CONTENTS

Unit Contents Page No.

Introduction to HRM
1.1 Definition
1.2 Nature and scope of HRM
1.3 Evolution of HRM
1 1-12
1.4 Challenges of HRM
1.5 HR Profession and HR Department
1.6 Functions of HRM
1.7 Global perspective of HRM

Human Resource Planning

2.1 Human Resource
2.2 Demand and Supply Forecasting
2.3 Factors affecting HRP
2 2.4 Job Analysis and Job Design 13-32
2.5 Recruitment and Selection- Recruitment Process
2.6 Sources and Methods of recruitment
2.7 Evaluation of Methods of Recruitment
2.8 Steps in selection

Training and Development

3.1 Need and importance of training and development
3.2 Training need analysis and techniques
3.3 Design training program
3 33-44
3.4 Types of training
3.5 Training evaluation
3.6 Executive development
3.7 Concept of career development
Unit Contents Page No.

Wages and Salary Management

4.1 Job evaluation
4.2 Wage determination
4 4.3 Types of wages 45-55
4.4 Salary structure
4.5 Fringe benefits
4.6 Executive compensation

Performance Management
5.1 Introduction of performance appraisal
5 5.2 Need and importance of performance appraisal 56-66
5.3 Performance appraisal process
5.4 Methods of performance appraisal

Employee Relations Management

6.1 Introduction of Employee relations management
6.2 Overview of Employee Relations Management
6 67-72
6.3 Importance of Relations Management
6.4 Employee Relation Management Tools
6.5 Issues in Employee relation Management
 Human Resource
Management

UNIT NO - I NOTES
INTRODUCTION TO HRM

OBJECTIVE
After learning this chapter you will be able
• To define human resource management
• To explain the nature and scope and global perspective of HRM.
• To identify the challenges of HRM

CONTENTS
1.1 Definition
1.2 Nature and scope of HRM
1.3 Evolution of HRM
1.4 Challenges of HRM
1.5 HR Profession and HR Department
1.6 Global perspective of HRM

1.1 DEFINITION

The total knowledge, skill, creative ability, talents and aptitudes of an

organization’s workforce as well as values, attitudes, approaches involved in the
organization’s work affairs are collectively called as Human Resources. Human
resource management is the term used to describe formal system devised for the
management of people within organization.
It is the strategic approach to the effective management of organization
workers so that they help the business gain a competitive advantage and
commonly referred to as the HR Department.
‘The process of hiring and developing employees so that they become more
valuable to the organization’ is also known as Human Resource management.
In simple sense, human resource management means employing people,
developing their resources, utilizing and compensating the resources in
accordance with the requirement of job and organization contributing towards
organizational and social and individual goals. INTRODUCTION
TO HRM 1
 Human Resource
Management
1.2 NATURE AND SCOPE OF HRM
NOTES

1.2.1 Nature of HRM

HR is primarily concerned with the management of people within
organization, focusing on policies and on systems. Human resources overall
purpose is to ensure that the organization is able to achieve success through
people. It is strategic approach to the acquisition, motivation, development and
management of the organization’s human resources.
The purpose of HRM is to maximize the productivity of an organization by
optimizing the effectiveness of its employees. HR departments are also
responsible for overseeing employee benefits designs, employee recruitment,
training and development, performance appraisal and rewarding (e.g. managing
pay and benefit systems).Human resource management is also concerned with
the organizational change and industrial relations, that is, the balancing of
organizational practices and with requirements arising from collective bargaining
and from governmental laws.
HRM is proactive process which looks forward to what needs to be done to
achieve organizational as well as personal goals. It focuses on the results rather
than the rules. It tries to help employees develop their potential fully and
encourages them to give their best to the organization. HRM mainly tries to build
and maintain cordial relations between the employees working at various levels
in the organization.

1.2.2 Scope of HRM

The scope of HRM is very vast and wide. It includes all the activities that
come under the title Human Resource Management. That is, the activities starting
from manpower planning till the employee leaves the company or organization.
Some of its aspects of HRM are

INTRODUCTION
2 TO HRM
 1. Personnel Aspect Human Resource
Management
This aspect of HRM is concerned with manpower planning,
recruitment, selection, training and development, placement,
performance appraisal etc. This simply shows that Human resource NOTES
management is not only about hiring and training the workforce but
the important objective of it is to ascertain individual growth,
development and effectiveness which will indirectly contribute
towards fulfillment of organizational and social goals.

2. Welfare Aspect
This aspect of HRM mainly deals with work environment of work
place. In this aspect focus is mainly on providing amenities such as
canteens, transport and medical facilities, safety services, welfare
funds and social security etc. This aspect of Human Resource
management also focuses on creating healthy working environment
by eliminating work place hazards, safeguarding machinery,
maintaining proper ventilation, sanitation, lighting etc. Emphasis is
also given on providing sickness benefits, employment injury benefits,
and personal injury benefits. It also takes care of finding real needs of
employees and fulfilling them with active participation of both
employees and management.

3. Industrial Relations Aspect

This aspect mainly includes union management, disciplinary
procedures, dispute settlements etc. Industrial relations being highly
sensitive area care must be taken while interacting with employees or
union management. Their grievances must be addressed and disputes
must be solved in effective manner so as to maintain peace and
harmony in the organization. It means that while dealing with this
aspect, care has to be taken so that no negative impact is left on the
organization while safeguarding the employee’s interests.

1.3 EVOLUTION OF HRM

Pre Industrial Revolution Period ¬- This period was marked with agriculture
as main or primary economy with the limited production. The production of
specialized crafts was limited and generally was carried out in villages or
communities with apprentices or workers assisting the master craftsmen. Also
the channels of communication were limited so was the limited scope for
marketing of such products.
Period of Industrial Revolution (1750-1850) – The period of industrial
revolution was marked by the conversion of economy from agriculture based INTRODUCTION
TO HRM 3
 Human Resource economy to industry based economy. Increased communication channels and
Management modernization led to the industrial set up and the department was set up to deal
with the issues like workers wages and salaries, their record maintenance,
NOTES housing facilities and health care which led to the emergence of personnel
management.
Important event of this period was the emergence and growth of labour
unions. At that time workers used to work for long hours and that to with very
less wages. Because of this with growing unrest workers started protest and lead
to establishment of labour unions. Personnel management department had to be
very much capable of handling the labour issues and management with
diplomacy and this led to the establishment of industrial relations department.

Post Industrial Revolution Period- Various studies and experiments

conducted in this period gave HRM altogether a new meaning and importance.
Fredrick Taylor’s principles of scientific management (1857-1911) led to
the evolution of scientific human resource management approach. This approach
was used in worker’s training, maintaining wage uniformity and deciding the
strategy to improve the worker’s productivity.
Hawthorne studies which were conducted by Elton Mayo and Fritz
Roethlisberger (1927-1940) shifted the focus of human resource from increasing
productivity to increasing work efficiency through greater work satisfaction.
Douglas McGregor Theory X and Theory Y (1960) and Abraham Maslow’s
Hierarchy of needs (1954) shifted the HRM approach from administrative and
personnel management to the more dynamic HRM approach which considered
workers as a valuable resource.
As a result, HRM became increasingly line management function which
included some major functions of Human Resource Department as follows:
1. Recruitment and Selection Of Skilled Workforce
2. Training and Development
3. Motivation and Employee benefits
4. Performance Appraisal.

1.4 CHALLENGES OF HRM

As we know Human Resource Management includes:

1. Job design
2. Manpower planning
INTRODUCTION
3. Recruitment
4 TO HRM
 4. Training and development Human Resource
Management
5. Performance management
6. Compensation and benefits
NOTES
7. Handling legal issues
While going through all these processes, HR professional faces many
challenges. To solve these issues HR manager has to be capable enough to
identify these issues so that he can prevent the organizational activities being
suffered by these challenges. These challenges can be categorized into three main
categories:

1.4.1 Environmental Challenges

These challenges are also called as external challenges as they arise due to
the external forces that exist in the environment outside the organization and
affect the performance of organizations management. These forces being external
to the organization are out of control of the management of the organization and
they have to be handled in proactive manner. Some of the environmental
challenges that human resource management faces are:
1. Changing environment
As the world is rapidly changing; the organizations management
should quickly adopt the changes so that they should not become
outdated from the new market. The human resource management of
an organization plays an important role in this regard and adopt such
policies which keeps the organization away from the emerging threats
and helps the organization to avail the new opportunities of the
environment.

2. Political and legal forces

Due to the changes in political parties and rules and regulation new
laws keep coming which have to be followed while doing the business. INTRODUCTION
TO HRM 5
 Human Resource It is the responsibility of human resource manager to anticipate the
Management changes and make necessary adjustments in the organization to cope
up with the changing laws so that organization keeps functioning
NOTES smoothly.

3. Technology
Technology is changing everyday in today's world and the
organizations have become technology-driven organizations. With the
changing technology workforce in the organization needs to be trained
to adopt these changes. New emerging technologies dominate the older
ones and make them outdated. Therefore new skills are to be
developed by the employees and need to de advanced every time the
technology changes. This creates the burden on human resource
manager to keep updating the skill of the employees and technology.

4. Cultural forces
Due to the globalization of businesses, workforce has become more
diverse and multicultural. This increases the pressure on Human
resource management to identify and to adopt to these cultural
differences and ignorance to this can lead to cultural
misunderstandings.

5. Economic Forces
Major external factor which affects HRM practices is economic
conditions. Recessions or booms in the economy or rate of inflation
affect consumer demands. Also the financial health of the organization
is affected by the economic conditions. Favourable economic
conditions help in expansion of existing programmes and new
programmes can be launched. But if the conditions are unfavourable
some programmes needs to be cancelled. Thus, number of economic
factors affects the HRM practices of the organization influencing its
operations.

1.4.2 Organizational Challenges

These challenges are related to the internal factors i.e. factors that are
inherent within a company which influence employee management. Though the
influencing factors are internal but they are evolved due to the environmental or
external factors and are in control of the human resource management of the
organization. Human resource management being proactive in nature anticipates
such challenges and takes corrective measure to prevent this from becoming
serious issues. Four main influencing factors are:
1. Company strategies
Specific competencies of employees that are required by the manager
INTRODUCTION are influenced due to the differences in company strategies. Depending
6 TO HRM
 upon the types of jobs employees perform, strategy shapes the Human Resource
competencies, attitudes and behavior of the employees. In this context Management
HR managers have to plan primary HR activities with strategic
objectives to increase employee contributions. NOTES
2. Company characteristics
Characteristics such as size of the company, development stages of
company influences human resource practices while managing the
workforce in the organization.

3. Organizational culture
Organizational culture is nothing but the set of basic assumptions,
values and beliefs of organizational workforce. Different companies
have distinct cultures which influence what work is done and how it
is done, within organizations.

4. Employee concerns
To implement the effective HR practices and make workers contribute
towards the organizational goals an effective manager needs to take
into account the concerns of their employees.

1.4.3. Individual Challenges

This aspect includes decisions related to the particular individual employee.
Employee’s relation with the organization affects the organizational issues. Some
of the factors which affect the HRM are:
1. Productivity
Employee’s ability and motivation to do the work greatly influences
the employee’s productivity. To improve the employee’s ability proper
training can be given to them.

2. Empowerment
When an individual employee exerts more control on the work
compared to their superiors this individual control is called as
empowerment. Due to this empowerment, employees work with an
enthusiasm and commitment. This empowerment also helps them to
learn new skills as they can make their own decisions while working.
But to identify the capable person to be empowered who can take
correct decisions is quite difficult task for HRM.

3. Job insecurity
Now a day’s most of the employees are looking for secure jobs because
in today's cut throat competition even successful organizations lay off
their employees. Also the restructuring and downsizing of the
organizations develop the sense of job insecurity within the employees
INTRODUCTION
of the organization.
TO HRM 7
 Human Resource 4. Work life balance
Management
The issue of work life balance in many companies is gaining increased
attention. The balance between the demands of employee’s personal
NOTES life and that of work is called as work life balance. Work life issues
can be of any type. It may be taking care of small children, dealing
with traffic or it may be looking after senior citizens at home. In
response to these issues, some progressive companies help their
employees out of these by providing them flexible work schedules.
Some companies like Abbott Laboratories provides the facility of child
care center. Company built a $10 million state–of –the-Art child care
center. Also Procter and Gamble operates an onsite center for night
workers who cannot leave their children alone at home in the night.
While establishing such work life balance programs, companies are finding
that employees who enjoy the benefits of such programs remain effective
contributors toward company goals. Also such programs can be a point of
attraction for potential job applicants.

1.5 HR PROFESSION AND HR DEPARTMENT

Human resource department of an organization needs to focus on activities

that add value to the company’s bottom line activities such as development of
human capital, change management, strategic planning and corporate culture
transition. Human Resource Department of any organization is responsible for
many workforce related issues such as identifying the needs of staff and trying
to meet them. It is also responsible for employee welfare and keeping employee
relations positive. Human resource department also focuses on maintaining
healthy and hygienic working atmosphere. The role of HR as a professional is at
the core of a company’s success as they develops and manages the culture in
their company.
HR profession is so diverse in nature that the HR professional has to
perform all-encompassing role. HR professionals have to be multi-
knowledgeable and competent in finance, sales, marketing and operations. The
person needs to be competent in legal matters, technical, cognitive and
interpersonal skills. To maintain harmonious relationship between employees
and organization is the prime goal of HR professional because employee’s
commitment towards organization is important for organization. Some of the
responsibilities of HR professionals are:

INTRODUCTION
8 TO HRM
 1. To develop the plans and policies and knowledge of corporate culture. Human Resource
Management
2. Involve in company’s strategy formulation by identifying and evolving
HRM strategies.
NOTES
3. Initiate the changes in an organization as internal change agent and
consultant.
4. Identify the problems and develop the solutions in human resource
areas.
5. Develop the communication channel between the employees and the
organization’s management.
6. Interviewing the applicants and informing them about job details,
benefits and conditions.
To be a successful and highly competent HR professional person needs to
be competent in following areas:
1. Business Mastery
To attain this mastery person should be keen and quick in
understanding and dealing with a business situation with a positive
way which will lead to a good outcome.
2. Personal Credibility

3. Change Mastery
HR professional should initiate the changes in the organization in
positive way. Person should be capable of anticipating the changes
may it be outside the organization and prepare the policies in advance
to deal with them in harmonious way.
4. HR Mastery
The HR professional needs to be able to handle the workforce related
issues skillfully. To keep the employees motivated different
performance appraisal systems needs to be implemented. Person needs
to be knowledgeable to identify need of job and recruit the appropriate
workforce.

1.6 FUNCTIONS OF HRM

Functions of Human Resource management are divided in to two categories:

A. Managerial functions
B. Operative functions.

INTRODUCTION
TO HRM 9
 Human Resource
Management

NOTES

Fig: Functions of HRM

A. Managerial functions
Managerial functions include function like planning, organizing,
directing and controlling.
i. Planning: Planning is primary function where number of staff
members needed to achieve the target by an organization are
determined. This particular function helps managers to design the
road map for the future.
ii. Organizing: this is a function where responsibilities are allocated
to the employees by considering their knowledge, skills and
competencies.
iii. Directing: this function activates the staff member working at
different levels to contribute effectively towards organizational
goal. This function also includes supporting and motivating
employees to contribute maximum by keeping focus on
organizational goal.
iv. Controlling: In this function performance of job holders are
checked and compared with the target given to them. If any
deviation is found between the target and actual performance,
controlling measures will be taken.

B. Operative Functions
Recruitment and selection, training and development, performance
appraisal, employee welfare and compensation management are the
INTRODUCTION main operative functions of Human Resource management.
10 TO HRM
 i. Recruitment and selection: recruitment is a process of creating Human Resource
pool of eligible candidates for selection purpose while selection Management
is a function of picking right candidate from the pool of eligible
candidates for the job. NOTES
ii. Training and development: training and development is a
function of improving knowledge skills and competency of the
staff members as per the need of task and organization.
iii. Performance appraisal: in this function, employee’s actual
performance and behavior is evaluated for the purpose of finding
out scope for improvement and reward finalization.
iv. Employee welfare: this function takes care of facilities and
benefits provided to an employee for taking in to consideration
their wellbeing.
v. Compensation management: this particular function takes care
of salary finalization, incentives, bonus and other benefits for the
employees.

1.7 GLOBAL PERSPECTIVE OF HRM

Because of globalization, every big or small organization has become global

giving rise to diverse workforce and cultural sensitivities. All this led to the
development of global HRM. In most organizations culture is the driving force.
To deal with the issues arising due to these cultural diversities, employee
engagement and retention strategies should be responsive. Reducing the risk of
international workforce and cross cultural issues is the main objective of
international or global HRM.
While working in international organization difficulty arises in
implementing HR practices. In host country while hiring employee, it is difficult
to get the right talent at right time. Diverse talent is available such as local
candidates, expatriates. But the problem arises whom to give preference. Again
hiring procedures are dictated by the host countries according to which employee
recruitment has to be done. All these factors have influence on hiring process.
During training and development program emphasis is given on cultural
and language training. Culture and language are the main issues which are to be
resolved during training program which will help employees to adapt to the work
culture. While deciding compensation policy appropriate strategy has to be
devised to compensate expatriates. Compensation policy should be such that it
will minimize the pay difference between parent, host and third country nationals.
Issues may also arise due to repatriation of employees.
While working with multinational organization, it is observed that need for
parent country and third country national decreases because more trained local
candidates become available. At the same time there is also the risk of physical
safety of employees. When expatriates fail to perform well it causes financial INTRODUCTION
losses to the firm. TO HRM 11
 Human Resource Dealing with the political leaders, economic and social interest groups
Management become difficult for HRM professional when working for global organization.
Also the labour laws changes from one country to another country. It is quite
NOTES difficult task to find right people at right time who can adapt to changes and
challenges of working in global organization. To keep the balance of local
decisions and decisions at Head Quarter level is the challenging task.

Summary
• Human resource management is set of activities that focus on effective
use of human resource in an organization.
• It encompasses the activities of recruitment, training and development,
salary and wages management, employee welfare, health and safety
management, services and benefits and so on.
• The human resource manager needs to take the decisions to meet the
organizations economic and societal objective by hiring, developing,
rewarding and maintaining the workforce in the organization.
• Successful and competent human resource management is essential for
organizational success and growth.
• The objective of HRM includes finding the right talent, providing them
effective motivation and leadership, paying and treating them fairly and
getting them involved in work productively.
Some of the challenges faced by HR managers are
1. External challenges (Environmental challenges)- changing
environment, political and legal forces, culture, economic challenges.
2. Internal challenges (Organizational challenges)- company strategy,
company characteristics, organizational culture, employee concerns
etc.
3. Individual challenges- productivity, empowerment, job insecurity and
work-life balance.
In the light of new challenges, there are indications that HR professional
will play an increasingly important role in an organization’s long range planning
and strategies.

Test Questions
1. Explain the nature and scope of Human Resource management.
2. What are the functions that are performed by HR department?
3. Discuss the external factors that affect the HRM practices in the
organization.
4. What are the organizational challenges faced by HRM professionals?

INTRODUCTION *****
12 TO HRM
 Human Resource
Management

UNIT NO - II
HUMAN RESOURCE PLANNING
NOTES

OBJECTIVES
After reading this chapter you should be able to
• Explain the importance of human resource planning.
• Describe the internal and external factors affecting labor supply and
demand.
• Explain the importance of job design.
• Define recruitment and explain its importance
• Identify multiple sources for recruiting employees and prepare a
recruitment advertisement.
• Evaluate recruitment methods.

CONTENT
2.1 Human Resource
2.2 Demand and Supply Forecasting
2.3 Factors affecting HRP
2.4 Job Analysis and Job Design
2.5 Recruitment and Selection- Recruitment Process
2.6 Sources and Methods of recruitment
2.7 Evaluation of Methods of Recruitment
2.8 Steps in selection

2.1 HUMAN RESOURCE

HR strategies are developed in a proactive manner with staff attempting to

design and develop appropriate Human Resource system which will meet
anticipated business conditions. Human resource planning is the ongoing process
of systematic planning of organizations most valuable asset i.e. human resource
to achieve its optimum use. In organizational planning human resource planning
is a sub system which is also called as strategic manpower planning. It helps
significantly in meeting future personnel needs and shortage of staff strength or
surplus of the same clearly indicates the absence of planning. HUMAN RESOURCE
PLANNING 13
 Human Resource Human resource planning being a part of strategic planning serves at both
Management ends of the strategy. At the first end, it provides inputs in the form of workforce
with required skills and numbers and at the other end once the strategy is set,
NOTES resource allocation is made according to the need of business strategy. But to
serve these needs manager must anticipate these demands in advance. Thus the
process of estimating the future quantity and quality of people required on the
basis of annual budget and long term business plans is called as HR Demand
forecasting. Demand forecasting helps in preventing the shortage of people.
Human resource planning makes sure that at the right time individuals with
required skills are available where they need to be, to meet organizations future
and current demands. An organization should have perfect balance between the
labour demand and available labor supply.
The term labor demand refers to the number of required skilled labor to
meet the organizations current and future needs. The term labor supply refers to
the potential skilled employees which are available to perform the job. This
clearly indicates that manager has to look at both the labor demand and its supply.
He should also anticipate the external factors that will affect demand and supply
of labor and make plans accordingly. A labor shortage is faced by the company
when labor demand exceeds the available labor supply. And the labor surplus
occurs when supply is more than demand. When there is shortage of labor, to
cope up with the situation managers use various tactics such as overtime,
outsourcing, off shoring etc. to cope up with surplus labor situation managers
can use tactics like lay off and early retirement plans. But before implementing
such tactics one has to know about organizations actual labor supply and demand.

2.2 DEMAND AND SUPPLY FORECASTING

Relative demand and supply for labor is influenced by variety of factors.

Manager must study both organizational and environmental factors that exert the
pressure on supply of labor relative to its demand.
Organizational factors or internal factors-
In the different parts of an organization numbers of employees are always
changing due to variety of reasons. Some of the influencing factors are employee
turnover, employee productivity, company’s performance, firm’s strategic
direction etc. Let us discuss these factors in details.
1. Employee turnover-
Employee turnover directly affects the labor demand. Employee
turnover occurs due to the voluntary and involuntary termination of
employees. Voluntary termination refers to the termination initiated by
employee itself and involuntary termination refers to the termination
HUMAN RESOURCE
initiated by employer. Organization gets significantly affected when
14 PLANNING
 talented employees leave the organization. Employee co-workers also Human Resource
get affected and it may lead to the slow performance by the co-workers Management
of an employee. Co-workers of an employee need to pick up to ensure
that work must get done even in the absence of the employee. If the NOTES
job that worker was performing is critical to the organization, vacant
positions needs to be filled up immediately and to attract the candidates
for this vacant position, manager may need to increase the salary for
the same position. Also the time demand is associated with this
decision.
In a company of 1000 people, if employee turnover rate is 10%, it
means that in a year company loses 100 employees. In this situation,
to remain competent, management must make sure that all these vacant
positions get filled and their related jobs are completed.
If company is losing 25 people per month, maintaining sufficient staff
level will become more difficult. Because when an employee leaves
an organization, very few individuals are there who will be moved to
other positions. In this case, though the existing employees have
chances of promotion, the same will diminish the potential internal
labor supply available for higher level vacant positions within an
organization.

2. Employee movements
Within organizations employees are moved from one job to another
job. For this purpose company uses promotion, transfer or even
demotion of an employee which changes the job profile. Promotion is
a strategy in which employees are moved to higher level positions with
increased levels of responsibility and authority. Employees can also
be transferred to the jobs of similar level of responsibility within an
organization. But management has to be careful that these movements
are not done haphazardly. To track the employee movements some
tools can be used such as replacement charts, succession planning and
transfer matrices.
Replacement charts are used to identify potential replacement
employee for job opening within an organization as it shows potential
employees who can be moved from one job to another if the posts are
vacant. This kind of tool helps company to make personnel changes
on short notice.
Succession planning focuses on identifying most capable employee
for top managerial positions or key jobs within an organization. This
kind of tool helps in finding out who is next in line for key jobs. While
preparing this succession planning tool, company also requires filling
in information about a particular skill to be developed for particular
job by an employee. Hus, succession planning not only helps managers HUMAN RESOURCE
PLANNING 15
 Human Resource but also guides potential employees to develop appropriate skills for
Management advancement opportunities.
Transition Matrix helps to understand internal movement trends of the
NOTES organization’s workforce. It provides model for tracking employee
movement throughout an organization which affects firm’s internal
demand and supply of labor. Transition matrix provides data to prepare
for workforce demand in future.

3. Employee productivity
Employee productivity refers to the assessment of the efficiency of an
employee i.e. the level of firms output relative to the inputs used to
produce the output. It can be evaluated in terms of the output of an
employee in a given period of time. Productivity of an employee is
assessed relative to an average of employees who performs the similar
jobs in the organization. It is an important consideration for business
because success of an organization depends upon the productivity and
efficiency of its workforce.
Productivity ratio shows the number of workers needed to achieve
particular output level. This helps to plan for the future growth or
decline in the demand for the products. One can calculate the ratio by
collecting data of an organization’s output level i.e. sales data and
amount of products produced versus the number of employees working
for that given period of time.

Table- calculating productivity ratio

Table shows hypothetical productivity ratio for a manufacturing plant.

From the above data we can see that productivity ratio for year 2010
was 50(4000/80). In this case average productivity ratio is 51 units per
HUMAN RESOURCE employee. If the estimated productivity output is 8000 units, dividing
16 PLANNING
 the output by average productivity ratio i.e. 51 we get forecasted labor Human Resource
demand of approximately 157 employees. Based on this data company Management
will need to recruit 7 more employees to maintain current level of
productivity. NOTES
Such kind of calculation can be performed in different industries.
Depending upon the type of business, companies can use sales data,
phone volumes, customer interactions etc. Companies can change their
productivity ratio with the help of more extensive recruitments, better
selection decisions and effective training sessions. This concludes that
more talented workforce in the firm can increase level of productivity
per employee.

4. Company Performance
Overall company performance influences the labor demand and
supply. At some point it happens that company realizes that they are
facing labor surplus or shortage of labor. This is a common problem
among the poorly performing companies. Companies don’t need or
cannot afford the same number of employees as they did previously
when customer demand for the product gradually decreases or
diminishes. But better performing companies can afford greater
number of employees and can pay for top notch employees.

5. Strategic direction
As we know, company strategies always keep on changing. Even
productivity ratios have limitations as they are based on assumptions
that current process will remain intact in future. But actually when the
strategy changes, it affects the productivity ratio. Company can step
up for improving performance by making decisions about whether they
should retrench or plan for expansion, maintain the status quo etc. And
changes in the strategy directly affect the labor demand or supply.
When companies plan to expand their operations to strive for growth,
they will try to increase their productivity to capture more market
share. This will lead to labor shortage. But when companies are
planning to reduce the operations, they are likely to face surplus labor.

Environmental factors or External factors

Managers can control the factors which are internal to organization. But
some external factors such as labor market, economic conditions, industry trends
etc. over which managers have very less control or they can’t be controlled at
all. Let us discuss these factors in detail.
1. Local labor market
Relative size of local market and its composition with individuals
having different skill sets, directly affects the labor potential to serve HUMAN RESOURCE
PLANNING 17
 Human Resource as a viable source of labor for companies. Location of company is
Management major driving force of the size and composition of the labor market. If
company is located in urban area, it will have access to larger labor
NOTES market as compared to rural area. In certain areas employees will lack
the skills needed by the company which leads to insufficient labor
supply to meet company demands. Similarly in college town, highly
educated labor will be available to do a variety of types of work.

2. Economic conditions
When the economy is in recession, the demand for many products drop
significantly and during high economic growth the demand for
products increases. This fluctuation in demand for consumer products
directly affects the labor demand for companies to meet their customer
needs. During the period of high economic growth consumer demand
for product increases and to meet the consumer needs labor demand
also increases. Similarly in recession, the consumer demand drops
which leads to the drop in labor demand by companies. Apart from
this, unemployment rate has great impact on labor availability. It
becomes easier for the companies to hire qualified individuals when
unemployment rises. And when the unemployment rate drops, hiring
qualified staff becomes difficult.
For effective management of workforce, firm should anticipate the
need of employees in particular department and balance their demand
with their available supply. Once the firm knows where there is
shortage of labor and where labor surplus exists, firm can make next
step to balance them. Let us discuss the labor shortage and labor
surplus tactics.

Labor shortage tactics

1. Employee overtime
It refers to the employees working for additional time period beyond
their normal work schedules. This is the quickest way to overcome
labor shortage. Generally this strategy is used when labor shortage for
short period of time. Sometimes this strategy proves costly when
length of anticipated labor shortage increases. Also when employees
work for many overtime hours, they may become dissatisfied and can
lead to employee turnover creating further labor shortage.

2. Outsourcing and contingent labor

Outsourcing refers to getting work done from other companies. For
example, company can outsource the work of floor cleaning, food
service for their cafeteria. Outsourcing not only saves the money but
also allows the firm to focus on the activities they do best to achieve
HUMAN RESOURCE
competitive advantage. Apart from outsourcing, employees are also
18 PLANNING
 hired on temporary basis to overcome labor shortage. This kind of Human Resource
temporary labor is also known as contingent labor. Contingent labor Management
also saves money for company and provides the firm flexibility in
adjusting the available workforce relatively quickly. NOTES

3. Employee retention
Main cause of labor shortage is employee turnover. To overcome this
problem employee retention strategies can be implemented which
reduces recruitment and selection costs, saves time and money on
training new recruits. Ultimately this ensures that productive
employees remain with company. This simply means that the
companies having lower turnover rate are industry leaders in terms of
employee productivity and overall company performance.

4. Employee promotions
Existing employees from one department can be moved to another
department where there is shortage of labor. This takes place quickly
as compared to other labor shortage tactics but the drawback is that
movement of one employee from one department to another leaves
behind another vacant place with respective responsibilities. This
means that labor shortage is transferred from one department to
another.

5. New recruitment
This is the final tactic used to address labor shortage. Primary benefit
of new hires is that it provides the firm with permanent solution to the
labor shortage as full time workforce is available to the company. This
also increases the size of the workforce of the company, whereas
overtime or employee transition focuses on providing solution with
current employees.
If the shortage is temporary, hiring new people can result in a labor surplus
over long period of time. To make a successful decision manager should have
knowledge of whether labor shortage is temporary or permanent. There can’t be
single best solution for labor shortage or surplus because every tactic has its own
advantages and disadvantages.

Labor surplus tactics

Some of the labor surplus tactics are layoffs, attrition or hiring freezes, early
retirement programs and movement of employees which managers use to address
labor surpluses. We will discuss these tactics in detail.
1. Layoffs
Layoff refers to quickly reducing no of employees. Primary advantage
of this tactic is that it helps managers to quickly adjust the labor size HUMAN RESOURCE
PLANNING 19
 Human Resource and its composition. This results in good balance between employee
Management capabilities and organizational needs. Though this tactic reduces
company’s immediate expenses, it can’t prove beneficial in future.
NOTES Also the announcements of layoffs can create feeling of job insecurity
among the employees and this can hamper the employee performance
in an organization. Company giving layoffs to the employees can face
harder time attracting new employees in future.

2. Attrition and hiring freezes

These tactics primarily focus on delaying the new recruitment.
Attrition means reduction in employee strength due to normal means
such as retirement and resignation and company’s decision not to fill
vacant position. Hiring freeze means temporary ban on recruiting new
employees for particular period of time. Primary benefit of this tactic
is it doesn’t create feeling of job insecurity among the employees
which layoffs do. Disadvantage is that current employees find
themselves over burdened while making up for labor shortage.

3. Early retirement programs

Early retirement programs aims at lowering firms workforce and labor
costs by providing employees with financial incentive to retire early.
But if the program is enticing or attractive, company can result in
greater employee exodus than company has planned.

4. Employee promotions, transfers and demotions

As these tactics can be helpful in labor shortage, they can also remedy
labor surplus. If some part of an organization is facing labor shortage,
surplus employees can be moved to the department where there is labor
shortage. Hence employees will not lose the job, thereby saving
company on layoff related costs.

2.3 FACTORS AFFECTING HRP

Human resource planning makes sure that at the right time right individuals
with the required skills are available where they are needed to be, to meet
organizations future and current needs. An organization should have perfect
balance between the labor demand and available labor supply. Following are
some of the factors that affect human resource planning.
1. Company strategy
Company strategy affect human resource planning in different ways.
HUMAN RESOURCE To remain competitive in market, some companies focus on cost
20 PLANNING effective strategy so as to acquire large market share. Some companies
 Human Resource
Management

NOTES

focus on quality and types of products or services i.e. product

differentiation strategy to achieve the competitiveness.
These kinds of strategies affect how quickly firms deal with labor
shortage and labor surpluses. Companies focusing on low cost finds
labor surpluses problematic and reduce surplus by using tactics such
as layoff which quickly reduces the size of workforce.

2. Organizational growth cycle

In smaller companies relative impact of labor shortage or surplus is
relatively greater than in large companies. When organization starts
growing need for human resource planning is felt. Reason is that
smaller companies are in much earlier stage of development and have
comparatively less labor slack or excess labor capacity. This lead to
limited internal workforce to cover the tasks and for filling new or
vacant positions. If the labor shortage is to be addressed quickly,
employee overtime tactics is more feasible as compared to new hires
as it will take longer time to fulfill the demand.
As compared to companies in earlier growth stage, matured companies
experience less variability and flexibility. As the growth slows down
and the workforce becomes old human resource planning is dominated
by retirement and retrenchment plans.
HUMAN RESOURCE
PLANNING 21
 Human Resource Further human resource planning focuses on labor surplus tactics such
Management as layoffs, retirement or retrenchment plans to meet the organizational
demands. At this stage HR department takes reactive actions instead
NOTES of being proactive as the organization experiences serious financial
and sales shocks.

3. Environmental uncertainties
Environmental uncertainties refer to political, social or economic
change. As noted earlier, we know that these factors have great impact
on all organizations. To deal with these kinds of uncertainties, human
resource manager should carefully formulate the recruitment, selection
and training and development policies. In addition to this, to balance
labor supply and demand balancing mechanisms such as succession
planning, transition matrix, layoffs etc. are included in the human
resource planning.

4. Time horizon
It refers to the time period for which a particular strategy will be
implemented in the organization. As we know that the conditions in
which organization is running keeps changing over the period of time
and no one can anticipate for how long particular business strategy
will work. So it becomes relatively difficult for the HR manager to
formulate the human resource planning policies while working in
uncertain conditions. When company decides to expand its business
operations, human resource manager focuses on hiring new recruits to
fulfill the demand of organizations according to the expansion plan.
This means that according to the business plans human resource
manager needs to keep hiring policies quite flexible.

5. Labor market
It is the market where potential people with required skills are
available. If the company is located in urban area, qualified, trained
and skilled labor will be easily available compared to the rural areas.
If company is located in rural areas, human resource manager will have
to depend on external labor market as less educated workforce is
available in local area.

6. Outsourcing
Outsourcing refers to get the work done from other companies. When
organization decides to outsource the part of the work, no human
resource planning is required.

HUMAN RESOURCE
22 PLANNING
 Human Resource
Management
2.4 JOB ANALYSIS AND JOB DESIGN
NOTES
Job Analysis is a systematic process of identifying the tasks, duties and
responsibilities that are to be performed in a job as well as competencies such as
knowledge, skills and abilities which individuals must possess to perform the
job successfully.

Job description involves summary of nature of a job or the tasks that are to
be performed, responsibilities of a job holder and the work conditions in which
job holder is expected to work.
Job specification the key competencies which job holder must possess to
be successful in the given job. Job description and job specification are the
important tools for employee management activities. For example, while
recruiting employees for a particular job, job analysis provides accurate
knowledge about the competencies that are needed to perform the particular task
in successful way and manager can make correct selection of required employees.

Job design
Job design provides the information about the tasks and responsibilities that
an employee is expected to perform in a particular job. Making use of job design,
company goals are translated into specific actions that employees are supposed
to perform. An effective job design help employees optimize their potential
contribution to gain the competitive advantage by focusing on the tasks and their HUMAN RESOURCE
responsibilities. PLANNING 23
 Human Resource While designing job managers need to consider
Management
1. A task that should be emphasized while designing a job
2. Simplicity or complexity of the tasks
NOTES
3. Employees’ ability to perform the tasks
4. Flexibility provided to the employees in terms of how and where they
perform their tasks.
In addition to this managers must take into consideration the competencies
needed to perform particular job in successful manner.
To enhance company performance is the ultimate goal of job design. To be
successful in this perspective, firm’s managers must understand the role of the
job that helps attaining competitive advantage for the company. Secondly,
managers must decide about how employees will perform their jobs. These
decisions shape the nature and extent of employees’ contribution towards
organizational objective.
Job design approaches focus on maximizing employee productivity by
different ways.
1. Efficiency Approach
This approach focuses on maximizing employee productivity by
simplifying jobs. This approach is based on Taylor’s scientific
management which makes use of time and motion studies. Techniques
used in this approach are job specification and job simplification.
Job specification refers to breaking down of job into simple core
elements which maximizes employee’s contribution towards achieving
competitive advantage.

HUMAN RESOURCE
24 PLANNING
 Job simplification involves removal of decision making authority from Human Resource
the employee and places them with supervisors which make available Management
wider pool of candidates and staffing becomes faster.
NOTES
2. Motivational Approach
This approach focuses on making jobs more interesting challenging
and complex to encourage employees. It uses following methods to
improve employee motivation:

Job Analysis Techniques

Following are some of the job analysis techniques
1. Observation
In this technique job performing employees are physically observed
and these observations are further analyzed to determine the main tasks
that are performed. This kind of technique is used to analyze the jobs
that involves repetitive tasks e.g. assembly line.

2. Interview
This is time consuming technique as it involves face to face question
and answer sessions which focuses on identifying the duties and tasks,
responsibilities related to the job, competencies required to perform
the job and working conditions.

3. Occupational information network

This kind of technique make use of online database of all kinds of jobs
which includes the information about tasks performed and related
behaviors and the job specification that are needed to perform job.

2.5 RECRUITMENT AND SELECTION- RECRUITMENT

PROCESS

Recruitment
It’s a process that occurs over a period of time and begins with identifying
the job openings that managers are supposed to fill. These job vacancies or
openings occur due to the reasons such as employee turnover, promotion or
employee movement within an organization. Also new jobs are created to fulfill
the labor demand when new process or new corporate strategy is to be
implemented.
This process is of considerable importance. Suppose, if some jobs become
vacant and no recruitment is done for long period, what will happen? If the job
HUMAN RESOURCE
is critical for organization then someone has to do that work until the new recruit
PLANNING 25
 Human Resource is found. Sometimes, even managers have to help or do the work until it gets
Management done if the company is small.
To attract the applicants, managers need to use different tactics such as
NOTES salary hike for that particular job or change in nature of job. This might lead to
the additional and unexpected costs to the company.

Recruitment Process
To be successful in recruitment process, manager must know the reason for
recruiting employees and what type of employees are needed to fulfill the
demand. If the objective for the recruitment is decided well before, recruitment
plan will be successful. Knowledge of the best recruitment sources and attractive
recruitment message helps to make recruitment process successful. Function of
recruitment is to locate manpower sources to fulfill job requirement and
specifications. From the above notes we can say that recruitment is the process
of identifying and attracting potential candidates from outside and within an
organization.
The selection process gets started once the candidates are identified which
includes collection, measurement and evaluation of candidates information about
qualifications needed for the position.

2.6 SOURCES AND METHODS OF RECRUITMENT

Once the job analysis is completely done and job specifications are
identified, key decision to be made is about whether to recruit from internal
sources or external sources. Internal sources refer to the existing employees of
an organization while external sources refer to the potential candidates present
in the market outside an organization. These external sources can be reached
through employment exchanges, educational institutes, recruitment agencies etc.
Which source to be utilized and by which means recruitment can be done totally
depends upon management policy, types of jobs, labor market etc. Decision about
recruitment sources depends upon nature and size of the company, number and
types of vacancies to be filled up and the time available for filling up the
vacancies.

Internal Sources
As mentioned earlier, internal sources refer to the existing workforce of an
organization. According to the job requirement employees can be moved from
one job to another job within an organization through promotions, transfer and
or employee demotions.

HUMAN RESOURCE
26 PLANNING
 Advantages of using internal sources are Human Resource
Management
1. Morale of the existing workforce is boosted as the get promoted.
2. Internal sources prove to be more cost-effective as it saves money on
NOTES
advertisements.
3. It also helps to save money on training and development of external
employees as existing employees are already familiar with
organizational culture and its operations.
4. Current employees get chance for job advancement.
5. It increases employee loyalty, commitment towards organization
which makes employees more productive.

Disadvantages of internal sources

As internal recruitment brings ‘inbreeding’ in the organization, new ideas
are restricted from coming in. When company needs new ideas or changes in the
corporate culture and to increase the workforce diversity, best way to reduce
inbreeding is to bring in new employees rather than promoting current
employees. When existing employees apply for the vacant position in the
organization and are not selected, they may become disgruntled, less productive
or even may leave the company. At some point of time, internal recruiting proves
to be temporary because promotions or employee movements leaves behind a
vacant positions which can be filled externally. Internal methods are not sufficient
to supply suitable pool of applicants.

External Sources
External sources include employment agencies, educational and technical
institutes, employment exchanges etc. External sources provide wide variety of
potential applicants with required skills. Recruitment using external sources is
greatly affected by labor market. Recruitment methods of a company and the
medium through which potential candidates search for a job, are highly variable.
In addition to this lack of labor mobility is another problem which arises due to
lack of knowledge about different job opportunities in labor market. Differences
in employer’s ability to pay, productivity and management attitude towards wage
rates, leads to the diversity in wage rates for the same occupation.
Management must decide whether to make recruitments internally or
externally. As the jobs above the entry level are usually filled with current
employees, external recruitment is limited mostly to the primary or entry level
jobs. Different methods that organization uses for recruitment are:
1. Direct method
In this method recruitment is done at educational institutes. Most
popular direct recruitment method is campus interview. Campus
interviews are cost effective as it saves money on advertisements. Also
HUMAN RESOURCE
these interviews are arranged on short notice and organization gets an PLANNING 27
 Human Resource opportunity to recruit among the fresh talent available in the form of
Management large pool of potential candidates. Another direct method is
establishing exhibits at job fairs where different kinds of skilled and
NOTES potential labor can be attracted on large scale.

2. Indirect method
Frequently used indirect technique of recruitment is advertising in
local newspaper- the most popular place to advertise the jobs. Though
newspaper is traditional and a viable option for advertisement even
today, the advent of internet has dramatically changed where people
go to search for job. Employers are now using internet more than they
use newspaper to post their jobs .Reason for this is that advertising in
newspaper is expensive as compared to the internet. Also posting job
on internet or company websites is more attractive. Organizations can
make use of company websites to recruit the employees. Recruitment
websites also provide as a greater tool than other types of advertising
options for posting jobs and company information can be provided in
easy and convenient way 24*7 to the individuals. Use of company
websites is cost effective technique for posting their jobs. Potential
candidates are provided with the all kinds of available openings on
one website.
A company shouldn’t only advertise online because many people use
internet for their job searches but everyone do not have internet access.
An organization must use multiple sources to make it sure that
organization is reaching most diverse audience possible with their
recruitment message.

3. Third party method

Frequently used third party recruitment methods are
Public employment exchanges- These are not- for-profit agencies
which are located in cities throughout the country. These exchanges
not only process unemployment claims but also helps job seekers by
providing career guidance. It also provides employers access to large
pool of both skilled and unskilled potential labors.
Private employment agencies- These agencies provide consultancy
services for fees. Agencies usually provide employers the candidates
for management positions or supervisory positions. Recruiters conduct
the initial screening and interview and sets up interview with the
company. For that, agency is paid with certain percentage of hires first
year salary after the hire has worked for at least 30 days.

HUMAN RESOURCE
28 PLANNING
 Human Resource
Management
2.7 EVALUATION OF METHODS OF RECRUITMENT
NOTES
Recruitment method selection is important decision of human resource
department. Organizational performance is depending on effective human
resource management. Recruitment is major function of human resource
management which involves selection of recruitment method. Selection of
recruitment method needs evaluation. Evaluation of recruitment method is based
on organizational need and business strategy. Attracting more applicants with
minimum cost and time is always objective of recruitment process. Organization
has to decide on priority manpower requirement.

2.7.1 Parameters for Evaluation of methods of recruitment

1. Time of recruitment
Very important parameter to evaluate recruitment method is time. How
immediate is need of manpower requirement some methods will help
you to fill immediate requirement.

2. Cost of Hiring
Cost of hiring is one of the important parameters for evaluation of
recruitment method. Effectiveness of recruitment method measured
on cost involved in recruitment process human resource department
has to manage cost of recruitment within the budget.
3. Quality of Hiring
Quality hiring is major task of human resource management.
Organizational performance and productivity is depend on quality of
hiring.

2.8 STEPS IN SELECTION

Selection is a process of picking the right candidates with prerequisite

qualification and abilities to fill the jobs. It’s quite lengthy and complex process
as it involves number of steps and this process may vary from organization to
organization depending upon urgency of hiring people and job requirements.
Requirement process is followed by selection process. Selection process involves
following steps:
1. Preliminary interview or screening applications
Application screening is done to narrow down the list of applicants
worthy of further consideration by completely removing or weeding HUMAN RESOURCE
out undesirable candidates at the outset. It’s an essential sorting process PLANNING 29
 Human Resource in which prospective candidates are informed about the job nature and
Management an organization. At the same time, necessary information about
applicant’s qualification, skills, experience etc. is elicited. This
NOTES preliminary interview also helps to observe the candidates verbal
communication skills, which is most useful information if these skills
are essential for successful job performance.

2. Application form
This device helps to collect information from candidates. This device
should be designed so that it will provide all the information relevant
to the employee selection.

3. Selection test
In order to check mental ability, individuals’ attitude and behaviour
certain psychological tests are conducted. E.g. Intelligence test,
aptitude test, interest test, personality test, psychological tests etc.
These tests are conducted to judge the suitability of the candidate for
job.

4. Employment interview
This is an essential element of selection procedure without which
selection process is incomplete. In the employment interview
information collected through application form and selection test is
cross-checked where candidates demonstrate their capabilities and
strength in relevance to their academic credentials. This step in
interview helps to obtain information about candidates’ background,
education and work experience. This step also informs the candidates
about company’s’ human resource policies and specific job profiles.

5. Medical examination
Candidates who have crossed above mentioned stages are sent for
medical examination to company’s physician or medical officer.
Medical examination is conducted to check whether candidate is
physically fit for the job or not. Unfit candidates are rejected. Medical
examination also helps to reveal existing disabilities of candidates and
provide a health record of employee at the time of selection.

6. Reference checks
Firms usually asks the candidates for references to cross check the
authenticity of the information provided by the candidate. References
can be previous employers; educational institutes from where the
candidate has completed his/her education. These people are requested
to provide frank opinion about candidate.
HUMAN RESOURCE
30 PLANNING
 7. Final approval Human Resource
Management
The candidates which are shortlisted by the human resource
department after crossing all the above steps are finally selected by
the executives of concerned departments. NOTES

8. Employment
Employment is offered to the candidate in the form of offer letter
mentioning the post to be offered, salary grade and the date by which
candidate is supposed to join and other terms and conditions.
Appointment is generally made on probation period of six months or
one year. If candidate gives satisfactory performance, he is finally
confirmed in the job.

9. Induction
Process of introducing new employee to the company and their
colleagues, informing them of the activities, customs and traditions of
company is called as induction. This process is conducted to
acclimatize the new employee with the new working environment.

10. Follow up
This is a stage where employee is asked about how he or she feels
about progress till date. Also employee’s immediate supervisors are
asked for the employee’s performance. If the follow up gives
unfavourable report it indicates that probably there has been a fault in
selection process. It is also essential to follow up new employees to
make sure that employee is settled in new work environment or not.

Summary
• Human resource planning (HRP) is referred to as manpower planning or
personnel planning and is concerned with the utilization of human
resources to help achieve organizational goals.
• This is done by assuring that the required manpower is available when
needed and utilized efficiently.
• It is a system of matching the supply of workforce with the organizational
demand within a given time frame.
• To be effective, any human resource plan needs to be derived from long
range strategies of the organization.
• Human resource planning is greatly affected by the factors such as
company strategy, organizational growth cycles and planning,
environmental uncertainties and planning, time horizon, labor market and
outsourcing.

HUMAN RESOURCE
PLANNING 31
 Human Resource • Job analysis help identifying the tasks, duties and responsibilities of the
Management job to be performed and the competencies required by the job performer
or the employee such as knowledge, skills and abilities.
NOTES • A successful Human Resource planning requires joint efforts by the HR
department and the operating workforce or the mangers in the
organization.

Test Questions
1. What is Human Resource Planning? Describe the various factors
affecting Human Resource Planning.
2. Explain the various factors affecting demand and supply forecasting.
3. Discuss the various sources and methods of recruitment.
4. Describe the selection process in detail.

******

HUMAN RESOURCE
32 PLANNING
 Human Resource
Management

UNIT NO - III NOTES

TRAINING AND DEVELOPMENT

Objectives
After completing this chapter you will be able to
- Know the meaning and importance of training program.
- Know the various training designs.
- Discuss the types of training needed in the organization.
- Develop a way to measure the effectiveness of training.
- Make decisions about training within the context of organizational
demands

CONTENTS
3.1 Need and importance of training and development
3.2 Training need analysis and techniques
3.3 Design training program
3.4 Types of training
3.5 Training evaluation
3.6 Executive development
3.7 Concept of career development

3.1 NEED AND IMPORTANCE OF TRAINING AND

DEVELOPMENT

Training
It is the systematic process of providing employees with the required
competencies such as knowledge, skills and abilities to perform their current job.
For example, if an employee needs to learn to use new computer software to do
his job, he needs to be trained on the new software. Training can be given in
many forms such as on the job training, online training or classroom training,
training by participating in role plays or simulations or by using these methods
in combination. TRAINING AND
DEVELOPMENT 33
 Human Resource In contrast development focuses on future aiming at preparing employees
Management for additional responsibilities in different jobs at higher level. Training and
development helps an organization to equip its workforce with sustained
NOTES competitive advantage.
Development refers to learning opportunities that helps employees grow. It
provides employees with general knowledge and attitudes which proves to be
helpful in higher position. Training and development proves to be critical
activities for success of a company. Appropriate training and development
opportunities increase employee satisfaction and help them to perform at higher
levels and achieve company goals.

3.2 TRAINING NEED ANALYSIS AND TECHNIQUES

Though training is costly and time consuming process, it has potential to

improve employee performance. To conduct a training need analysis is essential
task because then only manager can understand where the need of training lies.
Needs assessment helps to identify the gap between what employees are expected
to do and what are they actually doing and training helps to fill this gap. Training
should be designed such way that it supports the strategic goals of a company.
An effective training needs analysis involves organization analysis, tasks analysis
and person analysis.
Organization Analysis- Training needs analysis starts with organization
analysis which aims towards determining the firms’ progress towards its
objectives and goals. Training gaps can be found by SWOT analysis i.e. scanning
environment for opportunities and threats and internal evaluation of strength and
weakness.
Organization analysis not only determines where training is needed but also
determines the internal and external factors affecting company performance. In
the external environment, location and size of the labor market determines the
availability of the skilled labor to fulfill the organizational demand. New
technologies provide more efficient and effective processes. But managers need
to find out whether there is any gap between the employees existing knowledge,
skills and attitudes and the ones which are required to cope up with the new
technology. To comply with the new laws employees need to be trained. When
company takes new initiative such as expansion of process, managers should
consider whether the employees have capabilities to take advantage of this
opportunity. When company implies labor surplus strategies such as layoffs and
hire freeze, the retained employees needs to be trained to take on additional
responsibilities.
In the internal environment, employee turnover, absenteeism, accidents
taking place in the organization are some of the indicators which indicates the
need for training. High absenteeism indicates that lack of proper training creates
TRAINING AND pressure or stress which can lead to the employee turnover. Lack of proper safety
34 DEVELOPMENT training causes accidents. Sometimes employees’ supervisors need training or
even their co-workers need to be trained so that issues such as employee Human Resource
grievances or illegal behaviors such as sexual harassment do not arise. Management
Tasks Analysis- Next step to organization analysis is task analysis which
is carried out to find gaps between current KSAs of employees and the KSAs NOTES
needed to perform the required work to support organizational objectives. As
noted earlier organization analysis focuses on finding training gaps across
organizations’ workforce. Tasks analysis identifies specific training content which
will help to close the gaps between employees’ current competencies and those
which are actually required to make value-added contributions to their
organization.
The gaps can be due to different reasons. The hired employees of the
company might not have required skills. Sometimes job analysis might not be
performed properly which can lead hiring employees for the wrong skill set.
When organization changes its direction, the job needs to be restructured.
Sometimes employees with required skill set might not be available in the labor
market. Task analysis reveals the discrepancies between the employees’ existing
KSAs and the ones which are actually required. Increase in customer complaints,
increase in numbers of accidents, low levels of employees’ performance are some
of the indicators which indicate the need for training.
Person Analysis- A person analysis helps to identify which employees need
to participate in training program. Data which is obtained from instruments such
as interviews, performance appraisals, recommendations of supervisors,
employee skills inventories etc. helps to make this decision. Also employees’
skills tests and their individual production records help to determine which
employees need training.
Managers must make it sure that training is addressing the gaps between
organizations’ desired outcome and an employees’ individual performance. Some
non performing employees in the organization might have right qualifications
but they might not be willing to use it. This indicates need of person analysis and
effectiveness of training. Person analysis is a great tool to identify the situation
in which employees are not properly trained but it does not overcome the problem
of employee motivation. When there is lack of motivation for employees to
perform their job, it indicates the need of performance management rather than
employee training. Sometimes problem is not the lack of skills, but the problem
lies in communication gap regarding organization’s expectations between
managers and employees.

3.3 DESIGN TRAINING PROGRAM

Information collected in training need analysis provides information about

where training is needed in the organization, what should be the focus of the
training program and which employees needs to be trained. As this information
is valuable to the organization, planning of the training program should also be
of same value and effectiveness. The ultimate goal of the training program is to TRAINING AND
DEVELOPMENT 35
 Human Resource bridge the gap between the desired and current performance of employees
Management through the development of training program.
If the goals of the training program are clearly understood, it will help to
NOTES plan result oriented training program which will support the organizational
mission. Effective training program includes instructional objective of a training
program, appropriate lesson plans and principles of learning. We will discuss
these in details.

3.3.1 Instructional objective

Instructional objective provides the purpose of training program and also
shows what is included in it. The objective needs to be supportive of
organizational goals and should be clearly communicated to the employees so
that they know what they are going to learn from the training and how it will be
utilized in the job. In simpler terms it serves as guide to the trainer as well as
trainees.

3.3.2 Lesson planning

Lesson plan provides a map of what should be covered during each training
session to achieve particular objective. It also provides the details about how the
session will be carried out, what will be taught to the trainees and how, how long
each session will last etc. It works exactly similar to the lesson plans prepared
by a school teacher.

3.3.3 Principles of learning

Only the well prepared lesson plan is not necessary for effective training
sessions. Trainers also need to have the knowledge of different methods to train
the different employees, because all people cannot learn in the same way or at
the same pace. Some people can learn through demonstration while others can
learn by having it described to them. Many people learn through actually
performing the task. Keeping in mind all these things, training and development
plans should planned according to the learning preferences of employees. We
will discuss some learning principles related to learning styles, learning agility,
self-efficacy, training location and interest in learning.
1. Learning styles
Learning styles refers to how people absorb new information and
process it. Learning styles can be categorized into auditory, visual,
tactile and kinesthetic. Auditory learners are able to process and
remember the information by just hearing it. For auditory learners
lectures and discussions are the best training methods. Visual learners
when see the information especially in picture form such as tables or
maps, they can easily process it. So visual and audiovisual
demonstrations can be the best methods to train these employees.
TRAINING AND Some people can learn better through interacting with the material they
36 DEVELOPMENT are learning. These kinds of learners are called as tactile learners.
 Usually these kinds of learners underline what they are reading and Human Resource
often take down the notes when listening to the speakers. They prefer Management
the training programs that include writing activities which keeps their
hands busy. Learners which learn through actually doing the things NOTES
instead of just hearing or seeing it are called as kinesthetic learners.
We can conclude from all the above information that each employee
is comfortable with particular learning style. Managers need to identify
these differences which will help them to use a variety of training
approaches with their employees. This will definitely result into better
trained and more satisfied employees.

2. Learning Agility
Employees who look for new experiences and opportunities to acquire
new knowledge and skills are said to be high on learning agility. They
often try to incorporate the information into how they perform their
job. These employees are believed to be high potential employees.

3. Self-efficacy
It refers to the confidence that you can do something with respect to
the effectively utilize the information gained during training on their
jobs. Downside of this learning aspect is that employees having high
self-efficacy may rush through the training activity. On the other side,
employees having low efficacy can work hard to learn the things
during training activity.

4. Interest in learning
Manager needs to be careful while choosing the right training program
for employees because any single training method cannot be equally
interesting to everyone. Training sessions can prove to be effective
only when employees are genuinely interested in the content of the
training and are motivated to learn. Enthusiastic trainers and fun
learning experiences increase participants’ interest in the training
process. Interesting training programs ensures that employees
complete their training sessions and remember what they are taught.

5. Training location
Training location is the most important factor of the training process.
Basic things such as heat light and comfortable seating affects the
training sessions. A room that is too cold can distract the employees
as they try to keep themselves warm and if the room is too warm can
put trainees to sleep. Offsite training programs or the programs
sponsored by other organizations reduces the distractions caused due
to daily routines and unexpected events occurring in their jobs.
Whether it is onsite or offsite, location of the training program should TRAINING AND
DEVELOPMENT 37
 Human Resource be such that it ensures that environment is conducive to learning and
Management minimizes distractions.

NOTES Training methods

Managers are constantly making the decisions about how employees are
performing their jobs and whether additional training is needed to improve their
skills and knowledge. Appropriate training delivery method suitable for the
content and audience increases the value that training adds. In this section we
will discuss about different training methods.
1. On the-job-training
It takes place when co-workers or manager teaches an employee how
to perform a job in the actual job location rather than in a separate
training room. It is frequently used and most cost-effective method of
training. Benefit of this method is that during the learning process
employees are productive. Employees don’t have to take out time to
attend the training sessions. This method proves effective when the
trainer has knowledge that all trainees will not learn in the same way.
Sometimes it can be costly when trainer is not adequately trained to
perform certain tasks. In this case employees will not learn the right
way to perform job tasks. Internships are a type of on-the-job training
that is familiar to many students. It involves students working at
organization for a specific period of time which serves the purpose of
learning what a job is like. Students also learn about the relationship
between information learned in the classroom and actual practice in
the organization. These internships can be paid or unpaid. This
provides students an opportunity to try out a job of in interest. Best
performing interns often receive full-time job offers when they
graduate.

2. Classroom training
It’s a type of traditional learning that includes lectures, discussions,
role plays and other experiential activities and we all are very much
familiar with this. To train the employees lecturing is not an effective
method as it doesn’t always engage people. Lecturing can be used to
disseminate simple information but it doesn’t facilitate behavioral
change. Classroom training experiences can be enhanced by
incorporating role plays, discussions and other experiential activities
along with the lectures. Now, computer technologies allow companies
to create virtual classrooms that help to bring together employees from
different locations. Normally classroom training last for a shorter
period of time, perhaps one day instead of five days.

TRAINING AND
38 DEVELOPMENT
3. E-learning Human Resource
Management
It involves the use of Internet, computers and many other electronic
tools to deliver the information during training programs. Now,
training sessions can be conducted online, on demand regardless of NOTES
location of employee. This method of training helps an organization
to train more employees in efficient way and at faster rate. E-learning
can take place in many ways such as web based training, desktop
training, podcast training etc.
Web based learning refers to learning experiences accessed through a
secure web site such as online courses in which employees can log on
to a web site and participate in a webcast.
Desktop training refers to training approach which allows employee
to use software programs housed on their computer or servers to learn
new information or skills. It differs from the web-based training where
to learn any information employees need to log on to secure web site
which can be accessed from any computer whereas in desktop training
information is already housed on their computer.
Podcast training refers to the training through digital recordings which
can be downloaded and played back later at any point of time. It
reduces the time spent by employees in classroom and the cost of
employees transport to the training location.
Advantage of the e-learning is that it saves time and money needed
for the employee transport to training program location. On the other
side, the control of the program is more in employees’ hands which
can help employees to skip some part of the training session or move
quickly through the material. To avoid this kind of malpractices,
company should pilot the training program with small group of
employees to make sure that it achieves the desired goals.

4. Audiovisual training
It refers to the training making use of video presentation of the
information which is usually stored on a DVD and CD. Presentations
can be seen individually or in groups depending upon the objectives
and goals of training. Teaching computer skills using video can be
done individually. Training of team building can be best done in groups
which help employees to practice what they are learning from the
video. Video training ensures that employees receive the same
information. These training materials can be prepared by the
organization or they can buy programs off the shelf. Disadvantage is
that preparing a training material can be expensive or even off the shelf
programs can also be costly as it involves per-participant charge each
time they are used.
TRAINING AND
DEVELOPMENT 39
 Human Resource 5. Simulations
Management
Simulation based training involves the use of computer software to
create the model of real world scenario. During the training employees
NOTES are taught how to perform certain jobs in the real world scenario. Thus
simulated training is devised job training which is not actually on the
job but is away from the job. It helps employees to learn complicated,
hazardous and critical jobs and better prepare the employees for the
real life problems. Simulation models are extensively used in training
programs of different sectors right from IT professionals to Astronauts.
Simulation leads to high rate of completion as it keeps the employees
engaged in learning process. Drawback of the method is that
developing a simulation is quite complex process.

6. Blended learning
It refers to the use of multiple modes of training, often with one part
being online to achieve the training goals. In simple words, it is a
combination of offline and online learning in a way that one
compliments the other. A student attending the class in a real-world
classroom setting and supplement the lesson plan by completing online
multimedia coursework is the best example of blended learning.

3.4 TYPES OF TRAINING

Training can be categorized into four categories such as compliance

training, knowledge training, basic skills training and behavioral training.

3.4.1 Compliance training

It refers to the process of educating employees on company laws, its policies
and regulations. Organizations provide compliance training related to workplace
discrimination and harassment, records management, protecting trade secrets,
bribery etc. Compliance training ensures that employees know about what they
can do and cannot do from legal point of view. Different types of compliance
training are needed for different types of jobs. Supervisors need to have
knowledge of employee laws dealing with discrimination. Supervisors working
in manufacturing plant needs to know about workplace safety laws. These are
some of the examples that show how particular type of job affects the need for
compliance training.

3.4.2 Knowledge training

In today’s global business environment to achieve competitive advantage
knowledge is recognized to be the key component. Knowledge can be of any
TRAINING AND type. It can be technical or practical. Information of how machine works is a kind
40 DEVELOPMENT
of technical knowledge where as different approaches to project management is Human Resource
a kind of practical knowledge. A firm’s job description provides the information Management
to the employees about required knowledge and training programs are planned
accordingly to fill the identified gaps. NOTES

3.4.3 Skills training

To perform any kind of job certain skills are required along with the
knowledge. Skills training include proficiencies needed to actually perform the
job. For example, an administrative executive is trained in how to answer the
phone whereas salesperson is trained in assessment of customer needs and on
how to offer the customer information to make buying decision. A job description
which is well written provides the information about the required skills to
successfully perform the job and a person analysis better describes the extent to
which employee have those skills. When information is available about both of
these aspects a training program can be developed to address the skill gaps.

3.4.4 Behavioral training

Employees need training on the behavioral aspect of the job which focuses
on “how” to get the job done. For example, job which needs to be performed in
a team, team skills need to be taught to the team members. Time management,
leadership development, team training, customer service, sensitivity training are
some of the examples of behavioral training. Employee’s interaction with
customers can be improved through customer service training.

3.5 TRAINING EVALUATION

A successful training program is incomplete without evaluation. Evaluation

is the most important component of the training program. As training programs
are expensive, it is important to make it sure that they are delivering desired
results. Training program is evaluated in four levels.

3.5.1 Reaction
This level focuses on employees’ reaction to the training program.
Employees are asked to rate the aspects of training programs such as extent to
which employees have learned in the sessions, whether the course was
challenging, whether the instructor was motivating, was the training session
effective etc. on the scale of 1 to 5. The objective of this level is to measure
employee’s reaction to the course of training i.e. how the employees are feeling
about their learning experiences. The advantage of this level of evaluation is that
it can help to find out the problems particularly related to trainer or content of
training program. To be effective, considering only the reaction of participant is
not important as it won’t tell how much they learned and how effective the
TRAINING AND
training program was. It only tees whether employees liked it or not.
DEVELOPMENT 41
 Human Resource 3.5.2 Learning
Management
Providing new information or skills which will make employees implement
the same to their job is the main goal of the training programs. To determine
NOTES whether the learning has occurred during the training process pre-training and
post-training assessment can be conducted. If the results of these tests differs
then the organizations training program needs to be reviewed.

3.5.3 Behavior
Training program should be designed such that it helps to improve employee
performance in current job and it should also help employees to perform at higher
level and do the new things. Through training need analysis and the right
employee selection for training program will definitely improve the employee
performance. If there is high degree of transfer of training employees are more
likely to improve their performance. Transfer of training refers to the degree to
which the training program content actually brings the changes in job
performance. If the training content is more related to the tasks that employees
perform on their job, there will be greater transfer of training. For example, if
the training is conducted on the similar type of software that employees use on
their job, transfer of training in this case will be even more.

3.5.4 Results and return on investments

Different kinds of measures can be used to evaluate the returns on
investment of training program. These measures can include following factors:
- Total cost of training which includes charges for facilities, course material
provided to the trainees and remuneration to the instructor
- Per participant training costs
- Savings that are generated through reduced costs, reduced errors and
improved customer service
- Projected savings from conducted training program.

3.6 EXECUTIVE DEVELOPMENT

Executive development is aimed for the purpose of development of skills

and competencies of those individuals who has executive positions in an
organization i.e. 5% to 10% of top management. In many organizations we will
find special executive training teams which cascade them through different
strategies, goals for the management and overall organization. Executives must
adopt changes for development of organization and future leadership in the
organization. Change is the only constant factor in today's agile business
environment. Success of organization is depending upon executive development
TRAINING AND strategy of organization. Human resource management department is responsible
42 DEVELOPMENT
for career development of individuals and succession planning of organization. Human Resource
Executive development programs provide career paths and fast track career Management
planning for executives. Executive development is solution for employee
retention. Executive development programs aims for developing business NOTES
acumen, leadership responsibilities. Training and development activities
undertaken under this program for development of leadership in the organization
for meeting global challenges and the major areas are focused like technology,
culture, innovation , cross cultural issues etc.

3.7 CONCEPT OF CAREER DEVELOPMENT

Career is the lifelong process which includes series of activities for

developing one’s career. It refers to managing an employee’s career in an intra-
organizational or inter-organizational scenario. It involves skills training,
movement to higher responsibility job, and career change within an organization.
Career development is directly linked with individual goals and objectives. Some
companies provide the opportunities for employee career development where
employees need to meet the eligibility criteria and participate in rigorous selection
process. The program includes different activities which increases job related
competencies and support the career planning of an individual. Large companies
have well designed career development program but in smaller companies
employees have to take responsibility of their own career development.
Career counselors, managers, mentors and coaches play an important role
in assisting the employee to acquire the required competencies. Assessment
center, career workshops and job rotation provides the information to the
employees about where they are relative to the required competencies to move
into another job.

Summary
• Training is learning process which involves acquiring the required skills,
knowledge and attitudes to enhance employee performance.
• All training activities encompass the three main stages: to identify
learning needs, to deliver the training and to evaluate the results obtained.
• Training effectiveness mainly depends upon the proper diagnosis of
training needs and implementation strategy.
• Training needs analysis involves organizational analysis, tasks analysis
and persons analysis.
• At all levels the analysis of training needs involves defining the job to
be performed and the expected results and identifying the skills,
knowledge and attitudes required to perform the job.
TRAINING AND
DEVELOPMENT 43
 Human Resource • Various steps involved in the training evaluation are reaction, learning,
Management behavior and results.
• The concept of career development refers to managing an employee’s
NOTES career in an intra-organizational or inter-organizational scenario.

Test questions
1. What is mean by training need analysis? Explain the process of
training need analysis.
2. Discuss the need and importance of training and development
program.
3. Explain in detail the process of designing training program.
4. Discuss the different types of training.
5. Explain the different levels of training evaluation program.

*****

TRAINING AND
44 DEVELOPMENT
 Human Resource
Management

UNIT NO - IV NOTES
WAGES AND
SALARY MANAGEMENT

Objectives
After learning this unit you will be able to
• Explain the concept, objectives and methods of job evaluation
• Explain the need for compensation structure and its various components
like fringe benefits and executive compensation.
• Understand different types of wages and salary structure.

CONTENTS
4.1 Job evaluation
4.2 Wage determination
4.3 Types of wages
4.4 Salary structure
4.5 Fringe benefits
4.6 Executive compensation

4.1 JOB EVALUATION

Job evaluation refers to the administrative method of assessing the different

jobs or occupations. It’s a systematic process of determining the value of a job
in relation to another and serves the objective of determining the correct pay
scale. Job evaluation plays an important role in wage and salary determination.
Relative worth of job is determined mainly on the basis of job description and
job specification only. It proves to be the effective means of determining internal
pay relationships and helps to decide the company’s basic pay policies. Job
evaluation sets equitable base-pay relationship which serves as a foundation for
bonus or incentive plans. It also provides basis for employee movements within
the organization like transfers, promotion or even a demotion. Job evaluation
helps to control the costs of wages or salaries of the employees. It also helps
managers to reduce the employee grievances and improves employee WAGES AND
productivity through higher morale. SALARY
MANAGEMENT 45
 Human Resource Some objectives of the job evaluation are
Management
1. To maintain accurate and complete job descriptions of different jobs
in the organization.
NOTES
2. To provide standard procedure determining the relative job worth.
3. To determine fair and equitable pay scale.
4. To obtain internal and external consistency in wages and salaries.
Internal consistency refers to the concept of relative wages within the firm
whereas external consistency refers to a desired relativity of an organization’s
wage structure to that of the industry. Wages and salary surveys are necessary to
determine the external consistency which ultimately helps to serve the objective
of employee and employer satisfaction with wages and salaries paid.

The job evaluation process involves following steps

1. Collection of Job analysis data
Information is collected through one of the job analysis methods.
While gathering information job analyst must take care that similarities
and differences among the jobs are accurately captured. Because
ambiguous, incomplete or inaccurate job descriptions can result in
incorrect job evaluation.

2. Selection of compensable factors

These are the factors that the organization chooses to reward through
differential pay. These factors mostly include skills, knowledge,
working conditions, job responsibility etc.

3. Evaluation of a job
Job is evaluated using fundamental methods of job evaluation such as
quantitative methods and qualitative methods. We will discuss these
methods in details later.

4. Assigning pay to the job

Hierarchy of jobs in terms of their relative value to the organization is
the end product of the job evaluation exercise. Assigning pay to the
job hierarchy is referred to as pricing the pay structure which requires
a policy decision on how the organization’s pay levels relate to their
competitors.

JOB EVALUATION METHODS

Some common methods of job evaluation are grouped into two categories
such as Quantitative and Non-quantitative methods. The basic difference between
these two methods is that under non-quantitative methods, a job is compared as
WAGES AND
SALARY a whole with other jobs in the organization, whereas in case of quantitative
46 MANAGEMENT methods, the selected key factors of a job are measured.
1. Non quantitative methods Human Resource
Management
In this method jobs are compared as a whole with other jobs in an
organization.
NOTES
a. Ranking method
It is simplest method of evaluation in which each job as a whole is
compared with other and this comparison goes on until the evaluation and ranking
of last job. Job ranking is done in the order of importance of job from simpler to
the harder form and the importance is judged in terms of responsibilities, duties
and demands on the job holder. The jobs are ranked according to ‘the whole job’
rather than a number of compensable factors. Application of this method involves
following steps:
1. Carry out job analysis and job description to bring out the aspects that
are to be used for job comparison.
2. Identifying the benchmark jobs from all major departments and
functions which may be least or most important, or a job midway
between the two extreme ends.
3. To rank the jobs in the organization around the benchmark jobs until
all the jobs are placed in the rank in the order of their importance.
4. Finally all the ranked jobs are appropriately grouped by taking into
consideration the common features of the job such as skills, training
recruitments and the duties. And the jobs of the particular group
receive the same wage. Ranking method is used by the small
organizations where jobs are few and simple. This method is also
suitable for managerial job evaluation where contents cannot be
measured quantitatively. Being a simple one this method can be used
in the initial stages of organizational job evaluation.
Though this method is simple and quite economical to put into effect it has
no definite standards of judgment and also it has limitations when numbers of
jobs to be evaluated are more. It is less time consuming and little paperwork is
involved in it.

b. Classification/Grading method
In this method jobs are graded or classified depending upon the difficulties
or required skills to perform the job. Job grade is defined as group of different
jobs involving similar difficulty level or which requires similar skills to perform
the job. The job analysis provides required data to classify the jobs. The grades
are created by identifying some common factors such as knowledge, skills,
responsibilities etc. Some examples of job grades are clerical and non clerical
jobs, administrative jobs, and skilled jobs and so on. Once the grades are
established jobs are placed into their appropriate category depending upon the
WAGES AND
characteristics of a job and series of a job is created. Finally the wage rates are SALARY
fixed for each grade. This method is easy to understand and simple to operate MANAGEMENT 47
 Human Resource and being economical can be used I the small organizations. Job classification
Management helps to administer pay scale determination problem in easy manner. This method
is usually used for government jobs very rarely can be used in industries as it
NOTES cannot deal with the complex jobs.

2. Quantitative methods

a. Point-Factor method
This is most popular and widely used method of job evaluation and is
considered to be the extension of factor comparison method of job evaluation. It
is analytical and more objective method. In this method on the basis of various
identifiable factors such as skill, effort, knowledge, responsibility jobs are broken
down and points are allocated to each of these factors according to their
importance while performing the particular job. Then points allocated to various
factors are summed up and jobs with similar total of points are placed in similar
pay grades.
Steps involved in determining job points are as follows
1. Job to be evaluated is determined covering all the levels of
responsibility to be covered by the method.
2. Determine the factors to be used in evaluating the job. Number of
factors needs to be restricted to avoid over-complex scheme with
overlapping factors and duplication between factors.
3. Factors should be clearly defined so that different job raters interpret
them in the same sense.
4. Degrees of each factor are determined and point values are assigned
to each degree on the basis of arithmetic progression.
5. Finally points are added to give the total value of a job and money
values are assigned to points with predetermined formula.
It is the most accurate and comprehensive method of job evaluation as the
prejudice and human judgments are minimized so that system cannot be easily
manipulated. Though lot of clerical work is involved in recording rating scales,
the scales developed can be used for long time. This method is not suitable for
managerial jobs as the work involved is not measurable in quantitative terms. It
is quite expensive and time consuming method.

b. Factor comparison method

It is a combination method of both ranking and point-factor method as the
jobs are rated by comparing them and analyzing by breaking them into
compensable factors. This method is used to evaluate the professional and
managerial jobs. Steps involved in this method are:
1. Initially well recognized key jobs are selected from the cross section
WAGES AND of the department which represents all levels of wages and salaries
SALARY considered to be fair internally as well as externally.
48 MANAGEMENT
 2. Various job factors to be considered for comparison are identified Human Resource
which may be mental requirements, skills, responsibility and working Management
conditions, physical requirements etc.
3. Then each job factor is compared with the same factor of a key job NOTES
and rank is allotted.
4. By adding the ranks obtained by different factors of jobs the relative
worth of a job is determined. The ranks are then expressed in monetary
terms and these monetary values are added together to determine the
correct wage rate for the job.
This method provides more accurate information regarding relative worth
of a job as different factors are compared with the key jobs. Chances of
overlapping are reduced as the limited numbers of factors are compared for the
effective job performance. It is quite costly and time consuming method.

4.2 WAGE DETERMINATION

Wages refer to any economic compensation paid by the employer to their

employees for services rendered, under the contract of employment. According
to A.H. Hansen wages is the payment to labor for its assistance in production.
Wages include practically include anything of value that employees receive from
employers which includes hourly wages, salary, bonuses, fringe benefits, bonuses
etc. Employment benefits such as profit sharing payments, petrol allowance etc
also meet the definition of wages.
Wage determination refers to the listing of wage rates and fringe benefit
rates for each labor category of workers. Wages of the employees in the organized
sector in India are determined by different factor such as wage enactments,
prevalent wage rates, influence of trade unions etc. According to Lantham,
following factors have bearing on the wage formulation:
1. Cost of living- Workers need to be paid the adequate compensation
so that they will be able to maintain the acceptable level of living and
the concept of ‘minimum wage rate’ is based on the same justification.
However it becomes difficult to maintain the required level of living
due to inflationary spirals which leads to the increased cost of living
and fixed wages. Thus, compensation needs to be fixed or revive in
order to offset the increased cost of living by increasing dearness
allowance based on the cost of living index.
2. Productivity- Productivity is expressed in terms of production in
relation to time unit. According to the principle of payment by
performance, if the productivity of the worker is high, wage rate will
be high. Thus, any change in the productivity of worker will have its WAGES AND
SALARY
effect on the wage rate. Here, one should also consider that increase
MANAGEMENT 49
 Human Resource or decrease in the productivity is not always due to the workers efforts.
Management It may also due to the changes in technology, better management by
the higher level employees.
NOTES 3. Prevailing wage rates - To attract and retain the workers in the
organization wage rates need to be fixed as per the prevailing rates in
the industry. This is most widely used criterion for wage rate fixation
and is also known as ‘going wage rate’. Thus the prevailing wage rate
is fixed based on inter-firm wage rate comparison.
4. Ability to pay – Organizations tends to fix the wages according to
their capacity to pay. Wages beyond the organization’s affording
capacity will not enable the organization to sustain in the competitive
environment especially in the long run. Because such wages increases
the unit cost thus cutting the market share of an organization. In such
cases, to sustain organization follows the strategy of cost cutting by
reducing the wages and salary levels.
5. Attraction and retention of employees – The wages and salary levels
can be affected by the quantity and quality of the employees needed
by the organizations. For example, to retain the skilled employees at
highly responsible positions organization can decide to pay high wage
rate for these candidates. But for the scarce jobs wage levels will be
low.

4.3 TYPES OF WAGES

1. Living Wages
Living wages refers to the wages that are sufficient to provide for the basic
needs as well as certain amenities for the employee. It means the level of wages
that are sufficient to provide for the basic necessities and such amenities that are
considered necessary for the well-being of the employee and his family members
in accordance with his social status.
The term Living Wages has been defined as “The living wage should enable
the earner to provide himself and his family not just the basic essentials of food,
clothing and shelter but also the prudent comfort including education for the
children, protection against ill health, requirements of essential social needs, and
measures of insurance against the more import misfortunes against old age” by
the Fair Wage Committee Report.
Thus, Living Wage must provide not only the basic necessities, such as—
food, clothes and shelter, but also some comforts and amenities estimated by
WAGES AND current human standards such as—travelling, health, child education, social
SALARY needs, old age and recreation etc.
50 MANAGEMENT
2. Minimum Wages Human Resource
Management
According to Fair Wages Committee, Minimum Wages should provide not
only the basic necessities to worker but also provide for the maintenance worker’s
efficiency. This suggests that minimum wages must be sufficient to provide for NOTES
all requirements of education, health and other essential amenities.
Minimum Wages means the minimum payment to worker so that he will be
able to provide basic needs for himself and his family members and to maintain
his working efficiency only. According to some scholars, minimum wages should
ensure a minimum standard of living considering the health, efficiency and well-
being of the worker.
What should be the amount of fair wages is a question for which no specific
answer can be given. It depends upon the economic, social and geographical
factors of the country. Besides, it depends upon the size and paying capacity of
the enterprise also.
However, it can be said that minimum wages is the amount that is enough
for providing basic needs of the worker and his family and to enable him to
maintain his efficiency.

Objectives of Minimum Wages

Important objectives of minimum wages are as under
1. To maintain the efficiency of workers, particularly in the industries
where the workers do not get fair wages.
2. To discourage the strikes, lock-outs and industrial disturbances to
maintain industrial peace.
3. To increase the worker’s efficiency and protect their interests
particularly in case of unorganized workers.
4. To strengthen labour unions.
5. To help the employees maintain their standard of living.
6. To check the unhealthy competition among the workers and increase
their productivity.
7. To improve the management system and provide economic and social
justice to the workers.

3. Fair wages
Fair wages vary from country to country and from time to time, hence
cannot be defined in a précised manner. Therefore, fair wages can be determined
only after considering the particular industry circumstances for which wages are
to be determined. According to Encyclopedia of Social Sciences, fair wages refer
to the remuneration paid to the workers for the jobs which require equal
WAGES AND
efficiency and difficulty. Fair wage is more than the minimum wage and can be
SALARY
extended to the paying capacity of an organization. MANAGEMENT 51
 Human Resource
Management
4.4 SALARY STRUCTURE
NOTES
Salary Structure refers to the details of the salary being offered in terms of
the breakup of the various components constituting the compensation. It is the
set of parameters that define the salary. Two people can have the same salary but
still get different amounts of money every month this would happen when the
salary structure is different.
Salary structure determines the gross salary, in hand pays, allowances etc.
All these variables are paid to the employee as a part of his/her benefits and
compensation. If an employee does not have details of the components, he/she
cannot calculate the in hand salary.

Salary structure components

Following are the components of the salary structure
1. Basic Salary: It is the taxable base income and generally not more
than 40% of CTC. Basic salary forms the basis of salary structure
many a times. Most of the components may be defined as percentage
of basic salary.
2. House Rent Allowance: The HRA constitutes 40 to 50% of the basic
salary.
3. Special Allowances: Makes up for the remainder part of the salary,
mostly smaller than the basic salary and completely taxable.
4. Leave Travel Allowance: The non- taxable amount paid by the
employer to the employee for vacation/trips with family within India.
5. Gratuity: It is basically a lump sum amount paid by the employer
when the employee resigns from the organization or retires.
6. Provident Fund: Fund collected during emergency or old age. 12%
of the basic salary is automatically deducted and goes to the employee
provident fund.
7. Medical Allowance: The employer pays the employee for the medical
expenditures incurred. It is tax free up to Rs.15,000.
8. Bonus: Taxable part of the CTC, usually a once a year lump sum
amount, given to the employee based on the individual’s as well as the
organizational performance for the year.
9. Employee Stock Options: ESOPS are Free/discounted shares given
by the company to the employees. This is done to primarily for
employee retention.
WAGES AND
SALARY
52 MANAGEMENT
 These are few of the components which can be included in a typical salary Human Resource
structure but it may vary from organization to organization. Management

NOTES
4.5 FRINGE BENEFITS

Fringe benefits are nothing but additional compensation that is provided to

employees above and beyond an agreed-upon salary. Offering fringe benefits not
only help employees but also helps employers from a recruiting perspective. In
a similarly focused industry, employers find it challenging to attract desired talent
based on salary alone. By offering fringe benefits, especially those not available
through a competitor, it becomes easier for the employers to attract the required
talent.
Fringe benefits are generally tax-exempt, as long as certain conditions are
met. Recipients of taxable fringe benefits have to include the fair market value
of the benefit in their taxable income for the year.
Common examples of fringe benefits include medical and dental insurance,
use of a company car, housing allowance, educational assistance, vacation pay,
sick pay, meals and employee discounts. Total compensation includes regular
income and all of these paid benefits.
Fringe benefits are a major consideration in a total compensation package.
Salaries are important, but employees often accept or leave a job based on the
quality of fringe benefits. Health insurance costs have become very expensive
and employees that may have previously left a job more likely stay for these
benefits. Organizations use fringe benefits as a tool to hire and retain top talent
and to help create a motivated workforce.

4.6 EXECUTIVE COMPENSATION

Executive compensation is the monetary and non-monetary benefits which

are given to the senior management & executives of a company. Executive
compensation includes salaries, perks, incentives, insurances etc. This includes
high salaries for executive, insurances, company shares & other benefits.
Senior management plays a pivotal role in building the company's business
and brand. Thus, organizations look take care of these employees by giving them
special compensation and benefits. Their salaries & compensation is based not
only on their experience but also on their profile, qualification etc.

Components of executive compensation

WAGES AND
The various components of executive compensation are – SALARY
MANAGEMENT 53
 Human Resource 1. Salary- base salary
Management
2. Short Term Incentives (STI) - for meeting the short term goals
3. Long Term Incentives (LTI) – There are the incentives which are paid
NOTES
after a period more than a year (usually 3-5 years) like offering
restricted stocks
4. Guaranteed Severance Package
5. Perquisites – like club memberships, private planes,
6. Insurance – health insurance for self and dependents
The executive compensation is a part of Corporate Governance and has been
an issue of hot debate for quite a long time especially in western media. The
American Executives have often been criticized for the hefty packages received
despite lackadaisical performance of their companies. There are no legal
restrictions on the compensation paid to the executives in Western Companies.
However, the issue is not that severe in India partly because of the
provisions in Indian Companies Act 1956 and many executives being the
promoters of their companies. As per the Indian Companies Act, a ceiling has
been imposed on the executive compensation in public companies and their
private subsidiaries. The compensation cannot exceed 11% of the net profits of
the financial year. Also the compensation of whole time directors cannot exceed
10% of the profits. However, the executives of private companies have been
excluded from these restrictions.

Summary
• Job evaluation refers to the systematic process of determining the value
of a job in relation to another job to serve the objective of determining
the fair and equitable pay scale.
• It helps to control the costs of wages or salaries of employee and improve
their performance through higher morale.
• Job evaluation process involves collecting job analysis data, selecting
compensable factors, evaluating job and assigning pay scale to the
• Wages refer to the compensation paid by employer to the employee in
monetary terms for the services rendered by them.
• Wage determination process is strongly affected by cost of living,
prevailing wage rates, productivity of an employee and paying ability of
an employer.
• Salary Structure refers to the set of parameters defining the salary in terms
of the breakup of the various components constituting the compensation.

WAGES AND
SALARY
54 MANAGEMENT
Test questions Human Resource
Management
1. Explain the term job evaluation. Describe quantitative and non-
quantitative methods of job evaluation.
NOTES
2. Explain the term wages. Discuss the factors affecting wage
determination.
3. Write in detail about the different types of wages.
4. Explain the term Fringe benefits in detail.
5. What is executive compensation? What are the different components
of executive compensation?

*****

WAGES AND
SALARY
MANAGEMENT 55
 Human Resource
Management

UNIT NO - V
PERFORMANCE APPRAISAL
NOTES

Objective
1. You will be able to understand the need and importance of
performance appraisal.
2. You will be able to explain the process of performance appraisal.
3. You will be able to describe the methods of performance appraisal.

CONTENTS
5.1 Introduction of performance appraisal
5.2 Need and importance of performance appraisal
5.3 Performance appraisal process
5.4 Methods of performance appraisal

5.1 INTRODUCTION OF PERFORMANCE APPRAISAL

5.1.1 Performance appraisal

• It is an objective assessment to evaluate individual’s performance against
well defined benchmarks and to understand the abilities of a person for
further growth and development.
• Performance appraisal is a formal and systematic way of measuring and
evaluating an employee’s job related behaviors and outcomes which help
to discover how and why the employee is presently performing on the
job. This will also help to improve employee performance in future so
that the objective of individual, organizational and societal benefit is
achieved.
• Factors which are evaluated during this assessment includes job
knowledge, output quality and its quantity, leadership qualities,
supervision, co-operation, dependability, judgment, versatility, health, etc.

5.1.2 Purpose of Performance Appraisal

• To improve the performance and check how employee is performing and
what he is expected to do to fulfill the organizational goals and his job
PERFORMANCE specification.
56 APPRAISAL
 • To evaluate the training and development needs of employees. Human Resource
Management
5.1.3 Objectives of Appraisal
i. To provide feedback on the performance to the employees. NOTES
ii. To identify the training needs and provide the opportunity for
organizational diagnosis and development.
iii. To facilitate the communication between employer and employee.
iv. To improve employee performance through counseling, training and
development and motivating them through recognition and support.
v. To help in creating desirable culture and tradition in the organization.
vi. Effecting promotions and transfers and awarding pay increases to
motivate employees.
Appraisal in future aims at improving the performance instead of assessing
it through the system orientation from traditional way.
At the end, appraisal system seeks to evaluate opportunity factors such as
work environment for example ventilation and lightings, available resources as
human resource and mechanical assistance and social process as leadership
assistance.
Performance appraisal in other words, provides systematic judgment to back
up wage and salary administration. Performance appraisal is thus, useful for
compensation, placement and training and development purposes.

5.2 NEED AND IMPORTANCE OF PERFORMANCE

APPRAISAL

When appraisals are conducted on the regular basis and with attention to
better practices everyone is benefitted. Performance appraisal gives you the
opportunity to correct the poor job performance and reward excellence. It also
helps employees advance their career goals.
Performance appraisal is a prime opportunity which offers constructive
criticism to employee on that aspect of job performance which needs
improvement. Performance appraisal serves number of important functions. If it
is done effectively, it offers a large degree of satisfaction for both employee and
employer.
Giving and receiving feedback: An effective performance appraisal
provides opportunity to give the feedback as well as receive it. It provides
employee an important information about the job areas which needs improvement
and also the areas in which employee is performing well. Employees should be
allowed to provide their feedback by asking them some open ended questions
PERFORMANCE
designed to encourage them to share their insights.
APPRAISAL 57
 Human Resource • What do you think the strength and weaknesses of the organization are?
Management
• Do you feel supported by management to speak up when you have an
idea or problem? If not how can we improve or change that?
NOTES
• These kinds of questions reassure employees that their insights are truly
welcome. Listening to their responses helps them feel valued and this in
turn increases their level of engagement at work.
1. Goal setting
In addition to review the performance of an employee, the appraisal
also provides a good opportunity to establish new goals. To take the
advantage of this opportunity interviewer should offer specific
suggestions to improve the performance, as well as ways in which
management and company can support the employees to achieve the
decided goals. During this appraisal process employee and reviewer
can work together to set new goals or develop a plan to meet the
decided goals.

2. Improving communication
It helps to improve communication between employee and employer.
Open discussion about the job performance and the issues affecting it,
helps to develop the sense of trust between reviewer and employee.
When employees are better equipped to their job, they feel supported
by the management and challenged by their work which enhances the
sense of engagement among them. This ultimately leads to the higher
retention rate and increased loyalty towards their job and organization.

3. Measuring recruitment efforts

Performance appraisals help in evaluating the recruitment practices.
For example, the presence of many poor performers in an organization
indicates that recruitment process is lacking somewhere and needs to
be revised.

5.3 PERFORMANCE APPRAISAL PROCESS

Following steps are involved in the performance appraisal process

PERFORMANCE
58 APPRAISAL
 Human Resource
Management

NOTES

1. Establishing performance standards

First step in the performance appraisal process is establishing the
performance standards which can be used as base to compare the actual
performance. In this step the criteria is set to judge the performance
of an employee as successful or unsuccessful. The standards which are
to be set should be clear and understandable. Standards should be in
measurable terms.

2. Communicating standards
Once the standards are set, it is the responsibility of management to
communicate these standards to the employees. Employees should be
informed and standards should be clearly explained to them which will
help them to clearly understand their roles and what is expected from
them. These standards should also be communicated to the evaluators.
At this stage standards can be modified itself according to the feedback
of the employees or evaluators.

3. Measuring the actual performance

It is the continuous process of monitoring the employee performance
throughout the year and it is the most difficult part of the performance
appraisal process. While measuring the actual performance care should
be taken that appropriate measurement techniques are used and
personal bias should not affect the outcome of the process.

4. Comparing with the standards

Actual performance is compared with the desired performance to
check whether there is deviation in the actual performance of the
employees from the standards set. The result shows that whether the
actual performance is more than or less than the desired performance
which depicts a negative deviation in the organizational performance.
This includes recalling, evaluating and analysis of performance related PERFORMANCE
data of an employee. APPRAISAL 59
 Human Resource 5. Discussing results ( providing feedback)
Management
The results of the appraisal are communicated and discussed with the
employees on one-to-one basis with the focus on communication and
NOTES listening. With the aim of problem solving and reaching consensus,
the result, the problem and the possible solutions are discussed. The
performance appraisal feedback by the managers should be given to
the employees in such a way that it will be helpful to correct the
mistakes done by employees. Feedback should be given to the
employees with the positive attitude so that it will motivate them for
better performance. If the performance feedback task is not handled
carefully it may lead to emotional outburst.

6. Making decision – taking corrective actions

Employee performance appraisal is conducted to make the decisions
about employees without any bias by the HR manager. Decision about
employees rewarding, their promotion or demotion, transfers and even
suspension depends upon the results of the performance appraisal. To
avoid the grievances between management and employees decisions
taken by the managers should match with the performance appraisal
results, as ultimately these decisions affect the overall performance of
the organization.

5.4 METHODS OF PERFORMANCE APPRAISAL

Various methods are used to evaluate an employee performance. Few of

them are discussed below.

5.4.1 Past oriented methods

1 Paired comparison method
In this method performance of each employee is rated with another
employee in the form of pairs. The number of comparisons may be
calculated with the help of the formula: N*(n-2)/2

2 Rating scales
In this method of performance appraisal criterion such as attendance,
co-operation, attitude, dependability, output etc. are rated on the scale
ranging from excellent to poor.
Advantages
This method is easily adaptable and relatively easy to use. Also
the costs incurred are low.

PERFORMANCE
60 APPRAISAL
 Disadvantages Human Resource
Management
Personal bias of the evaluator can affect the outcomes of this
method.
NOTES
3. Forced choice description method
In this method of appraisal evaluator is given the series of readymade
statements arranged in the blocks of two or more. Evaluator is forced
to select out of the given statements to indicate which of them is more
or less descriptive of the employees.
Advantages
Use of this method avoids the interference of personal bias of the
evaluator while rating the performance of an employee.

Disadvantages
Statements used may not be properly framed to describe the
employee’s performance which may limit the accurate outcomes.

4. Forced distribution method

The forced distribution is most widely used and most criticized rating
system of performance appraisal by the companies all over the world.
Each employee is assessed by the supervisor based on certain
predetermined parameters and then they are ranked into three or more
categories such as excellent, good and poor.
This method is also called as bell-curved rating or stacked ranking.
This method typically chooses normal distribution curve to represent
the performance distribution which ensures that a small fraction of the
entire workforce is to be placed at the extremes, which is outstanding
performers and poor performers.
A relatively large section of employees fall in the middle section of
the curve. Image below illustrates this clearly.

PERFORMANCE
APPRAISAL 61
 Human Resource Advantages
Management
This method is simple to implement and cost effective. It also
helps to cultivate high performance culture in an organization.
NOTES
Disadvantages
Sometimes employees may feel that the evaluation is not fair
which can lead to unhealthy competition and rivalry among the
employees and loss of morale of the organizational workforce.

5. Checks lists
This method uses the checklist of the employee’s traits both positive
and negative related to their job prepared in the form of two columns-
viz ‘YES’ column and ‘NO’ column. The evaluator is just supposed to
tick YES or NO in front of the traits being evaluated. And when points
are allocated to the checklist it becomes a ‘weighted checklist.’
Advantages
This method is easy to administer as the standardized checklists
are used. It is also a cost saving method as very less training to
the evaluator is required. It promotes the objectivity and prevents
memory lapses.
Disadvantages
It does not allow any explanation regarding employee behavior
related to the job. Sometimes answers are more complex than
either/or and yes/no, in such cases check list method may not be
the ideal method.

6. Free essay method

In this method evaluator prepares the statements about the employee
to be evaluated. This statement mainly focuses on the strengths and
weaknesses of an employee in the job performance. An evaluator can
edit the statement alone or it can be composed in collaboration with
evaluators.
Advantages
It is less structured and confining as compared to the rating scale
method and allows evaluator to evaluator any aspect of the job
performance. It is open-ended and flexible process and gives
freedom of expression to the evaluator.
Disadvantages
These methods are time consuming and difficult to execute.
Being a subjective process it becomes quite difficult to compare
the results of individuals or draw any conclusion about the needs
PERFORMANCE
of an organization.
62 APPRAISAL
 7. Critical incidents Human Resource
Management
It involves identifying and describing specific incidents where
employee did something very well or something which needs
improvement on the basis of description of an incident. The manager NOTES
is supposed to describe, in writing, the behavior of an employee during
the critical incident occurred throughout the evaluation process.
Manager records the incidents as they occur, and the incident can be
positive or negative. This technique does not rely on the assignment
of ratings or rankings. The critical incidents help employee to improve
as the information in them is more detailed and specific as compared
to the rating scales.
Advantages
This method focuses on the actual job behavior of an employee.
Recency bias is reduced as it depends on the detail records of the
incidents.
Disadvantages
Negative incidents are more noticeable than positive ones.

8. Field review method

It is conducted by the evaluator who does not belong to the employee’s
department. The person is someone from corporate or HR department.
Advantages
In this method issues related to the evaluator’s bias are reduced
as the evaluator is from the different department.
Disadvantages
Evaluator being from the different department is unaware of the
working conditions. Also it is difficult for him to observe the
actual behavior of an employee.

5.4.2 Future oriented methods

1. Management by objectives
The concept of management by objective is put forth by the management
theorist Peter Drucker in 1950. The guiding principle of this method is that the
results can be observed and the employee traits and attributes must be guessed
at. In this result oriented method employee performance is measured by
examining the extent to which predetermined objectives have been met.
In this method objectives are jointly established by the employee and the
subordinate manager. Also the major areas of responsibility of an individual in
terms of expected results are defined and these measures are used as guideline
for operating the unit and assessing the contribution of each of its member.
Employees are expected to monitor their own development and progress and
PERFORMANCE
identify the skills needed to achieve their goals. APPRAISAL 63
 Human Resource Advantages
Management
This approach concentrates on the outcomes instead of assuming the
traits required of the employee. Employees are judged according to
NOTES their performance and not on the subjective opinion of their abilities.
It can give employees a satisfying sense of autonomy and achievement.

Disadvantages
Employees lack in reality checking skills which are needed during
setting an objective at the initial stage and for the purpose of self
auditing and self monitoring. These skills cannot be easily conveyed
by training. Variable objectives may lead to employee confusion.
Activities involved such as setting goals, measuring progress and
providing feedback are time consuming.

2. Psychological Appraisal
Professional psychologist involved in appraisal to asses employs potential
with future orientation for development of executives. This method is not
focusing on past performance. In depth interviews and psychological test
conducted with the help of experts. Final assessment report is prepared after
discussion with supervisors and reviewer. Potential appraisal and future
development and strategic goals are main objective of this method.

3. Assessment Centers
Assessment center is a central location where potential and performance of
employee is evaluated to identify employee competency for future need of higher
position of organizations. Assessment is done on various parameters for example
assertiveness, self confidence, communication, resistance to change, decision
making ability, and creativity etc. Assessment center involve combination various
methods like test, role play, social events, informal events, assignment, group
activity. Normally this type of assessment is outsourced to professional agency
or organization.

4. 360 Degree Performance Appraisal

A systematic process of collection of performance assessment and feedback
is developed from 360 degree for assessment of individual and group
performance. All stakeholders are involved for performance assessment for
example immediate supervisors, subordinates and collogues are involved in
rating process. Multiple raters are involved in performance assessment. It is also
known as 360 degree feedback system. Self appraisal is an integral part of this
appraisal method. Self development and future orientation is major focus of this
performance appraisal system.

PERFORMANCE
64 APPRAISAL
 Human Resource
Management

NOTES

360 Degree performance Appraisal

Advantages
Favoritism can be minimized with multiple rating. Employee also
involved in appraisal which leads to improve satisfaction level of
employees

Disadvantages
This method is time consuming due to multiple raters. Analysis is also
time consuming and difficult process.

Summary
• Performance appraisal is all about the evaluation of employee
• Performance against the well defined benchmarks.
• It helps to identify the need for training and development to improve the
employee performance.
• Performance appraisal provides an opportunity to give and receive the
feedback to both employees and management.
• It also helps to set the new goals and plans to meet them.
• The information obtained through performance appraisal is useful in three
major areas such as compensation, placement and training and
development.
PERFORMANCE
APPRAISAL 65
 Human Resource • The methods of performance appraisals include rating scales, critical
Management incidents, ranking methods, and management by objectives, paired
comparison method, forced choice method and many more.
NOTES • A sound appraisal system involves assessing employee performance on
regular basis.
• A suitable performance appraisal system has to be designed by keeping
in view the requirements and culture of an organization.

Test questions
1. What is performance appraisal? Discuss the need and importance of
performance of performance appraisal.
2. Explain the process of performance appraisal.
3. Write in detail about the Future oriented methods of performance
appraisal.
4. Explain in detail past oriented methods of performance appraisal.

*****

PERFORMANCE
66 APPRAISAL
 Human Resource
Management

UNIT NO - VI NOTES
EMPLOYEE RELATIONS
MANAGEMENT

CONTENTS
6.1 Introduction of Employee relations management
6.2 Overview of Employee Relations Management
6.3 Importance of Relations Management
6.4 Employee Relation Management Tools
6.5 Issues in Employee relation Management

6.1 EMPLOYEE RELATIONS MANAGEMENT:

The field of employee relations is also referred to as Industrial relations and

it comes under the umbrella of human resource. Since each and every
organization has HR department, it’s a responsibility of every employer to
manage the employee relations to maintain order and productivity within the
organizational workforce. It encompasses the programs and communication
channels that enforce corporate culture and resolves the different issues arising
in the workplace. Employee relations field helps to incorporate fair hiring
practices and equal employment opportunities.
Employee relations can be broken down into different codes of conduct
such as:
Workplace behavior - address to the issues related to employee attendance,
alcohol or drug abuse, profane language and disputes etc.
Employee conduct – addresses to the issues related to workplace discipline,
dress code and appearance, discrimination and sexual harassment etc.
Managers having excellent communication skills can effectively manage
the employee relations by encouraging open and frequent dialogues which helps
to create healthy work environment based on trust and mutual respect. Employee
relations manager needs to have ability to anticipate the issues before they
happen. He must be capable enough to recommend innovative solutions and
make quick decisions. EMPLOYEE
RELATIONS
MANAGEMENT 67
 Human Resource Employee relations management helps an organization to maintain the
Management healthy work environment by minimizing potentially disruptive issues.

NOTES
6.1 OVERVIEW OF EMPLOYEE RELATIONS
MANAGEMENT

Employee relationship management is an information system which

supports the relationship between the company and its employees. It enables the
employees to collaborate on particular managerial tasks with their employers.
Employee relationship management aims at aligning the interests of both, worker
and the employer.
The major assets of an organization are employees. It is important that the
employees perform together as a unit and contribute equally towards the
realization and achievement of a common goal. If the individuals are engaged in
constant conflicts and misunderstandings no task can be accomplished. It has
been observed that if the employees work together and share a warm relationship
among themselves targets are achieved at a much faster rate. If employees are
comfortable with each other, they can deliver their best and enjoy their work.
ERM refers to managing the relation between the employees in an
organization and the relationship can be between employee and the employer as
well as between employees at the same level. It is an art of effectively monitoring
and managing the relation between individuals either of the same team or from
different teams. ERM activity helps in strengthening the bond among the
employees and ensures that each one is equally important and satisfied and enjoys
a healthy relation with each other.
Employee relationship management includes various activities undertaken
by the superiors or the management to develop a healthy relation among the
employees and extract the best out of each team member.

6.2 IMPORTANCE OF RELATIONS MANAGEMENT

At the workplace every individual shares certain relationship with his co-
workers. Being social animal humans cannot work alone. An individual needs
someone to talk to, discuss and share their ideas and thoughts. An isolated
environment spreads negativity and demotivates employees. To create healthy
work environment it is essential that workers maintain healthy relationship with
each other at the workplace.
Work becomes easy when shared among the co-workers. A healthy relation
EMPLOYEE
RELATIONS with co- workers eases the work load on an individual and in turn increases their
68 MANAGEMENT productivity. One cannot do everything on his own. To accomplish the assigned
tasks within the given time frame responsibilities must be divided among team Human Resource
members. Management

There are certain issues on which decisions cannot be taken alone and need
of guidance and advice of other employee arises. While implementing certain NOTES
plans, pros and cons of it need to be discussed. And each and every team member
has right to express his opinion about the strategy to be implemented. This will
help to accomplish the organizational goals at faster rate.
In an organization where employees are working closely together, conflicts
are unavoidable. But if the employees are sharing healthy relations conflicts can
be easily resolved as they arise. And this ultimately helps to maintain high office
morale. When employees feel that they are heard and respected, it will boost their
morale and make them efficient in their job.
These strong relationships are vital not only to an individual but also to the
organization as whole because the culture of teamwork and mutual motivation
makes employee smarter and more efficient.

6.3 EMPLOYEE RELATION MANAGEMENT TOOLS

Poor relationships between management and staff cause many people to

dread going to work every day. This friction between management and staff not
only leads to poor attitude and morale but it also has adverse effects on company’s
productivity. There are multiple options available for managers and workers that
can help them work harmoniously to improve their performances and morale.
Some of the basic and important tools are discussed below.
1. Co-operation
Every team member should understand that work performance is not
about the competition, it’s all about coming together and
accomplishing the previously decided organizational goals. Managers
should delegate some specific responsibilities to certain employees
linked with the next one in order to provide top quality product and
services to the customers.
Good communication between management and employees helps to
build strong co-operation and understanding among them and building
good communication skills between employees and can be done
through the activities such as workshops, seminars, training programs,
office luncheons etc. The employees will take such opportunities as a
chance to take a break from the daily routine and help each other to
build their weaknesses into their strengths.

EMPLOYEE
RELATIONS
MANAGEMENT 69
 Human Resource 2. Motivation
Management
One should find the ways to bring the teams together. Teams should
be informed of their monthly goals and targets to be achieved and
NOTES rewards and incentives can be offered to motivate them to reach the
goals. Some of them can be:
• Bonuses
• Free lunches
• Gift vouchers
• Fitness perks etc.

3. Advantage of feedback
While taking certain decisions, inputs of an employee should be
Considered in that regard. Speaking with the employees of the
strengths and weaknesses of their department and how their managers
are executing their responsibilities will help the employees feel more
appreciated and valued. This will ultimately improve their productivity.
Another advantage of the employee feedback is that managers can get
the fresh mindset on the particular topic. Therefore, one should not
feel too proud to seek the assistance from the employees.
Taking employee feedback will not only help managers to view the
situations rationally from the alternate perspectives but it will also
provide the manager with the various viable options or alternatives to
choose from.

4. Rational conflict resolution

As mentioned earlier, conflicts are inevitable in the organization but it
doesn’t mean that they should not be the top priority. Conflicts arising
among employees easily disrupt the working environment, so it is
necessary to resolve them rationally and in timely manner.
While addressing to the conflict one should not be quick to judge because
jumping to the conclusion without hearing the multiple sides of the incident or
an issue may be dangerous for the organizational health. It is very important to
have an open minded approach towards the situation.

6.4 ISSUES IN EMPLOYEE RELATION MANAGEMENT

While working in an organization, every employee should ideally be

comfortable with his co-workers so that he will be motivated and stress free.
EMPLOYEE Mostly it is observed that no conclusion comes out of any dispute; instead it’s
RELATIONS wastage of time and it may lead to creating negative environment in the
70 MANAGEMENT
workplace. Employees are expected to work together as a one unit so that they Human Resource
can accomplish the goal at much faster rate. Management

Employees who enjoy warm and healthy relationship with each other tend
to discuss the things among them in the favor of team which ultimately benefits NOTES
the organization also. But sometimes it is very difficult to satisfy everyone in the
organization as the issues arising while working in the team may lead to major
unrest in the team. This can lead to spoiling the relationship between the
employees.
We will discuss some common issues in the employee relations
management.
1. General conflict management
As mentioned earlier in any working environment conflicts are
unavoidable. Efficiently managing conflicts is the most critical skill
to deal with the employee relation issues. Conflicts can arise between
management, employees and workers more frequently and this conflict
management is vital for the smooth running of an organization.
If there is proactive conflict management policy in place and proper
process to be followed, employees will feel satisfied as th.eir issues
have been addressed appropriately in time.

2. Safe working environment

Safety at the work place should be the priority in any organization. No
one wants to meet an accident and get injured. Therefore, every
organization should promote workplace safety and must have safety
rules and regulations.

3. Time and attendance issues

These issues can be major determinant to the organization. If
employees are prone to lateness, continuously remaining absent
without acceptable reasons or they are leaving before stipulated office
hours, it’s a loss of money to the company. This also hampers the
individual performance and ultimately company operations suffer. This
can lower the morale of the other team members and if these issues
are not addressed on time it can lead to the termination. However, if
there are no right procedures in place to support termination, demotion
or suspension of an employee, company will have to face the costly
lawsuits of unfair business practices.

4. Non compliance
A safe and safety environment needs to be maintained in an
organization. Therefore, when issues arise regarding discrimination
and workplace harassment, or in regards to parental leave or disability EMPLOYEE
or any dispute directly related to employee rights and compliance RELATIONS
MANAGEMENT 71
 Human Resource violations, opening a case and collecting all supporting documents is
Management necessary.
It is crucial to employ comprehensive and simple employee relations plan
NOTES and it will provide a huge benefit to HR professional. If an organization avoids
such type of common pitfalls using effective communication and automated
software will help the organization operate smoothly with less employee relation
issues.

Summary
• ERM refers to the information system which supports the relationship
between the employer and his employees.
• It includes various activities which help to develop the healthy employee-
employer relationship.
• Some of the tools which are used to promote the healthy environment at
the workplace are motivation, co-operation, advantage of feedback and
rational conflict resolution.
• Some of the issues arising during employee relation management are
general conflict management, work safety, time and attendance issues
etc.

Test questions
1. What is employee relations management? Explain in brief.
2. Discuss the importance of employee relations management in an
organization.
3. Explain different employee relation management tools.
4. Discuss the different issues in the employee relation management.

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EMPLOYEE
RELATIONS
72 MANAGEMENT