Training Design

Session - 9
Training & Development and other HR
Functions
Availability of training Recruitment
can
aid in recruitment
Training may permit Selection Effective selection may
hiring reduce training needs
less-qualified applicants
Training aids in the Performance A basis for assessing
achievement of Appraisal training needs and results
performance

Training and Compensation A basis for determining

development Management employee’s rate of pay
may lead to higher pay
Labor Union cooperation can
Relations facilitate training

2
 When is Training a Good Intervention

• Training might be appropriate when the performance

issue is a “can’t do” issue:
• Poor performance (resulting from a knowledge or skill
deficiency).
• Lack of basic skills (reading, writing, technology, math
skills).
• New technology.
• A customer request for new products or services.
• Higher performance standards.

3
 When Is Training NOT the Best Intervention?
• Training is not the best intervention when the performance
issue is a result of:
• Recruitment, selection or compensation problems.
• Insufficient tools, equipment or resources.
• Physical setting problems.
• A lack of motivation (job-person fit; person-org fit); a “won’t do” issue.
 What is Training Need Analysis

Process to determine whether training can

address a performance gap.
 Think About It
• Your sales director complains that her representatives are not
making their monthly quotas. She is convinced they need more
sales training to address this issue and asks you to design
something by the end of the week.

• What would you do?

6
 TNA Framework Components
• Organizational Analysis
• To align training with business strategy and to ensure there are resources and
managerial support for training.
• Task Analysis
• To identify the important work-related tasks and knowledge, skills, behaviors,
abilities (KSBAs);
• determine if the content and activities are consistent with trainee on-the-job
experience; and
• to develop measurable and relevant content, objectives and methods.
• Person Analysis
• To ensure that trainees have the basic skills, motivation, prerequisite skills or
confidence.

7
Needs Assessment Analysis

Organizatio Task Organizational

n Analysis Analysis Demands

Performance Gap

Person
Employee Capability
Analysis
 Organization Analysis
An Organization Analysis involves determining :
• Appropriateness of training given the organization’s
strategy.
• Resources (financial and development) available for
training and transfer after training.
• Where is training needed in the organization?
 Gather data mainly from senior and mid-level managers. Why?

9
 Task Analysis
Task Analysis involves:
• Identifying the important work-related tasks and knowledge, skills,
behaviors and abilities (KSBAs)
• How often and when tasks are performed
• Quantity & Quality of performance required

10
 Individual/Learner Analysis
The person/learner analysis involves:
• Determining whether performance deficiencies result from a lack of
knowledge, skill, behavior or ability (a training issue) or from a
motivational or work design problem.
• Identifying who needs the training; who has a KSBA deficiency.
• Determining readiness for training: basic skills, motivation, self-
efficacy.

11
 TNA Data Collection Methods
• Survey
• Interviews
• Observations
• Focus Groups
• Advisory Committees

12
 Airport Scene
Why have the three Airlines i.e. Indian Airlines, Air Sahara and Jet
Airways responded differently on the issue of Fog related delay and
cancellation of flights?
Preparedness at what level is missing?

13
IIMs, Foreign varsities line up to educate SHOs
At what levels the “Training Needs” has been identified?

14
Training Methods & Training
Evaluation
Session 11
Learning Theories – Three Categories
• Behaviorist Learning Theories
• Cognitive-Information processing Learning Theories
• Cognitive-Constructivist Learning Theories
Behaviorist Learning Theories
• Three Experimental Approaches (Associationistic):
• Association of Ideas
• Association between Sensations and Impulses (Law of Effect, Trondlike Puzzle
Box Experiment)
• Associationism & Reflexology (Classical Conditioning Theory; Pavlov’s
Experiment)
• UCS ----------------- UCR
Cognitive Information Processing Theory

Source: Atkinson and Shiffrin (1968)

Cognitive-Constructivist Learning Theories
• Cognitive Constructivist
• Social Constructivist
Instructional Design

Specific Prescription Multipurpose Prescription

Training Education
Learning Theories & Implications for Instructional Design
Behaviourism Information Processing Social Cognitive Constructivism

Cognitive Social
Main Metaphor Black Box Computer – Processing Video Camera
Nature of Out there, needs to be Needs to be acquired and Negotiated from Individually Socially
Knowledge acquired and used connected with experiences constructed Constructed
knowledge inside
Role of Leaner Performer Processor Observer/copier Explorer Collaborator
Role of Instruction Convey Knowledge Guide accurate Model & Reinforce Provide Social
acquisition of K behaviors experiences context
Instructional Practice Opportunities Organize and Present K to Model & reinforce Provide Social
Strategies be processed behaviors opportunities Learning
to experiment Environment
 Trainee Characteristics
• Trainability = f(Motivation X Ability X Perceptions of the Work
Environment)
• Pre-training Motivation
• How training is perceived by trainees (remedial vs. advances, labelling training as an
opportunity)
• Involvement in decisions about training
• Perceptions that participation in training would lead to benefits
• Organizational policies that support training
• Personality and Attitudes
• Individual Differences in the learning Process
• Learning styles
Kolb’s Model on Learning Style of Individuals
Transfer of Training
Climate for
Transfer

Opportunity to Technological
use Learned Support
Capability

Transfer of
Training

Self
Manager
Manageme
Support
nt Skills

Peer
Support
Source: Dilbert Archive
TRAINING METHODS
• On the Job Training
• Off the Job Training
On the Job Training
• Job Instruction Training
• Job Rotation
• Supervisory Assistance
• Mentoring
• Coaching
• Understudy
• Apprenticeship
• Internship
Off the Job Training
• Lecture / Class room training
• Vestibule Training
• Role Plays
• Case Studies
• Games
• Technology based learning
• OBL
• Sensitivity Training
Evaluating the Training Program
• Measuring program effectiveness
Most widely used model of training evaluation was developed by
Kirkpatrick
Criterion 1: Trainee reactions
Criterion 2: Extent of learning
Criterion 3: Learning transfer to job
Criterion 4: Results assessment
Training Evaluation - Level 1
• Reaction
Document the learners 'immediate reaction to the training.

• Measures -
Questionnaires, Interviews, Discussions
Training Evaluation - Level 2
• Learning
Use feedback devices or pre- and post- tests to measure what learners
have actually learned.

• Measures -
Written tests, Performance tests, Structured exercises
Training Evaluation - Level 3
• Behavior
Determine the level of improvement in job performance and assess
needed maintenance.

• Measures -
Sales / production targets, appraisal ratings
Training Evaluation - Level 4
• Results
Measure the degree to which learners apply new skills and knowledge to their
jobs. Note supervisors’ reactions to learners’ performance following training.

Measure- Overall improvement in organization

and department performance
• Costs & Profit
• Quality & Productivity
• Accidents
• Morale
• Turnover
Let us Revisit Sunpharma Case
Specifically how will you measure if training has resulted in any
change?
Conman Consultants
- At what level Conman Consultants fail?
- Was there a problem with design of Training Program?
- How will you evaluate the Training Effectiveness in this case?
Secretaries gave Reaction, is it sufficient to say “Training program was
a failure experiment”
Performance Management
& Appraisal
Session – 12
Wipro sacks 600 employees post performance appraisal
Economic Times

The country's third largest software services firm Wipro is learnt to have
fired hundreds of employees as part of its annual "performance appraisal".
According to sources, Wipro has shown the door to about 600 employees,
while speculation was rife that the number could go as high as 2,000.
At the end of December 2016, the Bengaluru-based company had over 1.79
lakh employees.
When contacted, Wipro said it undertakes a "rigorous performance
appraisal process on a regular basis to align its workforce with business
objectives, strategic priorities of the company, and client requirements”
In shoes of an Appraiser?
 WHAT IS PERFORMANCE ?

Performance means both BEHAVIOUR and RESULTS.

Behaviours emanate from the performer and transform performance from

abstraction to action.

Are behaviors only instruments of results?

-
FACTORS IMPACTING PERFORMANCE
f (ability + motivation)

f (ability + motivation + opportunity)

f (indi. attributes + wk effort + orgn support)

f (individual factors + contextual factors)

What’s the difference between

Performance Appraisal
and
Performance Management ?
Performance Appraisal

Performance appraisal = the formal assessment and rating of

individuals by their managers at – usually – an annual review
meeting.

Objective: determine whether employees are performing effectively.

Ownership ?
Performance Management

Performance management is a continuous process.

It is focused on the future and not the past.

Managers and individuals work together in partnership

 Performance Appraisal

• The information obtained through performance appraisal

provides foundations for
– recruiting and selecting,
– training and development of existing staff,
– and motivating and maintaining a quality work force by
adequately and properly rewarding their performance.
Purpose(s) of Performance Appraisal
• Evaluative purpose - Performance standing.
• Developmental purpose - identify problems in employees
performing the assigned task
• Additional Purpose?
• (a)
• (b)
CRITICAL CRITERIA OF DEVELOPING A PA
SYSTEM - RELIABILITY

• PA system must be able to consistently produce reliable results.

• How?
CRITICAL CRITERIA OF DEVELOPING A
PA SYSTEM - VALIDITY

• It is important to make sure that the appraisal items are really

measuring the intended performance or target behavior.

• If they are not, the PA system encourages the wrong kind of

work behaviors and produces unintended, frequently negative,
organizational outcomes.
CRITICAL CRITERIA OF DEVELOPING A
PA SYSTEM – NON BIASED

• It is important to make sure that the appraisal is non biased

• Rater’s
• Training
• Motivation
• Participation
• Opportunity Bias
RATING ERRORS

Common Rater
Bias Errors

Contrast Distributional Halo Horns

error errors error error
CRITICAL CRITERIA OF DEVELOPING A
PA SYSTEM – PRACTICALITY

• It is important to make sure that the appraisal is practical in

terms of execution
• Time required
• Timing of the appraisal
• Cost effectiveness
• Aggregation vs. Disaggregation
WHAT TO EVALUATE

• The first important step in developing a PA system is to

determine which aspects of performance to evaluate. The most
frequently used appraisal criteria are
• Task outcomes/results
• Behaviors,
• Traits
Results Approach
• What approach – Outcome is considered instead of process

• Less time taking

• Objective in nature

Applicability

• Employees are skilled in the needed behaviour

• Behaviours and results are obviously related

• Results show consistent improvement over time

• Multiple ways of doing the right job

Behaviour Approach
• Process Oriented
• How an employee does the job

Applicability
• The link b/w behaviours and results is not obvious
• Outcomes occur in distant future
• Poor results are due to causes beyond the performer’s control
Trait Approach
• Emphasises individual performer
• Stable traits are evaluated
Business Excellence Through Performance
Management at Tata Tea Limited
 Techniques for
Performance Appraisal
Session 13
Which Rating Method to Use?

Simple Paired
ranking comparison
Forced Distribution Method
 Specific Rating Methods
Graphic rating
scale

Critical incident Behaviorally anchored

method rating scale (BARS)

Behavioral observation Management-by-

scale (BOS) objectives (MBO)
Critical Incident
• Involves gathering reports of situations in which employees exhibited behavior
that were especially effective or ineffective in accomplishing their jobs.

• Recorded critical incident serves as a starting point for assessing performance.

Case in Point
• A student with learning disability was experiencing difficulty in writing.
Her parents wanted a laptop for her. Tom Jones, head of disability services
office ordered a laptop and it was delivered to the student’s teacher. No
training was provided to the child, her teacher or her parents. The laptop
was never used
Series of Incidents
• A problem was detected (a student with a special need was identified)
• Corrective action was taken (the laptop was ordered)
• Corrective action was initially positive (the computer was delivered)
• Corrective action was subsequently deficient (the computer was not used
because of lack of training from disability services office)

• Identify the Critical ones for assessing performance of Tom Jones

• Advantage
• Focus on actual job behavior rather than vaguely defined traits
• Disadvantage
• Time consuming – collecting & recording
• Difficult to attach a score quantifying the impact of the incident (either +ive or –ive)
Example of Graphic Rating Scales
Source: GDBV, HRM, 13th Ed.
Behavioral Observation Scale (BOS)

Source: GDBV, HRM, 13th Ed.

Management By Objective (MBO)
Cascading of Objectives
BARS
• Provides a description of each assessment along a continuum
• A description of each level of performance makes the assessment a more
objective accurate measure
How is it done ?
• Identify important dimensions of the Job (Key accountabilities)
• Generate Critical Incidents around each of the Dimensions
illustrating low, average, and high skills of performance for
each dimension.
• Assign a scale value to each of the incident
 Case in Point
BARS for measuring Job Knowledge
Job Knowledge – the amount of job-related knowledge and skills that an employee
possesses.

5 Exceptional Employee consistently displays high level of job knowledge in all the
areas of his/her job. Other employees go to this person for training
4 Advanced Shows high degree of knowledge in most areas of his/her job.
Consisitently completes all normal tasks. Employee continues searching for
more job knowledge and may seek guidance in some areas
3 Competent Employee shows an average level of job knowledge in all the areas of the
job. May need assistance in completing difficult tasks
2 Improvement Does not consistently meet the deadlines or complete tasks required for this
Needed job. Does not attempt to acquire new skills or knowledge to improve
performance
1 Major improvement Typically performs tasks incorrectly or not at all. Employee has no
Needed appreciation for improving his/her performance
 DIY
Godrej Agrovet - Product Manager - Agri Inputs
Godrej Agrovet Limited (GAVL) is a diversified agribusiness company dedicated to improving the productivity of
Indian farmers by innovating products and services that substantially increase crop and livestock yields.
Key Responsibilities:
1. Define product strategy for our PGR / PGD category.
2 Developing region based crop-product placement plan
3. Developing the regional promotional plan
4. Developing the core positioning and messaging for the product
5 Study of the competitors placement and communication strategy
6 Developing the appropriate marketing communications
7. Plan for product demos to customers
8. New product launches (AS and when applicable)
9. Meet revenue and volume/contribution/profitability measures
10. Maintenance of Inventory
Qualifications :
- B. Sc (Agriculture) / M. Sc (Agriculture) with MBA / PGDM from leading Indian Institute specializing in Marketing.
 Query – PRM 37 Participant
• The debate between relative and absolute performance appraisal systems has
been going on in organizations for quite some time. Organizations such as Ford
Motor Company and Microsoft faced lawsuits involving relative rankings,
because employees who were older, female, or minority members were
systematically being ranked in the lowest category with little justification.
Additionally, relative rankings are also not consistent with creating a team spirit
and may create a competitive, cutthroat environment.
• However, relative PA system helps the organization become more
performance-oriented and eliminate stagnation by weeding out
some employees with persistent performance problems.
So, what factors determine the type of appraisal system that the
organization should adopt as most of them seem to be following
relative PA in spite of the pitfalls?
Performance Appraisal
Errors and Appraisal Interviews
Session - 14
360 DEGREE APPRAISAL
Sources and Uses of Appraisal Data
Use Supervisor Peers Subordinate Client Self
served
Employment
decisions
X X X
Self
development
X X X X X
Experience of Some of the Indian Org / operating out of
India using 360 degree
• (NIIT, TISCO, TELCO, PHILIPS, WIPRO, ADITY BIRLA GP, BPCL,
MOTOROLA)
• The objective is mostly developmental
• Most organizations use it for top management only
• Some of the most common dimension assessed are – communication;
customer orientation, leadership, initiative, team skills
• Feedback is sought from all the sources
• Mostly feedback is given to the appraisee and is kept confidential.
The responsibility lies with the appraisee to draw up action plans
Instrument Issues
• Items should be directly linked to effectiveness on the job;
• Items should focus on specific observable behavior;
• Items should be worded in positive terms;
• Raters should be asked only about issues for which they have
firsthand knowledge.
Administration Issues
• Select raters carefully by using a representative sample of
people most critical to the ratee
• Use adequate number of raters
• Instruct respondents in how the data will be used
• Maintenance of confidentiality
• Alert and train raters regarding rater errors
 Task Type Classification
Behaviour can be observed and verified

Output can be observed and verified High Low

High Call Center worker

Knowledge worker, Consultant

Low Complex Job, Researcher, diff and observe the behaviour and output
Hospitality Job
Common Errors in Appraisal
• Unclear Standards
• Different raters will understand “Quality of Work” or Labels such as
“Good, Avg, Poor” Differently
• Include Descriptive Phrases
• Recency Error
• Maintaining regular report
• Similarity Error
• Training Rater & Multirater Feedback
Performance Appraisals:
Implementing Performance Appraisals

I. Gather documentation

II. Develop the written appraisal

III. Conduct the appraisal review session

Performance Appraisals:
Implementing Performance Appraisals (cont’d)
I) Documentation
a) Personal observation
Observe actual performance and judge results (Halo or Horn-
be aware of the biases)
b) Feedback documentation
Use performance notes made throughout the year
c) Personnel File
Examine past performance reviews, discipline records, and
awards
d) Measurement tools
Check documents that support performance rating.
e) Others’ observations (wherever applicable)
Review supervisor, manager, co-worker comments
Performance Appraisals:
Implementing Performance Appraisals (cont’d)

II. Develop Appraisal Guidelines for writing appraisals

a) Set aside dedicated time

Gather performance documentation and eliminate interruptions
b) Evaluate performance based on expectations
Review established expectations, job description, performance goals
c) Rate how well expectations were met
d) Give honest ratings
Acknowledge strengths and address ongoing problems
e) Provide specific examples
Avoid generalities, note specific contributions and accomplishments
f) Avoid personal and subjective statements
No exaggerations, no character attacks
Performance Appraisals:
Implementing Performance Appraisals (cont’d)
III. Conducting the Appraisal Review session
- Maximizing the review
1) Be prepared
o Determine discussion direction
o Anticipate objectives
o Gather supportive documentation
2) Set the right tone
o Establish a supportive environment
o Maintain confidentiality
o Level playing field – Avoid superiority
o Timing – choose a quiet time
o Demonstrate Respect
o Timeliness – Conduct reviews by due date
o Appointments – Don’t act like the employee’s time is less valuable
o Advance notice – Allow the employee to be prepared
o Icebreaker – Start on a friendly and relaxed note
Performance Appraisals:
Implementing Performance Appraisals (cont’d)

III. Conducting the Appraisal Review session

- Maximizing the review
3) Communicate Effectively
• Avoid communication roadblocks – Vague, evasive, derisive or derogatory
language, poor listening skills, strong emotions, one-way conversation
• Improve communication skills – be clear and concise, be honest, not brutal,
be an active listener and natural
Individual Quotes taken from actual Employee
Performance Evaluations
• Since my last report, this employee has reached rock bottom ……… and has started to dig
• Works well when under constant supervision and cornered like a rat in a trap
• The employee is depriving a village somewhere of an idiot
• He would argue with a signpost
• Takes him two hours to watch 60 minutes
Performance Appraisals:
During the Appraisal Process

IV. Potential Emotional Reactions

a) Emotional Distress

b) Hostility

c) Defensiveness

d) Denial
Appeals Process
• Addresses two types of issues:
• Judgemental – Validity of PA
• Administrative – Whether policies & procedures were followed
• How appeals process works ?
• HR department initially works as a mediator b/w employee and the
supervisor – LEVEL 1
• Policy and Procedure check in case of Admin
• Gathers facts on Judgmental issues and brings to the notice of
Appraiser in case of any inconsistencies
• Suggests corrective action – Appraiser
• Informs about the steps taken - Appraisee
What if it remains unsolved ?
• Level 2 / Level B appeal
• Outside & Unbiased arbitrator is appointed
• Arbitrator can make a panel
• Panel reviews the case, asks questions, interviews the grieving party,
researches the precedents, and reviews policy
• Take a vote to make decision
• Final and binding from the Company
Appraisal Blues @ CTC
Central Telecommunication Company
(CTC) Ltd
• Four year old JV mobile communication company with a
foreign partner which provided funds and technology.
• Current CEO -deputed by the foreign partner.
• Licenses to operate in three mobile telecom circles in India
• Market leadership position in two circles
• Still to generate profits
Central Telecommunication Company
(CTC) Ltd
• Number of employees - 600.
• Number of female employees < 10%
• Compensation linked with performance of the division as well
as individual
Central Telecommunication Company
(CTC) Ltd
• Participative Performance Enabler (PPE) System.
• Critical components are:
• Goal setting
• Year end rating of performance
• Feedback
• “incourse review of performance”
• Forced classification into five categories
Central Telecommunication Company
(CTC) Ltd
• Critical components are:
• Discussion of performance ratings with subordinates
• Obtaining consent before forwarding it to HR
• Goals for the next year
• Performance appraisal data to be used to decide annual increase,
bonus, and career advacement
Reporting Relationships

CEO

Raj Melhotra (Vice

President of Human
Resource & Chief
Officer for Ethics)

Pratosh (Associate
Vice President
Customer Service)

Madhavi (Manager –
Customer Service
Department)
Career Anchors & Internal
Labor Market
Session - 15
Reflection
• How many of you are aware about your Career Anchor?
• What has brought you here?
• Where do you aspire to be?
 Careers
• Career as Advancement:
• Notion of upward mobility
• It represents the sequence of promotions or movement to “better”
organizations or locations in a work related hierarchy during the
course of a person’s work life.
• Notion of directionality
 Careers
• Career as Profession
• Certain occupations represent “Career”
• Some clear pattern of systematic advancement
• There is a “regularized status passage”
 Careers
• Career as lifelong sequence of jobs
• Particular job history
• Regardless of occupation or level
• All people who work and have a work history have a career.
• No value judgment is made about the type of occupation or the
direction of movement
• Career here is a more neutral and less value laden concept
Career Anchor
• Self Concept
• Self Perceived Talents and Abilities
• Basic Values
• Evolved Sense of Motives & Needs as they pertain to careers
Implications for Career Development in 21st
Century Common Anchor category
• Security & Stability
• Autonomy/Independence
• Life Style
• Technical/functional competence
• General Managerial Competence
• Entrepreneurial Creativity
• Service/dedication to a cause
• Pure Challenge
21 st Century Scenario
• Small number of very large organizations
• Smaller and more varied kinds of organizations
• Few super organizations and great number of smaller
organizations
 Market Research as a Career: What to Tell the Junior-Level Researcher

• Be a Career Researcher
• Be a Researcher & a Upper Middle Manager
• Be a Researcher & an Entrepreneur
• Be in “Mainstream” & a Top Executive

• What are the organizational implications of the above?

• What are individual level implications?
• What are the career anchors for each of the above choice?
Internal Labor Markets
• Hiring and promotion practices are dependent upon - firms usage
of internal or external labor markets.
• Organizations that depend on an internal labor market make
hiring decisions with a long-term outlook
Internal Labor Markets (Advantages)

• Allow employers to develop a motivated and specialized

workforce.
• Reduces dependence on the external labor market.
• This independence reduces their need for information about future
external labor markets.
• Management will have reduced transaction costs and greater
loyalty
• Workers will have greater security and stability.
 Internal Labor Markets (Features)
• Demonstrate distinct job ladders that employees follow.
• There may be multiple internal labor markets within one firm.
• Job ladders allow entry only at the bottom, and movement up the
ladder.
• Future career path is primarily determined by the job ladder on
which he or she enters the firm.
• Entering job determines future advancement probabilities.
• The internal labor market job ladder model hypothesizes that once
an individual is on a career ladder, his or her career options are
limited by the ladder.
The Traditional Model of Career Stages

Source: HRM, Cengage Learning, 8th Ed.

Career Management
Session 16
 What happened to the women who graduated from IITs in the
90s?

What are the

• Institutional Factors
• Organizational Factors
• Individual Factors
that have influenced the “career paths” of IIT women graduates
in this case?
What were the career anchors for these women taking up
engineering positions in companies.
Career Management & Development
Career management
• The process for enabling employees to better understand and develop
their career skills and interests, and to use these skills and interests
more effectively.
Career development
• The lifelong series of activities that contribute to a person’s
career exploration, establishment, success, and fulfillment.
Employee Career Management Plan
• Highest probable promotion
• Skillsets require to reach there
Responsibility - Individual
• Assess your interests, skills, and values.
• Seek out career information and resources.
• Establish goals and career plans.
• Follow through on realistic career plans.
Responsibility - Manager
• Provide timely feedback.
• Participate in career development discussions.
• Support employee development plans.
Responsibility - Organization
• Communicate mission, policies, and procedures.
• Provide training and development opportunities.
• Provide career information and career programs.
• Offer a variety of career options.
Managing Promotions – When Career is
synonymous to Advancement
• Making promotion decisions
• Decision 1: Is Seniority or Competence the Rule?
• Decision 2: How Should We Measure Competence?
• Decision 3: Is the Process Formal or Informal?
• Decision 4: Vertical or Horizontal?
Managing Transfers
• Employees’ reasons for desiring transfers
• Personal enrichment and growth
• More interesting jobs
• Greater convenience (better hours, location)
• Greater advancement possibilities
• Relationship with peers, supervisors and subordinates
Managing Transfers
• Employers’ reasons for transferring employees
• To vacate a position where an employee is no longer needed.
• To fill a position where an employee is needed.
• To find a better fit for an employee within the firm.
• To boost productivity by consolidating positions.
Enhancing Diversity through Career
Management
• Sources of bias and discrimination in promotion decisions
• The “old-boy network” of informal friendships
• A lack of women mentors
• A lack of high-visibility assignments and developmental experiences
• A lack of company role models for members of the same racial or
ethnic group
• Inflexible organizations and career tracks
Enhancing Women’s and Minorities’
Prospects
• Eliminate institutional barriers
• Improve networking and mentoring
• Eliminate the glass ceiling/glass cliff
• Institute flexible schedules and career tracks
 Ulagnath Madan
• What are the stages that you can track in Ulagnath’s Career?
• For how long did the exploration continue
• What are the evidences of Ulagnath being a top performer?
• What were his career anchors? Did they change during his
employment with Imperial Glory Engineering Works Ltd. ?
• What do you think about the career advancement policy at Imperial
Glory? Did it provide career advancement?
• What changed during his tenure with the company?
• What went wrong in case of Ulagnath?
• Is it the failure of company to retain a good talent or is it individual
failure?
 The “New Psychological Contract”
• Old contract: “Do your best and be loyal to us, and we’ll take
care of your career.”
• New contract: “Do your best for us and be loyal to us for as
long as you’re here, and we’ll provide you with the
developmental opportunities you’ll need to move on and have a
successful career.”
Compensation & Strategic
Pay Plan
Session -17
 What Is Compensation?

The set of rewards that organizations provide to

individuals in return for their willingness to
perform various jobs and tasks within the
organization.
STRATEGIC COMPENSATION DIMENSIONS
• Basis for Pay
• Job vs. Skills
• Performance vs. Seniority
• Individual vs. Group Performance
• Short vs. Long Term Orientation –[Societal, Industry &
Corporate Culture]
• Risk Aversion vs. Risk Taking
• Corporate [narrow & stable] vs. Division Performance [New]
• Internal vs. External Equity
• Hierarchical [Traditional] vs. Egalitarian [de-emphasizes
traditional differentials]
• Fixed Pay Vs Incentives
• Qualitative vs. Quantitative Performance Measures

Source: Compensation Strategy: An Overview and Future Steps

What kind of Patterns Emerge?
What Patterns Emerge?
Components of the Compensation
System
 Strategic Options for
Compensation Levels

Which pay level is a firm on

the decline likely to choose?
Understanding Compensation Management

• Efficiency Wage Theory

• Firms will pay more than the market rate
• high levels of pay will raise productivity by motivating superior performance;
• attracting better candidates;
• reducing employee turnover;
• and persuading workers that they are being treated fairly.
 Understanding the Basic Purposes
of Compensation

Developing a
Compensation Strategy

Internal External Individual Pay Legal

Equity Equity Equity Surveys Standards
Compensation Equity Issues
• Compensation equity issues
• External equity: compare the pay of the same job in different
organizations and judge if it is fair
• Example: Retail store X has a Store Manager and retail store Y has a store
manager (the same job in two different organizations)
• Do the two stores pay their store managers the same or not?
Compensation Equity Issues
 Lead the market: the organization sets pay for some of its jobs to be
higher than what other organizations pay for the same jobs
 Above average pay levels would tend to increase costs
 Can the higher pay costs be offset by lower costs because of:
• Lower turnover rates
• Easier to recruit larger numbers of well-qualified applicants,
allowing increased hiring standards (“skim the cream”)
Compensation Equity Issues
• Match the market (match the competition): the organization sets
pay for some of its jobs to be about the same as what other
organizations pay for the same jobs
• No advantage or disadvantage in costs or in attracting and retaining
employees
Compensation Equity Issues
 Lag the market: the organization sets pay for some of its jobs to
be lower than what other organizations pay for the same jobs
 Below average pay levels would tend to decrease costs
 But the lower pay costs may be offset by higher costs because of:
• Higher turnover rates
• Difficulty in hiring well-qualified applicants, requiring lower hiring
standards
 Can we provide employees with more of other things that employees
value to compensate for the below average pay?
• Example: More opportunities for growth & promotions
• Example: Some of pay is in the form of company stock
Compensation Equity Issues
• Internal equity: compare the pay of different jobs in the same
organization and judge if it is fair
• Example: A retail store has an Assistant Store Manager and a Store
Manager (2 different jobs in the same organization)
• If they are paid the same, is that perceived as being fair?
• If they are paid differently, is the pay difference perceived as being fair?
Compensation Equity Issues
• Individual equity: compare the pay of individuals who do the
same job in the same organization and judge if it is fair
• Example: A retail store has 2 Assistant Store Managers (2 people
doing the same job in the same organization)
• If they are paid the same, is that perceived as being fair?
• If they are paid differently, is the pay difference perceived as being fair?
Economic Theories for Understanding
Compensation Management

• Labour Market: Internal vs. External

• External markets - Decisions about pay levels in the light of market intelligence
and its policies on where it wants to be in relation to the market.
• Internal market theory

• Supply and Demand

• Provides the logic of “market pricing”
Economic Theories/concepts for Understanding
Compensation Management

• Agency Theory
• The employment relationship is regarded as a contract between
principal and agent.
• The payment aspect of the contract is the means used by principal
to motivate the agent to work to the satisfaction of the principal.
• Human Capital Theory
• Conceptualizes employees as embodying a set of skills which can
be ‘rented out’ to employers.
• The knowledge and skills an employee has which come from
education and training including the training that experience
brings generate a certain ‘stock’ of productive capital.
Addressing Equity Issues
Salary Surveys

Job Analysis and

Job Evaluation
Methods to
Address Equity
Issues
Performance Appraisal
and Incentive Pay

Communications, Grievance
Mechanisms, and Employees’
Participation
 The Salary Survey

The Wage Survey:

Uses for Salary Surveys

To price To market- To make

benchmark price wages for decisions about
jobs jobs benefits
 Sources for Salary
Surveys

Sources of Wage and

Salary Information

Employer Self-
Consulting Professional Government The
Conducted
Firms Associations Agencies Internet
Surveys
Job Evaluation Methods
Session -18
 Determining What to Pay

Job Evaluation
Methods

Grading/ Factor-
Ranking Point
Classification comparison
Method system
system method
Ranking Method
• Orders job descriptions from highest to lowest based on a global
definition of relative value or contribution to the organization’s
success
• Two approaches
• Alternation ranking
• Paired comparison method
Grading Method or Classification Method
• Uses class descriptions that serve as the standard for comparing
job descriptions
• Classes include benchmark jobs
• Outcome
• Series of classes with a number of jobs in each
Grading Method or Classification Method
Factor Comparison Job Evaluation Method
Step 1. Obtain job information
Step 2. Select key benchmark jobs
Step 3. Rank key jobs by factor
Step 4. Distribute wage rates by factors
Step 5. Rank key jobs according to wages assigned to each factor
Step 6. Compare the Two Sets of Rankings to Screen out Unusable Key
Jobs
Step 7. Construct the job-comparison scale
Step 8. Use the job-comparison scale
 Source: Jay L. Otis and Richard H. Leukart, Job Evaluation: A Basis for Sound Wage
Administration, p. 181. © 1954, revised 1983. Reprinted by permission of Prentice Hall,
Sample Definitions of Five Factors Typically Used in Factor Comparison Method Upper Saddle River, NJ.

1. Mental Requirements
Either the possession of and/or the active application of the following:
A. (inherent) Mental traits, such as intelligence, memory, reasoning, facility in verbal expression,
ability to get along with people, and imagination.
B. (acquired) General education, such as grammar and arithmetic; or general information as to sports, world events, etc.
C. (acquired) Specialized knowledge such as chemistry, engineering, accounting, advertising, etc.

2. Skill Requirements
A. (acquired) Facility in muscular coordination, as in operating machines, repetitive movements, careful coordinations,
dexterity, assembling, sorting, etc.
B. (acquired) Specific job knowledge necessary to the muscular coordination only; acquired by performance of the work and
not to be confused with general education or specialized knowledge.
It is very largely training in the interpretation of sensory impressions.
Examples
1. In operating an adding machine, the knowledge of which key to depress for a subtotal would be skill.
2. In automobile repair, the ability to determine the significance of a knock in the motor would be skill.

3. Physical Requirements
A. Physical effort, such as sitting, standing, walking, climbing, pulling, lifting, etc.; both the amount exercised and the degree
of the continuity should be taken into account.
B. Physical status, such as age, height, weight, sex, strength, and eyesight.
Sample Definitions of Five Factors (continued)

4. Responsibilities
A. For raw materials, processed materials, tools, equipment, and property.
B. For money or negotiable securities.
C. For profits or loss, savings or methods’ improvement.
D. For public contact.
E. For records.
F. For supervision.
1. Primarily the complexity of supervision given to subordinates; the number of subordinates is a secondary feature. Planning, direction,
coordination, instruction, control, and approval characterize this kind of supervision.
2. Also, the degree of supervision received. If Jobs A and B gave no supervision to subordinates,
but A received much closer immediate supervision than B, then B would be entitled to a higher rating than A in the supervision factor.
To summarize the four degrees of supervision:
Highest degree—gives much—gets little
High degree—gives much—gets much
Low degree—gives none—gets little
Lowest degree—gives none—gets much

5. Working Conditions
A. Environmental influences such as atmosphere, ventilation, illumination, noise, congestion,
fellow workers, etc.
B. Hazards—from the work or its surroundings.
C. Hours. Source: Jay L. Otis and Richard H. Leukart, Job Evaluation: A Basis for Sound Wage
Administration, p. 181. © 1954, revised 1983. Reprinted by permission of Prentice Hall,
Upper Saddle River, NJ.
 Ranking Key Jobs by Factors1

Mental Physical Skill Working

Requirements Requirements Requirements Responsibility Conditions
Welder 1 4 1 1 2
Crane operator 3 1 3 4 4

Punch press operator 2 3 2 2 3

Security guard 4 2 4 3 1

11 is high, 4 is low.
 Ranking Key Jobs by Wage Rates1

Hourl Requirements Working

y Responsibil Conditio
Wage Mental Physical Skill ity ns
Welder $9.80 4.00(1) 0.40(4) 3.00(1) 2.00(1) 0.40(2)
Crane operator $5.60 1.40(3) 2.00(1) 1.80(3) 0.20(4) 0.20(4)
Punch press
operator $6.00 1.60(2) 1.30(3) 2.00(2) 0.80(2) 0.30(3)
Security guard $4.00 1.20(4) 1.40(2) 0.40(4) 0.40(3) 0.60(1)

11 is high, 4 is low.
The Point Method of Job Evaluation
• Three common characteristics of Point method:
• ◦Compensable factors
• ◦Factor degrees numerically scaled
• ◦Weights reflect relative importance of each factor
• Most commonly used approach to establish pay structures.
• Making explicit the criteria for evaluating jobs -- compensable factors
The Point Method of Job Evaluation
Step 1. Determine clusters of jobs to be evaluated
Step 2. Collect job information
Step 3. Select compensable factors
Step 4. Define compensable factors
Step 5. Define factor degrees
Step 6. Determine relative values of factors
Step 7. Assign point value to factors and degrees
Step 8. Write the job evaluation manual
Step 9. Rate the jobs
Generic Compensable Factors
• Skill
• Effort
• Responsibility
• Working Conditions
Skill
• Technical know-how
• Specialized knowledge
• Organizational awareness
• Educational levels
• Specialized training
• Years of experience required
• Interpersonal skills
• Degree of supervisory skills
Effort
• Diversity of tasks
• Complexity of tasks
• Creativity of thinking
• Analytical problem solving
• Physical application of skills
• Degree of assistance available
Responsibility
• Decision-making authority
• Scope of organization under
control
• Scope of organization impacted
• Degree of integration of work
with others
• Impact of failure or risk of job
• Ability to perform tasks without
supervision
Working Conditions
• Potential hazards inherent in job
• Degree of danger which can be exposed to
others
• Impact of specialized motor or
concentration skills
• Degree of discomfort, exposure, or
dirtiness in doing job
Establishing Pay Rates
• Price Each Pay Grade—Wage Curve
• Shows the pay rates paid for jobs in each pay grade,
• Relative to the points or rankings assigned to each job or grade by
the job evaluation.
• Shows the relationships between the value of the job as determined
by one of the job evaluation methods and the current average pay
rates for your grades.
Plotting a Wage Curve
Establishing Pay Rates (continued)
• Fine-Tune Pay Rates
• Developing pay ranges
• Flexibility in meeting external job market rates.
• Easier for employees to move into higher pay grades.
• Allows for rewarding performance differences and seniority.
• Correcting out-of-line rates
• Raising underpaid jobs to the minimum of the rate range for their pay grade.
• Freezing rates or cutting pay rates for overpaid jobs to maximum in the pay
range for their pay grade.
Wage Structure
Broadbanding
• Consolidating salary grades and ranges
• into just a few wide levels or “bands,”
• which contains a relatively wide range of jobs and salary levels.
• Pro and Cons
• More flexibility in assigning workers to different job grades.
• Provides support for flatter hierarchies and teams.
• Promotes skills learning and mobility.
• Lack of permanence in job responsibilities can be unsettling to new employees.
Broadbanded
Structure and
How It Relates
to Traditional
Pay Grades and
Ranges

Source: GD BV
HRM
13th Ed.
Pricing Managerial and Professional Jobs

Compensating Executives
and Managers

Executive
Base Short-term Long-Term
Benefits and
Pay Incentives Incentives
Perks
 Warren Buffett (2009)

“In the [last] forty years, …the CEO has had an important role
determining their [own] compensation. These people pick their
own compensation committees…. [they] aren't looking for
Dobermans; they're looking for cocker spaniels. It's been a system
that the CEO has dominated. In my experience, boards have done
little in the way of thinking through as an owner what they ought to
pay these people.”
Is there a loss to the company if
Executive Pay is Very
High/Unreasonable?
Executive Pay: The Stakes

• Excess pay costs shareholders

• Poorly structured pay arrangements:
• Dilute incentives to serve shareholders
• Distort incentives –
• E.g.: ability to unwind stock early causes execs to focus on
short-term earnings, at expense of long-term value
 “Official View” of Executive Compensation

• Arm’s-length bargaining with execs

• Executives are human – seek higher pay, regardless of performance
• But directors, loyal to shareholders, bargain hard with execs
• design pay to properly compensate, incentivize execs
• CEO pay is a market like any other

• The official view

• underlies most financial economists’ work on subject
• used to justify boards’ compensation decisions to
• shareholders
• policymakers
• courts
Do Boards Bargain at Arm’s Length?

• Many reasons directors favor executives:

• Incentives
• Going along w/CEO facilitates re-nomination by board
• 99+% board elections not contested
• CEO’s power to reward directors
• Social factors
• Collegiality
• Loyalty and friendship
• Cognitive dissonance
• directors who are/were CEOs like current system
• Personal costs of favoring executives are small
• Paying with other people’s money
Financial Incentive and
Benefits
Session 19
 Muffler Magic
• Fast growing chain of 25 automobile service centers in Nevada
• Originally started 20 years ago as a muffler repair shop
• Quality of mechanics
• Productivity is important
• Quality of repair work is important
 Muffler Magic
• Employs about 300 people
• Eight Managers (Functional & Regional)
• 8/9 service center managers report to regional managers
• Basic HR systems
• Training is on the job
• Hire anyone with a basic knowledge
• Profits going down
 Muffler Magic
• External consultant
• Paid sick leaves
• Skill-for-pay plan
• Grading according to skills
• A tech = $25 – $ 30 an hour
• B tech = $20 – $ 25 an hour
• C tech = $15 – $ 20 an hour
• D tech = $10 – $ 15 an hour
• E tech = $8 – $ 10 an hour
• Productivity linked team based incentive plan
 Discussion Points
• Would you accept the recommendation made by the consultant ? Paid Sick
Leave for mechanics?
• If you were Ron, would you accept Skill-for-pay given the fact that
qualified mechanics can find a job anytime?
• Productivity linked plan: is it implementable?
Compensation System Components
Benefits

Pay
 Ceiling Rate –
Human Capital (Efficiency Wage
Theory Theory)
Internal
Equity

Fixed in nature; does

BASE PAY
not fluctuate over Market Rate–
short term/time (Demand &
horizon; generally Supply Theory)
moves upwards
through increments in
base pay

Floor Rate – (Maslow’s Need

Hierarchy)/Herberg’s two factor
theory
Motivation, Performance, and Pay
• Incentives
• Financial rewards paid to workers whose production exceeds a
predetermined standard.
• Frederick Taylor
• Popularized scientific management and the use of financial incentives
in the late 1800s.
• Systematic soldiering
• Fair day’s work
 Motivation and Incentives
• Herzberg’s Hygiene–Motivator theory
• Hygienes
• Motivators
Motivation and Incentives (continued)
• Victor Vroom’s Expectancy Theory
• Motivation is a function of:
• Expectancy: that effort will lead to performance.
• Instrumentality: the connection between performance and the appropriate
reward.
• Valence: the value the person places on the reward.
• Motivation = E x I x V
• If any factor (E, I, or V) is zero, then there is no motivation to work toward the
reward.
Employee Incentive Plans

Individual Employee Incentive

and Recognition Programs

Sales Compensation
Programs

Pay-for-Performance Team/Group-based Variable

Pay Programs
Plans
Organizationwide Incentive
Programs

Executive Incentive
Compensation Programs
Individual Incentive Plans
• Piecework Plans
• The worker is paid a sum (called a piece rate) for each unit he or she
produces.
• Straight piecework
• Standard hour plan
Individual Incentive Plans (continued)
• Advantage of Piecework
• Easily understandable, equitable, and powerful incentives
• Disadvantage
• Quality problems caused by an overriding output focus
• Possibility of violating minimum wage standards
• Employee dissatisfaction - when incentives either cannot be earned or
are withdrawn
Individual Incentive Plans (continued)
• Incentives for Professional Employees
• Those whose work involves the application of learned knowledge to
the solution of the employer’s problems.
• Lawyers, doctors, economists, consultants
• Possible Incentives
• Bonuses, stock options and grants, profit sharing
• Better vacations, more flexible work hours
• Improved pension plans
• Equipment for home offices
Individual Incentive Plans (continued)
• Recognition-Based Awards
• Recognition has a positive impact on performance, either alone or in
conjunction with financial rewards.
• Day-to-day recognition from supervisors, peers, and team members is
important.
• Ways to Use Recognition
• Social recognition
• Performance-based recognition
• Performance feedback
• Eg. IBM first used Recognition Dashboard
Social Recognition (non financial) by Gujarat Gas Company
Limited

The Gujarat Gas

Company Uses
Special Congratulatory
Cards to Recognize
High-performing
Employees
Incentives for Salespeople
• Salary Plan
• Straight salaries
• Best for: prospecting (finding new clients), account servicing, training customer’s
salesforce, or participating in national and local trade shows.
• Commission Plan
• Pay is a percentage of sales results. (MF Advisors, Insurance Agents,
etc.)
• Can create wide variation in salesperson’s income.
• Likelihood of sales success may be linked to external factors rather than to
salesperson’s performance.
• Can increase turnover of salespeople.
Team/Group Incentive Plans
• Team (or Group) Incentive Plans
• Incentives are based on team’s performance.
• How to Design Team Incentives
• Set individual work standards.
• Set work standards for each team member and then calculate each
member’s output.
• Members are paid based on one of three formulas:
• All receive the same pay earned by the highest producer.
• All receive the same pay earned by the lowest producer.
• All receive the same pay equal to the average pay earned by the group.
• Which amongst the above three is best?
Organization-wide Incentive Plans
• Profit-Sharing Plans
• Cash plans
• Employees receive cash shares of the firm’s profits at regular intervals.
• The Lincoln incentive system
• Profits are distributed to employees based on their individual merit rating.
• Piece Work Plan + Merit Pay System [4 Factors : Supervision Required,
Workmanship & Attitude to Quality, Output, Ideas & Cooperation] + Stock
Purchase Plan + Suggestion System
• Deferred profit-sharing plans
• A predetermined portion of profits is placed in each employee’s account under a
trustee’s supervision.
 Example of Group
Incentive Plan - GE Information Systems
• A team-based incentive with links to individual payouts
• Team and individual performance goals are set
• If team hits its goals, team members earn their incentive
only if they also hit their individual goals
• Team incentive is 12% to 15% of monthly base pay
 Example of Group
Incentive Plan - 3-M
• Operates with an earnings-at-risk plan
• Base pay fixed at 80% of market
• Employees have a set of objectives to meet for pay to move
to 100% of market
• Additionally, there is a modest profit sharing component
The Case of Variable Pay
• Caresoft -Large fast-moving consumer products company
• Anil Mathur - Brand Manager
• Nitin Arora - Chief of HR
• Issue - Variable Pay System
The Case of Variable Pay
• Replaced the fixed compensation system with variable system:
• In 3 month’s time
• With little advance notice
• Execution – External HR consultancy
• Announcement - through an article in the in-house magazine and by
an email from the CEO
The Case of Variable Pay
• Profit-Sharing plan
• Variable Component to be paid out annually
• Linked to both the individual and the team
• Individual performance had a higher weightage than team
performance
• Peer incentives
The case of Variable Pay
• Coverage -
• Senior and Middle Management
• Junior Management left out
• Senior Management (GM to CEO) -> 15-40%
• The other categories ->5-15%
The case of Variable Pay
• Volume Sales down by 5 %
• Rupees Sales down by 15%
• New toothbrush not launched – Design & Production Team at Fault
• Left Mathur aggrieved
 Discussion Points
• Is it a design issue or an Implementation Issue ?
• OR BOTH ?
• What can Caresoft do ?
• Withdrawing the System Completely ?
• Reintroducing a different flavor of Variable Pay?
• Retaining the System as is ?
• Consequences ?
 Policy Issues in Designing Benefit Packages

Which benefits to offer Who will be covered

Whether to include retirees Coverage during probation

Policy Issues
How to finance benefits Degree of employee choice

Cost containment procedures Communicating benefits options

 WHY BENEFITS?
• They are required by law.
• Most employees are covered by a number of Union and state laws
requiring a minimum level of benefits as a condition of employing people.
• They are desired by employees.
• they are a major recruiting tool.
 WHY BENEFITS?
• They are demanded by unions.
• Indian Banks Association Vs All India Bank Employees Association
• They help to develop an atmosphere of trust in the organization.
• beyond an economic transaction.
• They provide more stability in the economy.
• reduction of insecurity among employees, the more stable is the economic
environment.
 Pay For Time Not Worked

Unemployment Vacations and

Insurance Holidays

Sick Supplementary Parental

Leave Pay Benefits Leave

Supplemental
Severance
Unemployment
Pay
Benefits
Pay for Time Not Worked
• Severance Pay
• A one-time payment when terminating an employee.
• Reasons for granting severance pay:
• Acts as a humanitarian gesture and good public relations.
• Avoids litigation from disgruntled former employees.
• Reassures employees who stay on after the employer downsizes its workforce of
employer’s good intentions.
Flexible Benefits Programs
• Cafeteria (Flexible Benefits) Approach
• Each employee is given a limited benefits fund budget to spend on
preferred benefits.
• Types of plans
• Flexible spending accounts
• Core plus option plans
• Flexible Work Arrangements
• Flextime schedules
• Compressed workweek schedules
• Job sharing
• Telecommuting
Central government buildings to have
crèches, ministries will furnish, train nurses
- Reasons for such benefits:
- Maintaining a healthy ratio of Female employees
- Minimize non-schedule work breaks
- More productive time at work
- Also, Reducing number of paid leaves
- Availability of child care – making workplace more attractive
Companies sweeten retirement sops for
Gen Y staff
• “Here and now" millennial generation
• Defined benefit plans (DBP) to defined contribution plans (DCP)
• Companies such as Mahindra & Mahindra (M&M) and IDFC have gone beyond
• At M&M, if a management staffer completes 10 years of service, they are entitled
to two-thirds of salary for every completed year of service or part thereof in
excess of six months and there is no ceiling on the limit of gratuity.
• There is a higher amount of attrition in the bracket of 3-5 years tenure with
organizations and hence a lot of employees will not see value in the benefit if it
has a lot of strings attached, like a tenure lock-in and amount being minimal

• How can companies design their benefits plan ?

• Increase in short range benefits can attract talent, fallouts?
• Not introducing benefits will result in unattractive workplace for Millennial.
Managing Global Human
Resource/ IHRM
Session 20
Field of IHRM

Inter-relationships between approaches in the field

Source: IHRM (Dowling, Festing and Engle, 2013)

HR activities/functions
• Human resource planning
• Staffing
• Recruitment
• Selection
• On boarding & Socialization
• Performance Management
• Training and development
• Compensation (remuneration) and benefits
• Industrial relations
Three dimensions of IHRM
• Broad human resource activities of procurement, allocation and
utilization;
• The national or country categories involved in IHRM activities;
• Three categories of employees of an international firm (HCN,
PCN, TCN).
Defining IHRM
• Interplay among three dimensions of human resource activities,
type of employees and countries of operations.
A model of IHRM
Who is an expatriate?
• An employee who is working and temporarily residing in a
foreign country
• Some firms prefer to use the term ‘international assignees’
• Expatriates are PCNs from the parent country operations, TCNs
transferred to either HQ or another subsidiary, and HCNs
transferred into the parent country
International assignments create expatriates
Differences between domestic and
international HRM
• More HR activities (International taxation, international
relocation and orientation, administrative services, host
government relations)
• Greater involvement in employees’ personal lives
• Changes in emphasis as the workforce mix of expatriates and
locals varies
• Risk exposure
• Broader external influences
Variables that moderate differences between domestic and international
HRM
The ‘top ten’ multinationals
1. Rio Tinto (UK/Australia)
2. Thomson Corporation
(Canada)
3. ABB (Switzerland)
4. Nestlé (Switzerland)
5. British American Tobacco
(UK)
6. Electrolux (Sweden)
7. Interbrew (Belgium)
8. Anglo American (UK)
9. AstraZeneca (UK)
10. Philips Electronics (The
Netherlands)

Source: UNCTAD Index of Transnationality

Transnationality Index
• Arithmetic Mean of following three ratios:

• the ratio of foreign assets to total assets

• the ratio of foreign sales to total sales
• the ratio of foreign employment to total employment

United Nations Conference on Trade and Development

What influences the Global Work
Environment
• Global Competition
• Mergers & Acquisition
• Organizational Restructuring
• Technological Advancements
The path to global status
• Structured response of going global is caused due to:
• Strain imposed by growth and geographical spread
• Need for improved coordination and control across business units
• The constraints imposed by host-government regulations on
ownership and equity
• Evolution path common but not normative
Stages of internationalization
Stages of internationalization: Exporting
• Typically the initial stage of international operations
• Usually handled by an intermediary (foreign agent or distributor)
• Role of HR department unclear at this stage
Sales subsidiary
• Replacing foreign agents/distributors with own through sales
or branch offices/subsidiaries
• May be prompted by:
• Problems with foreign agents
• More confidence in international activities
• Desire for greater control
• Give greater support to exporting activities
• PCNs may be selected, leading to some HR involvement
International division
• Creation of a separate division in which all international
activities are grouped
• Resembles ‘miniature replica’ of domestic organization
• Subsidiary managers report to head of international division
• Objectives regarding foreign activities may determine approach
to staffing of key positions
• Expatriate management role of corporate HR
Approaches to staffing in GHRM
• Factors affecting approaches to staffing
• General staffing policy on key positions at headquarters and
subsidiaries
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
• Constraints placed by host government
• Staff availability
Ethnocentric
• Strategic decisions are made at headquarters
• Limited subsidiary autonomy
• Key positions in domestic and foreign operations are held by
headquarters’ personnel; PCNs manage subsidiaries

• Reasons for Ethnocentric Approach ?

• Any disadvantages/demerits?
Polycentric
• Each subsidiary is a distinct national entity with some decision-making
autonomy
• HCNs manage subsidiaries who are seldom promoted to HQ positions
• PCNs rarely transferred to subsidiary positions
• Employing HCNs eliminate language and cultural barriers
• Less Expensive

• A Full Proof System, Any disadvantages/demerits?

Geocentric
• A global approach - worldwide integration
• View that each part of the organization makes a unique
contribution
• Nationality ignored in favour of ability:
– Best person for the job

• Challenges?
Geocentric staffing requirements
Regiocentric
• Reflects a regional strategy and structure
• Regional autonomy in decision making
• Staff move within the designated region, rather than globally
• Staff transfers between regions are rare
Reasons for international assignments
• Position filling
• Eg. Skills gap, launch of new endeavour, technology transfer
• Management development
• Training and development purposes, assisting in developing common
corporate values
• Organizational development
• Need for control, transfer of knowledge, competence, procedures and
practices
Roles of an expatriate
• Agent of direct control
• Agent of socialization – Bumble Bees
• Boundary spanner
The role of the corporate HR function &
Top Line Managers
• Managing people like global products. The feasibility of:
• The concept of a global internal labour market
• Standardization of work practices and HR activities
• Identifying which of the HR matters require central control and what can
be decentralized.