HUMAN RESOURCE MANAGEMENT

B.COM

UNIT-I
NATURE AND SCOPE OF HUMAN RESOURCE MANAGEMENT

Concept, Significance, Functions of Human Resource Management, Challenges of Human

Resource Management, Contributions of Industrial Psychology to Human Resource
Management, Human Resource Policies.

1.1 MEANING AND DEFINITION OF HUMAN RESOURCE MANAGEMENT:

(Human Resource Management (HRM) is a process of making the efficient and
effective use of human resources so that the set goals are achieved.)lt is that part of
management which is concerned with management of people in an organisation.
Human Resources are regarded as human factor, human asset, human capital and
the like.
According to Milkovich and Boudreau "HRM is a servie of integrated decisions
form the employment relationship, their quality contributions to the ability of the
rganisation to achieve their objectives."
According to Decenco and Robbins "HRM is concerned with the people dimension
in management."
According to E.F.L. Breach "HRM or personnel management is that part of
agement process which is primarily concerned with the human constituents of an
organization."

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 (According to Indian Institute of Personnel Management. '^Personnel management
is that part of management function which is primarily concerned with ~urnan relationship
in an organization."
Prom the analysis of the above definitions it is clear that HRM or personnel
management involves the following:
(i) It is a management of human resources of the enterprise.
(ii) It is concerned with the effective utilization of human resources.
(iii) It requires special knowledge and skills in human psychology, law and industrial
relations.

1.2 FEATURES / CHARACTERISTICS OF HRM :

We can indentify the following features to understand the nature and scope of HRM.
1. A Part of Management Discipline : HRM is a part of management discipline. It is
based on management concepts, principles & teachniques that are applied to
management of human resources.
2. As a Process : HRM is a process just like management process. HRM uses four
basic processes of management that is planning, organising, directing &
controlling.
3. As a continuous process : HRM is a continuous process, not a one-step action.
Therefore, it has to perform on continuous basis.
4. Concerned with people : HRM is concerned with people in the organisation both
present and potential. It is concerned with all types of personnel in the
organisation.
5. Directed toward achievement of objectives : HRM is directed towards achievement
of organisational objectives. The achievement of objectives depend largely on
quality of its people and their proper utilisation.
6. Universal Existence : HRM is not confined merely to business organisation but is
relevent to all organised activities. It is relevent to all areas of business
organisation i.e. production, finance, marketing, reserch & development etc.
1.3 COMPARISION BETWEEN PERSONNEL MANAGEMENT & HUMAN
RESOURCE MANAGEMENT:

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 There are diffenences of opinions so far as comparision between personnel igement
and HRM is concerned. Some treat both as the same, some treat both is different. Taking
all the views on comparison of personnel management or HRM, we can differenciate them
as follows:
Personnel Management HRM
1. It is a routine type and maintenence .1. HRM places emphasis on continuous
oriented administrative function. development of people at work.
2. It is mainly reactive and responds to 2. It is proactive function because it antici
the demands of an organisation pates future needs and acts accordingly.
whenever they arise.
3 it is an independent function without 3. It takes into account its linkages with all
giving due regard to organisational other parts of the organisation.
strategies and processes.
4. It takes a narrow view of its scope and 4. HRM undertakes a system view in which
objectives. attempt is made to create proper
organisional culture.
5. It emphasises on economical rewards 5. HRM emphasises on satisfaction of
and traditional job design for motivating higher needs for motivating people such as
people for better performance. challenging jobs, creativity etc.
6. It considers job satisfaction and 6. It is based on the permise that better
morale as cause of improved performance itself is a source of satifaction
performance. and high morole.

1.4 SCOPE OF HRM

Scope means the activities or areas that are covered within the framework of
human resource management. In order to achieve the objectives of HRM, the following
activities are undertaken:
(1) Human resource or manpower planning, i.e. determining the number and kinds of
personnel required to fill various positions in the organization.
(2) Recruitment, selection and placement of personnel i.e. employment function.

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(3) Training and development of employees for their efficient performance and
growth.
(4) Appraisal of performance of employees and taking corrective steps such as transfer
from one job to another.
(5) Motivation of workforce by providing financial incentives and avenues of
promotion.
(6) Remuneration of employees. The employees must be given sufficient wages and
fringe benefits to achieve higher standard of living and to motivate them to show
higher productivity.
(7) Social security and welfare of employees.
(8) Review and audit of human resource policy, procedures and practices of the
organization.
The field of human resource management is very wide as in obvious from the fact
that it is called by several terms such as "labour management", "manpower management",
"human relations", "Managing people", "personnel management" and so on. The Indian.
Institute of capersonnel Management has laid down the scope of human resource
management as follows:
(i) The welfare aspect concerned with working conditions and amenities such as
canteens, creches, housing, personal problems of workers, schools and recreation;
(ii) The labour or personnel aspect concerned with recruitment, placement
(iii) The industrial relations aspect concerned with trade union negotiation, settlement
of industrial disputes, joint consultation and collective bargaining. All these
aspects are concerned with human element in industry as distinct from the
mechanical.
1.5 FUNCTIONS OF HRM:
The functions of MRM may be divided into two parts as shown in the following chart :
FUNCTIONS OF HRM
Managerial Operative
1. Planning 1. Recruitment
2. Organising 2. Development of Personnel
3. Directing 3. Compensation

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4. Controlling 4. Record keeping
5. Motivation
6. Industrial relation
7. Research and audit.
8. Maintenance
A. MANAGERIAL FUNCTIONS:
1. Planning: It is the main function of management. It is concerned with manpower
planning, study of labour turnover rate, forecasting the future requirements of
personnel, planning for selection & training of personnel etc.
2. Organising: It involves the establishment of inter-relationship within an
organisation. It indentifies the various sub-groups and their jobs. Organisation
provides a structure for the company.
3. Directing: The directing function of HRM includes issuing instructions to the
workers, developing communication network and integrating the workers.
4. Controlling: It provides basic data for establishing standards for performance,
makes job analysis and performance apprisal etc. All these techniques assist in
effective control of the qualities and efforts of the workers.

B. OPERATIVE FUNCTIONS:
1. Recruitment : It is concerned with the obtaining of the proper kind and no. of
personnel necessary to accomplish organisational goals. It basically deals with
manpower plan, recruitment, selection, induction & placement.
2. Development of personnel : It deals with providing training to improve the skills
for proper job performance. In this process, various techniques are used to develop
the employees.
3. Compensation : Compensation means determination of adequate and equitable
remuneration of personnel for their contributions to organisation objectives. It is
one of the most difficult and important function of HRM.
4. Record keeping : In record keeping the HR manager collects and maintains
information concerned with the staff of the organisation. It assist the management
in decesion making such as promotion transfer etc.

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5. Motivation : Another important function of HR manager is to motivate people in
the work place through various financial and non-financtial incentives.
6. Industrial Relation : If the HR Manager is unable to make harmonious relation
between management & labour, industrial unrest will take place. Hence, the HR
manager must create harmonious relation in the organisation.
7. Research and audit : It is concerned with the research in various fields of
personnel activities and their effect on the workers of the organisation
8. Maintenence : It is concerned with providing various benefits for maintenence of
staff including medical, housing, educational, transport facilities, pension,
provident fund etc.

1.6 OBJECTIVES OF HRM :

The objectives of HRM may be discussed under two broad categories.
A. Basic or general objectives.
B. Specific objectives They are explained below:

A. BASIC OR GENERAL OBJECTIVES:

The basic objectives of HRM is to ensure that there are right people at the right time at
right place.
The basic objectives should include the following :
1. Maximum individual Development : The management should develop the
personality of each individual. Employees should always be regarded as a co-
owner or partner of the organisation and given a due importance in the
organisation.
2. Desirable working relationship : One of the main objectives of HRM is to have a
desirable working relationship between the employer and employees so that they
may co-operate with the management. Management should realise that worker is a
human being and human treatment should be given to him.
3 Effective moulding of human resource {Management should emphasis the effective
utilisation of human resources so that more production at minimum cost is

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 possible. Without effective moulding of human resources, other factors of
production wil be ineffective.

B. SPECIFIC OBJECTIVES :
They refer to the various activities of the HR department such as the following:
Selection: It includes selection of right type and number of person required to the
organisation.
1 Orientaion/Induction : It means proper orientation or introduction of new
employees of the organisation to their jobs and other people.
3. Training : HR department should organise suitable training programmes to
prepare people for better job performance and prepare them to accept the
challenges of higher jobs.
4. Better working performance : Another specific objective of HRM is to make
provision of better working conditions and other facilities for the workers such as
medical benefits, leave with pay, provident fund, pension etc.
5. Incentives : This objective includes the provision of fair wages and salary
administration and other incentives which will result in highest possible
productivity of workers.
6. Retirement : A full and fair consideration should be given to an employee when
his services are terminated or he leaves the organisation.
7. Trade Union : Trade unions play an important role in the industrial life. Therefore
good relation should be maintained with the representatives of the trade union.
8. Personnel Research : Provision of continuous personnel research should be there
so that sound decisions can be taken without any further delay as regards the
human resource matters.

1.7 SIGNIFICANCE OR IMPORTANCE OF HRM :

The significance of HRM may be of 3 (three) types, normally organisational
significance, social significance and professional significance.
They are explained below :

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1. Organisational significance : HRM is of vital importance to the individual
organisations as a means for achieving their objectives. It contributes to the achievement
of organisational objectives in the following ways :
i) By effective utilisation of human resource through motivatng them and changing
their attitudes towards the work.
ii) By devoloping personnel to meet the demands of the work effectively.
iii) By ensuring recruitment and retention of personnel in the organisation so that right
people are available at right time and right place.
Social significance : Since human resources are drawn from the society, their effective
contributions to the welfare of the society is important. It is often said that a happy worker
is not only happy at the work place but at home and in society too. The social significance
of HRM is achieved by :
i) Maintaining balance between jobs and job-seekers.
ii) Providing most productive employment from which socio-psychological
satisfaction can be derived.
iii) Utilising human capabilities and matching rewards for the contributions made by
people.
iv) Eliminating wasteful organisational and individual practices.
3. Professional Significance: Professional significance of HRM lies in developing
people and providing appropriate environment for effectve utilisation of their
capabilities.
This can be done by :
i) Developing people on continuous basis to meet the future challenges.
ii) Maintaining the dignity of personnel at the work place
iii) Providing proper physical and social environment at the work place.
iv) Providing environment and incentives for developing and utilising creativity

1.8 QUALITIES OR COMPETENCES OF GOOD HR MANAGERS.

For a good HR manager personality is more important than knowledge. Some rant
qualities required in a successful HR manager are explained below.

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1. Sense of Vocation : The responsibilities of the HR manager are so heavy that they
cannot be carried out without some sense of inner urge. The HR manager must
have faith in humanity and also in possibility of creating a better social and
industrial order.
2. Sense of Social responsibilities : Industry is a part of the socity whose successes
depends upon the effective co-operation of the people of the organisation as - -cial
group and social unit.
3. Capacity for leadership : The HR Manager has two roles to play as a leader
a) To help the management in solving the human problems.
b) To convince others about his view point.
c) Personnel Integrity : HR manager must be a man who can be trusted completely
so that all people in the organisation may come to him with their worries and problems. He
should be a man of great integrity'.
5. Capacity for persuasion :- This is the intellectual side of leadership. The HR
manager has to persuade his fellow managers. In negotiation, he should not make
any haste. He should have the patience to persuade the employees in the desired
direction.
6. Dynamic Personality : Besides the above mentioned qualities the HR manager
should possess a dynamic personality with the following charecteristics:
a) Spontanity of Speech : Fluency to speak combined with a good knowledge of
words and their meanings are essential for a HR manager.
b) Public Speech : It is often a necessity in the working life of a HR manager.
c) Face Expression : Mobility of facial expression is also important for HR Manager
because it will help in dealing with people more efficiently.
d) Courtesy : The HR manager is actually the human relation manager. He has to
speak to people of all grades and range. Therefore He should posses a great sense
of courtesy.

1.9 FUTURE CHALLENGES TO HR MANAGER :

It has been predicted that management of human resources in future will reveal at
least five features.

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1. The employees are likely to exercise greater impact on decisions influencing their
interest.
2. The government will likely to participate increasingly in labour-management
relation.
3. Technological innovations are likely to exert wider impact upon management of
human resouces.
4. The labour will no longer be considered a technical and economic factor of
production.
5. The busines is likely to accept its broader responsibilities:
The future trends in HRM are likely to pose varied challenges in organisational
settings. S.K. Bhatia, based on Human Resource Development model has classified
the future challenges of HR department in three categories.
A) ORGANISATIONAL LEVEL CHALLENGES :
It includes the following :
i) Integration of human resource plan with corporate plan
ii) Tasks of motivating executives.
iii) Wage settlement and executive salaries.
iv) Integration of changed techniques.
v) Keeping the organisation young and productive.
vi) Industrial relation movement from conflict to co-operation
B. CHALLENGES AT WORK PLACE LEVEL :
This includes the following :
1. Task of adopting workplace to rapid technological changes.
ii. Problem of non-performers
III. Problem of grievance management
iv. Emergence of Socio-psychological needs.
C. CHALLENGES AT HR DEPARTMENT LEVEL :
They include the following :
i. Developing personnel policies. (HR policies)
ii. Evaluation of personnel programmes and computerisation of manpower information
system.

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iii. Maintaining a high level of reputation of integrity and ability.
iv. Challenges related to HR research.

1.10 EVOLUTION OF HUMAN RESOURCE MANAGEMENT

The development of HRM was marked towards the end of 19th Century.
Ordinarily, the growth and history of HRM is divided into the following five periods:
1. Early Philosophy (before 1900)
2. Efficiency and Productivity Movement (1900-1920)
3. Period of Welfareism and Industrial Psychology (1920-30)
4. Period of Human Relations in Industry (from 1930-50)
5. Modern Period (after 1950)
1. Early Philosophy (Before 1900) : The history of personnel management or HRM
began with the name of Robert Owen. Owen is called the founder of HRM. In
1813, he wrote a book "A New View of Society", In that book he advocated the
need of better industrial relations and improvements in the service conditions. He
was a textile will manager at Scotland. His attitude towards workers was very
cordial, liberal and patternalistic. He got good houses constructed for his workers
by the side of his factory. He eliminated child labour and provided healthy
conditions. J.S. Mill, Andrew Yule and Charles Babbage, contemporary of Robert
Owen developed HRM as a science and supported the idea of wage incentives,
profit sharing and labour welfare etc.
2. Efficiency and Productivity Movement (1900-1920) : During the last year of
19th Century arrived the age of efficiency and productivity movement. The two
decades of 1900-20 were the years of scientific management movement. Taylor's
Scientific Management thought was accepted during this period. Taylor opposed
the idea of trade unionism and worker's orgaisation. The main contribution of these
two decades has been to increase in the size of units, introduction of scientific
thinking into actions, job analysis, standards costing, scientific selection and
training of workers and the idea of mental revolution.
3. Period of Welfareism and Industrial Psychology (1920-30) : Upto 1925, the
HRM had taken a definite form. The opposition of scientific management

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 movement by workers introduced the need of industrial psychology. Industrial
psychologists developed many new techniques like psychological testing, workers
training and non-financial incentives. They helped to give a professional form to
HRM. The Human Resource Management began to be realised as a profession and
a sperialist's function.
4. Period of Human Relations (1930-1950) : Prof Elton Mayo and his companions
conducted Hawthorne Experiments as the begging of human resources having
greater influence on production than that of other physical resources. Workers
must be treated as human being. His social, psychological and moral instincts
should be fully recognised by the management. Due to these experiments the
commodity concept of labour changed to social concept. The decade of 1940-50
was very important for the development of HRM. During the decade, many new
techniques were developed for the selection, training and induction of workers.
The personel philosophy became people oriented. Trade union flourished and
provision of fringe benefits for the workers became common.
5. Modern Times (1950 onward) : The history of HRM since 1950 upto current
time is the age of modern development. It is the period of citizenship concept of
labour where workers have full right to be consulted in determining the rules and
regulations under which they work. The concept of industrial democracy has
imposed many new responsibilities upon the HR managers of industrial houses. In
modern times, the HRM is widely accepted as an independent discipline. We
observe two important developments during this period
(a) After 1960, the HRM began to be realised as behaviours science which centered
completely on human elements with the study of organisational behavior as its
main crux.
(b) After 1970, the belief of 'Open, social and industrial system' became very popular
for business organisations. In modern times HRM is fully recognised as a
profession dealing with a management of human resources. Some authors call it
manpower management. These developments widened the scope of human
resource.

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1.11. GROWTH OF HUMAN RESOURCE MANAGEMENT:
With the increase in the size of industrial units increased the problems relating to
human resources. The conditions of workers was not satisfactory. They were regarded as
slaves. Industrialists used to squeeze them for their own profit.
But since the begging of the twentieth century there is a great change in the attitude
of industrialists towards labour. They have realised that labour is a partner in the
functioning of the industry. Modern workers are educated and united into a sense of social
responsibility. Government have come forward with various steps in improving the
conditions of the labour force. The mounting pressure of labour problems have changed
the attitude of management towards labour. The lenient view of various government
towards the workforce has been responsible for the growth and development of human
resource management.
The following are some of the factors responsible for the growth of HRM.
1. Technical Factors : The following technical factors have contributed a lot towards
the growth of HRM :
(a) Industrial Revolution brought in revolutionary changes in the methods and
techniques of industrial production. So the existing management principles were
suitably changed to reconcile the situation.
(b) With the advent of science new and newer products, methods, techniques and
processes were developed in the fields of production, communication and
marketing, affecting the industrial development and personnel relations.
2. Awakening among workers : After world war I, workers started to unite. A new
industrial labour movement soon became an important element in this structure.
With the emergence of International Labour Organisation (ILO) in 1919, the union
movement succeeded in improving the labour relations in industries. The concept
of industrial democracy is the outcome of the labour movement.
3. Change in government Attitude : The change in government attitude towards
labour, management and business was mainly due to the following reasons :

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(a) The laissez faire view point was popularised and it proposed a minimum of public
intervention in economic activities. However, political interest of the countries
could not be safeguarded by this policy. Hence protection policy was introduced by
nearly all the countries in the world. The government came to the rescue of the
employees in getting them rid of exploitation by the employers.
(b) The change in the concept of labour from the commodity concept to the human
concept was given a wide recognition. Labour in now regarded as a human being
and master of all the industrial activities. The idea of worker's participation in
management has been recognised by almost all the government of the world.
(c) Establishment of welfare states in most of the countries led to the enactment of
various labour laws for the welfare of the industrial force. Thus, the government
attitude was one of the factors in the growth of HRM or industrial relations.
4. Cultural and Social Changes : The following socio-cultural factors are also
responsible for the growth of HRM.
(a) Education brought the change in the attitude of labour towards their work. They
could understand what was favourable and what was against their interest. Hence,
they could no longer be exploited.
(b) Population Problem also had its impact upon the growth of HRM. Active
utilisation of men, unemployment and wage fixation, migratory character of labour
etc. are some of the population problems. These problems could beovercome by
motivating the people in the right direction.
(c) Social values of workers affect the efficiency of worker on the job. If a worker in
given due regard in the society or by his fellow workers, he will be the most
contented man in the society and his efficiency will be increased thereby.
5. Change in size of the business : The use of technically-developed machines,
simplification of methods and large scale production led to division of labour and
specialisation functions requiring large mumber of technical and non-technical
workers. The need of HRM was felt in order to get the work done by these people
efficiendy.
6. Change in the Attitude of Management: Some of the factors which compelled
the management to make a change in its attitude towards labour were the

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 development of scientific management, industrial revolution, awakening of
workers, favourable attitude of government toward's labour and change in the
social value of workers.
7. Change in the form of Business Organisation : In earlier years business was
carried on under sole proprietorship. With the advent of joint stock companies as a
form of business organisation, the size of the business increased exhorbitandy.
New management techniques developed to cope with the problems of HRM in
large industrial houses.
8. Problem of co-ordination and control : Large scale production created the
problem of control over the thousands of persons working in unit. The need of co-
ordination between personnel objectives, developed techniques and methods and
over all objectives of the organisation was realised. New structural relationship
were developed. The problems of control and co-ordination required an intensified
study to be made in the nature of working personnel.

1.12 GROWTH OF HRM IN INDIA :

The growth and development of HRM in India may be discussed under two broad
categories.
A. GROWTH AND DEVELOPMENT DURING PRE-INDEPENDENCE
PERIOD :
The HRM in India dates back to the report of the "Royal Commission on Labour"
in India (1927-1931) which recommended the appointment of labour officer to deal with
recruitment in order to check corrupt practices in industry in India. As a result, Welfare
officers began to be appointed by government as well as Industry. The labour welfare
officers were to deal with the following problemes
1. Working conditions.
2. Workers Housing facilities.
3. Medical facilities
4. Recreation facilities
5. Canteen facilities
6. Ration shop

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B. DEVELOPMENT IN POST INDEPENDENCE PERIOD :
After independence the development of HRM in India has taken place in the
following areas.
1. Labour Legislation : The govenment of India has done commendable work in this
direction. Several-Labour Legislations have been enacted such as:
a. Industreial Employment Act, 1946 (Standing order)
b. Industrial Disputes Act, 1947
c. Factories Act, 1948
d. Plantation Labour Act, 1951 (Tea, Rubber, & Coffee)
e. Mines Act. 1952 (coal, gold, maica) The Factories Act provided the appointment
of labour welfare officer in every factory employing 500 or more workers for the
purpose of helping the management in providing welfare measures to the workers.
2. Training : The govenment of India has arranged the training of workers and
management in India by establishing several training centers and institutes In 1947,
Xaviers Institute of Labour Relations (XLRI) was established. Some other
institutions that impart training facilities to workers and managers include-
A. Indian Institute of Personnel Administration, Kolkata
B Indian Labour Management Institute, Mumbai (ILMI)
C. Institute of Industrial Relations, Banglore (IIR)
3. Reforms during Emergency : During the state of Emergency in India from 5-76,
Several administrative steps were taken by the government for increasing the status
of labour, They include -
a) Aboilition of the system of bonded labour.
b) Encouraging the scheme of Workers Participation in Management (WPM).
4. Recent Trends in Labour Legislation : After 1978 the governtment of India has
taken several steps to improve the labour relations in Industries. Some of them are
as follows :
a) Amendment of the Industrial Disputs Act, Industrial Employment Act, and the
Employees State Insurance Act.
b) The govenment was empowered to declare any service as an essential service and
to ban strikes in such services for 6 (six) months (ESMA in 1981)

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 Recendy, the need of HRM has been widely recognised as a specialised function of
the management. Mostly all the organisations prefer to establish a HRM or personnel
department to deal with the working force in the enterprise. The scope of HRM in India
has expanded to cover the following:
i) Human and social implications of work
ii) Recruitment, selection, promotion and development of workers.
iii) Relations between employer and employee.
iv) Importance of Collective Bargaining
v) Terms and conditions of employment, fixation of wages and allowences, fringe
benifits, safety of healths etc.

1.13 OUTSOURCING OF HRM FUNCTIONS :

HR sendees outsourcing has become an acceptable norm in business. Outsourcing
means sending work outside the organization to be done by the individuals not employed
full time with the organization. This concept has entered the Indian Business only recently
because of international impact. The following HRM functions can be outsourced.
(i) Getting contingents workforces thorough Business Process Outsourcing (BPO) .
(ii) Preliminary process relating to recruitment & selection may be outsourced.
(iii) Administrative works related to employee benefits, employee welfare services,
staff training etc can be outsourced.
(iv) Some other functions like HR planning, job design, Job evaluation etc can also be
outsourced on selective basis.
Benefits of Outsourcing :
Outsourcing offers certain benefits to the HRM functions
(i) By outsourcing, the organization can concentrates on critical HRM fuctions.
(ii) The outsourcing agencies (BPO) have requisite skill and infrastructure and they
can provide services at much lower cost.
iii) Outsourcing leads to reduction in the investment requirements because the outside
agencies have already invested in those activities.
Problems in Outsourcing :
Problems related to outsourcing of HRM functions are of the following types.

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1) The organization has to depend on outsiders for getting things done & the work
can be delayed.
ii) The qualities of BPOs in India yet to achieve the requisite level. Its reliability &
capability should be ascertained.
III) It is argued that outsourcing of some routine & administrative function will
adversely affect the morale of the HR staff.

1.14 ROLE OF HR MANAGER :

Through out the world, the role of HRM has been well recognised, The HRM
Ktmdes are affected by the external environment such as government and its policies,
abour market, economic environment, competitions, population etc.
Similarly, internal factors such as organisation structure, job structure, health ftey
measures, salary structure, policies and procedures of the organisation etc. directly related
to the human resources of the organisation.
Thus, the HR manager has to play significant role in managing the above activities
in the following ways:
1. Integrating organisation plan with HR Plan : Organisational Planning must be
colsely integrated with the HR requirement of the organisation. The strategic HRM
is essential for success in business.
2. Human Resource Planning/Manpower planning : It is one of the important
activities of the HR manager. He is to make planning of human resources carefully
to meet the challenges in future.
3. Acquisition of Human Resource : Acquiring Human Resources is another
activity of HR manager. It is to be done very carefully because everything depends
on the people.
4. Managing Performance : Good Peformance by the employees benefits the
organisation in the long run. The HR manager is to play role in career advancement
for the talented and hardworking people.
5. Training and development: In order to improve the performance of individual
and groups, training and development activities are undertaken. It is the crucial
aspect of HRM.

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6. Compensation and Benefits : Compensation and benefits are activities that
determines salary and wage structure, rewards and benefits to be paid to the staff of
the organisation. The HR manager can play vital role in determining the
compensation plan and other benefits for the employees.
7. Health and Safety Provision : Making adequate provisions for the health and
safety of employees build a strong workforce. Health and safety issues are crucial.
(Factories Act 1948) Therefore, the HR Manager must take measures for health
and safety of workers as per legal provision so as to avoid further complicatons.
8. Encouraging Perticipation in Management : Participation increases the
performance of employees and their productivity. HR manager has to develop the
skills of participation among employees. Effective participation is not that easy.
The HR manager must try to secure participation of workers which helps in
building up industrial democracy.

1.15 STATUS OF HR MANAGER :

The HR manager's status or position in an organisation can be analysed from three
points of view.
1. As a line manager : First, the HR manager performs a line function by directing the
activities of the people in his /her own department. In other words, he or she has
line authority within the personnel department. The HR managers arc-also likely to
exert implied authority.
2. As a co-ordinator : HR manager also functions as the co-ordinator of personnel
activities. Here the HR Manager and his department act as the right arm of the top
executive. He co-ordinates the HR activities, policies and procedures that have
been approved and adopted by the top management.
3. As a staff Manager : Serving and advising the line managers is the bread and butter
of the HR managers job. The HR manager assist iri the hiring, training,
revaluating, rewarding, counselling, promoting and firing of the employees. He/
She also adminsters various benefit programmes like health and accident
insurance, vacation and so on.

19
 In assisting line manager, the HR manager can not forget his employee advisor)'
role. HR manager must take responsibility for clearly defining how management
should be treating employee.
Thus, the status or position of a HR manager include
i) Compensation and benefit manager.
ii) Employment and recruiting supervisor
iii) Training Specialist
iv) Human relations executive
v) Safety supervisor

1.16 EFFICIENCY OF HR DEPARTMENT

The term'efficiency' is used differently and in different perspective by differeni -L
sons. For an engineer it means efficiency of machines, for a cost accountant it means
higher productivity.
For a human resource manager efficiency means better industrial relations in any
sphere of activity. It always means ratio of output to the inputs. Thus, efficiency is an
input-output relationship. A department is said to be efficient if desired output is achieved
with the minimum efforts, expense and wastes. The higher is the input-output ratio; the
better is the performance of the department.
1.17 CRITERIA TO JUDGE THE EFFICIENCY:
The efficiency of the HR Department is very difficult to judge. There is no
universally accepted method measuring efficiency of a HR Department because human
clement is involved in it. However, the following criteria may be used to judge the
efficiency of the HR Department:
1. Good Industrial Relations: It is an indicator of the efficiency of the HR
Department. Maintenance of industrial peace and harmony signifies better
employer- employee relationship. Good industrial relations reduces grievance,
dissatisfaction etc among the employees.
2. Productivity : Productivity and efficiency are positively correlated. Efficiency
increases with the decreases in productivity. Human element is an important factor

20
 contributing to productivity. Thus, high productivity of labours proves the
efficiency of the Department.
3. Avoidance of waste : Avoidance of waste is an important tool for measuring
efficiency. The measure of waste can help to identify money and energy can be
lTiinimized by an efficient HR Department.
4. Low Absenteeism and Labours Turnover : The efficiency of the HR Department
can also be judged by the rate of labours absenteeism and labours turnover. Low
absenteeism and low turnover rate signify the proper selection, placement, training
and motivation of workers by the HR Department.
5 Over and under staffing: Over staffing and under staffing are common problems
in most of the Indian Organizations. Failure to estimate the requirements leads to
either over or under staffing problems. Both are detrimental to the proper
functioning of an organization. Absence of these two problems indicates efficiency
of the HR Department in formulation and implementation of human resource plan.
6. Human Resource Policy : The efficiency of the HR Department can also be
judged by the human resource policy or personnel policy formulated bv it.
Effective personnel policies ensure effective management of people, job
satisfaction, career advancement and maintenance of good industrial relations.
1.18. IMPACT OF PSYCHOLOGY IN HRM :
The application of psychology in HRM include practically all the subject matter
psychology and all the phases of industry.
The important areas of psychology that have influnced HRM include the
following.
1. Selection, placement and Promotion of Personnel : One of the earlier
application of psychology in HRM was the selection of personnel. Different
psychological tests are used for selecting the right kind of employees.
Two closely associated problems are placement and promotion. Psychology is used
in measurment of various kinds of human ability and to predict job success.
2. Training : After employees are hired, they must be trained to perform the job.
New training methods are being developed for successful conduct of training
process. Psychology and education becomes associated in a process of training.

21
3. Relations with the union : Application of psychology to HRM also include
relation with the union. Problems in bargaining, negotiation, grievance handling
etc. are the subjects of mutual interest to lawyers, sociologist, economist and
psychologist.
4. Interperonal Relations : Within an organisation there are many interpersonal
interactions. Supervisors interview subordinates and assign work to them,
exchange information with them and even councel them on personal matters. In
such cases, application of psychology becomes most essential.
5. Mental health of employee : The modern industrial organisation have recognised
the value of an employee's physical health. Some organisation are now considering
the role of psvehaitry and clinical psychology in dealing with the mental health of
employees like
a) alcoholism.
b) Mental anxiety
c) emotional adjustments.
Personnel department headed by the HR manager is expected to aid employees in
solution of these problems and developing a better understanding of themselves.
1.19 MEANING OF HR POLICY OR PERSONNEL POLICY:
Policy is a predetermined and accepted course of thoughts and actions established
as a guide towards expected goals and objectives.
A ccording to Edwin B Flippo "A policy is a man made rule or predetermined
course of action that is established to guide the performance of work towards the
organisation'
HR policy is one of the policies in the organisation which lays down the decision
making ciriteria in the area of manpower managemem^jtijicludes different policies as
recruirtment policy, selection policy, promotion policy, transfer policy, wage policy etc.
HR Policies must be known and understood before they become guide to action^ We find
the following things about HR Policies :
a) They are predetermined course of rules for actions.
b) They guide the performance of objectives.
c) They provide the standards or grounds for decision.

22
1.20 OBJECTIVES OF HR POLICIES
Personnel or human resource policy should have two types of objectives:
(A) General objectives:
The statement of general objectives should express the top management's basic
philosophy of human resources and reflect its deep underlying convictions as to the
importance of people in an organization and of the management activity which deals with
people. The management must formulate and develop a basic creed which should contain
a clear-cut statement of the company's general objectives of the personnel management's
major responsibility.
(B) Specific objectives:
The statement of specific objectives should refer to the various activities of
personnel administration connected with staffing, training, developing, wage and salary
administration, motivation, employee services and benefits, employee records, labours
relations and personnel research. The objectives of personnel policies may be summarized
as under:
1. To enable an organization to fulfill or carry out the main objectives which have
been laid down as the desirable minima of general employment policy,
2. To ensure that its employees are informed of these items of policy and secure their
co-operation for their attainment.
3. To provide such conditions of employment and procedures as will enable all the
employees to develop a pincer sense of unity with the enterprise and to carry out
their duties in the most willing and effective manner.
4. To provide an adequate, competent and trained personnel for all levels and types of
management.
5. To protect the common interests of all the parties and recognize the role of trade
unions in the organization.
6. To provide for a consultative participation by employees in the management of an
organization and the framing of conditions for this participation.
7. To provide an efficient consultative service which aims at erecting mutual faith
among those who work in the enterprise.

23
8. To establish the conditions for mutual confidence and avoid confusion and
understanding between the management and the workers by developing suggestion
plans, works committees etc.
9. To provide security of employment of workers so that they may not be distracted
bj the uncertainties of their future.
10. To provide an opportunity for growth within the organization to persons who are
villing to learn and undergo training to improve their future prospects.
11. To provide for payment of fair and adequate wages and salary to workers so that
their healthy co-operation may be ensured for an efficient working of the
undertaking.
12. To recognize the work and accomplishments of the employees by offering non-
monetary incentives.
13. To ere ate a sense of responsibility on the part of those in authority for the claims
of employees.
In brief, personnel policies should respect human dignity and personal integrity,
ensure fair treatment for all, irrespective of caste, creed or co lour and offer reasonable
social and economic security to employees. Peter Drunker has rightly said, "The
management must gear its policies and objectives in such a fashion that the employees
perform their work and do their assigned tasks."
1.21 PRINCIPLES OR ESSENTIALS OF SOUND HR POLICY :
A sound HR policy should be based on the following principles :
1. Principle of Common Interest : The Principle of common interest must be given
due recognition in designing HR policies. It should benefit all the concerned
parties. i.e. employer, employees and government.
2. Principle of Development: The organisation must provide ample opportunities for
the growth of employees personality. The personnel policy should lay down rules
for the scope for development.
3. Principle of Recognition of work : The HR policy should take into consideration
the employees expectations such as security on the job against accident, sickness
and old age.

24
4. Principle of participation in management : Employees representative should be
given participation in decision making bodies of the organisation so that they may
realise their responsibility towards management and workers. It will minimise
resistance to change.
5. Principle of recognition of Trade Union : As the trade unions play an important
role in the development of industrial relation, the management must recognise
them. The HR policies should incorporate the clause for amicable settlement of
disputes with the trade unions.
6. Principle of Change : Employees always resist change. The employees should be
prepared by the management well in advance to face the change. The..magement's
view points in this regard should be reflected in the HR policies.
1.22 NEED OF HR POLICIES :
Personnel policies or HR policies are needed to achieve the following purposes. :
1. Achieving the objectives of the organisation : Policies are guide to action
towards the objectives of the organisation. Hence they must be known and well
understood by every one in order to concentrate efforts on the objectives.
2. Uniformity in Decisions : HR policies provide the general foundation on which
decisions are taken. Various line authorities take decisions in an rganisation
keeping in view the HR policies, thus uniformity of action is maintained in similar
cases.
3. Delegation of Authority : HR policies make delegation of authority possible
which means assigning the work to others and give them authority to do it. HR -
licies help executives at various levels of decision centres to act with confidence
without consulting the superiors every time.
4. Better Control : HR policies specify relationship among organisation,
management and workers. Therefore, each group works for the achievement of the
large objectives of the organisation without any policy conflicts. Thus, HR Policies
provide better control.
5. Evaluating Efficiency : HR Policies serve as standards in execution of work.
Efficiency of a group may be evaluated by its performance in the light of the

25
 policv. Personnel Policy may be amended or a new policy may be formulated in
the light of the actual performance.
6. Confidence : HR policy provides the workers a security against exploitation and
creates confidence in employees who may know where they stand in the
organsation.
7. Motivation : HR policy introduces the employees to the objectives of the
rganisation. It guides the workers in achieving the objectives. They work
enthusiastically and with loyalty to get those objectives.
8. Guide to Management : HR policy provides guidance to management in relation
to personnel problems. It decides how to get the work done by people or how to
behave with them.
1.23 CONTENTS OF A HUMAN RESOURCE POLICY :
The human resource policy generally include the following contents :
1. Name of the Company : This includes a complete historical review of the
development of the company and full details regarding persons in management.
2. Selection : This includes sources of recruitment and methods, procedure and
techniques for selection.
3. Working conditions : Working conditions such as working hours, leave rules,
topmost authority level, channels for promotion and rules regarding suspension and
retirement etc. should be clearly mentioned in HR Policy.
4. Training : Full details regarding training programmes, Planning and objectives of
training programmes for existing and new employees are included in personnel
policy.
5. Grievance : Procedure for handling grievances should be mentioned in detail, i.e.,
to whom should they contact in case of any grievance and when, where and how?
6. Rules and Regulations : Rules and regulations governing accidents, unfair
termination, maintenance of discipline and standing orders should be clearly
defined in the HR Policy.
7. Offices : Full information regarding numbers and positions of various offices in
the organisation, their grades, wages, allowance and prerequistes attached to their

26
 bonus and incentive wage plans, methods of payments and priorities should be
given in the HR Policy.
8. Labour Welfare : Provisions for labour welfare and service activities such as
education, entertainment canteen facilities, financial assistance, profit sharing,
benefits of provident fund, compensation for accidents etc. should be made in a HR
Policy.
9. Industrial Relations : Full details regarding maintenance of industrial relations, e.
notice period for strikes and lock-outs rules for declaring strike illegal, monetary
and other losses of strikes and lock-outs to workers etc.
10 Collective Bargaining : HR Policy should include full particulars regarding
representation in collective bargaining.
11. Communication : Line of communication and authority relationship should be
ascertained in HR Policy.
12. Consultation : The HR Policy should clearly mention the methods and procedures
of joint consultation.
13. Fulfilment of Needs : The items to be incorporated in the HR Policy may be more
or less according to the needs of the organisation.
1.24 ESSENTIALS OR CHARACTERISTICS OF AN IDEAL HUMAN
RESOURCES POLICY :
Following are the essentials of an ideal H.R Policy :
1. Protection of Interest : An ideal personnel policy or HR Policy must protect the
interests of all parties associated with the enterprise, i.e. workers, entrepreneurs,
consumers, government and community. All concerned parties must get their due
share in the total production of the enterprise.
2. Precision and Certainty : Ideal HR Policy should be precise and clear to the point
and complete in every respect. It should not lead to varying and conflicting
interpretations otherwise unnecessary disputes would arise in there organisation.
3. Flexibility : An ideal HR Policy should be flexible enough to adjust and adapt any
change in economic, social, legal and technological factors from time to time
without disturbing the present norms and ideals.

27
4. Stability : An ideal HR policy should be reasonably stable and permanent.
Frequent changes should not be allowed as it would lead to confusion. It should be
a long-term policy.
5. Compromise with overall policies : An ideal HR Policy should be framed within
the overall policies of the enterprise with the objective to achieve the
organisational targets through better personnel planning and organisation.
6. Intergrative : An ideal HR Policy must intergrate characteristics of all people. It
must fully take into account the differing capacities, interests, aspirations, beliefs
and temperamental makeup of the people for whom it is meant.
7. Uniformity : An ideal HR Policy should be applicable to all members and all units
of the enterprise although variations are possible keeping in view the nature of
work and regional variances.
8. Acceptability : An ideal HR Policy must possess acceptability among the people
for whom it has been formulated. This will reduce the number of disputes and will
help maintain the discipline in the organisation.
9. Proper Communication : An ideal policy should be properly communicated to all
those for whom it is intended so that all employees could know their rights,
uabilities, duties and obligations in advance and could behave likewise.
10. Responsiveness to prevailing trends : An ideal HR Policy should be capable of
being adjusted to prevailing norms and trends of the business society. It should not
be against the prevailing trends. For example, if the current thinking is in favour of
workers participation in management, the HR policy should not be against it.
1.25 STEPS INVOLVED IN FORMULATION OF HR POLICIES /
PROCEDURES IN FORMULATION OF PERSONNEL POLICIES
Formulation of personnel policy is a top management decision. In certain organisations the
HR manager may be totally responsible for the entire process. The other method for
formulation of HR policies involves employees participation. Team work play an
important role in developing HR policies.
Top management may constitute a committee to formulate HR policies and it will proceed
through the following Steps :-

28
1. Fact finding : Facts and data are to be collected from inside and outside the
organisation. The fact should be dependable and quantitavely superb.
2. Reporting the proposed policy : The policy formulation committee shall report to
the top management, its opinion, judgement and findings. The HR manager plays a
key role in this matter. He will be the principal spokesman of the committee.
3. Written policy : Policy should always be in writing. A policy will be vague onless
it is written down. Secondly, if a policy is in writing, it will show what exacdy the
management means.
4. Discussing the proposed policy : A proposed policy should always be discussed
with participation of those who use and live with it. The management should
examine the views of employees in details.
5. Adopting and launching policy : Adopting and launching policy rest on the top
management. Generally management hesitate to release the policy accepted them
for fear of making commitment. Hence it is essential not to release the policy
unless the management means what it intends to mean.
6. Communication of Policy : The HR Policy manual or handbook should be
maintained by the HR department. Booklets on HR policy giving important points
of interest to employees should be issued.
7. iraising the Policy : The policy formulation commettee consisting of the
.^resentatives of management and other employees should appraise its
appropriatness and usefulness. Any serious difficulty should be reported to the top
management along with the constructive suggestions.
FACTORS TO BE CONSIDERED IN MAKING OF HR POLICY
The following factors should be kept in mind while determining the HR policy e
organisation.
1. Law of Country : The various laws and labour legistations govern the various i-
pects of personnel matters. Policies should be in conformity with laws of country.
2. Social Values and Customs : There are some codes of behaviour of any
community. The values and customs of the society should be taken into account in
framing HR policy.

29
3. Management Philosophy : Management cannot work for any length of time
without clear and broad philosophy. The attitudes of management, towards the
work force influence the policies and their actions.
4. State of Development : All changes as improvement in technology, innvotions,
composition of work force, financial structure etc. influence the adoption of HR
policies.
5. Financial Position of the Firm : The HR policies also depend on the financial
strength of the firm. The financial position sets the absolute limit to the
organisation's HR policies.
6. Union Objectives : While drafting the HR policies, the following objectives of the
trade union should be kept in view.
a) How well they are organised?
b) What is their bargaining capacity?
c) What are their pressure techniques? All these factors are responsible to HR policy.
Types of work force : The characteristics of work force and what is acceptable to them is
to be assessed by the personnel staff. A policy which is not acceptable to the workforce is
hardly worth implementaion.
1.27 KAIZEN :
It is a Japanese term implying continuous improvement, involving every employee
in every company function at all levels of an organisation.
'Kaizen' means 'continuous or ongoing improvement'. It is an inseparable aspect of
the management of quality. There is an old saying in Japanese, "if a man has not been seen
for three days, his friends should take a good look at him to see what changes have
befallen him." Such is the Japanese belief in unending improvement.
In fact, continous improvement is required in all activities of the organisation.
These activities may be —
(a) productivity improvement
(b) new product development
(c) labour management relations
(d) total productive maintenance (TPM)
(e) Just in time (JIT) Production and delivery system or

30
(f) customer orientation.
KAIZEN
Customer orientation Productivity improvement
Total quality control New product development
Quality Circle Labour management relations
Suggestion System zero defects
Total Productive Maintenance (TPM) Just in time system
All these are directly or indirecdy productive or productivity generating activities e
organisation. They all come under the umbrella of kaizen.
Kaizen has to basically do with small step by step continuous improvements, ations
or drastic improvements only happen once in a while and some what unpre-/ But smaller
and continuous improvements are more realisable, predictable, rollable and acceptable.
Various behavioural, cultural and philosophical changes brought about through small step-
by-step improvements than through radical
Kaizen philosophy believes that people at all levels, including the lower most in
the orgaisational hierarchy, can contribute to improvement. This is possible . Kaizen asks
for only small improvements. The Japanese and western perceptions resented in the
figures below :
Top management Innovation
middle Kaizen
management
supervisor, Maintenance
workers
Japanese perception of job
functions
Top management Innovation
Middle
management
Supervisors Maintenance
Workers
Western perception of job

31
 functions

Existence of kaizen does not belitde the importance and necessity of innovations.
Innovations should be supplemented by continuous improvement, so that the benefits of
the innovations keep increasing over time.
The worst organisations are those that do nothing but maintenance. These
organisations have no internal drive for either kaizen or for innovations. Change is forced
on management by the market conditions and competition. Unfortunately many of the
Indian companies fall in this category.
Quality in products / services comes through -
(a) Physical standards ....... Quanitifiable standards
(b) System Standards ....... methdology oriented
(e) behavioural standards ....... ways of interacting
(d) Philosophical standards ....... ways of thinking or attitudes and
motivational aspects
It has to do with the philosophy of, or strong commitment to continous
improvement. Without a philosophical basis, improvements can diminish and disappear
over time; they may not even materialise.
1.28 TOTAL QUALITY MANAGEMENT (TQM)
Total Quality Management (TQM) evolved and developed from the concepts of
quality control and quality assurance. It focuses on the customer and quality. Quality
management is also called quality assurance, quality function, total quality control and
zero defect. The Japanese have applied total quality control since world war II in the name
of company wide quality control (CWQC).
1.29 THE CONCEPT:
Quality is a dynamic concept and so is its management. Total Quality Management
(TQM) has been accepted throughout the world these days. It calls for continuous
improvement of quality with the co-operation of workers through innovation in product
and technology so as to meet the changing requirements of the customers. The launching
of ISO : 9000 series standards by the International Standards Organisation is an attempt to

32
help the industrial organisations in adopting TQM to improve their quality and
productivity' and to serve their customers efficiendy.
TQM is a philosophy which believes in a company-wide responsibility towards
quality. The main aim of TQM is to actively involve the production personnel in the
r_rsuit of quality and to infuse in them the spirit of continous improvement.
According to Sashkin and Kiser, Total Quality Management may be defined as
.rearing an organisational culture committed to the continuous improvement of skills,
aeamwork, processes, product and service quality and customer satisfaction."
Thus, TQM is a continuous customer centred employee driven improvement. :
achieving total quality, three things are essential :
(i) Meeting customers' requirements;
(ii) Continuous improvement through management process;
(iii) Involvement of all employees.
The quality standards do not remain the same for ever. They are to be modified or
changed to meet the requirements of customers and to make use of new technology. The
TQM also calls for involvement of employees in its programme. Without the acnve
involvement of employees, high quality standards cannot be achieved. Further, the whole
concept of TQM is directed towards meeting the requirements of customers.
During the early 1950s, the concept of total quality control (TQC) was coined by
\rmand V. Fiegenbaum, who defined TQC in 1954 as an effective system of integrating
rhe quality development, quality maintenance and quality improvement efforts of the ir.
DUS functions of business to enable production and service at the most economic evels to
meet full customer satisfaction. The Japanese called it company wide quality courol
(CWQC).
TQM is a company wide activity, and has to reach every employee within the
organisation as suggested in the following definition "Total Quality Management (TQM) i
an approach to improving the effectiveness of flexibility of business as a whole. It is
essentially a way of organising and involving the whole organisation, every department,
erv activity, every single person at every level (Oakland, 1989).
It is very important to note that first word 'Total'.
1. Total quality management is

33
2. Totality of functions in an organisation.
3. Total range of products and services offered by an organisation.
4. Addressing all aspects and dimensions of quality.
5. Addressing the quality aspects in every ting-products, services, processes, people,
resources and interactions.
6. Satisfying all customers - internal as well as external.
7. Involving everyone in the organisation in the attainment of total organisational
objectives.
8. Demanding total commitment from all in the organisation towards the achievement
of the obective.
When one does such a total job with an eye on quality (total quality), the result is
organisational excellence. Thus, TQM is not just about quality in the traditional sense. It is
about organisational excellence. Management has to make clear to employees, suppliers,
customers and the world exactly where it stands on quality. It is like saying, we will
deliver defect free products and services to our customers and co-workers on time, at
agreed costs." TQM is about turning all products, all services, all processes and all people
into 'gold'.
1.30 COMPONENTS OF TOTAL QUALITY MANAGEMENT
The following are the important components of TQM :
• Quality policy and its communication
• Team work and participation
• Problem solving tools and techniques
• Standardisation
• Design and implementation of a quality system
• Process control
• Customer / Supplier integration
• Education and mining
• Quality audit and review
Thus, the three important elements/components of TQM are discussed below :

34
1. Customer Orientation : Under TQM, the term 'Customer' means every user of a
product or service and not only the end user. This a very broad meaning of
'customer'.
TQM aims at satisfying the customer's requirement which never remain constant,
but deep on changing in time but keep on changing with the change in time
environments, circumstances, needs, fashion etc. Thus, meeting the changed
requirement of customers is a continuous goal of the producer.
2. Continuous improvement : The chgange in customer's requirements may be in
terms of desire for better quality product/service bigger size, reduced cost etc. So a
producer has to cope up with the new requirement. A new process may have to be
developed, or it may require a new producing design, the management has also to
take care of competition in the market so that customers donot shift to other
producers. For instance, introduction of 300 ml. cold drink bottles by one producer
led other producers to shift to bottling of 300ml. of their brands.
The advancement of technology is another important factor in improving the
quality. For example, photocopier was a big machine with a manual process when
it was introduced in India for the first time. The process was time consuming and
even quality was not upto the mark. There after, new photocopiers Xerox
machines) were introduced and slowly old machines disappeared for the simple
reason that customers' need underwent a sea change.
3. Employees' Involvement : As said above, TQM requires a continuous
improvement in quality of products. This calls for improvement in quality of work
of employees through training and development. The enhancement of skills of
employees will not only improve quality, but also bring down the cost of products
through efficient use of machines and materials and reduction of wastages. The
employees must also be conscious about the need for improvment in the quality of
work. Quality Circle (QC) is is an outstanding example in this regard. It is because
of employees' involvement in improvement of quality that TQM is referred to as
people's process.
TQM should be the concern of all managers and workers in the organisation if it is
to serve the purpose fully. No doubt TQM is planned by the top managers, the

35
 peeple at the middle and lower levels must be taken into confidence before
launching the TQM.
1.31 BENEFITS OF TOTAL QUALITY MANAGMENT
The following benefits can be derived from a sound TQM programme.
1. TQM brings quality consciousness in the enterprise which encourages production
of quality products.
2. TQM helps in providing greater satisfaction to the customers by meeting their
requirement. It the customers are satisfied, the sales are increased.
3. It creates a good public image of the enterprise by helping it to provide goods and
services of higher quality to the society.
4. There is better utilisation of materials, machines, capital, human resources etc.
5. Wastages are reduced to the minimum. As a result, cost of production is reduced
and profitability is increased. Even the customers could be provided good at lower
prices. The competitive position of the firm in the market is improved.
6. The employees are committed to higher quality and feel highly motivated. Their
morale is also higher because of the public image of the firm and its good will in
the market.
1.34 STEPS IN TQM PROCESS:
WE. Deming, an internationally renowned quality expert, known as father of TQM
has suggested Plan-Do-Check-Act cycle for the implementation of TQM in any
organisation. The steps in PDCA Cycle are shown in the figure.
1. Lay down policies and objectives of TQM. Determine what the customer in
supposed to receive and what they are actually receiving.
2. Check out the method to achieve TQM objectives.
3. Educate and train workers and managers to understand and meet the requirement
of TQM.
4. Start the operation of TQM by introducing new product, machines, procedures etc.
5. Observe results of operations and find out the causes of non conformance to
quality standards.
6. Analyse result and determine the consequences of non-conformance and place the
report before the top management.

36
7. Prevent undesired effects in quality improvement. Establish personal relationships
concerns and ideas.
8. Suggest measures for improvement of methods and design in future.
FUNDAMENTAL PRINCIPLES OF TQM
1. TQM is customer oriented.
2. TQM involves a long term commitment to the continuous improvement of all
processes.
3. TQM success depends upon top management commitment, leadership and
continuous involvement.
4. Products and services are the result of processes.
5. Much of the knowledge needed to improve a process resides in the workforce and
with the customers.
6. Responsibility for the establishment and improvement of processes lies with the
management.
7. Managers are responsible for the quality of suppliers' products and services re-
quired.
8. TQM is a strategy for continously improving performance at every level and in all
areas of responsibility.
9. TQM aims at achieving one broad, unending objective : continuous improvement
of products and services.
10. Successful TQM implemetation depends on establishing a nurturing, encouraging
environment, a disciplined, organisational goal setting methodology and a formal,
structured process - improvement methodology.
1.36 CRITICISM OF TQM :
TQM has been criticised for a gradual change towards what the customer desires.
Therefore, while it is radical in its aim of total customer satisfaction, its approach seems
incremental. TQM is criticised on the count of not showing the same sense of urgency as
six sigma which attempts at drastic changes.
Another criticism is that TQM is rather vague or imprecise in defining as to what
needs to be achieved. Total customer satisfaction as an objective is fine. But does a TQM
programme translate that into exact requirements?

37
 Another criticism is 'general' in nature. It is about the goal of any programme of
quality improvement. TQM attempts to reach the quality level expected by the customer.
According to the critics, the customers may not know to expect better. All quality
programmes, including TQM and Six Sigma are supposed to reach only upto the 'expected
quality curve. They donot go beyond.
1.37 SIX SIGMA
The term'Six Sigma' indicates that
(a) This is a quantitative methodology, and
(b) It is much more stringent or precise than the traditional 'three sigma' statistical
process control (SPC) model
Six Sigma is a quality-related programme. One may look into it as the big brother
of traditional SPC. But, that would amount to taking a very narrow view of Six Sigma.
First of all, in statistical terms, the change from tree sigma to six sigma is a drastic change.
It is shown in the following table :
Table : What do various sigma level mean?
a Level Yield % Defects per million opportunities
1 30.9 6,90,000
2 69.2 3,08,537
3 93.3 66,807
4. 99.4 6,210
5. 99.98 233
6. 99.9997 3.4
1.38 WHY DO COMPANIES NEED SIX SIGMA?
Companies need six sigma basically for two reasons :
1. Technological complexities and multi-stage processes : Today, the technology
of products like computers is such that it has to be totally defect free. The need for
'zero defects' is acutely felt in these technologically advanced times. Manufac-
turing has become a more complex activity than in earlier days. It has now multiple
process. Defect can arise at any or all of these successive processes. If the
processes have a three sigma quality level i.e. 99.73 percent yield and if there are

38
 just three such processes, the overall yield would be 0.9973 x 0.9973 xO.9973 =
0.9919 i.e. 8100 defects per million or 24 defects per thousand.
For a 9 - step process the overall yield would be :
0.919 x 0.9919 x 0.9919 = 0.9759, i.e. 21,100 defects per million.
Since modern production processes involve much more than nine successive
processes one can imagine what might happen if just three sigma levels were to be
used. The yields would be very low and unacceptable. The imperative of six sigma
levels of quality is, therefore, quite obvious. It appears like an absolute must.
Service industry is a major industry these days. Six Sigma is required in the service
industry like banks and insurance as much as in the manufacturing industry.
2. Rapid growth of the service industry and of the service components in a
manufactured product :
The service industry is much more quality sensitive than maufacturing. The reason
is proximity of the customers in servcie operations. The effect and feedback is
immediate. Moreover, in manufacturing defective products can be discarded or
reworked on and then sent to the customer. There can also be a physical inventory
of goods. Such tilings are not possible in services. A service - good or bad reaches
the customer directly.
A service delivered badly can't be recalled like manufacuted products. For
example, a small dead roach in a dish in the restaurant of a 5 - star hotel is enough
to kill the reputation. So even the fact that the hotel is maintaining good quality
99.999 percent of the time may not help the hotel.
The need for the input quality is acutely felt in the service industry. A stern quality
initiative such as that of six sigma is justified in service operations. It would mean
that out of one million encounters with custoemrs, only 3.4 will be defective, i.e.
unacceptable to the customers. For a service industry, even this defect rate appears
to be on the higher side.
1.39 BENEFITS OF USING SIX SIGMA
There are several benefits of applying six sigma.
1. It introduces rapid and almost radical improveents : Quality circles, Kaizen
and Quality Function Deployment are very necessary for an organisation at all the

39
 times. However, these measures produce incremental improvements. The pace of
improveent is, therefore, slow. Six Sigma is such an instrument of change which
can bring about radical changes in the way an organisation functions.
2. It transforms the entire organisation : When six sigma is implemented, the
entire organisation in all its constituent parts is geared for absorbing rapid and
radical changes. Six Sigma initiative makes the management to take a closer look
at the various functions and departments and the inter-relationships between them.
3. It provides a consistent metric : By its nature Six Sigma provides measures and
targets that are quantifiable. Specific defects - deviations from the customer
requirements are identified and measured. Improvement performance is also
measured. Organisational changes are brought about by the implementation of Six
Sigma.
4. The customer is always focus : The benefit of constant measurement is that the
customer is always in focus with his/her requirements being the standard against
which the measurements are done. Due to presence of six sigma, an organisation is
always aware of the changes in the market.
5. It is a continuous improvement process as well: Since Six sigma is a
measurement based initiative, the organisation that implements this initiative
would have to constandy keep itself appraised of the customers' requirements. In
short, Six Sigma initiative never stop. It is forever. It is true that six sigma signifies
radical improvement. But a radical improvement system does not have to negate
continuous improvement.
1.40 METHODOLOGY OF SIX SIGMA :
Six Sigma methodologies are about the following :
1. The Customer : Total customer satisfaction is the goal of six sigma. Therefore,
customer is the focus of six sigma action in anv of process.
2. The Metrics : Understanding the customer and his/her requirements and a design •
of appropriate metrics are central to Six sigma efforts in an organisation. Six
Sigma is quantitative in nature and quite exacting at that. Hence it is essential that
an appropriate metric be established as to how customer satisfaction may be
measured.

40
3. The Process : With the customer requirements and the metrics in view, the process
leading to customer satisfaction have to be improved - many of them radically. It is
done through technology upgradation, elimination of human errors, supply chain
adjustments, improvement in commnication etc.
4. The Employees: Planning an action is one thing and getting it done is another. The
importance of human element cannot ever be overstated. The employees have to be
informed/educated about the processes and the final goal.
5. Organisation Transformation: The importance of top management leadership is
absolute in Six Sigma. If the prevailing culture and the prevailing value system is
not appropriate for the transformational process of six sigma to set in, then the
culture and the value system have to be appropriately modified/redesigned and
robustly installed

41
 UNIT-II

RECRUITMENT AND PLACEMENT

Recruitment, Process and Sources, Selection Process, Tests and Interviews, Placement
and Induction
RECRUITMENT
2.1 MEANING AND DEFINITION OF RECRUITMENT:
Once the required number and kind of human resources are determined, the
management has to find the places where required human resources will be
availaole and how to attract them towards the organisation. This process is
generaUy known as recruitment.
some people use die term "Recruitment" for employment. These two are not one
and the same. Recruitment is only one of the steps in the entire employcment
process.
Edwin B. Flippo defined recruitment as "The process of searching for prospective
employees and stimulating them to apply for jobs in the organisation."
2.2 RECRUITMENT PROCESS
Recruitment of employees in an organization involves the following processes:
1. Deciding the Quantity of Personnel:
Before the selection is undertaken, the human resources department should assess
the need for personnel in quantitative terms. For example, the department should
assess
(a) How many personnel are required;
(b) What is exacdy the job;
(c) What will be their duties and respansibities;
(d) What will be the terms and conditions of employment etc.
2. Deciding the sources of recruitment:
After job analysis and man specification, every possible source should be tapped to
select the most efficient employee. The various sources are -
(a) Company's own steff (Promotion)

42
(b) Compearing firms
(c) Employment exchanges
(d) Educational institutions
(e) Situation wanted' columns of newspapers
(f) Situation vacant' advertisements
(g) Casual applicants
(h) Recommended candidates
3. Determination of characteristics to be possessed by prospective employees:
The man specification indicates the exact requirements needed for a particular job.
On the basis of nature of duties, the requirements also may change. Generally
speaking, the following qualities are required of an employee:
(a) General Qualities: They include good personality sound health, intelligence,
honesty, sociability and power of observatkr-
(b) Particular Qualities: They include educational qualifications, past experience,
knowledge of the organization, knowledge of customers etc.
(c) Technical Knowledge: Knowledge about the chemical or mechanical aspects of the
job, computer knowledge etc. are also required in performance of different jobs
4. Attracting the Candidates:
At this stage some techniques are to be developed to attract as many candidates as
possible to apply for the jobs. Publicity, reputation etc. may help a lot in
stimulating candidates to apply. Attractive salaries, incentives, scope for career
advancement etc may be highlighted to attract the most competent and skilled
candidates.
5. Evaluation:
In the final stages of recruitment process an evaluation may bring out the merits
and defects, if any, of the recruitment procedure.
Thus, in an ideal recruitment process, the recruiting agency or board must know
the following—
(a) How many and what types of employees are needed?
(b) Where and how to look for the most prospective employees with required
qualifications?

43
(c) How to induce them to apply for jobs?
(d) How to sort out the unqualified applicants?
(e) How to evaluate their works?
2.3 SOURCES OF RECRUITMENT :
Sources are those where prospective employees are available. Management has to
find out and develop sources of recruitment as early as possible because of high
rate of time laps.
The sources of recruitment are probably divided in two groups, (a) Interna]
sources (b) External sources.
The various internal and external sources are as under :
Sources of Recruitment

A. Internal B. External

1 Present Permanent 1 Educational and Employee

2 Temporary or casual Employee 2 training Institute
3 Retired/Retrenched Employee 3 Employment Exchange Similar
4 Dependents organizatin
Advertisement
Casual Applicant
Recommendation
Trade Unions

A. INTERNAL SOURCES :
Internal Sources are those sources that are within an organisational persuits. Many
companies adopt the policy of internal sources of recruitment. The important internal
sources are as under.
1. Present permanent Employee : Under this method the vacant positions are filled
in by promoting the employees from lower cadre from within the organization.
This is done due to availability of most suitable candidates internally or to motivate
the present employees or to meet the trade union demand.

44
2. Temporary or casual Employees : Organisations find this source to fill the
vacancies relatively at the lower level owing to the availability of suitable
candidates or trade unions pressure.
3. Retired / Retrenched Employees : Generally a particular organisation retrenches
the employees due to lay off. The organisation takes the candidates for
emplovement from the retrenched employees due to obligation or trade union's
pressure. Sometimes, the organisations prefer to re-employ their retired employees
as a token of their layalties of the organisation.
4. Dependence of deceased or disable Employees : Some organisations with a view
to developing the commitment not only to the employee but also to his family
members, provide employment to the dependent of deceased or disable present
employees.
2.4 WHY DO ORGANISATIONS PREFER INERNAL SOURCES OF
RECRIUTMENT? (MERITS OF INTERNAL SOURCES)
An organisation prefers internal sources than that of external sources for the following
reasons -
i) Internal recruitment can be used as a technique of motivation.
ii) It improves the morale of the employees.
iii) Suitability of internal candidates can be judged better than the external candidates
as known devils are better than unknown angels.
iv) Lovaltv, commitment, sense of belongingness and security of the present
employees can be enhanced.
v) Employees psychological needs can be met by providing an opportunity of
advancement.
vi) Employees economic needs for promotion and higher income can be satisfied.
vii) Cost of recruitment can be ntinimised.
viii) Cost of induction and training can also be minimised,
ix) Trade unions can be satisfied.

45
2.5 DEMERITS OF INTERNAL SOURCES:
Organisations do not necessardy rely on internal source as "too much umption of
even sugar taste bitter". The excessive dependence on this source cs the following draw
backs.
1. It discourages the flow of new blood into the organisation.
2. The organisation may become dull without innovations, new ideas and expertise.
3. The vacant posts may be filled up by unsuitable candidates.
4. Frequent transfer or promotion of employees may reduce the overall productivity.
B. EXTERNAL SOURCES :
External Sources are those sources which are outside the organisational persuits. r
important external sources are as follows :-
1. Educational and training institutions (Campus Recruitment): Campus offers
opportunities for recruitment of young graduates from the educational and training
institutes. This source is quite popular in western countries. In India also certain
public and private sector organisations conduct campus interviews for recruitment.
2. Employment Exchange : The governtment set up employment exchanges in
country to provide information about vacancies to the candidates and to help the
organisation in finding out suitable candidates. The Employment Exchange Act
1959 makes it obligator)' for the public and private sector enterprises to fill certain
type of vacancies through employment exhanges.
3. Similar Organisations : Generally experienced candidates are available
organisations producing similar products or engaged in similar business. Th
management can get most suitable candidates from this source.
4. Advertisement : Advertising through news papers and journal is the mos widely
used and popular source of attracting qualified people to apply in th organisation.
A care has to be taken in preparing advertising copy so that onl qualified applicants
should responds.
5. Casual applicants : Many organisations receive many unsolicited application for
various jobs. Organisatons do not throw such application but maintain classified
record of these applications. This serves as a source of prospectiv manpower.

46
6. Trade Union : Trade Union's leaders are aware of the availibility of candidate In
order to satisfy the trade union leaders management enquire trade union fo suitable
candidates.
7. Recommendations : An important source of recruitment is the recommendations
made by the current employees regarding someone whom they know and who
fulfill the qualifications for the vacant posts. The recommender usually gives the
applicant realistic information about the job.

2.6 MERITS OF EXTERNAL SOURCES :

Organisations search for the required candidates from the external sources for the
following reasons.
1. The suiable candidates with skill, knowldge and talent are generally available.
2. Candidates can be selected without any preconceived notions or reservations.
3. Employees selected from this source are generally placed in minimum pay scale.
4. Latest knowledge, skill, innovative or creative talent can be flowed into the
organisation.
5. The management has a wider choice while selecting the people for employment.

2.7 DEMERITS :
External Sources suffer from the following demerits:
1. A lot of money is spent on advertising and processing of applicatins. It proves to
be cosdy.
2. Recruitment from this source is time consuming. A lengthy process in involved.
3. There is no guarantee that the organisation will be able to attract right kind of
people from external sources.
4. Kxrernal sources may make the existing employees feel that their chances of
promotions are reduced.

47
2.8 DISTINCTION BETWEEN INTERNAL & EXTERNAL SOURCES:
Basis Internal
1. Meaning It involes search of personnel
From within the organisation
2. Economy Internal source proves to be
eheaper, as it does not
involve any cost.
V lime involved It is less time consuming
4. Scope of choice Choice of candidate is
limited.
5. Impact on staff The existing staff is
motivate to improve their
performance
6. Suitability It is not suitable for newer
type of job.
External
It involves find ing
candidates from outside
the organisation.
I External source is costlv
as it involves a long
process.
It consumes more time
I External source offers
wider choice.
The existing staff feels
dissatis if external
sources are used.
For newer type of jobs
candidates might be
recruited from external
sources.

2.9 MODERN SOURCES OF RECRUITMENT

A number of modern recruitment sources are being used by the corporate sector
irion to traditional sources. A few of them are explained below :
1. Outsourcing: Under this arrangement, a company may draw the required
personnel from the outsourcing firms or agencies on commission basis rather than
offering them employment. The outsourcing firms develop their human resource
pools by employing people for them and make available the personnel to various
companies as per their needs. The outsourcing firms get payment for their services
to their clients and give salary direcdy to the personnel. The personnel deputed by
the outsourcing agencies with the clients are not the employees of the clients. They
continue to be on the payroll of their employers, i.e. the outsourcing agencies. This

48
 system facilitates the organisation to hire security personnel from the security
agency, computer professionals from a computer firm or accountants from a
accountancy firm.
The advantages of getting human resources through the outsourcing agencies are as
follows :
(i) The companies need not plan for human resources much in advance. They can get
human resources on lease basis from an outsourcing agency.
(ii) The companies are free from industrial relations problems as human resources
taken on lease are not their employees.
(iii) The companies can dispense with this category of employees immediately after the
work is over.
2. Poaching or Raiding : Poaching means employing a competent and experienced
person already working with another reputed company which might be a rival in
the industry. A company can attract tatent from another firm by offering attractive
pay packages and other terms and conditions. For instance, several executives of
HMT left to join Titan watches, Several pilots of Indian Airlines left to left to join
private air taxi operators, several engineers of L&T examples where the firms have
raided the rival firms to procure their key personnel to enhance their competitive
advantages.
Whatever may be the means used to raid rival firms for potential candidates, it is
often seen as an unethical practice and not openly talked about. In fact, raiding has
become a challenge for the human resource managers of modern organisations
because poaching of a key executive by a rival firm will weaken the competitive
strength of the firm.
1. Outsourcing: Under this arrangement, a company may draw the required personnel
from the outsourcing firms or agencies on commission basis rather than offering
them employment. The outsourcing firms develop their human resource pools by
employing people for them and make available the personnel to various companies
as per their needs. The outsourcing firms get payment for their services to their
clients and give salary direcdy to the personnel. The personnel deputed by the
outsourcing agencies with the clients are not the employees of the clients. They

49
 continue to be on the payroll of their employers, i.e. the outsourcing agencies. This
system facilitates the organisation to hire security personnel from the security
agency, computer professionals from a computer firm or accountants from a
accountancy firm.
The advantages of getting human resources through the outsourcing agencies are as
follows :
(i) The companies need not plan for human resources much in advance. They can get
human resources on lease basis from an outsourcing agency.
(ii) The companies are free from industrial relations problems as human resources
taken on lease are not their employees.
(iii) The companies can dispense with this category of employees immediately after the
work is over.
2. Poaching or Raiding : Poaching means employing a competent and experienced
person already working with another reputed company which might be a rival in
the industry. A company can attract tatent from another firm by offering attractive
pay packages and other terms and conditions. For instance, several executives of
HMT left to join Titan watches, Several pilots of Indian Airlines left to left to join
private air taxi operators, several engineers of L&T examples where the firms have
raided the rival firms to procure their key personnel to enhance their competitive
advantages.
Whatever may be the means used to raid rival firms for potential candidates, it is
often seen as an unethical practice and not openly talked about. In fact, raiding has
become a challenge for the human resource managers of modern organisations
because poaching of a key executive by a rival firm will weaken the competitive
strength of the firm.
(viii) It ensures the most effective and suitable placement to candidates.
(ix) It enables centralised training programmes which further brings uniformity and
minimized overage cost of staff.
Despite these advantages of centralized recruitment, some organizations resort to
decentralized recruitment for the following reasons :

50
Merits of Decentralised Recruitment :
(i) The unit concerned concentrates only on those sources/places where it normally
gets the suitable candidates. As such the cost of recruitment would be relatively
less.
(ii) The unit gets most suitable candidates as it is well aware of the requirements of the
jobs regarding cultural, traditional, family background aspects, local factors, social
factors etc.
(iii) Units can recruit candidates as and when they are required without any delay.
(iv) The units would enjoy freedom in finding out, developing the sources, in selecting
and employing the techniques to stimulate the candidates.
(v) The unit would relatively enjoy advantage about the availabihty of information,
control and feedback and various functions/processes of recruitment.
(vi) The unit would enjoy better familiarity and control over the employees it recruits
rather than on employees selected by the central recruitment agency.
Both the systems of recruitment would suffer from their own demerits. Hence, the
management has to weigh both the merits and demerits of each system before
making a final decision about centralising or decentralising the recruitment.
Alternatively management may decentralise the recruitment of certain categories of
employees preferably middle and top level recruitment of other categories of
employees preferably lower ley el managerial personnel and centralise the
positions in view of the nature of jobs and suitability of those systems for those
categories of positions. The management has to find out and develop the sources of
recruitment after deciding upon centralising or decentralising the recruitment
function
2.11 RECRUITMENT PRACTICES IN INDIAN INDUSTRIES :
Findings of the various surveys conducted in foreign countries reveal that various
organisations use the following sources of recruitment in the order of the relative
practice: employee referrals, casual applicants, advertising, local educational
institutions, public employment exchanges, private employment agencies and
unions.

51
Industries in India depend on the following sources :
(i) Internal sources
(ii) Badly lists or a central pool of candidates from which vacancies are filled.
(iii) Public employment exchanges
(iv) Casual labourers
(v) Labour Contractors
(vi) Candidates introduced by friends and relatives
(vii) Private employment agencies/consultants.
(viii) Campus recruitment like Indian Institute of Management, Indian Institute of
technology, Indian Institute of science, National Institute for Training Industrial
Engineers.
(ix) Sons of the social: Recendy there has been a move in India that the vacancies at the
lower level should be filled by the local people (sons of soil). Some organisations
including public sector organisation have started providing jobs to sons of soil on
priority basis. The National Committee on Labour, in this connection,
recommended for providing employment to the local persons. Further, the
government of India issued directives to public sector enterprises to recruit local
candidates on priority basis.
(x) Specified Communities and categories : According to government directives the
organizations, particularly public sector have to recruit candidates to the specified
extent from the scheduled castes, scheduled tribes, backward communities and
from specified classes like physically handicapped, ex-servicemen and the like.
2.12 ESSENTIALS / PRINCIPLES / PRE-REQUISITES OF GOOD / SOUND
EFFECTIVE ECRUITMENT POLICY:
A good recruitment policy should be based on the following principles :
1. Centralisation : Recruitment of personnel for the whole organisation should be
centralised. The personnel or HR department may be charged with this
responsibility'.
2. Clear Policy : Both the internal and external sources of recruitment should be
given due importance. It should be clearly stated whether the existing employees

52
 would be given any preference in filling up the higher vacant posts and if so at
what basis.
3. Comparative Policy : In establishing the recruitment policy for the organisation,
the policy followed in similar organisations and government undertakings should
be considered.
4. Statutory Provisions : Statutory provisions regarding recruitment of personnel
should also be given proper consideration.
5. Flexibility : The recruitment policy should be flexible so that it can be amended
suitably to achieve the organisational objectives.
6. Consistancy : The recruitement policy should be widiin the framework of HR
policy and organisational policy.
7. Proper Qualifications : The qualifications of the applicants should match the job
description and job specification.
8. Merit : Merit should be the basis of recruitment and other conditions like
friendship, relations etc should be ignored.

2.13 FACTORS AFFECTING RECRUITMENT:

There are a number of factors that affect recruitment. They are broadly classified into two
categories as shown below :—
Factors affecting Recruitment

Internal factors External factors

1. Size of the organisation 1. Demographic factor

2. Recruitment policy 2. Labour market
3. Image of the organisation 3. Unemployment Situation
4. Image of job 4. Labour laws
5. Legal Consideration
A. INTERNAL FACTORS
Internal factors are those that are within the organisation affecting recruitment :
personnel. Some of them are expained below :-

53
1. Size of the organisation : The size of the organisation affects the recruitment
process. Generally, larger organisations find recruitment less problematic than
smaller organisations.
2. Recruitment policy : The recruitment policy of the organisation also affects the
recruitment process. The organisation may follow internal as well as external
recruitment policy which influence the whole process.
3. Image of the organisation : Good images of the organisation help to attract
potential and competent candidates. It influences the recruitment process of the
organisation.
4. Image of job : Better remuneration and working conditions are considered as the
characteristics of a good image of a job. Better image of the job also attracts
potential candidates.
B. External factors: There are some external factors which have their infulence on
recruitment process. Some of them are explained below :-
i) Demographic factors : Demographic factor include age, sex, literacy, rural-urban
population, economic status etc. These factors have profound impact on
recruitment process.
ii) Unemployment situation :- The rate of unemployment is another external factor
having its inflence on recruitment process. When the unemployment rate in a given
area is high, the recruitment process tends to be simpler.
b) Labour laws : There are several labour laws and regulations passed by the central
and state governtment that govern different types of employment. They include
various provision like working condition, compensation, retirement benefits, safety
and health of employees, employment of child and woman worker which must be
followed at the time of recruitment.
5. Legal consideration : Another external factor is legal consideration with regard to
employment. Reservation of jobs for schedule caste, schedule tribes and other
backward classes is the popular example of such legal consideration.

54
 SELECTION PROCESS / PROCEDURE OR STEPS
After identifying the sources of manpowers, searching for prospective employees
and stimulating them to apply for jobs in an organisation, the managament has to perform
the function of selecting the right employees at the right time.
There is no standard selection process that can be followed by all the companies.
Companies may follow different selection techniques depending on the size and nature of
busines, kind and no of persons to be employed, Government regulations to be followed
etc.
However, an ideal selection process should include the following steps :
1. Application Blank : The first step involved in the selection process is to supply an
application blank to the applicants for filling it with the information in respect of
educational qualification, age, experience etc. This serves as a written record and is
helpful at the interview step.
2. Employment Test: It is the second hardle that the potential candidates have to-pass
through. Now a days, many psychological test are becoming increasingly popular.
There are 2 types of tests.
(a) Trade test i.e test relating to the knowledge of the type of job.
(b) Psychological test which include aptitude test, intelligence test, interest test,
personality test achievement test etc.
3. Employment Interview : This is the most complex and difficult test to determine
the suitability of applicant for the job. It must be conducted in a friendly
atmosphere. Interviews help to get additional information form the candidate and
to determine his/her suitability for a job.
4 Reference Check : The reference check is the next step in the selection process.
The employer asks the potential candidates to supply two or three names of
persons who know them personally. The organisation may collect information
from the referees regarding the character, skill, potentiality etc. of the candidate.
Reference may also be checked from the past or present employer of the
candidates.
5. Medical Test : The medical or Physical examination has now become a part of
selection procedure in India. A candidate who is selected finally for the job has to

55
 undergo physical medical examination This is very important to know whether the
candidate is in good health or suffering from any disease.
6. Final selection and Placement: The candidates who clear all the above hurdles
are finally selected. A letter of appointment is issued to the successful candidates.
It contains details about pay scale and other terms and conditions of employment.
When the candidate joins the job, he/she is placed on a particular department or
unit after providing orientation or Induction.
1.14 FACTORS AFFECTING SELECTION DECISIONS :
Fitting the worker to the job is the first and the most important step in promoting
individual efficiency in industry. Scientific Selection of employees is an important
function : the Personnel Department. The object of scientific selection is to place on each
job worker who will be best fitted to the job.
The factors to be considered for selecting the right person for the right job are as under:
1. Physical Characteristics : They include sound body, limbs, height, weight, sight
etc.
2. Personal characteristics : They include age, sex, marital status, number of
children, family background etc.
3. Proficiency or skill and Ability : They include academic qualifications and
adequate previous experience of the candidate.
4. Competency : The potential of an individual for learning and becoming proficient
in job need to be considered. Competency points out capacity to acquire
knowledge and skill of success on the job.
5. Temperament and character : Emotional, moral and social qualities, honesty,
loyalty etc. are to be considered in selecting a candidate. A high degree of
intellectual competency can never serve as a substitute for such qualities as
honesty and trust worthiness. It is important to know about individual's character,
his habits of work, his way of reacting in this or that situation, his driving forces in
determining his fitness for the job.
6. Interest: Without interest, work is colorless and monotonous. With interest, work
seems meaningful and worthwhile to the individual and abilities are developed as

56
 well as accomplishments are realized. If a person has skill and competency, but he
has no interest in the job, he will be unhappy in his work,
2.15 ESSENTIALA OF A GOOD SELECTION POLICY
The selection process can be successful if the following preliminary requirements
are satisfied:
1. Someone should have the authority to select. This authority comes from the
employment requisition, as developed by an analysis of the work-load and
workforce.
2. These must be some standard of personnel with which a prospective employee can
be compared, i.e. there should be available before hand a comprehensive job
description and job specification as developed by a job analysis.
3. There must be sufficent number of applicants from whom the reqnired number of
employee may be selected.
4. "Job first, man next" should be the basic and fundamental principle of selection.
5. Management should not rely much on one single source. Selection should be from
internal as well as external sources.
6. Selection policy should be within the framework of HR policy and organization
policy.
7. The selection policy of the organization should commensurate the employment
policy of the government.
8. Selection policy should be flexible, not rigid so that necessary amendments may be
made whenever necessary.
9. The selection policy should be unbiased and employment oriented.
10 The selection policy should provide the vocational guidance for prospective
candidates.
2.16 DISTINCTION BETWEEN RECRUITMENT & SELECTION:
Technically speaking recruitment & selection are not synonymous. The main difference
between them are as follows :
Basis Recruitment Selection

57
1. Meaning It means searching for potential It is a process of picking up
emplyees and attracting them to the most suitable candidates
apply for jobs. from among the applicant.
2. Sequence Recruitment is the first step in Seection is the 2nd step for
the process of employment. appointment of employees.
3. Process Recruitment is a positive Selection is a negative
process process as it involves
as it does not involve the rejecting unsuitable
question of rejection. condidates and arriving at the
most suitable candidates.
4. Interview In case of recruitment In selection Inter-views is the
preliminary interview is not most widely used technique.
most widely used technique.
5. Relationship The process of recruitment does The process of slection leads
not lead to contractual toa contractual relationship
relationships between employer between the employer and
and the candidates. the potential employees.

2.17 TYPES OF TESTS

The various tests used by the employer can very broadly be divided into two
categories as follows :
Types of Test
Ability Test Personality Test
Aptitude Tests - Interest Tests
Intelligence Tests - Projective Tests
Achievement Tests - Personality Tests
Judgement Tests - Attitude Test
They are explained below :

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A. ABILITY TESTS:
A number of ability tests have been developed for the use of employee selection.
Important among them are as under :
i Aptitude Test : Aptitude Tests are designed to measure as to how quick the person
is at learning skills involved in performance of the job. It measures the candidate's
potential ability to learn after teaming Aptitude tests are used to predict future
ability of an employee. They include clerical aptitude, mechanical, artistic,
creativity aptitude tests etc.
ii Intelligence Tests : The mental ability of the person with respect to various aspects
is tested through intelligence tests. It measures the leaning ability and capacity to
understand or grasping power and reasoning power of an individual. The core
concept underlying is mental age. It is normally presumed that with physical
growth intelligence also grows. It is true in many cases but not in all.
Mental age is based on Intelligence Quotient or IQ. It is calculated by using the
formula given below.
= Mental Age x m Actual Age
The IQ of a person above 130 can be termed as very superior and between 90-109
average, below it may be dull. People with average IQ are the most numerous and
make reasonable contribution.
iii Achievement Test: These tests are designed to measure the proficiency achieved
by a person. Indian industries have now started conducting these to know what the
potential candidates have already achieved instead of believing their scores in
academic degrees. These tests are known by the names proficiency tests,
performance, occupational or trade tests. They are designed to test the knowledge
and proficiency acquired by the potential candidate.
iv Judgement Tests : They are designed to know the ability to apply knowledge in
solving a problem.
B. PERSONALITY TESTS:
Motivation, interests and predispositions are measured through these tests. The
following are the personality tests conducted by the organizations :

59
i. Interest Tests : They are designed to know the level ofinterest of the individual in
the areas of specialization and preferences for occupations. These tests were used
for vocational guidance. The most popular interest test is Kuder Reference Record.
It has three forms, vocational interest such as mechanical, scientific, artistic,
musical, clerical interest etc. Interest in personal areas such as group activities,
avoiding conflict etc. Preference reaction relate to particular occupations such as
sales, accounting, marketing etc.
ii Projective Tests : These tests are designed to know the projection of the
respondent by showing him the pictures. He reveals his attitudes, motives,
aspirations and apprehensions.
iii Personality Tests : These tests are designed to know the personality traits such as
co-operative attitude, temper, emotional balance.
iv Attitude Tests : These tests are designed to know the various tendencies towards
favouring or disfavouring people, actions, circumstances. Attitudes are known
from the responses of the respondents.
2.18 BENEFITS OF EMPLOYMENT TESTS :
Employment tests have become widely accepted in the selection process. However,
these should be considered simply as a step and not a replacement of the other
phases of the selection process.
The employment tests can offer the following advantages to the employees.
1. A test is an objective and standardized sample of certain qualities. It tends to
eliminate biasness in the selection of personnel.
2. Tests can identity talents of individuals which might otherwise be overlooked.
3. Tests reduce the costs of selection and placement because large number of
applicants can be evaluated within the least possible time.
4. Psychological tests can measure the aptitude of candidates and predict their
success.
5. Tests provide a healthy basis for comparing applicants' background. They compel
the interviewers to think through their evaluation more carefully.

60
2.19 LIMITATIONS OF TESTS :
Employment tests are often criticized on the. following grounds :
1. Tests measure only a part of the total information needed to make an accurate
selection. This criticism would be justified if tests were only selection method
used. Tests are rarely used as the only selection method. The objective should be to
maximize accuracy in selection by choosing proper combination of methods.
2. Sometimes, tests cannot make prediction of chances of success of an applicant
because he was nervous. But this is valid only when the test results for the entire
group are not valid. However, research data in regard to their validity is lacking. It
is true that tests are far from perfect, but other methods like application blank,
interviews, reference check etc. are also of limited value.
3. No test can measure with guarantee the complex combination of characteristics
required in numerous positions. But it should be remembered that tests have been
devised which do measure for more complex functions and faculties.
2.20 CONCEPT OF INTERVIEW
The interview proves to be almost a universal selection tool. Dealing with people
las always been an art and not a science. Successful interviewing is an art rather than
science as it involves dealing with people.
The interview is a face to face, oral, observational and personal appraisal method if
evaluating the applicant. It can also be described as a conversation with a propose tnd is
used almost universally in the staffing process
According to Scott Clothier and Spriegel, "an interview is a purposeful exchange
eas, the answering questions and communication between two or more persons."
According to Bingham, "an interview is_a_conversation with a purpose and the
jurpose may be to get information, to give information and to make a friend
In other words, an interview is an attempt from the candidate concerning his
.liability for the job under consideration.
There are three purposes that may be served by an interview:
(i) Giving information that will help the applicant make up his mind about the
company or the selling aspects?
(ii) Obtaining relevant information from the candidate; and

61
(iii) Making the candidate feel that he has been fairly treated.
In this country, obtaining information has been the primary objective of interview
ather than giving infromation.
21 TYPES OF INTERVIEWS
The interviews are of several types. It is for the human resource manager who has
D make a choice of a suitable type of interview while making selection of the
potential mployees for his ogranisation.
A brief discussion of various types of interviews are given below :
A STRUCTURED INTERVIEW:
It is also known as directive or highly organised pattern of interview. It is most
Bmmonlv used in our organizations.
Structured Interview is based on the assumption that relevant information about the
candidate can be obtained by asking questions which have been primarily
designed. There is very little variation in the pattern of questions that are asked by
the interviewer to different candidates.
The structured interview has certain positive aspect like Uniformity in interviewing
different candidates. However it does not extract the true information about the
inner feeling or motive of the candidate.
B. UNSTRUCTURED INTERVIEW:
It is also known as non-directive interview. It does not depend on pre-planned
questions prepared before the commencement of the interview. Questions emerge
as the discussion between the interviewers and the candidates proceed. In
unstructured interview the candidate is encouraged to express himself as freely as
possible on subjects covering his motivation, ambition, interest etc. The
interviewer assesses the candidates based on such discussion or expression.
The unstructed interview can have deep insight of a candidate if the interviewers
have requisites skills to prove such insights.
C. SEMI-STRUCTURED INTERVIEW:
Under this kind of interview the basic questions are prepared in advance and
responses are recorded on a standard point scale. The deviations from the prepared
list of question is allowed.

62
D. STRESS INTERVIEW:
Under the this type of interview a pressure of a kind is built on the candidate to
ascertain as to how he performs under the strained conditions. Such interviews are
conducted for the jobs which are to be performed under stressful conditions.
Interviewer sometimes causes insult to the candidate and tries to humiliate him.
This puts the candidate under a lot of stress. The candidate may keep his cool and
may answer in a matured way or may loose his temper and react sharply.
The demerit of this kind of interview is that the good candidates may not join the
organization because of negative image created in the mind of the candidate in
respect i of the organization.
E. DIRECTED INTERVIEW:
Under this kind of interview of direct force to face question answer situation
prevails. The questions relating to job duties, responsibilities and candidate's
background are asked. Through this interview the candidate's interest, motivation,
knowledge, hobbies etc are assessed. But it requires more time and the candidate is
to be taken into the ; -nfidence to evoke positive response.
2.22 PRINCIPLES FOR CONDUCTING INTERVIEW
The interviewer should follow certain rules or principles during the interview.
These principles have been evolved largely through trial and error.
In interview, a friendly and cordial relationship is to be established with the
interviewee. The interview should not be hurried. The interview should be closed
when the necessary information has been given and secured.
The candidate called for interview should not be made to wait or made to feel that
he is a beggar who can afford to wait for an indefinite time. The interviewer should
not forget that the first impression that a candidate gains of a company is very
important.
One important principle of good interviewing is that the interviewer should do the
minimum amount of talking himself and allow and encourage the candidate to talk
freely. To provide ample opportunity for expression sufficient time should be
given.

63
 Another basic principle of good interviewing is to respect the interest and
individuality of the candidate. The interviewer must not display an attitude of
superiority as the interview is a conversation between equals.
One principle of good interviewing is to make the candidate feel at ease. Unless the
candidate is put at ease and an atmosphere of friendliness is erected, it is difficult
to have a proper assessment of the candidate's capabilities.
The interviewer must remain detached and must not obtrude his own thoughts and
feelings into the mind of the candidate. He should keep his own views and
opinions to himself.
7. Hiring interview must be held in private. The interviewers note regarding the
assessment of the candidate should not be written in his presence but after he has
left the room and there is no possibility of his seeing it.
8. The interviewer must appear interested throughout and not seem to be following an
irksome routine. When the interviewee answers questions, the interviewer should
not only listen but also be attentive and express interest. The interviewer should
not interrupt as this will reduce co-operation.
2.23 ADVANTAGES OF INTERVIEWS
The importance or advantages of interview in the selection of an employee may be
summarized as under.
1. Selection of suitable candidate: Interview is considered to be the most satisfactory
way of judging mental qualities of a candidate. It decides whether the qualities
possessed by him make him suitable for the job.
2. Verification of data and information: Interview provides an opportunity to the
employer to verify the various data and information supplied by the candidates in
their application blank. The interviwer may seek clarification from the candidate
regarding those information.
3. Collection of Imformition: Interview can bring to the light many, other information
about the candidate that are not mentioned in the application blank. These are very
useful for right selection of personnel.

64
4. Knowledge about enterprise: Interview is a tool used to provide information about
the enterprise, its policies, objectives etc. to the candidate. The interviewee get a
chance to clarify about the facts regarding the jobs and the organization.
5. Advice and opinions: Interview can help the interviewer to get advice and opinions
of the interviewees for various problems of the enterprise. Thus, their co-operation
may be sought.
2.24 DISADVANTAGES OF INTERVIEWS
Personal or face to face interview is not free from certain limitations. Important
among them are as follows:
1. The Halo Effect : A single prominent characteristic of the candidate may affect
the judgment of the interviewer. This is known as halo effect. For example,
physical appearance of the candidate, his fluecy in language etc. may create halo
effect.
2. Personal Bias : Interviewers may have personal biases. Their own likes and
dislikes may affect their judgment. Sex, race, religion, community of the
candidates similar to the interviewer may have some influence on their selection
decision.
3. Projection : Projection errors arise when an interviewer expects his own qualities,
skills, values, philosophies etc. in an applicant. Therefore, he may select candidates
who have common features with him like voice, manners, opinions, appearance
and background.
4. Leniency : It is the tendency to give high scores. The opposite to leniency is
toughness. The interviewer may become lenient to candidates due to lack of
confidence and interest in rating. Tough interviewers have the tendency TO

consistendy give low scores.

5. Snap Judgment: The interviewer may make snap judgment about the candidate at
the very beginning. Hence, he may not take into ensideraion other useful
information of the candidate.
6. Stereo typing : This limitation arises when the interviewers presume a relationship
between a particular trait, culture or communal origin and a particular type of

65
 personality of the candidates. Because of this the judgment of the interviewers may
vary from each other.
2.25 QUALITIES OF A SUCCESFUL INTERVENER
Researches have more or less clearly shown that effectiveness of any interview
depends upon several personal qualities of the interviewer. A successful interviewer
should have the following characteristics:
1. He should usually be an elderly person (say about 40 or 45 years of age), more-
mature in outlook on life, slightly or moderately egoistical, and not too much
extrovert.
2. He must be socially detached which makes it possible for him to make more-
accurate judgment of others.
3. He should have slightly more than average intelligence, emotional mamrity,
interest in human beings and their behavior, sportsmanship and well adjusted life.
4. He should have extensive acquaintance with people similar in age and occupation
to those whom he interviews.
5. He should be a man with genuine feeling of warmth and affection so that he is able
to establish rapport quickly with an individual, however, nervous he may be.
6. He should be a man who has been fully trained in the art of interview, and who
knows what are the special weaknesses of this method and how to avoid on
continually refining his method and asking questions in the light of his experience.
7. He should be well informed and up to date where legislation on employment is
econcerned.
8 He should be a member of one or more professional management organization.
9. He should have an experimental and open-minded attitude towards tests and other
devices.
10. The interviewer must have a through understanding of the organization.
2.26 INDUCTION OR ORIENTATION PROGRAMME:
Induction of a new entrant into any existing group of people has been a common
feature we come across in our everyday life. A new entrant joins an organization as
a stranger to his co-worker, job and the organization. Hence, arrangement need to

66
 be made to introduce the new employee to the new organization. This is called
induction/orientation
According Michael Armstrong "Induction is the process of receiving and
welcoming an employee when he/she joins a company and giving him/her basic
information needed to setde down quickly and happily and start work."
Edwin B. Flippo has defined induction or orientation as "the welcoming process to
make the new employee feel at home and generate in him a feeling of
belongingness tothe organisation."
It is concerned with the problem of introducing or orienting a new employee to his
work-group, supervisor and the organization.
2.27 PURPOSE:
An induction or introduction programme should try to achieve the following
objectives :
1. To provide information about the organisation- its structure, products, rules and
regulations, etc. to the new employees.
2. To build up the new employees confidence in the organisation and in himself so
that he may become an efficient employee.
3. To promote a feeling of belonging and loyalty to the organisation among new
comers.
4. To ensure that the new employee may not form false impression regarding the new
place of work because first impression is the last impression.
5. To give the new entrant the information he needs such as location of locker room,
cafeteria and other facilities, time to break off, leave rules etc.
6. To foster a close relationship between the new workers and the old workers and
supervisors.
7. To create a sense of security for the worker in his job by impressing the idea that
fairness to the worker is the inherent policy in the organisation.
8. To bring about agreement between the organisational goals and personal goals of
the new employee.

67
9. To avoid cost of replacing workers who separate during the early impressionable
period because of lack of accurate information or incorrect impression about the
organisation.
2.28 BENEFITS OF INDUCTION PROGRAMME :
A formal induction programme may provide the following benefits to the new
comers and the organization.
(i) A well designed induction programme reduces anxiety, nervousness, absenteeism
and employee turnover.
(ii) Induction helps to minimise the cultural shock that a new employee undergoes on
joining a new organization.
(iii) Effective induction also helps to integrate the new employees into the organization
and foster the feeling of belonginess to the new organization.
(iv) Induction also binds the new comer and the present employees in a team.
(v) Induction programme may either be formal or informal Formal Induction is a
planned programme carried out to integrate the new entrants into the organization.
This is generally carried out by large size organization.
Informal induction is an unplanned introduction programme. It may be simply an
introduction to the new entrant about the job and the organization.
2.29 PROBLEM AREAS IN INDUCTION :
An induction programme may be faced with the following problems:
1. Orientation may remain a superficial indoctrination into company philosophy
policies and rules. Sometimes, it includes the presentation of an employee
handbook and a quick tour of the office or plant. The likely result is that the new
employee does not feel like part of the company.
2. Giving too much information in a orientation session becomes almost as much of a
problem as providing too little. If a great deal of information is given to employees
all at once, they may feel overwhelmed, overloaded and suffocated and may not
retain much. On the other hand, sketchy overview of the basis, i.e., a quick or
superficial orientation after which the new employee is immediately put to work
results in ineffective, sometimes negative socialisation. Thus, providing an
appropriate amount of information, becomes a real problem in orientation.

68
3. Orientation programme may be considered a burden by the supervisors.
Even when the personnel department has designed an elaborate orientation
programme and trained supervisors to conduct their part of it, orientation still may
not be effective. The supervisors might be more interested in immediate production
issues and may see orientation as far less important than other problems they face.
4. Orientation may suffer from "Mickey Mouse" assignment, i.e., small and
unimportant tasks. Sometimes, the new employee's first assignment is in the nature
of insignificant duties, perhaps intended to teach the job from the ground up.
Giving only menial tasks to the new employee might discourage job interest and
company loyalty in him.
30 PLACEMENT :
After the orientation pragramme is over, the new employees are placed at the jobs
hich fit with them. Thus placement is essentially a process of matching job and
andidates. Placement occurs when a job is assigned to an individual.
According to Cascio, "Placement occurs after orientation, placement is the
ssignment of individuals to jobs."
Placement of an individual employee may be at two stages
(a) Initial placement - after the selection and orientation.
(b) Subsequent Placement - in the form of internal mobility i.e. promotion, transfer,
demotion etc.
31 PLACEMENT SITUATIONS :
The problem of placement differs in three situation of placement -
When an individual has been selected for a particular position and he is placed to
that position.
When an individual has been selected for a specific position but place of position
or department has not been specified, eg- computer operator.
When an individual has been selected without specific reference to the position,
eg- Management trainee.
The problem of placement emerges in the later two situations. In today's business
context, the third type of situation is becoming more common. Individuals are selected not

69
for a specific job. Therefore their placement to a specific job at a particular point of time
requires several consideration.
Generally, the following elements need to be considered in placement of
employees under the third model:
(i) Individual - His suitability for a job is decided on the basis of the matching of his
profile.
(ii) Job - Preparation of job profile helps in matching the job and the individual.
(iii) Job family - Job family represent to classification of different jobs on the basis of
their nature.
2.32 PRINCIPLES OF PLACEMENT :
The following principles are to be followed at the time of placement of an
employee on the job :
1. He/she should be placed on the job according to the requirements of the job. The
job should not be adjusted according to the qualification or requirements of the
worker. Job first, man next, should be the principle of placement.
2. The job should be offered to a worker according to his/her qualifications. The
placement should neither be higher nor lower than the qualifications of the selected
employee.
3. The employee should be made conversant with the working conditions prevailing
in the industry and all thinking relating to the job. He/she should also be made
aware of the penalties if he/she commits a wrong.
4. While introducing the job to the new employee, an effort should be made to
develop a sense of loyalty and co-operation in him/her so that he/she may realize
his/her responsibilities better towards the job and the organisation.
5. The placement should be ready before the joining date of the newly selected
person.
6. The placement in the initial period may be temporary as changes are likely after
the completion of training. The employee may be later transferred to the job where
he/she can do better justice.

70
 If the above principles are stricdy followed, they will help to improve employee
morale. Right placement is needed to reduce labour turnover, absenteeism and
accident rates in the workplaces.
2.33 DISTINCTION BETWEEN SELECTION AND PLACEMENT :
Selection and placement are two important steps in the process of procurement of
personnel.
Selection is followed by placement. We can draw the following points of
distinction between selection and placement.
1. Selection is a decision to accept or reject an applicant on the basis of his/her
performance in selection test.
Placement is a decision to place a selected individual in one job than in another. In
selection, the task is to match people with the position. In placement the task is to
match position with the people.
Selection is best done where the number of the applicant is large relative to the
number of available jobs.
Placement is best done where the number of available job is large relative to the
number of selected candidates.
External forces play an important role in selection of imployees. Internal forces are
more significant in placement of employee in a job. Once selected it is difficult to
change and adjust the decision. Placement may be adjusted as an when need arises.

71
 JOB EVALUATION
3.1 MEANING & CONCEPT OF JOB EVALUATION :
Job Evaluation provides an objective method of measuring the comparative value f
jobs with;n an enterprise. It is a process of establishing the value or worth of jobs in
hierarchy. It attempts to compare the relative value or worth within an organization.
Scott, Clothier and Spniegel defined it as "Job evaluation or job rating is the
aeration of evaluating a particular job in relation to other jobs either within or outside die
organisation."
In the words of Kimball and Kimball Jr. "Job evaluation represents an effort to
determine the relative value of every job in a plant and the deterrnine what the fair basic
.age for such a job should be."
According to Dale Voder, "Job evaluation is a practice which seeks to provide a
degree of objectivity in measuring the comparative value of jobs within an organisation
md among similar organisations."
Thus job evaluation is essentially a job rating process. It does not actually price
jobs but places each job in its positions in thewhole job structure.
There are generally four steps in the process of job evaluation.
1. Determing the factors or elements required for the performance of all jobs for
which money is paid.
2. Comparing each job with other jobs on the basis of these factors.
3. Finding out a position for a job in the entire hierarchy.
4. Converting these positions into money rates.
3.2 JOB EVALUATION TECHNIQUES OR PROCEDURE :
In estabkshing a sound wage and salary structure in an organisation, techniques
such as job analysis, job description, grading of jobs and pricing the jobs are used. They
are explained below :
1. Job Analysis : Job analysis is the prerequisite for job evaluation. All necessary in
formations are collected through it. It defines the activities involved, job
requirements, machines, tools and materials to be used, time taken by the
employees in completing a given task and abilities of employees to meet the job
evaluation.

72
2. Job Description : In job description the information collected by the job analysis
process is systematically presented in a prescribed form for each job in the
organisation. It defines the title of the job, analyses the job into constituent tasks
and records why, how and when these are done; states the responsibilities involved
and conditions of employment for each job. This information is very important for
evaluating the job.
3. Job Grading : In job grading the relative levels of various jobs are determined and
jobs in the organisation are classified into several groups such as clerical,
accounting, stenographic etc. according to the similarity of duty, responsibility and
specification. Within the group these may further be classified on similar basis.
Differences within these classes, as expressed by differences in duties and
responsibilities accompanied by comparatively similar specifications or differences
or differences in specifications accompanied by similarity of duties may be
designated by job grades.
4. Pricing the Job : The main objective of job evaluation is pricing the jobs in the
organisation taking into consideration the various factors and characteristics of the
jobs by any of the methods of job evaluation. This removes internal and external
inconsistencies in wages and salaries.
Internal Consistency : This is concerned with the concept of relative wages within the
firm. If for example, a supervisor is paid less than a subordinate, it is inconsistency in
wage rates.
External consistency : It refers to a desired relativity of organisations wage structure to
that of the community, the industry or the nation. Wage and salary surveys determine the
external consistency. Collective bargaining may enter the picture. Job evaluation reduces
the area of collective bargaining by systematizing the determination of internal
consistency which is concerned with proper wage differentials.
METHODS OF JOB EVALUATION :
There are many ways of evaluating jobs. The different methods of job evaluation
may be discussed under two groups.
Methods of Job Evaluation
A. Non-Quantitative (Traditional)

73
Quantitative (Modern)
1. Ranking
2. Grading
1. Factor Comparison
2. Point System
NON-QUANTITATIVE METHODS :
Under these, there is no use of detail job factors. The job is treated as a whole and
job description rather than job Specifications are utilized. These are of following two
types:
1. Ranking Method : This is the oldest & simplest method of job evaluation. The
ranking method arranges the jobs within the organization in some order, from the most
difficult to the simplest or in the reverse order. It does not measure the value of jobs but
establishes their rank.
This method is generally used in small enterprises where jobs are fairly known to
the evaluators.
Advantages
(i) Suitable for smaller concerns : Ranking system is suitable lor smaller organizations
where the raters are fully acquainted with all the existing jobs in the enterprise.
(ii) Simple : The system is quite simple. An organisation does not experience any
difficulty in installing this method.
(iii) Easy : As the workers understand the process there is no problem in administering
the system.
(iv) Less Time : Less time is taken in evaluating the job. Disadvantages :
(i) No scientific Approach : There is no scientific approach in determining the ranks
of the job. Importance of the job may be arbitrarily ranked resulting in differences
in similar jobs and may be resented by the employees.
(ii) No fairness of judgment: The system decides the ranks of the jobs on the basis of
their importance but does not tell the reasons. Thus the fairness of the judgment
cannot be advocated if there arises any dispute regarding the fixation of grades.
(iii) Ranking difficult: If a new job is to be introduced in the organization it becomes a
matter of dispute which rank should be allotted to it.

74
2. Grading Method :
This is also known as job classification method. The job structure is divided into a
no. of classes. E.g. the menials may be put into one class, clerks in another and junior
officers in higher class and administrative officers in the top class.
This method is used by and large in the govt, offices and is rarely used in industry,
at least in large industrial concerns.
Advantages :
(i) Easy : The installation of the system is also comparatively easy as there does not
arise and difficulty in explaining the system to the employee.
(ii) More Accurate : Under this method, it is possible to evaluate more accurately the
job descriptions since the analysis is based on job descriptions.
iii) New Job : If a new job is to be introduced in the organisation, it is sufficient to
associate it with a class or grade which is comparatively a less difficult task.
Disadvantages :
(i) Unsuitable for a large scale : The system is not suitable for a large scale
company. The jobs are classified by total contents and by factors that comprise
them. Therefore, it is difficult to compile any comprehensive class specification for
a large organisation with a number of complex jobs.
(ii) Effect of salary rates : The existing wage and salary rates affect the grading of the
job. The raters justify the existing salary ranges. If the job description justifies the
lowering of the grade of a particular job, it cannot be done because labour normally
does not accept any adverse condition of service.
B. QUANTITATIVE METHODS :
The quantitative methods use a detail approach. Different job factors are selected
and measured in terms of job specification they are of the following two types :
1. Factor Comparison Method :
The factor comparison method is based on the principle that each job has certain
factors consisting of some requirements and Conditions. The following are the steps in
evaluating the jobs under this method :

75
Advantages :
(i) More Accurate : The system results in more accurate job evaluation as it is more
objective because weights are not selected arbitrarily.
(ii) Flexible : It is flexible as it has no upper limit on rating that a job may receive on a
factor.
(iii) Utilisation of few factors : It utilises few factors and thereby reduces the likelihood
of overlapping .
(iv) Logical: The procedure of rating new jobs by comparing with other standards or
key jobs is logical and not two difficult to accomplish.
Disadvantages :
(i) Costly : It is costly to install and somewhat difficult for anyone who is not
acquainted with the general nature of job evaluation technique to grasp.
(ii) Errors : The use of present wages for the key jobs may initially create errors into
the plan. The contents and the value of these jobs may change over a period of time
and this will lead to future errors.
(iii) Experts : Job evaluation under this system is made by experts. The top
management has to rely upon the advise of the technical experts as such. The
programme cannot be developed by the management independendy without the
help of specialists.
(iv) Complication : It is almost impossible to explain the complications of the system to
employees as such effective communication is jeopardized considerably by lock of
understanding.
(v) Weightage : It is very difficult to allot due weight age to each factor.
i) Selection of Various factors :
The most common factors that are selected for comparison includes
a) Physical requirements ie. light or heavy work.
b) Mental requirements like drafting, counting, copying.
c) Skill like engineering, drawing ability
d) Responsibility for materials, safety of others.
e) Working Conditions like high temperature, dark atmosphere, underground etc.
ii) Selection of key jobs :

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 The next step is the selection of a no. of key jobs. For instance, key jobs may be
machine operator, fitter, cleaner, ordinary labourer, watchman, driver etc.
iii) Converting key jobs into money rates:
The third step is to break up the total money rate paid to each key jobs into five
parts. E.g. - if a machine operator is paid Rs. 96 per day, Rs. 32 due for skill, Rs.16
for physical effort, Rs. 8 for mental contribution, Rs. 16 for working conditions
and Rs. 24 for responsibility.
iv) Fit other jobs into the Scale :
The final stage is to fit other jobs into the scale by comparing them with key jobs.
Then it is determined how much should be paid for each of the factors.
POINT SYSTEM:
The point system is based on the assumption that it is possible to assign points to
different factors. Most of the job evaluation plans in use now a days are point
plans. The commonly used point system was developed by the National Metal
Traders Association U.S.A. Under this system there are four main factors which
were sub divided into a number of sub-factors totalling eleven.
Advantages :
(i) Accuracy : This method is more effective because even the major factors are sub-
divided which ensures accuracy of evaluation.
(ii) For large enterprises : This system is most suitable for large enterprises.
(iii) Objective : It presents an objective study of job evaluation technique.
Disadvantages :
(i) Ceiling and floor : The award of point values results in developing a ceiling and
floor for each job.
(ii) Incorrect at initial stage : As the system of predetermined point value is arbitrary,
there is a possibility that the scale may be incorrecdy established at the initial stage
of the installation of the programme. Subsequendy, all of these succeeding work
will reflect these errors and some of the jobs may be over or under valued.
Factors :
i) Skill : 1. Education
2. Experience

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 3. Initiative.
Efforts : 4. Physical
5. Mental.
ill) Responsibility : 6. For equipment
7. For materials
8. For Safety of
others
9. For work of others.
iv) Job condition : 10. Working Conditions
11. Unavoidable hazards
The degree of each factor is determined and assigned number of points. The total
points assigned for all sub-factors give the point value of the job. It is used to
determine how much should be paid to each job.
3.3 SELECTION OF AN APPROPRIATE METHOD OF JOB
EVALUATION:
None of the system discussed above is free from defects. None is the best in all
conditions and for all types of organization. However, the point system is best in
the present circumstances. It is widely used in almost all the enterprises as a
technique of Job Evaluation.
Infact, it is better not to insist on a particular system of job evaluation. A mix of all
the methods almost should be adopted. Following principles should be followed
for selection of an appropriate method of job evaluation.
Job Rating : Job must be rated not the job holder.
Job Description: Reasonably clear & accurate job description and job specification
should be available to make the system accurate.
Factors : The job evaluation factors should be grouped under :
(a) Skills
(b) Experience
(c) Responsibilities
(d) Efforts and Initiative
(e) Working Conditions

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(f) Supervision needed.
Rating by Immediate Boss : Foreman or the Supervisor should participate in rating
of jobs in their own department.
5 Rating by Employees : The greatest degree of success can be achieved where the
employee themselves have an opportunity' to discuss the rating.
3.4. OBJECTIVES OF JOB EVALUATION
The major objectives of job evaluation are to help management achieve:-
(i) (Equitability of wage structure within thejlrni^i.e. internal consistency, and
(ii) Consistency of firm's overall wage structure with that of the industry in which the
firm operates. Apart from these two major or primary objectives, job evaluation
serves many other objectives also. Some of them are as under:
Establishment of sound wage foundation for incentive and bonus programmes.
Maintenance of consistent wage policy.
Enable management to gauge and control its payroll costs more accurately
Provide a framework for periodic review of wages and salaries
Classify functions, authority and responsibility which in turn aids in work
simplification and elimination of duplicate operations.
Reduce grievances and labour turnover and, thereby, increases employee morale
and improve management employee relationships
Serve as a basis for negotiation with the union.
ADVANTAGES OF JOB EVALUATION.
The following advantages are claimed by job evaluation.
Rationale wages and salary structure : Job Evaluation is a technique in t: hands of
the management by which a rationale wages & salary structure may be evaluated. It is the
basis of rationale wages & Salary Administration
Elimination of Inequalities: Job evaluation eliminates inequalities in job structure
and promotes harmonious industrial relations in the organization.
Proper emphasis on Job factors : Job evaluation is made after proper scrutiny of the
various factors determined by the job analysist.
Solution of Controversies : Job Evaluation provides a relatively objective basis for
wage acbiiinistration. Thus controversies relating to wages are resolved.

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 Development of workers : Ever}' worker knows the job description and the job
specification of each job. Hence, he / she tries to develop personality so as to occupy the
higher position.
Solution of Personnel Problem : Job Evaluation promotes industrial peace and
harmony by resolving personnel problems through a sound, consistence and rational
wages and salary structure.
3.6 LIMITATIONS OF JOB EVALUATION
The limitations of job evaluation are as under:
1 Lacks scientific precision: There is no standard list of factors to be considered for
job evaluation. Moreover, all job factors cannot be measured accurately. Thus, job
evaluation lacks scientific precision.
2. Might not Retain workers: The wages fixed for a job on the basis of job evalu-
ation might not retain workers who can make much money else-where because of
law of demand and supply.
3. Feeling of workers: There is a strong feeling among the workers that individual
merit should be rewarded as some kind of merit rating scheme has to be superim-
posed upon evaluated wage rates.
4. Unrealistic: It presumes that job of equal worth will be equally attractive to the
employee, but it is not true in real life. If a job offers no prospects of a rise, while
another job rated equal to it has bright prospects, the later will attract more people.
5. Lacks Flexibility: It tends to be inflexible in so far is it does not place right deal of
emphasis on the wage rates prevalent in the industry as a whole.
6. Opposition by Trade unions: Trade unions often regard job evaluation with
suspicion because some of the methods are not scientific and are difficult to un-
derstand. They fear that the job evaluation will do away with collective bargaining
for settlement of wages.
3.7 DIFFERENCES BETWEEN JOB EVALUATION AND JOB
DESCRIPTION:
Job description and Job Evaluation are two different techniques used by the HR
manager in proper selection and compensation of an employee in an organization. Though

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they are two different techniques, they have some relevance with each other. The
difference between job evaluation and job description can be identified as follows:
Job Description
3. Job description is the standard of jobs.
4. Job description facilities recruitment and selection of employees.
5. Job description is done on the basis of factors provided through job analysis.
Job Evaluation
1. It is a process of measuring the factors in each job.
2. Job evaluation is done before determination of salary and wage structure.
3. Job evaluation is the worth or value of the job.
4. Job evaluation facilitates the determination of accurate wage and salary rates.
5. Job evaluation is done on the basis of information provided by job analysis, job
description and job specification.
3.8 PRINCIPLES OF SUCCESSFUL / EFFECTIVE JOB EVALUATION
PROGRAMME.
The following principles can be followed for successful job evaluation programme.
Job evaluation should rate the job not the job holder.
Accurate job analysis, job description and job specification should be done before
job evaluation.
Job factors should be clearly defined and grouped under proper heads.
Pay scale should not be too many in an organization. This can be avoided through
proper grading of job.
First line supervises should be included in the committee of the job evaluation
Each group and class of jobs should have separate salary structure
Job evaluation programme should be given greater publicity using all possible
channels of communication.
Maximum transperancy in preparation and implementation of job evaluation
programme should be maintained.
All the relevant internal and external factors should be taken into account before
arriving at a final programme.

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 Job evaluation programme should have green signal from the (top) management of
the organization and support from the employees union.
3.9 MEASURES FOR IMPROVING JOB EVALUATION PROGRAMMES :
We suggest the following measures and steps for improving the working of
evaluation programme :
1. A job evaluation scheme should be choose cautiously. It should be devised and
administered with due regard to the conditions of the employment market, which
cannot be ignored if the scheme is to be successful. It should, therefore, reflect
those forces which are important in the market, e.g. relative supply of and parties
and job conditions.
2. The details of a scheme should be drawn up in such a way that they do not conflict
with other provisions of a collective agreement such as, for example, seniority
clauses and grievance procedure.
3. The scheme should be introduced on a plant to plant basis than applied to a whole
industry. This is because it is difficult to standardize jobs throughout an industry
unless the plants in it are so familiar that .Ley can be treated as being virtually a
single firm.
4. The scheme should be sold to all concerned and suggestions sought. It the workers
in a plant are unionised, it is highly desirable that any scheme adopted should be
agreed to and, if possible, developed joindy by the company and the trade unions.
5. It is of major importance that the number of job titles and classifications be kept to
a minimum. If they are not, a scheme becomes too inflexible because of the narrow
coverage of the job descriptions. Promotions within a grade become more serious.
Moreover, workers tend to feel more insecure and cling to their present jobs
because they may not have the qualifications for another job.
6. Any anticipated changes in methods should be carried out before a scheme is
installed and all modification in it should be resisted until it becomes fully
established.
In preparing job descriptions it is sound practice to emphasize in them the things
which make one job different from another rather than to find a comprehensive
statement of all the duties of the jobs.

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B. A scheme which provides for single rates and for definite ratios between the rates for
classes of workers (X, Y, Z etc) within a job grade is easier to administer than one
which establishes rate ranges and has no fixed ratios.
A scheme is better administered by the Industrial Relations staff of a company than
by the Industrial Engineers who may have developed it. The essence of successful
administration of a scheme is flexibility and this is better understood by those
engaged in industrial relations work than by Industrial Engineers.
The better the state of industrial relations the easier it is to introduce a job
evaluation scheme.
WAGE AND SALARY ADMINISTRATION
3.11 CONCEPT OF WAGES AND SALARY :
A 'wage' (or pay) is the remuneration paid for the service of labour in production
periodically to an employee/worker. 'Wages' usually refer to the hourly rate paid to such
groups as production and maintenance employees (blue-collar workers). International
Labour Organisation defined the term wage as "the remuneration paid by the employer for
the services of hourly, daily, weekly and fortnighdy employees."
On the other hand, 'salary' normally refer to the weekly or monthly rates paid to
dericaL administrative and professional employees (white-collar workers). The 'wage
levels' represent the money an average worker makes in geographic area or in his
organisation. It is only an average, specific markets or firms and individual wages can
vary widely from the average. The term "wage structure" is used to describe wage/ salary
relationships within a particular grouping. The grouping can be according to occupation or
organization such as wage structure for craftsman (carpenters, mechanics, bricklayers,
etc.)
The distinction between wage and salary does not seem to be valid in these days of
human resources approach where all employees are treated as human resources and are
viewed at par. Hence, these two terms can be used interchangeably. As such, term wage
and/or salary can be defined as the direct remuneration paid to an employee compensating
his services to an organization. Salary is also known as basic pay.

83
 The total amount of remuneration received by an employee during a given period
is known as "earnings". These include salary (pay), dearness allowance, house rent
allowance, city- compensatory allowance, other allowances, overtime payments etc.
3.12 DIFFERENT WAGE CONCEPTS :
1. Nominal wage : It is the wage paid or received in monetary terms. It is also known
as money wage.
2. Real wage : Real wage is the amount of wage arrived after discounting nominal
wage by the living cost. It represents the purchasing power of money wage.
The wage situation is very confusing but generally four wage concepts have been
suggested for adoption :
3. Minimum Wage : This concept represents not only the subsistence wage but also
some provisions for some measures of education, medical & other amenities. The
minimum wage formula is based on the fallowing guidelines:
(a) It is applicable to a working class family of three consumption units.
(b) Clothing requirements of 18 yards per annum.
(c) Fuel, lighting and other expenses such as children education & medical
requirements should be 20% of minimum wage.
The minimum wage concept may further be sub-divided as under :
(a) Statutory Minimum wage : It is the amount of remuneration fixed according to
the provisions of the Minimum Wages Act, 1948.
(b) The need-based minimum wage : It is the amount of remuneration fixed on the
basis of norms accepted at the 15th session the Indian Labour conference held at
New Delhi in July, 1957
The Conference recommended that minimum wages should ensure the minimum
human needs of industrial workers. The norms laid down by it are :
calculating the minimum wage, the standard working class family should be taken
to comprise three consumption units for one earner, the earnings of women, children and
adolescents being disregarded;
Minimum food requirements should be calculated on the basis of a set intake of
calories as recommended by Dr. Aykroyd for an average Indian adult of moderate activity;

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 Clothing requirements should be estimated on the basis of per capita consumption
of 18 yards per annum which would give for the average worker's family of four a total of
72 yards;
In respect of housing, the rent corresponding to the minimum area provided for
under Government area provided for under Government Industrial Housing Scheme
should be taken into consideration in fixing the minimum wage;
Fuel, lighting and other miscellaneous items of expenditure should constitute 211
percent of total minimum wage.
Living Wage : Living wage is the wage sufficient to ensure the workmen food,
shelter, clothing, fuel and some provisions for evil days. According to the Committee on
Fair Wages, the living wage is the highest amount of remuneration which can meet the
expanding aspirations of workers.
Fair Wage : It is the wage based on the ability to pay principle and is equal to that
received by worker performing similar works. It should not be less than the minimum
wage but should be a step towards a living wage. The fair wage should be based on :
(a) Labour productivity.
(b) Level of national income.
(c) Place of the industry in the economy.
Incentive wage : This is the amount of remuneration paid to a worker over and above the
normal wage as an incentive for employee's contribution to the increased production or
saving in time or material.
Saving Wage : In the Indian labour Conference, held in 1955, Vishwanath Dubey of
United Trade Union Congress (UTUC), suggested the concept of Saving Wage.
He said that the worker should be paid such a wage as would enable him to save
something for a rainy day.
3.13 NEED FOR SOUND SALARY ADMINISTRATION :
Management has to formulate and administer the salary policies on sound lines because of
the following reasons:
(i) Most of the employees, satisfaction and work performance are based on pay;
(ii) Internal inequalities in pay are more serious to certain employees;
(iii) Employees compare their pay with that of others;

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(iv) Employee act only to gross external inequalities;
(v) Employee comparison of pay are uninfluenced by levels of aspirations and pay
history; and
(vi) blmployees compare the pay of different employees with their skill, knowledge,
performance etc.
3.14 PRINCIPLES OF WAGE AND SALARY ADMINISTRATION :
Hie generally accepted principles governing the fixation of wages and salary are :
1. There should be a definite plan to ensure that differences in pay for jobs are based
upon variations in job requirements, such as skill, effort, responsibility or job or
working conditions, and mental and physical requirements.
2. The general level of wages and salaries should be reasonably in line with that
prevailing in the labour market. The labour market criterion is most commonly
used.
3. The plan should carefully distinguish between jobs and employees. A job carries a
certain wage rate and a person is assigned to fill it at that rate. Exception
sometimes occur in very high-level jobs in which the job-holder may make the job
large or small, depending upon his ability and contributions.
4. Equal pay for equal work, i.e. if two jobs have equal difficulty requirements, the
pay should be the same, regardless of who fills them.
An equitable practice should be adopted for the recognition of individual
differences in ability and contribution. For some units, this may take the form of rate
ranges, with in grade increases; in others it way be a wage incentive plan; in still others, it
may take the form of closely integrated sequences of job promotion.
There should be a clearly established procedure for hearing and adjusting wage
complaints. This may be integrated with the regular grievance procedure, if it exists.
The employees and the trade union, if there is one, should be informed about the
procedure used to establish wage rates. Every employee should be informed of his own
position, and of the wage and salary structure. Secrecy in wage matters should not be used
as a cover-up for haphazard and unreasonable wage programme.

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 wage should be sufficient to ensure for the worker and his family reasonable
standard of living. Workers should receive a guaranteed minimum wage to protect them
against conditions beyond their control.
The wage and salary structure should be flexible so that changing conditions can
be easily met.
Prompt and correct payments of the dues of the employees must be ensured and
arrears of payment should not accumulate.
11. For revision of wages, a Wage Committee should always be preferred to the
individual judgment, however unbiased or a manager.
12. The wage and salary payments must fulfill a wide variety of human needs,
including the need for self-actualization. It has been recognised that money is the
only form of incentive which is wholly negotiable, appealing to the widest possible
range of seekers. Monetary payments often act as motivators and satisfiers
interdependendy of other job factors.
3.15 THE WAGE DETERMINATION PROCESS :
Usually, the following steps are involved in determination of wage rates :
1. Performing Job Analysis : The process of job analysis results in job descriptions
which lead to job specifications. A job analysis describes the duties,
responsibilities, working conditions and inter-relationships between the job as it is
and the other jobs with which it is associated. It attempts to record and analyze
details concerning the training, skills, required efforts, qualifications, abikties,
experience and responsibilities expected of an employee. After determining the job
specifications, the actual process of grading, rating or evaluating the job occurs. A
job is rated in order to determine its value relative to all the other jobs in the
organisation which are subject to evaluation. The next step is that of providing the
job with a price. This involves converting the relative job values into specific
monetary values or translating the job classes into rate ranges.
2. Wage surveys : Once the relative worth of jobs has been determined by job
evaluation, the actual amounts to be paid must be determined. This is done by
making wage or salary surveys in the area concerned. Such surveys seek to answer
questions like what are other firms paying? What are they doing by way of social

87
 insurance? What is the level of pay offered by other firms for similar occupations?
etc. These surveys may be carried out by mailed questionnaire, telephone or
personal interviews with other managers and personnel agencies.
3. Relevant Organizational Problems: In addition to the results of job analysis and
wage surveys, several other variables have to be given due consideration in
establishing wage structure. For example, whether the organization would recruit
new employees after revised wage structure; what will be the result of paying
lower or higher compensation; and what should be the relationship between the
wage structure and the fringe benefit structure?
4. Preparation of wage structure : The next step is to determine the wage structure.
For this, Several decisions need to be taken, such as :
Whether the organisation is able to pay amount above, below or equal to the
average in the industry;
Whether wage ranges should provide for merit increases or whether there should
be single rates;
Which jobs are to be placed in each of the pay grades etc. There are no hard and
fast rules for making such decisions
Wage Administration Rules : The development of rules of wage administration has
to be done after the rate ranges have been determined. Rules have to be developed to
determine to what degree advancement will be based on length of service rather than
merit; with what frequency pay increases will be awarded; how controls over wage and
salary costs can be maintained, what rules will govern promotion from one pay grade to
another etc.
Explaining these to Employees : At the next stage the employees are to be
informed of the details of wage and salary programme. Although most hourly-paid
workers are informed through the wage contact about the details of wage programme, a
substantially smaller number of salaried employees have such information about their
jobs. It is considered advisable, in the interest of the concern and the employees, that the
information about average salaries and ranges in salaries of group should be made known
to employees concerned; for secrecy in this matter may create dissatisfaction; and it may
also vitiate the potential motivating effects of disclosure.

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 Finally, the employee is appraised and the wage fixed for the grade he is found fit.
16 FACTORS AFFECTING WAGE AND SALARY LEVELS :
Generally, a number of factors influence the wage & salary level in an
organization. Significant among them are as follows :
1. Remuneration in Comparable industries : Prevailing rate of remuneration in
comparable industries constitute an important factor in determining salary levels.
The organization must pay at least equal to the going rate for similar jobs in similar
organization.
2. Firm's abilities to pay : One of the principal considerations that must be kept in
view by the management in fixing the salary levels is the ability to pay. Trade
Unions demand higher wages when the Co's financial position is sound. The
management has to take decisions judiciously.
3. Cost of living : The cost of living is another important factor that influences the
quantum of salary. The employee expects that their purchasing power be
maintained at least at the same level. Dearness allowance is an allowance granted
to the employees with a view to meeting the price level changes.
4. Productivity: An interesting development in wage determination has been
productivity standard but linkage between productivity & wage does not appear to
be so easy because many problems may arise in measurement of productivity.
5. Union Pressure : The wages & salary levels are influenced by the strength of
unions, their bargaining capacity & their strategies. Trade Unions may influence
wages determination on the basis of wages in comparable industries, rising cost of
living.
6. Govt. Regulation : Govt, regulations influence wage determination. The two
important legislations which affect wage fixation are (a) Payment of Wages Act,
1936. (b) Minimum Wages Act, 1948.
The employers must keep in mind the various provisions made by these two
legislations in determining wage of workmen.
3.17 OBJECTIVES OF SALARY AND WAGE ADMINISTRATION :
The objectives of salary & wage administration are numerous and sometimes
conflict with each other. The important among them are as follows

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1. To acquire qualified competent personnel : Candidates decide upon their career in
particular organizations, mostly on the basis of the amount of remuneration.
Qualified & competent people join the best paid organization as such; the
organization should aim at payment of salaries that can attract such people.
2. To retain the present Employees : If the salary level does not compare favourably
with that of other similar organizations, employees quit the present one & join
other organization. The wage level must be at the competitive level in order to
prevent such quits.
3. To secure internal and external Equity : Internal equity means payment of similar
wages for similar jobs within the organization. External equity implies the payment
of similar wage to similar jobs in comparison to other organizations.
4. To ensure desired behaviour : Good salary & wage administration reinforce desired
behaviour like performance, loyalty-, accepting new responsibilities etc.
5. Other Objectives : Some other objectives of salary and wage administration are as
under
(i) To keep labour administrative cost in line with the ability of the organization to pay.
(ii) To project in public as progressive employee and to comply with the wage legislations.
(iii) To pay according to the content and difficulty of the job.
(iv) To facilitate payroll administration of budgeting and wage & salary control.
3.18 METHOD / SYSTEM OF WAGES PAYMENT:
There are various methods of wage payment. They may be discussed under
following heads
A. TIME WAGE SYSTEM
According to the system of time wage, a definite amount of money is paid for a
fixed period of time to the worker for his services. It may be per hour, per day, per week,
or per month. In such cases, the workers just try to spend their time & perform their duty
with a slow speed. They generally work without any competition & with tension free
mind.
Advantages :
Some advantages of time wage system are as follows :
(i) It is simple to use. Calculation of wages under the time wage system is easy.

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(ii) The workers will not attempt to do work hurridly. This ensures quality of work.
(iii) There are no ill feeling among workers as there is equality in the payment of
wages.
(iv) The time wage method is the most suitable one in those work places where it is not
possible to determine the contribution made by individual employee, e.g., office
work.
(v) The method enables the workers to receive stable income.
Disadvantages :
The time wage system suffers from the following limitations
(i) It fails to take into account the capabilities of individual workers. Some workers
are capable of doing more work within the stipulated time than others. But they
donot derive any benefit out of it.
(ii) As payment is based only on time spent, there may be a tendency on the part of the
workers to go slow. This results in delay in the completion of work.
(iii) The method necessitates close supervision to ensure that workers do not waste time
during working hours. This may also lead to higher supervision costs.
(iv) It is not possible to measure the actual performance of individual workers.
(v) The system further allows people without ability or willingness to take part in
work.
B. PIECE WAGE SYSTEM
Under this system a worker gets his wages from the employer according to the
quantity of work done by him irrespective of time he takes. The workers try to produce as
much as possible without considering the quality of products.
Advantages :
The advantages of the piece wage system are given below :
(i) It takes into account the capabilities of mdividual workers. People who are more
efficient will be able to earn more.
(ii) It does not give scope for the workers to go slow. The workers know that their
remuneration depends on the quantum of work done by them.
(iii) Close supervision is not necessary, as there in no tendency on the part of the
workers to waste time.

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(iv) Every worker strives to produce more in order to earn more. This encourages
healthy competition among the workers.
(v) It is possible to identify efficient and less efficient workers. This guides the
management on such matters as training, promotion, transfer etc.
Disadvantages :
The piece wage system has the following demerits :
(i) As more output means more wages, the workers are always hurry to produce more.
They are encouraged to have quantity at the cost of quality.
(ii) The workers always attempt to maximize their output and in doing so they use the
machines and tools recklessly and thus, the breakage cost may increase.
If the workers are not able to do the work because of machine breakdown or failure
of electricity or any other reasons they lose their wages. Thus, they always feel insecure.
The system will frustrate the less efficient worker. The efficiency may further
decrease because of discontent.
If there is no good and ready market for production, the problem of over-
production may arise.
INCENTIVE SYSTEM OR PLANS
Under the time wage & piece wage system, there are many progressive or
incentive systems developed by authors from time to time. A few of them are as follows -
Halsey Premium Plan : This plan was originated by F.A. Halsey, an Amencan
Engineer. It is a combination of the time and peace wage in a modified form. Under this
plan, a worker is guaranteed a minimum wage. If he can save rime, he gets 50% of wages
for time saved in addition to normal wages.
.g. - A worker was allowed 10 hrs times and he completes the work in 6 hrs. Thus,
he saved 4 hrs times. The wages for 4 hrs may be shared with the employer in the ratio of
50:50; 60:40; 70:30. If the worker received Rs 100 for 10 hrs, he will be paid an additional
wage of Rs. 20 for the time saved. The remaining Rs 20 will be shared by the employer.
Rowan Premium Plan : This plan was developed by David Rowan in 1901. To a
large extent, it is similar to that of Halsey Premium Plan. The only difference is that the
time saved should not be shared with the employer. It should be credited to the employee.

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In the earlier case, the worker will receive Rs. 100 plus Rs. 40 as additional wage
according to the Rowan Premium Plan.
Gantt Task Plan : This plan was developed by H.L. Gantt. It combines time, piece
wage and bonus. Standard tine, piece wage & bonus rate is determined in advance.
According to the plan, a standard output should be determined, e.g. 10 unit. If more
output is produced than the standard output, an extra wage should be paid as a percentage.
Inefficient workers should not be penalized.
For example : 12 units (extra wage at a percentage)
10 units (normal wage).
8 units (normal wage)
4. Taylor's differential Piece rate System : This plan was developed by F.W. Taylor, the
father of Scientific Management. Under this plan, two piece rates were prescribed.
Workers with high efficiency were paid a higher piece rate and workers who performed
below standard were paid lower wages. Thus, efficient workers were handsomely
rewarded and slow workers were penalized.
3.19 GUIDELINES OF A SOUND WAGE POLICY :
The following guidelines are to be kept in view while designing a sound wage policy :
1. Care : The wage policy should be carefully formulated. \
2. Communication : The wage policy must be communicated to the managerial staff and to
the workers and their trade unions.
3. Decision : Wage decisions should conform to the basic requirements of the wage policy.
If any anomalies or mistakes come to the light corrective measures must be taken.
4. Basis : Wherever possible, job evaluation should be done on the basis of job
description, job specification and job analysis.
5. Evaluation : The wage policy should be examined, evaluated and reviewed periodically
so that it meets the changing needs of the organisation.
6. Incentive : In the Indian environment it is necessary to reorient wage policy in order to
encourage production and productivity at the micro level in each industrial unit. The role
of Human Resource Manager in this regard is both educative and administrative.

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3.20 NATIONAL WAGE POLICY
Wage policy is complex and sensitive area of public policy of any nation because
of the status of working class in society, its commitment to industry and attitude towards
management. Also worker's morale, their motivation towards productivity, their living
standard and their industrial system, wages form the pivot around which most of the
problems revolve. Wages issues are often prominent in collective bargaining and represent
a frequent cause of grievances and industrial disputes. Dissatisfaction with wage rates is
one of the most common causes of low level of production, efficiency and morale.
As a welfare state, Indian is committed to secure for its working population, social
and economic justice which can be achieved through the formulation of a sound national
wage_policy in consonance with the Directive Principles of State Policy enunciated in the
Constitution of Indian. Article 39 of the constitution provides the principle of equal pay
for equal work for both men and women and Article 43 provides as a directive principle of
state policy. That the state must endeavour to secure for all workers a living wage and
conditions of work which ensure a decent standard of life as well as full enjoyment of
leisure and social and cultural oppormnities.
The aim of national wage policy in India should be to ensure an income ley el r r
the workers by which they can maintain a decent standard of living. By and large, the
people in India are poor. From the point of view of industrial relations, it must be
recognized that poverty constitutes a great threat to democracy. So the wage policy in any
country should be rational and based on social and economic considerations. The national
policy should ensure that people are not compelled to work at unreasonably low level of
wages and to live a life at sub-human levels of existence because of lack of effective
organization and bargaining power.
3.21 WAGE POLICY DURING FIVE YEAR PLANS
The First Five Year Plan recognized the significance of National Wage Policy.
Since the First Plan was drawn under the inflationary conditions, the planning commission
recognized any increase of wage as major factor of raising cost of production and general
price level. However, the commission acknowledged the need of increasing wages
exceptionally in those undertakings where they are unduly low or below the subsistence
level. It advocated, therefore, wage restrictions and confinement to the distribution of

94
profits. The plan also recommended that wages should be standardized both in the private
and public sectors. More emphasis was laid upon the full and effective implementation of
the Minimum Wages Act of 1948.
The Second Five Year Plan recognized a wage policy in which worker's right to a
fair wage was accepted. But for the want of a consistent formula it became very difficult to
implement it. However, the Tripartite Wage Boards were to be set up for the setdement of
wage disputes.
In the Third Five Year Plan the government held the responsibility in industrial and
agricultural sector, specially for those who belonged to the weaker sections of the society
and needed protection. The Planning Commission reviewed the norms and principles of
wage determination as laid down by the Fair Wages Committee and the Indian Labour
Conference.
The draft outline of the Fourth Five Year Plan felt that price rise was the basic
reason for any labour movement taken for increasing wages, and thus, suggested an
integrated income policy. Accordingly to its suggestion, it was decided to link dearness
allowances with the cost of living. Thus, the total wage should have three components:
i. basic pay or minimum wage;
ii. element related to cost of living or D.A. ; and
iii. element related to increase in productivity or bonus.
The Fifth Plan maintaining a reasonable balance between wages, Prices and
income stated "An equitable national wage structure, covering the public and private
sectors has to be evolved". At the same time the need for proper discipline on the part of
those who draw their income from property and enterprise has been emphasized.
The issues of wage policy in the sixth plan were related with the factors like need-
based minimum wage, protection of the real wages ti~ ugh compensation for rise in the
cost of the real wages through for increases in productivity, allowances for hazards of
occupation, wage differentials for skills, responsibilities and other justifiable reasons,
essential fringe benefits, bonus and other ex gratia payments and social security
arrangements. The plan also stressed the execution of minimum wages Act.
The Seventh Plan clearly mentioned, " An important aspect of labour policy
pertains to the formulation of appropriate wage policy." The basic objectives of wage

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policy are a rise in the levels of real incomes in consonance with increases in productivity,
promotion of productive employment, improvement in skills and reduction in disputes.
The Eight Plan has also recognized that the implementation of minimum Wages
Act of 1948 has been inadequate and in several cases it has not yet been implemented
properly.
The Ninth Plan emphasized on improvement of labour welfare with increasing
productivity and provision of a reasonable level of social security. It stated that under
Minimum Wages Act, 1948, no wage is fixed below Rs. 35/- per day.
The Tenth Plan mentioned that Wage bill is expected to grow and the increase in
productivity of labour should be reflected in higher growth of real Wages. The rise in the
real wages of casual labour only can not be a conclusive evidence either of an increase in
the real income or of tightening of labour when the incidence of underemployment has not
reduced and has rather gone up.
The Eleventh Plan suggested to shift the surplus labour from agriculture to high
wage non-agricultrual sector . It recommended increase in male casual labour wages.
Efforts should be made to increase the regular wage/salaried jobs.
INCENTIVE PLANS
3.22 MEANING OF INCENTIVE:
Incentive' or 'reward' can be anything that attracts a worker's artennon and
stimulates him to work. Incentives may be of financial nature well as of non-financial
nature, though more emphasis is placed on financial aspect.
In the words of Burack and Smith "An incentive scheme is a plan or programme to
motivate i idividual or group performance" An incentive programme is most frequent!
built on monetary rewands, but may also include a variety of non-monetary rewards or
prizes.
According to G.R. Terry, "Incentive means that which incites or has a tendency to
incite action"
French says "The term incentive system has a limited meaning that excludes many
kinds of inducements offered to people to perform work or to work up to or beyond
acceptable standards." According to him it does not include:
(i) Wage and salary payments and merit pay;

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(ii) Over-time payments, pay for holiday work or differential according to shifts, i.e. all
payments which could be considered incentives to perform work at undesirable times; and
(iii) Premium pay for performing danger tasks An incentive plan has the following
important features:
1. An incentive plan may consist of both 'monetary' and 'non-monetarv' elements.
Mixed elements can provide diversity7 needed to match the needs of individual
employees.
2. The timing, accuracy and frequency of a successful incentive are the very basis of
a successful incentive plans.
3. The plan requires that it should be properly communicated to the employees to
encourage individual performance, provide feedback and encourage redirection.
3.23 DETERMINANTS OF INCENTIVES
The effective use of incentives depends on three variables-
1. The Individual: Different people value things differently. All people do not attach
the same value to monetary incentives, bonuses, prizes or trips. Employee view
these things differently because of age, marital status, economic need and future
objectives.-----
2. The work situation: The work situation is made up of four important elements-
technology, satisfying job assignments, feed back and equity.
The range of incentive may vary on the basis of machine or work system. A
worker's job may incorporate a number of activities that he finds satisfying.
Incentive may take the form of greater flexibility in hours worked, extended
vacation time and other privileges that an individual values. Similarly, a worker
needs to be able to see the connection between his work and rewards. Lasy, he
considers fairness or reasonableness as part of the exchange for his work.
3. Incentive plan: Incentives, in general, are important motivators. Their effectiveness
depends upon three factors: drives, preference value and satisfying value of the
goal objects.
Incentive plan, whether monetary or non-monetary, tends to increase the level of
motivation in a person. Financial incentives relate more effectively with basic
motivation. Non-financial incentives are linked more closely with higher

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 motivation. The higher the position of a person in an organiztion's hierarchy, the
greater is his vulnerability to non-financial incentive.
3.24 CLASSIFICATION OF INCENTIVES
Incentives as stimulus are mainly psychological which maintain and strengthen the
desire to achieve improved performance. Incentives are mainly of two types (1) Monetary
ro financial Incentives, (2) Non-monetary or non-financial Incentives.
Financial incentives help the individuals to meet their basic needs and non-
financial incentives assist in meeting the higher order needs such as social needs, ego
needs and self-actualization needs.
Types of Incentives
Financial
Non-Financial
-Production Incentives -Attendance Bonus -Profit Sharing -Co-partnership -Leave
encashment -Leave Travel Concession -Gratuity Scheme
-Welfare schemes -Suggestion Schemes -Promotion Policies -Recognition
-Better working Conditions -Educational opportunities -Growth opportunities
Monetary or Financial Incentives: These incentives are payments for improved
productivity, attendance and general improvement in employee performance, Financial
incentive Schemes can be direct or indirect in nature. In direct financial incentive Scheme,
the payments are based on employees own performance or contribution to the job such as
production incentives schemes, attendance bonus, profit sharing bonus etc. In case of
indirect financial incentives, the payments are not directly related to employees
contribution but schemes are like subsidized means such as leave encashment, gratuity
scheme, leave travel concession etc.
Non-monetary or non-financial Incentives: Non-financial incentives are based on
sociological and psychological principles of higher behavior. These are generally
introduced as a normal practice in good management to elicit from employees a sense of
participation and belonging and their importance being not to be underestimated. The non-
financial incentives touch the inner feelings of employees and bring out a response an
much more impressive than is possible through financial incentives. The non-financial
incentives are the outcome of an enlightened management. The provision of better

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working condition, encouragement and appreciation of good work, a general atmosphere
of willingness and co-operation in dealing with common problems will contribute to
excellence in the areas of work and higher productivity.
3.25 ADVANTAGES OF INCENTIVE SCHEMES
It is difficult to underline the advantages of incentive schemes. One of the studies
carried out in a public undertaking revealed that after 4-5 months of the introduction of
incepntive schemes, following results were achieved-
(a) Increase in production- 20%
(b) Increase in productivity- 15%
(c) Reduction in rate of accidents- 60%
(d) Reduction in overtime-40%
In addition to the above, there was improvement in attendance, morale, willingness
to work and enforcement for increasing production. We have seen that incentive plans
provide higher reward for increased output.
Following are some of the advantages of incentive schemes-
(i) Achievement of higher production.
(ii) Lesser break-down and defective work.
(iii) Cutting down the cost of production
(iv) Oppormnity for higher corning to employees,
(v) Reducing the supervision time.
(vi) Effective use of manpower planning
In fine, the workers and employers gain economically by incentive schemes in
various ways. They are explained below :
(A) Benefits to workers :
(i) Increase in the wages : These systems increase the total wages of worker as he gets
the premium or bonus beside prescribed wages. Different schemes have different premium
amounts.
(ii) Improvement in work capacity : Work is to be finished in prescribed rime or before
time to get premium. Hence every worker works more. One who is unable to do his
prescribed work, he tries to reach the standard work level so that he may also get
premium.

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(iii) Improvement in Living Standard : Various incentives increase the wage of the
worker on one side, while on the other hand the producer has to pay less for more work
proportionately. This reduces the cost per unit, workers get goods cheap and their living
standard improves.
(B) Benefits to Producers :
(i) Increase in Production at less cost : Production increases rapidly as workers work
more for earning more bonus, premium and other incentives. Production cost per unit falls
as a worker get a single prescribed premium of wages, not the full amount for more
production.
(ii) Minimum Supervision : Workers work themselves for their increasing wage-Hence
supervision is no more needed.
(iii) Good Labour Relations : Workers and the employers both have same interest such
as saving in time, increase in production etc. Hence labour disputes are minimum.
(iv) Improvement in Organisation : Wages according to work and extra motivation, both
financial and non-financial, improve the organisation and diminishes misuse of time and
other factors.
(v) Standardisation : All incentive schemes are based on standardization. Hence time and
job standards are standardised by time and motion studies. Standardisation also improves
the method of production.
(c) Other Advantages :
(i) Encouragement to co-operation: Incentive plans promote mutual co-operation among
workers and management. Both become interested in increasing the surplus of the
enterprise which leads the enterprise to its maximum.
(ii) Reduction in overheads : Incentive schemes bring reduction in indirect overheads.
(iii) Improvement is work: These schemes improve the quality and quantity of work.
(iv) Better wage Policy : The wage policies become more sound and scientific.
3.26 DISADVANTAGES
The incentive schemes are not free from disadvantages. The following are some of the
disadvantages of incentive schemes:
(i) Possibility of incentive scheme being mis-understood because of its complexities.
(ii) Lack of consistency

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(iii) Psychological problems in the incentive systems.
(iv) Delay in the payment of the scheme.
In India, the majority of the workforce still have the problem relating to lower order needs.
Therefore, financial incentives have a positive impact in our country.
3.27 ESSENTIALS/ REQUISITES OF GOOD INCENTIVE PLANS
Following are the salient features to be considered in any incentive scheme-
1. It should be easily understood by the employees and the amount of benefits should
be really assessed.
2. It could be sold to the employees. It means that the incentive schemes should be
accepted by the employees of the organization.
3. The incentive plans must benefit employees as well as employer.
4. The benefits of the plans must have relation with their efforts and performance.
5. It should not be costly to operate. The potential benefit of the scheme should not
exceed its cost.
6. It should stimulate the interest among the workers.
7. It should stimulate the co-operation among the employees.
8. It should not be detrimental to the welfare of the employees.
9. It should assist in supervision.
10. It is essential that the incentive scheme has been supported by the top management.
11. The incentive schemes should be used at an appropriate time.
12. It should have wider coverage and should not be limited only to shop floor level
workers.
FRINGE BENEFITS
3.28 MEANING:
The term fringe benefits refers to various extra benefits provided to employees in
addition to wages and According to Cookmar, '(Those benefits which are provided by an
employer to or for the benefits of the employee and which are not in the form of wages,
salaries and kind related payments."
Different terms are used to denote fringe benefit. They are welfare measures, social
security measures, employee benefits etc.

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 The term fringe benefit cover's retirement benefits, the provided fund, gratuity,
pension, housing, medical, canteen, consumer co-operative store, educational facilities, re-
creational facilities etc.
3.29 NEED FOR EXTENDING FRINGE BENEFIT:
Most of the organizations have been extending fringe benefit to their employees
year after year for the following reasons
l. Employees Demand : Many fringe benefits are provided as per demands of the
employees. Employees demand such benefits due to galloping price index and cost
of living.
2 Trade Union Demand : Trade Unions try to get more and a new variety of fringe
benefits for their members such as insurance. If one union succeeds in getting one
benefit, the other unions persuade management to provide their fringe benefits.
Thus, the competition among trade unions within an organization results in more
benefits.
3. Employer's preference : Employers also prefer fringe benefits. Such benefits
motivate the employees for better performance in the organization. It improves
morale of the employees.
4 As a social security measure : Employer has to provide various benefits as a
social security the safty measures. Social securities like pension, compensation in
case of accident, medical facilities & some other contingencies.
5. Improvement of human relations : Fringe benefits satisfy the economic, social
and psychological needs of workers. For example, consumer's stores, canteen,
recreational facilities etc satisfy the worker's social needs. However, most of the
fringe benefits minimize economic problems and improves human relations.
3.30 OBJECTIVES OF FRINGE BENEFITS
The important objectives of fringe benefits are as follows:
1. To create and improve sound industrial relations.
2. To boost up employees morale.
3. To motivate the employees by identifying and satisfying their unsatisfied need.
4. To provide qualitative work environment and work life.

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5. To provide security to employees against social risks like old age benefits and
maternity benefits.
6. To protect the health of the employees and to provide safety to the employees
against accidents.
7. To promote employees welfare by providing welfare measures like recreation
facilities.
8. To create a sense of belongingness among employees and to retain them. Hence,
fringe benefits are called golden hand-cuffs.
9. To meet requirements of various legislations relating to fringe benefits.
10. To improve the public image of the organization.
3.31 TYPES OF FRINGE BENEFITS :
Organisations provide a variety of fringe benefits. They are classified into four
groups For Employment Security : Benefits under this head include unemployment
insurance, leave travel pay, Overtime pay, leave for maternity, provident fund, job to the
sons/ daughter of the employees and the like.
Payment for Employee Safety and Welfare and time not Security Health
Recretional And Retirement worked Facilities Benefits
Payment for time not worked: This category includes:
(a) Hours of work
(b) Paid holidays
(c) Shift premium
(d) Holiday pay; and
(e) Paid vacation
Employee Security: Physical and job security to the employee should also be
provided with a view to promoting security to the employee and his family members. The
benefits of confirmation of the employee on the job create a sense of job security. Further
a minimum and continuous wage or salary gives a sense of security to the life. The
payment of wages Act 1965 provides income security to For health Protection : Benefits
under this head include accident insurance, disability insurance, hospitalization, medical
care, sick benefits, sick leave etc.

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 For old age and Retirement: Benefits under this category include pension, gratuity
and medical benefit for retired employees, traveling concession to retired employees etc.
For personal identification ^^Participation : This category covers benefits like anniversary
awards, attendance bonus, canteen, co-operative credit societies, educational facilities,
counseling, recreational programme, safety measure etc.
ROBERT H.HOGE CLASSIFIED THE FRINGE BENEFITS INTO TWO
CATEGORIES-
(i) Payment for time not worked.
(ii) Extra pay for time worked.
The following classification of fringe benefits is adopted for discussion in Incba
Types of Fringe Benefits the employees. The Industrial Disputes Act, 1947
provides for the payment of compensation in case of lay off and retrenchment.
Safety and Health: Employee's safety and health should be taken care of in order to
protect the employee against accidents, unhealthy working conditions and to protect the
workers productive capacity. In India, the Factories Act, 1948 stipulated certain
requirements regarding working conditions with a view to providing safe working
environment. These provisions relate to cleanliness, disposal of wates, ventilation and
temperature, dust and fume, over crowding, lighting 'drinking water' 'latrine' 'urinals and
spittons. Provisions relating to safety measures include fencing of machinery' employment
of young persons on dangerous machines, lifting machines, revolving machinery,
excessive weights, protection of eyes, explosive or inflamable dust, gas etc.
Workmen's compensation Act, 1923 makes provisions for the payment of com-
pensation in case of invalidity and death of worker due to employment injury. Today,
various medical services like hospital, clinical and dispensary facilities are provided by
organizations not only to employees but also to their family members. Employees captate
Insurance Act, 1948 deals comprehensively about the health benefits to be provided.
Benefits under this Act include- Sickness Benefits, Maternity7 Benefits, Disablement
Benefits, Dependents Benefits, and Medical Benefits.
Welfare and Recreational Facilities: Welfare and recreational benefits include
(a) Canteens
(b) Consumer societies

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(c) Credit societies
(d) Housing
(e) Legal aid
(f) Employee counseling
(g) welfare organizations
(h) Holiday homes
(i) Educational facilities
0 Transportation
(k) Parties and picnics and
(1) Miscellaneous
(V) Old Age and Retirement Benefits :
There are various schemes which provide benefits to retired employees. Three
major types of benefits are as under -
1.. Provident Fund Scheme : Under the provisions of Employees' Provident Fund &
Miscellaneous Provision Act 1952, the employer has to contribution 8.33° o of wages for
salaries of employees every month. The employees make equal contribute to the fund. The
amount is accumulated till the retirement of the employee. A part of the money can be
withdrawn earlier under certain circumstances.
2. Pension Sf heme : A pension represent the pension payment of a fixed amount to a
retired employee or surviving dependents every month provided the employee has fulfilled
certain specific conditions of employment. One of the major conditions is the minimum no
of years of service which an employee should put to become eligible for pension.
3. Gratuity : The employment payment of gratuity is regulated by the Payment of
Gratuity Act 1972. Under this Act. Gratuity is payable to all employees after the
termination of their services by way of their retirement for their resignation provided they
have completed 5 yrs of continous services. The minimum amount of gratuity is
determined from time to time.
3.33 VOLUNTARY RETIREMENT SCHEME (VRS ) :
VRS involves of employees based on mutual agreement between the organization
and its employees. The VRS Scheme had attracted attention during 1990 s after the

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beginning of liberalization in Indian economy. VRS has been applied as downsizing
strategy. VRS is also known as "Golden Handshake"
The following issues are involved in VRS
1. Identification of need for VRS : The 1st step in making VRS successful is to
identify the need for VRS by asking questions whether there is really need for this.
2. Implication of VRS for the organization : VRS has certain serious implications for
the organization. It should be treated not as a panacea for all ills related to
managing human resources. It may be used specially to reduce surplus employees;
otherwise it can inflict injury to the organization.
3. Mechanism for VRS: Mechanism of VRS involves decisions about what is being
offered and to whom it is offered. E.g. - SAIL prescribes the ndnimum age limit
for VRS of different categories of employees such as unskilled workers 40 yrs,
skilled workers 43 yrs, junior management 40 yrs and middle management 50 yrs.
4. Developing understanding with Trade Unions : Many VRS plans had failed
because of resistance of workers through their unions. Therefore, there is need to
convince them by explaining various pars and cans and suggesting them the
alternatives which they can adopt after the VRS.
5. Rehabilitation plans for Employees : With growing number of employees under
VRS, a rehabilitation package may be planned by the company. Such a package
may include re-deployment of such personnel else where either by providing them
training or encouraging them to go for their business.

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 EMERGING HORIZON OF HRM
Emerging Horizon of HRM, Impact of globalization on HRM, Human Resource
Information System.
International Human Resource Management (HRM), Work Force Diversity, Learning
Organization and Virtual organization, Repratiation, Exit Interview, Down Sizing
4.1 EMERGING HORIZON OF HRM :
Three significant changes are occruing in Indian organization in the recent years,
as a result of globalization on HRM. They are as under:
1. Information Technology : I.T. is developing first and will continue to dominate
the economy in a big way in the future.
India has a well educated English speaking work force trained in IT. several IT
firms like WIPRO, IMFOSIS, Technologies 'SATYAM Computers, HCL
Technologies and the like have been established by Indian entrepreneurs & more
can be expected in the future. We have tremendous expertise in software
development.
2. Woman in work force : Women are rising to positions of power in Govt, and
private sector organizations. They are entering organization in greater number and
the social and cultural barriers for the advancement to higher level positions are
breaking down. We now see a higher divorce rate among women who are
dedicated to their careers. The one of the ways in which organizations would help
dual career families to reduce their stress is encourage the married couple to work
in the same organization.
3. Work force diversity : The composition of work force is changing. Younger more
educated and more ambitious men, women from different states and caste have
joined in the labour force and the trend is continuing. Workforce diversity includes
such character as race, sex, age, values and cultural norms.
Managing diversity in the work force is not easy. It requires a lot of understanding
and patience. The Schedule caste/tribes and women who are entering the working
in large number have to be effectively utilised & suitable career paths have to be
designed for them. Some organizations claim that they seek to rninimize diversity

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 in the workforce & maximize the capabilities of such a diverse work force. The
traditional HR system will not allow diversity only similarity'.
4.2 IMPACT OF GLOBILISATION ON HRM :
The new economic policy 1991 has globalised the Indian economy. There has been
a growing tendency among business firms to extend their sales or manufacturing to
new markets abroad. Globalization increases competition in the international
business. Firms that primarily competed only with local firms, now have to
compete with foreign firms. Thus, the world has become a global market where
competition is a two way street.
HRM is no longer constrained by national border. Eg. Mc. Donald, a US firm sells
Ham bars in China, Toyota, a Japanese firm makes car in Kentucky, Coca-Cola has
Soft drink markets, bottling plant in South Asia, Swiss company ABD Ltd. has
constructed power generation plant in Malaysia, South Korea, China and
Indonesia.
Thus the world has definitely become a global village.
The MNCs are characterized by the cultural diversities, intensified competition,
variations in business practices and so on. These are the impact of globalization.
Under such circumstances our companies have to tap global labour force and
formulate selection, training and compensation policies differendy to manage the
global human resources efficiendy.
Any manager, who is entrusted with the responsibility of managing human
resource in a global environment, will have to face new challenges. They must
have adequate knowledge on the legal, political environment, economic
environment, cultural environment etc. of different countries where from HRs are
employed for performance.
As companies have gone global, the number of their employees abroad has
increased. With more employees abroad, HR departments have had to tackle new
global challenges. For example, senior international HR managers in eight large
companies were asked questions such as "what are the key global pressures
affecting human resource management practices in your firm currendy and for the

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 projected future?" The three broad global HR challenges that emerged were as
follows:
(a) Deployment : Easily getting the right skills to where they are needed in the
organization regardless of geographical location;
(b) Knowledge and innovation dissemination: Spreading state-of-the art knowledge
and practices throughout the organisation regardless of where they originate; and
(c) Identifying and developing talent on a global basis : Identifying who has the ability
to function effectively in a global organisation and developing these abilities.
Dealing with such challenges means most employers have had to scramble to
develop HR policies and procedures just for handling global assignments. From a
practical point of view, the following issues are to be addressed:
1. Candidate Identification, Assessment and Selection: In addition to the required
technical and business skill, key traits to consider for global assignments include,
for instance, cultural sensitivity, interpersonal skills and flexibility.
2. Cost Projection : The average cost of sending an employee and family on an
overseas assignment is reportedly between three and five times the employee's
predeparture salary; as a result, quantifying total costs for a global assignment and
deciding whether to use an expatriate or a local employee are essential in the
budgeting process.
3. Assignment letters : The assignee's specific job requirements and associated pay
will have to be documented and formally communicated in an assignment letter.
4. Compensation, benefits and tax programmes : There are many ways to compensate
employees who are transferred abroad, given the vast differences in living
expenses around the world. Some common approaches to international pay include
home-based plus a supplement and destination based pay.
5. Relocation assistance : The assignee will probably have to be assisted with such
matters as maintenance of the person's home and automobiles, shipment and
storage of household goods, and so forth.
6. Family support : Cultural orientation, language training, education assistance and
emergency provisions are just some of the matters to be addressed here before the
family is shipped abroad.

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The impact of globalization can be observed from the following trends:
(1) Integration of Economies: Globalization has resulted in the opening up of vast
markets which can be tapped by big industries. This is possible only when there
exists harmony between the laburs and the management and both parries strive for
the growth of the industry.
(2) Global Benchmarking: Globalization has resulted in striving for highest quality of
products and processes so that they are competitive in the world market.
(3) Change in the Management Style: Today's management style is moving towards
participative management style where workers are delegated responsibility and
involved in the day to day decision making.
(4) Future of Public Enterprises: There is a need for a radical change in the focus of
public enterprises in the post-liberalization period. The public enterprises have to
increase their efficiency and productivity by restructuring the whole organizanon
after taking into confidence the workers so that they can be competitive in the
liberalized area.
4.3 MEANING OF HUMAN RESOURCE INFORMATION SYSTEM (HRIS)
Information is the life blood of an organization. An organization needs various
information regarding management of people such as training provided to the
employees, various sources of recruitment, employee turnover during the year etc.
Every manager in the organization makes decisions about planning, organization,
directing & controlling of his functions. As such, he needs information of various
types. In other words, every organization deigh information system which takes the
shape of Management Information system (MIS) .
This MIS covers the information needs of different functions including HRM
functions.
, the concept of HRIS has been derived from the concept of MIS. MIS is defined as
systematic collection, maintenance and interpretation of data for providing support
to management decision making. Based on this concept, HRIS can be defined as
follows:

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 HRIS is a systematic procedure for collection, storing, mamtaining and interpreting
data needed by an organization about its HRs and various activities that are
relevant for their management.
4.4 BASIC COMPONENTS OF HRIS :
The three basic components of HRIS are as under —
1 Input: Input function prescribes the procedure for collecting data by whom, when,
in what format and from what sources. It provides the capabilities needed to enter
data that are relevant to managing HRs.
2. Storage : Storage function involves storing data in various files & updating data
from time to time to keep them up to date. Based an storage of data information is
prepared for decision making.
3. Output : Output function of HRIS is most visible as it is direcdy relevant to users
to HRIS. In a computerized HRIS, output may appear in two-forms.
a. Hard copy printed on a piece of paper.
b. Soft copy visible on computer screen.
Whatever form is selected output is presented in a form which is easily
understandable & useful to users.
4.5 OBJECTIVES OF HRIS.
The HRIS is required basically for two purposes :
1. To supply information to various govt, agencies as required by statutory provision.
2. To provide information to managers for taking actions and making divisions on
matter related to managing human resources.
Thus, the basic objectives of HRIS can be spelled out further as follows :
i. HRIs should provide information in such a manner that it helps in improving
decisions.
Accurate, relevant, timely information is needed to improve decision making.
ii. Apart from decision making HRIS should supply HR information which is
requested by statutory provisions or other agencies like Industry Associations,
Research organization etc.

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iii. HRIS should provide information in the most cost effective way. Any information has
benefit but it has cost too. Benefits from information is divided in terms of
improved decision making and satisfaction of other requirements.
MNC's utilise several types of internal managers to tackle the international HR
system. They have to adopt different policies and practices for recruitement,
selection, training and development, payment of salaries and wages, performance
appraisal, incentives and motivation programme. The managers in international
HRM must have knowledge on international labour relations. They must be able to
identify the problems differendy and try to bring solution to them.
4.6 TYPE OF INFORMATION GENERATED BY HRIS :
The information generated by HRIS can be divided into two categones.
A. External Information: External information for managing human resources sh xild
be on the following aspects :
i. Nature of competition for human resources of different types.
ii. Nature of availability of human resources from different sources.
iii. Nature of training and development facilities available outside the organization.
iv. Socio-cultural and other back ground of human resources.
v. Various govt.-policies affecting the employment condition of people.
vi. Various labour laws which are relevant for managing HRs in the organization.
vii. Various states of trade union movement and its attitude towards employees.
viii. Various HRM practices adopted by different organization nationally and
internationally.
B. Internal Information :
HR department collects various relevant information from internal sources. Such
information may be as follows :
i. Particulars of each employee showing his/her name age, qualification, experience
and other relevant information.
ii. Types of employees recruited during the years.
iii. Training and development programmers offered.
iv. Result of performance appraisal.
v. Promotions, demotion, transfer, separation of employees.

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vi. Employee absenteeism or turnover.
vii. Maintainanced, safety and health services.
viii. Number and nature of disputes between labour and management and other
outcomes.
4.7 CONCEPT OF VIRTUAL ORGANISATION :
Virtual Organisation emerged in 1990 and is also known as Digital Organisation or
Network Organisation. Simply speaking, a virtual organisation is a network of cooperation
made possible by information and communication Technology (ICT). The ICT is the
backbone of virtual organisation. Managers in virtual organisation co-ordinate and control
external relations with the help of computer network links.
A virtual organisation permits managers to change an organisation's structure
quickly to meet changing conditions and situations. Internal departments, job
responsibilities and Lines of authority are shifted as needed. Boundaries between an
organisation and its customers and suppliers are blurred. In fact, some customers and
suppliers begin to spend more time in the organisation than some of its own employees.
The virtual form of organisation is increasing in India also. Nike, Reebok, Puma, HUL,
Dell computer etc. are the prominent companies working virtually.
4.8 FEATURES OF VIRTUAL ORGAN1SATION :
Following are the salient features of V.O. :
1. Technology : New technology has transformed the traditional ways of working.
The Computer Telephone Integration (CTI) has been used in all call-centre
application.
2. E-mail Integration : Integrating short message service (SMS) into the existing e-
mail infrastructure allows the VO. to take advantage of SMS products.
3. Office System Integration : SMS technology can greatly enhance the existing or
new office system.
4. Mobile data : Mobile data communication revolutionised where and how work is
done. The ability to link laptop to mobile phone keeps one connected to his/her
VO. from anywhere.

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5. Quick Response : Employees of virtual organisation respond quickly to changing
customer demands with customized products and services available at any time and
place.
6. Competent workforce : The entire workforce must be capable of mastering all the
competencies needed to serve customers effectively
7. Delegation of authority : Managers delegate authority to employees wluie
providing them with a clear vision of the organisation's goals.
4.9 TYPES OF VERTUAL ORGANISATION
Virtual organization may be divided into three types that are discussed below:
(1) Telecommuters: In telecommuting companies employees work from their homes.
They can interact with the workplace via personal computers connected with a
modem to the phone lines. Dow Chemicals, Xerox, Coherent Technology Inc etc
are some of the examples of companies that are using some form of
telecommuting.
(2) Outsourcing Employees: The second type of virtual organization represe::> those
that are characterized by the outsourcing of most or all core competencies. The
marketing and sales, human resources, finance, research and development,
engineering, manufacturing, information system are the activities that can be
outsourced by a company. For example, Nike relies on information technology as a
means for maintaining inter-organization coordination with outsource.
(3) Completely Virtual: The third type is completely virtual. Under this, a company is
linked to a large network of suppliers, distributors, retailers and customers as well
as to strategic and joint venture partners. Some examples of completely virtual
organizations are the Atlanta Committee for the Olympic Games (ACOG) in 1996.
4.10 DISTINCTION BETWEEN TRADITIONAL AND VIRTUAL ORGA-
NIZATION
The virtual organization may be distinguished from the traditional organization in
the following ways:
Traditional organization
1. It is less flexible and can not be adapted quickly with changing environmental
conditions.

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2 Interpersonal contact is the basis of such organization.
3. It facilitates direct and formal communi cation.
4. The cost of maintaining a traditional team is quite high.
5. It has limited ability to overcome time and space constraints.
Virtual organization
1. Tit is more flexible and can be adapted to changes in environmental conditions.
2. Information and communication
technology (ICT) is the basis of such organization.
3. facilitates indirect and informal communication.
4. The cost of mamtaining a virtual team is comparatively lower.
5. It is extremely useful to overcome time and space constraints.
4.11 MERITS OF VIRTUAL ORGANIZATION
(1) It is the latest type of organizational design that managers use to satisfy customer
demands.
(2) The organization structure can be changed quickly to meet changing conditions
and situations.
(3) Boundaries between the organization and its customers are made less distinct.
DEMERITS
(1) A virtual organization can only exist across physical hardware of a computer
network infrastructure.
(2) It can never replace the human resources.
(3) It requires heavy investment to create the system and staffing structures.
4.12 HRM IN VIRTUAL ORGANISATION :
Planning, Recruitment, Development, Maintenance, Retention and socioalisation
are the common human resource issues. V.O are staffed by highly efficient workers, who
are left to do their own things and produce highly competitive products or services.
From HR point of view V.O has both sides of the coin. The positive side is greater
job autonomy and more finanical stability. However, the negative side includs aspects like
longer work hours, poor working conditions, increased works demands and less career
opportunities.
In VO jobs are vanable and of short terms.

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People with mutli-skill are valuable to the organisation.
The Major HR issues involved in a VO are as follows:
i. Recruitment is conducted under time pressure and require high performance
expectation.
ii. Stability in social relationship is not very much required.
iii. Work pace is variable because the need for readiness to be mobilised at any
moment like defence services, is high.
iv. Job is of short terms : This requires VOs to make heavy investment to create
system and staffing structures.
v. The employee selection is a very crucial area in VO. Some important
considerations are to be made in selecting the employees. Important amone them
are :
a. Self guided and motivated people.
b. Knowledgeable about the organisation procedures.
c. An effective communicator.
d. Adoptablc.
e. Result Oriented.
Therefore, it is essential to consider the above qualities while recruiting and
selecting people to work in V.O.
4.13 CONCEPT OF LEARNING ORGANIZATION
In the competitive environment of the present millennium, only a learning
organization will survive.
A learning organization is understood as the one that has developed the capacity to
adopt and change. Like individuals, learning organizations constantly learn. In
such organizations, old beliefs or principles are demolished and a new order is
created. Under such organizations, the managers not only look at their people
differently but teach them to look at the world afresh.
4.14 CHARACTERISTICS OF LEARNING ORGANIZATION
Following are the salient features of a learning organization:
(i) System Thinking: Managers need to be aware of the open linkages between their
own actions and the actions of those around them.

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(ii) Personal Mastery: organizations need to encourage their employees to continually
learn and improve their own skills and abilities.
(iii) Mental Models: It is often sub-conscious, yet it can influence our behavior in
organization substantially. Mental models can put constraints in an organizations.
(iv) Building shared vision: For the development of a learning organization, the
building and maintenance of a shared vision offers individuals the support to excel
and learn.
(v) Team Learning: Sharing information among the team members is a vital element
of learning organization. Meaningful discussion and free thinking must be
encouraged among the members in a learning organization.
4.15 NEED OF A LEARNING ORGANIZATION
In the changing business environment, only a learning organization shall sur\rive
the emerging competitive global economy. Learning organization may prove vital
to fulfill the critical social and business needs.
The need for leaning organization may be summarized as under:
(1) It can survive tomorrows knowledge based economy.
(2) It can manage tomorrows intense global competition.
(3) It can cope with tomorrows rapid fire technological changes.
(4) It can handle tomorrows demanding and fragmented market
(5) It can build people based work system in a company.
4.16 DIFFERENCES BETWEEN TRADITIONAL AND LEARNING
ORGANIZATION
The following points of distinction can be identified between traditional and
learning organization Traditional
1. Vision is provided by the top management.
2. Top management decides what is to be done and die rest of die organization acts
on these ideas.
3. Each Person is responsible for his/her own job.
4. Conflicts are resolved through the use of power and influence.
5. The role of the leader is to provide rewards and punishments and maintain overall
control of cmplo Learning

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1. There is shared vision that emerge from many places.
2. Formation and implementation of ideas take place at all levels of the organizanon.
3. An individual understand his/her own jobs as well as the inter-relationship of his
job with other jobs.
4. Conflicts are resolved through the use of collaborative learning.
5. The role of leader is to build a shared vision, empower the personnel, inspire
commitment and encourage effective decision making throughout the enterprise.
4.17 WORK FORCE DIVERSITY :
Effectively managing diversity needs to be a top priority for managers in all
organisation, large or small public or private, profit or non-profit. Managing
diversity involves the followings :
i. Increasing Awareness : Diversity awareness programs can increase managers and
workers awarness of their own attitudes, biases and steno types. Diveristy
awareness programmes provide them with accurate information and improve the
understanding of others.
ii. Increasing Diversity Skills : Educating managers and their subordinate about why
and how people differ in the ways they think, communicate and approach etc. can
help all emplovee to develop a healthy respect for diversity.
iii. Encouraging Cultural Diversity : Cultural diversity in work place is growing
because of globalisation. People of diverse national origins like Koreans, Indians,
Swedish, Australian, Americans and others find themselves working together in
terms to perform tasks. The following strategies are helpful in managing cutlural
diversity.
a. Leave and Work outside your home country.
b. Develop friendship with people from different nations.
c. Learn another language.
d. Adopt to the customs of the new country.
iv. Encouraging Gender Diversity : Women's participation in the Work force is
increasing. In India, working women account for just 15% of the total female
population. Women also receive lower level of benefits.

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 There are ways of managing gender diversity. One way is to recognise that there is
strength in both the sexes. Men can learn from women's managerial style by using
appropriate relationship budding in the work place. Similarly women can learn
from man's style to be more assertive and direct, specially while giving
instructions.
INTERNATIONAL HUMAN RESOURCE MANAGEMENT
All companies have gone global, the number of their employees abroad has
increased. With more employees abroad, HR departments have to tackle new global
challenge. They have to develop new FIR policies and proc aures for employees abroad
and managing HR globally is compheated by the nature of the countries into which many
firms are expanding.
4.18 EFFECTS OF INTER COUNTRY DIFFERENCE IN HRM :
The following are the some of the factors which affect the International HRM :
1. Cultural Factors : Cultural differences from country to country require difference
in HR Policies. Studies show how such cultural difference can influence HR
policies. Eg. compared to employees in U.S., Indian workers behave differendy in
their work situation.'
2. Economic Factors : Differences in economic systems among countries also
influence the International HR policies. In the competitive situation as on few-
economic system, companies need people of high efficiency and productivity.
3. Industrial relation factors : It means the relationship between the worker, the union
and the employers. It varies from country to country. In m&ny countries the govt,
interfere little in the relations between the employers and unions. But in India govt,
largely determine the nature of HR policies in our firms.
4. Labour Cost Factors : HR practices are also influenced by differences in labour
cost existed in different countries. If the labour cost is high, it can require more
focus on labour efficiency. Then, HR practices should be shifted toward improving
labour performance. For example, labour cost is quite more in UK than in India.
Similarly, there are wide gaps in hours worked. Portuguese workers average about
1980 hours of work annually, while German workers average 1648 hours.

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5. Power Distance : It means that in institutions and organizations power should be
distributed equally among the members. Accordingly, the distance between the
government and the governed is narrower in democratic societies like India than in
dictatorial ones. For example, workers in India will have far more chances i >f
influencing decisions of the government than would the workers in Philippine-So,
the same thing applies to organizations also.
4.19 BASIC STEPS IN INTERNATIONAL HR ACTIVITIES
The HR practices that are involved in managing human resources in national
context also apply to international context. However, its approaches and
philosophies are changed. Depending on the distinct international context, there
can not be a single approach at international level. There is no single foolproof and
perfect approach for managing human resources.
Now, let us discuss the major steps involved in HR activities in an international
context.
Human Resource Planning : IFiere are usually three approaches to HR planning in
multinationals. These are ethnocentric, polycentric and geocentric.
n ethnocentric policy, all key management positions are filled by parent company
nationals and foreign subsidiaries are being locally staffed. They are known as
HCNs (Home Country Nationals). The ethnocentric HR planning policy is
followed due to lack of managerial talent in the host country.
In polycentric approach, the foreign subsidiaries are managed by host country
nationals and home-office headquarters by parent country nationals. This approach
may reduce the local cultural misunderstandings
The. geocentric approach seeks the best people for key jobs throughout the
organization regardless of nationality. This approach enables a firm to develop an
international executive cadre and reduce the tendency of national identification of
managers with units. The drawbacks of this approach, if any, are it faces conflict
with policies of local governments who desire foreign subsidiaries to employ their
citizens, cumbersome paper work, and increased relocation and training costs.

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 Recruitment and Selection : These two functions are concerned with ensuring right
man on right job at right time and right place. However, it not so easy, particularly
in case of multinational organizations.
Employers around the world tend to use similar criteria and methods for selecting
employees. In United States the methods used are :
a) Personal interview ;
b) Judge the person's ability to perform the technical requirements of the job ; and
c) Prove the work experience in a similar job.
The ranking of these methods are same in Australia and Latin America.
"Employee-Tests" is the top selection practice in People's Republic of China,
Indonesia and Korea, but not in the Unites States. Thus, job knowledge and
motivation, relational skills, flexibility and adoptability, extra cultural openness
and family situation are the five important factors that contribute in a foreign
assignment.
Training : Training is important to improve job skills of the employees. It should
coincide with staffing needs. Accordingly, employees in international
organizations need induction and training to make them fit for business
requirements. Such induction and training programmes should include social,
cultural, business and technical aspects. Generally, overseas employees need four
level training to be imparted, They are :
Level I : It focuses on the impact of cultural differences and on raising trainees awareness
of such differences and their impact on business out comes.
Level II : It focuses on attitudes and aims at getting participants to understand how
attitudes are formed and how they influence behavior.
Level III : It provides factual knowledge about the target country.
Level IV : At this level training provides skill building in areas like language, adjustment
and adoption skills.
Compensation: The issue of compensation or remuneration in case of internanonal
employees is a tricky one for two reasons:
a) paying all the employees of one rank the same compensation.
b) The cost of living can be significandv varying among the countrie>.

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 The most common approach for formulating international employers' remunera ri r.
is to equalize purchasing power across countries which is known as Balance Sheet
Approach. The basic idea behind this approach is that each foreign employee
should enjoy the same standard of living as enjoyed at home. For this, MNCs pay
equal basic pay to employees plus some allowances in the form of mobihtv
allowance, housing allowance, children's education allowance, etc.
Performance Appraisal : Like compensation, several things complicate the task of
appraising a foreign employee's performance. Two are the most crucial ones :
a) Who will appraise?
b) What will be criteria of appraising?
Appraisal is likely to be distorted bv cultural differences. For example, an US
employee in India may be appraised negatively by the Indian boss because
participative decision making is in; ppropriate in US culture.
Experts have suggested the five-point procedure for appraisal of international
employees :
i) Stipulate the difficulty involved in assignments at the work place of expatriate.
ii) Give more weight in evaluation towards the onsite manager's appraisal than
towards the home-site manager's
iii) In case the home-site manager appraises the expat employee, the manager should
take at least background advice from a former expat from the same overseas
location.
iv) If necessary, modify the performance criteria used for a particular job to fit the
overseas position and characteristics of that particular locality.
v) Use both quantitative and qualitative criteria to evaluate the performance of
overseas employee.
4.20 Difference between domestic HRM and International HRM
The following differences may be traced out between domestic HRM and
International HRM.
Domestic HRM
International HRM

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A) Staff are placed within the national LA) Staff work outside their national
boundaries.
2) Less number of rules and regulations to be managed - mostly employment and
taxation rules of the home country.
3) There is uniform, policy in administration.
4) No special attention to personal life. Confined to creche and cultural interaction.
5) Challenges are confined to the situation of a particular country.
6) special training is not required for socio-cultural adoption.
7) Very high number of rules and regulations which are related to taxation,
employment rule,language translating services, work permit etc.
of Broader perspective - management has to be done according' to the host
country-nationals (HCNs) and parent country nationals (PCNs) and Third country
nationals (TCNs).
4) Special attention to personal life of expatriate employees —cultural training,
schooling of children, employment opportunities for spouse.
5) International HRM has to be ready to face challenges like under performance of
expatriate employee, diplomatic relation between host country, currency exchange
rate etc.
6) Special training for expatriate is required so they might not face unnecessary
hassles in the alien socio-cultural environment.
4.21 REPATRIATION
Repatriation' means sending someone back to the their own country.
One of the most confounding and worrisome facts in International Human
Resource Management is sending employees abroad. About 40% to 60% of them
will probably quit within three years of returning home. One stud}' suggests that a
three-year assignment abroad for one employee with a base salary' of about
$100,000 costs the employer $ 1 million, once extra living cost, transportation and
family benefits are included . Given the investment the employer makes in training
and sending these often high potential people abroad, it obviously makes sense to
do everything possible to make sure they stay with the firm. For this, formal
repatriation programmes can be quite useful (One study found that about 5% of

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 returning employees resigned if their firm- r.id formal repatriation programmes,
while about 22% of those left if their firms had no such programme.
The heart and guiding principle for any repatriation programmes are :
i) Make sure that the expatriate and his or her family do not feel that the company has
left them adrift, ie. without having any control.
example, AT & T has an effective three part repatriation programme. First, AT &
T matches the expat and his or herfamily with psychologist training in repatriation
issue-The psychologist meets with the family before they go abroad. The
psychologist discus the challenges they will face abroad, assesses with them how
well he or she think the. will adapt to their new culture abroad. These guarantee in
writing that the company would not keep the expat abroad for more than some
period, such as three years and that on return he or she will receive a mutually
acceptable job.
Second, AT & T makes sure that the employee always feels that he or she is still in
the loop with what's happening back at the home office. For example, AT & T
assigns the expat a mentor and brings the expat back to the home office
periodically for meetings and to socialize with his or her colleagues.
Third, once its time for the expat employee and his or her family to return home
AT & Tprovides formal repatriation sermces. About six months before the
overseas assignment ends, the psychologist and an HR representative meet with the
expat and the family to start preparing them for the return. They work with the
person's family on the logistics of the move back home. Then, about a month after
returning home, the expat and family attend a 'welcome home' seminars, where
they discuss matters like the stress of repatriation.
4.22 STEPS IN REPATRIATION PROCESS
Progressive multinationals anticipate and avoid the repatriation problems by taking
several sensible steps. They can be summarized as follows :
1. Write repatriation agreements : Many firms including Dow Chemical and Union
Carbide use repatriation agreements. They provide guarantee in writing that the
international assignee will not be kept abroad longer than some period (such as 5
years), and that on return he or she will be given a mutually acceptable job.

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2. Assign a sponsor : The employee should be assigned a sponsor (such as a senior
manager at the parent firms home office). This person's role is to look after the
expatriate while he or she is away. This includes keeping the person appraised of
significant company events and changes back home, monitoring his or her career
interests, and putting the person's name into consideration for key openings when
the expatriate is ready to come home.
3. Provide career counseling : Provide formal career counseling session to ensure that
the repatriate's job assignments upon return meet his or her needs.
4. Keep communication open : Keep the expatriate "plugged in" to home-office
business affairs by providing management meetings around the world, frequent
home leave combined with stay at headquarters to work on specific projects, and
regularly scheduled meetings at headquarters.
5. Offer financial support : Many firms such as Alcoa pay real estate and legal fees
and help the expatriate to rent or in some other way maintain his or her residence,
so that the repatriate and his or her family can literally return home.
6. Develop reorientation Programme : Provide the repatriate and his or her family
with a reorientation programme to facilitate their adjustment back into the home
culture.
7. Build in return trips : One study concluded that particularly when expatriates come
from a more homogeneous culture (in this case Finland) and are sent to a more
"novel" culture, they can benefit by more frequent trips back to the home country
"to ensure that expatriates stay in touch with home country norms and changes
during their international assignment."
4.23 DOWNSIZING STRATEGY:
Downsizing strategy has become a buzz word in management. The term
downsizing means lowering down of size of an object. In the context of
management downsizing involves cutting the size of business operation. In the
context of HRM. downsizing strategy implies elimination of certain jobs. The basic
objective downsizing is to achieve right sizing i.e having employees in accordance
with organisation's needs.

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 An organisation may face different situation of over staffing. Some of the common
factors are as follows.
(a) An organisation may have faulty human resource planning.
(b) Because of technological advance there is a change in men-machine ratio.
(c) An organisation opt to outsource certain business function.
In order to overcome the problems of surplus staff, downsizing strategy is adapted.
Downsizing has been adopted throughout the world since 1980 to face
environmental threats and to face competition.
In India downsizing strategys is in practice since 1990s to face the threats of
economic liberalisation.
Demerits of Downsizing of Human Resources :
From the point of view of HRM, downsizing has the following adverse
consequences—
(i) More competent employees opted the scheme leaving the organisation with
comparatively incompetent employees.
(ii) Downsizng increases feeling of insecurity and reduces the morale.
(iii) Downsizng is against the basic concept of job security.
Some of the Down sizing are Introduction of voluntary retirement sclierm . golden
hand shake, etc
4.24 OUTPLACEMENT :
In recent years many MNCs and big companies have adapted the downsizing
strategy which employees are losing their jobs. To bring solution to this problem,
the concept of "outplacement" has been developed.
Outplacement means making arrangement for placement of downsized employees
in some similar or sister concerns. The outplacement of such experienced and
trained employees has got some merits and demerits.
Merits :
(i) The downsized company can ensure Job. security to the employees.
(ii) Experienced & trained employees may suitably be placed in different jobs.
(iii) The cost of recruitment, selection and training are reduced. Demerits :

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(i) The sister concerns or placement agencies may not get the skill & competent
employees as per job requirement.
(ii) The outplacement depends on the availability of jobs in similar sister concerns and
mutual understanding between the downsized companies and the sister concerns.
4.25 EXIT INTERVIEW
Many employers conduct exit interview with employees who are leaving the firm
for any reason. These are interviews, usually conducted by a human resource
professional just prior to the employee leaving. It brings out informauon about the
job or related matters and gives the employers insights into what is right or wrong
about their companies.
Exit interview questions include the following:
a) How were you recruited?
b) Why did you join the company?
c) Was the job presented correctly and honestly?
d) Were expectations met?
e) What was the workplace environment like?
f) What was your superior's management style like?
g) What did you like most/least about the Company?
h) Were there any special problem areas?
i) Why did you decide to leave, and how was the departure handled?
The assumption is that when the employee is leaving, he or she will be candid.
However, one study suggest that the information one gets form exit interview- is
questionable. The researchers found that at the time of separation, 38% of those
leaving blamed salary and benefits and only 4% blamed supervision. Followed up
18 months later, however, 24% blamed supervision and only 12% blamed salary
and benefits.
When Blue Cross of Northeastern Pennsylvania laid off employees, man. sa;d. exit
interview, 'This is not a stable place to work'. The firm took steps to correct that
misperception for those who stayed with Blue Cross.
Thus, exit interview, if conducted with deep insight can be very useful.

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 In our country, exist interview is not widely practiced in industry. Withdrawal may
take place due to death, discharge or voluntary resignation. Where the withdrawal
is voluntary, it may be possible to arrange for an exit interview. It often reveals the
cause of Labour turnover. It provides an opportunity to question why the employee
is leaving and whether this has got any anything to do with lack of satisfaction. A
person who is going to leave the company may be ready to speak frankly about his
difficulties and dissatisfaction which may throw light on selection and placement
policy.
Exist interview is to be conducted keeping in view the following important issues:
1. Conductor of Interview: First of all the person who will conduct exist interview
must be properly selected. Generally, the Human Resource Personnel or the
immediate supervisor of the concerned employee conduct the exist interview. In
certain cases, both the person may conduct the interview and their view points are
compared and analysed.
2. Timing of Interview : Another important aspect in regard to exit interview is the
proper timing. Some companies conduct it at the last day of the employee's service
while some others prefer to conduct it earlier. This is because on the last day the
employee may not be mentally as well as physically free to spend some time for
that purpose.
3. Form of Interview : The next thing to decide is whether the interview should be
structured or unstructured one. Some companies follow structured pattern and give
the employees a questionnaire to fill up. Some other companies follow
unstructured form as they feel that most employees fill up the questionnaire form
without much thinking. The unstructured interview can bring out the actual
feelings of the outgoing employee about the organisation.
4. Analysis of Results : The last issue relating to exit interview is the analysis of
results, i.e. the view points of the outgoing employee so that proper action plan can
be designed in future for reducing the tendency to leave an organisation by some of
the employees.

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