HR PLANNING & STAFFING

Prof. B D Singh
IMT, Ghaziabad

Take away my people, but leave my factories, &

soon grass will grow on the factory floors. Take
away my factories, but leave my people, & soon we
will have a new & better factory

Andrew Carnegie
• Strategic planning: the systematic determination of goals and the
plans to achieve them

• Business strategy plans to build a competitive focus in one line of

business

Strategic HRM interrelated practices, policies, and philosophies that

facilitate the attainment of organizational strategy

Human resource management can be viewed as an umbrella term

that encompasses the following:

- Specific HR practices, such as recruitment, selection, and appraisal

- Formal HR policies that direct and partially constrain the development of
specific practices
- Overarching HR philosophies, which specify the values that inform an
organization’s policies and practices
 The truth is that HR has never been more necessary. The competitive forces
that managers face today and will continue to confront in the future demand
organizational excellence. The efforts to achieve such excellence – through a
focus on learning, quality, teamwork and re- engineering – are driven by the
way organizations treat their people. These are fundamental HR issues. To state
it plainly: Achieving organizational excellence must be the work of HR.

Human capital-- the sum of employees knowledge, skills, experience, and

commitment invested in the organization
Talent make capital dance – market move
Linking HR Processes to Strategy

1. Start with organizational strategy and then create HR strategy.

2. Start with HR competencies and then craft corporate strategies based on these
competencies.
3. Do a combination of both in a form of reciprocal relationship.
- Corporate Strategies leads to HR Strategy – KPO, BPO, LPO etc.
- HR Competencies lead to business strategy – Silicon Valley, Bangalore IT

& ites
- Corporate Strategy & HR Strategy go together
- HR becomes business partners.

Why is HR not considered a strategic partner ?

- Top management does not consider HR as profession.

- HR professional are not considered experts in business.
- HR professional do not involve themselves in main stream business.
- HR is considered as advisory role.
- It is difficult to qualify the contribution of HR.
Are you a strategic partner?

1. Do you understand the business?

- Financial parameters?
- Customers?
- Technologies & technological change?

2. Do you know the corporate plan?

3. Are your HR policies linked with corporate strategies?
4. Are major decisions made with your inputs?

So what is HR’s role in future organizations? There is no easy

answer, and yet sometimes, the answer is something that has
been staring us in the face all along.
The passage of the employee through the organization, aptly
termed the Employee Lifecycle embraces talent acquisition and
as talent sourcing, talent enabling and development; talent
assessment and reward. It is critical to have practices at each
stage of this lifecycle that are designed to address not just the
current needs of the organization, but also protect its future.
Talent acquisition still means selecting people with appropriate
abilities for each job. But with organizations working hard to
reap the demographic dividend while ironically facing the most
acute talent shortage, HR’s greatest contribution to talent
sourcing comes in actively developing alternate pools of talent
and redefining the talent universe to include sources down the
educational stream or even across sectors. Here it is critical to
think out of the box, to explore recruitment on the basic tenet
of the aptitude of learnability and then augment this with in-
company knowledge and skills development.
Also of crucial importance is the need to closely align the talent
demand and supply cycles to optimize costs and improve
operational efficiency. Proactive HR departments march to the tune
of constantly reviewing the cycle time between demand and supply
of talent so that the right person at the right place at the right time,
is available with almost Just in Time precision. It is in the area of
Talent Assessment and Talent Reward that HR’s contribution to
future proofing can be most visibly experienced. These organization
clearly link organizational performance. And so, align individual and
team compensation quite clearly to organizational revenue and
margins. This allows the organization to reward liberally in good
years, but also tighten the belt in tough times bringing a much
needed element of variability in labor costs. Finally, in establishing
an unambiguous link between individual career growth and
organizational growth, HR can future proof organizations from
developing the proverbial bulge in the middle, so detrimental to
organizational progress. Job responsibility needs necessarily to
precede the reward of promotion, and that too only to the extent
that is required by the organizational business model.
All this does not make for high scores in the popularity stakes.
They require painstaking commitment to change and the
ability to stay the course. More importantly, they require the
movement of the organizational mindset from that of a best
employer for all employees to a better employer for better
performers and an implementation of the vitality curve in both
letter and spirit. But in the final analysis, they create lean,
strong organizations with a high performance work ethic,
confident of and competent to take on the future. As the
function’s famous academic and author Dave Ulrich states “
Achieving organizational excellence must indeed be the work
of HR.”
Environmental Scanning

1. Economic climate – Huge International market

- From industrial Revolution to knowledge Revolution –

New industries
- Globalization – Out sourcing from low cost countries,
- Need for mergers with international competencies

2. Labour market
- Global Labour market
- Diverse one
- Out sourcing
- Flexible work arrangement
3. Political And Legislative Factors
- Pay equity
- Work force rights
4. Technology
E – Commerce
- Convergence of work

5. Social

- Work place violence

- Retirement trends
- Work family issue
- Diversity

6. Stakeholders
- Union
- Public
- Customer
- Supplier
- Top Management
Environmental Scanning Sources and Methods

Environmental scanning systematic monitoring of trends affecting the organization

Techniques for Scanning

HR professionals can use several methods to generate predictions about the

future or extrapolate from current events to determine their impact on HR
practices. These methods include trend analysis, the Delphi technique, and
impact analysis.

Trend Analysis

Trend analysis a forecasting method that extrapolates from historical

organizational indices.

Delphi Technique

Delphi technique a forecasting method in which expert opinions are solicited and
summarized
Impact Analysis

Impact analysis a forecasting method on which past trends are analyzed

by a panel of experts who then predict the probability of future events.

Environmental Factors

1. Economic Climate
2. From the industrial Revolution to the Knowledge Revolution
3. Globalization
4. The Labour Market
5. Political and Legislative Factors
6. Technological Factors
7. Demographic Factors
8. Social and Cultural Factors
9. Stakeholders
Stakeholders
Stakeholder groups of people who have vested interests in an
organization’s decisions

Shareholders : Shareholders those who own shares of a

company
Customers
Suppliers
Governments
The Public
Unions
Employees
Top Management
Environment Scanning =forming mission (why we Exist)
vision (What we want to be) corporate strategy (Our Game
Plan)
Corporate strategy-HR strategy
• HR Strategy is HR Planning
• All other functions like staffing, training, performance
management, compensation management, labour relation, &

employee separations are derived from it.

• HRP is a proactive function- it scans & anticipates various
factors- internal & external to develop a plan
• It is more important during organizational turbulence – M&A,
disinvestment
• HR Planning always starts with understanding the business
needs of the organization
 flexible working schedule, childcare programme,
employee recognition programmes, employee
suggestion programmes, transport and Parking facility
programme, discount programme, departmental news
letter programme, employee involvement programme.
 HR Planning is both “top down” and “Bottom up”.
While HR plans should be based on overall business
needs and strategies, they should take into account
the needs and realities of organisational units. The HR
planning process should involve managers at all levels.
 An organization's HR plans are usually developed at
the departmental or business line level where business
directions are set and decisions made. But HR plans
are implemented (and adapted) individual managers in
the conduct of their ongoing operations. It is important
that managers understand the HR plans and priorities
of their organizations so they can guide their actions
accordingly.
 HR Planning is more than just having the “right people in the
right place at the right time”. Its about instituting the people –
related practices and activities that will help the organisation
achieve, and improve its business results. HR Planning
identifies the needs and strategies in this regard.
 HR Planning in its simplest form, is about answering 3
questions: what are my business needs, how/what do I need to
meet those needs and what strategies will I take to ensure my
needs are met?
 Strategic Manpower Planning is a dynamic, proactive, ongoing
process of systematically attracting, identifying, developing,
mentoring, and retaining employees to support current and
future organisational goals. Strategic Manpower Planning
focuses specifically on proactive planning to meet anticipated or
unanticipated vacancies due to retirement and other factors for
classes that serve as essential elements in meeting your public
service mandate.
 Some of the long and short-term strategies that may support
the strategic Manpower Planning process, may be retention,
induction Programme, employee assistance Programme,
 HRP is a forward looking function and an
organisational tool to identify skill and competency
gaps and subsequently develop plans for
development of deficient skills and competencies in
human resources to remain competitive. HRP
ensures benefits to the organisations by creating a
reservoir of talent, preparing people for future cost
cutting and succession planning besides creating a
back –up in case of diversification and expansion.
Optimum manpower planning, therefore, aims at:
 Balancing demand, supply, distribution and
allocation of manpower,
 Controlling cost of human resources,
 Formulating policies on transfer, succession,
relocation of manpower.
 HRP is a planning process by which an organization
can move from its current manpower position to its
desired manpower position.
 Manpower planning may be defined as a strategy for
acquisition, utilization, improvement and retention
of human resources.
 Human resource planning an
integral part of business planning
 Identifying and acquiring the right
number of people with the proper
skills
 Motivating them to achieve high
performance
 Creating interactive links between
business objective and resource
planning activities
Concept of Human Resource Planning
In order to understand the concept and features
of HRP, let us consider the following statement:
“Although human resource planning means
different things to different People, general
agreement exists on its ultimate objectives – the
most effective use of scarce talent in the interests
of the labour and the organization”.
On the basis of the review of various definition of
HRP, Geisler has emphasized that a suitable
definition of HRP should include four aspects –
forecasting manpower needs, developing
appropriate policies and programmes for
meeting those needs, implementing policies
and programmes, and controlling these
programmes. Based on these aspects he has
defined HRP as follows:
“Manpower planning (HRP) is the process-including
forecasting, developing implementing, and
controlling – by which a firm ensures that it has
the right number of people and right kind of
people, at the right place, at the right time, doing
this for which they are economically most
suitable.”
This definition of HRP serves the purpose
adequately and most of the definitions are based
on this. For example, Decenzo and Robbins have
defined HRP as follows:
“Specifically, human resource planning is the
process by which an organization ensures that it
has the right number and kind of people, at the
right place, at the right time, capable of effectively
and efficiently completing those tasks that will help
the organization achieve its overall objectives.”
Similarly, Leap and Crino have defined HRP as
follows:
 “Human resource planning includes the estimation of
how many qualified people are necessary to carry out the
assigned activities, how many people will be available
and what if anything must be done to ensure that
personnel supply equals personnel demand at the
appropriate point in the future.”
Based on the above definitions, following features of HRP
may be identified:
 HRP is a process which includes various aspects through
which an organizational tries to ensures that right
people, at right placed, and at right time are available.
 It involves determination of future needs of manpower in
the light of organizational planning and structure.
Therefore, it depends heavily on these factors.
Determination of manpower needs in advance facilitates
these factors management to take up necessary actions.
 It also takes into account the manpower availability at a
future period in the organization. Therefore it indicates
what actions can be taken to make existing manpower
suitable for future managerial positions and the gap
between needed and available manpower can be fulfilled.
 HRP AT DIFFERENT LEVELS
Different institutions make HRP at different levels
for their own purposes, of which national level,
sectoral level, industry level, unit level,
departmental level and job level are important.
1. National Level
Adjust the supply through its population policy,
family planning, educational policy etc. HRP at
national level helps to plan for educational
facilities, hospitals, employment plans,
agricultural and industrial developments etc.
2. Sectoral Level
Manpower requirements for a particular sector
like agricultural sector, industrial sector or
tertiary sectors are projects based on the
government policy, projected output/operations.
3. Manpower needs of a particular industry like
cement, textile, chemical are predicted, taking
into account the output/operational level of that
particular industry.
4. Unit Level
This covers the estimation of human resource
needs of an organisation or company based on its
corporate/business plans.
5. Departmental Level
This covers the manpower needs of a particular
department in a company.
6. Job Level
Manpower needs of a particular job within
department like mechanical Engineer are forecast
at this level.

IMPORTANCE OF HUMAN RESOURCE PLANNING

HRP is of primacy nature and, therefore, it precedes
all other HRM functions. Without HRP, no other
function can be undertaken in any meaningful way.
HRP contributes in the following ways in managing
human resources in an organisation.
1. Defining future personnel Need. Planning defines
future personnel need and this becomes the basis of
recruiting and developing personnel. In its absence,
there is likelihood of mismatch between personnel
needed and personnel available. Steel Authority of
India Limited, there are 170000 employees and
McKinsey & Company, consultancy firm engaged by
SAIL to devise its revival strategy, has suggested
pruning of this level to bring it to 100,000.
2. Coping with Changes. There is growing global
competition- competing manpower
3. Providing base for Developing Talents. Jobs are
becoming more and more knowledge-oriented. This
has resulted into changed profile of manpower. For
example, in Larsen and Turbro, MBAs, engineers
and technicians constitute about 70 per cent of its
total employee strength of 20,000. there is a
shortage of certain category of personnel and there
is frequent movement of personnel from one
organisation to
Another. organizations must be ready to face such an eventuality
by taking proper HRP steps.
4. Increasing Investment in Human Resources. Every year,
cost of acquiring MBAs from reputed institutes is increasing by
more than 20-25 percent per annum. Such a high cost has forced
many companies to have a relook at their HRM functions and
particularly HRP and to align these with new situations.
5. Forcing to Management to involve in HRM. Systematic HRP
forces top management of an organization to participate actively
in total HRM functions.
6. Casualisation of work place – non- core activities –
outsourcing
Mechanization, automation & cybernation in place of manpower.
7. Unite the perspective of Line & staff managers
8. Helps determine productivity
9. Helps determine training needs
10. Helps capitalizing on HR strength
11. Incorporates new patterns of working- virtual offices, flexi
timing, etc
 According to Megginson, “to have an
organisation that looks forward to the future
and tries to stay alive and prosper in a
changing world, there must be active,
vigorous, continuous and creative planning”.
 Thus there is a greater need for planning in
order to keep the organisation dynamic in a
changing situation of uncertainty.
If used properly, it offers a number of benefits:
1. Create reservoir of talent

2. Prepares people for future

3. Expand or contract strength

4. Cut Cost

5. Succession planning
RESPONSIBILITY FOR HUMAN RESOUCE PLANING
Formulation of human resource plans is a shared task
between top management line managers and HR
department
 Top management is involved in HRP process because
ultimately, it approves various plans of the organisation
as a whole.
 Functional managers under whom people work.
 The responsibilities of HR department in regard to HRP
process have been described by Geisler as follows:
– To assists, counsel and pressurize the operating management to
plan and establish objectives;
– To collect and summaries data in total organizational terms and
to ensure consistency with tong-term objectives and other
elements of the total elements of the total business plan;
– To monitor and measure performance against the plan and keep
the top management informed about it
– To provide research necessary for effective manpower and
organisational planning
– Responsibility for HRP at Hindustan Lever- Top Managers, Line
Managers, HR Managers
Human resource planning process
HRP is a process and it proceeds through various
interrelated activities.
 Forecasting future manpower requirements, either in
terms of mathematical projection of trends in the
economy and developments in the industry or of
judgmental estimates based upon specific future plans
of the company.
 Inventorying present manpower resources and
analyzing the degree to which these resources are
employed optimally;
 Anticipating manpower problems by projecting present
resources into the future and comparing them with the
forecast of the requirements, to determine their
adequacy, both quantitatively and qualitatively and
 Planning the necessary programmes of recruitment,
selection, training deployment, utilization, transfer,
promotion, development. Motivation and compensation
so that future manpower requirements will be met.
 Human Resource Planning
. Organizational objectives
Human resource
planning
Forecasting supply
Forecasting needs for
of human resources
Human resources
Identification
of human
resource gap
Surplus human Shortage of human
resources resources
Action plans
for bridging

Monitoring & control

Review Process –
HR Audit
Organizational Objectives, Plans and Policies :
Objectives generate various plans an policies which
provide direction for future course of action. Out of
this direction, various subsystems of the organization
devise their own plans and programmes. While going
through the process of HRP, organizational policies
with regard to effective utilization of human resources
should be identified and incorporated in planning
process. Specifically, following questions are
important in this regard:
1. Are vacancies to be filed by promotions form within or by
hiring form outside?
2. How do the training and development objectives interface
with the HRP objectives?
3. What union constraints are encountered in HRP and what
policies are needed to handled these constraints?
4. How to enrich employee’s job? Should the routine and boring jobs
continue or be eliminated?
5. How to downsize the organization to make it more competitive?
6. To what extent production and operations be automated and what
can be done about those displaced?
7. How to ensure continuous availability of adaptive and flexible
workforce?
8. Outsourcing- Contracting?

2. Human Resource Planning: The planning process consists of two

major activities: forecasting needs of human resources and
forecasting supply of human resources. Both in terms of quality
and quantity – at future date.
3. Identification of Human Resource Gap: Forecasting needs for
human resources and forecasting supply of human resources, both
taken together, helps to identify gap between human resources
needed and their availability – either there may be surplus human
resources of there may be shortage of human resources.
4. Action Plans : Various action plans are devised to
bridge the human resource gap. If there is
surplus of human resources either because of
improper HRP in the past or because of change in
organizational plan, such as divestment of
business or closing down some business because
of various reasons, action plans may be devised
to prune their size through layoff, voluntary
retirement, etc. if there is shortage of human
resources, action plans may be devised to recruit
additional personnel.
5. Review & Audit :
 Human Resource Planning: A Win- Win
Process
 Wins for Employees
 Wins for the Enterprise
1. Appropriate organization
1. Competitive pay and structure and people to
benefits plants. face challenges and meet
corporate objectives,
both short and long term.
2. Development of internal
resources, leading to
2. Career development and stability and culture
opportunities for growth building.

3. Improved motivation and

morale of employees,
3. Reduced fear of leading to improved
redundancy. performance.
4. Training and 4. Productivity gains,
development, leading to leading to cost reduction
continued marketability.
5. Improved customer
5. Continuity of satisfaction, leading to
employment due to improvement in
organization's ability to business.
retain workforce.
6. Reduction in hiring and
6. Fuller realization of training costs due to the
potential, leading to job improved ability to retain
satisfaction. employees and
7. Conducive work culture development of internal
and management style resources to fill future
leading to satisfaction vacancies.
 Barriers to effective human resource
planning
 Improper linkage between HRP and Corporate
Strategy.
 Inadequate appreciation of HRP
 Rigidly in Attitudes
 Environment Uncertainty
 Conflict between Long-term and Short-term HRP.
 Inappropriate HR Information Systems

Measure for making HRP Effective

1. Commitment and involvement of top management in HRP.

2. Proactive, rather than reactive, human resources
management approach.
3. Greater participation of line managers at all levels in HRP
process.
4. Effective design of HR information
system integrated with the
organisation’s management
information system.
5. Linking HRP to corporate strategic
management process.
6. Enough flexibility in HR plans to
take care of changing situations.
 JOB ANALYSIS
Job analysis can be defined as an examination of the
jobs in an organization with a view to documenting
the knowledge, skills, and abilities (KSAs e.g.,
experience) associated with successful performance of
those jobs.
Job - a grouping of related duties, tasks, and

behaviors performed by one or more individuals,

namely jobholders
Positions refers to the number of individuals who are
performing the duties, tasks, and behaviors required
by a specific job
Job analysis of subdivided work in the organization,
both at the level of the individual job and for the
entire flow of the production process.
• Job description and job specification are the written
outcomes (documents) produced by the job analysis
process. The job description emphasizes the duties or
tasks to be carried out on the job. For job specifications,
the emphasis is on identifying the competencies the
jobholder must possess to be a successful performer in
the specified job.

Job Description

The data collected for job analysis provide the basis for
preparing job description for each job. This functional
description describes what the job entails. Although there
is no standard format for a job description, it usually
includes:
1. Job title - a title of the job.
2. Job summary – a brief statement of what the job entails.
3. Job activities – a description of the tasks performed,
material used and extent of supervision given or
received.
4. Working conditions and physical environment – heat,
light noise level, hazards are described.
5. Social environment – Information on size of work group
and interpersonal inter-actions required to perform the
job.

Job Specification

(i) Essential attributes – abilities, skills and knowledge that

a person must possess.
(ii) Desirable attributes – those attributes that one ought to
possess.
(iii) Contra-indicators – attributes that will become a
handicap to successful job performance.
 The format for job specification should include the
following items:
1. Position title 2. Education/training
3. Experience 4. Knowledge
5. Abilities 6. Skills
7. Aptitude 8. Desirable attributes
9. Contra-indicators, if any

Problems Associated with Job Analysis

Job analysis that is neither updated nor reviewed

Job description or specification that is too vague
Contamination and deficiency – Deficiency an error of
omission when a job description or specification fails to
incorporate important aspects of the job required for
success.
Contamination an error that occurs when unimportant
or invalid behaviors or attributes are incorporated into a job
description or specification.

4 Time and Costs of job analysis – Some organizations are

deterred to be associated with the process.

Specific Job Analysis Techniques

• Critical Incidents Technique – critical incidents technique a

qualitative process of job analysis that produces
behavioural statements along a range from superior to
ineffective performance for a specific job.

2. Behaviourally Anchored Rating Scales – behaviourally

anchored rating scales a job is divided into a number of
key dimension, and each dimension contains a range of
statements of job behaviour “anchored” to a numerical
scale.
3. Position Analysis Questionnaire – A structured job
analysis checklist that includes 194 items or job elements
used to rate a job.

4. Functional Job Analysis – Analyses any job using three

essential elements: (1) people (important interpersonal
relationship on the job), (2) data (obtaining, using, and
transforming data in aid of job performance), and (3)
things (physical machinery, resources, and the
environment). Each of these three dimensions is then rated
by level of complexity and importance.

5. The Hay System – The Hay system uses three key

factors to analyze each job: (1) know-how (the specific
knowledge and skills required to perform the job), (2)
problem-solving (the decisions and problems that must be
successfully handled on the job), and (3) accountability
(the jobholder’s responsibilities for critical task completion
and for organizational resources, budgets, supervision of
people, etc.
Competency- Based Approaches

Competency any knowledge, skill, trait, motive, attitude,

value, or other personal characteristic that is essential to
personal characteristic that is essential to perform the job
and that differentiates superior from solid performance.

Core competencies – characteristics that every member of an

organization, regardless of position, function, or level of
responsibility with the organization, is expected to possess

Role or specific competencies – characteristics shared by

different positions within an organization. Only those
members of an organization in these positions are expected
to possess these competencies.
 Methods & Techniques of Demand
Management
 Forecasting of demand of human resources needs is
the first and most important step in any human
resource planning process.
 Forecasting is not a very accurate exercise over a
long-term period. For short range planning of less
than a year fairly accurate forecast is perhaps
possible. No processes or techniques exist that can
take into account all the parameters and
circumstances required for accurate long-term
estimation of manpower needs.
 Dynamic business circumstances,
 rapidly changing technologies and their impact on
products and methods of production,
 political and social changes and ever increasing
competition keep changing the set of circumstances
assumed at the time to forecast.
HR Forecasting
What is certain is the uncertainty of the future. As time passes, the working
environment changes internally as well externally. Internal changes in the
organizational environment include product mix and capacity utilization,
acquisition the external environment include government regulations,
consumerism, and competence levels of employees, among a host of other
factors.

Forecasting The Overall Human Resource Requirements

The existing job design and analysis may thoroughly be reviewed keeping in view
the future capabilities, knowledge and skills of present employees. Further the
jobs should be redesigned and reanalyzed keeping in view the organisational and
unit wise plans and programmes, future work quantum, future activity or task
analysis, future human resources and based on future organisational plans, Job
analysis and forecasting. One on the important aspects of demand forecasting is
the forecasting of the quality of human resources (skill, knowledge values,
capabilities etc.) in addition to quantity of human resources.
Benefits of HR Forecasting
1. Reduces HR costs
2. Increase Organizational Flexibility
3. Ensures a close linkage to the Macro Business
forecasting process
4. Ensures that organizational requirements take
precedence over issues of resource constraint and
scarcity

Goal /Stage of HR Forecasting

The goal of HR forecasting is to obtain sufficient

numbers of trained personnel who will be able
perform successfully in jobs when those jobs need to
be filled. To do this, the forecasting process has five
1. Identify organizational goals, objectives, and plans.
2. Determine overall demand requirements for personnel.
3. Assess in-house skills and other internal supply
characteristics.
4. Determine the net demand requirements that must be
met from external, environmental supply sources.
5. Develop HR plans and programs to ensure that the right
people are in the right place.

Environmental and organizational factors affecting

HR forecasting

The HR forecasting process is extremely complex,

requiring specific numerical and skill competency
targets for personnel to be met despite operating in
circumstances of high uncertainty. This uncertainty
arises from both external environmental factors and
from inside the organization itself. Given this
 Uncertainty and the natural rate of change resulting from
operating in a turbulent, global economy, the key factor
for HR forecasters is to incorporate flexibility into the
program responses associated with demand and supply
forecasts.

HR Forecasting time Horizons

1. Current forecast
2. Short-run forecast
3. Medium-run forecast
4. Long-run forecast

Prediction a single numerical estimate of HR

requirements associated with a specific time horizon and
set of assumptions

Projection incorporates several HR estimates based on a

variety of assumptions
Contingency plans, plans to be implemented when severe,
unanticipated changes to organizational or environmental
factors completely negate the usefulness of the existing
HR forecasting predictions or projections

Determining Net HR Requirements

1. Determine HR Demand
2. Ascertain HR Supply
Internal supply – refers to current members of the
organizational workforce who can be retrained, promoted,
transferred, etc. to fill anticipated future HR requirements.

External supply – potential employees who are currently

undergoing training (e.g., university students) or are
working for competitors, or who are members of unions or
professional associations, or currently are in a transitional
stage, between jobs unemployed.
Skills inventory – Personal database record on each
employee.

3. Determine Net HR Requirements

The third step in the process involves the determination of

net HR requirements. From steps one and two above, the
following equations are derived:

HR demand = external supply + internal supply

HR demand - internal supply = external supply

Personnel who can fill organizational HR demand

requirements must be found from either the current internal
workforce supply or from external environmental sources. As
explained above, if we are unable to meet the numerical and
KSA demands for personnel from internal source, either
because of the qualification or performance deficiencies of
current workers or because of an explicit organizational
decision to recruit new blood, the residual supply not met
through current employees must come from outside:

External supply requirements = replacement + change

supply components

replacement supply = hiring to replace all normal losses

(Normal losses are those that result from retirements,

terminations, voluntary turnover, promotions, transfers, and
leaves, and these losses must be replaced to keep the
workforce size at the current level.)

change supply = hiring to increase (or decrease) the overall

staffing level

Recall from our earlier discussion of HR demand that future

personnel requirements must not only replace the current
Workforce employees (in terms of numbers and skill
competencies), but also reflect desired future changes to
staffing levels.

external supply = current workforce size x (replacement %

per year + change % per year)

external supply = 1000 (.11+.07) = 110+70 =180

Another organization with a workforce of 450, which has a

historical annual replacement/loss rate of 8% and a corporate
downsizing policy that will reduce overall staffing levels by
9.5%, has the following supply requirement:

external supply = 450 (.08+ [-.095] = 36-43= -7

HR surplus occurs when the internal workforce supply

exceeds the organization’s requirement or demand for
personnel
4. Institute HR Programs: HR Deficit and HR Surplus

HR deficit = HR demand > HR internal supply

HR deficit occurs when demand for HR exceeds the current

personnel resources available in the organization’s workforce
(HR internal supply)

HR surplus = HR demand < HR internal supply

Job sharing occurs when two or more employees perform the

duties of one full-time position, each sharing the work activities on
a part-time basis

Attrition the process of reducing an HR surplus by allowing the

size of the workforce to decline naturally because of the normal
pattern of losses associated with retirements, deaths, voluntary
turnover, etc.

Hiring freeze a prohibition on all external recruiting activities.

Factors to be considered before Forecasting demand
for employees
 Economic factors: as business is an economic
activity, forecasts must consider economic
aspects like per capita income, employees’
expectations of wages and salaries, cost and
price of raw materials, inflation rate, etc. Fiscal
policies and liberalization of trade will also
influence requirements.
 Social/ Market Factors: the expectations of
existing and potential employees on wages
 Demographic factors: decisively influential upon
future requirements, these include availability of
youth, training facilities, women in the active
labour force, sex ratio, facilities for professional
education, income level, education/literacy etc.
•Competition: Competitors strategies, including advertising,
quality of product, pricing, and distribution influence future
staffing in a variety of ways.
•Technological Factors: Technology has to be stage of the
art if company is to survive the competition. Growth and
expansion of business: growth is possible through
Product diversification
Increased capacity of production.
Expansion plans are executed through:
Merger
 Acquisition
 Joint venture participation
 Formation of horizontal and vertical integration
 Establishment of national and international value
chains
Management philosophy/ Leadership: Top management
ultimately decides what levels of staffing are
required.
Innovative management: As competition increases with
globalization and liberalization of trade, management
needs to be innovative to stay afloat and sustain
competitive advantage.
 Managerial Dilemma
Assumptions of social
environment

Assumptions Business
of political plans
environment
DEMAND
FORECASTING
EXERCISE

Assumptions Assumptions
of technology of labour
conditions market
Assumptions
of economic
trends
Issues in demand forecasting
 Social Factors
 Technologies Factors
 Political Factors
 Economic factors
 Demand Generation
 Growth
 Employee Turnover
There are several good reasons to conduct demand
forecasting. It can help:
1. Quantify of the jobs necessary for producing a given
number of goods, or offering a given amount of services
2. Determine what staff-mix is desirable in the future
3. Assess appropriate staffing levels in different parts of the
organization so as to avoid unnecessary costs
4. Prevent shortages of people where and when they are
needed most
5. Monitor compliance with legal requirements with regard to
reservation of jobs
Forecasting techniques
Forecasting techniques vary from simple to
sophisticated ones. Before describing
each technique, it may be stated that
organisation generally follow more than
one technique.
The techniques are:
1. Managerial judgment
2. Ratio-trend analysis
3. Work study techniques
4. Delphi technique
5. Flow models
6. Others
 Managerial Judgement: This technique is very simple. In
this, managers sit together, discuss and arrive at a figure,
which would be the future demand for labour. The
technique may involve a ‘bottom-up’ or a ‘top-down’
approach. In the first, line managers submit their
departmental proposals to top managers who arrive at the
company forecasts. In the ‘top down’ approach, top
managers prepare company and departmental forecasts.
These forecasts are reviewed with departmental heads and
agreed upon. Neither of these approaches is accurate- a
combination of the two could yield positive results. In the
‘bottom-up’ and ‘top-down’ approaches, departmental
heads are provided with broad guidelines. Armed with such
guidelines, and a consultation with the HRP section in the
HRM department, departmental managers can prepare
forecasts for their respective departments. Simultaneously
top HR managers prepare company forecasts. A committee
comprising departmental managers and HR managers will
review the two sets of forecasts, arrive at a unanimity,
which is then presented to top managers for their approval.
Ratio –trend Analysis
 This is the quickest forecasting technique. The technique involves
studying past ratio, say, between the number of workers and sales
in an organization and forecasting future ratios, making some
allowance for changes in the organization or its methods. Exhibit 4
shows how an analysis of actual and forecast ratios, between the
number of routine proposals to be processed by an insurance
company’s writing department and the number of writers
employed could be used to forecast future requirements.
Exhibit 4 : Demand Forecast- Inspectors
Year Production No. of Employees Ratio
Inspector :
-3 1500 150 1:10
Actual -2 1800 180 1:10
Last Year 2000 180 1:11
Next Year 2200 200 1:11
+2 2500 210 1:12
+3 2750 230 1:12
Simple Mathematical Methods

The productivity ratio is the average number of units produced

per direct labor employee per year. Suppose a company produces
sofas and knows from past history that the productivity ratio is
about fifty sofas per furniture assembler per year. If the
marketing department expects to sell 10,000 sofas in the coming
year, then the company needs 10,000/50=200 furniture
assemblers.
Direct-to-indirect-labor staffing ratios are used to calculate the
number of individuals required in other jobs. For instance, if the
sofa firm generally has one supervisor for every fifteen
assemblers, then about thirteen supervisors will be needed for
two hundred assemblers. Past experience also may show that two
shipping-and-receiving clerks are required for every fifty
assemblers. This means that the company needs a total of eight
clerks.
Productivity and staffing ratios based on historical data may be
modified judgmentally if the ratios are expected to change. For
instance, if the union has negotiated a new contract requiring
workdays that are thirty minutes shorter and more paid holidays,
the expected productivity ratio should be adjusted downward. If
an improved order-processing program will be installed in the
clerks’ computers, the staffing ratio may change, with fewer
clerks needed to service the same number of direct workers.
Delphi Technique

Delphi technique can be used for forecasting

human resources needs in two forms. First, it can
be used to know the trends for changing job
profile and, consequently, the changing personnel
profile across the country or at international
level. Second, this, technique can be used to
solicit views of expert in different functional areas
of an organisation about the changing profile of
personnel in their respective departments in the
light of changing environment. Such views are
collected and summarized by HR department to
arrive at a decision about the types of personnel
needed in future. Delphi technique is used
primarily to assess long-term needs of human
resources.
Work Study Technique
 Work-study technique can be used when it is possible to apply
work measurement to calculate the length of operations and the
amount of labour required. The starting point in a manufacturing
company is the production budget, prepared in terms of volumes
of salable products for the company as a whole, or volumes of
output are then multiplied by the planned volume of units to be
produced to give the total number of planned hours for the period.
This is then divided by the number of actual working hours for an
individual operator to show the number of operators required.
Allowance will have to be made for absenteeism and idle time.
 The number of operative required to complete specified volume of
operation is:
. Planned output .
Standard output per hour * standard hours per person

Standard output per hour is not always a constant factor but,

generally, it increases over the period of time because of learning.
 Work –study technique is a method of
forecasting human resource needs. It is a
decision Making tool. It is been used in
estimating personnel needs from a group of
experts, usually managers. The HR experts act
as intermediaries, summaries the various
responses and report the findings back to
experts survey again after they get this
feedback. Summaries and surveys repeated
until the experts opinions begin to agree. This
agreement reached is the forecasting of the
human resource needs.
Some other Methods

Regression analysis:

Past levels of various work load indicators, such as sales,

production levels, and value added, are examined for
statistical relationships with staffing levels. Where
sufficiently strong relationships are found, a regression (or
multiple regression) model is derived. Forecasted levels of
the retained indicators are
Entered into the resulting model and used to calculate the
associated level of human resource requirements.

Productivity ratios : Historical data are used to

examine past levels of a productivity index (P):
P= Work load/Number of People
Where constant, or systematic, relationships are found,
human resource requirements can be computed by diving
predicted work loads by P.

Personnel ratios: Past personnel data are examined to

determine historical relationships among the employees
in various jobs or job categories. Regression analysis or
productivity ratios are used to project either total or key-
group human resource requirements, and personnel
ratios are used to allocated total requirements to various
job categories or to estimate for non-key groups.
Time series analysis: past staffing levels
(instead of work load indicators) are used to project
future human resource requirements. Past staffing
levels are examined to isolate and cyclical variation,
long-term terms, and random movement. Long term
trends are then extrapolated or projected using a
moving average, exponential smoothing, or
regression technique.

Combination of different methods of forecasting

human resource needs is followed. Even where
work-study technique is followed to assess the
human resource needs at the operative level, it is
not undertaken every year, as the standards fixed in
a year serve the purpose for many years. In order to
understand how various methods are applied in
practice we shall see in the staffing.
 Methods & techniques for supply management
 Armstrong has defined forecasting of human resource supply as
follows:
“Manpower supply forecasting measure the number of people likely
to be available from within and outside and organisation, after
making allowances for absenteeism, internal movements and
promotions, wastage and changes in work hours, and other
conditions of work”
Reasons for supply forecast are the following:
1. Helps quantify number of people and positions likely to be
available in future to achieve objectives
2. Helps clarify the staff mixes that will exist in future
3. Asses staff level in different part of organisation
4. Prevent shortage of people where they are needed most
5. Monitor future conditions with legal requirement for job
reservations.
Supply source is divided in to two category
1. Internal supply
2. External supply
External Supply – staffing
Internal supply can be undertaken by Human resource flow model
Human resource inventory

Human resource flow model- An organization can be considered as a

system of flow- both inflows and outflows of various resources.
Based on this concept, a flow model of human resources has been
developed which is known as Markov chain analysis model of
simply as Markovian model. This can be applied for organization
as a whole or any of its sub systems. The basic assumption of
this model, and which is true, is that is a system, there are
inflows and outflows of personnel during a period, in our case the
HR plan period. In this model the forecast of human resource
supply proceeds as follows:
1. Determination of the period in which HR flows are measured
2. Establishment of categories of states as called in the model to
which an individual can be assigned
3. Counting of annual flows of individuals among states for several
time periods a state may be absorbing (gain/losses) or non-
absorbing (Charge in position levels)
4. Estimating the probability of transitions form one state to another
based on the past trend;.
Estimation of personnel supply based on flows

Sources of inflows No. of persons sources of outflows no. of persons

Transfer in 10 Resignations 8
No. of supervisor
at the beginning Discharges 2
of plan period
Retirements 3
Promotion in 8 Promotions 5
100 Demotions
Total inflows 18 1
Total supervisors 99 Total outflows
Available 19
Similar exercise can be done for other categories of personnel.
Flow Models
 Flow models are very frequently associated with forecasting
personnel needs. The simplest one is called the Markov
model. In this technique, the forecasters will:
 Determine the time that should be covered. Shorter lengths
of time are generally accurate than longer ones. However,
the time horizon depends on the length of the HR plan
which, in turn, is determined by the strategic plan of the
organization.
 Establish categories, also called states, to which employees
can be assigned. These categories must not overlap and
must take into account every possible category to which
and individual can be assigned. The number of states can
neither be too large nor too small.
 count annual movements (also called ‘flows’) among states
for several time periods. These states are defined as
absorbing (gains or losses to the company) or non-
absorbing (change in positive levels or employment status).
Loses include death or disability, absences, resignations
and retirements. Gains include hiring, rehiring, transfer and
movement by position level.
 Estimate the probability of transitions from one state to
another based on past trends. Demands a function of
replacing those who make a transition.
 There are alternatives to the simple Markov model. One
called the semi –Markov, takes into account not just the
category but also the tenure of individuals in each
category. After all, likelihood of movements increases with
tenure. Another methods is called the Vacancy Model,
which predicts probabilities of movement and number of
vacancies. While the semi-markov model helps estimate
movement among those who situations and tenure are
similar, the vacancy model produces the best results for an
organization.

 Markov analysis is advantageous because it makes sense to

decision makers. They can easily understand its underlying
assumptions. They are, therefore, likely to accept results.
The disadvantages include: (i) heavy reliance on past-
oriented data, which may not be accurate in periods of
turbulent change and (ii) accuracy in forecasts about
individuals is sacrificed to achieve accuracy across groups.
Human resource inventory
- Normally use to count tangible inputs & outputs
- Determination of personnel whose inventory is to be prepared,
cataloguing of factual information of each individual, systematic
and detailed appraisal of these individuals, and detailed study of
those individuals who have potential for development.
Skill inventory
1. Employee’s personal data
2. Skills- education, job experience, training etc
3. Special achievements, if any
4. Salary and job history and
5. Potentials of the employee
Management inventory
1. Personal data
2. Work history
3. Strengths and Weakness
4. Career plan
5. Promotion potentials
6. Number and types of employees managed
7. Total budget managed
8. Any special achievements such as acquisition of additional
degrees, papers presented, conferences attended etc.
Existing inventory-
i. Head counts total, department-wise, sex-wise, designation-
wise, skill-wise, payroll-wise etc.
ii. Job family inventory- clerks, cashiers, typists, stenos sub-job
family, skill, qualification, similar operations, production
engineer mechanical & maintenance engineer, mechanical, job
families like general administration production etc.
iii. Age inventory-skill, experience, values, capabilities,
qualification & training including minute qualifications,
inventory of salary grades-pay wise, allowance wise and total
salary-wise. Sex-wise inventory, Local and non-local wise
inventory, inventory of past performance and future
potentialities.
Potential Losses-
Permanent total loss is due to labour turnover. Labour turnover is
measured by the following formula

Number of employees left during a specified period

____________________________________________x 100
Average number of employees during the same period
 Permanent partial loss consists of wastage of skills, capabilities
etc. due to ill-health and involvement of employees in
accidents.
 Temporary total loss of human resource is due to
absenteeism
 Temporary partial loss includes consultancy,
advisory and other services offered by the
employees to others.
Potential Additions
i. Permanent total
ii. Permanent partial
iii. Temporary total
iv. Temporary partial
v. Permanent total additions in case of departments
include promotions, demotions and transfers
within the organisation. Permanent partial addition
consists of acquisition of new skills, knowledge,
values, aptitude etc. by the existing employees.
vi. Deputation
vii. Consultancy & advisory
Analyzing source of supply
Internal and external factors affecting manpower
Local Factors : Local factors include, population density in the area,
local unemployment level, availability of employees on part time,
temporary and casual basis current and future competition for the
similar categories, outcome from local educational and training
institutes, residential facilities available, local transport and
communication facilities, traditional pattern of employment and
availability of manpower with required qualifications and skills, the
pattern of place to live, local housing, shopping, educational
facilities, medical facilities, regulations of local government like
reservation for local candidates, candidates belonging to scheduled
backward and minority communities etc.
National factors: Technologies, scientists, management graduates
computer professionals etc. effect of changing educational
patterns, impact of government, national educational policy,
impact of government employment regulations such as reservation
for candidates belonging to SC, ST and other categories etc.
International Factors
Estimating the Net Human Resource Requirements
Action plan for recruitment Redeployment, Redundancy and Retrenchment
Forecasting future supply from all sources
Action plan for recruitment, development etc.
Modify the organisational plan
If future supply of human resources from all the external sources is
estimated to be inadequate or less than the requirements (share of the
particular firm in labour market) the manpower planner has to suggest
the management to alter or modify the organisational plan.
BPOs lay off anti-poaching agreements (E T, 21/11/2006)

Retention plan –
1. Adjustment of the salary levels with those of the comparable industries
so as to remove inequalities.
2. Providing opportunities for career development, provide training facilities
adopting the policy of promoting from within, more systematic
promotional procedure, providing opportunities for self-development,
assignment of challenging work, etc.
3. Introduction of effective consultation and negotiating machinery,
encouragement of grievance redressing and conflict resolution rather
than suppressing.
4. Providing of extensive training and development facilities. Encouraging
the employees to participate in the management, development
programmes and training programmes both within and outside the
organisation.
And programmes should be effective in meeting not
only organisational but individual needs.
5. Selection procedure should meet the job and
organisation requirements not only for the present
position to which the candidate has applied but
also his potentialities for future jobs in the career
line.
6. Provide more conducive working conditions and
extensive fringe benefits
7. Provide the scope for extensive participation of
the employee in decision-making and create the
environment that the system in the organization is
participative management but not autocratic
management.
8. Provide the facilities and environment for
conducive interpersonal relations.
9. Provide the scope for challenging, creative and
innovative work.
10. Work life-balance.
 Identification of Human Resource
Gap
 Gap analysis is the process of comparing
the workforce Demand Forecast to the
workforce Supply Projection. A gap
(projected supply is less than forecasted
demand) indicates a future shortage of
needed employees. A surplus (projected
supply is greater than forecasted demand)
indicates a future excess in some
categories of employees which may also
require action.
HR STAFFING
 Managing HR Gap
 Demand Forecast Supply
Forecast

HR Gap

Shortage Excess/ Surplus

Two types of HR Planning for managing gap
1. Aggregate Planning
2. Succession Planning

 Shortage & Supplements Strategies

for managing shortage
 Short Term
 Long Term
Short Term
 Increase OT

 Increase Subcontract

 Increase productivity

 Buy back vacation/leave encashment

 Temporary Assignment

 Temporary Leaves

 Transfers (temporary)
 Strategy Development

 Job class  Competency- based classification to

modifications get flexibility to recruit and mobilize

 Compensation  Broad band approach in

flexibility compensation to get opportunity

 Succession planning to address

 Succession
future gaps
planning
 Attract the best talent.
 Specialized
recruitment and
selection
 Just in time training for new skills
and knowledge developments
keeping pace technological
 Customized advancements.
training or
retraining
 Retention and  Design innovative
productivity productivity linked
techniques incentives.

 Re-deployment,  Re-deployment plan

career transition, or within a given job
separation family to successfully
get re-deployed.
 Job Analysis
 A purposeful, systematic process for collecting
information on the important work-related aspects
of a job.
 Definition
 Job Analysis is the aspect of employment planning
which is concerned with the study of the jobs in
an enterprise. In particular, job analysis and the
resultant job specifications clarify the following
aspects of each job: the work activities; the tools,
equipment, and work aids used; job-related
tangible and intangibles (such as materials used,
products made, services rendered) work
performance; job context (working conditions)
and candidate requirements (such as knowledge,
skills, experience and personal attributes)
 In JA the following information is gathered (Glueck
1978):
 Work activities:
– Work activities and processes
– Activity records
– Procedures used
– Personal responsibility
 Worker-oriented activities:
– Human behaviours such as physical actions and communicating
on the job
– Elemental motions for methods analysis
– Personal job demands, such as energy expenditure
 Machines, tools, equipment and work aids used
 Job-related tangibles and intangibles
– Knowledge dealt with or applied (as in accounting)
– Materials processed
– Products made or services performed
 Work performance (Note: Not all JA systems develop the
work performance aspects):
– Error analysis
– Work standards
– Work measurements, such as time taken for a task
 Job Context
– Work schedule
– Financial and non-financial incentives
– Physical working conditions
– Organisational and social contexts
 Personnel requirements for the job
– Personal attributes such as personality, interests
– Education and training required
– Work experience
 Job Description
 A job description is an account of the duties and
activities associated with a particular job. A job
description is prepared to identify a job, define
that job within established limits, and describe its
content. It is typically a one or two page summary
of the basic tasks performed on a job and
constitutes the role expectations relative to that
job. Job descriptions have a number of important
uses including development of job specifications,
work force planning and recruitment, orientation
of new employees, and development of
performance appraisal systems.
 Job Specification
 A job specification describes the characteristics
required to perform the job activities outlined in
the job description. They focus on the persons
performing the job rather than on the work itself.
A job specification may also include information
on the knowledge, skills, and abilities required to
perform the job, as well as such items as the
education, experience, and physical attributes
needed for successful accomplishment of job
tasks. Job specifications are the means by which
HRM specialists identify persons with the skills
they seek and help focus efforts to recruit them.
 Job descriptions and job specifications
– Job Title- title of the job and other identifying information
such as its wage and benefits classification
– Summary- brief one or two sentence statements
describing the purpose of the job and what outputs are
expected from job incumbents
– Equipment-clear statement of the tools, equipment and
information required for effectively performing the job
– Environment- descriptions of the working conditions of the
job, the location of the job, and other relevant
characteristics of the immediate work environment such
as hazards and noise levels.
– Activities- includes a description of the job duties,
responsibilities, and behaviours performed on the job.
Also describes the social interactions associated with the
work (for example, size of work group, amount of
dependency in the work).
The job specification evolves from the job description. It
addresses the question ‘What personal traits and
experience are needed to perform the jo effectively? The
job specification is especially useful in offering guidance
for recruitment and selection.
 Summary Job Analysis
A process of Obtaining all Pertinent job Facts
 Job description  Job specification
A statement containing A statement of human
items such as qualifications necessary to do
 Job title the job. Usually contains such
items as
 Location
 Education
 Job summary  Experience
 Duties  Training

 Machines, tools, and  Judgment

equipment  Initiative

 Materials and forms used  Physical effort

 Supervision given or  Physical skills

 Responsibilities
received
 Communication skills
 Working conditions
 Emotional characteristics
 Hazards
 Unusual sensory demands such
as sight, smell, hearing.
 Job Design
Once a thorough JA has been conducted and there are
high-quality job descriptions and job specifications
available, an organisation can use this information to
design or re-design jobs. This information is very useful
for structuring job elements, duties and tasks in a
manner that will help to achieve optimal performance
and satisfaction.

Job design is the personnel or engineering activity of

specifying the contents of the job, the tools and
techniques to be used, the surroundings of the work,
and the relationship of one job to other jobs.
– Work Simplification
– Job Rotation
– Job Enlargement
– Job Enrichment
– Scientific Management and the Mechanistic Approach
– Job Enrichment as a Motivational Approach
 Job Market & Job Discrimination-
Labour Trends
 The labour market can be viewed as a process by which the
supplies of a particular type of labour and the demand for
the same are balanced.
 The main functions of labour markets are-
–To fix wages and other terms of employment,
–To allocate labour among occupations, jobs and employers
Acommodity market refers to physical place where buyers and
sellers of a particular commodity gather for engaging in
transactions while a labour market is viewed as a process by
which supplies of a particular type of labour and demands for
that type of labour are balanced, is an abstraction. Secondly,
unlike a commodity market, the relationship between the seller
and a buyer in a labour market is not temporary and as such
personal factors which can be ignored in a commodity market
become important in a labour market.
Wage, fixing is an essential characteristic of the labour market
where (in the absence of unions) the buyers of labour normally
sets the price but in the commodity market it is normally the
seller who sets the price.
In labour market the price that is set tends to be fixed for some length of
time. The labour market is far more complex than the commodity market.

 Structured & unstructured labour markets

– We may also distinguish labour markets according to their ‘structure’. Labour
markets range all the way from the highly structured to the unstructured,
depending upon the presence or absence of rules covering the employment
relationship.

– Phelps had defined unstructured labour market “as one which contains few, if
any, established intitutions by means of which people obtain market
information, move into and out of jobs, qualify for advances in rank or identify
themselves with any type of organisation”.

– The structured labour market is, in general, the market of individual bargains in
which there are few rules affecting employment practices. The unstructured
labour market has the following features:
– There are no unions with seniority riles
– Relations between employers and employees is transitory
– Workers are unskilled
– Payment is by unit of produces and
– Little capital is employed
The market for domestic servants is an example of unstructured market.
 In a structured market, institutional rules limit the
movement of workers, they affect hiring policies and
often they are the deciding factor in wage
determination.
 Indian Labour Market
– The Indian labour market is dominated by a feature called
casual labour. The main feature of a casual labour market is
that the relationship between the buyer and the seller of
labour is a temporary one.
– In India absenteeism is very high and due to a high rate of
absenteeism and employment of ‘budlis’ a casual labour
market has growth even in the manufacturing industries.
– One of the features of the industrial labour in India is its
migratory character.
– The workers are attracted to the towns, by the lure of higher
wages, but the instability of their employment, chronic house
famine and high rents prevent them from settling down and
bringing their families form the village.
 Workforce Diversity
– Gender diversity
– Cultural diversity
– Age diversity

 Job discrimination
– Discrimination means the act of making distinctions among
people or groups of people. For example, a discriminating
employer may make a distinction between men and
women for a job and choose only male applicants

 Religious Discrimination
– In USA at the early days there was religious discrimination
because early settlers often came to America to escape
from the religious persecution in Europe.
 Racial Discrimination
– In India there is no racial discrimination in the job market.
 The Older Worker
– By the year 2000 there will be higher proportion of aged people in the
labour force than they are now. Little attention has been given to the
older workers who are mostly above 65. In USA one-tenth Americans
is over 65 years of age.

 Job engineering and job reassignment. These are two things which
companies can accomplish to help the older worker. Job
engineering refers to redesigning the work stations so that the
work can be done in a way that is les taxing on the employee. The
work should be planned in such a way that it could be done in a
sitting posture, reducing body movement or changing the flow of
work. Job reassignment is moving the person into a different
position in which the task does not demand so much in terms of
dexterity or speed but just as rewarding. Older workers can
become good trainers and set up men as well as rework rejects
from the production line.
 Finding employment after the age of forty become more difficult
for the following reasons:
 Seniority and policies of promotion
 The decline in self-employment
 Closing of plants force older
 Retirement age to fifty through VRS
 Employment of Women
– Women’s liberation movement all over
the world has changed the attitudes of
women towards the job. Again, equal pay
for equal work has become a law in most
of the developed countries.
– Employment of handicapped
 In
India it is a policy of the Govt. to reserve 2
percent vacancies for the physically
handicapped.

– Sons of the Soil

– Medical Discrimination
 Trends in Labour Supply
 Changes in the Composition of the Population
 Subgroup Participation Changes
 Labour Force Quality
 Level of Education
 Women in the Labour Force
 The Older Employee
 Handicapped Workers in the Labour Force
Part Time & Full Time Work
Part time work has increased during the 1980s. Usually a
part-time worker is a person who works less than the
normal rate of 40 hours a week (or whatever the country’s
norm is). To understand well the notion of part-time work,
you have to draw a distinction between voluntary and
involuntary part-time employees. A person who is working
part-time because he/she cannot get full time employment
is involuntarily a part-time employee for whom the position
means something different than to a co-worker who wished
for a part-time assignment.
 The major group of part-time workers are:
– Women: Traditionally, with the responsibilities of running homes
and child rearing, more women have preferred to work part-
time. Furthermore, some experts have found that more
husbands would rather have their wives work part time than full
time.
– Students : in developed countries such as the US & UK, a large
number of students between the ages 18-24 enrolled in higher
education institutes work part-time. In US, on the average
students work 20 hours a week.
– Retired and older persons: In order to keep active and to
supplement any retirement income or social security payments,
a number of older citizens work part-time. Most of these persons
are highly skilled and could serve as training resources to new
recruits.
– Persons with a physical or mental disability: Part-time work is
often more suited for handicapped and disabled persons. In
some specific disabilities, only part time work enables individuals
to work without aggravating their disabilities.
While most part-time work is in the service industries there are
also numerous opportunities in the retail and wholesale trades
and in manufacturing.
In a great number of circumstances, there are many advantages in
part time work for employees, such as flexibility in scheduling,
ability to
Spend more time with their families,
additional compensation and stabilization
of employment. However for employers,
there are also certain disadvantages such
as part-time work requiring additional
training and record keeping expenses, lack
of protecting from trade union etc. trends
unions sometimes oppose the use of part-
timers, viewing them as robbing work
opportunities from additional full-timers
who would become their members.
Trends in Labour Demand
 India is Asia-Pacific’s cheerleader
in hiring.
 Overall rise in manpower
– India : 28%
– China : 16%
– Japan : 15%
– Malaysia : 8%
– Singapore : 8%
 ITeS sizzles, not just in India but
also in Asia-Pacific.
 Overall rise in manpower
– ITeS : 32%
– BFSI : 16%
– Manuf: 14%
– IT : 10%
 As a corollary, talent crunch is rising.
Attrition in India is expected to cross 20%
this year.
 2004 : 14%
 2005 : 20%
 2006 : 14%
 Despite robust growth in the region, India is
the worst affected in Asia-Pacific.
 India : 20%
 China : 15%
 Korea : 12%
 Singapore : 12%
 Why they are leaving?

 There’s significant mismatch between the

reasons why executives leave and the
retention strategies that companies are
deploying:

 External inequity of salary 22%

 Limited growth opportunities 21%
 Role stagnation 15%
 Under utilization of skills 9%
 Lack of recognition 8%
 Why/What companies are doing?

The top five retention strategies

companies are using to keep them
hooked:
 Work –life balance 11%
 Leadership accessibility 10%
 Timely & meaningful

Feedback: 10%
 Pay above market 8%
 Telecommuting 8%
 Tapping exit interviews
 It’s a last ditch effort but India Inc is making it
nevertheless. The customary exit interviews are being
taken seriously & companies are using them to offer:
 Immediate
Compensation hikes 23%
 Pay revisions 35%
 Immediate role
Enhancement 36%
 Immediate change
In role 50%
 Improved work
Life balance 55%
 Improved work
environment 55%
 Commitment to
Career progression 70%
 Long Term
1.
 Recruit Permanent Employees

 Hire Long Tenure employees

2. Offer Incentives to postpone retirement

3. Rehire retired employees- Full Term /Half
Term
4. Redesign work so that fewer employee
are needed
5. Automise/Cybernise jobs
 Employee Surpluses
 Short Term
1. Freeze, hires temporarily
2. Reduce OT
3. Reduce Work hours
4. Temporary Shut down / Lay off
5. Excuse absences
6. Temporary out assignments
7. Encourage attrition
8. Encourage sabbaticals
 Long Term
1. Hiring Freezes
2. No replacement for those who leave
3. Offer VRS/ERS
4. Pay cuts
5. Retrenchments
6. Reduce outserved work
7. Switch over to variable pay
8. Expand work
9. Retrain & Redeploy
10. Transfer
11. Out place
 Recruiting
 Staffing, the process of recruiting applicants and selecting
prospective employees, remains a key strategic area for human
resource management. Given that an organisation’s performance
is a direct result of the individuals it employs, the specific
strategies used and decisions made in the staffing process will
directly impact an organisation’s success or lack thereof
 More extensive, costly, and time-consuming than others.
Organisations have great latitude to select from a variety of
staffing techniques, each of which offers various degrees of
sophistication, such benefits come at a price.
 Trends such as broader job scope and responsibilities, the move
toward leaner staffing and operating with fewer full-time
permanent employees, smaller autonomous units, pay for
company-wide performance, flatter organisation structures affect
the types of individuals and skills that organisation seek and
influence how organisations find and screen applicants. The
staffing process must be more strategically focused: Newer
challenges and considerations must be directly incorporated into
an organisations staffing strategy.
Recruitment Policy

a. Government policies
b. Personnel policies of other competing organisations;
c. Organisation’s personnel policies;
d. Recruitment sources;
e. Recruitment needs;
f. Recruitment cost;
g. Selection criteria and preference etc

Centralized vs. Decentralized recruitment

Source of Recruitment
Internal Sources : Internal source include:
a. Present permanent employees,
b. Present temporary/casual employees,
c. Retrenched or retired employees,
d. Dependents of decreased, disabled, retired and present
employees.
External Sources

1. The suitable candidates with skill, knowledge, talent etc.

are generally available.
2. Candidates can be selected without any pre-conceived
notion or reservations.
3. Cost of employees can be minimised because employees
selected from this source are generally placed in
minimum pay scale.
4. Expertise, excellence and experience in other
organisations can be easily brought into the
organisations.
5. Human resources mix can be balanced with different
background, experience, skill etc.
6. Latest knowledge, skills and creative talent can be
brought into the organisation.
External sources include:

a. Educational and Training Institutes,

b. Private Employment Agencis/Cosultants
c. Public Employment Exchanges
d. Professional Associations,
e. Data Banks
f. Casual Applicants
g. Similar Organisations
h. Trade Unions.
 Staffing takes on even greater importance
in the service sector, which continues to
create the largest number of jobs in our
economy, a service-based economy
requires different skills and has higher
turnover costs than those associated with
manufacturing, payroll typically assumes a
higher percentage of overall costs in
service organisations. Companies in this
traditionally high turnover sector need
strategic staffing initiatives that allow
them to attract and retain productive
employees, minimizing operating
expenses.
 Temporary Versus Permanent
Employees
 Provide flexibility
 In addition to hiring temporary employees
from an agency, an organisation can
subcontract work to an outside vendor,
this is usually done on a project basis.
 In-house temporary employees provide
the organisation with more flexibility
 Efficiency than it would garner from
outside temps
 Employees have more variety in their work
assignments.
Internal Versus External Recruiting
 The organisation already has
performance data on employees
 Promotion /Rotation from within
motivates employees
 ADVANTAGES & DISADVANTAGES OF
INTERNAL & EXTERNAL RECRUITING
 INTERNAL

Advantages
Have performance data available
Motivational
Less training/socialization time
Faster
Less Expensive
Disadvantages
Possible politics
Inbreeding
 External
Advantages
Fresh Ideas and view points
Expand knowledge base
Disadvantages
Unknown entities
Detrimental to internal applicants
Training and socialization time
Time- consuming
Can be expensive
 Methods of Recruiting
 Small organisations often do their recruiting very
informally, by work of mouth allowing the direct
supervisor to find someone of his or her own
choosing
 Ina computrised database, the skills inventory
component of the human resource information
system can be used to assist in internal recruiting.
 External recruiting may also be done informally
through contact with friends, acquaintances of
existing employees
 Advertising in selected media
 Internet is one of the fastest-growing recruitment
methods
 Internet gives an employer global exposure to
potential applicants, which can be critical if particular
language skills or cultural backgrounds are needed.
 Employment agencies, more commonly called
staffing agencies or staffing services
 State job service agencies are publically
funded by the federal government
 Private Industry Council

 College and university on-campus recruiting

SELECTION
 Job Analysis

 Recruitment

 Application Form

 Written Examination

 Preliminary Interview
 Group Discussion
 Tests
i) Intelligence test
ii) Aptitude test
iii) Interest test and personality test
iv) Situational test
v) Judgment test
 Final Interview
 Medical Examination
 Reference Checks
 Final decision by the line manager
 Employment
INTERNATIONAL ASSIGNMENTS
 To ensure the success of overseas
assignments, employers are increasingly
testing employees, adaptability, open-
mindedness, ability to tolerate uncertainty
and ambiguity, and independence. Similarly,
many are also interviewing and screening
family member adaptation either require the
employee to return home before the end of
the assignment or have a negative impact
on the employee’s performance. Screening
employees as part of staffing international
operation has consequently become much
more elaborate and strategic to ensure the
success of the assignment.
 COMPETENCY MAPPING –A TOOL
FOR OPTIMIZING HUMAN CAPITAL
 Outsourcing
Goals
Outsourcing refers to a contractual relationship for the provision of
business services by an external provider. In other words, a
company pays another company to do some work for it. Currently,
outsourcing is being promoted as one of the most powerful trends
reshaping management. However, organizations have always
outsourced some functions.

Outsourcing
Outsourcing the practice of one organization contracting with
another organization to provide services or products.

Outsourcing HR functions

In HR, the functions most likely to be outsourced are temporary

staffing, payroll, training, recruiting, and benefits administration.
 HR Functions that may be outsourced

Compensation Recruitment and Selection

• Payroll • Advertisements
• Benefits • Screening of applications
• Compensation administration • Testing
• Pension • Reference checking
• Preliminary interviews
Training • Salary negotiations- at the executive
• Program delivery level
• Program design and development • Exit interviews
• Training consulting to line departments
• Training needs analysis Health and Safety
• Program Evaluation
• Strategic Planning for T & D • Employees assistance program
• Administration • Wellness programs
• Developing training policy
Small Business and HR Outsourcing

Most businesses do not hire an HR professional until the employee

numbers reach about 100, or even 400. But legislated HR functions,
such as payroll and benefits, are necessary for every organization,
regardless of size, so small businesses turn to other small
businesses specializing in HR. The advantages are the following:
• Lessens the handling of routine, transactional HR work (payroll) by
in-house staff
• Offers access to experts who may provide advice in atypical
situations (employee fraud)
• Provides the management of one-of services (such as computer
training)
• Ensures that the company is complying with current legislation

Outsourcing is not the same as using consultants who may provide

assistance on a project-by-project basis. Small businesses are
looking for a long-term relationship with a provider who understands
small business in general and their business in particular.
The rationale for outsourcing
There are at least six major reasons that organizations outsource:

Financial: first reason cited for the outsourcing decision is to save

money. Organizations believe that costs can be reduced by
outsourcing a function such as payroll.

Strategic Focus: core competence an internal activity critical to

organizational success which creates a competitive advantage and
influences future growth.

• Activities traditionally performed internally

• Activities critical to business success. Core work contributes
directly to the bottom line; non-core work doesn’t
• Activities creating current or potential competitive advantage
• Activities that will influence future growth or rejuvenation.
Core functions that should not be outsourced are orientation,
leadership development, employee relations, final selection,
performance management, and succession management, as these
depend on an understanding of organizational culture, a long-term
orientation, consistency, trust, and confidential information.
Outsourcing allowed us to get out of low value-added administrative
work and become more strategic. We now focus on health and
safety, leadership development, total compensation, and employee
and labour relations. Our department at head office has 12 staff
today compared to 40 in 1994. But, with our change in focus, out
performance within the organization has taken a quantum leap.

Technical: Technology also enables a company to reduce

transaction time (the time it takes to handle a request).

Improved Service:
Quality improvement is cited as another benefit of outsourcing.
Performance standards can be written into the contract more tightly
than may be possible with current and long-tenured employees.
Managers can choose the “best of breed” vendors that have
outstanding track records and more flexibility in hiring and rewarding
their employees

Specialized Expertise: Another reason cited by some companies

for outsourcing is that they find the laws and regulations governing
HR so complex that they decide to outsource to firms that have the
specific expertise required. The motto is “Outsource when
somebody can do it better than you”.

Organizational Politics: An outsourced function is not as visible as

an in-house department performing the same tasks. Some
organizations make the decision to outsource to get rid of a
troublesome department, such as one where employees are
underperforming . Outsourcing a functions also reduces the head
count.

Risks And Limitations

Projected benefits vs. Actual Benefits

Service Risks

Employee Morale

Reduced Value

Management of Outsourcing

Managing the outsourcing well is critical. First, outsourcing must be

subjected to a cost-benefit analysis. Can the contractor do a better
job, faster, while main training service levels and meeting legislative
requirements? How will this be measured? The following sections
describe ways of selecting vendors, negotiating the contract, and
monitoring the arrangement.

Selecting the Vendor

Negotiating the Contract

Monitor the Arrangement

Summary:

Outsourcing refers to the contractual arrangement wherein one

organization provides services or products to another. There is a
growing trend to outsource HR functions. The advantages of
outsourcing include the reduction of costs, the increased energy and
time to focus on an organization’s core competencies, access to
technology and specialized expertise, which both result in increased
levels of service, and the political advantages of removing a
troublesome function or reducing headcount. But there are
disadvantages. The anticipated benefits may not be realized.
Service levels may decrease. Employee morale and commitment
may be reduced, as well as the value of the organization. Managing
the contractual arrangement with the service provider is the key to
optimizing the benefits and minimizing the risks.
 Creating excellence through Talent
Management
 Theterm “Human Capital” describes the
economic value of the organisation’s
knowledge, skill and capabilities.
Human Capital is intangible and hence cannot
be managed the way organizations manage
jobs products, technology, etc. one of the
reasons for it is that the employees, not the
organizations, own their human capital. If
valued employees leave the organization, they
take away the human capital with them and
investment made by the company in training
and developing of those people is lost
 Optimizing Human Capital to gain competitive
advantage is the concern of current day HR Managers
in all organizations, irrespective of their size and
nature of business they are engaged in.
 “Successful Companies of the 21st Century will be
those who do the best job of capturing storing and
leveraging what their employee know”.
 Companies manage their human capital successfully
through:-
Creating a performance –oriented
work culture
 Minimizing turnover of their premium employee group
significantly
 Maximizing Employee satisfaction
 Effective investment in employee compensation and
development
 Maintaining efficient back-up for key positions and key
performers
 Implementing efficient performance assessment methods
 Reset Mind-set: This involves embedding the organization’s
value and behavior to all its employees. It is to make all its
employees realize that
 Potential is about future performance, not past
performance.
 Everyone has potential worth developing
 Good technical knowledge is not the only criterion
for a good managerial position but it has to be
coupled with excellent people skills
 Recognize that business change and a focus on
strategic issues require different leadership and
management capabilities
 Set Focus :
 Be linked to selection, recognition, and reward
process as well as to annual objectives
 Be interpreted as an ongoing set of challenges for
overcoming resistance
 Build a state of change readiness to tackle future
business opportunities
 Identify and nurture future leaders
 Have a spotlight on talent with development needs in
mind
 Identify most valuable employees to tackle new
challenges at work.
 Assessment of talent:
 A Tool for Optimizing the Human Capital
 position in an organization, and using it for job
evaluation, recruitment, training and development,
performance management, succession planning etc.
the organization effectively communicates what it
actually expects from them. The competency frame
work serves as the bedrock for all HR applications.
As a result of competency mapping, all the HR
processes like talent induction, management
development, appraisals and training yield much
better results.
 The human capital forms the most valuable
asset that can be possessed by any
organization. Competency mapping forms an
excellent tool for optimizing the human
capital. By identifying the key competencies
for an organization or a particular
 Competency mapping involves identifying the
competencies that will be needed by people working
in an organization. The level of competency needed
by employees at each level must also be specified.
This depends on the type of job they do and the
environment in which the organization functions.
Once this is identified, the remaining process
becomes easier. The next step will be to match the
existing level of competencies with what is actually
required and take measures to bridge the gap.
 .
 Can a round peg fit a square hole? So can’t a
wrong employee in a right organization
 The organization will have to find a correct
person who will fulfill its expectations or will
have to chisel and shape up the existing
employee to fit its expectations.
 What is competency mapping
 Competency mapping is the process of identifying
key competencies for an organization or a particular
position in an organization, and then using it for job
evaluation, recruitment, training and development,
performance management, succession planning, etc.
“The competency frame work serves as the bedrock
for all HR applications. As result of competency
mapping, all the HR processes like talent induction,
management development, and training yield much
better results.”
 Competency and its aspects
 Task skills: these are the basic requirements to
perform individual skills.
 Task management skills: this is the ability to
manage a number of different tasks within the
job
 Contingency management skills: this refers
ability to deal with the responsibilities and
expectations of the work environment,
including the ability to work with others.
 Core Competencies
 Behavioral Aspects
– Ability to express ones thoughts clearly
– Ability to make others understand you
– Ability to listen to others
– Ability to understand other
– Ability to write your thoughts clearly
– Ability to summarize ones ideas in a
precise way
 Interpersonal Relationship Building Ability

 Behavioral aspects
– Ability to work in groups or work as a
team
– Ability to initiate talks
– Ability to understand other’s problems
– Ability to empathize with others
– Courage to apologize on committing
mistakes.
 Negotiating Ability
 Negotiating Ability
 Behavioral aspects

– Ability to reason
– Ability to be ethical during the process
– Ability to predict the next argument of opponents
– Ability to survive till the end and not to surrender
– Ability to associate various arguments and think
logically
– Critical Thinking Ability
 Creativity
 Behavioral Aspects
– Ability to think differently
– A keen sense of colors
– Ability to present differently
– Courage to accept and present the ideas
 Relating six sigma to HR Strategy
 In all HR practices such strategic intent should be evident. In recruitment and
selection, focus should be to select those who have multiple skill sets and who can
be utilized interchangeably by cross lateral movement. This requires foreseeing the
future skill sets with the changing technology or process. Similarly regular
competency mapping and a synergy between individual and organisational
competencies need to be achieved through training till they all fit for the purpose.

 Similar importance to compensation planning, motivation and retention should be

given to ensure commitment and loyalty to the organization. There are many ways
to design compensation innovatively and also for employees’ retention. Pro-active
HR Practices, call for creating a work environment that recognizes creativity, inter-
organizational co-operation rather than competition, working as cross – functional
teams, productive meetings for innovative results, introduction of formal innovation
programmes and finally organisation’s receptivity to new ideas and perspectives.

 Creativity is, therefore, the core competency.

Promotion/Transfer- A tool to fill up HR Gap.

HRP at the enterprise level is integrated with

transfer, promotion and job rotation. For internal
staffing of vacancies, suitable policies on the
above areas must exist, or else, the organisation
would be constrained to frequently go for
redundancy, leaving its fate only to external
hiring. For managerial and executive levels, this
is addressed by succession planning. For non-
executive positions, suitable policies on
promotion and transfer and also job rotation,
facilitate restructuring of manpower and their
redeployment to meet the recruitments of HRP
 Job Rotation

 Job Mobility
 Job Enrichment

 Job Enlargement
 Career Planning- Development &
Succession Planning

 Effective HRP encompasses career

planning, career development and
succession planning. Even though in this
era of rapid technological changes,
organisations are besieged with the
problem of manpower redundancy,
organisation are equally concerned with
the problem of retention of manpower.
 While one way to increase retention is by extrinsic
motivational rein forcers, the other way obviously is to
address the need of employees, which centers around
individual career planning and career development.
From an organisation’s point of view also these
initiatives reinforce its strategic plans and make its
goals and objectives achievable. An organisation
without career planning and career development
initiatives is likely to encounter the highest rate of
attrition, causing much harm to its plans and
programmes. Similarly, without succession planning,
manning of vacancies, particularly at higher levels,
becomes difficult. There are examples of many
organizations, who had to suffer for not being able to
find a right successor for their key positions. With the
increased scope for job mobility and corporate race for
global head-hunting of good performers remains
awfully short. This again strengthens the need for
effective career planning, career development and
succession planning.
 Overview of Career Development
 Career development essentially means the process of increasing
an employee’s potential for advancement and career change. In
other words, it is a process of planning the series of possible jobs
which an individual may hold in the organisation over time and
developing strategies designed to provide necessary job skills as
the opportunity arises. Therefore, career development relates to
the readiness for progression through a series of positions during
an individual’s working life. Career development may be
differentiated from career planning and career management.
Career development is a systematic process of guiding position,
whereas career planning is a process of establishing career
objectives for an employee (or by the person himself) and
developing planned strategies to achieve them including activities
which help in making choices with respect to occupations,
organisation’s job assignments and self development measures.
Career management, on the other hand, relates to specific human
resource management activities such as recruitment, selection,
placement and appraisal to facilitate career development. Poor
career development programme may affect an organisation at
least in two ways:
 High employee turnover, particularly those in their beginning of
their career.
 Decreasing employee involvement.
 ADVANTAGES OF CAREER
DEVELOPMENT
 It reduces employee turnover by providing
increased promotional avenues
 It improves employees morale and motivation
 It enables organisations to man promotional
vacancies internally, thereby providing
opportunities to reduce the cost of managerial
recruitment
 It ensures better utilization of employees’ skill and
provides increased work satisfaction to employees.
 It makes employees adaptable to the changing
requirement of the organisation.
 OBJECTIVES OF CAREER
DEVELOPMENT
 To attract and retain effective persons in
an organisation
 To utilize human resources optimally
 To improve morale and motivation level of
employees
 To reduce employee turnover.
 To practice a balanced promotion from
within’ policy
 To make employees adaptable to changes
 To increase employees’ loyalty and
commitment to the organisations
 CYCLES OF CAREER
DEVELOPMENT PROCESS
 Exploratory Stage: Compulsory job rotation for a
reasonable time period. The purpose of such job
rotation for a reasonable time period. The purpose
of such job rotation is to allow the employee to
select his preferred job from a wide range of
available jobs in the organization.
 Establishment Stage: After a new entrant choose
his career from different given alternatives (where
such options are available), he needs to be
provided with regular feedback on his
performance. A successful career development
process at establishment stage, therefore, is
important to retain employees in the organisation
and at the same time to develop a sense of
loyalty and commitment to the organisation
 Maintenance Stage: This is a mid-career
stage for employees who strive hard to
retain their established name and fame.
Therefore, at this stage employees need to
put their continuous efforts for self-
development this stage is crucial and
unless the organisation adopts suitable
career development programmes, it may
face high employee turnover
 Stage of Decline: Employees at this stage,
being prepared for retirement, get scared
from the possible threat of reduced role or
responsibilities in the organization. Career
development process at this stage, should
aim at helping the employees to get
mentally prepared for retirement rituals
 Succession Planning
 Succession planning involves identifying key management
positions that the organisation cannot afford to have
vacant. These are usually senior management position
and / or positions that the organisation has tradionally had
a very difficult time filling.
 Traditional succession planning utilizes a relatively simple
planning tool called a replacement chart. Replacement
charts identify key positions, possible successors for each
of these positions, whether each potential successor
currently has the background to assume the job
responsibilities, or the expected amount of time it will take
for the potential succesor to be ready. Replacement charts
are easily derived from the organisation chart and are often
part of the human resource information system.
 Subjective personal assessments.
 Some organisations, are much more systematic about their
succession planning. Their replacement charts may contain
specific skills, competencies, and experiences rather then
subjective estimates of time readiness.
 The 21st century may need to develop much larger pools
of talent with very broad sets of skills. Many
organisations are beginning to embrace the development
of succession planning strategies that are based more on
organisation-needed competencies and flexibility than
focusing on subjective assessment of “readiness”
 Critical training and development needs of investment-
oriented approach toward employees, it facilitates
leadership continuity through succession planning, it
facilitates strategic planning by examining the future
availability of employees and their skill sets, it facilitates
an understanding of shifts and trends in the labor
market through an examination of job requirements and
employee capabilities, it facilitates employee
development by determining the skills that will be
needed to achieve strategic objectives as well as to
ensure future career success, it facilitates budget
planning and resource allocation be determining needs
for employees in response to the organisation’s strategic
plan, it facilitates efficiency by estimating future
employee surpluses and shortage, it facilitates the
organisation’s adaptation to its environment.
Importance of Succession Management

Succession management – the process of ensuring that

pools of skilled employees are trained and available to
meet the strategic objective of the organization

Resources for Succession Management

1. Provide increased opportunities for high-potential

workers.
2. identify replacement needs as a means of targeting
necessary training, employee education, and employee
development.
3. increase the talent pool of promotable employees
4. contribute to implementing the organization’s
5. help individuals realize their career plans within the
organization.
6. Tap the potential for intellectual capital in the
organization
7. Encourage the advancement of diverse groups.
8. Improve employee’s ability to respond to changing
environmental demands
9. Improve employee morale.
10. Cope with the effects of voluntary separation programs.
11. Decide which workers can be terminated without damage
to the organization.
12. Cope with the effect of downsizing.
13. Reduce headcount to essential workers only.

Internal Versus External

Advantage of Internal Candidates

• Organizations have more and better information about
internal candidates.
• organizations that offer career development and
opportunities to internal candidates increase commitment and
retention among their employees
• internally developed leaders preserve corporate culture.
• Internal candidates can hit the road running, because they
know the organization, its people, and its processes. The other
employees know the internal candidate, and there is less
internal disruption, waiting to see who the new executive is
and what changes he or she will make. Internally chosen
executives do not replace those who report to them often as
external candidates do; externally chosen candidates often get
rid of the “old guard”.
• Recruitment and selection costs are lower. For example, the
replacement cost of a CEO is estimated to be $75,0000,
including the use of a search firm and lost opportunities getting
the external candidate up to speed.

Advantage of External Candidates

• The external candidate may have better skills to lead the

organization through a major transformation or change in
strategy.
• The external candidate brings new knowledge and skills
to the organization and prevents the organization from
becoming inbred and stale.

Succession Management Process

• Align succession management plans with strategy

• Identify the skills and competencies needed to meet
strategic objectives
• Identify high-potential employees
• Provide developmental Opportunities and Experiences
i) Management development methods
ii) Promotions
iii) Job Rotations
iv)Special assignments
v) Formal training and development
vi)Mentoring and coaching
To the Manor Born?

The cult classic, ‘The Godfather’ dealt with the subject of

succession planning in a rather subtle, yet non-distinctive
manner. Though Michael Corleone, the youngest among the
Corleone sons, didn’t have any inclination towards his
father’s business, he had to reluctantly take over after his
two elder brothers walked away from the scenario. Michael
had neither any prior working experience nor was he versed
with the nuances of the business. But since his father was
keen on having one of his sons carry on the legacy, Michael
wasn’t left with much of a choice. This however, is not the
case in organization. Choosing a successor is not an easy
task and it becomes harder when there is a need to choose
between someone who has the family name and someone
with the right qualifications. “Historically, successors have
been chosen on the grounds of familial lineage; this is, of
course, based on the premise that they are capable of taking
over the reigns of the business. However, a successor
is to be judged by merit alone and the definition of merit goes
beyond lineage, “says Shrikant Kulkarni, Senior VP-HR, KPIT
Cummins Infosystem Ltd. Avirat Sonpal, MD Unisource Group,
agrees, “ A successor should be appointed on the basis of
his/her skills and his/her ability to run the business with
panache and confidence. However, if the heir/heiress takes
over, he/she ought to be qualified and experienced enough to
be able to assume responsibility for the role that he/she is
about to take on.”
Several CEOs are facing the dilemma of who to choose
from since choosing a leader is an investment that the
company is going to make for the long run and any wrong
decision on the company’s part can have disastrous
consequences.

The next in line

Succession planning has gained immense meaning in today’s

world economy where the war to gain the competitive edge is
severe. Successors need to possess just the right mix of work
Experience, talent and change management skills. They have
to be well-versed with the organisational objectives and
should be able to identify the workforce’s developmental
needs. And to pick the right successor, one has to make a
choice based on analytical thinking and evaluation rather
than emotion. For a long time, there was a trend of
companies choosing blood relatives over deserving
employees, who deserved to be rightfully, the next in line.
However, this outlook is slowly changing. Sonpal opines, “if
the business is one’s own or family-run, the liability on the
part of an heir/heiress running the business increases and so
the efforts invested by an heir/heiress wouldn’t be note
worthy.” He/she tends to slack a bit and he/she feels that
‘dad’ is always available in times of need. “But successors
who are chosen from within the organisation would be loyal
to the cause and would refrain from straying. Also, the
person would be aware of the faith instilled in him/her and as
a result, the individual output of the employee would also
increase,” adds Sonpal. He further adds that while choosing
someone from within the organisation to take on the
responsibility of such a caliber, the person concerned needs
to have a clear idea of how the company functions, its ideals
and principles and other intangible elements which are only
acquired over time. Experts, therefore, add that an existing
senior employee will have an edge over the heir/heiress to
acquire the position of the CEO due to his/her tenure in the
organisation.

The outside edge

Organisaitons need a successor who is a good crisis manager

and is competent enough to handle the pressure and give
workable solution in times of emergencies. Lack of
preparation is the most frequently committed succession-
planning mistake. Hence, it is necessary that employers
invest a lot of time evaluating various options. Aditya Gupta,
Founder and President, Infovision Group gives his take on
this issue, “ One can also opt for the right fit from a different
organisation. A CEO from another organisation/industry
opens an array of choices for the organisation.” Sonpal
agrees, “The candidate would bring with him/her varied
experience from another setting, and so he/she might be
able to upgrade and positively impact the current systems
and processes with his/her vast expanse of knowledge.”
Kulkarni believes, “He/she will also have an ability to give
direction to the company based on his/her past experience
and understanding of the industries he/she has worked in.”

Quality Control

“A successor should have the ability to go the extra mile

and learn the business, if she/she is new to the business.
There are chances that there might be conflict within the
organisation once the new successor is appointed and
he/she should have the ability to tackle such situations,”
says Gupta. Vivek Talwar, MD, Nitco Tiles, opines, “A
successor should only be chosen by merit and not by birth.
An existing employee will bring passion as well as an
entrepreneurial skill to take the business to another level.
However, it is necessary to ensure that the person selected
has a bit of both so that the company moves forward to
another level in a structured manner.”
“One of the most important factors that a successor
should possess is an ability to maintain strong relationships
with key stakeholders that can be translated into an ability
to bring about growth in alignment with the company’s
goals. Also, he/she should have the ability to execute
strategies better, quicker and more effectively, on account
of formal and informal networks within the organisation and
should have a well-developed value system that is in sync
with the corporate culture in terms of close interaction with
the leaders,” adds Kulkarni.
In the end, it’s success that counts. Choosing Michale
Corleone, as the successor was a circumstantial decision and
so was his success. But in an organisation, it’s one of the
most important decisions that one makes. A succession
planning programme should look good both on paper and in
practice. In addition, it needs to be constantly, nurtured. So
the question you need to ask now is would you choose
someone with the right last name or someone with the
right talent?
The question of Succession To plan or Not to plan by
Anita Belani
Have you noticed that suddenly corporate India is asking some
very basic but key questions? We hear many buzz words in
recent times which were only uttered very rarely even as early
as a decade ago. One such term that is bothering our corporate
leaders greatly is the whole issue of Succession Planning.
We are living in strange but exciting times – there is so
much change is the only constant in our lives at this time.
Organisations are going through huge amounts of growth,
mergers and acquisitions and re-engineering which often brings
up the need for the availability of key management staff or
skills at a moment’s notice. It is no secret that talent
acquisition is the single most difficult thing for organizations to
cope with today-in this increasingly competitive market it is a
constant challenge for organizations to keep the pipeline of
skilled and talented individuals going and there is a serious
recognition of the fact that with all the growth and changes
happening, highly
skilled senior managers and experts can be required to fill
critical roles at a very short notice. How does one cope with
these is sues without having a nervous breakdown? This
requires a strategic approach that is as critical as and is a
tematic and flexible succession planning process that is part
of the DNA of the organisation.

What is succession planning?

Succession planning is the process that identifies and

develops employees for future openings in strategic positions
that can arise due to changes in leadership, mergers, growth
into new territories etc. if done properly, Succession Planning
forms part of a strategic & integrated human resources
approach that links career planning, training, potential
assessment and performance appraisal. But now often do we
see a structured, strategic approach like this being practiced
in organisations? Typically a critical departure leads to panic
and the knee jerk reaction is either to move a not –so-ready
Person in the role or go outside in search of a replacement. If
a robust succession planning process is in place it would
minimize the chance of poor choices which may cause adverse
impact in the form of loss in productivity, attrition, delays in
execution of critical planes etc.

A succession plan provides for a sequence of employee moves

so that a ready pool of candidates is available to fill critical
positions in advance of their opening up. If this identification
is made in a systematic manner, candidates can be mentored,
coached trained, developed and, therefore, made
appropriately ready to occupy specific roles as and when they
open up. Just think about the state of the Indian cricket team
if the universities, state leagues did not get the next breed to
Tendulkars & Dravids ready to take on the mantle as the
senior players exit from the international scene. Granted
organisations are a lot more complex tan a game of cricket
but I am sure you get my drift. Imagine your national team
with an old bunch trying to play the young, lean, mean,
hungry Australian team. Definitely not a pretty sight. Moral
of the story? The right kind of people for the right kind of
jobs cannot be conjured up out of thin air and the sooner we
realise that the better.
Companies that have figured this out do realise that a
workforce that is provided focused development through work
experience and skill building is likely to stay with them
longer.. Career development and skill enhancement are the
two most critical retention tools for any organisation and the
importance of such processes cannot be stressed enough.
Succession planning aids in this process by enabling
organisations to identify individuals that need to developed or
grown for future opportunities. There is also a greater sense
of commitment & loyalty in the system because employees
feel that the company is investing in them, thereby enabling
retention of key high potentials. One of the key benefits or a
well rounded career/ succession planning process is also a
creation of a learning culture which in turn increases the
engagement quotient in the organisation. As a result of the
assessment of areas that need to be developed in the
organisation to cater to future requirements, a more
streamlined approach can be developed to understand
where the future talent supply is going to come from, what
new roles need to be developed to manage new business
areas and thereby helping survive in the global economy.

How to Succession – plan?

Succession planning is a future oriented process and for it

to be successful the CEO has to drive it in the organisation.
If the top management does not support the initiative it will
become just another policy that languishes on the internal
HR portal but is never really utilized to its potential. The
most important point to note is that it does not have to be a
complicated process but if something is put in place it has
to be driven properly to maximize the potential & benefits.

As a first step the organisation has to decide how deep the

succession plan should be created in the hierarchy. It is
recommended that the top two layers of the organisation
and some selective critical positions below that should be
planed for. The more granular you get the harder it is to do
justice to an exercise like this. The level of detail that’s
required to have a well thought out bench strength chart at
the end of this exercise will make it difficult to mange if
every position in the organisation becomes a part of this
exercise.
As the next step a proper system should be created to
analyse data on potential candidates for future roles. An
executive review system which looks at past performance &
potential appraisals, experience, skills, education of the
individuals and has a mechanism to match these with future
role requirements is very important. Also of critical
importance is a way to assess personal career goals of
individuals so that there is no mismatch in future job match
ups. Comparisons of these tow inputs will help organisations
understand the training & development requirements to plan
for. Additionally, on the job training can also be planned for
and an assessment can be made of the gaps that exist in
management succession and skill building.
In Conclusion

Organisations need to realise that succession planning is as

critical as creating a strategy for business success. It is a
core necessity. An India moves into the top three
economies of the world, it is critical for organisations to be
prepared to handle this transition with a tem that can face
future global challenges. Succession Planning can greatly
help in the regard.
 Need for Manpower Training
 Updating Knowledge
 Avoiding Obsolescence

 Improving Performance

 Developing Human Skills

 Imparting Trade-specific Skills

 Stabilizing the Workforce

 Classification of Training Programmes
Depending on the functional level & occupational categories of
employees, an organisation can classify training programmes as
under:

 Level Nos. Types of Training

Workers 1. Introduction
2. Job Training
3. Craft Training
4. Special Purpose Training
Supervisors 1. Induction
2. Foremanship/Shopfloor Supervision
3. Manpower Management
Staff Members 1. Introduction
2. Professional
3. Technical
4. Human Relations
Managers &
Executives 1. Induction
2. Executive Training
3. Training in Executive Development
 Skilling & Multiskilling
 Skills of human resources have now become an
important factor to address global competitiveness both
at the organisational and national level.
 Skill is defined as a coordinated series of actions that
serve to attain some goal or accomplish a particular
task. Operationally, skills are defined widely as overt
responses and controlled stimulation. Overt responses
may be verbal, motor or perceptual. Verbal response
typically stresses on speaking (which requires
memorization of words), motor responses stress on
movements of limbs and body while perceptual
responses stress on understanding of sensory response.
Controlled stimulation, on the other hand, is energy
inputs to the workers, which we express in units of
frequency, length, time and weight. Technological
change and skill requirements have been made a subject
of investigation in many studies across the world.
 Transformations in skill due to technological change
occur along two tracks, (i) compositional shift, structural
change in occupational pattern due to creation or
elimination of jobs of a given skill level and the
distribution of persons to job in a sectoral economy and
(ii) changes in work content (the technical nature of work
and the role relations surrounding work performance).
 Internationally, the careers of the future will require
greater education (more in the form of institutionalized
knowledge) at the job entry level and will also demand
continuing education to keep pace with technological
dynamism. Greater level of technological literacy even for
lower skill and low paying occupations will be in demand
in future.
 Conventionally, skill can be defined as those knowledge
or attributes, which are deemed vital to organizational
success.
 There are four general types of skills:
 Technical skills: which relate to specific concepts,
methods and tools specific to an organization.
 Supervisory skills- which enable one to effectively
supervise others.
 Interpersonal skills- which enable people to
communicate and interact effectively.
 General Business skills- lines of business and
support infrastructure.
 Technical, skills are observable, demonstrable and
testable. The other skill types are softer, more
subjective and difficult to quantify.
 Any organisation going for skill renewal or skill-
change exercise, needs to undertake the following
tasks:
– Profile the skills required by jobs,
– Assess the skill levels acquired by individuals
– Conduct a gap analysis between required and acquired
skill.
– Training should ideally occur before the skill is needed so
that daily work can reinforce training.
 MULTI SKILLING
 Multi skilling is defined as the process to train employees in
specific skills that cross the traditional trade-specific or
craft-specific skill sets. Thus, to develop multi skills,
employees require additional training to enable them to
perform more multi skills, employees require additional
training to enable them to perform more jobs within the
same job family or to do the entire jobs from a holistic
point of view. Multiskilling is often misconstrued to succeed
downsizing. But downsizing occurs due to skill
obsolescence, among other reasons, while multiskilling is
for holistic development of human potentialities to
effectively address to the requirements of changing
production process (more flexible and customized )
organisational systems (decentralized control) and state-of-
art technology (numeric control, computer numeric control,
direct numeric control etc.). Multi skilling facilitates intra-
occupational and inter-occupational job mobility and
thereby, reinforces HRP.
 COMPETENCIES
 Competencies are set of behaviours,
which encompass skills, knowledge,
abilities and attributes.
Competencies need to be assessed
at the organisation and individual
level.
 ORGANISATIONAL FLEXIBILITY
 If organisations are structured along functional or specialist lines,
there exists a rigidity which inhibits change other than marginal
change.
JOB FLEXIBILITY
 Jobs are grouped, job flexibility is concerned with the design or
content of individual jobs
FLEXIBILITY IN HUMAN RESOURCING
 A relatively small central core of highly skilled employees on
direct, permanent contracts, with the size of this workforce set at
close to the minimum expected level of requirement.
 A larger group of secondary employees, on terms such as fixed-
term and temporary contracts which make it possible to change
their number relatively quickly and without incurring redundancy
costs.
 An outer ring of workers of various kinds (not employees) such as
agency staff, self-employed freelance workers, contractor and
consultants. Their use can be changed even more rapidly than of
the secondary employees.
Flexible Conditions of employment
 From the viewpoint of a redundancy
avoidance policy, there are several key
elements of the employment package
where flexibility is of utmost
significance. Following issues need to be
addressed:
 Contractual duties
 Working times
 Relocation schemes
 Retirement and pensions
 Operational Approach
Short –term operational measures that can be
taken to avoid or reduce such action, in
particular are as under:
 Natural wastage and recruitment restrictions
 Stopping or reducing overtime
 Terminating the employment of non-
permanent workers (temporary, casual,
fixed-term contract, self employed, agency
employees)
 Retraining and redeployment
 Retirement measures
 Volunteers for redundancy
People Capability Maturity Model (P-CMM)
 P-CMM adapts the maturity framework of the
Capability Maturity Model for software to managing
and developing an organisation’s workforce. To
attract, develop, motivate, organize and retain talent
to continuously improve capability of an organisation.
P-CMM is now widely used in organisations across the
world. This is designed to integrate manpower
improvement with process improvement
programmes. Based on the best current practices in
the fields such as human resources and
organisational development, the P-CMM provides
organizations with guidance on how to gain control of
their processes for managing and developing their
human resource. P-CMM helps organisations to
characterize the maturity of their human resource
practices, guides a programme of continuous
 Manpower development, set priorities for immediate
actions, integrate manpower development with process
improvement, and establish a culture of software
engineering excellence. It describes an evolutionary
improvement path from adhoc, inconsistently performed
practices to a mature disciplined development of the
knowledge, skills and motivation of the human resources.
 The P-CMM consists of five maturity levels that lay
successive foundations for continuously improving talent,
developing effective teams, and successfully managing the
people assets of the organisation. Each maturity level is a
well-defined evolutionary plateau that institutionalizes a
level of capability for developing the talent within the
organisation.
 Managing manpower redundancy
 Technological developments, global competition, the
emergence of a new economy and markets,
demographic and political changes are some of the
factors which influence organisations to go for
frequent adjustments in existing structure, systems
and processes and redefine their relationships with
customers and other stakeholders to right size or
downsize workforce and more specifically managing
manpower redundancy.
 There are two aspects to redundancy avoidance-
long-term or strategic and short-term operational
action can be put in place as a preventive measure,
i.e. before anything approaching a redundancy
situation occurs, whereas short-term or operational
action is taken to avoid or minimize actual or
imminent redundancies. The key feature of long-
term or strategic measures is planning. Alan
Fowler(1999) ‘Managing Redundancy’
 Assessment of the likely trends affecting the
viability of the business.
 Eventually be reactive
 Adopting of crisis management measures,
which includes making of sudden changes in
the constitution and size of the work force.
 Age & service profiles
 Hierarchy and rigid and centralized
management systems
 Be permanent full time employees
 Redundancy agreements with its trade union

 Skills, multi skilling & competency are the

major issues concerting HRP.
 Knowledge Management
 Shortage of critical skills
 Another important aspect which deserves the
attention of HRP is demographic change process. For
developed countries, the problem is ageing
population, but for a developing country like India,
the problem is just the reverse. Our working
population is increasing at an annual rate of 1.09%.
By the year 2015, we will have more population in
the working age group (15-64 years), which would
be 66.7% of the total population against the present
rate of 61.2%. Therefore, we need to concentrate
on human resource development in a planned
manner, duly identifying the skill requirements.
 Hewitt seeks futuristic talent development plan 2007
 HEWITT Associates on Wednesday recommended
creation a a nodal agency for workforce
development in India, to align the education
system with the skill requirements of the industry.
This would enable India to capitalize on the
growing opportunities in the global offshoring
services space.
 “With US, UK, Japan and Singapore witnessing
change in demographics fuelled by an expanding
againg population, India is well positioned to meet
the shortfall of service professionals, particularly
in software and BPO sectors. However, the
challenge is to improve the employability of our
workforce to meet this surge.” Anupam Prakash,
Asia lead, global sourcing and business
transformation, Hewitt Associates, said on the
sidelines of a Hewitt-Nasscom summit.
Hiring to increase in Oct-Dec 2006
 Main recruitment drivers include retail,
media, FMCG, IT and financial services
 Bangalore projects the highest business
outlook index point, followed by Mumbai
and Delhi for the next three months
 Even cities with index points below the
national average show more companies
are planning to increase hiring activities
 Hiring trends are highest at 31% followed
by IT at 18%, production at 17% finance
and others at 11% administration at 8%,
& HR at 4%
 While India is positioned to cater to the
global services requirements, the challenge is
to transform the raw talent into employable
poll. “Of the three million grads that India
produces, only 15% are hirable,” he said.
Hewitt has sought a comprehensive futuristic
talent development plan for the country.
“Under standing the skill requirements of
high-growth and high priority industries and
the skill gaps they are experiencing for entry-
level talent will be key to tapping growth
opportunities, “Mr prakash said.
JUST HOW DO YOU
MEASURE

ATTRITION
 During an analyst call of a major IT services
company, a question was raised about its
attrition rate. The query was directed at the
differing number which was arrived at by the
company and the analyst, though both were
right in their own way of calculating the
figure.
 main methods of calculating attrition-one
which is based on the last 12 month while the
other being the quarter figure arrived at on an
annualized basis. Nitin Sethi, industry leader,
IT & ITeS, Hewitt Associates, says:
“Calculation of attrition rates in the Indian
industry has been no consistent approach or
method to calculate attrition rats and the
approach may vary from organization to
organization.”
 The formula for quarter on an annualized basis’
attrition is computed on the premise of the numerator
divided by the denominator and it gets extrapolated
for the full year. This calculation is prone to being
impacted by the seasonality is prone to being
impacted by the seasonality in attrition, typically
which is high in June and September quarters while
the December and March quarters are relatively low.
In the formula of last twelve months, attrition is
computed on the basis of the trailing 12 months that
negates any seasonality in attrition.
 Further, the calculation and declaration of
attrition is also an ‘unaudited’ figure as there
are various other elements which may or may
not be people under different categories like
trainees, probationers, or even the under
performers.
 Tarun Singh, director, Kenexa Technologies, India,
says: “Most organization in practice do not evolve
robust measurements for calculating cost of a bad hire
or labour turnover. The detailed information required
and the measurement metrics are not common one-
size-fits –all formulae, but have to be designed based
on the nature of business and function of the
organization. Thus different models and statistics
may be statistics may be specific to and hold true for
different organization.”
 Providing and examples, Achal Khanna,
country general manager, Kelly Services India,
says if a company has 1,00 employees in April
2004 and 2,00 in March 2005, then they may
take their base as 2,000 in March 2005, then
they may take their base as 2,000 in or as
1,500 (average for the year) and if the number
of employees who left is 300 then the attrition
figure could be 15% or 20% depending on
what base you take.
 Thecase of differing attrition rate could be
perhaps linked to the growth being
experienced by the IT industry and the
pressure points in terms of supply of
manpower. In this people driven business, it is
imperative to have the attrition under control.
 According to Bhaskar Das, vice-president- HR,
Cognizant, it reports attrition for the quarter on an
annualized basis as that’s the globally accepted
practice by many companies. Das says “I think
investors and analysts do find it difficult to gauge
what the real attrition number is, different formulae
are used by different companies.” It is also important
for the companies to project the ‘right number’ to
their stakeholders and its employees as any high
degree of attrition could set the ball rolling in the
wrong direction.
 Sethi says, “Since attrition rates are a very
important factor in determining the health of a
company, they would want to adopt different
methods of calculating attrition which will suit
them(produce lower attrition numbers). “Ms
Khanna says, “Attrition number is also a PR or
stock/analyst statement and is prone to
dressing’ up”.
 The level of attrition also directly impacts the
business of any organization. It not just the
various costs which are associated with the
people leaving the organization, but hindering
its future growth plans. A lower rate of
attrition bodes well for any organization.
 Attrition also directly relates to the employee
engagement in the company as well as the confidence
of the customer in the ability of the company to
deliver the services. Singh says high attrition rate
affects employee morale, inhibits new people from
joining and shakes the clients faith in it and even
perhaps impacts stock performance. “In some case it
can be simply seen as an organisation’s competitor
appreciating its quality of hires and the output, post-
training- almost a backhanded compliment, “ says Ms
Khanna.
 Bhaskar says, “ In the information technology
industry people are the core assets. It there is
frequent change there would be discontinuity
in providing the same level of experience to
customers,” he adds. He says attrition data is
also used to find out whether any employee
engagement process needs to be tweaked to
build stronger businesses.
 Given this background on the differing view-
points on attrition, is there a need for own
common standard of defining attrition or a set
of methodologies, which could actually define
how it needs to be calculated.
 “Absolutely,” says Sethi, “We need a common
standard for the industry. It is very difficult to arrive
at industry and company benchmarks if the method of
calculating is different from company to company.”
 Singh feels it would probably be difficult to arrive at
a common standard for calculating attrition for
various reasons which may range from organizations
experiencing high attrition rates and also employee
turnover which needs to be split up into component
parts like employees who leave within a year of
joining or those who are asked to leave due to low
productivity.
 TV Mohandas Pai, director, HR & Training
Infosys says, reporting attrition is a new
phenomenon for any industry especially for IT
sector and it is still a evolving process.
 He says it is upto to the individual companies
to choose the methods it would like of
calculating attrition and feels that a common
standard would evolve over a period of time.
Costs involved in Attrition

• Administration cost
• Sourcing cost
i) Agency cost
ii) Advertising cost
• Recruitment cost
• Training & Development cost
• Replacing an employee (Compensating for knowledge
loss- learning curve).

A Nasscom- Hewitt Associates survey says that the cost of

attrition in the industry is 1.5 times the annual salary.
Reasons for attrition

1. Better prospects
2. Further education
3. Health
4. Marriage
5. Migration
6. Others
7. Personal
8. Termination

Others include Proximity to residence, Night shifts,

Relocation and Dropouts.
Personal include relations with other employees,
Unhappiness/dissatisfaction, children at home, family
etc.
Attrition’s like rust, innovate to fight it

Wipro BPO HR head V Anandkumar is co-authoring a book on

the BPO industry. The book, meant to be a guide for every
entrant to the industry, looks closely at the issues from an
employee and employer perspective. Mr. Anandkumar
discusses with Writankar Mukherjee various challenges for
Indian BPO industry.

Can you provide a figure for the cost of attrition which the
Indian BPOs are paying?

Attrition is like rust. During a simulation exercise, we realized

that for a $200 million call centre with 15,000 people and
100% attrition, the cost of attrition would be $25 million. This
equals the entire profit of the company (assuming the company
makes a profit of 12.5%). Companies need to look at using this
kitty to come up with tangible solutions for attrition.
What is the root cause of attrition?

Let’s look at the Service Level Agreements (SLA’s) that BPOs

sign with utilization at 85%. This means that in 60 minutes,
an agent will be on call for 51 minutes. Extrapolate that to 8
hours a day that’s 408 minutes out of 480. it’s humanly
impossible to do this day after day. Since the payment
terms with the customer is linked to achieving this SLA – the
employees get driven to the wall – longer hours and close
performance monitoring adds to the stress.

Indian call centre agents, on an average, earn less than

$3000 per year against the global average of $18,000. With
one of the lowest rates in the world, we strive to deliver the
highest customer satisfaction and also the highest profits.
The combination of these low rates, high SLA’s and the
desire for a high profit creates a bubbling cauldron which is
the cause of high attrition. However, companies run their
captives at much lesser stringent SLA’s than what they sign
off with the third party vendors – that’s one of the reasons
why captives have much lower attrition.

BPOs are now focusing on tier II and III markets. Do you

think this model will work?

In metros, costs are spiralling – the rentals in Mumbai alone

have gone up by more than three times in the last four
years. Pune, Delhi, Bangalore, Hyderabad and Chennai are
still able to manage but fast approaching saturation. As a
result, companies will now set up 1,000 seat centres in
smaller towns – this will help reduce attrition initially when
you are the first mover – but when others follow the
problem may crop up again. Cost of recruitment in smaller
cities is lesser, but investment in training will be higher. But
with the rupee gaining and profitability getting affected,
companies have to think innovatively-benefits out of
squeezing operational efficiency are fast drying up. Setting
up centres in college towns like Manipal and Vallabh
Vidyanagar can help you get part-time workers.
With Indian BPOs setting up facilities overseas, what are the
HR challenges?

BPOs will be amongst the first Indian companies to employ

large number of people overseas. Managing team of 1,000
– 2000 people overseas requires a different mindset.
Transferring people from here is not the solution – you need
to hire and integrate the local workforce. Integrating them
culturally is a challenge. The largest of Indian companies
have an India-centric mindset and even brand initiatives
with Indian names. In such a case, communication is critical
and lots need to be done on this front.

The Economic Times 30 Oct, 2007.