UNIT-II SYLLABUS:

Functional Management: Human Resource Management (HRM) Concepts of HRM, Basic functions of HR
Manager: Manpower planning, Recruitment, Selection, Training and Development, Wage and Salary
Administration Performance Appraisal, Grievance Handling and Welfare Administration, Job Evaluation
and Merit Rating.- Marketing Management: Concepts of Marketing, Marketing mix elements and
marketing strategies.

CONCEPTS OF HRM
Human Resource Management (HRM) is a relatively new approach to managing people in
any organisation. People are considered the key resource in this approach. Human Resource
Management is a process, which consists of four main activities, namely, acquisition, development,
motivation, as well as maintenance of human resources. Human Resource Management is
responsible for maintaining good human relations in the organisation. It is also concerned with
development of individuals and achieving integration of goals of the organisation and those of the
individuals.
Definition:
1. Scott, Clothier and Spriegel, ―Human Resource Management as that branch of
management which is responsible on a staff basis for concentrating on those aspects of
operations which are primarily concerned with the relationship of management to employees‘
and employees to employees and with the development of the individual and the group.‖
2. Edwin B. Flippo, ―Human resource management is planning, organizing, directing and
controlling of the procurement, development, and resources to the end that individual and
societal objectives are accomplished.
Nature of Human Resource Management:
The nature of the human resource management has been highlighted in its following features:
1. Inherent Part of Management: Human resource management is inherent in the process of
management. This function is performed by all the managers throughout the organisation
rather that by the personnel department only. If a manager is to get the best of his people, he
must undertake the basic responsibility of selecting people who will work under him.
2. Pervasive Function: Human Resource Management is a pervasive function of management.
It is performed by all managers at various levels in the organisation. It is not a responsibility
that a manager can leave completely to someone else. However, he may secure advice and
help in managing people from experts who have special competence in personnel
management and industrial relations.
3. Basic to all Functional Areas: Human Resource Management permeates all the functional
area of management such as production management, financial management, and marketing
management. That is every manager from top to bottom, working in any department has to
perform the personnel functions.
4. People Centered: Human Resource Management is people centered and is relevant in all
types of organizations. It is concerned with all categories of personnel from top to the bottom
of the organisation. The broad classification of personnel in an industrial enterprise may be as
 Blue-collar workers (i.e. those working on machines and engaged in loading,
unloading etc.) and white-collar workers (i.e. clerical employees),
 Managerial and non-managerial personnel,
 Professionals (such as Chartered Accountant, Company Secretary, Lawyer, etc.) and
non-professional personnel.
5. Personnel Activities or Functions: Human Resource Management involves several
functions concerned with the management of people at work. It includes manpower planning,
employment, placement, training, appraisal and compensation of employees. For the
performance of these activities efficiently, a separate department known as Personnel
Department is created in most of the organizations.
6. Continuous Process: Human Resource Management is not a one shot function. It must be
performed continuously if the organisational objectives are to be achieved smoothly.
7. Based on Human Relations: Human Resource Management is concerned with the
motivation of human resources in the organisation. Human relations skills are also required in
training performance appraisal, transfer and promotion of subordinates.
FUNCTIONS OF HR MANAGER
HR MANAGER A person who headed with HRM department. Or A person who is charge of the
department that deals with the employment, training, support, records etc, of company.
Role of HR Manager
1. The conscience role:- the conscience role is that of humanitarian who reminds the management of its
morals & obligations to its employees.
2. The Counsellor :- employees who are dissatisfied with the present job approach the personnel manager
for counselling. In addition employees facing various problems like marital, health, children’s
education/marriage, mental, physical & career problems.
3. The Mediator:- as a Mediator, the Personnel Manager plays the role of peace maker. He settles the
disputes between employees & the management. He acts as a liaison & communication link between both
of them.
4. The spokesman:- he is a frequent spokesman for or representative of the company.
5. The Problem Solver:- he acts as a problem solver with respect to the issues that involve human
resources management & overall long range organisational planning.
6. The Change Agent:- he acts as a change agent & introduces changes in varios existing programmes.
The various functions of a HR Manager are as follows:

1. Manpower Planning: Manpower planning is also known as human resource planning (HRP). It
may be defined as a rational method of accessing the requirements of human resources at different
level in an organization. It ends with proposals of recruitment, retention or dismissal. Through
planning a management strives to have the right number and the right kinds of people at the right
places, at the right time, to do things which result in both the organisation and the individual
receiving the maximum long-range benefit.
2. Recruitment: Recruitment means search of the prospective employee to suit the job requirements
as represented by job specification–a technique of job analysis. When the manpower plan reveals
the need for additional people in organization, the manager has to initiate the search for
employees and see that they apply for jobs in the organization. Recruitment is often called
Positive function. At this stage the applications are invited for further scrutiny and short-
listing. The sources of recruitment includes internet, executive search agencies, employment
exchanges, university and college campus, Ads in TV and Radio, recommendation of existing
employees, etc
3. Selection: The process of identifying the most suitable persons for the organization is called
selection. It is also called Negative function because here applications are screened and
shortlisted on the basis of selection criteria. The main purpose is to choose right person for
right job. The selection procedure, depending upon the cadre, involves different stages. The
organizations are free to formulate their own selection procedures, as there is no standard
practice. Normally a selection process involves: Initial screening or short listing,
Comprehensive application or bio-data screening, Aptitude or written tests, Group discussions,
Personal interview, Medical examination, Employment offer.
4. Training and Development skills: Training is an organized activity for increasing the
knowledge and skills of people for a definite purpose. It involves systematic procedures for
transferring technical know-how to the employees so as to increase their knowledge and skills
for doing specific jobs with proficiency. In other words, the trainees acquire technical
knowledge, skills and problem solving ability by undergoing the training programme.
The training methods are differed into two categories:
 On-the-job training methods: It is designed to make employees immediately
productive. It is learning by physically doing the work. These methods include: Job
instruction training, Experimental learning, Demonstration, Apprentice learning.
 Off-the-job training Methods: It is meant for developing an understanding of
general principles, providing background knowledge, generating an awareness of
comparative ideas and practice. It includes: Lectures or talks and class room
instructions, Conferences, Seminars, Team discussions, Case study, Role planning,
Programmed instructions.
5. Placement: After training the employee is placed in his position under the charge of a
manager. The new recruit is allowed to exercise full authority and is held responsible for the
results. Placement involves assigning a specific job to each one of the selected candidates.
However, placement is not simple as it looks. It involves striking a fit between the
requirements of a job and the qualifications of a candidate. The importance of placement is that
it reduces employee‘s turnover, absenteeism, accidents and dissatisfactions.
6. Salary and Wage Administration: Compensation is the Human Resources Management
function that deals with the every type of reward individuals receives in the exchange for
performing organizational tasks. It is the major cost of doing the business for many
organizations. It is the chief reason why some individuals seek employment. The objective of the
compensation is to create the system of rewards that is equitable to the employers and
employees alike. The desired outcome of the employees is to attract the employees towards the
tasks.
The salary constitutes of the Basic Salary, Dearness Allowance (DA), House Rent
Allowance (HRA) and other allowances. Some other benefits include profit sharing, bonus,
leave travel concessions, medical reimbursement, provident fund, gratuity, group insurance
schemes, pension, accident compensation, leave with pay, educational allowance, etc.
7. Promotion: It refers to the advancement of an employee to a job with a higher authority and
responsibility. It may also carry better compensation package. It is viewed as a means of filling
up vacancies in the organization from time to time. The basis of promotion could be merit or
seniority depending upon the nature and level of job. As and when the vacancies arise, the
qualified staff may get promotion.

8. Transfer: It is a lateral shift that moves an individual employee from one position to another
i.e. it may be in same department or to a different department or location. To optimize the
human resources at different locations or departments, employees are transferred from one
location to another. It is also viewed as a tool for punishing the employee in case of misconduct
or misbehavior. It does not involve any change in salary, duties and responsibilities.

9. Separation: It refers to termination of employment i.e. the employee is separated from his
job. It is also called as dismissal. In case of misconduct or misbehavior or where the employee
is not in a position to improve his performance, he is terminated.
 MANPOWER PLANNING
Manpower planning is also known as Human Resource Planning (HRP). Human Resource
Planning is concerned with the planning the future manpower requirements are the organisation.
Human Resource planning is the process by which a management determines how an organisation
should move from its current manpower position to its desired manpower position. Through
planning a management strives to have the right number and the right kinds of people at the right
places, at the right time, to do things which result in both the organisation and the individual
receiving the maximum long-range benefit.
Definition:
1. Coleman – ―Human Resource Planning as the process of determining manpower
requirements and the means for meeting those requirements in order to carry out the
integrated plan of the organisation.
2. Leap and Crino – ―HRP includes the estimation of how many qualified people are
necessary to carry out the assigned activities, how many people will be available, and what, if
anything, must be done to ensure that personnel supply equals personnel demand at the
appropriate point in the future‖.
Objectives of HR Planning:
The objectives of human resource planning may be summarized as below:
1. Forecasting Human Resources Requirements: HRP is essential to determine the future
needs of HR in an organization. In the absence of this plan it is very difficult to provide the
right kind of people at the right time.
2. Effective Management of Change: Proper planning is required to cope with changes in the
different aspects which affect the organization. These change needs continuation of
allocation/reallocation and effective utilization of HR in organization.
3. Realizing the Organizational Goals: In order to meet the expansion and other organizational
activities the organizational HR planning is essential.
4. Promoting Employees: HRP gives the feedback in the form of employee data which can be
used in decision-making in promotional opportunities to be made available for the
organization.
5. Effective Utilization of HR: The data base will provide the useful information in identifying
surplus and deficiency in human resources.
Manpower Planning Process (HRP Process):
Human resource planning refers to a process by which companies ensure that they have the
right number and kinds of people at the right place, at the right time; capable of performing different
jobs efficiently. Planning the use of human resources is an important function in every organisation.
A rational estimate to various categories of personnel in the organisation is an important aspect of
human resource planning.
HRP involves the following process:

Corporate Goals and Resources

Departmental targets and resources

Department
Identify and Analyze workload
Level

Access manpower requirements

Succession plan Employee Turnover Employee Development

Shortage or Surplus of Staff

Formulate strategies for

Succession, Recruitment, Redundancy, Employee Development

Top Management Review

Company
Level Financial Clearance

Management Approval

Action Plans

Evaluation and Control

Steps in Human Resource Planning:

1. The manpower planning starts with identifying the corporate goals and resources.
2. Each department has to identify their targets and resources allocated.
3. Analyze their work load and access manpower requirements.
4. They have to formulate succession plan, training programs for employee
development and employee turnover.
5. In case of additional staff required, plan for recruitment and in case of surplus,
discharge them.
6. Accordingly the proposals are made to top management. They review the proposal.
7. After getting clearance, the departments evaluate the financial terms.
8. After approval, they formulate action plans to implement the decisions.
9. Action plans are evaluated and controlled in terms of department requirements and
financial constraints.
RECRUITMENT
Recruitment means search of the prospective employee to suit the job requirements as
represented by job specification–a technique of job analysis. It is the first stage in selection which
makes the vacancies known to a large number of people and the opportunities that the organisation
offers. In response to this knowledge, potential applicants would write to the organisation. The
process of attracting people to apply in called recruitment.
Definition:
1. Dale S. Beach - Recruitment as the development and maintenance of adequate manpower
resources. It involves the creation of a pool of available labour upon whom the organisation
can depend when it needs additional employees.
2. Edwin B. Flippo - Recruitment is the process of searching for prospective employees and
stimulating them to apply for jobs in the organisation.

Sources of Recruitment

The various sources of recruitment are generally classified as:

1. Internal Sources:
This refers to the recruitment from within the company. The various internal
sources are promotion, transfer, past employees and internal advertisements.

2. External Sources:
External sources refer to the practice of getting suitable persons from outside. The various
external sources are advertisement, employment exchange, past employees, private placement
agencies and consultants, walks-ins, campus recruitment, trade unions, etc. The following
external sources of recruitment are commonly used by the big enterprises:
1. Direct Recruitment: An important source of recruitment is direct recruitment by placing a
notice on the notice board of the enterprise specifying the details of the jobs available. It is
also known as recruitment at factory gate. It is generally followed for filling casual vacancies
requiring unskilled workers. This method of recruitment is very cheap as it does not involve
any cost of advertising vacancies.
2. Casual Callers: The organisations which are regarded as good employers draw a steady
stream of unsolicited applications in their offices. This serves as a valuable source of
manpower. If adequate attention is paid to maintain pending application folders for various
jobs, the personnel department may find the unsolicited applications useful in filling the
vacancies whenever they arise.
 3. Media Advertisement: Advertisement in newspapers or trade and professional journals is
generally used when qualified and experienced personnel are not available from other
sources. Advertisement gives the management a wider range of candidates from which to
choose. Its disadvantage is that it may bring in a flood of response, and many times, from
quite unsuitable candidates.
4. Employment Agencies: Employment exchanges run by the Government are regarded as a
good source of recruitment for unskilled, semi-skilled and skilled operative jobs. In some
cases, compulsory notification of vacancies to the employment exchange is required by law.
Thus, the employment exchanges bring the jobs givers in contact with the job seekers.
5. Management Consultants: Management consultancy firms help the organisations to recruit
technical, professional and managerial personnel. They specialize middle level and top level
executive placements. They maintain data bank of persons with different qualifications and
skills and even advertise the jobs on behalf their clients to recruit right type of personnel.
6. Campus Recruitment: Jobs in industry have become increasing technical and complex to
the point where college degrees are widely required. Consequently big organisations maintain
a close liaison with the universities, vocational institutes and management institutes for
recruitment to various jobs. It is also known as campus recruitment.
7. Recommendation: Applicants introduced by friends and relatives may prove to be a good
source of recruitment. In fact, many employers prefer to take such persons because something
about their background is known. When a present-employee or a business friend recommends
someone for a job, a type of preliminary screening is done and the person is placed on a job.
8. Labour Contractors: Labour contractors are an important source of recruitment in some
industries in India. Workers are recruited through labour contractors who are themselves
employees of the organisation. The disadvantage of this system is that if the contractor leaves
the organisation, all the workers, employed through him will also leave. That is why this
source of labour is not preferred by many business organizations.
9. Telecasting: The practice of telecasting of vacant posts over T.V. is gaining importance
these days. Special programmes like ‗Employment News‘, etc, over the
T.V have become quite popular in recruitment for various types of jobs. The detailed
requirements of the job and the qualities required to do it are publicized along with the
profile of the organisation where vacancy exists.
10. Raiding: Raiding is a technical term used when employees working elsewhere are attracted
to join organisations. The organisations are always on the lookout for qualified professionals,
and are willing to offer them a better deal if they make the switch. There are always some
employees who are professionally very competent, but dissatisfied with something or the
other in the organisation.

SELECTION
.

The process of identifying the most suitable persons for the organization is called
selection. It is also called Negative function because here applications are screened and shortlisted on
the basis of selection criteria. The main purpose is to choose right person for right job. The selection
procedure, depending upon the cadre, involves different stages. The organizations are free to
formulate their own selection procedures, as there is no standard practice. Selection is the process of
picking up individuals (out of the pool of job applicants) with requisite qualifications and
competence to fill jobs in the organization.
Definition:
Selection is the process of differentiating between applicants in order to identify and hire
those with a greater likelihood of success in a job.Essentials of a Good Selection Practice:
1. Detailed job descriptions and job specifications prepared in advance and endorsed by
personnel and line management.
2. Trained the selectors.
3. Determine aids to be used for selection process.
 4. Check competence of recruitment consultants before retention.
5. Involve line managers at all stages.
6. Attempt to validate the procedure.
7. Help the appointed candidate to succeed by training and management development.

Steps in Selection:

1. Preliminary Interview: The purpose of preliminary interviews is basically to eliminate

unqualified applications based on information supplied in application forms. The basic
objective is to reject misfits. On the other hands preliminary interviews is often called a
courtesy interview and is a good public relations exercise.
2. Selection Tests: Jobseekers who past the preliminary interviews are called for tests. There
are various types of tests conducted depending upon the jobs and the company. These tests
can be Aptitude Tests, Personality Tests, and Ability Tests and are conducted to judge how
well an individual can perform tasks related to the job. Besides this there are some other tests
also like Interest Tests (activity preferences), Graphology Test (Handwriting), Medical Tests,
Psychometric Tests etc.
3. Employment Interview: The next step in selection is employment interview. Here interview
is a formal and in-depth conversation between applicant‘s acceptability. It is considered to be
an excellent selection device. Interviews can be One-to-One, Panel Interview, or Sequential
Interviews. Besides there can be Structured and Unstructured interviews, Behavioral
Interviews, Stress Interviews.
4. Reference & Background Checks: Reference checks and background checks are conducted
to verify the information provided by the candidates. Reference checks can be through formal
letters, telephone conversations. However it is merely a formality and selections decisions are
seldom affected by it.
5. Selection Decision: After obtaining all the information, the most critical step is the selection
decision is to be made. The final decision has to be made out of applicants who have passed
preliminary interviews, tests, final interviews and reference checks. The views of line
managers are considered generally because it is the line manager who is responsible for the
performance of the new employee.
6. Physical Examination: After the selection decision is made, the candidate is required to
undergo a physical fitness test. A job offer is often contingent upon the candidate passing the
physical examination.
7. Job Offer: The next step in selection process is job offer to those applicants who have
crossed all the previous hurdles. It is made by way of letter of appointment.
8. Contract of Employment: After the job offer is made and candidates accept the offer,
certain documents need to be executed by the employer and the candidate. Here is a need to
prepare a formal contract of employment, containing written contractual terms of
employment etc.
TRAINING AND DEVELOPMENT
Training is an organized activity for increasing the knowledge and skills of people for
a definite purpose. It involves systematic procedures for transferring technical know-how to
the employees, so as to increase their knowledge and skills for doing specific jobs with
proficiency. In other words, the trainees acquire technical knowledge, skills and problem
solving ability by undergoing the training programme.
Training makes newly appointed workers fully productive in the minimum of time.
Training is equally necessary for the old employees whenever new machines and equipment
are introduced and/or there is a change in the techniques of doing the things. In fact, training
is a continuous process. It does not stop anywhere. The managers are continuously engaged
in training their subordinates. The purpose of training is to bring about improvement in the
performance of work. They should ensure that any training programme should attempt to
bring about positive Changes in the Knowledge, Skills, and Attitudes of the workers.

Definition:
According to Edwin B. Flippo, ―Training is the act of increasing the knowledge and
skills of an employee for doing a particular job‖.

Need and Importance of Training:

1. Increasing Productivity: Instruction can help employees increase their level of
performance on their present job assignment. Increased human performance often
directly leads to increased operational productivity and increased company profit.
2. Improving Quality: Better informed workers are less likely to make operational
mistakes. Quality increases may be in relationship to a company product or service, or
in reference to the intangible organizational employment atmosphere.
3. Helping Company fulfills its Future Personnel Needs: Organizations that have a
good internal educational programme will have to make less drastic manpower
changes and adjustments in the event of sudden personnel alternations. When the need
arises, organizational vacancies can more easily be staffed from internal sources if a
company initiates and maintains and adequate instructional programme for both its
non-supervisory and managerial employees.
4. Improving Organizational Climate: An endless chain of positive reactions results
from a well-planned training programme. Production and product quality may
improve; financial incentives may then be increased, internal promotions become
stressed, less supervisory pressures ensue and base pay rate increases result.
5. Improving Health and Safety: Proper training can help prevent industrial accidents.
A safer work environment leads, to more stable mental attitudes on the part of
employees. Managerial mental state would also improve if supervisors now that they
can better themselves through company-designed development programmes.
6. Obsolescence Prevention: Training and development programmes foster the
initiative and creativity of employees and help to prevent manpower obsolescence,
which may be due to age, temperament or motivation, or the inability of a person to
adapt himself to technological changes.
7. Personal Growth: Employees on a personal basis gain individually from their
exposure to educational experiences. Again, Management development programmes
seem to give participants a wider awareness, an enlarged skin, an enlightened
altruistic philosophy, and make enhanced personal growth possible.
METHODS OF TRAINING:
The following methods are generally used to provide training i.e. On-the-Job Training
and Off-the-Job Training:

On-the-Job Training Methods:

This type of training is imparted on the job and at the work place where the employee
is expected to perform his duties. It enables the worker to get training under the same
working conditions and environment and with the same materials, machines and equipments
that he will be using ultimately after completing the training.
1. On Specific Job: On the job training methods is used to provide training for a specific
job such electrician, motor mechanic, pluming etc.
a) Experience: This is the oldest method of on-the-job training. Learning by
experience cannot and should not be eliminated as a method of development, though
as a sole approach, it is a wasteful, time consuming and inefficient.
b) Coaching: On-the-Job coaching by the superior is an important and potentially
effective approach is superior. The technique involves direct personnel instruction
and guidance, usually with extensive demonstration.

2. Job Rotation: The major objective of job rotation training is the broadening of the
background of trainee in the organisation. If trainee is rotated periodically from one job
to another job, he acquires a general background.

3. Special Projects: This is a very flexible training device. The trainee may be asked to
perform special assignment, thereby he learns the work procedure. Sometime a task-
force is created consisting of a number of trainees representing different functions in the
organisation.
4. Apprenticeship: Under this method, the trainee is placed under a qualified supervisor
or instructor for a long period of time depending upon the job and skill required. Wages
paid to the trainee are much less than those paid to qualified workers. This type of
training is suitable in profession, trades, crafts and technical areas like fitter, turner,
electrician, welders, carpenters etc.

5. Vestibule Training: Under this method, actual work conditions are created in a class
room or a workshop. The machines, materials and tools under this method is same as
those used in actual performance in the factory. This method gives more importance to
learning process rather than production.

6. Multiple Management: Multiple management emphasizes the use of committees to

increase the flow of ideas from less experience managers and to train them for positions
 of greater responsibility.

Off-the-job Training Methods:

The following are the off the job training techniques:
1. Special Courses and Lectures: Lecturing is the most traditional form of formal
training method. Special courses and lectures can be established by business
organizations in numerous ways as a part of their development programmes.

2. Conferences: This is also an old method, but still a favorite training method. In this
method, the participants pools, their ideas and experience in attempting to arrive at
improved methods of dealing with the problems, which are common subject of
discussion; Conferences may include buzz sessions that divide conferences into small
groups of four or five intensive discussion. These small groups then report back to the
whole conference with their conclusions or questions.

3. Case Studies: This technique, which has been developed, popularized by the Harvard
Business School, U.S.A is one of the most common form of training. A case is a written
account of a trained reporter of analyst seeking to describe an actual situation. Some
causes are merely illustrative; others are detailed and comprehensive demanding
extensive and intensive analytical ability. Cases are widely used in variety of
programmes. This method increases the trainee‗s power of observation, helping him to
ask better questions and to look for broader range of problems.

4. Brainstorming : This is the method of stimulating trainees to creative thinking This

approach developed by Alex Osborn seeks to reduce inhibiting forces by providing for a
maximum of group participation and a minimum of criticism. A problem is posed and
ideas are invited. Quantity rather quality is the primary objective. Ideas are encouraged
and criticism of any idea is discouraged.

5. Laboratory Training: Laboratory training adds to conventional training by providing

situations in which the trains themselves experience through their own interaction some
of the conditions they are talking about. Laboratory training is more concerned about
changing individual behaviour and attitude. There are two methods of laboratory
training: simulation and sensitivity training.
a) Simulation: An increasing popular technique of management development is
simulation of performance. In this method, instead of taking participants into the
field, the field can be simulated in the training session itself Simulation is the
presentation of real situation of organisation in the training session. There are two
common simulation methods of training: role-playing is one and business game.
b) Sensitivity Training: Sensitivity training is the most controversial laboratory
training method. Many of its advocates have an almost religious zeal in their
enhancement with the training group experience. Some of its critics match this
favour in their attacks on the technique.

WAGE AND SALARY ADMINISTRATION

Compensation is the Human Resources Management function that deals with the
every type of reward individuals receives in the exchange for performing organizational
tasks. It is the major cost of doing the business for many organizations. It is the chief reason
why some individuals seek employment.
Financial compensation is either direct or indirect. The direct financial compensation
consist of the person receives in the form of wages, salaries, bonuses or commissions etc.
Indirect compensation consists of the like praise, self-esteem, recognitions, motivation,
productivity, (Benefits and Welfare). In the present economic situation the major cash flow of
 the organization is more than 50% in financial and non-financial compensations. Pay is
influenced by series of external and internal factors.
While the basic wage or pay is the main component of compensation, fringe benefits
and cash and non-cash benefits influence the level of wages or pay because the employer is
concerned more about labour costs than wage rates per se. The tendency now is towards an
increasing mix of fringe benefits, which therefore have an important impact on pay levels. In
industrialized countries, and sometimes in countries with high personal tax rates, the non-pay
element of executive compensation has substantially increased in recent years.
The compensation policy depends on certain criteria below:
1. Adequate: Minimal Governmental, union and managerial levels should be met.
2. Equitable: Each person should be paid fairly, in the line with his or her effort,
abilities and training.
3. Balanced: Pay, benefits and other rewards should provide a reasonable total rewards
package.
4. Cost-effective: The pay should not be excessive, considering what the organization
can afford to pay.
5. Secure: Pay should be enough to help employees feel secure and aid him or her in
satisfying basic needs.
6. Incentive providing: Pay should motivate effective and productive work.
7. Acceptable to the employee: The employee should understand the pay system and
feel it is a reasonable system for the enterprise and him or herself.

Determinants of Compensation:

 Internal equity
o Fair and adequate compensation is critical to motivating employees attracting
high- potential employees, and retaining competent employees. Compensation
has to be fair and equitable among all workers in the same company (internal
equity). Internal equity can be achieved when pay is proportionate to the
individual employee‘s qualifications and contributions to a company.
 External equity
o On the other hand, compensation also has to be fair and equitable in comparison
to the external market (external equity). If a company pays its employees below
the market rate, it may lose competent employees.
o In determining adequate pay for employees, a manager must consider the three
major factors: the labour market, the nature and scope of the job, and
characteristics of the individual employee.
 Labour market.
o Potential employees are recruited from a certain geographic area—the labour
market.The actual boundary of a labour market varies depending on the type of job,
company, and industry. Pay for a job even within the same labour market may vary
widely because of many factors, such as the industry, type of job, cost of living, and
location of the job. Compensation managers must be aware of these differences. To
help compensation managers understand the market rate of labour, a compensation
survey is conducted.
 Nature and scope of the job
o Several factors are generally considered in evaluating the market rate of a job. They
include the cost of living of the area, union contracts, and broader economic
conditions. Urban or metropolitan areas generally have a higher cost of living than
rural areas. Usually, in calculating the real pay, a cost-of-living allowance (COLA)
is added to the base wage or salary. Cost-of-living indexes are published periodically
in major business journals.
 Characteristics of the individual employee
o The characteristics of an individual employee are also important in determining
 compensation. An individual‘s job qualifications, abilities and skills, prior
experiences, and even willingness to work in hardship conditions are determining
factors. Within the reasonable range of a market rate, companies offer additional
compensation to attract and retain competent employees.
In principle, compensation must be designed around the job, not the person. Person-
based pay frequently results in discriminatory practices, which violates the legal preconditions.
For job-based compensation, management must conduct a systematic job analysis, identifying
and describing what is happening on the job. Each job must be carefully examined to list the
necessary tasks and actions, identify skills and abilities required, and establish desirable
behaviours for successful completion of the job.
As the market becomes more dynamic and competitive, companies are trying harder
to improve performance. Since companies cannot afford to continually increase wages by a
certain percentage, they are introducing many innovative compensation plans tied to
performance. Several of these plans are:
1. Incentive Compensation Plan: Incentive compensation pays proportionately to
employee performance. Incentives are typically given in addition to the base wage;
they can be paid on the basis of individual, group, or plant-wide performance. While
individual incentive plans encourage competition among employees, group or plant-
wide incentive plans encourage cooperation and direct the efforts of all employees
toward achieving overall company performance.
2. Skill-Based or Knowledge-Based Compensation: Skill-based pay is a system that
pays employees based on the skills they possess or master, not for the job they hold.
Some managers believe that mastery of certain sets of skills leads to higher
productivity and therefore want their employees to master a series of skill sets. As
employees gain one skill and then another, their wage rate goes up until they have
mastered all the skills. Similar to skill-based pay is knowledge-based pay.

Team-Based Compensation: As many companies introduce team-based management practices

such as self-managed work teams, they begin to offer team- based pay. Recognizing the
importance of close cooperation and mutual development in a work group, companies want to
encourage employees to work as a team by offering pay based on the overall effectiveness of the
team.
Performance-Based Compensation: In the traditional sense, pay is considered entitlement that
employees deserve in exchange for showing up at work and doing well enough to avoid being
fired. While base pay is given to employees regardless of performance, incentives and bonuses
are extra rewards given in appreciation of their extra efforts. Other incentives and bonuses are
calculated based on this new merit pay, resulting in substantially more total dollars for highly
ranked employee performance. Frequently, employees also receive an end-of-year lump sum
bonus that does not build into base pay.
JOB EVALUATION
It is a technique of assessing systematically the relative worth of each job. The
fundamental pre-requisite to the establishment of a compensation policy is the determination
of the comparative values of jobs throughout the hierarchy. These values form the basis to
build the pay and the benefits package.
Objectives:
1. To establish correct wage correct wage differentials for all jobs within the factory.
2. To bring new jobs into their proper relatively with jobs previously established.
3. To help clarify lines of authority, responsibility and promotion.
4. To accomplish the foregoing by means of the facts and principles, this can be readily
explained to and accepted by all concerned.
5. To establish a general wage level for a given factory which will have parity with those
of neighboring factories.
JOB EVALUATION METHODS

Qualitative Method:
It can broadly be classified as ranking or classifying the job from lowest to highest.
1. Ranking technique: In this method, the jobs in the organization are arranged in either
in the ascending or descending order and numbered serially. The basis of such
arrangement could be the job description in terms of duties, responsibilities,
qualifications needed, relative difficulty involved in don the job, or value to the
company.
 Amount of work involved
 Supervision needed
 Extent of responsibility required
 Difficulties involved in the work conditions
2. Classification Method: This is also called job-grading method. Here, the number of
grades and the salary particulars for each grade are worked out first. The grades are
clearly described in terms of knowledge, skill and so on. Major steps for job
evaluation:
 Deciding the number of grades
 Writing grade descriptions
 Identifying/listing of the jobs to be evaluated
 Preparing job descriptions
Quantitative Method:Where point values are assigned to the various demands of a job and
relative value is obtained by summing all such point values.
1. Factor comparison method: Every job requires certain capabilities on the part of the
person who does the job. These capabilities are considered as critical factors, which
can be grouped as follows:
 Mean effort and Skill
 Physical
 Responsibility
 Working conditions
Step involved in the factor comparison method:
i) Identify the key jobs
ii) Rank the key job, factor by factor
iii) Apportion the salary among each factor and rank the key jobs
iv) Compare factor ranking of each job with its monetary ranking
v) Develop a monetary comparison scale
vi) Evaluate non-key jobs based on the monetary comparison scale
2. Point-rating method: There are four widely accepted factors used in the point rating
method, skill, effort, responsibility and job conditions each of these factors is divided
into sub-factors.
 Skills: It includes the rating factors such as Education and training,
 Experience, Judgment and initiative.
 Efforts: This factor includes Physical and Mental abilities of an individual.
 Responsibility: It includes the factors like Materials or product, Equipment or
process, Safety of others, and Work of others.
 Job conditions: It includes the working environment of the organization

The process of job evaluation involves the following steps:

1. Gaining acceptance: Before undertaking job evaluation, top management must explain the
aims and uses of the program to managers, emphasizing the benefits. Employees and unions
may be consulted, depending on the legal and employee relations environment and company
culture. To elaborate the program further, presentations could be made to explain the inputs,
processes, and outputs/benefits of job evaluation.
2. Creating job evaluation committee: It is not possible for a single person to evaluate all the
key jobs in an organization. Often a job evaluation committee consisting of experienced
employees, union representatives, and HR experts is created to set the ball rolling.
3. Finding the jobs to be evaluated: Every job need not be evaluated. This may be too taxing
and costly. Certain key jobs in each department may be identified. While picking up the
jobs, care must be taken to ensure that they represent the type of work performed in that
department, at various levels.
4. Analysing and preparing job description: This requires the preparation of a job
description and also an analysis of job specifications for successful performance.
5. Selecting the method of evaluation: The method of evaluating jobs must be identified,
keeping the job factors as well as organizational demands in mind. Selecting a method also
involves consideration of company culture and the capacity of the compensation and
benefits function or job evaluation committee.
6. Evaluating jobs: The relative worth of various jobs in an organization may be determined
by applying the job evaluation method. The method may consider the "whole job" by
ranking a set of jobs, or by comparing each job to a general level description. Factor-based
methods require consideration of the level of various compensable factors (criteria) such as
level and breadth of responsibility, knowledge, and skill required, complexity, impact,
accountability, working conditions, etc. These factor comparisons can be one with or
without numerical scoring. If there is numerical scoring, weights can be assigned to each
such factor and scores are associated with different levels of each factor, so that a total score
is determined for the job. All methods result in an assigned grade level.
MERIT RATING
Merit rating in a technique to evaluate the merits of duals according to job request
merit. The personal abilities that an individual brings to his job, measured by the extent to
which his output or quality of his work exceeds the minimum that can reasonably to expected
for his basic rate of pay.

Definition:
1. Edward Flippo, ―Merit rating is a systematic, periodic and, so far as humanly
possible, an impartial rating of an employee‗s excellence in matters pertaining to his
present job to his potentialities for a job.‖
2. Scot, Clothier and Spriegal, ―Merit rating of an employee is the process of evaluating
the employee‗s performance on the job in terms of the requirements of the job.‖

Objectives of Merit Rating:

The objects of Merit Rating are as follows:
1. To make a comparative study of the abilities of different employees.
2. To provide higher reward to the more efficient employees.
3. To prove the justification of different wages to employees according to their abilities.
4. To establish harmonious relation between employees and employers.

5. To motivate the employees to do better and more work.

6. To determine a policy for promotions and transfer.
7. To evaluate the success of training programmes.

Methods of Merit Rating:

1. Rating Procedure: In this method, the abilities of an employee are compared with
that of other employees. Under this method, the employees are divided into efficient
and inefficient employee. This method adopts the technique of paired comparison.
Therefore, the pairs of two employees each are made according to the formula of
N(N-1)Z and the more efficient employee in every pair is underlined. The employee
having maximum underline is treated as the most efficient employee whereas the
employee having no underline to his credit is treated least efficient employee.
2. Grading Method: Here different grades are divided for evaluating the ability of
different employees and then the employees are placed in these grades. The grades
are, Excellent, Very Good, Good, Average, Bad, and Worst. Every grade may again
be sub-divided into three grades: (i) Highly Satisfactory (ii) Satisfactory (iii) Non-
satisfactory. Employees can be placed in any of these groups according to their
abilities.
3. Man to Man Comparison Method: This is the method where, a master scale is used
to evaluate the qualities of different employees. The five scales of performance are
determined for every job in the master scale. For example, to measure the efficiency
of employees, first of all the most efficient employee is selected and after that the
most inefficient employees are selected who are respectively more efficient than
average efficiency and less efficient than average efficiency.
4. Graphic Rating Method: In this method, the abilities of employees are evaluated
 through graph. The abilities of all the employees are represented on a graph paper
with the help of scale. Following qualities are included to evaluate the ability of
employees such as Quantity of Job, Quality of job, Regularity, ability to learn, ability
to initiate, dependence upon other employees and officers, safety aspects, ability to
direct, ability to supervise, behaviour with other employees and officers.
5. Checking List Method: A list of necessary qualities for the performance of a job is
prepared under this method. The qualities of the employees are measured on the basis
of the abilities of such lists. If an employee possesses that quality the sign (+) is
marked in the list. If that quality is not possessed by an employee the sign (-) is
marked in the list. If there is a doubt regarding it, the sign of (?) is marked in the list.
On the basis these sign, the abilities of an employee are evaluated.
6. Descriptive Method: In this method supervisor prepares a detailed report of the
abilities, efficiency and potentialities of the employees under his supervision. All the
employees are evaluated on the basis of these reports.
7. Forced Choice Descriptive Method:
In this method some details are collected regarding the performance of an
employee on the given job. After this, some standards are fixed with the consent of
evaluations. The performance of an employee is evaluated on the basis of these
standards and the ability and efficiency of all the employees are evaluated on this
basis.

Comparison of Job Evaluation and Merit Rating:

Job Evaluation Merit Rating

Meaning It is a technique by which different Merit Rating is the process by
jobs of an enterprise are evaluated. which the ability, efficiency and
potentiality of an employee are
evaluated.

Beginning This process is started before the This process of Merit Rating is
appointment of an employee. started after the appointment of
employees.

Procedure of In the process of job evaluation, In the process of Merit Rating, the
Evaluation the ability, efficiency and the performance of an employee is
potentiality of an employee are evaluated by comparing it with the
evaluated. performance of another
employee‘s of equal rank and
status.

Relation It is related with the relative study It is related with relative study of
of different jobs. different employees.

Basis of In the process of job evaluation, In the process of Merit Rating, the
Determining the remuneration of an employee remuneration of an employee is
Wages and is determined. determined on the basis of his
Salaries efficiency, ability and potentiality.
GRIEVANCE HANDLING
A grievance may be defined as any feeling of discontent or dissatisfaction, whether expressed
or not and whether valid or not, arising out of anything connected with the company that an
employee thinks, believes or even feels is unfair, unjust or inequitable.
A grievance may be:
1. Unvoiced or stated by the worker,
2. Written or unwritten, and
3. Valid or ridiculous, and may arise out of something connected with the company, e.g.,
company policy or actions

A good grievance handling procedure:

1. Simple, easy to understand and to operate
2. Settle grievances at lower level
3. Systematically handle the grievances promptly remedify the conditions complained of
4. Depending upon the nature of grievance, refer it to appropriate authority
5. Ask the employee to give his complaint in writing;
6. Permit the worker to appeal against the decision taken at lower level
7. The grievance procedure should be made, realizing the importance of industrial harmony and
good labour relations.
Reasons for Grievances
Grievances may occur for a number of reasons:
1. Economic: Employees may demand for individual wage adjustments. They may feel that
they are paid less when compared to others. For example, late bonus, payments, adjustments
to overtime pay, perceived inequalities in treatment, claims for equal pay, and appeals against
performance- related pay awards.
2. Work environment: It may be undesirable or unsatisfactory conditions of work. For
example, light, space, heat, or poor physical conditions of workplace, defective tools and
equipment, poor quality of material, unfair rules, and lack of recognition.
3. Supervision: It may be objections to the general methods of supervision related to the
attitudes of the supervisor towards the employee such as perceived notions of bias, favoritism,
nepotism, caste affiliations and regional feelings.
4. Organizational change: Any change in the organizational policies can result in grievances.
For example, the implementation of revised company policies or new working practices.
5. Employee relations: Employees are unable to adjust with their colleagues, suffer from
feelings of neglect and victimization and become an object of ridicule and humiliation, or
other inter- employee disputes.
6. Miscellaneous: These may be issues relating to certain violations in respect of promotions,
safety methods, transfer, disciplinary rules, fines, granting leaves, medical facilities, etc.

Forms of Grievances
A grievance may take any one of the following forms: (a) factual, (b) imaginary, (c)
disguised.
1. Factual: A factual grievance arises when legitimate needs of employees remain unfulfilled,
e.g., wage hike has been agreed but not implemented citing various reasons.
2. Imaginary: When an employee‘s dissatisfaction is not because of any valid reason but
because of a wrong perception, wrong attitude or wrong information he has. Such a situation
may create an imaginary grievance. Though management is not at fault in such instances, still
it has to clear the ‗fog‘ immediately.
3. Disguised: An employee may have dissatisfaction for reasons that are unknown to himself. If
he/ she are under pressure from family, friends, relatives, neighbours, he/she may reach the
work spot with a heavy heart. If a new recruit gets a new table and almirah, this may become
an eyesore to other employees who have not been treated likewise previously.
Grievances Handling Procedure

The procedure the management applies to deal with the employees grievances can be stated
as follows:
1. Timely Action: The first and foremost requisite in grievance handling is to settle them
immediately as and when they arise. Or say, grievances need to be nipped in the bud. Sooner
the grievance is settled, lesser will be its effects on employees‘ performance. This requires the
first line supervisors be trained in recognizing and handling a grievance properly and
promptly.

2. Accepting the Grievance: The supervisor should try to recognize and accept the employee
grievance as and when it is expressed. It must be noted that acceptance does not necessarily
mean agreeing with the grievance, it simply shows the willingness of the supervisor to look
into the complaint objectively and dispassionately to deal with the grievance. Evidences suggest that
more the supervisor shows his or her concern for the employees, lesser is the number of grievances
raised by the employees.

3. Identifying the Problem: The grievance expressed by the employee maybe at times simply
emotionally, over-toned, imaginary or vague. The supervisor, therefore, needs to identify or
diagnose the problem stated by the employee.

4. Collecting the Facts: Once the problem is identified as a real problem, the supervisor should,
then, collect all the relevant facts and proofs relating to the grievance. The facts so collected
need to be separated from the opinions and feelings to avoid distortions of the facts. It is
useful to maintain the facts for future uses as and when these are required.

5. Analyzing the cause of the Grievance: Having collected all the facts and figures relating to
the grievance, the next step involved in the grievance procedure is to establish and analyse the
cause that led to grievance. The analysis of the cause will involve studying various aspects of
the grievance such as the employees past history, frequency of the occurrence, management
practices, union practices, etc.

6. Taking Decision: In order to take the best decision to handle the grievance, alternative
courses of actions are worked out. These are, then, evaluated in view of their consequences
on the aggrieved employee, the union and the management. Finally, a decision is taken which
is best suited to the given situation in the organisation. Such decision should serve as a
precedent both within the department and the organisation.

7. Implementing the Decision: The decision, whatsoever taken, must be immediately

communicated to the employee and also implemented by the competent authority.
McGregor‘s ―Hot- stove Rule‖ should be strictly followed while implementing the
decision. The decision, thus, implemented should also be reviewed to know whether the
grievance has been satisfactorily resolved or not.

In case, it is not resolved, the supervisor once again needs to go back to the whole procedure
step by step to find out an appropriate decision or solution to resolve the grievance. However, if the
grievance is not resolved at the internal level, the grievance is, then, referred to an arbitrator who is
acceptable to the employee as well as the management. The arbitrator follows a quasi-judicial
process where both the parties present evidence. Based on the evidences so produced, the matter is
cross-examined in thread-bare. The arbitrator then thinks, applies his mind and arrives at a decision.
The decision taken by arbitrator is final and binding on both the parties.
WELFARE MEASURES-STATUTORY AND NON STATUTORY COMPLIANCE
The concept of labour welfare originated in the desire for a humanitarian approach to ameliorate the
sufferings of the workers and their families on account of the baneful effects of large-scale
industrialization like undesirable social consequences and the labour problems which have evolved in the
process of transition from tradition to modernity. Later it became a utilitarian philosophy which worked as
a motivating force for labour and for those who were interested in it. Lastly, labour welfare received
inspiration from the evolution of the social thought in regard to democracy and welfare state.

Definition:
1. The I.L.O. (SEA) session held at New Delhi in 1947 defined, Labour Welfare as ―such
services, facilities and amenities, which may be established in or in the vicinity congenial surroundings
and to provide them with amenities conducive to good health and good morale.

2. N.M. Joshi defined, labour welfare ―covers all the efforts which employers make for the
benefit or their employees over and above the minimum standard of working conditions fixed
by Factories Act, 1948 and over and above the provision of social legislation providing
against accident, old age, unemployment and sickness‖.

3. The Committee on Labour Welfare (1969) defined, labour welfare to ―include such
services, facilities and amenities as adequate canteens, rest and recreational facilities, sanitary
and medical facilities, arrangements for travel to and from work and for the accommodation
of workers employed at a distance from their homes and such other services, amenities, and
facilities including social security measures as contribute to improve the conditions under
which workers are employed‖.
Labour Welfare Agencies in India
In India, the main agencies engaged in labour welfare include:
1. Central Government: The Central Government has passed a number of Acts for the welfare
of different types of workers. It also administers the implementation of industrial and labour
laws. The important Acts which incorporate measures for the welfare of the workers are:
Factories Act, Indian Mines Act, Employment of Children Act, Maternity Benefits Act,
Plantation Labour Act, etc. Under these Acts, employers have to provide certain basic welfare
facilities to the workers.
2. State Government: The implementation of many provisions of various labour laws rests
with the State Governments. The State Governments run health centers, educational centers,
etc. for the welfare of the workers. They also keep a vigil on the employers that they are
operating the welfare schemes made obligatory by the Central or State Government. The State
Governments have been empowered to prescribe rules for the welfare of workers and appoint
appropriate authorities for the enforcement of welfare provisions under various labour laws.
3. Employers: Many employers provide voluntarily welfare facilities along with the statutory
welfare facilities. These include residential lease accommodation to employees, medical and
transport facilities, reading rooms, scholarships to children of workers, patronize teams of
employees for hockey, football, etc. Employers can provide welfare facilities individually or
collectively i.e., through their associations. Employers have to play a major role in providing
welfare facilities to industrial workers.
4. Trade Unions: Trade Unions are supposed to raise the welfare of workers and naturally they
are expected to provide certain welfare facilities to their members. Unions can provide
educational cultural another facilities to their members. Some trade unions like the Rashtriya
Mill Mazdoor Sangh are doing good work in the field of labour welfare.
5. Voluntary Organisation: Some social-welfare and charitable organizations conduct social
welfare activities which are useful to all sections of the society including industrial workers.
These agencies provide medical aid, educational facilities, scholarships, etc. However, the
 contribution of such organizations in labour welfare is not so significant.

CLASSIFICATION OF WELFARE
Welfare Services related to physical and social well-being of the employees both within and
outside the organisation. Within the organisation these include provision of medical benefits,
recreational facilities, libraries, canteens, rest rooms, etc. They may also include meals and
refreshments supplied free of cost or at subsidized rates to the employees. But outside the
organisation, welfare arrangements include provision of housing accommodation, education of
children of employees, sports fields, medical facilities for the family, etc. The welfare facilities are
classified as Statutory and Non-Statutory compliance.
Statutory Welfare Compliances:
Those which have to be provided irrespective of size of establishment, say, drinking water.
Also, those which have to be provided subject to the employment of a specified number of people.
The Provisions of Factories Act Regarding Labour Welfare - Sections 42 to 49 of the Factories Act,
1948 contain specific provisions relating to welfare of labour. Sec.42 to 45 applies to all factories
irrespective of the number of workers employed. Secs. 46 to 49 are applicable to factories employing
more than a specified number of workers.
These provisions are discussed below:
1. Washing Facility (Sec.42): In every factory: (a) adequate and suitable facilities for washing
shall be provided and maintained for the use of the workers therein; (b) separate and
adequately screened facilities shall be provided for the use of male and female workers; (c)
such facilities shall be conveniently accessible and shall be kept clean.
2. Facilities for Storing and Drying Clothing (Sec.43): The State Government may, in respect
of any factory or class or description of factories, make rules requiring the provisions therein
of suitable places for keeping clothing not worn during working hours and for the drying of
wet clothing.
3. Facilities for Sitting (Sec.44): In every factory, suitable arrangements for sitting shall be
provided and maintained for all workers obliged to work in a standing position, in order that
they may take advantage of any opportunities for rest which may occur in the course of their
work.
4. First-Aid Appliances (Sec.45): There shall in every factory be provided and maintained so
as to be readily accessible during all working hours first-aid boxes or cupboards equipped
with the prescribed contents, and the number of such boxes or cupboards to be provided and
maintained shall not be less than one for every one hundred and fifty workers ordinarily
employed at any one time in the factory.
5. Canteens (Sec.46): The State Government may make rules requiring that in any specified
factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen
or canteens shall be provided and maintained by the occupier for the use of the workers.
6. Shelters, Rest Rooms and Lunch Rooms (Sec.47): In every factory wherein more than one
hundred and fifty workers are ordinarily employed, adequate and suitable shelters of rest
rooms and a suitable lunch room, with provision for drinking water, where workers can eat
meals brought by them, shall be provided and maintained for the use of the workers.
7. Creches (Sec.48): In every factory wherein more than 30 women workers are ordinarily
employed, there shall be provided and maintained a suitable room or rooms for the use of
children under the gage of six years of such women.
8. Welfare Officers (Sec.49): In every factory wherein five hundred or more workers are
ordinarily employed, the occupier shall employ in the factory such number of welfare officers
as may be prescribed. Further, provisions were made in other acts also for the appointment of
welfare officers. For example, Section 58 of the Indian Mines Act, 1952 provides: ―For
every mine wherein 500 or more persons are employed ordinarily, the owner, the agent
or manager shall appoint a suitably qualified person as Welfare Officer‖.
Non-Statutory Welfare Compliances:
In the case of certain amenities, there are no minimum standard laid down as in the sphere of
housing, medical treatment, recreation, transport and educational facilities. This is left to the
discretion of the employer. These facilities are:
1. Economic Services: The employees often need money for purchase of bicycle, scooter, T.V.,
sewing machine, fan, etc. to raise their standard of living. The employer may advance them
the money which could be paid back by the employees in the form of monthly installments to
be deducted from their salaries. The employees may also be induced to build up their own
funds for future contingencies.

2. Recreational Services: Management may provide, for recreational facilities. More agreeable
informal atmosphere is promoted through the contacts and relationships built up in the
recreational events. The management may provide for indoor games like Table Tennis in the
common room for employees. In case of big organizations, management may also arrange for
playgrounds for outdoor games and induce the workers to prepare teams to play matches with
other similar teams.

3. Facilitative Services: These are conveniences which the employees ordinarily require such
as:
a) Housing Facilities: Some organizations construct flats for their employees and provide
the same either free or at a nominal rent. In some cases, cash compensations are given
while in other cases, loans are advanced to the employees to enable them to construct or
purchase their own houses or flats.

b) Medical Facilities: Health is one of the foremost things for the employees and it is but
natural that there may be some injuries because of accidents while working. So first-aid
facilities must be provided for within the factory premises. In addition, medical scheme is
generally in operation under which reimbursement of medical expenses actually incurred
is allowed. The organisation may also prescribed doctors from whom the employees may
get services in case of need.

c) Washing Facilities: It is necessary to provide for wash basins and washing facilities to be
conveniently accessible to all workers which should be clean, properly separated and
screened for the use of male and female employees.

d) Educational Facilities: Educational facilities may be provided by the organisation to the

employees‘ children by starting a school for them.

e) Leave Travel Concession: Many organizations reimburse actual fares incurred by the
employee in undertaking a tour along with his or her spouse and minor children once
during a specified number of years.
MARKETING MANAGEMENT
The term “market” originates from the Latin word “Marcatus” which means “a place where
business is conducted.” A layman regards market as a place where buyers and sellers personally
interact and finalize deals. Marketing is an essential function of a modern organization whether it
deals in products or services. Marketing is a process of identifying the customer‟s requirements and
satisfying them efficiently and effectively. It constitutes the eyes and ears of the business.
Marketing is the basic reason for the existence of a business organization. In the age of fast
changes, marketing is springboard of all business activities. It works as the guide for all
business/non-business organization. It is a powerful mechanism which alone can satisfy the needs
and wants of consumers at the place and price they desire. Marketing is said to be the eyes and ears
of a business organization because it keeps the business in close contact with its economic,
political, social and technological environment, and informs it of events that can influence its
activities as per requirements of the market.

Definition:
1. Philip Kotler defines, “Marketing is a societal process by which individuals and groups
obtain what they need and want through creating, offering and freely exchange products and
services of value with others.”
2. E.F.L. Brech defines, “Marketing is the process of determining consumer demand for a
product or service, motivating its sales and distributing it into ultimate consumption at a
profit.”
For a managerial definition, marketing has often been described as “the art of selling
products.” Marketing management takes place when at least one party to a potential exchange thinks
about the means of achieving desired responses from other parties. Marketing management as the art
and science of choosing target markets and getting, keeping, and growing customers through
creating, delivering, and communicating superior customer value.

FUNCTIONS OF MARKETING MANAGEMENT

The marketing functions direct and facilitate the flow of goods and services from the producer
to the end user. Firms must spend money to create time, place and ownership utilities as discussed
earlier. Several studies have been made to measure marketing costs in relation to overall product
costs and service costs and most estimates have ranged between 40-60 percent. These costs are not
associated with raw materials or any of the other production functions necessary for creating form
utility. What then does the consumer receive in return for this proportion of marketing cost? This
question is answered by understanding the functions performed by marketing.
The marketing process starts and ends with these functions. Marketing is responsible for the
performance of 8 universal functions: buying, selling, transporting, storing, standardizing and
grading, financing, risk taking and securing marketing information. Some functions are performed by
manufacturers, others by marketing intermediaries like wholesalers and retailers.
The marketing functions can be broadly categorized into three categories. Buying and selling,
the first two functions represent exchange functions. Transporting and storing are physical
distribution functions. The final four marketing functions – standardizing and grading, financing, risk
taking and securing market information – are often called facilitating functions because they assist
the marketer in performing the exchange and physical distribution functions.

A. Exchange functions:
1. Buying: Ensuring that product offerings are available in sufficient quantities to meet
customer demands.
2. Selling: Using advertising, personal selling and sales promotion to match goods and
 services to customer needs.

B. Physical distribution functions:

Transporting: Moving products from their points of production to locations convenient for
purchasers.
Storing: Warehousing products until needed for sale.
C. Facilitating functions:
Standardizing and grading: Ensuring that product offerings meet established quality and
quantity control standards of size, weight and so on.
Financing: Providing credit for channel members or consumers.
Risk taking: Dealing with uncertainty about consumer purchases resulting from creation and
marketing of goods and services that consumers may purchase in the future.
Securing marketing information: Collecting information about consumers, competitors and
channel members for use in marketing decision making.

MARKETING MIX
The term „marketing mix‟ was introduced by Prof. N.H. Borden of the Harward Business
School. It describes combination of the four inputs which constitute a company‟s
marketing system the product, the distribution system, the price structure and the promotional
activities. Marketing mix strategy is an overall marketing approach that is used to achieve objectives
of strategy marketing plans. A marketer involves several factors while dealing with the marketing-
mix strategy product lines, brands and packaging, price setting and strategies, channel, design,
selection and management and communication strategies.

Definition:
1. According to Philip Kotler, “Marketing Mix is the set of controllable variables that the firm
can use to influence the buyer‟s response”.
2. According to Mr. Jerome McCarthy an American expert, “Marketing mix is the pack of four
sets of variables, namely product variables, price variables, promotion variables and place
variables.
3. According to Stanton, marketing-mix is a combination of four elements – product, pricing
structure, distribution system and promotional activities used to satisfy the needs of an
organizations target market and at the time achieve its marketing objectives. Marketing mix
represents a blending of decision in four areas, product, pricing, promotion and physical
distribution. These elements are interrelated because decision in one area usually affects
actions in the others.
Marketing mix is the set of controllable variables and their levels that the firm uses to
influence its target market. McCarthy popularized the four Ps nearly product, price, place and
promotion. Each firm strives to build up such a composition of 4„P‟s, which can create highest
level of consumer satisfaction and at the same time meet its organisational objectives.
Thus, this mix is assembled keeping in mind the needs of target customers, and it varies from
one organisation to another depending upon its available resources and marketing objectives.
Marketing – mix is a combination of several mixes as shown in above fig. Marketing – mix
encompasses product-mix (brand, quality, weight, etc.), price-mix (unit price, discount credit etc.),
promotion mix (advertising, salesmanship and sales promotion), and place-mix (distribution
channels, transport, storage, etc.).
Importance of Marketing Mix:
Determination of marketing-mix is an important decision which the marketing manager has to
take. If proper marketing mix is determined the following benefits will occur to the organization.
1. Marketing-mix takes care of the needs of the customers; it helps in increasing sales and
earning higher profits.
2. Marketing-mix facilitates meeting the requirements of different types of customers.
3. Marketing-mix gives consideration to the various elements of the marketing system. There is
a balanced relation between these elements.
4. Marketing-mix facilitates meeting the requirements of different types of customers.
5. Marketing-mix serves as the link between the business firm and its customers. It focuses
attention on the satisfaction of customers.

Various elements of marketing-mix are inter related and inter dependent as shown in the fig.
below. For instance, feature of a product inefficient its price, but the price customer can pay also
determines the product features. The choice of channels is determined by the nature of product and
its price. Similarly, promotional activities add to the cost of the product, the nature of product and its
price also influence the kind of promotion to be done.
A brief description of the elements of marketing-mix is given below:
1. Product: Product is a set of tangible and intangible attributes designed to satisfy consumer
needs. Marketing activities start from the generation of idea about product and ends with the
positioning of the product in the target markets. Customer‟s needs should be identified by the
company, so it could design the product or services accordingly. In the process of product
planning and development, the marketer should take into account the right design, desired
color and size, preferred style, appealing brand name, attracting packaging, well informed
label and effective after sales services of the products.
The marketer should identify the important specific variable out of the above and it
should be given due importance in product planning and development. In short, product
planning and development involves decisions about: quality of the product, size of the
product, design of the product, volume of production, Packaging, warranties and after – sale
service, product testing and product range, etc.

2. Price: It is one of the most difficult tasks of the marketing manager to fix the right price. The
marketing manager has to do a lot of exercise to determine the price. Price is the value of the
product or service expressed in monetary turns. From buyer‟s point of view, it is the cost
which he is paying to marketer in order to obtain product or service. Price has its important
role in marketing. The price of the product is related with affordable paying capacity of the
consumer, the purpose and motive behind the purchase etc.
The marketer should explore and design suitable price strategies to capture maximum
market share. Major price policies and strategies are geographical pricing, uniform pricing,
unit pricing, resale price maintenance, leader pricing, follow the leader pricing, skim pricing,
psychological pricing, price competition, non-price competition and discount and allowances
Pricing decisions and policies have direct influence on the sales volume and profits of the
firm. Price therefore is an important element of the marketing-mix. Right price can be
determined through pricing research and by adopting test marketing techniques.
3. Promotion: Promotion is the communication by the marketer to its target customers
regarding its products or services. In advertising, sales promotion and publicity it is unilateral.
In personal selling it is fully bilateral but in public relations it is up to some extent bilateral.
The marketer must make a judicious mixture of three basic elements of sales promotion,
advertising, personal selling and sales promotion keeping in view the type of product, number
of customers, geographical area of market, financial and managerial resources.
Promotion deals with informing and persuading the customers regarding the firm‟s
product. Most promotional campaigns comprise a combination of two or more promotional
methods as no single method of promotion is effective alone. Factors like nature of product,
nature of customer, stage of demand and promotional budget influence the inputs that should
be taken into consideration while devising a promotion plan.

4. Place or Physical Distribution: Production has no meaning until and unless the product is
delivered to the consumers. In this regard, the marketer should select the right distribution
policy. The marketer should take into account the factors affecting the choice of channel of
distribution. Place-mix entails activities that are necessary to transfer – ownership of goods to
customers and to make available goods at the right time and place. Thus it includes decision
about the channel of distribution and the place at which the products should be displayed and
made available to the customers.
The basic purpose of establishment of channel is to provide convenience in buying to
the customers so that they can purchase firms products or services without any harassment.
The important channels used for physical distribution of goods are wholesalers and retailers.
In some cases the manufacturers even own the retail outlets. e.g., oil companies in India have
their own stations distributing their petroleum products.
 5. The Fifth P: Packaging: Apart from the 4Ps which are basic to the value delivery process of
any company, packaging has assumed its importance as the 5th „P‟ of marketing mix
strategy. Packaging is the art, science and technology of preparing goods for transport, sale
and exchange. In recent times, packaging has become an effective marketing tool. It has
become a useful marketing tool because of the growing importance of self-service,
innovation in packaging industry.
The significance of packaging has increased these days because of severe competition
in the market and rise in the standard of living of the people. Packaging facilitates the sale of
a product. It acts as a silent salesman of the manufacturer, particularly at a place where there
is methods of retail selling, automatic vending and other self-selection methods of retail
selling.

The Expanded Marketing Mix:

In service industry one needs more P‟s than the five already discussed.
1. Physical Evidence: Before making a service purchase, the customer doesn‟t know how to
examine the quality of service provided by a service outlet and hence certain physical clues
like actual location etc. help in making a decision. Thus cleanliness at school, college, hotels,
clinics, restaurants, cinema hall, airports etc. becomes more important. Where people
exchange the services, the provision of adequate facilities becomes more important as in case
of hotels, airports, etc. Second part of the physical evidence is the peripherals service coupon,
air ticket, cash memo, cheque book, token, slips, pen, crockery etc.

2. People: People constitute an important dimension of marketing of services as quality of

service depends of quality employees it has. As provider of services, the marketer must
deliver the right product to the customer. Every employee in the organization becomes a sales
person of company‟s service. Therefore, his attitude, style, sense of responsibility etc.
become more important. People are important to influence the other customers.

3. Process: It refers to the process by which a customer is served with the desired product. The
process of delivery becomes important in a service organization. It includes the procedures,
mechanism and routines which remain within the organization. The decisions in service
process cover technology, specific equipments, location, layout etc.
Thus, we see that marketing of services requires an expanded marketing mix comprising the
product, price, place, promotion and the people, physical evidence and process. The marketer has to
be more careful in selecting the right marketing-mix strategy in case of marketing of services to
satisfy the customer requirements.

MARKETING STRATEGIES BASED ON PRODUCT LIFE CYCLE

A product is a physical good or service or combination of both. It is capable of satisfying the
buyer‟s needs. It attempts to recognize distinct stages in sales history of the product. The success or
failure of a product life depends on how well it makes adjustments to ever changing, saturation and
decline stages. The length of each stage or product life cycle varies on product nature and
environment conditions.
A product has a life cycle is to assert four things:
1. Products have a limited life.
2. Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different marketing, financial, manufacturing, purchasing, and human
 resource strategies in each stage of their life cycle.

Stages in Product Life Cycle (PLC):

There are six stages a product passes through from time of its introduction to decline over a
period of time:

Sales

Introduction Early growth Rapid growth Maturity Saturation Decline

Time
1. Introduction: This stage follows just after the launch of the product. The sales are likely to be
very slow. Most of the buyers do not come forward as the product is new and untested.
2. Early Growth: This is the critical stage. When the usage of product starts flowing into the
market and the results are encouraging more and more buyers come forward to buy and the unit
cost relatively is high, with increased expenses, etc.
3. Rapid Growth: A new product enters the stage of rapid growth when it satisfies the need of the
customers. The sales will increase with repeat purchases and also by mouth publicity and
promotion by manufacturer.
4. Maturity: When the sales growth slows down, it is called maturity stage. At this stage, the firms
tend to attract the customers away from their competitors through cheaper prices and larger
promotional efforts and outlay.
5. Saturation: When the sales slows down to zero. The size of market does not increase beyond this
stage i.e. a new customer is replaced by the old customer who has stopped buying the product.
6. Decline: When the sales of the product tend to fall. When they do not satisfy the customer, it is
no more preferred. As a result its competing products offering superior benefits take over the
market.