRM


1. Human Resource Management

• Human resource is a group of individuals that forms the workforce of an


organisation. It is responsible for executing various operations and functions of
the organisation.

• Inefficient management of human resource may create a number of difficulties


for an organisation like employee dissatisfaction, unclear organisational goals
and objectives.

• Human Resource Management can be defined as a comprehensive process that


involves acquiring, recruiting, and maintaining an efficient pool of employees in
an organisation.

• It focuses on employees issues related to recruitment, selection, compensation,


benefits, training and development.
2. Human Resource Management

Objectives of HRM

Societal objectives

Organisational objectives

Functional objectives

Personal objectives
3. Human Resource Management

Scope of HRM

Human resource Selection and


Job design
planning staffing

Training and Organisational Compensation


development development and benefits

Personnel
Employee Union-labour research and
assistance relations information
system
4. Human Resource Management

Structure of the HR Department

HR
department

Personnel
Staffing Organisational Ethics and Training and
transaction
management development labour development
management
Functions of HRM

Manpower planning

Job analysis

Compensation management

Recruitment and selection

Performance appraisal

Training and development

Employee welfare and motivation

Employee grievances
Challenges in HRM

Change management

Employee acquisition and


retention

Employee empowerment

Workforce diversity

Business expansion
Personnel Management

• Similar to HRM, personnel management (PM) is an organisational function that


focuses on the wellbeing of employees in an organisation. PM is more related to
transactional and administrative aspects of HR functions.

• The concept of PM was used by organisations before the concept of HRM came
into existence in the mid-1980s.

• The two concepts PM and HRM are confused with each other. However, there are
certain differences between the two. HRM is a modern approach to people
management while PM is a traditional one.
Strategic Management and HRM

Strategic human resource management (SHRM) is a framework that defines an


organisation’s direction to achieve its goals and objectives through human capital.
In an organisation, SHRM aims at:

• Developing high quality workforce by hiring and retaining talented people

• Enabling employee participation for achievement of the objectives

• Ensuring special motivational programs for employees

• Establishing performance targets for employees

• Measuring the performance related to targets

• Providing appraisal systems, training and development to employees


Let’s Sum Up

• HRM is a process of attaining, developing, and retaining employees in an


organisation.

• An organisation is affected by various internal and external business factors.


These factors pose various challenges for HRM in an organisation in terms of
change management, employee acquisition and retention, employee
empowerment, and workforce diversity.

• Personnel management is a traditional approach to people management while


HRM is a new approach to people management.

• SHRM can be defined as a framework prepared by an organisation to follow a


particular direction in order to accomplish organisational goals and objectives.
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Chapter 2: Human
Resource Planning
Chapter Index
S. No Reference No Particulars Slide
From-To

1 Learning Objectives 20

2 Topic 1 Human Resource Planning 21-23

3 Topic 2 Process of Human Resource Planning 24-25

4 Topic 3 Techniques of HR Demand 26-34


Forecasting

5 Topic 4 Benefits of Human Resource Planning 35-36

6 Topic 5 Challenges in Human Resource 37-38


Planning

7 Let’s Sum Up 39
• Explain the concept of human resource planning

• Discuss the process of human resource planning

• Identify techniques of HR demand forecasting

• Explain the benefits of human resource planning

• Elaborate on the challenges of human resource planning


1. Human Resource Planning

• The term planning can be defined as a process of finding out a course of action for
the accomplishment of organisational goals and objectives.

• The process of planning starts with taking into consideration the current
operations of an organisation and finding out the areas of improvement for the
upcoming year.

• HRP can be defined as a process of estimating the future human resource


requirements and ensuring that the organisation’s objectives are met by having
the right people in the right job at the right time.

• HRP is also called manpower planning as it involves putting the right people at
the right job at the right time so that organisational goals and objectives can be
met within the stipulated time.
2. Human Resource Planning

Need for Human Resource Planning


• Effective HRP process helps organisations to identify vacant positions and the
skills and expertise required and to attract people to apply for those positions.

• HRP is needed to identify the skills and competencies of managers who might be
selected either internally within a public sector enterprise or externally from
other public enterprises.

• HRP helps organisations to meet ever-changing manpower requirements.

• Most organisations face high lead times between operations, which create
unnecessary delays in product delivery. These lead times can be reduced if
organisations have a competent workforce in place. Hiring efficient workplace can
be possible through effective HRP.
3. Human Resource Planning

Objectives of Human Resource Planning


• To make optimum utilisation of available human resource.

• To monitor the progress of all employees in order to ensure that organisational


goals are achieved.

• To enforce control measures whenever needed.

• To ensure that the entry and exit of people in the organisation are continually
monitored and any problem occurring at any stage of the process is immediately
sorted.

• To avoid conflicts of interests among employees.


1. Process of Human Resource Planning

Reviewing business
goals

Scanning the
environment

Balancing manpower
demand and supply

Implementing and
monitoring the HR plan
2. Process of Human Resource Planning

1. Reviewing business goals: Before planning human resource requirements, HR


personnel study the organisational goals and objectives.

2. Scanning the environment: In this step, the HR personnel determine the number
of people required to meet organisational goals and objectives.

3. Balancing manpower demand and supply: This step involves bringing manpower
demand and supply at an equilibrium position.

4. Implementing and monitoring the HR plan: After equalising demand and supply,
the HR plan is to be taken into action.
1. Techniques of HR Demand Forecasting

Techniques of HR
demand forecasting

Qualitative methods Quantitative methods


2. Techniques of HR Demand Forecasting

Qualitative Methods

Qualitative
methods

Expert Management Delphi


forecasts forecasts technique
3. Techniques of HR Demand Forecasting

• Expert forecasts: Sometimes HR personnel seek inputs from professional HR


experts regarding future staffing requirements of their organisations.

• Management forecasts: This is an internal HR demand forecasting method. In


organisations, managers from different departments along with other
knowledgeable people are responsible for determining human resource
requirements. They decide the number of people to be hired, skills required, etc.

• Delphi technique: In this method, a group of pre-selected experts is responsible


for forecasting demand. These experts provide their judgement on human
resource requirements. The responses given by these experts are summarised
and a report is prepared. This process keeps continuing until all experts agree on
the estimated human resource requirements.
4. Techniques of HR Demand Forecasting

Quantitative Methods

Quantitative
methods

Ratio trend
Trend analysis Work study
analysis
method method
method
5. Techniques of HR Demand Forecasting

• Trend analysis method: In this method, it is assumed that past trends of


employee movement in an organisation are steady and suggest future trends of
employee movement. The steps of trend analysis method are as follows:

1. Firstly, a suitable business factor is selected based on which HR needs are


assessed.

2. A historical trend of the business factor is plotted with respect to the number of
employees. From this, a labour productivity ratio can be established.

3. In this step, the current labour productivity ratio is compared with the ratios of
the last five years and the differences or changes are noted.

4. In this step, HR demand is estimated by dividing total sales (business factor) by


the labour productivity ratio.

5. In the final step, HR demand is projected for the target year.


6. Techniques of HR Demand Forecasting

• Ratio trend analysis method: This is a method used to forecast HR demand based
on the ratio of production level and the availability of workers.

• Work study method: This method, also called work-load analysis, is used to
estimate total production and predict activities for a certain period in the future.
This method is used when the estimated workload is easily measurable.
7. Techniques of HR Demand Forecasting

Factors affecting HR Demand Forecasting

Factors affecting
HR demand
forecasting

External business Internal business


environment environment
8. Techniques of HR Demand Forecasting

• External business environment: The external business environment of an


organisation comprises various economic, political, legal, social, and technical
forces. These forces largely affect the HR demand forecasts of organisations.

• Internal business environment: It comprises the internal strengths and


weaknesses of organisations. The changes in the internal business environment
of organisations largely influence HR demand forecasting.
9. Techniques of HR Demand Forecasting

• In addition, demand forecasting is also affected by employee attrition and


absenteeism due to various reasons, such as illness, family issues, retirements,
and terminations.

• These factors are common in most organisations and influence demand


forecasts of organisations.

• Apart from this, future action plans of organisations also affect HR


requirements.

• These changes are usually measured through surveys, market analysis,


technological parameters, etc.
1. Benefits of Human Resource Planning

• HRP enables organisations to fulfil present and future human resource


requirements so that organisational operations can be carried out without any
hindrance.

• It ensures that the right people are placed at the right job at the right time,
which, in turn, helps organisations to mitigate various business risks like change
in technology, economic fluctuations, etc.

• HRP equalises the demand and supply of human resource in an organisation by


anticipating the situations of shortage and surplus of human resource. Both the
situations can be dangerous for the organisation. This is because the shortage of
human resource may hamper the functioning of the organisation, while surplus
would incur unnecessary costs for the organisation.
2. Benefits of Human Resource Planning

• HRP ensures that employees with desired skills and knowledge are available to
work under challenging situations, such as expansion and diversification.

• HRP serves the individual needs of employees through promotions, transfers,


training and development, etc.

• HRP estimates the cost of human resource, such as salary and other benefits;
thereby formulating HR budget for various departments of an organisation. This
ultimately helps in the preparation of an overall organisational budget.
1. Challenges in Human Resource Planning

• Planning HR requirements involves high cost, time, and efforts. However, HRP
can be a challenge for organisations lacking in funds.

• HRP can be a great challenge in situations, such as employee attrition, changes


in government laws, change in technology, economic conditions (like recession,
inflation, depression, etc.), and so on.

• The selection of the right demand forecasting technique can be a major difficulty
in HRP. This is because the selection of a technique depends on various factors
like organisational budget, level of expertise available, stipulate time, etc.
2. Challenges in Human Resource Planning

• A lack of proper coordination and cooperation between different departments of


an organisation can convert the entire HRP process into a failure.

• Another challenge of HRP is work culture shift in organisations. Most employees


prefer to keep working in the same manner. When an organisation decides to
take a new approach to HRP, employees may resist this change. In such a case,
they may not make proper utilisation of their skills.
Let’s Sum Up

• HRP can be defined as a process of estimating the future human resource


requirements and ensuring that the organisation’s objectives are met by having
the right people in the right job at the right time.

• Effective HRP process helps organisations to identify vacant positions and the
skills and expertise required and to attract people to apply for those positions.

• HRP process involves reviewing business goals, scanning the environment,


balancing manpower demand and supply and implementing and monitoring the
HR plan.

• Various qualitative and quantitative techniques are used in forecasting HR


demand.
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Chapter 3: Job Analysis
and Job Design
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 44

2 Topic 1 Job Analysis 45-49

3 Topic 2 Job Description 50-52

4 Topic 3 Job Specification 53-55

5 Topic 4 Job Design 56-57

6 Topic 5 Approaches to Job Design 58-62

7 Let’s Sum Up 63
• Explain the concept of job analysis

• Define job description

• Describe job specification

• Explain the concept of job design

• List different approaches to job design


1. Job Analysis

• A job may be defined as a collection of different tasks, duties, and responsibilities


to be performed by individuals so that organisational goals can be met within the
stipulated time.

• Each job has certain specifications as per the skills required to perform that job.
To assign the right jobs to the right people and maintain a flow of operations, it is
important for an organisation to analyse jobs.

• Job analysis is a systematic process of identifying and documenting the


important functions involved in a job, tasks required for the job, and skills and
abilities needed to perform those tasks.
2. Job Analysis

Scope of Job Analysis

Human Resource Planning (HRP)

Recruitment and selection

Training and development

Compensation and benefits


3. Job Analysis

Process of Job Analysis

Step 1

Step 2
Determining the
purpose of job Step 3
analysis Communicating
the objectives Step 4
Conducting job
analysis Step 5
Developing job
description and
job specification Maintaining and
updating job
description and
job specification
4. Job Analysis

Information Collection for Job Analysis

Job content

Job context

Job requirement
5. Job Analysis

Methods for Collecting Job Analysis Data

Interviews

Questionnaire

Observation

Participant’s diary/logs
1. Job Description

• Job description is an organised factual statement that is prepared by


considering the data gathered in the job analysis process. Thus, job description
can be defined as a written record of the duties, responsibilities, and
requirements of a specific job.

• Job description is descriptive in nature and provides information on the type of


job to be performed, the way to perform it, and the individual responsible to
perform the job.

• It divides a job into various sub-jobs and explains the nature of each sub-job.
The main aim of job description is to differentiate a particular job from other
jobs in an organisation and decide the outer limits of that job.
2. Job Description

Need and Objectives of Job Description


• Job description helps in clearly communicating the expectations of an
organisation from employees.

• It ensures that the duties and responsibilities of employees are aligned with the
organisation’s vision.

• It provides a basis for deciding job structure and measuring job performance.

• Job description lays the foundation for fair pay and grading systems.

• Job description serves as an important reference tool in the case of


employee/employer disputes or any discipline issues.

• It can be used to determine training and development needs when expectations or


requirements are not met.
3. Job Description

Process of Writing Job Description


1. The first step involves noting down all the aspects of a job.

2. The next step is to decide the tasks to be included in the job.

3. In this step, various key responsibilities are identified from the raw data.

4. After the roles and responsibilities are finalised, they are ranked in an order
based on their priority.

5. After the job description is written, it is checked by experts.


1. Job Specification

• Job specification, also known as employee specification, is a statement that


summarises the acceptable attributes of employees, such as their experience,
aptitude, educational qualifications, and skills, required to perform a job.

• It is an extension to job description as it is always accompanied with every job


description.

• Job specification helps in determining what type of people are required to fill
particular job positions in an organisation.
2. Job Specification

Need and Objectives of Job Specification


• Identifying prospective candidates: Job specification helps in attracting potential
employees by matching their skills and abilities with job requirements. This
helps managers in preparing a list of relevant questions for job interviews.

• Attracting candidates: Job specification familiarises candidates with the skills


and abilities required to perform a particular job in an organisation. Accurate and
clear job specification helps in attracting a large number of candidates.

• Supporting an organisation’s competency: Job specification helps an organisation


to strengthen its core competency by clarifying the skills and abilities required to
perform different jobs in an organisation.
3. Job Specification

Features of Job Specification

Physical specifications

Emotional and social specifications

Mental specifications

Behavioural specifications
1. Job Design

• Job design can be defined as a process of specifying and arranging work activities
of individuals or groups in an organisational setting.

• The main objective of job design is to establish job structures in a manner that
they meet the organisation’s requirements as well as personal and individual
needs of jobholders.
2. Job Design

Process of Job Design

Assessing existing work practices

Analysing tasks

Designing jobs

Revaluating job design


1. Approaches to Job Design

Job rotation

Job enlargement

Job enrichment

Job simplification
2. Approaches to Job Design

Job Rotation
• Job rotation, one of the most commonly used job design approach, involves
shifting an employee from one job to another with an aim to add variety and
prevent monotony.

• Sometimes it also involves making certain alterations in the existing job profile of
an employee so that the job does not appear repetitive.

• Job rotation enables employees to bring out their creative instincts and maximum
potential.
3. Approaches to Job Design

Job Enlargement
• Job enlargement is a method of expanding the scope of a job with the addition of
some more tasks and duties to it.

• The main aim of job enlargement is to make the existing profile of the employees
appealing.

• The additional tasks or duties do not require new but can be performed by using
similar skills and efforts.
4. Approaches to Job Design

Job Enrichment
• Job enrichment is a process in which employees are given opportunities to utilise
their abilities by participating the decision-making process of an organisation.

• The concept of job enrichment was proposed by Herzberg in the 1950s in his two-
factor theory of motivation. According to him, a job can be enriched when it
involves the elements of enthusiasm, challenge, and vision.
5. Approaches to Job Design

Job Simplification
• Job simplification is a process wherein a job is broken into smaller tasks to make
the job easier and interesting.

• The divided tasks are assigned to employees as individual jobs. This improves the
productivity of employees by reducing their mental and physical efforts.

• This approach is implemented by using time and motion studies.


Let’s Sum Up

• Job analysis is an important part of the HR function and helps in obtaining


accurate, reliable, and latest information about the job.

• Job description is a written statement that defines the roles, responsibilities,


and requirements of a specific job.

• Job specification, also referred to as employee specification, is defined as the


statement that summarises the basic skills and attributes that should be present
in a person to perform a job.

• Job design can be defined as a process of specifying and arranging work


activities of individuals or groups in an organisational setting.

• There are a number of approaches used by organisations to design jobs namely


job rotation, job enlargement, job enrichment and job specification.
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Chapter 4: Recruitment
and Selection
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 68

2 Topic 1 Recruitment 69-77

3 Topic 2 Selection 78-84

4 Topic 3 Outsourcing 85-86

5 Let’s Sum Up 87
• Explain the concept of recruitment

• Describe the importance of recruitment

• List the factors influencing recruitment

• Discuss the concept of selection

• Distinguish between recruitment and selection

• Explain the concept and significance of outsourcing


1. Recruitment

• The process of finding and attracting talented applicants for a particular job
position in an organisation is called recruitment.

• Recruiting new people helps organisations to get jobs done in order to meet
organisational goals and objectives and improve its productivity.

• An effective recruitment policy focuses on providing clear job details to


candidates or prospective employees, establishing a positive image of the
organisation, and getting the best person for the vacant job position.
2. Recruitment

Meaning and Definition


• Recruitment is a process of attracting the most qualified and talented candidates
for a job from a large pool of interested candidates.

• According to Edwin B. Flippos, “Recruitment is a process of searching for


prospective employees and stimulating them to apply for jobs in the
organisation.”
• According to Yoder, “Recruitment is 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.”
3. Recruitment

Purpose and Importance


• Recruitment brings forth a large pool of candidates and ensures that the
maximum of them applies for a job vacancy.

• It lays a foundation for the selection of the right candidate for the right job.

• Recruitment helps in analysing both the current and future human resource
requirements of the organisation.

• It can be used as an indicator of future HR trends; for example, changes in the


job market.
4. Recruitment

• Cooperation and coordination with colleges, universities, and various other


educational institutes can be strengthened through recruitment.

• Recruitment helps HR personnel and managers to adapt to changes taking place


in the internal and external environment.

• Recruitment helps managers and HR personnel to manage job vacancies.


5. Recruitment

Factors Influencing Recruitment


The various internal factors are as follows:

• Recruitment policy of an organisation: It outlines the objectives of recruitment


and provides a structure for a recruitment program.

• Size of the business: If an organisation plans to expand its operations, it needs to


recruit more personnel.

• Recruitment cost: There is a cost involved in recruiting a candidate. Thus,


organisations tend to use the recruitment method that incurs the lowest cost per
candidate.

• Human Resource Planning (HRP): Effective HRP helps to identify gaps in the
existing workforce of an organisation.
6. Recruitment

The various external factors are as follows:

• Labour market: The availability of labour in the location of the organisation


influences its recruitment policy to a large extent.

• Image/goodwill: A positive image and goodwill of an organisation helps to attract


people easily.

• Political-legal-social environment: Various government rules and regulations


prohibiting discrimination in recruitment have affected recruitment practices in
organisations.

• Level of competition: The high level of competition force organisations to change


their recruitment policy.
7. Recruitment

Sources and Methods of Recruitment


The various internal sources are as follows:

Promotions

Transfers

Internal advertisements/job posting

Former employees

Employee referral/recommendations
8. Recruitment

The various external sources of recruitment are as follows:


Management consultants
Public advertisements
Campus recruitment
Deputation personnel
Professional or trade associations
Public and private employment agencies
Executive search firms
Special events
Vocational guidance counsellors
Self-initiated walk-ins and write-ins
Computer databases
9. Recruitment

Process of Recruitment
Recruitment planning

Strategy development

Searching

Screening

Evaluation and control


1. Selection

• Selection is a process of choosing candidates who have the required knowledge


and skills to do a particular job. This process is usually carried out from a large
group of potential job applicants.

• The main purpose of selection is to find out the best candidate available from a
large group of people to do the required job successfully.

• Sometimes due to the negligence and lack of skills and experience of HR


personnel, talented candidates are denied the opportunity to work in an
organisation.

• Thus, organisations need to have capable HR personnel who can ensure the right
people with the right potential.
2. Selection

Difference between Recruitment and Selection


S. No. Recruitment Selection
1 Recruitment is a searching process Selection is a process of choosing the best
where employees are encouraged to candidate among the group of interested
apply for a job. applicants to fill a job vacancy.
2 Recruitment provides a large pool of Selection happens after recruitment and the
candidates from which only those most suitable person is chosen from a large
candidates are shortlisted by the HR group of people provided by the recruitment
personnel whose skills and process.
qualifications closely match with the
organisation’s job requirements.
3 A large number of people can apply The best candidate is selected at this stage
at this stage for a certain job after screening out of other candidates.
position.
4 No contracts or terms and conditions Contracts or terms and conditions are usually
are present in the recruitment stage. present once the candidate is selected.
3. Selection

Process of Selection
Conducting preliminary interviews

Filling an application blank

Conducting employment tests

Conducting employment interviews

Performing reference checks

Conducting physical examinations

Offering the appointment letter

Making final selection


4. Selection

Interview: A Method for Selection


• The term interview can be defined as a conversation between two or more people
wherein a series of questions are asked from one person in order to collect
information about the person.

• According to Jucius Michael, "An interview is a face-to-face, oral, observational,


and personal appraisal method.”
• The person who asks questions is called the interviewer while the person who
responds to the questions is called the interviewee.

• Interview is used an effective selection method as the interviewer assesses the


interviewee and decides whether the person is suitable to perform the job.
5. Selection

Steps for an Effective Interview

Preparing for the interview

Conducting the interview

1. Preparing for the interview: The interviewer must prepare for the interview
before actually conducting it.

2. Conducting the interview: After preparation, finally the interview is conducted by


the interviewer. The interview needs to be conducted in a peaceful environment
where there are no disruptions and the interviewee finds the confidence to
answer questions freely.
6. Selection

Selection in India
• Selection practices spread across various sectors in India, for example, IT,
judicial, oil and gas, manufacturing, healthcare, engineering, hospitality, etc.

• In the IT sector, many IT companies used the structured interviews and reference
checks in their selection process.

• Indian Oil, a top public sector oil and gas corporation, uses application blanks,
resumes, mental ability tests, work samples, personality tests, etc. as a part of its
selection practices.

• Various personality tests and structured interviews are used as a part of best
selection practices by Indian manufacturing companies.

• Structured interviews are used by Indian companies in other sectors like


healthcare, engineering, hospitality and education, etc.
7. Selection

Selection from a Global Perspective


• Most of the organisations around the world use processes of selection which are
not much different from each other.

• Global organisations face some major problems during the selection of potential
candidates. One such major problem is cultural variations among nations.

• The working patterns, lifestyle and the overall environment are also quite
different in America, Europe, Australia, etc.

• Each country has their selection styles.

• Moreover, some countries prioritise certain selection trends while other countries
take alternative routes.
1. Outsourcing

• Outsourcing has enabled business enterprises to acquire all types of physical and
intellectual resources from around the world to carry out their operations.

• The four stages of outsourcing is depicted as follows:

Strategic thinking

Evaluation and selection

Contract development

Outsourcing management and governance


2. Outsourcing

Outsourcing HR in India
• Human resource outsourcing in India is currently becoming popular among the
masses.

• Big to small-scale firms are getting into this recent trend.

• The latest size of outsourcing of HR practices in India is about $2 billion, the


current market of $27 million, and the growth rate of about 50 per cent.

• Foreign multinational companies outsource their HR activities in India due to


various reasons, such as easy availability of workers, low costs, achievement of
top quality services, presence of good facilities, high-class processes, etc.
Let’s Sum Up

• The process of finding and attracting talented applicants for a particular job
position in an organisation is called recruitment.

• Recruitment helps HR personnel and managers to adapt to changes taking place


in the internal and external environment.

• Selection is a process of choosing candidates who have the required knowledge


and skills to do a particular job. This process is usually carried out from a large
group of potential job applicants.

• Interview is used an effective selection method as the interviewer assesses the


interviewee and decides whether the person is suitable to perform the job.

• Outsourcing has enabled business enterprises to acquire all types of physical


and intellectual resources from around the world to carry out their operations.
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Chapter 5: Induction and
Orientation
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 92

2 Topic 1 Induction 93-96

3 Topic 2 Orientation 97-100

4 Let’s Sum Up 101


• Explain the concept of induction

• Describe the need for induction

• Discuss the concept of orientation

• Explain the process of orientation

• Elaborate on the importance of orientation


1. Induction

• Induction is a formal process of introducing new employees to the work


environment. The process begins with the entry of employees into the
organisation which later fuses with the training and development process. Thus,
induction is believed to motivate employees to quickly adapt to the organisation,
which, in turn, increases their productivity.

• The main aim of induction is to familiarise newly appointed employees with the
organisation’s vision, mission, goals, and objectives. An induction generally
provides a brief introduction about the history, culture, values, functions,
processes, products and services, and policies and standards of the organisation
to new employees. Moreover, employees are communicated the expectations of the
organisation from them.
2. Induction

Process of Induction

Step 1
Step 2
Collecting
employee Step 3
Identifying
information Step 4
the
Defining
objectives Step 5
the
of the Deciding
audience
induction the content
Providing
program and mode
feedback
of delivery
3. Induction

Merits and Demerits of Induction


The following are some advantages of induction:

• An effective induction program helps employees to get comfortable with the


organisation and hence reducing the turnover rate.

• An induction program also presents the worth of the organisation to employees.


This wins loyalty and commitment of employees towards the organisation.

• An induction program provides employees with an opportunity to know and


connect with fellow employees.

• An induction program allows an organisation to inform employees about its


expectations regarding behaviour, attitude, and code of conduct.
4. Induction

The demerits of the induction program are explained as follows:

• Sometimes an induction program provides too much information to employees,


which is not even required by them.

• If an induction program is not designed properly, employees may not have a


clear understanding of an organisation’s functioning. This may demoralise
employees.

• Employees would not be able to show dedication or become a part of a team in


case they are not inducted properly.

• If an employee leaves the organisation, the time, money, and efforts spent on the
induction process gets wasted.
1. Orientation

• In induction program, employees are introduced to the work culture of an


organisation.

• However, it is not sufficient for employees to be only aware of work culture of the
organisation to perform effectively.

• Employees need to have a clear understanding of their job roles and


responsibilities.

• A process of briefing the job roles, responsibilities, and duties to employees is


called orientation.
2. Orientation

Types of Orientation
• General or specific orientation: A general orientation program is conducted for all
new recruits irrespective of their departments and profiles. In such a program,
employees are made aware of the dos and don’ts of their jobs, general safety
measures, precautions to be taken while performing their jobs, etc. On the other
hand, a job-specific orientation program aims at providing employees with
specific information about their job profile.

• Traditional and modern orientation: In the traditional orientation program,


organisations use general and repeated orientation material. On the other hand,
a modern orientation program is updated as per changes in job requirements.
3. Orientation

Process of Orientation

Step 1
Step 2
Reviewing
the Step 3
organisation’s Determining
policy and the objectives Step 4
Determining
expectations of the the type of
orientation Step 5
orientation Deciding the
program mode of
program Taking
delivery
feedback
4. Orientation

Effectiveness of Orientation Program

Clear objectives

Well-defined audience

Accurate information

Appropriate methodology
Let’s Sum Up

• Induction is a formal process of introducing new employees to the organisation


and making them confortable to adapt to the working atmosphere.

• The need for induction can be understood from the perspective of both the
organisation and employees.

• The steps in the process of induction include collecting employees’ information,


defining the audience, providing feedback, etc.

• An orientation program is broadly classified into general or specific and


traditional or modern.

• The features of an effective orientation program include clear objectives, well-


defined audience, accurate information, and appropriate methodology.
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Chapter 6: Competency
Mapping and Assessment
Centres
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 106

2 Topic 1 Competency Mapping 107-114

3 Topic 2 Assessment Centres 115-124

4 Let’s Sum Up 125


• Explain the concept of competency mapping

• Discuss the importance of competency models

• Explain the concept of assessment centres

• List measurement tools used in assessment centres

• Differentiate between assessment centre and development centre


1. Competency Mapping

• Competency is a set of knowledge, skills or behaviour that an individual needs to


demonstrate to perform a particular work successfully.

• Competency mapping is a process of assessing the strengths of employees in an


organisation and judging whether they are fit for a particular job.

• Competency mapping enables both the organisation and employees to identify the
areas of improvement of employees’ performance.

• These areas of improvement can be related to problem-solving skills, decision-


making skills, teamwork, discipline, leadership, management, etc.

• Competency mapping provides insight to employees into their career prospects.


2. Competency Mapping

Types of
competencies

Technical Managerial/organisational Human/behavioural Conceptual


3. Competency Mapping

Developing Competency Models

Preparing for the model

Collecting information

Building the model

Implementing the model

Evaluating and updating


the model
4. Competency Mapping

1. Preparing for the model: This is the first and foremost step in the process of
developing a competency model wherein the purpose of the model is defined.

2. Collecting information: This step involves gathering information related to job


roles and responsibilities.

3. Building the model: This step involves grouping and sub-grouping skill sets into
competencies; for example, decision-making, problem-solving, interpersonal
skills, etc.
5. Competency Mapping

4. Implementing the model: This step involves putting the established model into
practice.

5. Evaluating and updating the competency model: This is the final step in the
competency model development process where a thorough evaluation is carried out to
assess how much are the resultant competencies beneficial to the organisation.
6. Competency Mapping

Uses of Competency Models


• Competency models improve the selection process in organisations as these
models help in assessing the competencies of candidates and deciding whether
they are fit for a particular job.

• These models help in performance appraisal as competencies of employees are


measured to identify their strengths and weaknesses.

• Competency models enable HR personnel to establish an effective structure for


training and development by providing insight into the existing competency level
of employees.
7. Competency Mapping

• Competency models facilitate career orientation in organisations by defining a


career pathway for employees. Moreover, they enable organisations to focus on
their core competencies by making effective utilisation of employees’ skills and
abilities.

• These models help in clearly communicating the organisation’s expectations


mission, vision, and core values to employees so that they can work toward
achieving organisational goals and objectives.
8. Competency Mapping

Future Trends in Competency Modelling


• Over the years, organisations around the globe have become too competitive that
they want to be market leaders and stay distinguished from the pile.

• For this, they need to strive hard to attract a large customer base and offer high-
quality products and services in the market.

• In order to achieve such positive results, organisations need to raise the


competence levels of their employees.

• It is predicted that in the future, many medium and small-scale IT companies


will also learn from these big IT giants and develop successful competency models
which will have greater impact on their workforce.
1. Assessment Centres

• An assessment centre is a technique used in the selection process for identifying


the skills and abilities of candidates. This technique is applied to collect
information on the competencies of candidates that cannot be gathered in
interviews alone.

• In organisations, assessment centres are generally used for the selection of


senior-level personnel like managers, supervisors, executives, and other higher
management personnel.

• In assessment centres, candidates (who apply for higher positions) are given real-
life exercises.

• Assessment centres may include individual or group activities, real-life


simulation games, a series of tests and interviews, which helps in evaluating
whether an applicant would be able to perform a particular job successfully.
2. Assessment Centres

History of Assessment Centres


• Assessment centres were first used in 1942 in the UK by War Office Selection
Boards for solving discipline and behavioural issues of officers and selecting the
right candidates for major roles. The main activities involved in these assessment
centres were simulation exercises, tests, and interviews.

• Consequently, the number of officers who were found to be unsuitable to do a


particular job reduced and there was a significant increase in the number of
efficient officers.

• Assessment centres in the UK gained popularity in 1986 when industries


employing 500 and more people used assessment centres. Going by the current
trends, many industries in the UK have now started using assessment centres.
3. Assessment Centres

• The US had a very infamous history of using assessment centres.

• During the early days, the Office of Strategic Studies in the US used assessment
centres to appoint spies during the Second World War.

• In the following years after the Second World War, various American private
companies started using assessment centres to select people, notably, American
Telephone and Telegraph Company (AT&T) in 1956.

• Other large American companies, such as IBM, GE, and Sears, also started
using assessment centres in their selection process.

• Gradually, assessment centres were considered to be an effective technique for


selecting employees by organisations across the globe.
4. Assessment Centres

Measurement Tools

Measurement
tools

Simulations Tests Interviews


5. Assessment Centres

Simulation
tools

Leaderless In-basket
Role playing Presentations Work sample
group exercise exercise
6. Assessment Centres

Elements of
a test

Cognitive Job Physical


Integrity Personality
ability knowledge ability
7. Assessment Centres

• Interviews are formal meetings in person where qualifications, knowledge, and


skills of an applicant are assessed by the hirer.

• These interviews provide an opportunity to HR personnel to collect essential


information from the applicant and determine whether he/she is suitable to
perform the job.

• Not only this, interviews also enable the applicant to have a fair idea of the job
requirements.

• However, the effectiveness of interviews largely depends on the type of questions


asked.

• Thus, interview questions must be designed in such a way that they provide
adequate job-related information to candidates.
8. Assessment Centres

The three main steps in an interview method are as follows:

Preparing for the interview

Conducting the interview

Noting down responses


9. Assessment Centres

Differences Between Assessment Centre and Development Centre


Assessment Centre Development Centre
Pass/fail criterion is present. Pass/fail criterion is not present.
A job position is filled up. Development of people takes place.
Short-term organisational needs are Long-term organisational needs are
addressed. addressed.
There can be a large number of There is a 1:1 ratio of assessors to
candidates. However, the number of candidates.
assessors is less.

Line managers can be assessors. Line managers cannot be assessors.


There is less focus on self-assessment. There is more focus on self-assessment.
There is focus on what participants can There is more focus on the participant’s
do in the current situation. potential levels.
9. Assessment Centres

Assessment Centre Development Centre


Organisational needs have to be met. Both organisational and individual
needs have to be met.

Assessors act as judges. Assessors act as facilitators.


Selection is the primary focus while Developmental feedback or follow-up is
developmental feedback or follow-up the primary focus while selection takes
takes the backseat. the backseat.

Feedback is given later. Feedback is given immediately.


Organisations have greater control on Participants have greater control on the
the collected information. collected information.

It is generally used for potential It is used for internal candidates.


employees.
Let’s Sum Up

• Competency is a set of knowledge, skills or behaviour that an individual needs to


demonstrate to perform a particular work successfully.

• Competency mapping helps in clearly stating the roles of an individual in the


organisation.

• Competency mapping enables organisations to determine training and


development requirements of employees.

• An assessment centre is a technique used in the selection process for identifying


the skills and abilities of candidates.

• In assessment centres, candidates (who apply for higher positions) are given
real-life exercises.
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Chapter 7: Training and
Development
Chapter Index
S. No Reference No Particulars Slide
From-To

1 Learning Objectives 130

2 Topic 1 Concept of Training 131-138

3 Topic 2 Types of Training 139-140

4 Topic 3 Methods of Training 141-143

5 Topic 4 Training and Learning 144


Organisations

6 Topic 5 Concept of Development 145-148

7 Let’s Sum Up 149


• Explain the concept of training

• Discuss different types of training

• List the methods of training

• Discuss training and learning organisations

• Explain the concept of development

• Elaborate on the need for development in organisations

• Differentiate between training and development


1. Concept of Training

• Hiring skilled and qualified personnel is of paramount importance to any


organisation. However, to achieve success in the long run, it is essential for an
organisation to train and educate its employees to increase their knowledge base
and develop new skills.

• This not only leads to the development of employees but also increases their
productivity; thereby leading to organisational effectiveness.

• Training is an organised process that involves teaching or providing instructions


with an aim to improve the performance of recipients or help them to achieve a
required level of knowledge or skill.
2. Concept of Training

Training and Education


The difference between education and training is as follows:
Point of Difference Education Training
Purpose It aims at developing the It aims at developing new
mindset of individuals. skills and knowledge of
individuals.
Level of learning Individuals may find it It is easier to learn.
difficult to learn.
Measure of success Education is based on the It is based on certificates and
system of scores and grades. job performance.
Length of process It may extend to one to three It generally lasts for one to
years. five days or sometimes for a
few weeks.
Changes The learner becomes more The participant becomes
radical and skilful in general skilful in a particular job.
thinking.
3. Concept of Training

Need and Importance of Training


• Training is required to make new employees aware of their job roles and duties,
organisational processes and functions, etc.

• Training leads to the building of efficient and effective teams; thereby enabling
the organisation to quickly respond to changes in the business environment.

• It motivates employees to work toward the accomplishment of organisational


goals and objectives by providing them a clear picture of the organisation’s
expectations.

• It improves the knowledge of employees about their job roles, which leads to
enhanced productivity and organisational effectiveness.
4. Concept of Training

• Training focuses on developing the intellect and personality of employees so that


they can perform effectively.

• Training inculcates a sense of team spirit, teamwork, and inter-team


collaboration, which helps employees to adapt to team culture.

• Training enables employees to identify their strengths and use them as well to
recognise their weaknesses and correct them.
5. Concept of Training

Stakeholders in Training
• Top management: A training program cannot be conducted without the consent of
the top management. This is because it is the top management that allocates
resources for conducting any training program.

• Participants: They comprise the target audience of a training program.


Participants strive to achieve the learning goals and objectives of the training
program and apply this learning while performing their jobs.

• Trainer: A trainer plays a crucial role in motivating and inspiring participants by


making training sessions interesting and informative.
6. Concept of Training

Process of Training

Reviewing Deciding
Assessing
organisational training
training needs
objectives objectives

Implementing Designing the


Evaluating the
the training training
program
program program
7. Concept of Training

International Training Issues


• Sometimes organisations are not interested in bearing the extra cost incurred on
international training. The cost and infrastructure of international training is
comparatively higher.

• Many organisations find it difficult to look for a trainer who has skills to train
people from different backgrounds.

• Determining the type and design of the training for a diverse audience is also
sometimes difficult.
8. Concept of Training

Factors Influencing the Effectiveness of Training

Top management support

Acceptance of participants

Adoption of continuous process

Technological advancement

Type and time of training


1. Types of Training

• Induction training: This type of training is conducted for new appointees.


Induction training focuses on introducing new employees to organisational
procedures, functioning, policies, culture, rules, and regulations.

• Job training or orientation: This training is given to both new and existing
employees. Orientation aims at making employees aware of job roles,
responsibilities, and accountabilities.

• Apprenticeship training: This is a hybrid form of job training and classroom


teaching where trainees are trained about both the knowledge and the skills
required in performing a particular job.
2. Types of Training

• Internship training: In this type of training, vocational and educational institutes


enter into a formal contract with organisations to provide practical training to
their students. This type of training is required to facilitate formal education
with practical training.

• Training for promotion: There are some employees in organisations who tend to
perform better than their existing job roles. Many organisations identify and
appreciate these employees by giving them special training that can prepare
them for the next promotion. As promotion leads to changes in job roles and
responsibilities of employees, training needs to be given. In this way, employees
are trained to get promotion and perform efficiently.
1. Methods of Training

On-the-job training method: It is a method wherein training is imparted to


employees when they are actually performing their jobs at a workplace. This method
is generally used by organisations to train employees for performing various
operative functions. Some of the on-the-job training methods are as follows:

• Job rotation

• Coaching and mentoring

• Assignments

• Apprenticeship

• Internship

• Orientation
2. Methods of Training

Off-the-job training methods: In this method, trainees are sent to the location
outside the actual workplace to acquire new skills and knowledge. Off-the-job
training may be provided by certified trainers within the organisation or external
trainers. Some of the common off-the-job training methods include:

• Classroom lectures

• Audio visual

• Case studies

• Role playing

• Simulation

• Vestibule training
3. Methods of Training

Coaching and Mentoring


• Coaching and mentoring is the most commonly used on-the-job training method.
In the coaching process, employees receive feedback on their performance and
guidelines to perform better, from their supervisors regularly.

• Mentoring is a form of coaching used by executives to train their subordinates. It


involves one-to-one coaching that continues until the employee becomes capable
enough to surpass his/her mentor.

• Coaching and mentoring help employees to learn quickly through one-to-one


interaction. Moreover, it enables organisations to keep track of the performance
of employees and make optimal utilisation of their skills.
Training and Learning Organisations

• A learning organisation is one that focuses on acquiring knowledge and


encouraging innovative ideas with an aim to survive in a rapidly changing
business environment.

• A learning organisation creates an environment that supports employees in


their learning and critical thinking and encourages new ideas.

• As a learning organisation promotes constant learning, training plays an


important role in the growth of the organisation.
1. Concept of Development

• Development is a long-term process that aims at the overall improvement of


employees for future job performance.

• It focuses on enhancing the conceptual and theoretical knowledge of employees


for a particular job position that they may hold in the future. For example, if an
employee has instinct leadership qualities, he/she may be prepared for the
position of a manager or team leader through proper education or mentoring.

• Sometimes employees are asked to handle some of the tasks related to their
future job position. For instance, an employee may be asked to handle a team in
case he/she has been considered for a team leader in the future.
2. Concept of Development

Need for Development in Organisations

Increased efficiency and reduced wastage

Increased employee morale

To improve industrial relations

Optimum utilisation of resources

Fast response to change


3. Concept of Development

Difference between Training and Development


Point of Difference Training Development

Scope It is a narrow concept. It is a broad concept.


Training is a part of
development.
Validity or suitability Training has its validity for the Development is valid for
present job only. current as well as the
future jobs.
Applicability Training is applicable for a Development is not job
particular job. specific.
Target audience It is applicable to employees Development is generally
working at operating level. applicable to employees
working at middle and
top management levels.
4. Concept of Development

Point of Difference Training Development

Methods Mostly on-the-job training Mostly off-the-job


methods are used. training methods are
used.

Skills and knowledge Training develops the Development improves


physical and mental skills intellectual abilities,
of employees to perform a such as leadership skills,
current job. interpersonal skills, and
decision-making skills of
employees to prepare
them for future jobs.
Let’s Sum Up

• Training is an organised process of imparting skills and knowledge to employees


with an aim of improving their productivity.

• Training and education are complementary to each other. An organisation selects


employees on the basis of their education. However, while imparting training, it
is presumed that employees have a certain level of education.

• There are different types of training imparted in organisations. Some of them


include induction training, apprenticeship training, training for promotion, etc.

• Methods of training are broadly classified into two categories on-the-job training
and off-the-job training.

• Development is a long-term process that aims at improving interpersonal and


leadership skills of individuals from a future perspective.
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Chapter 8: Human
Resource Development
Chapter Index
S. No Reference No Particulars Slide
From-To

1 Learning Objectives 1543

2 Topic 1 Meaning of Human Resource 155-162


Development

3 Topic 2 Functions of HRD 163-164

4 Topic 3 Process of HRD 165-167

5 Topic 4 Types of HRD Systems 168-170

6 Topic 5 Effectiveness of HRD 171-172

7 Let’s Sum Up 173


• Explain the concept of HRD

• Discuss the functions of HRD

• List the stages involved in the HRD process

• Discuss the types of HRD systems

• Discuss the effectiveness of HRD


1. Meaning of Human Resource Development

• Human Resource Development (HRD) is a framework used by organisations to


help employees develop their knowledge, skills, and abilities so that they can
perform efficiently in their job.

• HRD provides employees various opportunities, such as training and


development, career planning, coaching and mentoring, performance
management, etc.

• These programs help organisations to build a strong workforce where employees


work in a productive manner to achieve organisational goals and ensure excellent
customer service.
2. Meaning of Human Resource Development

HRD is a continuous process that aims to improve overall productivity through:

• Investment in human resource: From an organisation’s perspective, output can be


enhanced by investing in the development of skills and abilities of human
resource.

• Optimum utilisation of human resource: Organisations strive to make effective


utilisation of human resource on which they invest in a planned manner.

• Participation of human resource: Employees are motivated if they are encouraged


to participate in the decision-making process of an organisation, which ultimately
boosts productivity.
3. Meaning of Human Resource Development

Need for HRD


• Changes in the business environment: Various changes take place in the internal
and external business environment of organisations from time to time.

• Poor performance: If employees lack the required skills and are demotivated,
they would not perform as per the expectations, which adversely affect the
organisation’s productivity.

• Launch of new products: Organisations need to introduce new products from time
to time to stay ahead of competition.

• Higher performance standards: Organisations generally establish high


performance standards for their employees.

• Career progression requirements: Employees always aspire to move to the next


level of their jobs.
4. Meaning of Human Resource Development

Levels of needs

Organisational
Work level Personal level
level
5. Meaning of Human Resource Development

• Organisational level: The need for HRD arises at the organisational level when
an organisation alters its business strategy with respect to the changes in the
business environment.

• Work level: The work performance of employees can be enhanced if organisations


focus on developing the existing skills and knowledge of employees.

• Personal level: Employees are motivated to perform effectively if they have the
right attitude and a high level of motivation and satisfaction.
6. Meaning of Human Resource Development

Objectives of HRD
• To respond quickly to the changing business environment.

• To identify the strengths and weaknesses of employees.

• To improve organisational performance by developing the skills, knowledge base,


and competencies of employees.
7. Meaning of Human Resource Development

Scope of HRD
• Training and development: HRD programs are designed to train employees in
particular jobs.

• Organisational development: HRD helps in organisational development by


ensuring that cordial relationships are maintained among employees, conflicts
are avoided, and employees are motivated to work towards organisational goals
and objectives.

• Career development: Employees always seek to progress in their career and


transform themselves into highly competent individuals.
8. Meaning of Human Resource Development

• Performance appraisal: This is one of the most important functions in an


organisation wherein the actual performance of employees is compared with and
the desired performance.

• Placement, promotions and transfers: Depending on the appraisal reports,


employees are placed in other departments, promoted to the next level from their
current level, or transferred to a new location.

• Employee motivation: HRD encourages employees to perform better in their jobs


by serving as a motivational tool.
1. Functions of HRD

Functions of HRD

Training and Organisational


Career development
development development
2. Functions of HRD

• Training and development: This function of HRD focuses on changing or


improving the knowledge base, skills, and abilities of employees.

• Organisational development: This function of HRD focuses on improving the


overall performance of an organisation and the well-being of its members through
planned interventions.

• Career development: It is an important process that is meant to make employees


realise their work potential. Career development consists of two parts, namely
career planning and career management.
1. Process of HRD

Needs Assessment

Design

Implementation

Evaluation
2. Process of HRD

1. Needs assessment: This is the first step that involves determining the need for an
HRD program in an organisation. This is done by identifying gaps in the
performance of employees.

2. Design: After the objectives are identified, the next step is that the program
should be designed in such a way that the set objectives can be met effectively.

3. Implementation: This is the next phase of the HRD process where the designed
HRD program is put into practice so that the identified objectives can be met.

4. Evaluation: This is the final step of the HRD process where the effectiveness of
the designed HRD program is measured. In this step, it is checked whether the
designed HRD program has met the set objectives.
3. Process of HRD

The four phases of the HRD process together referred to as ‘A DImE’ framework, is
shown below:
1. Types of HRD Systems

Career system

Work system

Development system

Self-renewal system

Culture system
2.Types of HRD Systems

• Career system: This system focuses on attracting new employees and retaining
the existing ones so that an organisation can continuously achieve its
performance.

• Work system: HRD ensures that the employees are attracted and retained
effectively so that the organisational objectives are met.

• Development system: The business environment changes quite rapidly and


organisations need to adapt to changes to stay competitive in the market.
3.Types of HRD Systems

• Self-renewal system: An organisation needs to revive its business and products


and services from time to time so that it can withstand the increasing challenges
of the changing business environment.

• Culture system: Employees in an organisation belong to different cultural


backgrounds and have different mind-sets. HRD focuses on creating a work
culture where employees can work with a sense of togetherness to achieve
organisational goals and objectives.
1. Effectiveness of HRD

• Effective linkage: An HRD program can be effective if all HRD functions, such as
performance appraisal, training, and career development are aligned with each
other.

• Clear objectives: An HRD program must follow a set of clearly defined objectives
in order to be effective. It is essential that HRD objectives must be defined based
on the needs of employees, organisational requirements, and changes in the
external and internal business environment.

• Effective communication: Communication is a key factor in determining the


effectiveness of an HRD program.

• Feedback from employees: An effective HRD program always has room for
feedback so that the loopholes of the program can be identified and corrected.
2. Effectiveness of HRD

• Coal India Limited (CIL) has an effective HRD program in place which focusses
on developing existing human resources.

• The main objective of this program is to enhance the skills and competencies of
employees by providing training in different areas like technical, management,
etc. for their future growth and development.

• The HRD program at CIL focuses on recent technological changes so that


employees are comfortable using the latest technology necessary to fulfil high
production demands.

• Thus, in order to achieve high employee performance and productivity, CIL


integrates its annual HRD plan with the HRD programs in all its 26 training
centres across the country.
Let’s Sum Up

• Human Resource Development (HRD) is a framework used by organisations to


help employees develop their knowledge, skills, and abilities so that they can
perform efficiently in their job.

• HRD provides employees various opportunities, such as training and


development, career planning, coaching and mentoring, performance
management, etc.

• An HRD program can be effective if all HRD functions, such as performance


appraisal, training, and career development are aligned with each other.

• Communication is a key factor in determining the effectiveness of an HRD


program.
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Chapter 9: Career
Planning and Succession
Planning
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 178

2 Topic 1 Definition of Career 179-183

3 Topic 2 Career Planning 184-191

4 Topic 3 Succession Planning 192-196

5 Let’s Sum Up 197


• Define the term career

• Explain various career stages

• List various career anchors

• Discuss the concept of career planning

• Explain the concept of succession planning


1. Definition of Career

• A career is a sequence of jobs taken up by an individual throughout his/her


lifetime.

• It encompasses formal education, practical training, and occupational experiences


received by the individual.

• In other words, career can be defined as changes that take place in the work
attitude of individuals when they pass through the different stages of life. This is
the subjective view of the word career.

• However, there is an objective view of career as well. According to the objective


view, an individual’s career is composed of a sequence of work-related activities
that gives meaning and stability to his/her life.
2. Definition of Career

Career Stages

Exploratory stage

Establishment stage

Maintenance stage

Decline stage
3. Definition of Career

1. Exploratory stage: This is the pre-employment stage that takes place before
individuals get into any job. This stage generally ends in early and mid-twenties
for most people. This stage is crucial for individuals as it is the period when
individuals explore and analyse their goals and objectives and prepare their
mind-sets accordingly. It is about self-exploration where individuals identify
their goals and interests. Career objectives in this stage are often influenced by
parents, teachers, and peer groups.

2. Establishment stage: This stage normally begins when individuals join their
first job. They make mistakes and are full of anxiety about their professional life.
As it is the first job experience for individuals, they strive to establish a position
in the society and get recognised for their work.
4. Definition of Career

3. Maintenance stage: After individuals enter into their professional life, they
strive to maintain stability in their jobs. Thus, this stage is referred to as the
maintenance stage.

4. Decline stage: This is the last stage of individuals’ career where they retire and
take leave from their organisations to provide job opportunities to successors.
Irrespective of having a glorified career or dismissal one, this stage comes to
every individual. Different people react differently to this stage. For some, it is
the end of creativity and being active, while others welcome it as a relief from
work pressure and stress. Many people also consider this stage as an
opportunity to socialise with their friends and family members.
5. Definition of Career

Career Anchors

General managerial

Technical/functional

Security/stability

Entrepreneurial creativity

Service/dedication to a cause

Pure challenge

Autonomy/independence

Lifestyle
1. Career Planning

• People always come across a phase when they feel overwhelmed by a job or
career they are into.

• In such a case, they generally fail to plan the changes they need to make for
their career growth and development.

• Career planning is a practice or exercise where individuals identify their work


related objectives, strengths, and weaknesses so that they can select an
occupation or profession of their choice.

• It is a structured process of analysing the skills and interests of individuals,


deciding their career goals, and formulating strategies to achieve them.
2. Career Planning

The main aim of career planning is to enable individuals to making right career
choices. However, career planning is influenced by various factors. Some of these
factors are explained as follows:

• Skills and abilities: The skills and abilities of an individual play an important
role in his/her career planning. The chosen education and training program
must be in sync with the actual skills and capabilities of an individual. A lack of
sync between the education and actual skills may result in making wrong career
choices.
3. Career Planning

• Values and interests: Career planning is highly influenced with one’s areas of
interests. Different individuals have different areas of interests based on which
they look for suitable career options. Any mismatch between the areas of
interests and career options largely affect the career planning process.

• Salary expectations: Individuals have certain expectations regarding


remunerations they would be getting in exchange of their services. For some
individuals, remuneration may be a deciding factor to choose a particular career
option, while for others; it may one of the factors in selecting the career option.
Thus, career planning must address the salary expectations of individuals.
4. Career Planning

Objectives of Career Planning


• Career planning helps in attracting and retaining skillful and talented
employees. This is because organisations today do not offer a job but a career
which is of greater interest for people.

• It boosts employees’ motivation and morale. This reduces employee turnover as


motivated employees tend to stay longer with the organisation.

• A good career plan not only helps individuals in their career growth but also
helps the organisation in meeting its goals and objectives.

• When an organisation takes an interest in employees’ growth and development


through career planning, it increases job satisfaction among employees. This
results in reducing absenteeism of employees from work.
5. Career Planning

Process of Career Planning

Performing self-assessment

Identifying career choices and


preferences

Aligning needs and opportunities

Formulating action plan

Evaluating the process


6. Career Planning

Merits and Demerits of Career Planning


The following are the merits of career planning:

• Career planning provides individuals with knowledge about available career


opportunities and their priorities.

• It aids individuals in making selection of their career, which is appropriate to


their preferences and scope of development.

• It helps an organisation in identifying a talented and competent pool of


employees who can be promoted to the next level in the organisation.

• It ensures employees of their future growth in the organisation. This makes


employees to stay in the organisation to enjoy their growth instead of switching
to other jobs.
7. Career Planning

• It contributes towards the successful accomplishment of individual and


organisational goals.

Demerits of career planning are as follows:

• Sometimes career growth is limited in an organisation, which makes career


planning an unrealistic process.

• Prejudice and interventions make systematic career planning a difficult process.


For instance, individuals are influenced by their peer groups instead of pursuing
their own aspirations. Similarly, in an organisation, sometimes promotions are
the results of favouritism.
8. Career Planning

• Decline in career opportunities also affects career planning. The decline may
occur because of changes in internal and external business environment of an
organisation. For example, with the advent of computers, the career
opportunities for clerks declined. The decline generally results in career shifts.

• A lack of knowledge about one’s aspirations and interests leads to the mismatch
of needs and opportunities. This results in career complications.
1. Succession Planning

• Succession planning is a process of finding a successor for key positions in an


organisation. It aims at identifying and developing the existing people who
have potential to fill key positions in the organisation.

• A productive and successful succession planning ensures the availability of


experienced and capable employees in an organisation. In order to have an
effective succession planning, an organisation must approach succession
planning as an integrated process that aims at both organisational and
individual development.

• Therefore, it can also be explained as a process of finding a replacement for key


positions of the organisation. This helps the organisation in generating greater
revenues, improving its market image, and achieving competitive advantage.
2. Succession Planning

Objectives of Succession Planning


• To identify key positions in the organisation and evaluate the skills and abilities
of employees to fill such positions.

• To create immediate back-up plans for filling short-term vacancies.

• To give a quick response to organisational changes that may take place in the
future.

• To develop employees through comprehensive training and performance


management programs.

• It facilitates individual career development in the organisation.


3. Succession Planning

Process of Succession Planning

Developing
Identifying key Identifying the
succession
positions talent pool
strategies

Implementing
Evaluating the
succession
plan
strategies
4. Succession Planning

Merits and Demerits of Succession Planning


The following are some merits of succession planning:

• It helps individuals in realising their career plans and aspirations in the


organisation.

• Succession planning helps in developing a pool of qualified and experienced


people within the organisation.

• It identifies employees’ renewal needs so that employees can be prepared for


future challenges through required training and development programs.

• It enables successors to respond to rapid changes in the organisation.


5. Succession Planning

Some of the demerits of succession planning are given as follows:

• It may lead to the appointment of wrong successors, which adversely affects


organisational growth and development.

• It may have the wrong timing of implementation when the organisation is still
immature. This will induce disharmony among employees leading to poor
business growth.
Let’s Sum Up

• A career is a sequence of activities taken up by an individual throughout his/her


work life in terms of formal education, practical training, and job experience.
This leads to changes in an individual’s life making his/her life better.

• In order to have a good career, individuals must identify their objectives,


strengths, and weaknesses so that they can select the most suitable occupation
or profession. This process of self-assessment and career option selection is
referred to as career planning.

• Just like career planning, an organisation prepares a replacement plan for its
key positions. The process of preparing such a plan is called succession planning.
It prepares organisations to fill the vacancies of their key positions.
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Chapter 10: Performance
Management
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 202

2 Topic 1 Concept of Performance 203-206


Management

3 Topic 2 Meaning of Performance 207-217


Appraisal

4 Topic 3 Concept of Potential Appraisal 218-220

6 Let’s Sum Up 221


• Explain the concept of performance management

• Discuss the concept of performance appraisal

• List the steps involved in performance appraisal

• Discuss the concept of potential appraisal

• Describe the techniques of potential appraisal


1. Concept of Performance Management

• Performance management is a process that comprises a set of activities


performed to ensure that organisational goals are met successfully.

• The term performance management was coined by Dr. Aubrey Daniels in the late
1970s to describe a technology used for managing the two critical elements of
performance, behaviour and results.

• Performance management is of utmost importance for an organisation in order to


assess its progress.

• In the context of HRM, performance management aims at improving, developing,


and managing employees’ performance and aligning them with organisational
objectives.
2. Concept of Performance Management

Nature of Performance Management


Performance management helps organisations to evaluate their performance from
time to time and ensure better productivity. An effective performance management
has the following benefits:

• Performance management works as a tool that helps in developing employee


performance

• It identifies training and development needs of employees to ensure skilled,


competent, and motivated workforce.

• Performance management helps an organisation in setting goals, developing


human resource, and rewarding employee performance.
3. Concept of Performance Management

Significance of Performance Management

Performance management helps in encouraging employees to participate in the


decision making process.

It helps in establishing meaningful work targets for employees

It sets performance standards based on which the evaluation is done

It carries out a career development program for employees


4. Concept of Performance Management

Performance Management Systems in India


• The concept of performance management was introduced in India in 1940 by
some well-known private sector organisations like Union Carbide, Tata Iron and
Steel Company, Bata, and Voltas.

• In the late 1970s and early 1980s, many Indian organisations started using
performance appraisal to evaluate employee behaviour and develop employee
capabilities.

• By 2004, multiple organisations, such as Infosys, Titan, Tata Steel, Bharat


Petroleum, Dr. Reddy’s Lab, and the National Stock Exchange started using some
of the most sophisticated forms of performance management systems.
1. Meaning of Performance Appraisal

• Employees are the most important and valuable sources for an organisation’s
growth and progress. Therefore, an organisation needs to motivate and reward its
employees from time to time in order to ensure their continuous performance.

• Performance appraisal is one such mechanism that not only helps an


organisation to understand the abilities and competencies of its employees but
also motivates them for improving their current performance level.

• It is a process of analysing the past performance and future potential of


employees.

• The performance of employees can be analysed on the basis of various


parameters, such as hard work, quantity of output produced, the quality of work
done, responsibilities undertaken, initiatives, regularity, and punctuality.
2. Meaning of Performance Appraisal

Objectives of Performance Appraisal


• Performance appraisal helps in determining the training and development needs
of employees by assessing performance gaps.

• It focuses on developing new skills of employees so that they may hold various
key positions in the future.

• Performance appraisal provides an effective feedback to employees, which, in


turn, helps them to improve their performance.

• It helps an organisation to decide the compensation and incentives to be paid to


its employees.

• Performance appraisal helps in reducing internal conflicts and grievances among


employees.
3. Meaning of Performance Appraisal

Process of Performance Appraisal


Establishing performance standards

Communicating the standards

Determining personnel responsible for conducting performance appraisal

Measuring the performance

Communicating the results of appraisal to the concerned employees

Taking corrective actions


4. Meaning of Performance Appraisal

Methods of Performance Appraisal

Performance
appraisal methods

Past-oriented Future-oriented
methods methods
5. Meaning of Performance Appraisal

Past-oriented methods: These are the oldest techniques of performance appraisal.


Past-oriented methods are based on a trait-oriented approach wherein the
performance of employees is evaluated on the basis of established standards of traits
or qualities of employees. Some of the important past-oriented methods are:

• Confidential report: In this method, a descriptive report is prepared by the


immediate reporting authority of the employee being appraised, usually at the
end of the year

• Essay method: In this method, an appraiser writes an essay or a short narration


about the performance of the employee being appraised.

• Critical incidents method: In this method, an employee is appraised by taking the


job-related critical incidents and the related behaviour of employees into account.
6. Meaning of Performance Appraisal

• Checklist method: In this method, the appraiser provides a rating to the


employee about his/her behaviour at the workplace.

• Forced choice method: This method requires the appraiser to provide rating to an
employee from a set of descriptive statements.

• Paired comparison method: Implies It is a method in which the appraiser


compares the performance of each employee with the other employees, one at a
time.

• Forced distribution method: Assumes that In this method, the performance level
of employees is matched with a normal statistical distribution.
7. Meaning of Performance Appraisal

Future-oriented methods: With rapid changes in technology, appraisal methods in an


organisation have also got modified. Nowadays, organisations use various future-
oriented appraisal methods. Some of the future-oriented methods are:

• Human resource accounting method: In this method, the relative worth of an


employee is determined in terms of money.

• Management by Objectives (MBO) method: This is one of the commonly used


performance appraisal approach in which employees are asked to establish goals
for themselves in assistance with their superiors.
8. Meaning of Performance Appraisal

• Assessment centre method: In this approach, employees are asked to complete


the tests and exercises related to the activities they might encounter on their
jobs.

• 360-degree appraisal method: This method provides an organisation with a more


comprehensive picture of an employee’s performance. In this method, the
organisation appraises an employee based on the feedback received from various
sources, such as superiors, subordinates, colleagues and the employee
himself/herself.

• Behaviourally Anchored Rating Scales (BARS): This method Rrepresents the


combination of traditional rating scales and critical incident methods.
9. Meaning of Performance Appraisal

Benefits of Performance Appraisal


Human Resource Planning (HRP)

Recruitment and selection

Personnel decisions

Training and development programs

Feedback and self-development

Employee motivation

Career planning and development

Compensation and reward


10. Meaning of Performance Appraisal

Problems of Performance Appraisal

Design and implementation problems

Biasness

Resistance

Incompatible work environment

The leniency biasness

Recency effect
11. Meaning of Performance Appraisal

International Performance Appraisal


• In the global scenario, performance appraisal depends a lot on both inter-cultural
and intra-cultural differences and interpretation of the term ‘performance’ by
employees working in various countries.

• Performance is viewed differently in different cultures.

• At a global level, performance appraisal is done based on parameters, such as


profits, return on investment, cash flows, productivity, sales per employee,
punctuality, and rate of customer complaints etc.

• Some MNCs also use qualitative parameters, such as innovativeness, leadership,


motivation, judgment, adaptability, etc. for performance appraisal.
1. Concept of Potential Appraisal

• Potential appraisal is a holistic approach to study the qualities of an employee in


terms of personality, character and intellect.

• It helps an organisation in identifying the potential of employees for higher job


positions and larger responsibilities.

• Potential appraisal is a technique that informs employees about various aspects


like succession plans, future prospects, training and development needs,
improvement areas, and so on.

• The potential appraisal process involves collecting information on employees’


performance in their previous jobs and capabilities utilised, such as ability to
take initiatives, creativity level, and risk taking ability.
2. Concept of Potential Appraisal

Purpose of Potential Appraisal


• Potential appraisal evaluates the capacities of employees, which, in turn, helps
employees to perform efficiently.

• It assesses an organisation’s ability to develop future managers.

• It assesses the analytical power of employees, which indicates the ability to


analyse problems and examine them critically.

• It builds the creative imagination of employees.

• Potential appraisal develops the sense of reality among employees, which refers
to an individual’s way of interpreting a situation.

• It helps in developing leadership skills among employees, which refer to abilities


to direct, control, and harmonise with people.
3. Concept of Potential Appraisal

Techniques of Potential Appraisal

Self-appraisal

Psychometric tests

Management games

Leadership exercises
Let’s Sum Up

• Performance management is a process that comprises a set of activities


performed to ensure that organisational goals are met successfully.

• Performance appraisal is a process of analysing the past performance and future


potential of employees.

• Some of the important past-oriented methods include confidential report, essay


method, critical incidents method, and checklist method.

• Some of the important future-oriented methods include human resource


accounting method, assessment centre method, management by objectives (MBO)
method, and 360-degree appraisal method.

• Potential appraisal is a holistic approach to study the qualities of an employee in


terms of personality, character and intellect.
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Chapter 11: Compensation
and Rewards ECONOMICS
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 226

2 Topic 1 Concept of Compensation 227-235

3 Topic 2 Fringe Benefits and Fringe 236


Benefit Tax (FBT)

4 Topic 3 Reward Management 237-239

5 Topic 4 Reward Systems 240-242

6 Topic 5 Recognition 243-244

7 Let’s Sum up 245


• Define the concept of compensation

• Discuss fringe benefits and fringe benefit tax

• Describe reward management

• Explain reward systems

• Discuss the concept of recognition


1. Concept of Compensation

Compensation includes not only salary and wages, but also the direct and indirect
rewards and benefits. The following are the different forms of compensation:

• Direct financial compensation: It mainly includes pay received by an employee in


the form of wages, salaries, bonuses, and commissions at regular intervals.

• Indirect financial compensation: It mainly includes financial rewards that are not
a part of direct compensation, such as benefits, leaves, retirement plans, and
educational facilities.

• Non-financial compensation: It mainly includes opportunities offered by an


organisation to employees for career development and advancement. It also
includes opportunities for recognition as well as the work environment and
conditions.
2. Concept of Compensation

Significance of Compensation
The following points explain the significance of compensation in an organisation:

• Facilitating recruitment and selection

• Retaining employees

• Boosting employee motivation

• Eliminating pay discrimination

• Defining job hierarchies


3. Concept of Compensation

Components of Compensation

Basic pay:
wages and salary

Allowances:
Base compensation
TA, DA, HRA

Direct incentives:
Compensation commission, bonus, long terms incentives

Fringe benefits:
retirement, safety, security benefits
Supplementary
compensation
Indirect incentives:
perquisites, employee stock options
4. Concept of Compensation

Theories of Compensation
The two most important theories that have been developed are reinforcement theory
and equity theory.

• Reinforcement Theory: The reinforcement theory was propounded by B.F Skinner


(a behaviourist) and is based on the fact that the behaviour can be changed by
repeating any internal or external stimulus.

• Equity theory: John Stacey Adams (1963) propounded the equity theory wherein
“every employee wants to arrive at equity in the rewards provided to him or her”.
This theory holds the meaning of equity in terms of the perception of an employee
not the employer.
5. Concept of Compensation

Industry Compensation
• Organisations sometimes need to compare their compensation structure with that
of other organisations in the industry in order to gauge whether their employees
are overpaid or underpaid. For this, organisations need to consider data on the
labour market, labour demand and supply, and other data relevant to labour law.

• Apart from this, industry compensation empowers employees with industrial


benchmarking standards to compare their compensation with various industry do
mains and functional groups both in their native countries and global markets.

• Industry compensation provides relevant information on salary trends, working


conditions, minimum wages and other work-related issues to employees,
employers, and trade unions
6. Concept of Compensation

Executive Compensation
Executive compensation are the monetary and non-monetary benefits given to
employees working at upper level management of an organisation. The main
components of executive compensations are:

Cash compensation

Long-term incentive plans

Short-term incentive plans

Executive benefits

Perks
7. Concept of Compensation

Compensation Administration
Compensation administration is a systematic process that involves a number of
steps: Job analysis

Job evaluation

Pay structure development

Wage and salary survey

Job pricing

Compensation revision and control


8. Concept of Compensation

International Compensation
International compensation can be defined as the combination of monetary and non-
monetary rewards that are offered to expatriates (professional or skilled workers
living in a foreign country) for their performance. Components of international
compensation are:

• Allowances

• Taxes

• Spousal assistance
9. Concept of Compensation

Concept of Remuneration
Remuneration is payment made to an employee in exchange for work or services
he/she performed. It includes both wages and salary and other benefits. It is
influenced by various factors.

• External Factors: These are uncontrollable factors which exist outside an


organisation.

• Internal Factors: These are the factors that exist within the organisation.
Therefore, these factors can be controlled.
Fringe Benefits and Fringe Benefit Tax (FBT)

Fringe benefits are designed based on the following aspects:

• Statutory requirements: These requirements make an organisation legally


answerable for its actions.

• Security: It refers to a feeling of safety and fulfilment of social needs among


employees

• Hazards of industrial life: It refers to dangers associated with working in a


specific industry.

• Competition: It refers to the business rivalry between competitors

Organisations also have to pay taxes in lieu of the benefits that they provide to their
employees. These taxes are known as fringe benefit taxes (FBT). In the year 2009,
FBT was abolished by the government of India as a part of 2009-10 budget.
1. Reward Management

• Rewards can be defined as a payment made to employees in return of their


contribution. These rewards are used by organisations to boost the motivation of
employees so that they keep performing to the best of their capabilities

• A process of developing reward strategies and putting them into practice is called
reward management.

• According to Armstrong (2010), “Reward management is known as the strategy,


policies and procedures necessary to guarantee that the value of people and their
contribution for the organization is recognized and rewarded”.
2. Reward Management

Need for Rewards


The following points explain the need for rewards in an organisation:

• To enhance the level of productivity in the organisation.

• To retain employees for a long period.

• To create a healthy work environment.

• To minimise the rate of employee turnover


3. Reward Management

Intrinsic and Extrinsic Rewards


• Intrinsic rewards: These are intangible rewards offered to employees for their
intrinsic fulfilment; thereby motivating them to perform better. For example,
providing authority to employees for making decisions would make them feel
motivated to show their capabilities and accept challenges.

• Extrinsic rewards: These are tangible rewards provided to employees after


they accomplish a given task. These rewards are mainly related to monetary
benefits provided to employees in the form of bonus, promotion, and other
benefits, after they complete a particular project or assignment within the
stipulated time.
1. Reward Systems

• A reward system comprises standards, rules, and procedures associated with the
allocation of benefits or rewards to employees with an aim to gain their
commitment towards organisational goals.

• Reward systems are developed in organisations to recognise the best performers


among all employees.

• The main components of reward systems are base salary, incentives (both short
term and long term) and other benefits (for example, pension programs, medical
programs).
2. Reward Systems

Types of Rewards Systems


There are different ways of rewarding employees containing through monetary and
non-monetary benefits.
Types of reward system

Monetary reward
system

Non-monetary
reward system

Additional reward
system
3. Reward Systems

Effectiveness of Reward Systems


Reward systems are said to be effective if they motivate employees to use the best of
their capabilities to meet organisational goals and objectives. An effective reward
system focuses on:

• Boosting the morale of employees

• Improving the performance of employees

• Developing positive attitude among employees towards work

• Increasing overall productivity

• Reducing employee turnover


1. Recognition

Recognition is a measure adopted by organisations to appreciate the efforts and


performance of employees. In other words, recognition is acknowledgement of an
employee’s performance. While designing a reward program, the following are some
of the key points that must be considered:

• Organisational goals to be supported by the reward program should be identified.

• The desired employee performance or behaviour to be rewarded should be


determined.

• The criteria for evaluating the performance or behaviour should be defined.

• Appropriate recognition measures should be established.

• The recognition program should be effectively communicated to employees


2. Recognition

Some commonly used recognition programs are

• Structured recognition programs: These programs include regular recognition


events such as employee of the month or year recognition.

• Informal recognition programs: These are spontaneous recognition programs that


include offering privileges, such as working from home.

• Symbolic recognition programs: Many a times organisations offer small gifts,


such as plaques or coffee mugs with inscriptions as a token of sincere
appreciation for hard work.
Let’s Sum Up

• Compensation can be defined as a pay package that employees receive in


exchange of services rendered by them to an organisation.

• Compensation helps an organisation in various ways, such as facilitating


recruitment and selection, retaining employees, and eliminating pay
discrimination.

• For the adequate management of compensation, a segment of HRM, also known


as compensation administration is required. Compensation administration is the
management of compensation costs incurred by an organisation.

• Rewards are payment made to employees in return of their contribution used by


organisations to boost their motivation.

• Recognition is a measure adopted by organisations to appreciate the efforts and


performance of employees.
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Chapter 12: HR Audit and
Accounting
Chapter Index

S. No Reference No Particulars Slide


From-To

1 Learning Objectives 2503

2 Topic 1 HR Audit 251-252

3 Topic 2 HR Accounting 253-254

4 Topic 3 HR Information Systems (HRIS) 255-258

5 Let’s Sum Up 259


• Explain the concept of HR audit

• Discuss the process of HR audit

• Explain the concept of HR accounting

• Discuss the methods of HR accounting

• Explain the concept of HRIS

• List the components of HRIS


1. HR Audit

• The term audit can be defined as an unbiased examination and verification of an


organisation’s financial statements, employee records, etc. to determine their
accuracy and outline any issues that need to be addressed.

• HR audit is a systematic process of examining the policies, procedures, practices,


structure, strategies, employee documents, etc. with respect to an organisation’s
HRM function.

• It aims to evaluate the strengths, weaknesses, and developmental needs of


employees with a view to enhance organisational performance.

• It helps an organisation to determine the effectiveness of its HRM function.

• HR audit plays a crucial role in an organisation as it helps managers to take


decisions on current HR problems so that overall productivity is not affected.
2. HR Audit

Process of HR Audit

Determining the objectives of the HR Audit

Gathering the background data

Formulating the audit plan

Developing the audit report

Acting based on the report


1. HR Accounting

• Human Resource Accounting (HRA) is defined as a system of identifying,


collecting and reporting data on investments in human assets.

• In other words, HRA is a future approach that reflects the potential of human
resource in monetary terms.

• HRA acts as an important tool to human asset control and provides information
to an organisation whether the asset is appreciated, depleted, or conserved.
2. HR Accounting

Methods of HR Accounting

Methods of HRA

Cost-based method Value-based method


1. HR Information Systems (HRIS)

• Human Resource Information System (HRIS) is a system designed to provide


necessary information for effective management of human resource.

• In other words, HRIS is an online database system that helps in managing


information related to all employees of an organisation at one place. This
information can be related to employees’ salary structure, appraisal, and leaves,
and so on.

• HRIS collects, stores, processes, generates, and disseminates human resource


information for effective business decision making.

• It provides information on various HR policies formulated by the organisation to


HR personnel as well as employees.
2. HR Information Systems (HRIS)

Components of HRIS
• Input: This component enters employee data into HRIS. The processes and
procedures needed for data collection are initially established. Once the data is
collected, it is entered into the system in a coded form. Next, the data is validated
using validation tables, which can be changed or updated whenever needed.

• Data maintenance: This component of HRIS updates the data which is stored in
the storage device. Although new data is included in the system, the old data is
also kept as a backup.

• Output: HR managers tend to be more interested in this component of HRIS as


essential information and reports of human resources are generated.
3. HR Information Systems (HRIS)

Types of HRIS

Types of HRIS

Operational
Tactical HRIS Strategic HRIS
HRIS
4. HR Information Systems (HRIS)

Application of HRIS in HR Management


• Job description: HRIS produces reports describing jobs according to employee
specifications and other information.

• Training and development: HRIS provides information on training courses,


location, timings, details of the trainer, list of trainees, competency levels of
trainees, etc.

• Performance appraisal: HRIS enables managers to conduct real-time


performance appraisal by filling online forms, taking feedback from various
parties on employees’ performance, etc.

• Retention strategy: HRIS provides information on employees’ performance,


attitudes, behaviour, etc. as reflected in survey sheets and online reports.
Let’s Sum Up

• HR audit is a systematic process of examining the policies, procedures, practices,


structure, strategies, employee documents, etc. with respect to an organisation’s
HRM function.

• HR audit plays a crucial role in an organisation as it helps managers to take


decisions on current HR problems so that overall productivity is not affected.

• Human Resource Accounting (HRA) is defined as a system of identifying,


collecting and reporting data on investments in human assets.

• HRA acts as an important tool to human asset control and provides information
to an organisation whether the asset is appreciated, depleted, or conserved.

• Human Resource Information System (HRIS) is a system designed to provide


necessary information for effective management of human resource.
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