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Reference Books:¬ Human Resource and Personnel Management - K.Aswathappa ¬ Human Resource and Management - Subba Rao ¬ Personnel Management and Industrial Laws - P S Narayan and P C K Rao ¬ Human Resource Development and Management - Biswanath Ghosh ¬ Personnel Management - C B Mamoria

»Meaning and Definition:
¬ Personnel Management is a method of developing potentials of employees so that they get maximum satisfaction out of their work and give their best efforts to the organization. - P. Pigors and Charles Myers. ¬ Personnel Management is that part of management process, which is primarily concerned, with the human constitution of an organization. -E F L Brech ¬ The personal function is concerned with the procurement, development, compensation, integration and maintenance of the personnel of an organization for the purpose of contributing towards the accomplishment of that organizations major goals and objectives. Therefore, Personnel Management is planning, organizing, directing, and controlling of performance of those operative functions. -Edwin B. Flippo

» Objectives of Personnel Management:
¬ Recruitment and Selection of right people at the right time and in the right quantity. ¬ Induction of employees to the respective jobs. ¬ Educating employees about the jobs, results expected, goals of the organization, and climate, etc. ¬ Providing employees with training. ¬ Providing better working conditions in organization. ¬ Retaining qualified and competent people. ¬ Ensuring an effective and fair compensation structure within an organization. ¬ Providing employees monetary incentives and motivate them to increase productivity. ¬ Providing opportunities for research and help people keep abreast of the developments in their respective fields.

» Functions of Personnel Management:

HRM notes

HRP: The actual Personnel Mgt. Process begins with the estimation of the number and the type of people needed during the coming period. HRP 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 tat will help the organization achieve its overall objectives. 1. Recruitment and Selection: Recruitment is the process of searching for and obtaining applications for jobs, from among when the right people can be selected. A formal definition of recruitment is: it is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected. Training and Development Industrial Relations Human Resource P lanning Personnel Management Recruitment Employee and Selection Maintenance Employee Motivation Compensation Benefit s Performance Mgt.

2. Performance Management: Performance management is a formal, structural system of measuring and evaluating an employee’s job, related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit. 3. Training and Development: It is an attempt to improve

current or future employee’s performance by increasing an employee’s ability to perform through learning, usually by

HRM notes

changing the employee’s attitude or increasing his/her skills and knowledge. The need for training and development is determined by the employees performance deficiency, computes as follows: Training and development need = Standard performance – Actual performance
4. Compensation and Benefits: It is what an employee receives in return for his/her contribution to the organization. The HR specialist has a different task of fixing wages and wage differentials acceptable to employees and their leaders. It comprises of wages and salary, incentives, fringe benefits and non-monetary benefits. 5. Industrial Relations: It is concerned with the system, rules and procedures used by unions and employees to determine the reward for effort and other conditions of employment to protect the interest of the employed and their employers, and to regulate the ways in which employers treat their employees. Specifically, it covers the foll.: i. Collective bargaining. ii. Role of mgt., unions, and govt. iii. Labour legislation. iv. Industrial relations training. v. Machinery for resolution of industrial disputes. 6. Employee Maintenance: After employees have been hired, trained and remunerated, they need to be retained and maintained to serve the organization better. Welfare and Maintenance facilities are designed to take care of well being of the employees-they do not generally result in any monetary benefit to the employees. Nor are these facilities provided by employers alone. Governmental and non-governmental agencies. and trade unions too, contribute towards employee maintenance. 7. Employee Motivation: HR specialists must use several ways to motivate employees. Motivation is the result of processes that arouse enthusiasm and persistence to pursue a certain course of action. Motivational strategies include attractive compensation, job enrichment leading to job satisfaction, better working conditions and a good career path.

» Personnel Principles:
If policy is a guide for managerial decisions and actions, principle is the fundamental truth established by research, investigation and analysis. Many personnel principles have been established through practices, experience and observation, Principles are universal truths generally applicable to all organizations. Policies, on the other hand, vary from organizations to organizations. Principles guide managers in formulating policies, programmes, procedures, and practices. They also come handy in solving any vexing problem. Some of the personnel principles are: 1

HRM notes

1. Principle of individual development to offer full and equal opportunities to every employee to realize his/her full potential. 2. Principle of scientific selection to select the right person for the right job. 3. Principle of free flow of communication to keep all channels of communication open and encourage upward, downward, horizontal, formal and informal communication. 4. Principle of participation to associate employee representative at every level of decision making. 5. Principle of fair remuneration to pay fair and equitable wages and salaries commensurating with jobs. 6. Principle of incentive to recognize and reward good performance. 7. Principle of dignity of labor to treat every job and every job holder with dignity and respect. 8. Principle of labour mgt. co-operation -to promote cordial industrial relations. 9. Principle of team spirit to promote co-operation and team spirit among employees. 10. Principle of contribution to national prosperity to provide a higher purpose of work to all employees and to contribute to national property.

» The Role of Personnel Manager:
Personnel play an important role in the mgt. of change in an organization. He accomplishes organization goals by building a capable and dynamic work force. He tries to create a sense of involvement and commitment on the part of employees. He creates a sound and favorable working climate and working relationships by motivating employees and achieves organizational goals by effective utilization of human resources. He is responsible for administrative and personnel functions and carries out a number of duties in this regard. The Personnel Manager commonly plays interpersonal role, informational role and decisional role. The interpersonal role helps in interacting with number of people in the organization. The informational role helps in acquiring sufficient knowledge to arrive at timely decisions. The decisional role helps in taking innovative steps and increases the organizations effectiveness. Policy Initiator and Formulator: The personnel manager is required to formulate policies to effectively guide the organization structure and maintain a level of morale necessary for maximizing satisfaction. Personnel policies are concerned with placing the right man on the right job, providing adequate job training, opportunity and recognition to deserving employees. Advisor: The personnel manager advises the line mgt. in resolving routine operational problems. He assists mgt. in various activities while conducting negotiations with union or service matters, arrangement of training and development programmes, welfare activities, manpower planning, communication o bulletins, reports and procedural guidelines. 1

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Problem Solver: the personnel manager contributes towards organizational effectiveness by advising solutions to the problems that require more knowledge, expertise, experience and judgment. The personnel mgrs. Provide expert guidance on personnel problems to line mgrs. that are unable to manage smoothly. Mediator: The personnel mgr. plays a mediator role to maintain peace and harmony in the organization. This is achieved under the premises of an open and effective system of communication that clarifies doubts and removes confusion in the organization.] Well-wisher: Here, the mgr. deals with devising policies relating to social clubs, sports facilities, canteens, saving schemes, superannuation and pension funds, legal and fringe benefits. These policies help in providing security to the employees and motivate and retain them. Representative: The personnel mgr. plays a dual role of mgt. spokesperson and workers representatives and tries to resolve conflicts between them. Decision-maker: The personnel mgr. handles crisis situations by taking innovative and safeguards the timely decisions and interests of both the parties.

» Changing scope of Personnel Management:
A historical perspective can provide a better picture of changing scope of Personnel Mgt. the

¬ The Historical Perspective The earliest recognition of the need for Personnel Mgt. was the institution of Labour Officer in India which can be traced back to the recommendations of the Royal Commission on Labour in India (1929-31). It recommended the employment of a labour officer and “the exclusion of the jobber from engagement and dismissal of labour.” The Royal Commission emphasized recruitment and dismissal as the primary responsibilities of labour officer which were so far enjoyed by the jobber. The labour officers, at this stage, were also visualized as having to perform police functions as the position between the employers and workers was often viewed as a law and order problem. Subsequently, the labour officer’s function changed from mere employment function to welfare activities and he really became a welfare officer. Thereafter, the Factories Act 1948 and the State Rules hereunder created the institution of labour welfare officers making it compulsory for factories with 500 or more workers to employ the prescribed number of welfare officers. Subsequent yrs saw a gradual shift from emphasis on labour welfare to personnel administration. Thus, the function of personnel mgr. Today includes, in addition to labour welfare and recruitment, the important aspect of industrial relations as the industrial relations fast deteriorated. The advent of trade unions on the scene accelerated this shift in emphasis. It may be said that personnel administration came to be recognized in India 1

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in 1951, when a personnel officer was appointed in a chemical concern in Bombay with regular personnel mgt. functions as we understand them today. Thereafter many big concerns set up their own personnel depts. headed by personnel mgrs. and in still larger organizations by personnel directors. In course of time, two professionals bodies, the Indian Institute of Personnel Management (IIPM) and the National Institute of Labour Management (NILM), were set up. IIPM had its headquarters at Calcutta and NILM at Mumbai. These two places were the premier centers of traditional industry. in pre-independent India. The aftermath of the Second World War and the countries political independence witnessed increased awareness and expectations of workers. During the 1960’s, the personnel function began to expand beyond the welfare aspect, with labour welfare, Industrial Relations and personnel administration integrating into the emerging profession called “personnel management” (PM). Simultaneously, the massive thrust given to the heavy industry in the context of planned economic development, particularly since the Second Five Year Plan and the accelerated growth of the public sector in the national economy resulted in a shift in focus towards professionalisation of management. By the 1970’s, a shift in professional values was discernible. It shifted from a concern for welfare a focus on efficiency. In the 1980’s professionals began to talk about new technologies, HRM today challenges and HRD. The two professional bodies, IIPM and NILM, merged in 1980to form the National Institute of Personnel Management (NIPM). In the 1990’s the emphasis shifted to human values and productivity through people. Reflecting this trend, the American Society for Personnel Administration (ASPA) was renamed as the society or Human Resources Management (SHRM). Thus, beginning in the 1920’s, the subject of HRM has growth into a matured profession. Table shows the evolution of HRM. Evaluation Of HRM in India Period Status 1920s-1930s Clerical Development Status Beginning Pragmatism welfare, paternalism 1940s-1960s Administrative 1970s-1980s Managerial Struggling for recognition Achieving Technical, Introduction Statutory, Outlook Emphasis

of capitalists

legalistic. Professional

of techniques Regulatory, 1

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legalistic, confirming, impersonal. Imposition of standards on other functions. Strategic Human values, productivity through people

1990s Executive


business partner

¬ The Modern Context It is necessary to go a step forward in view of changing environment and behaviour patterns of the people. Even today manpower planning and development is a neglected field in India being practiced only in case of handful of large companies. With the advent of fresh problems such as those faced by organizations desiring more automation. mechanization or computerization, a great skill is required in performing the personnel mgt. function to avoid interference from govt. as well as agitation from labour and trade unions. Besides, as the organizations in India move from sellers to a buyers market, productivity and effectiveness will become increasingly important. More competent mgrs. will be required. Thus, manpower planning and development will be the need of the future in the personnel mgt. function.

» Meaning and Definition:
¬ Human Resource Management relates to the total set of knowledge, skills and attitudes that firm need to compete. It involves concern for action in the mgt. of people, including selection, training and development, employee relations and compensation. ¬ HR Mgt. is a process of formulating, implementing and evaluating HR strategies to achieve organizational objectives. It encompasses the entire gamut or human resource development in an organization, including manpower planning, transfer and promotions, compensation and benefits.

» Difference Management:
Personnel Management





Human Resource Management HRM is the mgt. of knowledge, abilities, talents,

1. Personnel means person employed. employee’s skills, Personnel Mgt. is the mgt. of people etc. employed.


HRM notes

2. Employee in personnel mgt. is mostly Employee in HRM is treated not only as treated as economic man as his services economic but also as social and psychological are exchanged for salary/wages. Man. Thus, the complete man is viewed under this approach. 3. Employee is viewed as a commodity or resource. tool or equipment which can be purchased and used. Employee is treated as a

4. Employees are treated as cost centre and Employees are treated as profit centre and therefore mgt. controls the cost of therefore, invests capital for human labour. resource development and future utility. 5. Employees are used mostly for organizmultiple mutual ational benefit. employees and Employees are used for the Benefit of the organization, their family members.

» Meaning and Definition of Strategic HRM:
Strategic human resource mgt. has been defined as “the linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.” Put another way, it is “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.” Strategic HR means accepting the HR function as a strategic partner in both the formulation of the company’s strategies, as well as in the implementation of these strategies through HR activities such as recruiting, selecting, training, and rewarding personnel. Clarify the Business Strategy ¬ New markets. ¬ Operating changes. ¬ New products. ¬ Enhanced technologies. ¬ Improved customer service. Management Has Direct Control 1

HRM notes

Realign the HR functions and Key People Management Practices ¬ HR services ¬ HR systems ¬ HR function structure ¬ People management practices: » Performance Management. » Rewards and recognition. » Communications. » Training and career development. » Rules and policies. » Staffing, selection and succession. » Leadership development. * These are systematic in that they interact with each other to influence individual and organizational behaviour. Management Has Direct Control Create Needed Competencies and Behaviours ¬ Individual ¬ Organizational People and the link between business Business Strategies strategy and realization of results. Management Has No Direct Control Only Influence Direct Evaluate Influence and Refine

Realization Of and Results ¬ Growth ¬ Profitability ¬ Market Share Management Has No Control Only

HR’s Role in Formulating Strategy: HR can supply competitive intelligence that may be useful as the company formulates its strategic plans. Details regarding new incentive plans being used by competitors, opinion survey data from employees that provide information about customer complaints, and information about pending legislation like labour laws or mandatory health insurance are some examples. HR also participates in the strategy formulation process by supplying information regarding the company’s internal strengths and weakness. 1

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E.g. IBM’s decision to buy Lotus was probably prompted in part by IBM’s conclusion that its own human resources were inadequate for the firm to reposition itself as an industry leader in networking systems.

HR’s Role In Executing Strategy:
HR mgt. supports strategic implementation in other ways. E.g. HR is involved in the execution of most firms’ downsizing and restructuring strategies, through outplacing, employees, instituting pay-forperformance plans, reducing health care costs, and retaining employees.

» Process of Strategic HRM:
Environmental Evaluation Scanning and Control External Strategic Budgets Internal Process and Performance Functional Strategy Formulation Business Strategy Control Procedures Formulation Strategy Formulation Strategy Implementation

Corporate Strategy Formulation


Environmental Scanning:
Environment needs to be scanned in order to determine trends and projections of factors that will affect fortunes of the organizations. Scanning must focus on task environment. Not those elements outside the task environment are ignored, but they receive less attention. Scanning helps identify threats and opportunities prevailing in the environment.

Strategy Formulation:
1. 2. 3. Strategies are formulated at 3 levels: Corporate level Business unit level and Functional level Corporate - level Strategy: 1

HRM notes

This is formulated by the top mgt. of an organization made up of more than 1 line of business. The major questions that need to be answered at this stage are – What kind of business should the company be engaged in? What are the goals and expectation for each business? How should resources be allocated to reach these goals? Business - level Strategy: While the major question at the corporate – level is, “In what industries or businesses should we be operating?,” The appropriate question at the business unit level is, “How should we compete in the chosen industry or business?” A business unit is an organizational subsystem that has a market, a set of competitors, and a goal distinct form those of other subsystems in the group. Functional – level Strategy: Each business unit will consist of several depts., such as sales, finance, HRD, etc. Functional level strategies identify the basic courses of action that each of the depts.. must pursue in order to develop the business unit to attain its goals. In formulating functional level strategies, managers must be aware that the different functions are interrelated. Each functional area, in pursuing its purpose, mesh its activities with the activities of other depts.

Strategy Implementation:
Strategy formulated need to be implemented. Implementation of strategies is, often more difficult than their formulation. Although implementation is the logical step to formulation, the two differ in the following ways: Strategy formulation is positioning forces before action. Strategy implementation is managing forces during the action. Strategy formulation focuses on effectiveness. Strategy implementation focuses on efficiency. Strategy formulation is primarily an intellectual process. Strategy implementation primarily is an operational process. Implementing strategies requires such actions are altering sales territories, adding new depts., closing facilities, hiring new employees, etc. Strategy formulation concept and tools do not differ vastly for small, large or non-profit organizations. However, strategy implementation varies substantially among different types and sizes of organizations.

Strategy Evaluation:
Strategy evaluation helps determine the extent to which the company’s strategies are successful in attaining its objectives. Basic activities involved in strategy evaluation are: 2

HRM notes

1. Establishing performance targets, stds. and tolerance limits for the objectives, strategies and implementation plans. 2. Measuring the performance in relation to the targets at a given time. If outcomes are outside the limits, inform managers to tale actions. 3. Analyze deviations from acceptable tolerance limits. 4. Execute modifications where necessary or feasible. Strategy evaluation can be a complex and sensitive task. Too much emphasis on evaluating strategies may be expensive and even counter productive. No mgr. wants to be evaluated too closely. Little or no evaluation can create even worse problems.

» Framework of Strategic HRM:
For HR professionals to become strategic business partners, they would have to work within the following framework: 1. Know the business: All round knowledge of the business would be the prime requirements for HR to be a strategic partner in business. It would need a thorough understanding of: the type of business activity performance by the activity. the goals and objectives of the company the environment in which the business exist and operates the working of different depts. in the organization. The target markets and customers of the business, and In-depth know-how of the products or services offered. 2. Formulation of an Efficient Recruitment and Selection System: The HR professionals should be in a position to design and administer an efficient recruitment system. This is because a job is to be given to right person who can perform it at an optimal level benefiting the organization. HR should identify and recruit such individuals who can translate the organization’s goals into reality. Because by doing this only, HR would go on to become a team member or strategic partner. 3. Drafting of good HR policies: HR needs to draft good and consistent policies because, if the policies of the organization were clear to everybody, it would ensure smooth and effective business operations by which HR would signify the importance of being a strategic partner in business. 4. Building a Conducive Environment in the Establishment: The climate of an organization is of utmost importance since, if it is an environment is not conducive to the needs and requirements of the employees they will not be able to perform their best. This creation of an ideal organizational climate would be the responsibility of the HR professionals in order to realize the company goals. 2

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5. Follow Scrupulously the Concept of Management by Objective (MBO): HR professionals also believe that no function or activity can be done if it is not done with an aim/mission or objective behind it. The HR with good amount of coordination with other depts. should device an Objective Plan scaling the entire organizational hierarchy i.e. setting objectives for the employees at every level of the organization which would complement the achievement of the ultimate goals of the establishments. Off course the setting up of goals would be done with considerable amount of discussion with employees. 6. Play the role of a team builder: It is an accepted fact that none of the organizational objectives can be achieved in isolation. The present era is the era of empowering and building long lasting teams. It is the concept of synergy which works in team building. The HR professionals should know the art of getting done through wining teams. Because teams can achieve much more than what can be achieved by a single individual. Even HR professionals, should see to that they also be a team member occupying a central position in a team as it supplements the working of other depts..

Sales Production Marketing

Human Resource



7. Percolation of the values of the Company to all levels of the Organization: In order to be a strategic business partner. HR should make all efforts to percolate and channelize the vision of the company to all the employees of the company. It should show the employees, that this is the place where we want to see our company in the near future. Just doing this will not suffice. HR will have to tell them that it is they who can actually take the company to such high ranks as envisioned. 2

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8. HR professionals should take active initiative in Corporate Planning and Decision Making 9. HR should also be proactive in identifying training needs of all the employees and try to motivate them to increase their performance. 10. Lastly HR professionals should also deploy an efficient feedback mechanization which would facilitate control and also opportunities for improving their own and the organizations performance.

» Changing environment of HRM:
Most changes in this world don’t take place in a vacuum-artists and poets create their works in response to the times in which they live, wars emerge out of economic and political pressure, and companies change their structures in responses to the need to follow their customers overseas, for instance Therefore, to better understand HR’s role in, organizations today it’s useful to understand how companies themselves are changing and the trends that are causing these changes to occur. Perhaps most importantly, organizations today are under intense pressure to be better, faster, and more competitive-HMO’s are squeezing more productivity out of hospitals, companies like City group are merging and downsizing, and Universities are working hard to boost enrolments and faculty productivity. Why is this the case? Globalization, technical advances and deregulations are three of the trends accounting for these competitive pressures.

» Challenges facing HRM today:
The most striking challenge in HR’s role today is its growing involvement in developing and implementing the company’s strategy. Strategies increasingly depend on strengthing organizational competitiveness and on building committed work teams, and these put HR in a central role. We’ve seen that in a fast-changing, globally competitive and quality oriented industrial environment, it’s often the firm’s employeesits human resources- who provide the competitive key. It is thus now increasingly common to involve HR in the earliest stages of developing and implementing the firm’s strategic plan, rather than to let HR react to it. Globalization refers to the tendency of firms to extend their sales or manufacturing new markets abroad, and, for business everywhere, the rate of globalization in the past few years has been nothing short of phenomenal. From boosting the productivity global labour force to formulating compensation policies for expatriate, managing globalization and its effects on competetitiveness will thus be a major HR challenge in the next few years. Technological Advances: Technology has been forcing - and enabling- firms to become more competitive. Technology is also changing the nature of work . For example, telecommunications already makes it relatively easy for many to work at home, and the use of computer-aided design/computer-aided manufacturing (CAD/CAM) systems plus robotics is 2

HRM notes

booming. Manufacturing advances like these will eliminate many blue-collar jobs, replacing them with more highly skilled jobs, and these new workers will require a degree of training and commitment that their parents probably never dreamed of. As a result, to remain competitive, jobs and organization charts will have to be redesigned, new incentive and compensation plans instituted, new jobs description written, and new employee selection, evaluation, and training programs instituted-all with the help of HR mgr. Trends in the Nature Of Work: There has been a pronounced shift from manufacturing jobs to service jobs. These service jobs will in turn require new types of “knowledge” workers, new HR mgt. Methods to manage them and new focus on human capital. Human capital refers to the knowledge, education, training of a firm’s workers and it’s more important than it has been ever before. One reason is the rise in service jobs: service jobs like consulting put a bigger premium on worker education and knowledge than do traditional manufacturing jobs. Another is the fact that even factory jobs are becoming more demanding. New HR systems and skills will be required to select, train and motivate such employees and to win their commitment. Implementing them won’t be easy: Insecurity and shorter job tenure are diminishing employee commitment today, in the opinion of some experts. Workforce Diversity: It is another major work-related trend. Creating unanimity from a diverse workforce may also turn out to be a considerable challenge for HR. Establishing HR programs that don’t just pay lip service to diversity may thus be a challenge for many employers. New Management Practices: The quest to be more competitive has led many firms to change hoe they are organized and managed. E.g. The traditional, pyramid-shaped organization is going out of style. At firms like AT&T, the new way of organizing stresses cross-functional teams and boosting interdepartmental communications. There is a corresponding de-emphasis on “sticking to the chain of command” to get decision made. Employees are being empowered. Some experts argue that today’s organization should put the customer on top, and emphasize that every move the company’s makes should be toward satisfying the customer needs. Flatter organizations are becoming the norm. Instead of the pyramid-shaped organization with 7 to 10or more layers of mgt., flat organizations with just 3 or 4 layers will prevail. Work is increasingly organized around terms and processes rather than specialized functions.

A HRIS is a systematic procedure for collecting, storing, maintaining, retrieving and validating data needed by an organization 2

» HRIS (Human Resource Information System)

HRM notes

about its human resources. The HRIS is usually a part of the organizations larger mgt. system(MIS). The HRIS need not be complex or even computerized. But computerization has its own advantage of providing more accurate and timely data for decision making. The areas of application of HRIS are many. Some of them include training mgt., risk mgt., turnover analysis, succession planning, flexible benefits administration, compliance with govt. and legal environment, etc.

Steps in implementing HRIS:
As with any major change, proper planning is an absolute necessity for successful implementation of an HRIS. The steps outlined below describe the specific procedures involved in successfully developing and implementing an HRIS. Step 1: Inception of idea. The idea of an having an HRIS must originate from somewhere. The originator of the idea must prepare a preliminary report showing the need for an HRIS and what it can do for the organizations. Step 2: Feasibility study. Feasibility study evaluates the present system and details the benefits of an HRIS. It evaluates the costs and benefits of an HRIS. Step 3: Selecting a project team. Once the feasibility study has been accepted and the resources allocated, a project team should be selected. The project team should consist of an HR who is knowledgeable about the organization’s HR functions and activities and about the organization itself and representatives from both management information systems and payroll. As the project progresses, additional clerical people from the HR department will be needed to be added. Step 4: Defining the requirements. A statement of requirements specifies in detail what exactly the HRIS will do. A large part of the statements of requirements normally deals with the details of the reports that will be produced. Naturally, the statement also describes other specific requirements. This typically includes written descriptions of how users collect and prepare data, obtain approvals, complete forms, receive data and performa other non-technical tasks with HRIS use. The key here is to make sure that the mission of the HRIS truly matches management’s needs for an HRIS. Step 5: Vendor Analysis. This step determines what hardware and software are available that will best meet the organizations needs for the lowest price. This is a difficult task. The best approach is usually not to ask vendors if a particular package can meet the organizations requirements but how it will meet those requirements. The results of this analysis will determine whether to purchase an ‘off-the-shelf’ package or develop the system internally. Step 6: Package contract negotiation. After vendor has been selected, the contract must be negotiated. The contract stipulates the vendor’s responsibilities with regards to software, installation, service, maintenance, training, and documentation. 2

HRM notes

Step 7: Training. Training usually begins as soon as possible after the contract has been signed. First, the members of the project team are trained to use the HRIS. Towards the end of the implementation, the HR representative will train managers from other depts.. in how to submit information to the HRIS and how to request information from it. Step 8: Tailoring the system. This step involves making changes to the system to best fit the need of the organization. A general rule of thumb is not to modify the vendor’s package, because modifications frequently cause problems. An alternative approach is to develop programs that augment the vendor’s program rather than altering it. Step 9: Collecting the data. Prior to start up of the system,, data must be collected and entered into the system. Step 10: Testing the system. Once the system has bee tailored to the organization’s needs and the data entered, a period of testing follows. The purpose of testing phase is to verify the outputs of HRIS and to make sure it is doing what it is supposed to do. All reports should be critically analyzed for accuracy. Step 11: Starting up. Start-up begins when all the current actions are put into system and reports are produced. It is wise to attempt start- up during a lull period so that maximum possible time can be devoted to HRIS. Even though the system is tested, some additional error often surface during start-up. Step 12: Running in parallel. Even after the new HRIS has been tested, it is desirable to run the new system in parallel with the old system for a period of time. This allows for the comparison of outputs of both the system and examination of inaccuracies. Step 13: Maintenance. It normally takes several weeks or even months for the HR people to feel comfortable with the new system. During this stabilization period, any remaining errors and adjustments should be handled. Step 14: Evaluation. After the HRIS has been in place for a reasonable length of time, the system should be evaluated. Is the HRIS right for the organization and is it being properly used?

» VRS (Voluntary Retirement Scheme):
VRS is an innovative concept evolved in India in the post Economic Reform Environment. The Scheme was initially implemented in the financial year 00-01. VRS is an attempt to synthesize an operation aimed towards downsizing the workforce, with employees willing acceptance & participation. In other words it is retrenchment without tears. A very package of terminal benefits & compensation favorably motivated employees in large numbers of voluntarily seek early retirement & leave service, thus realizing the objective of the companies to shed part of the surplus manpower & become leaner. The initial experience gained in VRS scheme operated by the companies has enabled the government to extend the methodology to a wider scale in the subsequent period & to accomplish the process of rationalization of manpower & shedding excess flap in other 2

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Public Sector & Private Sector undertakings all of which have become overcrowded with heavy surplus workforce, consequent to the rationalization of systems & procedures in the post Reform period shedding a host of redundant controls & restrictive provisions, transferring several functions hither to performed by the government to private enterprise, & switching over to computerized operations everywhere, rendering huge workforce manually carrying on these operations redundant. The result is high cost wage component with low productivity, & making Indian Industry & business less competitive in the global market. It is an anomaly that the Indian worker is paid comparatively low scales of wages, while the employers are suffering from a high cost of labour content in their cost structure. It is the number employed that creates the situation of low wage & high cost. This both the worker & the business/industry stand to benefit by rationalization of work force & improve productivity. Why such an elaborate system & why are companies forced to downsize their workforce by such a steep level? They recruit employees initially incurring considerable cost, & subsequently have to train them for several years continuously. At clerical level an employee needs six months training, while an officer at a junior level is given training on direct recruitment for three years. It may need for such an officer another 5 years to be eligible to become a branch manager & so on for different higher positions, most of which are filled through internal promotions. All these involve huge expenditure. Banks pertain to the category of service industry providing a specialized professional service. Its main stock-in-trade is expert knowledge, an intangible asset. This prime asset of the banks is not stored in its show rooms or godowns, but rests with its officers & employees. A part of the same may be structured & retained in instruction manuals, guidelines & job charts, but predominantly it rests with employees, who are repositories of its knowledge-wealth. A huge turnover of skilled & trained employees at a point of time from n institution will disrupt its normal working, in addition to the loss of heavy resources already spent on their recruitment & elaborate training incurred under the consideration that their service will be continuously available for the full term or entire span of their career. The fast changing economic paradigms affect business models so frequently that in the event of a business model redefinition, restructuring of the workforce becomes a necessity. Each time this necessity arises, we see corporate wooing employees with severance schemes that are extremely severe on the companies’ finances & quality of the workforce. It is unknown that competent employees use this opportunity to make the best of both the worlds. Given the scheme of things voluntary severances is best replaced with compulsory severance. While this may seem as anathema to corporate it is extremely hard on the employees themselves who have developed a certain skill set over a period of time & now finds themselves redundant. Thus to make this model operative in India it is necessary to institute compensation schemes that are commensurate to the extent of damage 2

HRM notes

borne by the individual. The logical scheme/instrument that can address this issue is Insurance. The scheme should cover the employees against structural unemployment for a period of time he remains unemployed. This is of course subject to the fact that the employee is wiling & capable to take up a job requiring commensurate or higher skill. LIC has variants to such insurance but it does not address the issues raised here. Job insurance has been in vogue in the US for many years now. The premium is partly paid by the employer, partly subsidized by the government. In India however the scheme has to be defined differently. For one, ours is a government that has a huge fiscal deficit to contend with. Moreover the extent of unemployment is so high in the country that to take care of this extra load of structurally unemployed workforce would mean an unmitigated assault on the exchequer. In light of such circumstances it is difficult to conceive the government as lending a helping hand to hole the safety net. Thus the question related to who pays for the cover has to be tackled differently. Who suffers the most by this shake out? Probably, the reader will agree that the sufferer be exempted, if not wholly, at least partially, the pain of having to pay for the cover. In the Indian context, as in the rest of the world, the employee is the loser in such shake out. Companies typically shed weight to avoid suffering or do so to come out of their malady of over weight. To shed weights these corporate have to pay heavily. It is in this sense that the organization now benefits from such a scheme & therefore must pay for the benefit. On the other hand, the individual finds termination a bolt from the blue. It is in this sense that he must be exempted from bearing the major burden of the premium.

» Meaning and Definition:
Human resource planning (HRP) is the foundation of an effective HRM. It typically involves forecasting HR needs of the organization, and establishes and implements plans, trains and develops various programmes to ensure timely availability of quality people in the organization. In fact, the strategic planning and HRP are intimately related. This also aids the HR mgr. in performing the duties effectively in the process of recruitment and selection. Therefore, HRP is an indispensable process in the organization that streamlines all the activities. ¬ Human resource planning is “the process by which the mgt. determines how an organization should move from its current to desired manpower position. Through planning, mgt. strives to equip with the right number and the right kinds of people at right places, at the right time to do things which result in both the organization and the individual receiving the maximum long-range benefit.” (Eric W. Velter) ¬ “Manpower planning is the strategy for the acquisition, utilization, improvement, and preservation of an enterprise’s human resources. It relates to establishing job specifications or the quantitative requirements of 2

HRM notes

jobs determining the number of personnel required and developing source of manpower.” (G. Stainer) ¬ “Manpower planning is the process of determining the requirements and the means of meeting those requirements in order to carry out the integrated plan of the organization.”

» Importance of HRP:
1. Future Personnel Needs: Planning is significant as it helps determine future personnel needs. Surplus or deficiency in staff strength is the result of the absence of or defective planning. The problem of excess staff has become so heavy that many units are restoring to VRS to remove the excess staff. 2. Coping with change: HRP enables an enterprise to cope with changes in competitive forces, markets, technology, products and govt. regulations. Such changes generate changes in job content, skill demands, and number and type of personnel. Shortage of people may be induced in some areas while surplus in other areas may occur. 3. Creating Highly Talented Personnel: As was mentioned earlier, jobs are becoming highly intellectual and incumbents are getting vastly professionalized. L&T, an engineering giant, has MBA’s, engineers, technicians who collectively constitute 70% of the total employee strength of 20,000. The HR mgr. must use his/her ingenuity to attract and retain qualified and skilled personnel. Another fact of the high-talent personnel is mgt. succession planning. Who will replace the retiring chief executive? From what pool of people will top executives be selected and how will these individuals be groomed for their increased responsibilities? HRP is an answer to these and other related questions. 4. Protection of Weaker Sections: SC/ST candidates, physically handicapped, children of socially and physically oppressed and backward-class citizens enjoy a given % of jobs, not withstanding the constitutional provision which guarantees equal opportunities for all. 5. International Strategies: HRP will grow increasingly important as the process of meeting staff needs from foreign countries and the attendant cultural, language and developmental considerations grow complex. 6. Foundation for Personnel Functions: Manpower planning provides essential information for designing and implementing personnel functions, such as recruitment, selection, personnel movement and training and development. 2

HRM notes

7. Increasing Investments in Human Resources: Another compelling reason for HRP is an investment an organization makes in its human resources. Human assets, as opposed to physical assets, can increase in value. An employee who gradually develops his/her skills and abilities becomes a more valuable resource. 8. Resistance to Change and Move: There is a growing resistance among employees to change and move. There is also a growing emphasis on self-evaluation and on evaluation of loyalty and dedication to the organization. All these changes are making it more difficult for the organization to assume that it can move its employees around anywhere and anytime it wants, thus increasing the importance and necessity of planning ahead. ¬ ¬ ¬ ¬ ¬ ¬ 9. Other Benefits: Foll. are other potential benefits of HRP: Upper mgt. has s better view of the HR dimensions of business decisions. Personnel costs may be less because the mgt. can anticipate imbalances before they become unmanageable and expensive. More time is provided to locate source talent. Better opportunities exist to include women and minority groups in future growth plans. Better planning of assignments to develop mgrs. can be done. Major and successful demands on labour markets can be made.

The important objectives of manpower planning in an organization are: i) to recruit and retain the human resource of required quantity and quality; ii) to meet the needs of the programmes of expansion, diversification, etc; iii) to improve the standards, skill, knowledge, ability, discipline, etc; iv) to estimate the cost of human resources; v) to make the best use of its human resources; vi) to foresee» the impact of technology on work, existing employees and future human resource requirements; vii) to assess the surplus or shortage of human resource and take measures accordingly; viii) to minimize imbalances caused due to non-availability of human resources of right kind, right number in right time and right place.

» Objective of HRP:

» Specific Goals of HRP:

HRM notes

HRP anticipates not only the required number of employees but also determines the action plan for all the functions of personnel mgt. The major goals of HRP are: i) It checks the corporate plan of the organization. ii) It helps to anticipate the cost of salary enhancement, better benefits, etc. iii) It provides scope for advancement and development of employees through training, development, etc. iv) It helps to anticipate the cost of salary, benefits and all the cost of human resources facilitating the formulation of budgets in and organization. v) To foresee the changes in values, aptitude and attitude of human resources and to change the techniques of interpersonal, mgt., etc. vi) It causes the development of various sources of human resources to meet the organizational needs. vii) It helps to take steps to improve human resources contributions in the form of increased productivity, sales, turnover, etc. viii) It facilitates the control of all the functions, operations, contribution and cost of human resources. ix) It gives an idea of type of tests to be used and interview techniques in selection based on the level of skills, qualifications, intelligence, values, etc., of future human resource. x) To plan for physical facilities, working conditions and the volume of fringe benefits like canteen, schools, hospitals, conveyance, etc.

» The HRP Process:
Process of HRP consists of following steps: 1. Analyzing organizational plans. 2. Demand Forecasting: Forecasting the overall human resources requirements in accordance with the organizational plans. 3. Supply Forecasting: Obtaining the data and information about the present inventory of human resources and forecast the future changes in the human resource inventory. 4. Estimating the net human resources requirements. 5. In case future surplus, plan for redeployment, retrenchment and lay-off. 6. In case future deficit, forecast the future supply of human resources from all sources with references to plan of other companies. 7. Plan for recruitment, development and internal mobility if future supply is more than or equal to net human resource requirements. 8. Plan to modify or adjust the organizational plan if future supply will be inadequate with reference to future net requirements. 3

HRM notes


HRM notes

Analyzing Organizational (10) Objectives Plans and Programmes (2) Demand Forecast Resource Requirement Skill wise Minus Knowledge wise etc. (9)


Adjust or Modify the Organizational Plans Control and Review Mechanisms (4) Net Human Resources Requirement for FutureForecast Supply of Res

Present Programmes (3) Supply Forecast Present Inventory of Human

Resources + Additions Losses – Skill wise the Future. Knowledge wise etc. Human ource in all (5) Sources if Supply is Surplus of Future Available Human Resources within The Organization Plan for (6)

Skill- Knowledge- Values etc

(7) Inadequate Shortage of Future Available Human Resource within the Organization Plan for (8)


HRM notes

Redeployment Internal Mobility

Retrenchment/ Redundancy




Human Resource Planning Model


HRM notes

1. Analyzing the Organizational Plans:
The process of human resource planning model planning should start with analyzing the organizational plan into production plan, technological plan, plans for expansion, diversification, etc.

2. 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 organizational and unit wise plans and programmes, future work quantum, future activity or task analysis, future skills, etc.

3. Supply Forecasting:
The first step of forecasting the future supply of human resource is to obtain the data and information about the present human resource inventory. Existing Inventory The data relating to present human resource inventory in terms of human resources components, number, designation-wise should be obtained. Principal dimensions of human resources inventory are: i) Head counts regarding total, dept.-wise, sex-wise, designation-wise, skillwise, etc. ii) Job Family Inventory: It includes number and category of employees of each job family i.e., all jobs related to same category like clerks, cashiers, typists, etc. each sub-job family i.e., all jobs having common job characteristics (skill, qualification, similar operations) like production engineer (mechanical) and maintenance engineer (mechanical) and broad job families like general administration, production, etc. iii) Age Inventory: It includes age-wise number and category of employees. It indicates age-wise imbalance in present inventory which can be correlated in future selections and promotions.

4. Estimating the Net Human Resource Requirements:
Net human resource requirements in terms of number and components are to be determined in relation to the overall human resource requirements for a future date and supply forecast for that date. The difference between overall human requirements and future supply of human resources is to be found out.

5. Action Plan for Redeployment, Redundancy/Retrenchment:
If future surplus is estimated, the organization has to plan for redeployment, redundancy, etc. If surplus is estimated in some jobs/depts., employees can be redeployed on other jobs/depts. Where the deficit of the employees is estimated. 6. Forecast Future Supply for All the Sources: If deficit is estimated in any dept. and in the entire organization mgt. has to forecast the future supply of human resources from various sources like internal sources, comparable organizations, labour market, etc.

7. Action Plan for Recruitment, Development:

HRM notes

If the forecast relating to future supply of manpower from internal sources of the organization shows favorable trends, the mgt. may prefer internal candidates and plan for promotion, transfer, training and development. If suitable candidates are not available from internal sources and, if the forecasts relating to future supply from external sources indicate the availability of required human resources, plan for recruitment and selection.

8. Modify the Organizational Plan:
If future supply of human resources from all the external resources is estimated to be inadequate or less than the requirements, the manpower planner has to suggest the mgt. to alter or modify the organizational plan.

9. Retention Plan:
Though there is a problem of unemployment, organizations experience shortage of some categories of employees. and some organizations experience shortage of some other categories of employees due to employee mobility. Hence, the organizations have to plan for retention of the existing employees.

» Steps For Establishing Successful HRP:
HRP refers to the estimation of the number and the type of people needed during the ensuing period. HRP is influenced by several factors, such as the type and strategy of organization; environmental uncertainties; time horizons; type and quality of information; and type of jobs being filled. The HRP is a five-step process. The steps are: 1. Defining organizational objectives and policies: The HR plan must be derived from organizational objectives. Organizational objectives are defined by the top mgt. and the role of HRP is to sub serve the overall objectives by ensuring availability and utilization of human resources. Once the organizational objectives are specified, communicated and understood by all concerned, the HR dept. must specify its objectives with regard to HR utilization in the organization. 2. Forecast of personnel needs and supplies: Demand forecasting is the process of estimating the future quantity and quality of people required. The basis of the forecast must be the annual budget long-term corporate plan, translated into activity levels for each function and department. Personnel demand analysis provides the manager with the means of estimating the number and the kind of employees that will be required. The next local step for the management is to determine whether it will be able to procure the required number of personnel and the sources for such procurement. 3. HR programming: Once an organization’s personnel and supply are forecast, the two must be reconciled or balanced in order that vacancies can be filled by the 3

HRM notes

right employees at the right time. HR programming, the third step in the planning process therefore, assumes greater importance. 4. HRP implementation: Implementation requires converting an HR plan into action. A series of action programmes are initiated as a part of HR plan implementation. Some such programmes are recruitment, selection and placement; training and development, retraining and redeployment; the retention plan; and the redundancy plan. 5. Control and evaluation of programmes: The HR plan should include budgets, targets and standards. It should clarify responsibilities for implementation and control, and establish reporting procedures, which will enable achievements to be monitored against the plan. These may simply report on the numbers employed against establishment and on the numbers recruited against the recruitment targets. But they should also report employment costs against budget, and trends in wastage and employment ratios.

Job analysis is the procedure through which you determine the duties of these positions and the characteristics of the people who should be hired for them. The analysis procedure information on job requirement; this information is then used for developing job descriptions and job specification. ¬ Job analysis is the process of studying and collecting information relating to the operation and responsibilities of a specific job. The immediate product s of this analysis are job descriptions and job specifications. ¬ Job analysis is a systematic exploration of the activities within a job. It is a basic technical procedure, one that is used to define the duties, responsibilities and accountant abilities of a job. ¬ A job is a collection of tasks that can be performed by a single employee contribute to the production of some product or service provided by the organization. Each job has certain ability requirements with it. Job analysis is the process used to identify these requirements.

» Meaning and Definition:

A job description is a return statement of what the job holder actually does, how he/she does it, and under what conditions job is performed. This information is in turn used to write a job specification that lists the knowledge, abilities, and skills needed to perform the job satisfactorily. There is no standard format you must use in writing job description, but most description contains section on: 1. Job Identification. 2. Job Summary. 3. Responsibilities and Duties. 4. Authority of Incumbent. 3

» Job Description:

HRM notes

5. Standards of performance. 6. Working conditions. 7. Job specifications. 1. Job Identification: The job title specifies the title of job, such as supervisor of data processing operations, mktg. mgr. or inventory control clerk. Job titles and descriptions should be kept current. 2. Job Summary: The job summary should describe the general nature of the job, listing only its major functions or activities. Thus, the mktg. mgr. “plans, directs, and coordinates the mktg. of the organizations products and / or services.” 3. Relationships: There is occasionally a relationships statement, which shows the job holder’s relationship with others inside and outside the organization. 4. Responsibilities and Duties: This section presents a list of jobs major responsibilities and duties. Each of the job’s major duties should be listed separately and described in a few sentences. This section should define the limits of the jobholder’s authority, including his/her decision-making authority, direct supervision of other personnel, and budgetary limitations. 5. Standards of Performance: Some job description contains standards of performance sections. This state the standards the employee is expected to achieve under each of the job description’s main duties and responsibilities. 6. Working Conditions and Physical Environment: The job description may also list the general working conditions involved on the job these might include things like noise level, hazardous conditions, or, heat.

» Job Specification:
A statement of human qualifications necessary to do the job. Usually contains such items as: ¬ Education. ¬ Experience. ¬ Training. ¬ Judgment. ¬ Initiative. ¬ Physical Effort. ¬ Physical skills. ¬ Responsibilities. ¬ Communication skills. ¬ Emotional characteristics. ¬ Unusual sensory demands such as sight, smell, hearing.

» Process of Job Analysis:


Process Of job analysis

HRM notes

Strategic Choices Gather Information Process Information Job Description Job Specification

Uses of Job Description and Job Specification: ¬ Personnel Planning ¬ Performance Appraisal ¬ Hiring ¬ Training and Development ¬ Job Evaluation and Compensation ¬ Health and Safety ¬ Employee discipline ¬ Work Scheduling ¬ Career Planning

The figure illustrates the process of job analysis. The figure also points out the uses of information about jobs. As may be seen from the fig. job analysis is useful for several purposes, such as personnel planning, performance appraisal and the like. Strategic Choices: With regard to job analysis, an organization is required to make at least 4 choices: 1. The extent of employee involvement in job analysis. 2. The level of details of the analysis. 3. Timing and frequency of analysis. 4. Past-oriented versus future-oriented job analysis. Information Gathering: This step involves decisions on 3 issues viz; 1. What type of data is to be collected?” 2. What methods are to be employed for data collection? 3. Who should collect the data? Information Processing: Once the job information has been collected, it needs to be processed, so that it would be useful in various personnel functions. Specifically, job-related data would be useful to prepare job description and job specification. Job description implies objective listing of the job title, tasks, duties and responsibilities involved in a job. Job specifications on the other hand, involve listing employee qualifications, skills and abilities. These specifications are needed to do the job satisfactorily. Job Description: Same as notes above. Job Specification: Same as notes above.

The methods of collecting job- elated data are: - i) Observational method, ii) Interviews, iii) Questionnaire, iv) Checklists, v) Technical conferences and vi) Diary. A combination of these approaches may be used depending upon the situation and the organization.

» Methods of collecting job data:


HRM notes

i) Observation: In this method, the job analysts carefully observes the job holder at work and records what he or she does, and how much time is needed for completion of a given task. ii) Interview: In this, analyst interviews the job holder and his/her supervisor to elicit information about the job. Usually a structured interview form is used to record the information. During the interview, the analyst must make judgments about the information to be included and its degree of importance. iii) Questionnaire: Job holders fill in the given structured questionnaires which are then approved by their supervisors. The filledin questionnaires offered enough data or jobs. Standards questionnaires are available or they may be prepared for the purpose by the analyst. Standard or prepared questionnaire should contain following basic information: ¬ The job title of the job holder; ¬ The job title of the job holder’s mgr./supervisor; ¬ The job titles and numbers of the staff reporting to the job holder; ¬ A brief description of the overall role or purpose of the job; and ¬ A list of the main task or duties that the job holder has to carry out; as appropriate, these should specify the resources controlled, the equipment used, the contracts made and the frequency with which tasks are carried out. i) Checklists: A checklists is similar to a questionnaire but the response sheet contains fewer subjective judgments and tends to be either-yes-or-no variety. Checklists can cover as many as 100 activities and job holders tick only those tasks that are included in their jobs. He/she may also be asked to write any additional tasks he/she performs which is not stated in the checklist. The checklist, thus answered, will be the basis for tabulating job-related data. ii) Technical Conference Method: In this method services of supervisors who possess extensive knowledge about the job are used. It is from these experts that details about the job are obtained here, a conference of supervisors is used. The analyst initiates discussion which provides details about jobs. iii) Diary Method: This method requires job holders to record in detail their activity each day. If done faithfully, this technique is accurate and eliminates errors caused by memory lapses the job holder makes while answering questionnaires and checklists. Conclusion: The methods described above are not being viewed as mutually exclusive. None of them is universally superior. The best results can be obtained by a combination of these methods.

» Quantitative Techniques:

The methods of collecting job-related data, described above, are used by most employers. But there are locations where these narrative approaches are not appropriate. For example there is a desires to assign a quantitative value to each job so that jobs can be compared for pay purposes, a more quantitative approach will be appropriate. The position analysis questionnaire, mgt. position description questionnaire, and functional job analysis and the three popular techniques of job analysis. 4

HRM notes

Position Analysis Questionnaire: The Position Analysis Questionnaire (PAQ) is a highly specialized instrument for analyzing any job in terms of employee activities. The PAQ contains 194 job elements on which job are created depending on the degree on which an element is present. These elements are grouped into 6 general categories. They are: i. Extent of use ii. Importance of the job iii. Amount of time iv. Possibility of occurrence v. Applicability vi. Special Code Management Position Description Questionnaire (MPDQ): The MPDQ is a highly structured questionnaire containing 208 items relating to managerial responsibilities, restrictions, demands and other miscellaneous position characteristics. These 208 items are grouped under the 13 categories they are: 1. Product, Mktg. and Financial Strategy Planning. 2. Co-ordination of other organizational units and personnel. 3. Internal business control. 4. Products and services responsibility. 5. Public and Customer relations. 6. Advanced consulting. 7. Autonomy of actions. 8. Approval of financial commitments. 9. Staff service. 10. Supervision. 11. Complexity and stress. 12. Advanced financial responsibility 13. Broad personnel responsibilities. Functional Job Analysis (FJA): FJA is a worker-oriented job analytical approach which attempts to describe the whole person on the job. The main features of FJA include the foll.: 1. The fundamental distinction must be made between what has been done and what employees need to do to get things done. For example, bus crew do not carry passenger but they drive vehicle and collect fare. 2. Jobs are performed in relation to data, people and things. 3. In relation to things, employees draw on physical resources; and in relation to people, employees drawn on interpersonal resources. 4. The level of difficulty required in dealing with data, people and Feedback things are hierarchical and can be represented by an ordinal scale.

Job design is affected by organizational, environmental, and Factors behavioral factors. Productive Job and Design Satisfying Environmental Job Factors

» Factors Affecting Job Design: Organizational

Behavioral Factors

4 Factors Affecting Job Design

HRM notes

Organizational Factors
It includes characteristics of task, work flow, ergonomics, and work practices. ¬ Characteristics of Task: Job design requires the assembly of number of tasks in to a job or group of jobs. An individual may carry out one main task which consists a number of interrelated elements or functions. On the other hand, task functions may be split between a team working closely together or strung along an assembly line. ¬ Work Flow: The flow of work in an organization is strongly influenced by the nature of product or service. The product or service usually suggests the sequence and balance between jobs if the work is to be done efficiently. ¬ Ergonomics: It is concerned with designing and shaping jobs to fit the physical abilities and characteristics of individuals so that they can perform their jobs efficiently. It helps employers to design jobs ins such a way that workers’ physical anilities and job demands are balanced. ¬ Work Practices: They are set ways of performing work. Work practices were till now, determined by time and motion study which determine standard time needed to complete a given job. A new technique has now emerged, which if introduced, could rustically alter the work practices in industrial undertakings. Called Maynard Operating Sequence Technique (MOST), the technique uses a standard formula to list the motion sequence ascribed in index values.

Environmental Factors
Environmental elements affect all activities of HRM, and job design is no exception. The external factors that have a bearing on job design are employee abilities and availability and social and cultural expectation. ¬ Employee Abilities and Availabilities: Efficiency consideration must be balanced against the abilities and availabilities of the people who are to do the work. ¬ Social and Cultural Expectations: Their were days when getting a job was a primary consideration. The worker was prepared to work on any job and under any working conditions. Not any more. Literacy, knowledge and awareness among workers have improved considerably, so also their expectations from jobs. Hence jobs must be designed to meet the expectations of workers.

Behavioral Elements

HRM notes

Behavioral factors have to do with human needs and the necessity to satisfy them. Higher-level needs are more significant in this context. Individuals inspired by higher-level needs find jobs challenging and satisfying which are high on the following dimensions: ¬ Feedback: Individuals must receive meaningful feedback about their performance, preferably by evaluating their own performance and defining the feedback. ¬ Autonomy: Autonomy is being responsible for what one does. It is the freedom to control one’s responses to the environment. ¬ Use of Abilities: The job must be perceived by individuals as requiring them to use abilities they value in order to perform the job affectively. ¬ Variety: By injecting variety into jobs, personnel specialists can reduce errors caused by fatigue.

» Techniques of Job Design:
Job Enlargement: It involves expanding the number of tasks or duties assigned to a given job. It is naturally opposite to work simplification. Adding more tasks or duties to a job does not mean that new skills and abilities are needed to perform it. Job Enrichment: It seeks to improve both task efficiency and human satisfaction by building into people’s job, quite specifically, greater scope for personal achievements and recognition, more challenging and responsible work, and more opportunity for individual advancement and growth. An enriched job will have more responsibility and autonomy, more growth opportunities. Autonomous or Self-directed Teams: As was stated above, job enrichment necessitates empowerment. Empowerment results in self-directed work teams. A self-directed work team is an instant group of employees who are responsible for a ‘whole’ work process or segment that delivers a product or service to an internal or external customer. To varying degrees, team members’ work together to improve their operations, handle day-to-day problems, and plan and control their work. High-Performance Work Design: It is a means of improving performance in an environment where positive and demanding goals are set. It starts from the principle of autonomous group working and develops an approach which enables group to work effectively together in situations were the rate of innovation is high. Operational flexibility is important and there is, therefore, the need for employees to gain and apply new skills quickly with minimum supervision.

» Objectives of Job Evaluation:
Following are the objectives of Job Evaluation: 1. To gather data and information relating to job description, job specification and employee specification of various job in an organization. 2. To compare the duties, responsibilities and demands of job with that of other jobs. 3. To determine the hierarchy and place of various jobs in an organization. 4. To determine the ranks or grades of various jobs. 4

HRM notes

5. To ensure fair and equitable wages on the basis of relative worth or value of jobs. In other words equal wages are fixed to the fobs of equal worth or value. 6. To minimize wage discrimination based on sex, age, caste, religion, region, etc.

» Methods of Job Evaluation:
Job evaluation methods are of two categories-non-analytical and analytical.

Non-analytical Methods:
Ranking and job-classification methods come under this category because they make of detailed job factors. Each job is treated as a whole in determining its relative ranking. ¬ Ranking Method: This is the simplest, the most expensive and the most expedient method of evaluation. The evaluation committee assesses the worth of each job on the basis of its title or on its contents, if the latter is available. But the job is not broken down into elements or factors. Each job is compared with others and its place is determined. The method has several drawbacks. Job evaluation may be subjective as the jobs are not broken into factors. It is hard to measure work jobs. ¬ Job-grading Method: As in the ranking method, the job-grading method does not call for a detailed or quantitative analysis of job factors. It is based on the job as a whole. The essential requirements of the jobgrading method are to frame grade descriptions to cover discernible differences in degree of skill, responsibility and other job characteristics. Job grades are arranged in order of their importance. Each succeeding grade reflects a higher level of skill and responsibility, with less and less supervision.

Analytical Methods:
These include the point-ranking method and the factorcomparison method. ¬ Point-Ranking Method: The system starts with selection of job factors, construction of degrees of each factor, and assignment of points to each degree. Different factors are selected for different jobs, which accompanying differences in degrees and points. The advantages of this method are: 1. The procedure adopted is systematic and can easily be explained to the employees. 2. The method is simple to understand and easy to administer. ¬ Factor-Comparison Method: This method yet another approach for job evaluation in the analytical group. Under this method, one begins with the selection of factors, usually 5 of them-mental requirements, skill requirements, and physical exertion, responsibility and job conditions. These factors are assumed to be constant for all the jobs. Each factor is ranked individually with other jobs. Then total point values are then assigned to each factor. The worth of a job is then obtained by adding together all the point values.

» Job Evaluation Process:
The job-evaluation process starts with defining objectives of evaluation and ends with establishing wage and salary differentials. 4

HRM notes

(1) (2) 2(a) Job Description

Objectives of Job Evaluation Job Analysis 2(b) Job Specification Job-evaluation Programme Wage Survey




Employee Classification

1. Objectives: The main objective of job evaluation, as was studied earlier, is to establish satisfactory wage and salary differentials. Job analysis precedes the actual programme of evaluation. 2. Job Analysis: It provides job-related data which would be useful in drafting job description and job specification. a. Job description provides the information relating to duties and responsibilities. b. Job specification provides information relating to the minimum acceptable quality of an employee . 3. Job Evaluation: A job-evaluation programme involves answering several questions. The major ones are: i. Which jobs are to be evaluated? ii. Who should evaluate the job? iii. What training do the evaluators need? iv. How much time is involved? v. What should be the criteria of evaluation? vi. What methods of evaluation are to be employed? 4. Wage Survey: Now that the job hierarchy has been established with the help of evaluation methods, it is time to fix wage and salary differentials. Before fixing such differentials, the wage rate must be ascertained. It is here that wage survey assumes relevance. The first step in a wage survey is to select key jobs, the duties of which are clearly defined, reasonably stable, and representative of all levels of job. Thus, a sample of jobs is created. Secondly, a sample of firms in the labour-market area must be chosen. The labour market for different jobs can vary from local to regional to national in scope. With both samples being selected, the final task is to obtain appropriate wage information, taking care to ensure that the job comparisons being made are valid. Job content, the varying qualities of personnel of these jobs, and the total 4

HRM notes

comparison programme must be carefully analyzed, compared, and equated. 5. Employee Classification: The last phase in the job evaluation process is to establish classification. Employee classification is the process of assigning a job title to every employee in the organization.

Recruitment is defined as, “a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient workforce.” Edwin B. Flippo defined recruitment as “the process of searching for prospective employees and stimulating them to apply for jobs in the organization.” Those definitions can be analyzed by discussing the processes of recruitment through systems approach. Recruitment is the process of finding and attracting capable applicant for employment. The process begins when new recruits are sort and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected.

» Meaning and Definition:

The general purpose of recruitment is to provide a pool of potentially qualified job candidates. Specially, the purposes are to: i. Determine the present and future requirements of the organization in conjunction with personnel-planning and job-analysis activities. ii. Increase the pool of job candidates at minimum cost. iii. Help increase the success rate of the selection process by reducing the number of visibly, under qualified or overqualified job applicants. iv. Help reduce the probability that job applicants, once recruited and selected, will leave the organization only after a short period of time. v. Meet the organizations legal and social obligations regarding the composition of its work-force. vi. Begin identifying and preparing potential job applicants who will be appropriate candidates. vii. Increase organizational and individual effectiveness in the short and long term. viii. Evaluate the effectiveness of various recruiting techniques and sources for all types of job applicants. Recruitment represents the first contact that a company makes with potential employees it is through recruitment that many individuals will come to know a company and eventually decide whether they wish to work for it. A well-planned and well-managed recruiting effort will result in high quality applicants, whereas, a haphazard and piecemeal effort will result in 4

» Purpose and Importance of Recruitment:

HRM notes

mediocre once. High-quality employees cannot be selected when better candidates do not know of job openings, are not interested in working for the company, and do not apply. The recruitment process should inform qualified individuals about employment opportunities create a positive image of a company, provide enough information about the jobs so that the job applicants can make comparisons with their qualifications and their interests, and generate enthusiasm among the best candidates so that they will apply for the vacant positions.

» Factors Governing Recruitment:
Given its key role and external visibility, recruitment is naturally subject to influence of several factors. These include external and internal forces. External Forces: Of particular importance is the supply and demand of specific skills in the labour market. If the demand for a particular skill is high relative to the supply, an extraordinary recruiting effort may be needed. When the unemployment rate in a given area is high the companies’ recruitment process may be simpler. The number of unsolicited applicants is usually greater, and the increased size of the labour pool provides better opportunities for attracting qualified applicants. On the other hand, as the unemployment rates drops recruiting efforts must be increased and new sources explored. Labour-market conditions in a local area are of primary importance in recruiting for most non-managerial, supervisory and middle-mgt. positions. However, so far as recruitment for executive and professional positions are concerned conditions of all India market are important. Another external factor is political and legal considerations. Reservation of jobs for SCs, STs, minorities, and other backward classes (OBCs) is a political decision. The companies’ image also matters in attracting large number of job seekers. Blue-chip companies’ attract large number of applications. Often, it is not the money that is important. It is the perception of the job seekers about the company that matters in attracting qualified prospective employees. Internal Factors: There are certain internal forces which deserve consideration while recruiting personnel. One such internal factor is the recruiting policy of the organization. Most organizations have a policy on recruiting internally (from own employees) or externally (from outside the organization).Generally, the policy is to prefer internal sourcing, as own employees know the company well and can recommend candidates who fit the organizations culture. Another related policy is to have temporary and part-time employees. An organization hiring temporary and part-time employees is in a less advantageous position in attracting sufficient applications. MNCs operating in our country prefer local citizens as they can understand local languages, customs and business practices well. 4

HRM notes

A major internal factor that can determine the success of the recruiting programme is whether or not the company engages in HRP. Effective HRP greatly facilitates the recruiting efforts. Size is another internal factor having its influence on the recruitment process. An organization with one hundred thousand employee will find recruiting less problematic than an organization with just one hundred employees. Cost of recruiting is yet another internal factor that has to be considered. Recruiting cost are calculated per new higher and fig. is considerable now-a-days. Recruiters must, therefore, operate within budgets. Careful HRP and forethought by recruiters can minimize recruitment costs. One cost-saving measure, for instance, is recruiting for multiple job openings simultaneously. The best solution is to use proactive personnel practices to reduce employee turnovers, thus, minimizing the need for recruiting. Evaluating the quality, quantity and cost of recruitment helps ensure that it is efficient and cost-effective. Finally, an organization registering growth and expansion will have more recruiting on hand than the one which finds its fortunes declining.


HRM notes

Personnel Planning

Job Analysis

Employee Requisition

Job Vacancies

Recruitment Planning ¬ Number ¬ Types

Searching Activation “Selling” ¬ Message ¬ Media

Applicant Pool


Potential Hires

To Selection

Strategy Development ¬ Where ¬ How ¬ When

Applicant Populatio n

Evaluation and Control

Recruitment Process


HRM notes

» Recruitment Process:
Recruitment refers to the process of identifying and attracting job seekers so as to build a pool of qualified job applicants. The process comprises five interrelated stages, viz; (i) planning (ii) strategy development, (iii) searching, (iv) screening, and (v) evaluation and control. The ideal recruitment programme is the one that attracts a relatively larger number of qualified applicants who will survive the screening process & accept positions with the organization, when offered. Recruitment programmes can miss the ideal in many ways: by failing to attract an adequate applicant pool, by under/over selling the organization, or by inadequately screening applicants before they enter the selection process. Thus, to approach the ideal, individuals responsible for the recruitment process must know how many and what types of employees are needed, where and how to look for individuals with the appropriate qualifications and interests, what inducement to use (or avoid) for various types of applicant groups, how to distinguish applicants who are unqualified from those who have a reasonable chance of success, & how to evaluate their work.

Recruitment Planning
The first stage in recruitment process is planning. Planning involves the translation of likely job vacancies and information about nature of these jobs into a set of objectives or targets that specify the (i) number and (ii) type of applicants to be connected. Number of contacts: Organization, nearly always, plan to attract more applicants than they hire. Companies calculate yield (yRs) which express the relationship of applicant inputs to outputs at various decision points. For example, assume that an organization attempting to recruit sales people ran a series of newspaper advertisements. The advertisement generated resumes from 2000 applicants, of which 200 were judged to be potentially qualified (yR = 10:1). Type of Contacts: This refers to the type of people to be informed about job openings. The type of people depends on the tasks and responsibilities involved and the qualifications and experience expected. These details are available through job description and job specification.

Strategy Development
Once it is known how many and what type of recruits are required, serious consideration needs to be given to i) ‘make’ or ‘buy’ employees; ii) techno logical sophistication of recruitment and selection devices; iii) geographic distribution of labour markets comprising job seekers; iv) sources of recruitment; and v) sequencing the activities in the recruitment process. ‘Make’ or ‘Buy’: Organizations must decide whether to hire less skilled employees and invest on training and education programmes, or they can hire skilled labour and professionals. Technological Sophistication: The second decision in strategy development relates to the methods used in recruitment and selection. This decision is mainly influenced by the available technology. The advent of computers has made it possible for employers to scan national and international applicant qualifications.

» Sources of Recruitment:
International Recruitment


HRM notes

Internal recruitment seeks applicant for positions from those who are currently employed. Internal sources include present employees, employee referrals, former employees, and former applicants. Present Employees: Promotions and transfers from among the present employees can be a good source of recruitment. Promotion to higher positions has several advantages. They are - (i) it is good public relations; (ii) it builds morale; (iii) it encourages competent individuals who are ambitious; (iv) it improves the probability of good selection, since information on the individual’s performance is readily available; (v) it is cheaper than going outside to recruit; (vi) those chosen internally are familiar with the organization; and (vii) when carefully planned, promoting from within can also act as a training device for developing middle-level and top level managers. Employee Referrals: This can be a good source of internal recruitment. Employees can develop good prospects for their families and friends by acquainting them with the advantages of a job with the company, furnishing cards of introduction, and even encouraging them to apply. Previous Applicants: Although not truly an internal source, those who have previously applied for jobs contacted by mail, a quick and inexpensive way to fill an unexpected opening.

External Recruitment
External sources far outnumber the internal methods. Specifically, source external to an organization are professional or trade associations, advertisements, employment exchanges, college/university, institute placement services, walk-ins and write-ins, consultants, contractors, displaced persons, radio and television, acquisitions and mergers, and competitors. Profession or Trade Associations: Many associations provide placement services for their members. These services may consist of compiling job seekers lists and providing access to members during regional or national conventions. Advertisement: These constitute a popular method of seeking recruits as many recruiters prefer advertisements because of their wide reach. Want ads describe the job and the benefits, identify the employer, and tell those who are interested and how to apply. They are the most familiar form of employment advertising. Employment Exchanges: Employment Exchanges have been set up all over the country in deference to the provision of the Employment Exchanges (Compulsory Notifications of Vacancies) Act, 1959. The act implies to all industrial establishments having 25 workers or more each. Campus Recruitment: Colleges, universities, research laboratories, sports fields and institutes are fertile ground for recruiters, particularly the institutes. In fact, in some companies, recruiters are bound to recruit a given number of candidates from these institutes every year. Walk-ins, Write-ins, and Talk-ins: The most common and least expensive approach for candidates is direct applications in which job seekers submit un solicited application letters or resumes. Direct applications can also provide a pool of potential employees to meet future needs. Consultants: ABC Consultants, Ferguson Associates, Human Resource Consultants, Head Hunters, Batliboi and Company, Analytic Consultancy Bureau, Aims Mgt. Consultants and The Search House are some among the numerous recruiting agencies. These and other agencies in the profession are retained by organizations for recruiting and selecting managerial and executive personnel. 5

HRM notes

Acquisitions and Mergers: Another method of staffing organizations is a result of the merger or acquisitions process.

» Evaluation and Control Of Recruitment:
Evaluation and control is necessary as considerable costs are incurred in the recruitment process. The costs generally incurred are: 1. Salaries for recruiters. 2. Mgt. and Professional time spent on preparing job description, job specifications, advts., agency liaison, and so forth. 3. The costs of advts. r other recruitment methods, i.e., agency fees. 4. Cost of producing supporting literature. 5. Recruitment overheads and administrative expenses. 6. Costs of overtime and outsourcing while the vacancies remain unfilled. 7. Cost of recruiting unsuitable candidates for the selection process. Questions should always be asked as to whether the recruitment methods used are valid and whether the recruitment process itself is effective.

Evaluation of Recruitment Process
The recruitment process has the objective of searching for and obtaining applications from job seekers in sufficient numbers and quality. Keeping the objective in mind, the evaluation might include: 1. Return rate of applications sent out. 2. Number of suitable candidates for selection. 3. Retention and Performance of the candidates selected. 4. Cost of the recruitment process. 5. Time lapsed data. 6. Comments on image projected.

Evaluation of Recruitment Methods
The evaluation of recruitment methods might include: 1. Number of initial enquires received which resulted in completed application forms. 2. Number of candidates at various stages of the recruitment and selection process, especially those short listed. 3. Number of candidates recruited. 4. Number of candidates retained in the organization after 6 months.

» Philosophies of Recruiting:
The traditional philosophy of recruiting has been to get as many people to apply for a job as possible. A large number of job seekers waiting in queues would make the final selection difficult, often resulting in wrong selections. Job dissatisfaction and employee turnover are the consequences of these. A persuasive agreement can be made that matching the needs of the organization to the needs of the applicants will enhance the effectiveness of the recruitment process. The result will be a workforce which is likely to stay with the organizations longer and performance at a higher level of effectiveness. Two approaches are available to bring about this match. They are i) realistic job preview (JRP), ii) job compatibility questionnaire (JCQ).

Realistic Job Previews (RJP)

HRM notes

RJP provides complete job-related information, both +ve and -ve, to the applicants. The information provided will help job seekers to evaluate the compatibility among the jobs and their personal ends before hiring decisions are made. Research on realistic recruiting shows a lower rate of employee turnover in case of employees recruited through RJPs, particularly for more
complex jobs and higher level of job satisfaction and performance, at the initial stages of employment.

Job Compatibility Questionnaire (JCQ)
The JCQ was developed to determine whether an applicants preference for work match the characteristics of the job. The JCQ is designed to collect information on all aspects of a job which have a bearing on employee performance, absenteeism, and turnover and job satisfaction. The underlying assumption of the JCQ is that the greater the compatibility between an applicants preferences for a job and the characteristics of the job as perceived by the job seeker, the greater the probability of employee effectiveness and longer the tenure.

The role of selection in an organization’s effectiveness is crucial for at least, two reasons. First, work performance depends on the individuals. The best way to improve performance is to hire people who have the competence and the willingness to work. Second, cost incurred in recruiting and hiring personnel speaks volumes about the role of selection. Costs of wrong selection are much greater, In organization with wrong selection incurs these types of costs. The first type is incurred while the person is employed. This can be the result of production or profit, losses, damaged co. reputation, accidents due to negligence, absenteeism and the like. The second type of cost is associated with the training, transfer or terminating the services of the employee. Costs of replacing an employee with fresh one-costs of hiring, training and replacementconstitute the third type of cost. Generally, the more important the job, the greater the cost of selection error.

» Role of Selection:

Selection is now centralized and is held by the human resource department. This arrangement is preferable because of the following advantages; 1. It is easier for the applicant because they can their applications to a single centralized department/agency. 2. It facilitates contact with applicants because issues pertaining to employment can be cleared through one central location. 3. It helps operating managers to concentrate on their operating responsibilities. This is especially helpful during peak hiring periods. 4. It can provide for better selection because hiring is done by specialist trained in staffing techniques. 5. The applicant is better assured of consideration for a greater variety of jobs. 6. Hiring cost may be cut because duplication of effort is minimized. 5

» Organization for selection:

HRM notes

7. With increased government regulations on the selection process, it is important that people who know about these rules handle a major part of the selection process.

» Selection Process:
Selection is a long process, commencing from the preliminary interview of the applicants and ending with the contract of employment. Environmental Factors Effecting Selection: Selection is influenced by several factors. More prominent among them are supply and demand and of specific in the labour market, unemployment rate, labour-market conditions, legal and political considerations, company’s image, company’s policy, HRP, and cost of hiring. The last three constitute the internal environment and the remaining form the external environment of the selection process. Preliminary Interview: the purpose of a preliminary interview is scrutiny of applications, that is, elimination of unqualified applications. Selection Tests: Job seekers who pass the screening and the preliminary interview are called for tests. Different type of tests may be administered, depending on the job and the company. Generally, tests are used to determine the applicant’s ability, aptitude and personality. Ability tests. (also called achievement tests) assist in determining how well an individual can perform tasks related to the job. An excellent illustration of this is the typing test given to a prospective employee for secretarial job. An aptitude test helps determine a person’s potential to learn in a given area. Personality tests are given to measure a prospective employee’s motivation to function in a particular working environment.

Employee Interview: The next step in the selection process is employment interview. Interview is a formal, in-depth conversation conducted to evaluate the applicant’s acceptability. It is considered to be an excellent selection device. Its popularity stems from its flexibility. Interview can be adopted to unskilled, skilled managerial and professional employees. It allows a two-way exchange of information, the interviewers learn about the applicant, and the applicant learns about the employer. The employment interview can be (i) one-to-one (ii) sequential (iii) panel. Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and, perhaps, gaining additional background information on an applicant. Although listed on the applicant form, references are not usually checked until an applicant has reached the fourth stage of a sequential selection process. Organizations normally seek letters of reference or telephone references. The latter is advantageous because of its accuracy and low cost. The telephone reference also has the advantage of soliciting immediate, relatively candid comments, and attitudes can sometimes be inferred from hesitations and inflections in speech. Selection Decision: After obtaining information through the preceding steps, selection decision-the most critical of all the steps-must be made. The other stages in the selection process have been used to narrow the number of candidates. The final decision has to be made from the pool of individuals who pass the tests, interviews and reference checks. Physical Examination: After the selection decision and before the job offer is made, the candidate is required to undergo a physical

HRM notes

fitness test. A job offer is, often, contingent upon the candidate being declared fit after the physical examination. Job Offer: Job offer is made through a letter of appointment. Such a letter generally contains a date by which the appointee must report on duty. The appointee must be given reasonable time for reporting. This is particularly necessary when he or she is already in employment, in which case the appointee is required to obtain a relieving certificate from the previous employer. Contracts of Employment: There is a need of preparing contract of employment. Contracts for employment serve many useful purposes. Such contracts seek to restrain job-hoppers, to protect knowledge and information that might be vital to a company’s health bottom-line, and to prevent competitors from poaching highly valued employees. Concluding the Selection Process: Contrary to popular perception, the selection process will not end with executing the employee contract. There is another step-a more sensitive one-reassuring those candidates who have not been selected. Such candidates must be told that they were not selected, not because of any serious deficiencies in their personalities, but because their profiles did not match the requirements of the organization. They must be told that those who were selected were done purely on relative merit. Evaluation of Selection Programme: The broad test of effectiveness of the selection process is the quality of the personnel hired. An organization must have competent and committed personnel. The selection process, if properly done, will ensure availability of such employees. How to evaluate the effectiveness of a selection programme? A periodic audit is the answer. Audit must be conducted by people who work independent of the HR department.

» Barriers to Effective Selection:
The main objective of selection is to hire people having competence and commitment. This objective is often defeated because of certain barriers. The impediments which check effectiveness of selection are perception, fairness, validity, reliability and pressure. Perception: Our inability to understand others accurately is probably the most fundamental barrier to selecting the right candidate. Selections demand an individual or a group of people to asses and compare the respective competencies of others, with the aim of choosing the right persons for the jobs. But our views are highly personalized. We all perceive the world differently. Our limited perceptual ability is obviously a stumbling block to the objective and rational selection of people. Fairness: Fairness in selection requires that no individual should be discriminated against on the basis of religion, race, caste or gender. But the low numbers of women and other less-privileged sections of the society in middle and senior mgt. positions and open discrimination on the basis of age in job advts. and in the selection process would suggest that all the efforts to minimize inequity have not been very effective. Validity: Validity is a test that helps predict job performance of an incumbent. A test that has been validated can differentiate between the employees who can perform well and those who will not. However, a validated test does not predict job success accurately. It can also increase possibility of success.


HRM notes

Reliability: A reliable method is one which will produce consistent results
when repeated in similar situations. Like a validated test, a reliable test may fail to predict job performance with precision. Pressure: Pressure is brought on the selectors by politicians, bureaucrats, relatives, friends and peers to select particular candidates. Candidates selected because of compulsions are obviously not the right ones. Appointments to public sector undertakings generally take place under such pressures.

» New Methods of Selection:
In recent years, new methods of selection have been found out by HR specialists. These approaches are deemed to be alternatives to the traditional methods of selection. Three interesting alternatives are participative selection, employee leasing and assessment centre. Participative selection means the subordinates participate in the selection of their co-workers and supervisors. The idea is that such participation will improve quality, increase support for the selected supervisors and co-workers, and improve employee morale. In employee leasing, the client company leases employees from a third party, not on temporary basis, but rather are leased as full-time, k\long-term help. An interesting feature of this method is that the client company needs to perform such personnel activities as hiring, compensation or record keeping. Employees already working elsewhere are leased. They are not directly employed by the company where they are working. The advantages of employee leasing are significant. The client is relieved of many administrative burdens, as well as the need to employ specialized personnel employees. Further, employees not recruited by one client are sent to another client company for employment. A very effective new method is assessment centre. Candidates are selected not by a single method but by a battery of tests and methods viz, panel interviews, group discussions, role plays, case studies, in-basket exercise, focused behavioral interview.

Training refers to the methods used to give new or present employees the skills they need to perform their jobs. Training might thus mean showing a machinist how operate his new machine, a new salesperson how to sell her firm’s product, or a new supervisor how to interview and appraise employees. Training’s focus has broadened in the past few years. Training used to focus mostly on teaching technical skills, such as training assemblers to solder wires or teachers to device lesson plans. Employees today need skills(and thus training) in team building, decision making, and communication, as well as technological and computer skills. » Nature of Training and Development: Training and development is … it is an attempt to improve current or future employee performance by increasing an employee’s ability to perform through learning, usually by changing the employee’s attitude or increasing his or her skills or knowledge. The need for training and development is determined by the employee’s performance deficiency, computed as follows: Training and development need= Standard performance- Actual performance. 5

» Meaning and Definition:

HRM notes

Development refers to those learning opportunities designed to help employees grow. Development is not primarily skills-oriented. Instead, it provides general knowledge and attitudes which will be helpful to employees in higher positions. Efforts towards development often depend on personal drive and ambition

» Objectives of training and Development:
The HR formulates the following training objectives in keeping with the Company’s goals and objectives: a) To prepare the employee both new and old to meet the present as well as the changing requirements of the job and the organization. b) To prevent obsolescence c) To impart the new entrance the basic knowledge and skill they need for an intelligent performance of definite job. d) To prepare employee’s for higher level tasks. e) To assist employee’s to function more affectively in their present positions by exposing them to the latest concepts, information and techniques and developing their skills they will need in their particular fields. f) To build up a second line of competent officers and prepare them to occupy mare responsible positions g) To broaden the mind of senior managers by providing them with opportunities for an interchange of experiences within and outside with a view to correcting the narrowness of outlook that may arise from over specialization h) To develop the potentialities of the people for the next level job. i) To ensure smooth and efficient working of a department j) To ensure economical output of the required quality. k) To promote individual and collective moral, a sense of responsibility, co-operative attitudes and good relationships.

» Training Process:

Organizational Objectives and strategies Assessment of Training Needs Establishment of Training Goals Devising Training Programme Implementation of Evaluation of Results Training Programme 5

HRM notes

Organizational Objectives and Strategies: The first step in the training
process in an organization is planning i.e. the assessment of its objectives and strategies. What business are we in? At what level of quality do we wish to provide this product or service? Where do we want to be in the future? It is only after answering these and their related questions that the organization must assess the strengths and weakness of its human resources. Needs Assessment: Needs assessment diagnoses present problems and future challenges to be met through training and development. Needs assessment occurs at two levels-group and individual. An individual obviously needs training when his or her performance falls short of standards, that is, when there is performance deficiency. Inadequacy in performance may be due to lack of skill or knowledge or any other problem. The problem of performance deficiency caused by absence of skills or knowledge can be remedied by training. Assessment of training needs occurs at the group level too. Any change in the organization’s strategy necessitates training of groups of employees. For example, when the organization decides to introduce a new line of products, sales personnel and production workers have to be trained to produce, sell and service the new products. Training can also be used when high scrap or accident rates, low morale and motivation, or other problems are diagnosed. Training and Development Objectives: Once training needs are assessed, training and development goals must be established. Without clearlyset goals, it is not possible to design a training and development programme and, after it has been implemented, there will be no way of measuring its effectiveness. Goals must be tangible, verifiable, and measurable. This is easy where skills training is involved. Behavioral objectives like attitudinal changes can be more difficult to state. Nevertheless, clear behavioral standards of expected results are necessary so that the programme can be effectively designed and results can be achieved.

Designing Training and Development Programme: Every training and
development programme must address certain vital issues- i) who participates in the programme? ii) who are the trainers? iii) what methods and techniques are to be used for training? iv) what should be the level of training? v) what learning principles are needed? vi) where is the programme conducted? Implementation of the Training Programme: Once the training programme has been designed, it needs to be implemented. Implementation is beset with certain problems. In the first place, most managers are actionoriented and frequently say they are too bust to engage in training efforts. Secondly, availability of trainers is a problem. In addition to possessing communication skills, the trainers must know the company’s philosophy, its 5

HRM notes

objectives, its formal and informal organization, and the goals of the training programme. Training and development requires higher degree of creativity than, perhaps, any other personnel speciality. Scheduling training around the present work is another problem. How to schedule training without disrupting the regular work? There is a problem of record keeping about the performance of trainee during his or her training period. This information may be useful to evaluate the program of the trainee in the company. Programme implementation involves action on the following lines: 1. Deciding the location and organizing training other facilities. 2. Scheduling the training programme. 3. Conducting the programme. 4. Monitoring the progress of trainees. Evaluation of the Programme: The last stage in the training and development process is the evaluation of results.

There are many impediments which can make a training programme ineffective. Following are the major hindrances: ¬ Management Commitment is Lacking and Uneven: Most companies do not spend money on training. Those that do tend to concentrate on mgrs., technicians and professionals. The rank-and-file workers are ignored. This must change, for, as a result of rapid technological change, combined with new approaches to organizational design and production mgt., workers are required to learn 3 types of new skills: i) the ability to use technology, ii) the ability to maintain it, and iii) the ability to diagnose system problems. In an increasingly competitive environment, the ability to implement rapid changes in products and technologies is often essential for economic viability. ¬ Aggregate Spending on Training is Inadequate: Companies spend minuscule proportions of their revenues on training. Worse still, budget allocation to training is the first item to be cut when a company faces a financial crunch.

» Impediments to Effective Training:

¬ Educational Institutions Award Degree but Graduates Lack Skills: This is the reason why business must spend must sums of money to
train workers in basic skills. Organizations also need to train employees in multiple skills. Managers, particularly at the middle level, need to be retrained in team-playing skills, entrepreneurship skills, leadership skills and customerorientation skills. ¬ Large-scale Poaching of Trained Workers: Trained work-force is in great demand. Unlike, Germany, where local business groups pressurize companies not to poach on another company’s employees, there is no such system in our country. Companies in our country, however, insist on employees to sign ‘bond of tenure’ before sending them for training, particularly before deputing them to undergo training in foreign countries.

¬ No Help to Workers Displaced because of Downsizing:
Organizations are downsizing and de-layering in order to trim their work-forces. The government. should set apart certain fund from the National Renewal Fund for the purpose of retaining and rehabilitating displaced workers. ¬ Employees and B Schools Must Develop Closer Ties: B Schools are often seen as not responding to labour-market demands. Business is seen as not communicating its demands to B Schools. This must change. 5

HRM notes

Businessmen must sit with Deans and structure the courses that would serve the purpose of business better. ¬ Organized Labour can Help: Organized labour can play a positive role in imparting training to workers. Major trade unions in our country seem to be busy in attending to mundane issues such as bonus, wage revision, settlement of disputes, and the like. They have little time in imparting training to their members.

Training and development programmes help remove performance deficiencies in employees. This is particularly true when- i) the deficiency is caused by a lack of ability rather than a lack of motivation to perform, ii) the individuals involved have the aptitude and motivation needed to learn to do the job better, and iii) supervisors and peers are supportive of the desired behaviors. There is greater stability, flexibility, and capacity for growth in an organization. Training contributes to employee stability in at least two ways. Employees become efficient after undergoing training. efficient employees contribute to the growth of organization. Growth renders stability to work-force. Further, trained employees tend to stay with the organization. They seldom leave the company. Training makes the employees versatile in operations. All rounders can be transferred to any job. Flexibility is therefore ensured. Growth indicates prosperity, which is reflected in increased profits from year to year. Who else but well-trained employees can contribute to the prosperity of an enterprise? Accidents, scrap and damage to machinery and equipment can be avoided or minimized through training. Even dissatisfaction, complaints, absenteeism, and turnover can be reduced if employees are trained well. Further needs of employees will be met through training and development programmes. Organizations take fresh diploma holders or graduates as apprentices or mgt. trainees. They are absorbed after course completion. Training serves as an effective source of recruitment. Training is an investment in human resources with a promise and it serves as an effective source of recruitment. Training is an investment in HR with a promise of better returns in future.

» Importance Of Training and Development:

The process of training evaluation has been defined as “any attempt to obtain information on the effects of training programme, and to assess the value of training in the light of that information.” The various methods of training evaluation are: i) Immediate assessment of trainees’ reaction to the programme. ii) Trainees’ observation during training programme. iii) Knowing trainees’ expectations before the training programme and collecting their views regarding the attainment of the expectations after training. iv) Seeking opinion of trainees’ superior regarding his/her job performance and behavior before and after training. v) Evaluation of trainees’ skill level before and after training programme. vi) Measurement of improvement in trainees on the job behavior. vii) Examination of testing system before and after sometime of the training programme. viii) Measurement of trainees’ attitude after training programme. 6

» Evaluation Of Training Programme:

HRM notes

ix) Cost-benefit analysis of the training programme,.

Performance appraisal is: “it is the systematic evaluation of the individual with respect to his/her performance on the job and his/her potential for development.” “a formal, structured system of measuring and evaluating an employee’s job, related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefits.” The second definition includes employees’ behavior as part of the assessment.

» Meaning and Definition:

Data relating to performance assessment of employees are recorded, stored, and used for several purposes. The main purpose of employee assessment are: 1. To effect promotions based on competence and performance. 2. To confirm the services of probationary employees upon their completing the probationary period satisfactorily. 3. To assess the training and development needs of employees. 4. To decide upon a pay raise where regular pay scales have not been fixed. 5. TO let the employees know where they stand in so far as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development. 6. Finally, performance appraisal can be used to determine whether programmes such as selection, training, and transfers have been effective or not.

» Objective Of Performance Appraisal:

» Appraisal Process:

The Performance Appraisal Process
Objectives of Performance Appraisal

Establish Job Expectations Design an Appraisal Programme Appraise Performance Performance Use appraisal Data for Interview Appraisal Purposes 6

HRM notes

1. Objectives of Appraisal: Objectives of appraisal, as stated above,
include effecting promotions and transfer, assessing training needs, awarding pay increases, and the like. The emphasis in all these is to correct the problems. These objectives are appropriate as long as approach in appraisal is individual. Appraisal, in future, would assume systems orientation. In the systems approach, the objectives of appraisal stretch beyond the traditional ones. In the systems approach appraisal aims at improving the performance, instead of merely assessing it. 2. Establish Job Expectations: The second step in appraisal process is to establish job expectations. This includes informing the employees what is expected from him or her on the job. Normally, a discussion is held with his or her superior to review the major duties contained in the job description. individuals should not be expected to begin the job until they understand what is expected of them.

3. Design the Appraisal Programme: Designing the appraisal programme
poses several questions which needs answers. They are, i) Formal versus informal appraisal; ii) Whose performance is to be assessed? iii) Who are the raters? iv) What problems are encountered? v) How to solve the problems? vi) What should be evaluated? vii) When to evaluate? viii) What methods of appraisal are to be used? 4. Performance Interview: Performance interview is another step in the appraisal process. once appraisal has been made of employees, the raters should discuss and review the performance with the ratees, so that they will receive feedback about where they stand in the eyes of superiors. feedback is necessary to effect improvement in performance, especially when it is inadequate. specifically, performance interview has three goals: i) to change the behavior of employees who’s performance does not meet organizational requirements or their own personal goals, ii) to maintain the behavior of employees who perform in an acceptable manner, and iii) to recognize superior performance behaviors so that they will be continued. 5. Use of Appraisal Data: The final step in the evaluation process is the use of evaluation data. the data and information generated through performance evaluation must be used by the HR department. The data and information will be useful in the following areas of HRM: a. Remuneration administration. b. Validation of selection programmes. c. Employee training and development programmes. d. Promotion, transfer and lay-off decisions. e. Grievance and discipline programmes. f. HR planning. 6

HRM notes

» Methods of Performance Appraisal:
1. 2. 3. 4. 5. 6. 7. 8. 9. The most commonly used appraisal techniques: Essay appraisal Graphic rating scale Field review Forced-choice rating Critical incident appraisal Mgt.-by-objectives approach Work-standards approach Ranking Methods Assessment Centers Essay Appraisal: In its simplest form, this technique asks the rater to write a paragraph or more covering an individuals strength, weakness, potential & so on. In most selection situations, particularly those involving professional, sales, or managerial positions, essay appraisals from former employers, teachers, and our associates carry significant weight. The assumption seems to be that an honest & informed statement-either by word of mouth or in writing-form someone knows a man well, is fully as valid as more formal & more complicated methods. The biggest drawback to essay appraisal is their variability in length & content. Moreover, since different essays touch on different aspects of a mans performance or personal qualifications are difficult to combine or compare. Graphic rating scale: This technique may not yield the depth of an essay appraisal, but it is more consistent & reliable. Typically, a graphic scale assesses a person on the quality & quantity of his work (is he outstanding, above average, average or unsatisfactory?) & on a variety of other factors that vary with the job but usually include personal traits like reliability & cooperation. It may also include specific performance items like oral & written communication. Field review: When there is reason to suspect rather bias, when some raters appear to be used in higher standards than others, or when comparability of ratings is essential, essay or graphic ratings are often combined with a systematic review process. The field review is one of several techniques for doing this. A member of the personnel or central administrative staff meets with small groups of raters from each supervisory unit & goes over each employees rating with them to (a) identify areas of inter-rater disagreement, (b) help the group arrive at a consensus, & (c) determine that each rater conceals the standards similarly. This group-judgment technique tends to be more fair & more valid than individual ratings & permits the central staff to develop an awareness of the varying degrees of leniency or severity-as well as bias-exhibited by raters in different departments. On the negative side, the process is very time consuming. Forced-choice rating: Like the field technique, this technique was developed to reduce bias & establish objective standards of comparison between individuals, but it does not involve the intervention of a third party. Although there are many variations of this method, the most common one asks raters to choose from among groups of statements those which best fit the individual being rated & those which least fit in. The statements are then rated or scored, very much the way the 6





HRM notes

psychological test is scored. People with high scores are, by definition, the better employees; those with low scores are the poorer ones. Since the rater does not know what the scoring rates for each statement are, in theory at least, he cannot play favorites. He simply describes his people, & someone in the personal dept. applies the scoring rates to determine who gets the best rating. 5. Critical incident appraisal: The critical incident technique looks like a natural to some people for performance review interviews, because it gives a supervisor actual factual incidents to discuss with an employee. Supervisors are asked to keep a record, a “little black book,” on each employee & to record actual incidents of positive or negative behavior. The supervisor sets the standards if they seem un fair to a subordinate, might he not be more motivated if he at least some say in setting, or at least agreeing to, the standards against which he is judged? 6. Management by Objectives: It should be noted, however, that when MBO is applied at lower organizational levels, employees do not always want to be involved in their own goal setting. As Arthur N. Turner & Paul R. Lawrence discovered many do not want self-direction or autonomy. As a result, more coercive variations of MBO are becoming increasingly common, & some critics see MBO drifting into a kind of manipulative form of management in which pseudo-participation substitutes for the real thing. Employees are consulted, but management ends up imposing its standards & its objectives.

7. Work-standards approach: Instead of asking employees to set their own performance goals, many organizations set measured daily work standards technique establishes work improving productivity. When realistically used, it can make possible an objective & accurate appraisal of the work of employees & supervisors.

To be effective, the standards must be visible & fair. Hence a good deal of time is spent observing employees on the job, simplifying & improving the job where possible, & attempting to arrive at realistic output standards. 8. Ranking methods: For comparative purposes, particularly when it is necessary to

compare people who work for different supervisors, individual statement, ratings, or appraisal forms are not particularly useful. Instead, it is necessary to recognize that comparisons involve as overall subjective judgment to which a host of additional facts & impressions must somehow be added. There is no single form or way to do this. Comparing people in different units for the purpose of, say, choosing a service supervisor or determining the relative size of salary increases for different supervisors, requires subjective judgment, not statistic. The two most effective methods are alternation ranking & paired comparison ranking. Alternation ranking: In this method, the names of employees are listed on the left-hand side of a sheet of paper-preferably in random order. If the rankings are for salary purposes a supervisor is asked to choose the “most valuable” employee on the list, cross his name off, & put it at the top of the column on the right-hand side of the sheet. Next, he selects the “least valuable” employee on the list, crosses

HRM notes

his name off, & puts it at the bottom of the right-hand column. The ranker then selects the “most valuable” person from the remaining list, crosses his name off & enters it below the top name on the right-hand list, & so on. Period-comparison ranking: This technique is probably just as accurate as
alternation ranking & might be more so. But with large numbers of employees it becomes extremely time consuming & cumbersome.


To illustrate this method, let us say we have 5 employees: Mr. Abbott, Mr. Barnes, Mr. Cox, & Mr. Eliot. We list their name on the left-hand side of the sheet. We compare Abbott with Barnes on whatever criterion we have chosen, say, present value to the organization. If we feel Abbott is more valuable than Barnes, we put a tally beside Abbott’s name. We then compare Abott with Cox, with Drew & with Eliot. The process is repeated for each individual. The man with the most tallies is the most valuable person, at least in the eyes of the rater; the man with no tallies at all is regarded as the least valuable person. Assessment centers: Typically, individuals from different department

are brought together to spend two or three days working on individual & group assignments similar to ones they will be handling if they are promoted. The pooled judgment of observers-sometimes derived by period comparison or alternation ranking-leads to an order of-merit ranking for each participant. Less structured, subjective judgments are also made.

The performance-appraisal system serves many organizational objectives & goals. Besides encouraging high levels of performance, the evaluation system is useful in identifying employees with potential, rewarding performance equitably, & determining employee needs for development. These are all the activities that should support the organizations strategic orientation. Although these activities are clearly instrumental in achieving corporate plans & longterm growth, typical appraisal systems in most organizations have been focused on short-term goals. From the strategic mgt. point of view, organizations can be grouped into 3 categories- defenders, prospectors, & analyzers. Performance appraisal has definite roles in all 3 strategies. Typically, defenders have a narrow & relatively stable product-market domain. Because of this narrow focus, these organizations seldom need to make major adjustments in technology, structure or methods of operations. They devote primary attention to improving the efficiency of their existing operations. Because of the emphasis on skill building within the organization, successful defenders us performance appraisal as a means for identifying training needs. Performance appraisal is usually more behavior oriented. Finally, the focus is often on comparing individual or group performance with the previous year’s performance. Organizations with a prospector strategy continuously search for different product & market opportunities. In addition, these organizations regularly experiment with potential responses to new & emerging environmental trends. 6

» Organizational Strategy & Performance Appraisal:

HRM notes

Prospectors are often the harbingers of change. Because of the emphasis on skills identification & acquisition of human resources from external sources, as opposed to skills building within the organization, prospectors often use the performance appraisal as a means of identifying staffing needs. The emphasis is on results. Finally, the focus is on division & corporate performance evaluation as they compare with other companies during the same evaluation period. Organizations with an analyzer strategy operate in 2 types of product market domains. One domain is stable while the other is changing. In their more innovative areas, managers watch their competitors closely & rapidly adopt the ideas that appear promising. In general, analyzers use cost-effective technologies for stable products & project or matrix technologies for new products. Analyzers tend to emphasize both skill building & skill acquisition & employ extensive training programmes. Thus, these organizations attempt to identify birth training as well as staffing needs. The appraisal systems are considered at the individual, group & divisional levels. Finally, successful analyzers have a tendency to examine current performance with past performance within the organization. Cross-sectional comparisons (comparisons among companies) may also occur.

» Edward Deming on Performance Appraisal:
Deming is opposed to employees assessment, because it: 1. Rewards people for manipulating the system rather than improving it, 2. Is often self-defining, 3. Is consistent with team-work, 4. Acts as a substitute for proper management, & 5. Is inherently unfair. His alternatives to performance appraisal are: 1. Meticulous selection of leaders. 2. Educating workers about their obligations, & improved training & education after selection, 3. Getting leaders to function as colleagues rather than as judges, 4. Subordinate performance to be assessed using statistical data, 5. Three to four interviews annually, with subordinates aimed at support & encouragement, & 6. Accommodation to lone workers.

Three theories are – reinforcement & expectancy theories, equity theory & agency theory. Reinforcement & Expectancy Theory: The reinforcement theory postulates that a behavior which has a rewarding experience is likely to be repeated. The implications for remuneration is that high employee performance followed by a monetary reward will make future employee performance more likely. By the same token, a high performance not followed by a reward will make its recurrence unlikely in future. The theory emphasizes the importance of a person actually experiencing the reward.

» Theory of Remuneration:


HRM notes

Equity Theory: Adams’s equity theory points that an employee who perceives
inequity in his or her rewards seeks to restore equity. The theory emphasizes equity in pay structure of employees’ remuneration. Agency Theory: The agency theory focuses on the divergent interests & goals of the organizations stakeholders & the way that employee remuneration can be used to align these interests & goals. Employers & employees are the two stakeholders of a business unit, the former assuming the role of principals & the latter the role of agents. The remuneration payable to employees is the agency cost. It is natural that the employees expect high agency costs while the employers seek to minimize it. The agency theory says that the principal must choose a contracting scheme that helps align the interest of the agents with the principal’s own interests. These contracts can be classified as either behaviororiented (e.g. merit pay) or outcome-oriented (e.g. stock option schemes, profit sharing, & commission).

» Factors Influencing Employee Remuneration:
A number of factors influence the remuneration payable to employees. They can be categorized into i) external & ii) internal factors.

External Factors
Factors external to an organization are labour market, cost of living, labour unions, government legislations, the society, & the economy. Labour Market: Demand for & supply of labour influence wage & salary fixation. A low wage may be fixed when the supply of labour exceeds the demand for it. A higher wage will have to be paid when the demand exceeds supply, as in the case of skilled labour. Going rate of pay is another labour-related factor influencing employee remuneration. Going rates are those that are paid by different units of an industry in a locality & by comparable units of the same industry located elsewhere. Productivity of labour also influences wage fixation. Productivity can arise due to increased effort of the worker, or as a result of the factors beyond the control of worker such as improved technology, sophisticated machines & equipment, better management. Cost of Living: Next in importance to labour market is the cost of living. A rise in cost of living is sought to be compensated by payment of dearness allowances, basic pay to remain undisturbed. Labour Unions: The presence or absence of labour organizations often determines the quantum of wages paid to employees. Employers in nonunionized factories enjoy the freedom to fix wages & salaries as they please. An individual non-unionized company may be willing to pay more to its employees if only to discourage them from forming one. Labour Laws: We have a plethora of labour laws at the central as well at the state levels. Some of the central laws which have a bearing on employee remuneration are the Payment of Wages Act, 1936; the Minimum Wages act, 1948; the Payment of Bonus Act, 1965; Equal Remuneration Act, 1976; & the Payment of Gratuity Act, 1972. The Payment of Wages Act was passed to regulate payment of wages to certain classes of persons employed in the industry. The Minimum Wages Act enables the central & state government to fix minimum rates of wages payable to employees in sweated industries. The Equal Remuneration Act provides for payment of equal remuneration to men & women workers for same or similar work. 6

HRM notes

Society: Remuneration paid to employees is reflected in the prices fixed by an organization for its goods & services. For this reason, the consuming public is interested in remuneration decisions. The Economy: The last external factor that has its impact on wage & salary fixation is the state of economy. While it is possible for some organizations to thrive in recession, there is no question that economy affects remuneration decisions. For example, a depressed economy will probably increase the labour supply. This, in turn should serve to lower the going wage rate.

The Internal Environment
Among the internal factors which have an impact on pay structure are the company’s strategies, job evaluation, performance appraisal, & the worker himself or herself. Business Strategy: The overall strategy which a company pursues determines the remuneration to its employees. Where the strategy of the enterprise is to achieve rapid growth, remuneration should be higher than what competitors pay. Where the strategy is to maintain & protect current earnings, because of the declining fortunes of the company, remuneration level needs to be average or even below average. Job Evaluation & Performance Appraisal: Job evaluation helps establish satisfactory wage differentials among jobs. Performance appraisal helps award pay increases to employees who show improved performance. The Employee: Several employee-related factors interact to determine his or her remuneration. These include performance, seniority, experience & potential. Performance is always rewarded with pay increase. Rewarding performance motivated the employees to do better. Experience makes an employee gain valuable insights & should therefore be rewarded. Potential is useless if it is never realized. Yet, organizations do pay some individuals on their individuals.

» Linkage of Remuneration Strategy with Business Strategy:
Remuneration plans, like any other HR activity, must become an input to formulating a business strategy. Wage & salary plans must derive from an assessment of what must be paid to attract & retain the right people, what the organization can afford, & what will be required to meet the organization’s strategic goals. Business Strategy Remuneration Invest to grow cash with average incentive performance. Modest benefits. 6 Marhet Position Remuneration & Maturity Stimulate etrepreneurialism Blend of Strategy High above

Merging or growth Rapidly

HRM notes

Manage earningscash with protect markets moderate incentive

Normal growth to

Reward mgt. skills.

Avg. maturity

Harvest earningsaverage cash reinvest elsewhere small

No real growth or decline

on individual, unit, or corporate performance. Standard benefits. Stress on cost Belowcontrol incentive tied to cost control. Standard benefits. with

Companies do the following, viewing remuneration from a strategic perspective: 1. They recognize remuneration as a pivotal control & incentive mechanism that can be used flexibly by the management to attain business objectives. 2. They make the pay system an integral part of strategy formulation. 3. They integrate pay considerations into strategic decision-making processes, such as those that involve planning & control. 4. They view the company’s performance as the ultimate criterion of the success of the strategic pay decisions & operational remuneration programmes.

» Steps for devising a Remuneration Plan:
The persons responsible for determining a remuneration plan are advised to employ sequential steps as described below: Job Descriptions: Job descriptions are crucial in designing pay systems, for, they help to identify important job characteristics. They also help determine, define & weigh compensable factors (factors for which an organization is willing to pay-skill, experience, effort, & working environment). Job Evaluation: The next step in pay fixation is to establish relative worth of jobs by employing job evaluation. A number of techniques are available to evaluate jobs. For example, in the point-ranking method of job evaluation, each job is analyzed & defined in terms of the compensable factors an organization has agreed to adopt. Points are assigned to each degree of a compensable factor, such as responsibility.

Job Hierarchy: The points assigned to all compensable factors are
aggregated. Total points scored will help to establish the hierarchy of job worth, starting from the highest point total to the lowest point total. Pay Surveys: Job hierarchy being established, the next step is to establish pay differentials. Before fixing wage & salary differentials, prevailing wage & salary rates in the labour market need to be ascertained. Hence the relevance of pay surveys.

» Challenges Affecting Remuneration:

HRM notes

The more important of the challenges are skill-based pay, salary reviews, pay secrecy, comparable worth, & international pay. Skill-based pay: In traditional job-based pay, employees are paid on the bases of jobs they do. In the skill-based system, workers are paid on the basis of number of jobs they are capable of doing, or on the depth of their knowledge. The purpose of this system is to motivate employees to acquire additional skills so that they become more useful to the organization.

Skill-based pay & job-based pay compared
Factors Pay structure perform Employer’s focus Job-based Based on job performance Skill-based Based on ability to

Job carries wage Employee carries wage, Employee linked to job Employee linked to skills Employee focus Job promotion to earn Skill acquisition to earn greater pay greater pay Procedures required Assess job content; Assess skills; Value jobs Value skills Advantages Pay based on value of work Flexibility; work performed Reduced workforce Disadvantages Potential personnel Potential personnel Bureaucracy; Inflexibility Bureaucracies; Cost controls

Pay Reviews: Pay, once determined, should not remain constant. It must be
reviewed & changed often, but how often becomes a relevant question. Pay reviews may be made on predetermined dates, anniversary dates or there could be flexible reviews. In organized industrial establishments, pay reviews take place once in three years. Managements enter into wage & salary agreements with labour unions & the agreement will be valid for 3 yrs. Pay Secrecy: Equity in remuneration is a significant factor in employee performance. Perceived inequity in wages & salaries will demotivate & demoralize employees which will lower employee performance. One way of avoiding this problem is for managements to maintain secrecy. Comparable Worth: One of the popular principles in employee remuneration is equal pay for equal work. Infact, this principle has been the inspiration behind the enactment of the Equal Remuneration Act. Under this act, male & female nurses are to be paid the same if their merit & seniority match. International Pay: In increasing globalization of business, international pay assumes great relevance.

» Concepts Of Wages:

While evolving, wage policy, three concepts of wages, viz, i) minimum wages, ii) fair wages, iii) living wages are generally considered. These are broadly based on the needs of workers, capacity of the employee to pay, & the general economic conditions prevailing in a country.

Minimum Wage
Minimum wage is one which provides not merely for bare sustenance of life, but also for the preservation of the efficiency of worker. For this purpose, the


HRM notes

minimum wage must also provide for some measure of education, medical requirements & amenities.

Fair Wage
Fair wage is understood in two ways. In a narrow sense, wage is fair if it is equal to the rate prevailing in the same trade & in the neighborhood for similar work. In a wider sense, it will be fair if it is equal to the predominant rate for similar work throughout the country.

Living Wage
Living wage is a step higher than fair wage. Living wage may be described as one which would enable the wage earner to provide for himself/herself & his/her family not only the bare essentials of life like food, clothing, & shelter, but a measure of frugal comfort including education for children; protection against ill health; requirements of essential social needs; &/or measure of insurance against the more important misfortunes including old age.

Employee participation means associating representatives of workers at every stage of decision making. Participative management is considered as a process by which the workers’ share in decision making extends beyond the decisions that are implicit in the specific contents of the job they do. This, in actual practice, amounts to the workers having a share in the reaching of final managerial decision in an enterprise. A clear & more comprehensive definition is: “Workers’ participation, may broadly, be taken to cover all terms of association of workers & their representatives with the decision-making process, ranging from exchange of information, consultations, decision & negotiations to more institutional forms such as the presence of workers’ member on management or supervisory boards or even management by workers themselves.”

» Meaning & Definition:

There are three group of managerial decisions which have a direct impact on the workers of any industrial establishment. They are social, personnel & economic decisions. Economic decisions include financial aspectsthe methods of manufacturing, automation, shut-down, lay-offs, mergers & similar other functions. Personnel decisions refer to recruitment & selection, promotions, demotions, transfers, grievance settlement, work distribution, & so on. Social decisions relate to hours of work, welfare measures, questions affecting work rules & conduct of individual workers, safety, health, and sanitation & noise control. The workers must have a say in the decisions on the issues mentioned above. But there is a difference of opinion about the scope & the extent to which workers can participate in social, personnel & economic decisions. One school of thought is of opinion that the workers or trade unions should, on parity basis, sit with the management as equal partners & make joint managerial decisions on all matters. The other school propounds the view that the workers should only be given an opportunity, through their representatives, to influence managerial decisions at various levels. The first old view could lead to workers actual participation in the decision-making process of the management, while the

» Scope & Ways of Participation:


HRM notes

second aspect will work out to be consultation of workers in managerial decisions. i) Participation at the Board level: The workers’ representative on the board can serve as a control element & a guide to the management in its exercise of personnel & social functions. He or she can guide the Board members on matters of investment in employee benefit schemes like housing, & so forth. ii) Participation through Ownership: Workers may become more involved in industries by making them shareholders of the company. This may be done by including them to buy equity shares. The management may promote the scheme by allowing the workers to make payments in installments. It may also advance loans or even give financial assistance to such workers to enable them to buy equity shares. iii) Participation through Complete Control: Workers require complete control of the management through elected boards. The system of selfmanagement in Yugoslavia is based on this concept. It gives complete control to workers to manage directly all aspects of industries through their representative. iv) Participation through Staff or Works Councils: Staff councils or works councils are bodies on which the representation is entirely of the employees. There may be one council for the entire organization or a hierarchy of work councils forms the shop-floor to the Board level. The members of the councils are elected by the employees of respective sections. v) Participation through Joint Councils & Committees: Joint councils are bodies comprising representatives of employers & employees. The function of these bodies may range from decision making on some issues, to merely advising the management as consultative bodies. vi) Participation through Collective Bargaining: The principle of collective bargaining confers on the management & workers the right, through collective agreements, to lay down certain rules for the formulation & termination of the contract of employees, as well as the conditions of service in an establishment. vii) Participation through Suggestion Schemes: Employees’ views on such matters as machine utilization, waste management, energy conservation & safety measures are invited, & rewards is given for the best suggestion. This procedure enables the management to arouse & maintain the employees’ interests in the problem of their concern & its management. viii) Participation through Quality Circles: A quality circle consists of 7 to 10 people from the same work area who meet regularly to define, analyze, & solve quality & related problems in their area. Employees are involved in decision making. This privilege makes them acquire communication & analytical skills & improve the efficiency at the workplace. ix) Empowered Teams: Empowering refers to passing on authority & responsibility. Empowerment occurs when power goes to employees who then experience a sense of ownership & control over their jobs.

conditions have to be fulfilled: 1. The participants, namely, the management & the operatives, must have clearly defined & complementary objectives. And the objectives of one party should not work at cross-purposes with the objectives of the other party. 7

» Pre-Requisites For Successful Participation: To make any of the participative methods successful, the following

HRM notes

2. There must be a free flow of information & communication between the management & workers. In this way, distrust & suspicion are avoided, & workers become responsible & mature when they discuss their demands with the management. 3. The representatives of workers must be drawn from the workers themselves. The participation of outside trade union leaders should be discouraged. This is necessary because the problems & difficulties of the workers are better understood by the workers themselves than by others. The workers, therefore, can put across their point of view to the management with confidence. 4. Strong & effective trade unionism is necessary for the success of participative management. Politicization & multiplicity of trade unions defeat the purpose of participation & management. 5. Workers’ education & training make a significant contribution to the purposive working of participative management. Trade unions & the government can play a vital role in organizing & conducting training programmes. 6. Neither party should feel that its position is threatened by participation. If workers that their status will be adversely, affected they will not participate. If managers feel that their authority is threatened, they will refuse participation or will be on the defensive. 7. Consultative bodies, collective bargaining & suggestion schemes make a mockery of participative management. To make workers’ participation meaningful & purposeful, workers should be associated at all levels of decision making. 8. The success of participation depends on a suitable participative structure & a change of heart on the part of employers & employees, which may take a long time to develop. To expedite this development, some sort of legislative action is necessary. 9. There could be the danger of a major portion of the resources of the enterprises being diverted to workers without much consideration for further investments. It may be desirable to reserve a certain percentage of the resources for reinvestment, either through mutual agreement or legislation. 10. The financial cost of participation should not exceed the values, economic & otherwise, that come from it. Employees cannot spend all their time in participation, to the exclusion of all other work.

» Importance of Participation:
The greatest benefit of participative management is that the employee identifies himself or herself with work & this leads to an improved performance. Participation tends to improve motivation because employees feel more accepted & involved in the situation. Their self-esteem, job satisfaction, & co-operation with management will also improve. The results often are reduced conflict & stress, more commitment to goals, & better acceptance of a change. Employees may also reduce turnover & absences when they begin to feel that working conditions are satisfactory & that they are becoming more successful in their jobs. Finally, the act of participation in itself establishes better communication, as people mutually discuss work problems. The management tends to provide workers with increased information about the organizations finances & operations, & this helps employees to give better quality satisfactions. 7

HRM notes

Whatever may be the objective, the form or the level of participation, there is hardly a study in the entire work literature which fails to demonstrate that satisfaction in work is enhanced, or that generally acknowledged beneficial consequences accrue from a genuine increase in the workers’ decision-making powers. It is not really difficult to explain why participation works. It is almost a matter of common sense that humans will take greater pride & pleasure in their work if they are allowed participatory freedom in shaping the policies & decisions which affect their work.

» Personnel Policies:
A policy is a plan of action. It is a statement of intention committing the management to a general course of action. When the management drafts a policy statement to cover some features of personnel programmes, the statement may often contain an expression of philosophy & principle as well. A policy statement is more specific & commits the management to a definite course of action. The following is a policy: Our policy is to institute every practical method for engineering safety into our processes & equipment, to provide protective clothing where necessary, to train employees in safe operating procedures, & to vigorously enforce established safety rules. Our policy is to provide a healthy plant by giving adequate attention to cleanliness, temperature, ventilation, light & sanitation.

Advantages of Personnel Policies:

Organizations should have personnel policies as they ensure the following benefits: 1. The work involved in formulating personnel policies require that the management give deep thought to the basic needs of both the organization & employees. The management must examine its basic convictions as well as give full consideration to the prevailing practices in the organization. 2. Established policies ensure consistent treatment of all personnel throughout the organization. Favoritism & discrimination are, thereby, minimized. 3. Continuity of action is assured even though top-management personnel change. Policies promote stability. 4. Policies serve as a standard of performance. Actual results can be compared with the policy to determine how well the members of the organization are living upto the professed intentions. 5. Sound policies help guide employee motivation & loyalty. This is especially true where the policies reflect established principles of fair play & justice & where they help people grow within the organization. 6. Sound policies help resolve interpersonal, interpersonal & intergroup conflicts.


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