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Explain the steps in manpower planning?
The objectives of HR plan must be derived from organizational objectives. Specific requirements in terms of number and characteristics of employees should be derived from the organizational objectives. Organizational objectives are defined by the top management and the role of HRP is to sub serve the overall objectives by ensuring availability and utilization of human resources.
2 Once the organizational objectives are defined by the top management and the role of HRP is to sub serve the overall objectives by ensuring availability and utilization of human resources. Once the organizational objectives are specified, communicated and understood by all concerned, the HR department must specify its objectives with regard to HR utilization in the organization. HR Demand Forecast Demand forecasting is the process of estimating the future quantity and quality of people required. The basis of forecast must be annual budget and long-term corporate plan, translated into activity levels for each function and department. There are several good reasons to conduct demand forecasting Quantify the jobs necessary for producing a given number of goods Determine what staff-mix is required Asses appropriate staffing levels in different parts of the organization Prevent shortages of people Monitor compliance with legal requirements with regard to reservation of jobs
HR Supply Forecast Personnel demand analysis provides the manager with the means of estimating the number and kind of employees that will be required. The next logical step for the management is to determine whether it will be able to procure the required number of personnel and the sources for such procurement. This information is provided by supply forecasting. Supply forecasting measures the number of people likely to be available from within and outside an organization, after making allowance for absenteeism, internal movements and promotions, wastage and changes in hours, and other conditions of work. reasons for supply forecast are Helps quantify number of people and positions expected to be available Helps clarify staff mixes that will exist in the future Assess existing staffing levels in different parts of the organization Prevents shortage of people Monitors expected future compliance with legal requirements of job reservations
HR Programming Once an organization’s personnel and supply are forecast, the two must be reconciled or balanced in order that vacancies can be filled by the right employees at the right time. HR Plan Implementation Implementation requires converting an HR plan into action. A series of action programmes are initiated as apart of HR plan implementation. Recruitment, Selection and Placement – after the job vacancies are known, efforts must be made to identify sources and search for suitable candidates. The selection programme should be professionally designed. Training and Development – The training and development programme should cover the number of trainees required and programmes necessary for existing staff Retraining and Redeployment – new skills are to be imparted to existing staff when technology changes Retention Plan – retention plan covers actions which would help reduce avoidable separations of employees. Downsizing – where there is surplus employee, trimming of labour force will be necessary Control and Evaluation Control and evaluation represents the fifth and the final phase in the HRP process. The Hr plan should include budgets, targets and standards. It should also clarify responsibilities for implementation and control, and establish reporting procedures, which will enable achievements to be monitored against the plan.
4 Q 2. What is personnel manual and how is it designed? MEANING AND DEFINITIONS OF PERSONNEL POLICIES: Personnel policies are the principles and rules of conduct which "formulate, redefine, break into details and decide a number of actions" that govern the relationship with employees in the attainment of the organization objectives. The scope of personnel policies is vast arid employees from all departments are covered by personnel policies. (1) According. to Edwin B. Flippo, "A policy is a man-made rule: or pre-determined course of action that is established to guide the performance of work toward the organization objectives. It is a type of standing plan that serves to guide subordinates in the execution of their tasks. " (2) According to Calhoon, "Personnel policies constitute guides to action. They furnish the gei1eral standards or bases on which decisions are reached. Their genesis lies in an organization’s values, philosophy, concepts and principles." HOW TO PREPARE A PERSONNEL POLICY MANUAL? Preparation of personnel policy manual is a lengthy, costly and time-consuming activity. It involves lot of administrative work. Many persons are involved in this joint/collective activity. (1) Lengthy procedure involved: The steps to be taken for the preparation of personnel policy manual depend on the material on policy manual already available. If personnel policies on various aspects of personnel management have already been written, the task consists of gathering the policies together, arranging them in a logical order and writing them according to some acceptable format. Each policy needs to be placed properly so that the manager using the manual will understand all aspects (objectives, application, etc.) of the policy easily, quickly and correctly. (2) Firm decision to prepare policy manual: The decision to prepare a manual is to be taken by the top management of the company. It also has to decide who is going to be in charge of its preparation. It is desirable to make one person responsible for the drafting of the manual. (3) Giving suitable authority to In charge, Personnel Policy Manual: The person appointed for the preparation of the manual should be given authority to set up a small committee which will assist in gathering the data necessary for the
5 preparation of complete and comprehensive manual. The major sources of information should also be decided. In some cases, manual preparation is the revision and updating of the old manual or preparation of new manual. (4) Appointing of a small committee for manual preparation: The committee set up for the preparation of manual should be small and functional. The initial task of the committee is to collect data from individual departments. There should be time limit for the preparation of final draft of the manual. (5) Interviewing supervisors for information collection: The supervisors are mainly responsible for administering company policies and practices. The supervisors should be interviewed for understanding what is going on in the company at present. They (supervisors) will be useful in finding out whether the present policies (written or unwritten) are working and where they are not working. Association of supervisors is important as it gives them opportunity to participate in the preparation or in the revision of the personnel manual. (6) Preparing first draft of policy manual: After collecting the required data, views of supervisors, etc, the first draft of personnel policy manual should be prepared. The language of the draft should be clear. The first draft of the manual should be flexible and open to additions and changes. (7) Circulating first draft for review and recommendations: Copies of the first draft should be taken and circulated among the supervisors and others directly concerned with the use of the manual. Their opinions should be collected for the preparation of final draft of the manual. (8) Final printing of manual: The manual maybe large in the case of a large organization manufacturing and marketing wide product line.. A manual should have printed pages with proper binding so as to make it available in a book form. Sometimes, it is prepared in a loose-leaf form. A printed manual in book form can be used for a longer period of three to five years. Thereafter, new updated and revised manual can be introduced by discarding the old one. (9) Periodical revision and updating of the manual: Periodical revision and updating of personnel policy manual is necessary due to organizational and other changes. The jobs of manual preparation are never finished as conditions inevitably and continuously change.
A personnel manager /HR manager or a manual coordinator should be appointed for this job Here, he can draft the manual by using the steps noted above. The steps serve as guidelines for manual drafting. Q 3. Why and how does job rotation take place? (Concept question) Job rotation implies movement of employees from one job to another. With job rotation, a given employee performs different jobs, but more or less of the same nature. When an activity is no longer challenging, the employee would be rotated to another job at the same level that has similar skill requirements. Advantages of Job Rotation• • • • • Job rotation is a way to overcome boredom and monotony. It is likely to increase intrinsic reward potential of a job because of different skills and abilities needed to perform it. Workers become competent in several jobs rather than only one, which in turn benefits the organization. Knowing a variety of jobs improve the worker’s self-image provides personal growth and makes the worker more valuable to the organization. Periodic job changing can also improve interdepartmental co-operation, employees become more understanding of each other’s problems. Disadvantages of Job Rotation • • An employee does not gain a particular specialization. Moving from one job to another also gets irritating because the normal routine of an employee is disturbed and also time is wasted in adjusting to the new job. The employee may feel alienated when he/she is rotated from job to job. • Training costs are increased
7 Q 4. Why and how does a transfer take place? Firstly what is a transfer? A transfer involves a change in the job (accompanied by a change in the place of the job) of an employee without a change in responsibilities or remuneration. A transfer differs from a promotion in that the latter involves a change in which a significant increase in responsibility, status and income occurs, but all these elements are stagnant in case of a transfer. Another difference is that transfers are regular and frequent, as in banks and other government establishments, but promotions are infrequent. Reasons for transfers The reasons for transfers vary from organization to organization and from individual to individual within an organization. Broadly speaking, the following are the reasons for transfers: There is a shortage of employees in one department or plant because of a heavy demand, which necessitates a requirement of more employees. In another department or plant, employees may be surplus because of slackened demand for the products manufactured by the company. This will lead to workers being idle and wastage of manpower. Workers are thus transferred from the surplus department to another department or plant where there is shortage of staff. Incompatibilities between the worker and his or her boss or between one worker and another worker. Correction of a wrong initial placement of an employee. A change has taken place in the interests and capacities of an individual, compelling him to transfer to a different job. Over a period of time, the productivity of an employee may decline because of the monotony of his or her job. To break this monotony, the employee is transferred. The climate may be unsatisfactory for an employee’s health. He or she may request a transfer to a different place where his or her health will not be affected by the climate. Family related issues cause transfers, especially among female employees like when they get married and want to join their husbands.
Types of transfers 1) Production transfers – as mentioned earlier, a shortage or surplus of the labour force is common in different departments in a plant or several plants in an organization. Surplus employees in a department have to be laid off, unless they are transferred to another department. Transfers effected to avoid such imminent lay-offs are called production transfers. 2) Replacement transfers – replacement transfers are too intended to avoid imminent lay-offs, especially of senior employees. A junior employee may be replaced by a senior employee to avoid laying off the senior one. A replacement transfer usually takes place when all the operations are declining and it is carried out to retain long-service employees as long as possible. 3) Versatility transfers – versatility transfers are done to make employees versatile and competent in more than one skill. Clerical employees in banks, for example are transferred from one section to another so that they acquire the necessary skills to attend to the various activities of the bank. Versatile transfers may be used as a preparation for production or replacement transfers. 4) Shift transfers – generally speaking, industrial establishments operate more than one shift. Transfers between shifts are common, such transfers being made mostly on a rotation basis. Transfers may also be effected on special requests from employees. Some request a transfer to the second shift or the night shift in order to avail the free time during the day to take up part time jobs. 5) Remedial transfers – remedial transfers are effected at the request of employees and are therefore called personal transfers. Remedial transfers take place in instances like the initial placement of an employee may have been faulty or the worker may not get along with his or her supervisor or with other workers in the department he or she may be getting too old to continue in his or her regular job or
9 the type of job or working conditions may not be well adapted to his or her personal health if the job is repetitive, the worker may stagnate and in all such instances the employee would benefit by transfer to a different kind of work. Q 5. Explain the HRM Model? Nature of HRM Human Resource Planning Job Analysis Recruitment Selection Placement Training and Development Remuneration Motivation
Participative Management Communication Safety and Health Welfare Promotions etc Industrial Relations Trade Unionism Disputes And their Settlement
Competent and willing workforce
Future of HRM
The HRM model contains all HR activities. When these activities are discharged effectively, they will result in a competent and willing workforce who will help realize organizational goals. There is another variable in the model – environment. It may be stated that the HR function does not operate in vacuum. It is influenced by several internal and external forces like economic, technological, political, legal, organizational, and professional conditions. HRM: is a management function that helps manager’s recruit, select, train, and develop members for an organization. Human Resource Planning: is understood as the process of forecasting an organizations future demand for, and supply of, the right type of people in the right number. Job Analysis: is the process of studying and collecting information relating to the operations and responsibilities of a specific job. The immediate products of this analysis are job descriptions and job specification. Recruitment: is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected. Selection: is the process of differentiating between applicants in order to identify (and hire) those with greater likelihood of success in a job. Placement: is understood as the allocation of people to jobs. It is the assignment or reassignment of an employee to a new or different job. Training and development: it is an attempt to improve current or future employee performance by increasing an employee’s ability to perform through learning, usually by changing the employee’s attitude or increasing his or her skills and knowledge. The need
11 for training and development is determined by employee’s performance deficiency, computed as follows: Training and development need = Standard performance – Actual performance Remuneration: is the compensation an employee receives in return for his or her contribution to the organization. Motivation: is a process that starts with a psychological or physiological deficiency or need that activates behavior or a drive that is aimed at a goal or an incentive. Participative management: Workers participation may broadly be taken to cover all terms of association of workers and their representatives with the decision making process, ranging from exchange of information, consultations, decisions and negotiations to more institutionalized forms such as the presence of workers members on management or supervisory boards or even management by workers themselves as practiced in Yugoslavia. ((ILO) Communication: may be understood as the process of exchanging information, and understanding among people. Safety and health: Safety means freedom from the occurrence or risk of injury or loss. In order to ensure the continuing good health of their employees, the HRM focuses on the need for healthy workers and health services. Welfare: as defined by ILO at its Asian Regional Conference, defined labour welfare as a term which is understood to include such services, facilities, and amenities as may be established in or in the vicinity of undertakings to enable the person employed in them to perform their work in healthy, congenial surroundings and to provide them with amenities conducive to good health and high morale. Promotions: means an improvement in pay, prestige, position and responsibilities of an employee within his or her organization. Transfer: involves a change in the job (accompanied by a change in the place of the job) of an employee without a change in the responsibilities or remuneration.
12 Separations: Lay-offs, resignations and dismissals separate employees from the employers. Industrial relations: is concerned with the systems, rules and procedures used by unions and employers to determine the reward for effort and other conditions of employment, to protect the interests of the employed and their employers, and to regulate the ways in which employers treat their employees. Trade Unions: are voluntary organizations of workers or employers formed to promote and protect their interests through collective action. Disputes and their settlement: Industrial disputes mean any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or terms of employment or with the conditions of labour of any person.
13 CONCEPT TESTING QUESTIONS Q 1. Meaning and Definition (of all concepts for every chapter) Q 2. Difference between: personnel management and HRM Dimension 1. Employment contract Personnel Management HRM Aims to go ‘beyond’ contract. Can do, outlook, impatience with rule Business need Values/mission Nurturing Customer Integrated Fast Transformational leadership Direct Facilitation Integrated, key task Performance related Harmonization Individual contracts Few Team work Manage climate and culture Learning companies
Careful delineation of written contracts 2. Rules Importance of devising clear rules 3. Guide to management Procedures action 4. Behaviour referent Norms/ customs and practices 5. Managerial task vis-à-vis Monitoring labour 6. Key relations Labour management 7. Initiatives Piecemeal 8. Speed of decision Slow 9. Management role Transactional 10. Communication Indirect 11. Prized management Negotiation skills 12. Selection Separate, marginal task 13. Pay Job evaluation 14. Conditions Separately negotiated 15. Labour management Collective-bargaining contracts 16. Job categories and Many grades 17. Job design Division of labour 18. Conflict handling Reach temporary truce 19. Training and Controlled access to courses development 20. Focus of attention for Personnel procedures interventions 21. Respect for employees
Wide ranging cultural, structural and personnel strategies Labour is treated as a tool People are treated as assets which is expendable and to be used for the benefit of replaceable an organization, its employees and the society as a whole
14 22. Shared interest 23. Evolution Interests of the organization Mutuality of interests are uppermost Precedes HRM Latest in the evolution of the subject
GROUP 1 (TOPICS COVERED) Personnel management Human resource management Strategic HRM New trends in HRM 1] PERSONNEL MANAGEMENT DEFINITIONS OF PERSONNEL MANAGEMENT/ HRM The term personnel management is defined in different ways. The following definitions are worth noting: (1) According to Edwin Flippo" Personnel management is the planning, organizing, directing, and controlling of the procurement, development, compensation, integration, maintenance, and separation of human resources to the end that individual, organizational and societal objectives are accomplished". (2) According to George R. Terry, "Personnel management is concerned with the obtaining and maintaining of a satisfactory and satisfied, work force". (3) According to Walter D. Scott, "Personnel management is concerned with the attaining of maximum individual development; desirable working relationship between employer and employees, and an effective moulding of human resources as contrasted with physical resources". (4) According to British Institute of Personnel Management, London, "Personnel Management is that part of management which is concerned with the people at work and with their relationship within an enterprise". OBJECTIVES/PURPOSES OF PERSONNEL MANAGEMENT / HUMAN
RESOURCE MANAGEMENT: The basic objective of personnel management is to maintain efficient team of workers for the benefit of the organization. In addition, to provide opportunities of selfdevelopment to employees and finally to maintain congenial work atmosphere and inter-personnel relations are the objectives of personnel management. Personnel management aims at giving fair treatment to employees as regard wages, 'welfare facilities, non-monetary benefits, working conditions and so on.
15 The objectives of HRM are derived from the basic objectives of an organization. In order to achieve organizational objectives, integration of employer's interest and employee interests is necessary. The objectives of personnel management/HRM in any industrial organization can be summarized as under. (1) To attain maximum individual development (self-development) of the members of an organization and also to utilize available human resources (with the organization) fully and effectively. (2) To mould effectively the human resources. (3) To establish desirable working relationships between employer and employees and between groups of employees. (4) To ensure satisfaction to the workers so that they are freely ready to work. (5) To improve the service rendered by the enterprise to the society through better employee morale, which leads to more efficient individual and group performance. (6) To establish and maintain a productive and self respecting relationship among all the members of an organization. (7) To ensure the availability of a competent and willing workforce to the organization for its progress and prosperity. (8) To help organization to achieve its goals by providing well trained, efficient and properly motivated employees. (9) To maintain high morale and good human relations within the organization for the benefit of employer and employees. (10) To secure the integration of all the individuals and groups with the organization by reconciling individual/group goals with those of an organization.
16 2] HUMAN RESOURCE MANAGEMENT MEANING AND DEFINITION Personnel refers to the employees working in an organization at different levels. Personnel management (also called human resource management) is that aspect of total business management, which deals with human relationships within an organization. Personnel represent human resource, which is different from material resources. Human resource is the most productive and most versatile. In addition, the manpower in an organization needs human treatment. Employees have a capacity to feel, think and even to react. Management has to deal with the employees in a careful and tactful manner. Material resources such as land, machines, raw materials, equipment, etc. are easy to manage. This is because they have no capacity to feel or think or react. This is not the case with human resource i.e. manpower. Man and machines are not on par and must not be treated in the same manner. This is because of all the resources manpower is the only resource, which does not depreciate, with the passage of time. According to Peter F. Druckert UtIle prosperity, if not the survival of any business depend on the performance of its managers of tomorrow." The material resources alone will not help the organization to achieve its objectives. For this, effective co-ordination and utilization of material and human resources are required. This suggests the importance of human resources.
The human resource is very important and useful. It should be nurtured and used for the benefit of the organization. This is a challenging job before personnel manager/management. The organization can make rapid progress only when the employees are satisfied and co-operative. On the other hand, the organization will have to face various problems and difficulties, if the employees are not co-operative but hostile. This indicates that human resource is most strategic and critical determinant of growth of a business unit. Every organization needs loyal, efficient and satisfied labour force. For this, adequate attention should be given to personnel management. OBJECTIVES OF HRM Same as objectives of personnel management (given above)
17 FUNCTIONS OF HRM A personnel manager has to perform the basic functions of management. These managerial functions include' planning, organizing, directing and controlling personnel. The operative functions of the department are: procurement of staff, development of staff through training, payment of compensation to staff i.e. wages and salaries, integration of manpower i.e. fair reconciliation of individual, social and organizational goals and interests and maintenance of staff i.e. providing them safety at the work place and also to offer welfare facilities and conveniences to employees. In brief, personnel management involves the following operational functions:
(1) Procurement of manpower: Procurement means acquiring the manpower required by an organization from time-to-time. The basic Principle in procurement is "right man for the right job". The procurement function includes manpower planning and forecasting, recruitment, selection, appointment, placement and induction of employees so as to have a team of efficient and capable employees for the benefits of the organization. Even promotions and transfers are covered by this broad personnel function. (2) Development of manpower: Development of manpower (human resource development) means planning and execution of the training programmes for all categories of employees in order to develop new skills and qualities required for working at the higher level. Manpower development is possible through training and career development programmes and not simply by offering attractive wages to workers. Executive development programmes are introduced for the benefit of higher-level managers Similarly; future manpower requirement will be, met internally through HRD programmes. It aims at educating and training employees for the improvement of overall performance of an organization. HRD (Human Resource Development) programmes are for education, training and development of existing manpower in an organization. This is for facing new problems and challenges likely to develop in the near future.
(3) Compensation payment to manpower employed: One function of HRM is to
18 pay compensation (in monetary form) to employees for the services rendered. For this, a fair system of remuneration payment (wages and salaries) needs to be introduced. Remuneration to employees should be attractive so that the labour force will be satisfied and disputes, etc. will be minimized. Fair wage payment acts as a motivating factor. (4) Integration of interests of manpower and the organization: Manpower is interested in wage payment while organization is interested in higher profits, consumer loyalty, market reputation and so on. HRM has to reconcile the interests of the individual members of the organization with those of the organization.
(5) Maintenance of manpower: This manpower function relating to maintaining satisfied manpower in the organization through the provision of welfare facilities. For this, attention needs to be given to health and safety measures, maintenance of proper working conditions at the work place, provision of welfare facilities and other non-monetary benefits so as to create efficient and satisfied labour force with high morale. Even collective bargaining and workers participation come within this broad personnel function. (6) Provision of welfare facilities: Employees are offered various welfare facilities. They include medical, educational, recreation, housing, transport and so on.
(7) Misc. functions: Misc functions under HRM include maintenance of service records of employees (which are used for promotions/transfers performance appraisal, etc.), promotions and transfers of employees, maintaining cordial industrial relations, introduction of rational grievance procedure, performance evaluation of employees, career planning of employees, maintenance of discipline, administering the policies with regard to disciplinary action and compliance of various labour laws.
19 EVOLUTION OF HRM IN INDIA The importance of personnel/human resources management is now universally accepted and India is not an exception to this rule. In India, large business enterprises, public sector enterprises and even medium and small enterprises appoint personnel manager or human resources development (HRD) manager to look after the personnel functions such as recruitment, promotions and transfers, training and manpower development, provision of welfare facilities, compensation management and so on. The term HRM is a relatively new term emerged during the 1970s. It is now used as a better and meaningful substitute to personnel management. HRM is wider in scope and has its distinct philosophy.
The process of industrial development started in India rather late. It was during the British Rule and that too after the First World War that textile, jute, iron and steel and other organised industries started in India. Recruitment, wage payment, welfare facilities and other personnel problems were noted only when labour class was employed on a large scale in the industrial sector. This is the starting period for personnel management in India. In the early British period and prior to that personnel management and personnel functions were absent, (Reference to some personnel functions and systematic management of resources was made in Kautilya's Arthashastra during the 4th century Be.) as industrial activities were extremely limited. They were also conducted on a small scale. As compared to India, the industrial growth was rapid in Europe. As a result, the concept of personnel functions and personnel management made rapid progress. The concept of personnel management function in India is based on similar concept developed in Europe much earlier.
The personnel function in India has been the product(outcome) of various factors such as industrial growth, labour, legislation, exploitation of workers in the early period and their demand for certain basic necessities of life. (e.g. fair wage, weekly, holiday, essential facilities at the work place)The need for labour officers in Indian industry was felt/realized as early as 1929 for the protection of labour force in industrial units. In 1931, the members of Bombay Mill owners' Association appointed Labour Officers in their textile mills (on voluntary basis) for the settlement of grievances and disputes of employees. Similar arrangement was introduced in the jute mills in Bengal (under the
20 leadership of Jute Mills Association). The labour welfare officers were given the responsibility to promote sports and welfare activities and provide food shops (canteen facility) to workers. After Independence, many pro labour legislations were made for the protection and welfare of workers. The scope of personnel management function was made more broad and liberal. Many provisions regarding recruitment, salary payment and conditions of service were laid down. This gave recognition to the personnel management function in the industrial establishments. Gradually, the need of personnel management and its role in cordial labour relations and fair treatment to employees need were recognized by industrial organizations. Personnel departments under the leadership of personnel managers were started in the companies. Liberal welfare facilities were introduced for the benefit of employees. Such measures taken for the protection and welfare of employees enlarged the scope of personnel management. Even training and manpower development programmes added new dimensions to the activities of personnel management. Many companies have now, prepared well-defined personnel policies, grievance and other procedures and liberal package of welfare facilities. Such additional activities/functions under personnel management raised the importance and popularity of personnel department.
HRM ACTIVITIES/MODEL Explained above in the full length questions DIFFERENCE BETWEEN HRM AND PERSONNEL MANAGEMENT Explained above in the concept testing question CHALLENGES FACING HRM IN INDIA With organizations achieving a HRD climate, a basic source of human motivation to perform higher, human wastage has been reduced. So, whereas personnel management regarded wages and salaries as the main source of motivation, Human Resource Management (HRM) regards creation of a congenial work climate (HRD climate), job challenges, creativity and opportunity for development as the motivating forces.
21 The challenges in HR that would be very critical are staffing. The biggest fear that such big corporate have is, if two or three wrong people get together, they can bring down the company. So, one is hiring the right kind of people, then right kind of values and the right kind of professional competencies. The other challenge is to continuously allow people to develop and grow so that they have very high energy and the ability to energize others with the edge to resolve conflicts, and the ability to execute. You will also have to bear in mind that they also have aspirations. So managing the aspirations and rewarding them timely and accurately become critical in such organizations. A lot of companies expect their problems to disappear the moment HR is implemented. "HRM is a means to an end, not the end ". The other reasons why HR implementations often fail include lack of preparation, lack of top management involvement, faulty selection process, improper use of the HRM policies/department/funds, too high expectations. Cost is an important factor while considering the implementation of HR activities. The companies are trying to cut costs while conducting HR programmes and are exorbitantly spending on other unimportant activities of the organization. HRM is still in its stage of infancy, it yet has to evolve and become more a way of doing business or managing the organization. It shouldn’t be used as a tool or remedial measure when the problem/ crisis arises. Nowadays, the employees are being forced to attend self-improvement and overall development programmes compulsorily without the staff’s knowledge/interest and companies are spending huge amounts on such welfare activities, which are absolutely redundant and should be eliminated from the system. Pay packages and incentives have to be supplemented with some supplementary packages but the company tries to replace the monetary benefits by some workshops or seminars or presentations or training courses which demotivate the workers because their expectations are being ignored in the bargain. We look at the career development of people very strongly. We do not believe that we should be the highest paymasters. 3] STRATEGIC HRM
22 Strategic Management is defined as ‘ the set of managerial decisions and actions that determine the long-term performance of a corporation. It includes environmental scanning, strategy formulation, strategy implementation and evaluation and control. The study of strategic management, therefore, emphasizes monitoring and evaluating environmental opportunities and threats in the light of a corporation’s strengths and weaknesses.’ The strategic management process involves the following four processes.
The advent of HRM has brought the linkage between employer-employee relationship and strategic management to sharp focus. Since Environmental Scanning helps identify threats and opportunities prevailing in the external and internal environment, HRM is of great help in locating opportunities and threats. HRM is in a unique position to supply competitive intelligence that may be useful in Strategy Formulation. Details regarding advanced incentive plans being used by competitors, opinion-survey data from employees that elicit information about customer complaints, and information about pending legislation like labour laws or mandatory health insurance are some examples. The strengths and weaknesses of a company’s human resources can have a determining effect on the viability of a company’s strategic options.
23 Unique HR capabilities serve as a driving force in strategy formulation. A company may build it’s new strategy around a competitive, advantage stemming from it’s human resource. The well known accounting and consultancy firm, Arthur Anderson, developed unique HR capabilities in training, which provides the firm with a competitive advantage enabling it to provide fast and uniform in-house training. HRM supplies a company with a competent and willing workforce which is responsible for executing strategies i.e Strategy Implementation. For example Maruti Udyog and Hindustan Motors are manufacturing cars, essentially using identical technology. The secret behind the meteoric rise of Maruti is its workforce. HRM supports strategy implementation in other ways too. For example human resource today is heavily involved in the execution of a company’s restructuring and downsizing strategies, through outplacing employees, instituting performance linked pay plans, reducing health care costs and retraining employees. And in an increasingly competitive global market place, instituting HR practices that build employee commitment can help improve an organization’s responsiveness. Lastly Human Resource Management must be continuously evaluated to make strategic management highly effective by supplying human resources who are competent and committed. Thus Strategic Human resource Management today is given due importance and offers several financial and non-financial benefits to a company. 4] NEW TRENDS IN HRM MAINSTREAM economists perceive voluntary retirement as a measure to shed the workforce whose marginal productivity is zero. Further, it is argued that this could be introduced in an industrial organization for maintaining its cost effectiveness in an increasingly competitive world. Moreover, voluntary retirement is accompanied by technological modernization that warrants the replacement of labor with capital. Technological modernization improves the productivity of existing workforce so much so that a section of the existing workforce becomes again redundant even as modernization enhances the installed capacity of the technology. The workforce that becomes redundant in this process has to retire or be retrenched.
24 The rationale behind the introduction of voluntary retirement scheme (VRS) in India is that any organized industrial organization has to operate within the existing legislative framework, which does not allow the organization to shed the redundant workforce without adequate compensation Employers refer to VRS as 'golden handshake', trade unions call it 'voluntary retrenchment scheme', and for the government, it is 'unstated exit policy' which means that an exit policy which may not exist on paper. VRS is one of the strategies introduced in the early 1980s in central public sector undertakings (PSUs) to reduce the so-called surplus or redundant workforce. It gained publicity after the introduction of new economic policy in 1991. In India, the government employs more than 70 per cent of the organized workforce; it uses all its channels to reduce the organized sector of the workforce without antagonizing the trade unions. It is envisaged in the new economic policy that VRS can provide minimum sustenance security to the retired individual and his family. Trade unions play a crucial role in introducing the VRS in any organized sector firm. The main objective behind the scheme is to send out those who cannot be retrained in new skills. The premise of the argument appears to be weak. The liberalization policy, in its anxiety to modernize, restructure and globalize the products of Indian industry, is wasting precious labor force that could have been modernized through retraining and onthe-job training. Precious skills and abilities of the retrenched workforce are equated with worn out physical capital that may not be susceptible to repair or modernization. Are human beings not capable of learning and modifying their knowledge, skills and applying the same to produce higher output? The current emphasis on restructuring does not allow such questions. The free economy and trade liberalization have ushered in the need for the enterprises to have a competitive edge. Economic forces have led to organizational cost cutting, changes in production processes, exploration of new markets, plant relocations, modernizations, downsizing and structural changes. Organizational adjustment at all levels has become extremely imperative. Over manning has crept into almost all industrial units on account of the inability of the enterprises to
25 reduce or adjust workforce as per the business needs. The sort of cuts that only happened in heavy industries has now become widespread. The days of nibbling away deadwood have long gone. It's time for the organizations to realign and focus on the core competencies. THE GOLDEN HANDSHAKE Voluntary Retirement Scheme (VRS) is the latest mantra of many a corporate and Public sector units. The company may decide to declare a VRS based on their HR plan and suitability. For a common salaried individual this becomes a major decision. The company as per their human resource policy declares VRS or the Voluntary Retirement Scheme. VRS is a scheme whereby the employee is offered to voluntarily retire from his services before his retirement date. Subject to certain conditions the company offers VRS to its employees It is the golden route to cut the excess flab. The most humane technique to retrench the employees in the company today is the voluntary retirement scheme. It is the golden handshake for the employees and the only option today for the companies to downsize their headcount. The scheme which is formally permitted by the Department of Public Enterprises and which provides the lucrative way for the employees to terminate their services and accept VRS. This process should convince them that the posts in the organization have become redundant and not the person and the organization still values the person. Since this process involves emotions and feelings, every care must be taken by the management that the process must be carried out in such a manner that it keeps the dignity of the employees but at the same time achieves the objective in a tactful manner. PINK SLIP A "pink slip" is a notice of dismissal or termination from one's job, also known as one's "walking papers." The term "pink slip" dates from the early 20th century, and originally referred to the practice of including a pink-colored slip of paper in an employee's weekly pay envelope notifying the worker of his or her termination. There does not seem to be any particular significance to the use of the color pink aside from the fact that it made the notice stand out from any other papers that might be in the envelope.
26 Though the "pink slip" in the pay envelope has probably been superseded by e-mail these days, "to be pink slipped" is still very much in use as shorthand for "to be fired."
1) What are the challenges facing HRM? / Explain the changing role of HRM? The 1990s have brought a revolutionary change in our business. Post- liberalisation is marked by a shift from command economy to market driven economy; from sheltered market to competitive market; from monopoly to competition; and from domestic trade to global trade. Such a shift calls for a different approach to HR activities. During the preeconomic liberalization, the HR managers had aopted a reactive strategies to people’s problems. The need of the hour is proactive approach, a strategy which helps HR managers foresee events and take appropriate actions before the events occur. The major challenges are: Globalisation Globalisation is increasingly viewed as a growth strategy by several companies. Growing internalisation of business has its impact on HRM functions. The HR department is required to cope with the problems of unfamiliar laws, languages, practices, competitions, attitudes, management styles, work ethics and more. HR managers are required to know that international operations have: More functions, such as taxation and co-ordination of departments. More heterogenous functions, such as co-ordination of multiple salary currencies More involvement in the employee’s personal life, such as housing, health, education and recreation. HR functions such as planning, staffing, remuneration and the like, therefore, will be affected by globalisation. Corporate Reorganisations The past three to four years brought us news about corporate mergers, takeovers and massive reorganizations to fend off hostile take-over bids. It is difficult to imagine circumstances that pose a greater challenge for HRM than reorganization resulting from acquisition, merger, divestiture or a take-over threat. The reorganization will have impact on organizational levels and employees. The employees of both the ‘taking over’ as well as the ‘taken over’ companies will have anxious moments because of 1. Fear of loss of jobs 2. Job changes, including new roles and assignments 3. Transfers to new geographic location 4. Changes in remuneration 5. Changes in career possibilities 6. Changes in organisational power, status, an prestige, 7. Staff changes, including new peers, supervisors, and subordinates, and 8. Changes in corporate culture and loss of identity in the company. There is little indication that the pace of mergers and acquisitions will slacken in the future. But an important key to the success of almost any merger or acquisition is the management of HR.
27 New organizatioanl forms The practice of HRM is shaped by the organisational forms in which people are employed. But the employment potential of these giant corporations is declining. Large production units have become increasingly a thing of the past, and large companies now tend to consist of business units managed relatively independently. The consequence has been a higher profile of medium size and small sized firms as employers. A majority of the population are employed in units with fewer than 200 employees. This trend affects HRM in various ways Smaller firms and establishments means a more personalised style- not necessarily more progressive, but more fsce-to –face. Smaller units may require less complex and sophisticated systems of personnel management, but may also be less able to sustain them in areas like management development. Smaller unit are less able to sustain a specialist personnel management function. On the other hand, the business and human challenges of operating in this kind of environment are becoming greater. The contribution of HRM will then be in facilitating the processes, which support the development of the enterprise, rather than, as traditional personnel management has one, in administering systems for controlling people. The basic challenge to HRM an enterprise management comes from the changing character of competition.Competition in many sectors is no longer between individual firms, large or small, but between constellation of firms. Changing demographics of workforce The major challenge that has resulted from changing workforce demographics concerns dual career couples, couples where both partners are actively pursuing professional careers. Organizations have been accustomed to using job moves and physical relocation as an important means of developing talent. The increasing number of dual career professionals limits individual flexibility in accepting such assignments. Another change in the workforce demographics relates to the growing number of employees who are young. Dormitories, gymnasium, breakfast, these are the kind of facilities that need to be provided to the workforce which has more of young employees. Changed employee expectations With changes in work-force demographics, employee expectations and attitudes also have shifted. Traditional allurements such as job security, attractive remuneration,housing and the like do not attract and motivate today’s workforce. Employees demand empowerment and expect quality with the management. Previous notions about managerial authority are giving way to employee influence and involvement along with mechanisms for upward communication and due process. Another expectation by the employee is that the electronic and telecommunication revolution will improve the quality of work life. Innovations in communication and computer technology will accelerate the pace of change, and as a result, lead to many innovations in HRM. Also, today’s average worker demands better treatment, challenging jobs and career advancement. The HR manager must, therefore, redraw the profile of the worker and discover new methods of hiring, training, remunerating and motivating employees.
Proactive industrial relations strategy There is almost a metamorphosis at the industrial relations front. Strikes, lockouts and loss of mandays are declining considerably. This transformation is the result of socioeconomic and political reasons. The challenge to the labour movement comes not so much from any destructive potential intrinsic in HRM but from its capacity to co-opt and integrate workers into the enterprise by building a relationship with them. Not having to compete with the management for worker’s loyalty, trade unions behave towards their members exactly as any monopolistic organisation would. HRM comes as a threat to this cosy arrangement, for management is not only seeking to get back to the neglected employee, but doing so in an environment where there own unions had taken them for granted. The need now is to adopt a proactive strategy towards industrial relations, an approach which should enable HR specialists to look into the challenges unfolding in the future and to be prepared to convert them into opportunities. Contribution to the success of the Organization The biggest challenge to an HR manager is to make all employees contribute to the success of the organization in an ethical and socially responsible way. The society’s well being, to a large extent depends on its organisations, particularly business organisations. It must be the endeavour of everybody to ensure success and stability of organizations. Responsibility is more on the HR manager as it is he who co-ordinates people’s activities and it is the people who make or mar organizations. Need for attitudinal change in PSUs While success of organizations in general is vital for society’s well being, public sector undertakings tell a different story. It may be asserted that although most PSUs are strong in manpower, R&D, systems, manuals, principles, and procedures, they fail to use it and incur losses. Behind this phenomenon is the role of the personnel. Employees of loss making units have wrong attitudes towards their work and their organizations. Consequences are low productivity, absenteeism, militancy and other similar evils. These issues must be addressed by the HR manager. Renewed focus on people The good news for HR managers is that there is renewed focus on people in organizations. For too long, managers believed in structures, strategies and systems. But over the last decade, technological, competitive and market changes have eroded its effectiveness. The top management must therefore nurture the ideas of the frontline engineers and sales representatives, encourage interpersonal relationship and self monitoring and develop personal communications with key people. The role of HR manager in the unfolding scenario is clear. He or she must make the focus on people justifiable and sustainable. Managing the mangers
29 Managing the managers is another challenge before the HR manager. Mangers believe they are a class apart and expect remuneration which may be unreasonable and highly expensive. Managers instead of managing their allotted functions, assume the role of the employer and fire those whom they feel are too smart. Yet, managers are the individuals who run the show and an organisation cannot do without them. Protect the interests of weaker sections Another important challenge for HRM is to protect the interest of weaker sections of the society. The dramatic increase of women, minorities and other backward communities in the workforce has resulted in the need for organisations to re-examine their policies, practices and values. Q2. What is the role of Strategic HRM? The role of HRM in formulating and implementing strategies is crucial. It is the people who formulate and implement strategies and the people are supplied by HRM. Role in Strategy Formulation: HRM is in a unique position to supply competitive intelligence that may be useful in strategy formulation. Details regarding advanced incentive plans used by competitors, opinion survey data from employees that give information about customer complaints and information about pending legislation like labour laws or mandatory health insurance are some examples. The strengths and weaknesses of a company’s human resources can have a determining effect on the viability of a company’s strategic options. A company may build its new strategy around a competitive advantage stemming from its human resource. Role in Strategy Implementation: HRM supplies the company with a competent and willing workforce, which is responsible for executing strategies. HRM supports strategy implementation in other ways too. For example, human resource today is heavily involved in the execution of the company’s downsizing and restructuring strategies, through out placing employees, instituting performance-linked pay plans, reducing health-care costs and retraining employees. And, in an increasingly competitive global market place, instituting HR practices that build employee commitment can help improve an organisation’s responsiveness. A well-designed strategy can fail if sufficient attention is not paid to the HR dimension. HR problems that arise when executing strategies may be traced to one of the following 3 causes: a. Disruption of social and political structures b. Failure to match individuals’ aptitudes with implementation tasks; and c. Inadequate top-management support for implementation activities. Strategic implementation poses a threat to many managers and employees in an organisation. Guidelines which help ensure that human relationships facilitate but not disrupt strategy implementation include open communication, co-opting as many
30 managers and employees in the strategic management process and matching managers with strategies through transfers, promotions, job enlargement and job enrichment. 3. What is job evaluation? What are its objectives? Job Evaluation Concept Job Evaluation is the process of analysis and assessment of jobs to ascertain reliably their relative worth, using the assessment as a basis for a balanced wage structure. Job Evaluation is used to establish a wage structure which is acceptable to both Management and Labour by providing a relative value of every job in a plant or industry. Definition Job Evaluation may be defined as “an attempt to determine and compare demands which the normal performance of a particular job makes on normal workers without taking into account into the individual abilities or performance of the workers concerned. Objectives of Job Evaluation The major objectives of job evaluation are to help management achieve: 1. Equitability of wage structure within the firm, and 2. Consistency of the firm’s overall wage structure with that of the industry in which the firm operates. Apart from these primary two objectives, job evaluation serves the following objectives as well: 1. Establishment of a sound wage foundation for incentive and bonus programmes. 2. Maintenance of a consistent wage policy. 3. Enable the management to gauge and control its payroll cost more accurately. 4. Provide a framework for periodic review of wages and salaries. 5. Classify functions, authority and responsibility which in turn aids in work simplification and elimination of duplicate operations. 6. Reduce grievances and labour turnover and, thereby, increase employee morale and improvement management – employee relationships. 7. Serve as a basis for negotiation with the union or employees. 8. Help in selecting, promoting, transferring and training employees. Thus, we can say that job evaluation plays a key role in wage and salary administration and assists managers in meeting day-to-day problems. 4. What are the methods of job evaluation? Job evaluation methods are of two categories – non analytical and analytical
Non-Analytical Methods: - These methods make no use of detailed job factors. Each job is treated as a whole in determining its relative ranking.
Ranking Method Job – Grading Method
Analytical Methods: Point Ranking Method Factor Comparison Method Ranking Method: This is the simplest and the most inexpensive method of evaluation. The evaluation is done by assessing the worth of each job on the basis of its title or on its contents, if the latter is available. The job is not broken down into elements or factors. Each job is compared with others and its place is determined. Drawbacks – Job evaluation may be subjective, as the jobs are not broken into factors. It is hard to measure whole jobs. Job – Grading method: This method does not call for a detailed or quantitative analysis of job factors. It is based on the job as a whole. Under this method the number of grades if first decided upon, and the factors corresponding to these grades are then determined. Facts about jobs are collected and are matched with the grades, which have been established. The essential requirements of this method are to frame grade descriptions to cover discernible differences in degree of skill, responsibility and other job characteristics. Job grades are arranged in the order of their importance in the form of a schedule. The lowest grade may cover jobs requiring greater physical work under close supervision, but carrying little responsibility. Each succeeding grade reflects a higher level of skill and responsibility, with less and less supervision. ADVANTAGES – It’s simple and inexpensive. In organizations where number of jobs is small, this method yields satisfactory results. DISADVANTAGES – Job description are vague and are not quantified. Difficulty in convincing employees about the inclusion of a job in a particular grade because of vagueness of grade descriptions. More job classification schedules need to be prepared because the same schedule cannot be used for all types of jobs. Point Ranking Method: this system starts with the selection of job factors, construction of degrees for each factor, and assignment of points to each degree. Different factors are selected for different jobs, with accompanying differences in degrees and points. The range of grades and scores is also predetermined- for example, from 210 to 230 points, the 5th grade; 231 to 251 points the 6th grade and so forth. A given fob is placed on a particular grade, depending on the number of points it scores. Advantages – A job is split into a number of factors. The worth of each job is determined on the basis of its factors and not by considering the job as a whole.
32 The procedure adopted is systematic and can easily be explained to the employees. The method is simple to understand and easy to administer. Disadvantages – Employees may disagree with the points allotted and to factors and their degrees identified. Serious doubts are expressed about the range of points allotted and matching them with the job grades, for example- a score range of 238 to 249 is grade seven and the next range of 250 to 271 is grade six. A variation of one point makes all the difference. Factor Comparison Method: Under this method one begins with the selection of factors usually five of them- mental requirements, skill requirements, physical exertion, responsibility and job conditions. These factors are assumed to be constant for all the jobs. Each factor is ranked individually with other jobs. For example – all jobs may be compared first by the factor ‘ mental requirements’. Then the skills factor, physical requirements, responsibility and working conditions are ranked. Thus a job may rank near the top in skills but low in physical requirements. The total point values are then assigned to each factor. The worth of a job is then obtained by adding together all the point values. AdvantageJobs of unlike nature – for example, manual, clerical, and supervisory may be evaluated with the same set of factors. DisadvantageThe method is complicated and expensive. 2) Describe any method of job evaluation. Job evaluation methods are of two categories - non analytical and analytical. The non – analytical methods include methods like ranking method job grading method. Whereas the analytical methods include methods like point - ranking method and factor – comparison method.
Job – grading or Job classification method
1. It is based on the job as a whole and does not call for detailed or quantitative analysis. 2. Under this method a number of grades is decided upon and the factors corresponding to this grade are decided upon. 3. Then the facts about the jobs are collected and matched with the grades which have been established. 4. This classification can be done in the following manner.
1 2 3 4 5
NATURE OF TASKS
Close supervision Checked & closely supevised Subject to occasional checks Require little supervision Answerable to non – routine queries.
Largely physical in nature Small no. of clearly defined Simple tasks rules and short training period More complicated routines, Straight – requiring knowledge & forward tasks alertness on the worker’s part. Independent Exercise of some initiative & arrangements detailed familiarity with other of work such established procedures. Involving individual degree of Routine work responsibility & control over a small group of staff. Involving co-ordianation of several lower grade functions, Non – recognised individual routine work knowledge & control over a small group of staff. Inidividual Specialists knowledge tasks
No follow up
5. The essential requirement of job – grading method is to frame grade descriptions to cover discernible differences in degree of skill, responsibility and other job characteristics. Job grades are arranged in the order of their importance in the form of a schedule. 6. Each suceeding grade reflects a higer level of skill and responsibility with less and less supervision. Advantages of Job – grading method 1. Simplicity and inexpressiveness 2. Effective in organizations where number of jobs is small.
Disadvantages of Job – grading method 1. The job grade descriptions are vague and not quatified. 2. Difficulty in convincing the employees about inclusion of a job in a particular grade because of the vagueness of the grade descriptions. 3. More job classification shcedules need to be prepared because the same schedule cannot be used for all types of jobs.
34 6) What is Job Design? Meaning: Job Design involves conscious efforts to organise tasks, duties, and responsibilities into a unit of work to attain certain objectives. Definition: Job design integrates work content (tasks,functions,relationships),the rewards (extrinsic and intrinsic), and the qualifications required (skills,knowledge,abilities)for each job in a way that meets the needs of employees and the organisations. Three Steps of Job design: 1. Specification of individual tasks 2. Specification of the method of performing each task 3. Combination of tasks into specific jobs to be assigned to individuals. Key to successful job design lies in balancing the requirements of the organisation and the job holder. Job design results in making the job specialised which could leads to boredom and degradation of job holder. Factors affecting Job Design Feedback
Organisational Factors Environmental Factors Behavioural Factors Organisational Factors Characteristics of Tasks: Complexity in a job may be a reflection of the number and variety of tasks to be carried out, or the range and scope of the decisions that have to be made, or the difficulty of predicting the outcome of decisions. Work Flow: The flow of work in an organisation is strongly influenced by the nature of the product or service. The product or service usually suggests the sequence and balance between jobs if the work is to be done efficiently. Ergonomics: Ergonomics is concerned with designing and shaping jobs to fit the physical abilities and characteristics of individuals so that they can perform their jobs effectively. Ergonomics does not alter the nature of the job tasks, but the location of tools, switches and other facilities, keeping in view that the handling of the job is the primary consideration. Productive and Satisfying Job
Work Practices: Work practices are set ways of performing work. These methods may arise from tradition or the collective wishes of the employees. Either way, the HR department’s flexibility to design jobs is limited, especially when such practices are part of a union – management relationship. Failure to consider work practices can have undesirable outcomes. Environmental Factors Employees’ Abilities and Availability: Efficiency consideration must be balanced against the abilities and availability of the people who are to do the work. When Henry Ford made use of the assembly line, for e.g., he was aware that most potential workers lacked any automobile – making experience. So, jobs were designed simple and required little training. Social and Cultural Expectations: Literacy, knowledge and awareness among workers have improved considerably, so also their expectations from jobs. Hence, jobs must be designed to meet the expectations of workers. Also, when designing jobs for international operations, the organisation should not neglect national and cultural differences like hours of work, holidays, religious beliefs, management styles, and worker sophistication and attitudes which can affect the design of jobs across international borders, or it can lead to dissatisfaction, low motivation and a low quality of work life. Behavioural Elements Higher level human needs are more significant in this context. Individuals inspired by higher level needs find jobs challenging and satisfying which are high on the following dimensions: Feedback: Individuals must receive meaningful feedback about their performance, preferably by evaluating their own performance and defining the feedback. This implies that they should ideally work on a complete product or on a significant part of it. Autonomy: Autonomy is being responsible for what one does. Jobs that give workers authority to make decisions will provide added responsibilities, which tend to increase the employee’s sense of recognition and self – esteem. Use of Abilities: The job must be perceived by individuals as requiring them to use abilities they value in order to perform the job effectively. Variety: Lack of variety may cause boredom. Boredom, in turn, leads to fatigue, which causes mistakes. By injecting variety into jobs, personnel specialists can reduce errors caused by fatigue.
Techniques of Job Design
1. Work Simplification: In this technique, the job is simplified or specialised. A given job is broken down into small sub – parts and each part, is assigned to each
36 individual. Work simplification involves i) mechanical pacing of work, ii) repetitive work processes, iii) working on only one part of the product, iv) predetermining tools and techniques, v) restricted interaction among employees and vi) few skill requirements. 2. Job Rotation: Job rotation is one answer to boredom which implies movement of employees from job to job. With job rotation, a given employee performs different jobs, but more or less, jobs of the same nature. 3. Job Enlargement: Job enlargement involves expanding the number of tasks or duties assigned to a given job. It is naturally opposite to work simplification. Adding more tasks or duties to a job does not mean that new skills and abilities are needed to perform it. 4. Job Enrichment: Job enrichment seeks to improve both task efficiency and human satisfaction by building into people’s jobs, quite specifically, greater scope for personal achievement and recognition, more challenging and responsible work, and more opportunity for individual advancement and growth. An enriched job will have more responsibility and autonomy (vertical enrichment), more variety of tasks (horizontal enrichment), and more growth opportunities. 5. Autonomous or Self-Directed Team: A self – directed work team is a group of committed employees who are responsible for a ‘whole’ work process or segment that delivers a product or service to an internal or external customer. 6. High-Performance Work Design: It is a means of improving performance in an environment where positive and demanding goals are set. It starts from the principle of autonomous group working and develops an approach which enables groups to work effectively together in situations where the rate of innovation is high. Employees are needed to gain and apply new skills quickly with minimum supervision for operational flexibility. Positive and Negative Outcomes of Job Design Approaches: Job Design Approach
1. Work Simplification 2. Job Rotation
Job is highly specialised, so that less trained and less paid employee can perform. Job’s intrinsic reward potential is likely to increase. Organisation too stands to gain because of the versatility of its employees. Worker’s self image will grow. There is enhanced interdepartmental cooperation. Claims to have motivational impact.
Over simplification results in boredom with attendant risks of errors and resignations. Jobs do not improve. Workers may feel rootless and alienated.
3. Job Enlargement
4. Job Enrichment
Mere adding one zero to another zero – adding one more boring task to another. Likely to be resisted by employees. Increased motivation, reduced People may not like to accept
absenteeism, psychological new responsibilities. Union needs of employees are met. resistance adds to the problem. Brings about empowered teams. Job enrichment, if not accompanied by other job inputs, will fail in its goal. 5. Autonomous Work There is greater involvement of There is resistance from Team employees in decision – making, employees, unions, and which brings in commitment. managers and supervisors. 6. High-Performance Works in an environment of high May not work in large Work Design rate of innovation and bureaucratic organisation. operational freedom.
II. 1. What is the meaning and definition of Human Resource Planning? Meaning: • HRP is the process of forecasting an organisation’s future demand for, and the supply of, the right type of people in the right number. It is only after this that the HRM department can initiate a recruitment and selection process. • It is a sub-system in the total organisational planning. • It facilitates the realisation of the company’s objectives by providing the right type and the right number of personnel. • HRP is variously called manpower planning, personnel planning or employment planning. A few definitions of HRP are:
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. Human resources planning is the process by which an organisation ensures that it has the right number and kind of people, at the right place, at the right time, capable of effectively and efficiently completing those tasks that will help the organisation achieve its overall objectives. Human resources planning, then, translates the organisation’s objectives and plans into the number of workers needed to meet those objectives. Without a clear-cut planning, estimation of an organisation’s human resource need is reduced to mere guesswork.
2. What is the importance of HRP?
Importance of Human Resource Planning
Human Resource Planning (HRP) is understood as the process of forecasting an organization’s future demand for, and supply of, the right type of people in the right number. It is only after this that the HRM department can initiate the recruitment and selection process. Human resource planning translates the organization’s objectives and plans into the number of workers needed to meet those objectives. Without a clear cut planning, estimation of an organisation’s human resource need is reduced to mere guesswork. The following points highlight the importance of HRP.
38 1. Future Personal Needs:- Planning is significant as it helps determine future personnel needs. Surplus or deficiency in staff strength, is the result of the absence of or defective planning. All public sector enterprises find themselves overstaffed now as they never had any planning of their personnel requirements. They went on a hiring spree upto the late 1980’s. Since then, recruitment and selection have been banned, but the ban came too late. The private sector is no exception. As many as 76.5 per cent of Indian organizations have surplus labour. The problem of excess staff has become so heavy that many units are resorting to “voluntary retirement schemes” (VRS) to remove the excess staff. Such surplus labour would not have been there if there were HRP. Moreover, there is lack of succession planning in most public sector units. Absence of succession planning has resulted in a situation where many organizations function without chief executives. Indian Airlines has been headless for a period of 10 months and Gas Authority of India has been headless for 27 months. The anomaly of surplus labour, juxtaposed with the lack of top executives stems from the absence of or a defective HRP. 2. Coping with Change:- HRP enables an enterprise to cope with changes in competitive forces, markets, technology, products, and government regulations. Such changes generate changes in job content, skill demands, and number and type of personnel. Shortage of people maybe noticed in some areas while surplus in other areas may occur. 3. Creating Highly Talented Personnel:- Jobs are getting highly intellectual and incumbents are getting vastly professionalized. L&T, an engineering giant, has MBA’s, engineers and technicians who collectively constitute 70% of the total employee strength of 20,000. The HR manager must use his ingenuity to attract and retain qualified and skilled personnel. These people are known for job hopping, thereby creating frequent shortages in the organization. Manpower planning helps prevent such shortages. 4. Protection of Weaker Sections:- In matters of employment and promotion, sufficient representation needs to be given to SC/ST candidates, physically handicapped, children of the socially and politically oppressed, and backward class citizens. These groups enjoy a given percentage of jobs, notwithstanding the constitutional provision, which guarantees equal opportunities to all. A wellconceived personnel planning programme would protect the interests of such groups. 5. International Strategies:- International expansion strategies depend upon HRP. The departments ability to fill key jobs with foreign nationals and the reassignment of employees from within or across national borders is a major challenge facing international businesses. With a growing trend towards global operation, the need for HRP will grow, as well as the need to integrate HRP more closely into the organization strategic plans. HRP will grow increasingly important as the process of meeting staffing needs from foreign countries and the attendant cultural, language, and developmental considerations grow complex. Without effective HRP and subsequent attention to employee recruitment, selection, placement, development and career planning, the growing competition for foreign executives may lad to expensive and strategically- disruptive turnover asmong key decision makers. 6. Foundation for Personnel Functions:- Manpower planning provides essential information for designing and implementing personnel functions, such as recruitment, selection, personnel movement (transfers, promotions, layoffs) and training and development.
39 7. Increasing Investment in Human Resource:- Another compelling reason for HRP is the investment an organization makes in its human resources. Human assets as opposed to physical assets, can increase it value. An employee who gradually develops his/her skills and abilities becomes a more valuable resource. Because an organization makes investments in its personnel either through direct training or job assignments, it is important that employees are used effectively throughout their careers. An increasing number of executives are acknowledging that the quality of the workforce can be responsible for significant differences in short-run and long-run performances. 8. Resistance to Change and Move:- There is a growing resistance among employees to change and move. There is also a growing emphasis on selfevaluation and on evaluation of loyalty and dedication to the organization. All these changes are making it more difficult for the organisation to assume that it can move its employees around anywhere and anytime it wants, thus increasing the importance and necessity of planning ahead. 9. Other Benefits:- Following are other potential benefits of HRP: Upper management has a better view of the HR dimensions of business decision. Personnel costs may be less because the management can anticipate imbalances before they become unmanageable and expensive. More time is provided to locate talent Better opportunities exist to include women and minority groups in future growth plans. Better planning of assignments to develop managers can be done Major and successful demands on local labour markets can be made. 3. What are the objectives/specific goals of HRP? HR plans need to be based on organizational objectives. In practice, this implies that the HR plan must be derived from organizational objectives. Specific requirements in terms of numbers and characteristics of employee’s should be derived from the organizational objectives. Organizational objectives are stated by the top management and the role of HRP is to subserve the overall objectives by ensuring availability and utilization of human resources. For example, if a modernization of the plant is planned by the top management in their strategic planning for the next five years, the human resources department has to start from this objective and plan for human resources and for the modernization, premodernization, and post modernization periods. HR planning must take care of recruitment, selection, training and development to meet the modernisation and post modernisation as well as for additional recruitment wherever necessary. Separating redundant labour and training and updating the existing labour must also include the human resource planning. Modernisation plan is bound to fail unless proper man power is envisaged to cope with the modernisation. Once the organizational objectives are specified, communicated and understood by all concerned, the HR department must specify its objectives with regard to HR utilization in the organization. They must focus on • Ensuring optimum use of human resources.
40 • Keeping the organizational workforce to cope with the technological development and modernisation. • Streamlining uninterrupted supply of workforce to the functional needs of business from time to time. • Union constraints encountered in HRP and develop policies needed to handle the constraints. • Automation of production and operations and what can be done of those displaced. • Cutting down surplus, redundant manpower and retraining and redeploying the manpower appropriately. • Ensuring a career planning for every employee of the organization and making succession programs. It means that human resource planning must include objectives for accomplishing organizational goals and individual aspirations of the employees. If the estimated results fall short of the objectives, reasons for failure must be determined through performance evaluation and the defects rectified. Also, the plan or the objective must be revised whenever needed. Once the plan is finalized, efforts must be made to implement it and make periodical evaluation of the results. 4. What are the limitations and challenges of HRP? Planners face a few challenges while formulating an HRP. The major ones are the following: 1) People question the importance of making HR practices future oriented and the role assigned to HR practitioners in formulation of organizational strategies. Their argument is – there are people when needed. Offer attractive packages of benefits to them to quit when you find them in surplus. When the task is so simple, why elaborate time consuming planning for human resources? Surprisingly this perception about HRP is also held by the top management. 2) HR practitioner perceived as experts in handling personal matters, but are not experts in managing business. The personnel plan conceived and formulated by HR practitioners when enmeshed with the organizational plan, might make the overall strategic plan itself defective. 3) HR information often is incompatible with the information used in strategy formulation. Strategic planning efforts have long been oriented towards financial forecasting often to the exclusion of other types of information. Financial forecasting takes precedence over HRP. 4) Conflicts may exist between long term and short term HR needs. For example, there arises a conflict between the pressure to get the work done on time and long term needs, such as preparing people for assuming greater responsibilities. Many managers are of the belief that HR needs can be met immediately because skills are available in the market as long as wages and salaries are competitive. These managers fail to realize that by resorting to hiring or promoting depending on short term needs alone, long term issues are neglected. 5) There is a conflict between quantitative and qualitative approaches to HRP. Some people view HRP as a numbers game designed to track the flow of people across departments. These people take a strictly quantitative approach to planning. Others take a qualitative approach and focus on individual employee concerns such as promotability and career development. Best results would accrue if there is a balance between quantitative and qualitative approaches.
41 6) Non involvement of operating managers renders HRP ineffective. HRP is not strictly an HR department function. Successful planning needs a co-ordinated effort on the part of operating mangers and HR personnel. 5. What are the steps for a successful integrated HRP? Steps for an integrated HRP An integrated Human Resources Planning requires a human resource information system. A human resource information system (HRIS) is a systematic procedure for collecting, storing, maintaining, retrieving and validating data needed by an organization about its human resources. The HRIS is usually a part of the organization’s larger management information system (MIS). The HRIS need not be complex or even computerized. But computerization has its own advantage of providing more accurate and timely data for decision making. The steps in implementing an HRIS As with any major change, proper planning is an absolute necessity for successful implementation of an HRIS. The steps outlined below describe the specific procedures involved in successfully developing and implementing an HRIS. Step 1. Inception of idea. The idea for having an HRIS must originate somewhere. The originator of the idea should prepare a preliminary report showing the need for an HRIS and what it can do for the organizations. Step 2. Feasibility study. Feasibility study evaluates the present system and details the benefits of an HRIS. It evaluates the costs and benefits of an HRIS. Step 3. Selecting a project team .Once the feasibility study has been accepted and the resources allocated,a project team should be selected. The project team should consist of an HR representative who is knowledgeable about the organisation’s HR functions and activities and about the organization itself and representatives from both management information systems and paytoll. As the project progresses, additional clerical people from the HR department will be needed to be added. Step 4. Defining the requirements. A statement of requirements specifies in detail exactly what the HRIS will do. A large part of the statement of requirements normally deals with the details of reports that will be produced. Naturally, the statement also describes other specific requirements. This typically includes written descriptions of how users collect and prepare data, obtain approvals, complete forms, retrieve data and perform other non technical tasks associated with HRIS use. Step 5. Vendor analysis. This step determines what hardware and software are available that will best meet the organizations needs for the lowest price. This is a difficult task. The best approach is usually not to ask vendors if a particular package can meet the organizations requirements but how it will meet those requirements. The results of this analysis will determine whether to purchase and “off –the-shelf” package or develop the system internally. Step 6. Package contract negotiation. After a vendor has been selected, the contract must be negotiated. The contract stipulates the vendors responsibilities with regard to software, installation, service maintenance, training and documentation. Step 7. Training. Training usually begins as soon as possible after the contract has been signed. First, the members of the project team are trained to use the HRIS. Towards the end of the implementation, the HR representative will train managers from other departments in how to submit information to the HRIS and how to request information from it.
42 Step 8. Tailoring the system. This step involves making changes to the system to best fit the needs of the organization. A general rule of thumb is not to modify the vendor’s package because modifications frequently cause problems an alternative approach is to develop programs that augment the vendors program rather than altering it. Step 9. Collecting the data. Prior to start-up of the system data must be collected and entered into the system. Step 10. Testing the system. Once the system has been tailored to the organizations needs and the data entered a period of testing follows. The purpose of the testing phase is to verify the output of the HRIS and to make sure it is doing what it is supposed to do. Al reports should be critically analysed for accuracy. Step 11. Starting up. Start-up begins when all the current actions are put into the system and reports are produced. It is wise to attend start-up during a lull period so that maximum possible time can be devoted to the HRIS. Even though the system has been tested some additional errors often surface during start-up. Step 12. Running in parallel. Even after the new HRIS is tested it is desirable to run the new system in parallel with the old system for a period of time. This allows for the comparison of outputs of both the system and examination of any inaccuracies. Step 13. Maintainance. It normally takes several weeks or even months of the HR people to feel comfortable with the new system. During this stabilization period any remaining errors and adjustments should be handled. Step14. Evaluation. After the HRIS has been in place for a reasonable lengthy of time the system should be evaluated. Is the HRIS right for the organization and is it being properly used? Following the above steps when implementing an HRIS will not guarantee success but it will increase the profitability.
Recruitment and Selection
Theoretically speaking, Recruitment and Selection are 2 separate functions. Recruitment deals with the forming a pool of applicants for a particular job, whereas Selection deals with finding the best one of the lot.
MEANING AND DEFINITION
In simple terms, recruitment is understood as the process of searching for and obtaining applicants for jobs, from among whom the right people can be selected. A formal definition of recruitment is: “It is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected.”
PURPOSES AND IMPORTANCE
43 The general purpose of recruitment is to provide a pool of potentially qualified job candidates. Specifically, the purposes are to: Determine the present and future requirements of the organization in conjunction with its personnel planning and job analysis activities Increase the pool of job candidates at minimum cost Help increase the success rate of the selection process by reducing the number of visibly, under qualified or overqualified job applicants Help reduce the probability that job applicants, once recruited and selected, will leave the organization only after a short period of time Meet the organizations legal and social obligations regarding the composition of its workforce Begin identifying and preparing potential job applicants who will be appropriate candidates Increase organizational and individual effectiveness in the short term and long term Evaluate the effectiveness of various recruiting techniques and sources for all types of job applicants Recruitment represents the first contact that a company makes with potential employees. It is through recruitment that many individuals will come to know a company, and eventually decide whether they wish to work for it. A well-planned and well-managed recruiting effort will result in high-quality applicants, whereas, a haphazard and piecemeal effort will result in mediocre ones. High-quality employees cannot be selected when better candidates do not know of job openings, are not interested in working for the company, and do not apply. The recruitment process should inform qualified individuals about employment opportunities, create a positive image of the company, provide enough information about the jobs so that applicants can make comparisons with their qualifications and interests, and generate enthusiasm among the best candidates so that they will apply for the vacant positions.
The first stage in the recruitment process is Recruitment Planning. Planning involves ht e translation of likely job vacancies and information about the nature of these jobs into a set of objectives or targets that specify the (i) (ii) Number and Type of applicants to be contacted.
NUMBER OF CONTACTS Organisations, nearly always, plan to attract more applicants than they will hire. Some of those contacted will be uninterested, unqualified, or both. Each time a recruitment programme is contemplated, one task is to estimate the number of applicants necessary to fill all vacancies with qualified people. Companies calculate yield ratios (yRs), which express the relationship of applicant
44 inputs to outputs at various decision points. For example, assume that an organisation attempting to recruit sales people ran a series of newspaper advertisements. The advertisement generated resumes from 2000 applicants, of which 200 were judged to be potentially qualified (yR = 10:1). Of these 200, 40 attended the interview for final selection (yR = 5:1). Of these 40, 30 were actually qualified and offered jobs (yR = 4:3); and of the 30, 20 accepted (yR = 3:2). In this case, the overall yR is 100:1. Thus, a requirement of 30 hires, during a specified period, would mean a recruitment target of 3000. The yRs must be used with circumspection. No yRs will be available for recruiting employees for the first time, or for recruiting sources or methods that have not been tried. Recruiters in such cases have to depend upon their counterparts in other organisations or make their own guesses. TYPE OF APPLICANTS TO BE CONTACTED This refers to the type of people to be informed about job openings. The type of people depends on the tasks and responsibilities involved and the qualifications and experience expected. These details are available through job description and job specification.
45 EVALUATION AND CONTROL OF RECRUITMENT Evaluation and control is necessary as considerable costs are incurred in the recruitment process. The costs generally incurred are: Salaries for recruiters. Management and professional time spent on preparing job description, job specifications, advertisements, agency liaison, and so forth. The cost of advertisements of other recruitment methods, that is, agency fees. Cost of producing supportive literature. Recruitment overheads and administrative expenses. Costs of overtime and outsourcing while the vacancies remain unfilled. Cost of recruiting unsuitable candidates for the selection process. Questions should always be asked as to whether the recruitment methods used are valid and whether the recruitment process itself is effective. Statistical information on the cost of advertisements, time taken for the process, and the suitability of the candidates for consideration in the selection process should be gathered and evaluated. However, exercises seem to be seldom carried out in practise. EVALUATION OF RECRUITMENT PROCESS The recruitment process has the objective of searching for and obtaining applications from job-seekers in sufficient numbers and quality. Keeping this objective in mind, the evaluation might include: Return rate of applications sent out. Number of suitable candidates for selection. Retention and performance of the candidates selected. Cost of the recruitment process. Time lapsed data. Comments on image projected. EVALUATION OF RECRUITMENT METHODS The evaluation of recruitment methods might include: Number of initial enquiries received which resulted in completed application forms. Number of candidates at various stages of the recruitment and selection process, especially those short listed. Number of candidates recruited. Number of candidates retained in the organisation after six months.
Philosophy of Recruiting:
The traditional philosophy of recruiting has been to get as many people to apply for a job as possible. A large number of jobseekers waiting in queues would make the final selection difficult, often resulting in wrong selections. Job dissatisfaction and employee turnover are the consequences of this. A persuasive agreement can be made that matching the needs of the organisation to the needs of the applicants will enhance the effectiveness of the recruitment process. The result will be a workforce which is likely to stay with the organisation longer and
46 performs a higher level of effectiveness. Two approaches are available to bring about this match.
1. Realistic Job Previews (RJP):
RJP provide complete job-related information, both positive and negative, to the applicants. The information provided will help jobseekers to evaluate the compatibility among the jobs and their personal ends before hiring decisions are made. RJP's can result in self-selection process - job applicants can decide whether to attend the interviews and test for final selection or withdraw themselves in the initial stage. The following table contracts some of the outcomes that can develop from traditional and realistic job previews. Traditional Procedures Set initial job expectations too high Realistic Procedures Set job expectations realistically Job may or may not be attractive depending on individual needs Some accept, some reject job offer Work experience confirms expectations Higher job survival, satisfaction, no thoughts of quitting
Job is typically viewed as attractive
High rate of job offer acceptance
Work experience belies expectations Lower job survival, dissatisfaction, frequent thoughts of quitting
Research on realistic recruiting shows a lower rate of employee turnover in case of employees recruited through RJP's, particularly for more complex jobs and higher levels of job satisfaction and performance, at the initial stages of employment. RJP's are more beneficial for organisations hiring at the entry level., when there are innumerable applicants per position, and under conditions of relatively low employment. Otherwise, the approach may increase the cost of recruiting by increasing the average time it takes to fill each job.
2. Job Compatibility Questionnaire (JCQ):
JCQ was developed to determine whether an applicant's preferences for work match the characteristics of the job. The JCQ is designed to collect information on all aspects of a job, which have a bearing on employee performance, absenteeism, turnover and job satisfaction. The underlying assumption of the JCQ is that the greater
47 the compatibility between an applicant's preferences for a job and the probability f employee effectiveness and longer the tenure. The JCQ is a 400-tem instrument that measures job factors that are related to performance, satisfaction, turnover and absenteeism. Items cover the following job factors: task requirements, physical environment, customer characteristics, peer characteristics, leader characteristics, compensation preferences, task variety, job autonomy, physical demands, and work schedule. The JCQ is administered to jobseekers who are very familiar with either a specific position to be filled and/or a target job under study. Respondents are asked to indicate the extent to which each JCQ item is descriptive of the job or position under study.
Recruitment is a process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applicants from which new employees are selected. A well-planned and well-managed recruiting effort will result in high quality applicants, whereas a haphazard and piecemeal effort will result in a mediocre once. Several factors such as external factors like supply an demand unemployment rate, labour markets and political and legal considerations, internal factors like recruiting policy, size, cost of recruiting etc govern the recruiting process. The process comprises of 5 inter related stages: 1. Planning 2. Strategy development 3. Searching 4. Screening 5. Evaluation and control
The first stage in recruitment process is planning. Planning involves translation of likely job vacancies and information about the nature of these jobs into a set of objectives or targets that specify the number and the type of applicants to be contacted. Number of contacts: organisations always plan to attract more applicants than they plan to hire. Some of those contacted will be uninterested unqualified or both. Each time a recruitment process is contemplated, one task is to estimate the number of applicants necessary to fill all the vacancies with qualified people. Type of contacts: this refers to the type of people to be informed about the job openings. The types of people depend on the tasks and responsibilities involved and the qualifications and experience expected. These details are available through job description and job specification.
48 Once it is known how many and what type of recruits are required, consideration needs to be given to make or buy employees, technical sophistication of recruitment and selection devices, geographic distribution of labour markets comprising job seekers, sources of recruitment, and sequencing the activities in the recruitment process. Make or buy refers to hire less skilled employees ad to invest in training and education programmes or hire skilled professionals. The second decision in strategic relates to the methods used in recruitment and selection. The advent of computers has made it possible for employers to scan national and international applicants qualifications. It has also made possible for job seekers to gain better access. In order to reduce costs, companies look into the national markets for managerial employees, regional or local markets for technical employees, and local markets for clerical and blue-collar employees. The sources for recruitment may be internal or external. The internal sources would be present employees, referrals given by the employees, former employees or previous applicants. Whereas the external sources would be consultants, headhunters, advertisements, employee exchanges, campus recruitment, contractors, displaced persons, radio and television, acquisitions and mergers, competitors, international recruitment etc. then both the sources of recruitment are evaluated. Both have their own advantages and disadvantages.
Once a recruitment plan and strategy are worked out, the search process can begin. It involves two steps: 1. Source aviation 2. Selling 1. Source Aviation: Typically sources and search methods are activated by issuances of an employee requisition. This means that no actual recruiting takes place until line managers have verified that a vacancy does exist or will exist. If the organisation has planned well and done a good job of developing its sources and search methods, activation soon results in a flood of applications and/or resumes. The application received must be screened. Those who pass have to be contacted, and invited for interview. Unsuccessful applicants must be sent letters of regret. Selling The second issue to be addressed in the searching process concerns communication. Here, contacts are tightrope. On tone hand they want as many applications and on the other hand they must resist overselling of their virtues. In selling the organisation both message and the media need attention. Selection of medium or media has to be done with lot of care.
Screening of applicants can be regarded as an integral part of recruiting process. The selection process will begin after the applicants have been
49 scrutinized and short-listed. Applications received in response to advertisement are screened and only the eligible applicants are called for interview. The purpose of screening is to remove from the recruiting process, at an early stage those applicants who are visibly unqualified for the job. Effective screening can save a great deal of time and money. Care must be taken that potentially good employees are not lost and women and minorities receive full and fair consideration. In screening, clear job specifications are invaluable. Applications are judged on the basis of their knowledge, skills, abilities, and interests required to do the job. The techniques used to screen applicants vary depending on the candidate sources and recruiting methods used. Interviews and application blanks are used to screen walk ins. Campus recruiters and agency representative’s use in interviews and resumes. References checks are also useful in screening.
V Evaluation and control
Evaluation and control is necessary as considerable costs are incurred in the recruitment process. The costs generally incurred are Salaries for recruiters Management and professional time spent on preparing job description, job specification, advertisements, agency liaison, and so forth The cost of advertisement and other recruitment methods like agency fees Cost of producing supporting literature Recruitment overheads and administrative expenses Cost of overtime and outsourcing while the vacancies are remain unfilled Cost of recruiting unsuitable candidates for selection process Questions should always be asked as to whether the recruitment methods used are valid and whether the recruitment process itself is valid. Statistical information on the cost of advertisements, time taken for the process etc should be gathered and evaluated. However, exercises seem to be seldom carried out in practice. Evaluation of recruitment process: The recruitment process has the objective of searching for and obtaining applications from job seekers in sufficient numbers and quality. Keeping in mind these objectives, the evaluation might include: Return rate of application sent out Number of suitable candidates for selection Retention and performance of the candidates selected Cost of recruitment process Time lapsed data Comments on image projected
Evaluation of recruitment methods: The evaluation of recruitment methods include:
50 Number of initial inquiries received which resulted in completed application forms. Number of candidates at various stages of the recruitment and selection process, especially those short-listed. Number of candidates recruited Number of candidates retained in the organization after six months.
Role of Selection (Selection Policy).
Selection is the process of picking individuals (out of the pool of job applicants) with requisite qualifications and competence to fill jobs in the organization. A formal definition of selection is “It is the process of differentiating between applicants in order to identify (and hire) those with a greater likelihood of success in a job.” The role of selection in an organization’s effectiveness is crucial for at least, two reasons. First, work performance depends on individuals. The best way to improve performance is to hire people who have the competence and the willingness to work. Arguing from the employee's viewpoint, poor or inappropriate choice can be demoralizing to the individual concerned (who finds himself or herself in the wrong job) and demotivating to the rest of the work-force. Effective selection, therefore, assumes greater relevance. Second, cost incurred in recruiting and hiring personnel speaks volumes about the role of selection. Here is one instance to prove how expensive recruitment has become. Pepsi had gone on a crash recruitment drive. Six people from the company took over the entire Oberoi Business Center in Bombay for six days. 3000 applications in response to an advertisement issued earlier were scanned, applicants were asked to respond by fax within 100 hours. Finally, the short-listed persons were flown in and interviewed. Quite an expensive affair by any standard!
False Negative Error True Negative (‘Low Hit’)
True Positive (‘High Hit’) False Positive Error Predicted
Outcomes of the Selection Process
51 Costs of wrong selection are much greater. The figure shows four possible outcomes of a selection decision. Two of these—'true positive' ('high hit') and 'true negative' (low hit')—are right selection decisions. The other two out-comes represent selection errors. In the 'false positive error', a decision is made to hire an applicant based on predicted success, but failure results. In 'false negative error', an applicant who would have succeeded is rejected based on predictions of failure. In either case, selectors will have erred. They may remember that the selection successes will be written in sand and failures in stone. An organization with a false positive error incurs three types of costs. The First type is incurred while the person is employed. This can be the result of production or profit losses, damaged company reputation, accidents due to negligence, absenteeism, and the like. The second type of costs is associated with the training, transfer or terminating the services of the employee. Costs of replacing an employee with a fresh one—costs of hiring, training and replacements—constitute the third type of costs. Generally, the more important the job, the greater the cost of the selection error. In the case of false negative error, an applicant who would have succeeded is rejected because of predicted failure. Most false negative errors go unnoticed except when the applicant belongs to a reserved category and files a discrimination charge. Costs associated with this type of error are generally difficult to estimated A careful selection will help an organization avoid costs associated with both false positive error as well as false negative error. Explain the selection process Selection is the process of picking individuals with requisite qualifications and competence to fill jobs in the organization. A formal definition of selection is it is the process of differentiating between applicants in order to identify those with a greater likelihood of success. Selection is significant as it has its impact on work performance and employee cost. Selection is generally done by the HR department often in consultation with the line managers.
Selection is a long process, commencing from the preliminary interview of the applicants and ending with the contract of employment. In practice, the process differs among organizations and between two different jobs within the same organization. Selection procedure for senior managers will be long-drawn and rigorous, but it is simple and short while hiring shop-floor workers.
Environmental Factors Affecting Selection
Selection is influenced by several factors. More prominent among them are supply and demand of specific skills in the labour market, unemployment rate, labourmarket conditions, legal and political considerations, company’s image, company’s policy, HRP, and cost of hiring. The last three constitute the internal environment and the remaining form the external environment of the selection process. 1. Preliminary Interview
52 The applications received from job seekers are subject to scrutiny so as to eliminate unqualified applicants. This is usually followed by a preliminary interview the purpose of which is more or less the same as scrutiny of applications, that is, elimination of unqualified applications. Scrutiny enables the HR specialists to eliminate unqualified jobseekers based on the information supplied in their applications forms. Preliminary interview, on the other hand, helps reject misfits for reasons, which did not appear in the application forms. Besides, preliminary interview, often called ‘courtesy interview’, is a good public relations exercise. 2. Selection Tests Job seekers who pass the screening and the preliminary interview are called for tests. Different types of tests may be administered, depending on the job and the company. Generally, tests are used to determine the applicant’s ability, aptitude and personality. Ability tests assist in determining how well an individual can perform tasks related to the job. An excellent example of this is the typing test given to a prospective employee for a secretarial job. An aptitude test helps to determine a person’s potential to learn in a given area. An example of such a test is the General Management Aptitude Test which many business students take prior to gaining admission to a graduate business school programme. Personality tests are given to measure a prospective employee’s motivation to function in a particular working environment. There are various tests designed to assess a candidate’s personality. The Bersenter Personality Inventory, for example, measures one’s self-sufficiency, neurotic tendency, sociability, introversion and extroversion, locus of control, and self-confidence. The Thematic Apperception test (TAT) assesses an individual’s achievement and motivational levels. Other personality tests, such as the California Psychological Inventory (CPI), the Thurstone Temperament Survey (TTS), Minnesota Multiphasic Personality Inventory (MMPI), and Guildford-Zimmerman Temperament Survey, have been designed to assess specific personality traits. Aptitude tests indicate the ability or fitness of an individual to engage successfully in any number of specialized activities. They cover such areas as clerical aptitude, numerical aptitude, mechanical aptitude, motor-coordination, finger dexterity and manual dexterity. Interest tests are used to measure an individual’s activity preferences. These tests are particularly useful for students considering many careers or employees deciding upon career changes. Graphology test is designed to analyse the handwriting of an individual. It has been said that an individual’s handwriting can suggest the degree of energy, inhibitions and spontaneity, as well as disclose the idiosyncracies, and elements of balance and control. For example, big letters and emphasis on capital letters indicate a tendency towards domination and competitiveness. A slant to the right, moderate pressure and good legibility show leadership potential. Employers usually consult graphologists to supplement their usual personnel recruitment procedures. Polygraph tests are designed to ensure accuracy of the information given in the applications. Department stores, treasury offices and jewellery shops – that is those highly vulnerable to theft or swindling – may find polygraph tests useful.
53 3. Employment Interview The next step in the selection process is employment interview. An interview is conducted at the beginning and at the end of the selection process. The emphasis here is on the latter. Interview is a formal, in-depth conversation conducted to evaluate the applicant’s acceptability. It is considered to be an excellent selection device. Its popularity stems from its flexibility. Interview can be adapted to unskilled, skilled, managerial and professional employees. It allows a two-way exchange of information, the interviewers learn about the applicant, and the applicant learns about the employer. However, interviews do have shortcomings. Absence of reliability is one limitation. No two interviewers offer similar scoring after interviewing an applicant. Lack of validity is another limitation. This is because, few departments use standardized questions upon which validation studies can be conducted. Finally, biases of interviewers may cloud the objectivity of interviews. The employment interview can be one-to-one, sequential or panel. In one-to-one interview, there are only two participants – the interviewer and the interviewee. This can be the same as the preliminary interview discussed earlier. The sequential interview takes the one-to-one a step further and involves a series of interviews, usually utilizing the strength and knowledgebase of each interviewer, so that each interviewer can ask questions in relation to his subject area of each candidate, as the candidate moves from room to room. The panel interview consists of two or more interviewers and the figure may go up to as many as 15. Any panel interview is less intimate and more formal than the one-to-one, but if handled and organized well, it can provide a wealth of information. If not handled carefully, the panel interview can make the candidate feel ill at ease and confused about whose question to answer and whom to address. Interviewers themselves are likely to experience nightmare, not knowing who will ask which question and in what order. 4. Reference & Background Checks Many employers request names, addresses, and telephone numbers of references, for the purpose of verifying information and perhaps, gaining additional background information on an applicant. Although listed on the application form, references are not usually checked until an applicant has successfully reached the fourth stage of a sequential selection process. When the labour market is very tight, organizations sometimes hire applicants before checking references. Previous employers, known public figures, university professors, neighbours or friends can act as references. Previous employers are preferable because they are already aware of the applicant’s performance. But, the problem with the reference is the tendency on the part of the previous employer to overrate the applicant’s performance just to get rid of the person. Organizations normally seek letters of references or telephone references. The latter is advantageous because of its accuracy and low cost. The telephone reference also has the advantage of soliciting immediate, relatively candid comments, and attitudes can sometimes be inferred from hesitations and inflections in speech.
54 It may be stated that the information gathered through references hardly influence selection decisions. The reasons are obvious: • • • The candidate approaches only those persons who would speak well about him. People may write favourably about the candidate in order to get rid of him. People may not like to divulge the truth about a candidate, lest it might damage or ruin his career. In several cases, references are a formality and are seldom verified by the employer. 5. Selection Decision After obtaining information through the preceding steps, selection decision – the most critical of all the steps – must be made. The other stages in the selection process have been used to narrow the number of candidates. The final decision has to be made from the pool of individuals who pass the tests, interviews and reference checks. The views of the line manager will be generally considered in the final selection because it is he who is responsible for the performance of the employee. The HR manager plays a critical role in the final selection. 6. Physical Examination After the selection decision and before the job offer is made, the candidate is required to undergo a physical fitness test. A job offer is, often, contingent upon the candidate being declared fit after the physical examination. The results of the medical fitness test are recorded in a statement and are preserved in the personnel records. There are several objectives behind a physical test. Obviously, one reason for a physical test is to detect if the individual carries any infectious diseases. Secondly, the test assists in determining whether an applicant is physically fit to perform the work. Third, the physical examination information may be used to determine if there are certain physical capabilities which differentiate successful and less successful employees. Fourth, medical check-up protects applicants with health defects from undertaking work that could be detrimental to themselves or might otherwise endanger the employer’s property. Finally, such an examination will protect the employer from workers’ compensation claims that are not valid because the injuries or illnesses were present when employee was hired. JOB OFFER The next step in the selection process is job offer to those applicants who have crossed all the previous hurdles. Job offer is made through a letter of appointment. Such a letter generally contains a date by which the appointee must report on duty. The appointee must be given reasonable time for reporting. This is particularly necessary when he is already in employment, in which case the appointee is required to obtain a relieving certificate from the previous employer. Again, a new job may require movement to another city which means considerable preparation and movement of property. The company may also want the individual to delay the date of reporting on duty. If the new employee’s first job upon joining the company is to go
55 on training, the organization may request that the individual delays joining the company until perhaps a week before such training begins. Naturally this practice cannot be abused especially if the individual is unemployed and does not have sufficient finances. Decency demands that the rejected applicants be informed about their nonselection. Their applications may be preserved for future use, if any. It needs no emphasis that the applications of selected candidates must also be preserved for future references. 8. Contracts of Employment After the job offer has been made and the candidates accept the offer, certain documents need to be executed by the employer and the candidate. One such document is the attestation form. This form contains certain vital details about the candidate which are authenticated and attested by him. Attestation form will be a valid record for future reference. There is also a need for preparing a contract of employment. The basic information that should be included in a written contract of employment will vary according to the level of the job, but the following checklist sets out the typical headings. Job Title Duties, including a phrase such as “The employee will perform such duties and will be responsible to such a person as the company may from time to time direct.” Date when continuous employment starts and the basis for calculating service Rate of pay, allowances, overtime and shift rates, method of payments Hours of work including lunch break and overtime and shift arrangements Holiday arrangements Length of notice due to and from employee Grievance procedure Disciplinary procedure Work Rules Arrangements for terminating employment Arrangements for union membership Special terms relating to rights to patents and designs, confidential information and restraints on trade after termination of employment Employer’s right to vary terms of the contract subject to proper notification being given Alternatively called employment agreements or simply bonds, contracts of employment serve many useful purposes. Such contracts seek to restrain job hopers, to protect knowledge and information that might be vital to a company’s health bottom line, and to prevent competitors from poaching highly valued employees. Great care is taken to draft the contract forms. Often, services of law firms are engaged to get the forms drafted and finalized. Most employers insist on agreements being signed by newly hired employees. But high employee turnover sectors such as software, advertising and media are more prone to use such contracts.
56 The drawback with the contracts is that it is impossible to enforce them. A determined employee is bound to leave the organization, contract or no contract. The employee is prepared to pay the penalty for breaching the agreement or the new employer will provide compensations. It is for this reason that several companies have scrapped the contracts altogether. Lintas and Ogilvy and Mather are examples. Concluding the Selection Process Contrary to popular perception, the selection process will not end with executing the employment contract. There is another step – a more sensitive onereassuring those candidates who have not been selected. Such candidates must be told that they were not selected not because of any serious deficiencies in their personalities, but because their profiles did not match the requirements of the organization. They must be told that those who were selected were done purely on relative merit. 9. Evaluation of the Selection Programme The broad test of the effectiveness of the selection process is the quality of the personnel hired. An organization must have competent and committed personnel. The selection process if properly done will ensure availability of such employees. How to evaluate the effectiveness of a selection programme? A periodic audit is the answer. Audit must be conducted by people who work independent of the HR department. Two alternative methods of selection are participative selection and employee leasing. In participative selection, subordinates participate in selection of their co-employees. Employee leasing represents the leasing of employees by a client company from a third party.
In our country, selection of blue-collared and white-collared employees is unsystematic. However, in case of managerial personnel, the process is fairly systematic. International hiring is assuming greater relevance these days. External Environment
R E J E C T E D A P P L I C A N T S
Reference & Background Analysis Selection Decision
What are the Sources of Recruitment.
The sources of recruitment can be broadly categorized into internal and external sources(I) Internal Recruitment – Internal recruitment seeks applicants for positions from within the company. The various internal sources include: Promotions and Transfers – Promotion is an effective means using job posting and personnel records. Job posting requires notifying vacant positions by posting notices, circulating publications or announcing at staff meetings and inviting employees to apply. Personnel records help discover employees who are doing jobs below their educational qualifications or skill levels. Promotions has many advantages like it is good public relations, builds morale, encourages competent individuals who are ambitious, improves the probability of good selection since information on the individual’s performance is readily available, is cheaper than going outside to recruit, those chosen internally are familiar with the organization thus reducing the orientation time and energy and also acts as a training device for developing middle-level and top-level managers. However, promotions restrict the field of selection preventing fresh blood & ideas from entering the organization. It also leads to inbreeding in the organization. Transfers are also important in providing employees with a broad-based view of the organization, necessary for future promotions. b. Employee referralsEmployees can develop good prospects for their families and friends by acquainting them with the advantages of a job with the company, furnishing them with introduction and encouraging them to apply. This is a very effective means as many qualified people can be reached at a very low cost to the company. The other advantages are that the employees would bring only those referrals that they feel would be able to fit in the organization based on their own experience. The organization can be assured of the reliability and the character of the referrals. In this way, the organization can also fulfill social obligations and create goodwill. c. Former EmployeesThese include retired employees who are willing to work on a part-time basis, individuals who left work and are willing to come back for higher compensations. Even retrenched employees are taken up once again. The advantage here is that the people are already known to the organization and there is no need to find out their past performance and character. Also, there is no need of an orientation programme for them, since they are familiar with the organization. d. Dependents of deceased employeesa.
59 Usually, banks follow this policy. If an employee dies, his / her spouse or son or daughter are recruited in their place. This is usually an effective way to fulfill social obligation and create goodwill. (II) External Recruitment – External recruitment seeks applicants for positions from sources outside the company. They have outnumbered the internal methods. The various external sources include: a. Professional or Trade Associations – Many associations provide placement service to its members. It consists of compiling job seeker’s lists and providing access to members during regional or national conventions. Also, the publications of these associations carry classified advertisements from employers interested in recruiting their members. These are particularly useful for attracting highly educated, experienced or skilled personnel. Also, the recruiters can zero on in specific job seekers, especially for hard-to-fill technical posts. b. Advertisements It is a popular method of seeking recruits, as many recruiters prefer advertisements because of their wide reach. Want ads describe the job benefits, identify the employer and tell those interested how to apply. Newspaper is the most common medium but for highly specialized recruits, advertisements may be placed in professional or business journals. Advertisements must contain proper information like the job content, working conditions, location of job, compensation including fringe benefits, job specifications, growth aspects, etc. The advertisement has to sell the idea that the company and job are perfect for the candidate. Recruitment advertisements can also serve as corporate advertisements to build company’ image. It also cost effective. c. Employment ExchangesEmployment Exchanges have been set up all over the country in deference to the provision of the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959. The Act applies to all industrial establishments having 25 workers or more each. The Act requires all the industrial establishments to notify the vacancies before they are filled. The major functions of the exchanges are to increase the pool of possible applicants and to do the preliminary screening. Thus, employment exchanges act as a link between the employers and the prospective employees. These offices are particularly useful to in recruiting blue-collar, white collar and technical workers. d. Campus RecruitmentsColleges, universities, research laboratories, sports fields and institutes are fertile ground for recruiters, particularly the institutes. Campus Recruitment is going global with companies like HLL, Citibank, HCL-HP, ANZ Grindlays, L&T, Motorola and Reliance looking for global markets. Some companies recruit a given number of candidates from these institutes every year. Campus recruitment is so much sought after that each college; university department or institute will have a placement officer to handle recruitment functions. However, it is often an expensive process, even if recruiting process produces job offers and acceptances eventually. A majority leave the organization within the first five years of their employment. Yet, it is a major source of recruitment for prestigious companies.
Walk-ins, Write-ins and Talk-insThe most common and least expensive approach for candidates is direct applications, in which job seekers submit unsolicited application letters or resumes. Direct applications can also provide a pool of potential employees to meet future needs. From employees’ viewpoint, walk-ins are preferable as they are free from the hassles associated with other methods of recruitment. While direct applications are particularly effective in filling entry-level and unskilled vacancies, some organizations compile pools of potential employees from direct applications for skilled positions. Write-ins are those who send written enquiries. These jobseekers are asked to complete application forms for further processing. Talk-ins involves the job aspirants meeting the recruiter (on an appropriated date) for detailed talks. No application is required to be submitted to the recruiter. ContractorsThey are used to recruit casual workers. The names of the workers are not entered in the company records and, to this extent; difficulties experienced in maintaining permanent workers are avoided. g. ConsultantsThey are in the profession for recruiting and selecting managerial and executive personnel. They are useful as they have nationwide contacts and lend professionalism to the hiring process. They also keep prospective employer and employee anonymous. However, the cost can be a deterrent factor. h. Head HuntersThey are useful in specialized and skilled candidate working in a particular company. An agent is sent to represent the recruiting company and offer is made to the candidate. This is a useful source when both the companies involved are in the same field, and the employee is reluctant to take the offer since he fears, that his company is testing his loyalty. i. Radio, Television and InternetRadio and television are used to reach certain types of job applicants such as skilled workers. Radio and television are used but sparingly, and that too, by government departments only. Companies in the private sector are hesitant to use the media because of high costs and also because they fear that such advertising will make the companies look desperate and damage their conservative image. However, there is nothing inherently desperate about using radio and television. It depends upon what is said and how it is delivered. Internet is becoming a popular option for recruitment today. There re specialized sites like naukri.com. Also, websites of companies have a separate section wherein; aspirants can submit their resumes and applications. This provides a wider reach.
j. CompetitorsThis method is popularly known as “poaching” or “raiding” which involves identifying the right people in rival companies, offering them better terms and luring them away. For instance, several executives of HMT left to join Titan Watch Company.
61 There are legal and ethical issues involved in raiding rival firms for potential candidates. From the legal point of view, an employee is expected to join a new organization only after obtaining a ‘no objection certificate’ from his/ her present employer. Violating this requirement shall bind the employee to pay a few months’ salary to his/ her present employer as a punishment. However, there are many ethical issues attached to it. k. Mergers and AcquisitionsWhen organizations combine, they have a pool of employees, out of whom some may not be necessary any longer. As a result, the new organization has, in effect, a pool of qualified job applicants. As a result, new jobs may be created. Both new and old jobs may be readily staffed by drawing the best-qualified applicants from this employee pool. This method facilitates the immediate implementation of an organization’s strategic plan. It enables an organization to pursue a business plan, However, the need to displace employees and to integrate a large number of them rather quickly into a new organization means that the personnel-planning and selection process becomes critical more than ever. Evaluation Of External Recruitment External sources of recruitment have both merits and demerits. The merits are The organization will have the benefit of new skills, new talents and new experiences, if people are hired from external sources. The management will be able to fulfill reservation requirements in favour of the disadvantaged sections of the society. Scope for resentment, heartburn and jealousy can be avoided by recruiting from outside. The demerits are Better motivation and increased morale associated with promoting own employees re lost to the organization. External recruitment is costly. If recruitment and selection processes are not properly carried out, chances of right candidates being rejected and wrong applicants being selected occur. High training time is associated with external recruitment.
METHODS AND TECHNIQUES OF TRAINING
A multitude of techniques are used to train employees. Training techniques represent the medium of imparting skills and knowledge to employees. Training techniques are means employed in the training methods. They are basically of two types.
Methods and Techniques of Training
On the Job Techniques
Off the Job Techniques
Methods applied in the workplace while the employee is working.
Away from the workplace
1. Lectures: It is the verbal presentation of information by an instructor to a large audience. The lecturer is presumed to possess knowledge about the subject. A virtue in this method is that it can be used for large groups and hence the cost of training per employee is very low. However, this method violates the principle of learning by practice. Also this type of communication is a one-way communication and there is no feedback from the audience because in case of very large groups it is difficult to have interactive sessions. Long lectures can also cause Boredom. 2. Audio Visuals: This is an extension of the lecture method. This method includes slides, OHPs, video tapes and films. They can be used to provide a range of realistic examples examples of job conditions and situations in the condensed period of time. It also improves the quality of presentation to a great extent. 3. On- the – Job- Training: It is used primarily to teach workers how to do their present jobs. Majority of the industrial training is on the job training. It is conducted at the work site and in the context of the job. Often, it is informal, as when experienced worker shows a trainee how to perform tasks. In this method, the focus of trainer’s focus is on making a good product and not on good training technique. It has several steps, the trainee first receives an overview of the job, it’s purpose and the desired outcomes. The trainer then demonstrates how the job is to be performed and to give trainee a model to copy. And since a model is given to the trainee, the transferability to the job is very high. Then the employee is allowed to mimic the trainer’s example. The trainee repeats these jobs until the job is mastered. 4. Programmed Instruction (PI): In this method, training is offered without the intervention of the trainer. Information is provided to the employee in blocks, in form of books or through teaching machine. After going through each block of material, the trainee goes through a test/ answers a question. Feedback in the form of correct answers is provided after each response. Thus PI involves: Presenting questions, facts, and problems to the learner. Allowing the person to respond Providing feedback on the accuracy of the answers If the answers are correct, he proceeds to the next block or else, repeats the same. However it is an impersonal method and the scope of learning is less as compared to other methods of training. Also the cost of preparing books, manuals and machinery is very high.
63 5. Computer Assisted Instruction (CAI): This is an extension of the PI method. In this method, the learner’s response determines the frequency and difficulty level of the next frame. This is possible thanks to the speed, memory and the data manipulation capabilities of the computer. 6. Simulation: It is any equipment or technique that duplicates as nearly as the possible the actual conditions encountered at the job. It is an attempt to create a realistic for decision-making. This method is most widely used in Aeronautical Industry. 7. Vestibule Training: This method utilizes equipment which closely resemble the actual ones used in the job. It is performed in a special area set aside for the purpose and not at the workplace. The emphasis is placed on learning skills than on production. It is however difficult to duplicate pressures and realities of actual situations. Even though the kind of tension or pressure may be the same but the employee know it is just a technique and not a real situation. Also the employees behave differently in real situations than in simulations. Also additional investment is required for the equipment. 8. Case study: It is a written description of an actual situation in the business, which provokes the reader to think and make decisions/ suggestions. The trainees read the case, analyse it and develop alternative solutions, select the best one and implement it. It is an ideal method to promote decision making skills. They also provide transference to an extent. They allow participation through dicussion. This is the most effective method of developing problem solving skills. The method /approach to analysis may not be given importance. Many a times only the result at the end of the case may be considered and not the line of thinking to approach it. This is a major disadvantage since case studies must primarily be used to influence or mend the attitude or thinking of an individual. 9. Role Playing and Behavior Modeling: This method mainly focuses on emotional (human relation) issues than other ones. The essence is on creating a real life situation and have trainees assume parts of specific personalities (mostly interchanged roles of boss and subordinate to create empathy for one another). The consequence is better understanding of issues from the other’s point of view. Concept of Behavior Modeling: Fundamental psychological process by which new patterns of behavior can be acquired and existing ones can be altered. “ Vicarious process” learning takes place not by own experience but by observation or imagination of others’ action. It is referred to as “copying”, “observational learning” or “imitation” implying that it a behavior is learned or modified through observation of other’s experiences. This change may be videotaped and showed to the trainee and he can review and critique it. It also helps him see the negative consequences that result from not using the behavior as recommended. 10. Sensitivity Training: it uses small number of trainees usually less than 12 in a group. They meet with a passive trainer and get an insight into their own behavior
64 and that of others. These meetings have no agenda and take place away from the workplace. The discussions focus on why participants behave the way they do and how others perceive them. The objective is to provide the participants with increased awareness of their own behavior, the perception of others about them and increased understanding of group process. Examples: Laboratory training, encounter groups. Laboratory training is a form of group training primarily used to enhance interpersonal skills. It can be used to develop desired behaviors for future job responsibilities. A trained professional serves as a facilitator. However once the training is over employees get back to being the way they are. 11. Apprenticeships and Coaching: It is involved learning from more experienced employee/s. This method may be supplemented with other off-the-job methods for effectiveness. It is applied in cases of most craft workers, carpenters, plumbers and mechanics. This approach uses high levels of participation and facilitates transferability. Coaching is similar to apprenticeships. But it is always handled by a supervisor and not by the HR department. The person being trained is called understudy. It is very similar to on the job training method. But in that case, more stress is laid on productivity, whereas here, the focus is on learning. In this method skilled workforce is maintained – since the participation, feedback and job transference is very high. Immediate returns can be expected from training – almost as soon as the training is over the desired outcomes can be seen in the trainee.
Job description is an important document, which is basically descriptive in nature and contains a statement of job analysis. It provides both, organizational information (location in structure, authority, etc) and functional information (what the work is). It defines the scope of job activities, major responsibilities, and positioning of the job in the organization. It provides the worker, analyst and a supervisor with a clear idea of what the work must do to meet the demands of the job. It concerns such functions as planning, coordinating and assigning responsibility. Though job description is not assessment, it provides an important basis for establishing assessment standards and objectives. Job description describes “jobs” and not the “job holders”. The movement of employees due to promotion, quits, etc would create instability to job descriptions if people rather than jobs are described.
The job specification takes the job description and answers the question, “what human traits and experience are needed to do the job well?” It tells what kind of person to recruit and for what qualities that person should be tested. Job specifications translate the job description into terms of the human qualifications that are required for a successful performance of a job. They are intended to serve as a guide in hiring and job evaluation. As a guide in hiring, they deal with such characteristics as are available in an application bank, with testing interviews and checking of references.
65 Job specification is developed with the cooperation of the personnel department and various supervisors in the whole organization. The personnel department co ordinates the writing of the job descriptions and job specifications and secures agreement on the qualifications required. These specifications relate to physical characteristics, psychological characteristics, personal characteristics, responsibilities and other features of a demographic nature.
A performance appraisal is a process of evaluating the performance and qualifications of the employees in terms of the requirements of the job for which he is employees, for purposes of administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally. Several methods and techniques of appraisal are available for measuring the performance of an employee. Some of the traditional methods are Straight Ranking Method Man-to-man Comparison Methods Grading Graphic Rating Scales Check Lists Following are some of the modern methods: Assessment Centers Appraisal by Results or Management by Objectives Human Asset Accounting Method We will briefly discuss one of the modern methods of appraisal Assessment centers: The most important feature of assessment center is job-related simulations. These simulations involve characteristics that managers feel are important to the job success. The evaluators observe and evaluate participants as they perform activities. Under this method, many evaluators join together to judge employee performance in several situations with the use of variety of criteria. It is used mostly to help select employees for the first level (lowest) supervisory positions. Assessments are made to determine employee potential for purposes of promotion. The assessment is generally done with the help of a couple of employees and involves a paper-and-pencil test, interviews and situational exercises.
An Assessment Center Model Establish goals for programme Obtain top mgmt. commitment Do detailed job analysis Develop policies for feeding back data Design physical facilities Select exercises and participants Conduct programme
Define dimensions to be assessed
Design assessor training programme
Provide feedback Evaluate participants and center against job success criteria
JOB ANALYSIS: An Important Employment Tool
All hiring decisions and supervisory evaluations should be made on objective criteria. A supervisor needs to know each job under his or her supervision, and the
67 qualifications needed to perform it, to develop objective interview questions and objectively evaluate an employee’s performance. Human resource specialists who are responsible for initial screening of job applicants and mediating performance appraisal disputes must also understand the key components of the jobs in their organization. Job analysis provides an objective basis for hiring, evaluating, training, accommodating and supervising persons with disabilities, as well as improving the efficiency of your organization. It is a logical process to determine: (1) purpose-the reason for the job, (2) essential functions-the job duties which are critical or fundamental to the performance of the job, (3) job setting-the work station and conditions where the essential functions are performed, and (4) job qualifications-the minimal skills an individual must possess to perform the essential functions. A job analysis describes the job, not the person who fills it. Job Analysis is a process to identify and determine in detail the particular job duties and requirements and the relative importance of these duties for a given job. Job Analysis is a process where judgments are made about data collected on a job. Purpose of Job Analysis To produce a basic job description of what the job is in the here and now which can facilitate basic human resource problem solving. To describe duties and characteristics in common with and different form other positions or jobs. When pay is closely associated with levels of difficulty these descriptions help foster a feeling of organizational fairness related to pay issues. The purpose of Job Analysis is thus to establish and document the 'job relatedness' of employment procedures such as training, selection, compensation, and performance appraisal. Job Analysis should collect information on the following areas: Duties and Tasks (frequency, duration, complexity) Work Environment (risks) Tools and Equipment ( eg. protective clothing) Relationships ( internal and external) Requirements (The knowledge, skills, and abilities (KSA's)
Methods of Job Analysis/ Data Gathering methods Interviews – individual or group Questionnaire Observation Critical incidents Photo tape recording Review of records
68 JOB DESCRIPTION Job description is an important document, which is basically descriptive in nature and contains a statement of job analysis. It provides both, organizational information (location in structure, authority, etc) and functional information (what the work is). It defines the scope of job activities, major responsibilities, and positioning of the job in the organization. It provides the worker, analyst and a supervisor with a clear idea of what the work must do to meet the demands of the job. The content of job descriptions should identify and describe: Mental Functions Relations with Others Physical Demands (strength, movement, auditory, vision, etc.) Environmental Conditions and Physical Surroundings Equipment Used Hazards
It concerns such functions as planning, coordinating and assigning responsibility. Though job description is not assessment, it provides an important basis for establishing assessment standards and objectives. Job description describes “jobs” and not the “job holders”. The movement of employees due to promotion, quits, etc would create instability to job descriptions if people rather than jobs are described. Thus to sum it up all, Job descriptions, as a management tool, can greatly simplify an organization's human resource management.
The aim of job evaluation is to provide a systematic and consistent approach to defining the relative worth of jobs within a workplace, single plant or multiple site organization. It is a process whereby jobs are placed in a rank order according to overall demands placed upon the jobholder. It therefore provides a basis for a fair and orderly grading structure. Job evaluation does not determine actual pay. That is a separate operation, normally the subject of negotiation between management and employees or their trade union representatives. Only the job is evaluated, not the person doing it. It is a technique of job analysis, assessment and comparison and it is concerned with the demands of the job, such as the experience and the responsibility required to carry out the job. It is not concerned with the total volume of work, the number of people required to do it, the scheduling of work, or the ability of the job holder.
Purpose of job evaluation
It can be beneficial when the existing grading structure is in need of review. It can help establish or maintain the credibility and acceptability of a grading system. It facilitates the accommodation of new or revised jobs into the grading structure. It can be used by organisations as a basis for job matching and external pay comparisons. Improved Human Resource Management
69 In the past job evaluation has tended to be used more often for white collar, rather than manual employees. However, there has been a steady increase in the use of job evaluation for all types of jobs. The concern for unit labour costs makes it vitally important for organisations, operating in highly competitive markets, to ensure that the grading level of their employees accurately reflects the relative importance of their jobs to the organization. Properly introduced and maintained, job evaluation can help lay the foundation of fair and orderly pay structures and thus improve relationships.
Techniques of job evaluation:
• • •
Job ranking - Each job is considered as a whole and placed in a ‘felt fair’ rank order to produce a league table. Paired comparisons - Each job is compared as a whole with each other job in turn, and points (0, 1 or 2) awarded according to whether its overall importance is judged to be less than, equal to, or more than the other jobs. Job classification - In job classification the number of grades is decided first and detailed grade definitions produced. Representative (benchmark) jobs are evaluated to validate the definitions.
Points rating – It breaks down each job into a number of factors, with the factors sometimes being further broken down into sub-factors. Points are awarded for each factor according to a predetermined scale and the total points decide a job’s place in the ranking order. Tailor made or “off the peg” - Factors and definitions more accurately reflect the range of jobs to be evaluated and are arrived at through consensus; consequently they are more likely to be acceptable to the workforce.
New Methods for Selection.
In recent years, new methods of selection have been found out by HR specialist these approaches are deemed to be alternatives to the traditional methods of selection.
New Method Of Selection
70 Participative Selection Two interesting alternative are participative selection and employee leasing. Participative selection means that subordinates participate in the selection of their coworkers and supervisors. The idea is that such participation will improve quality, increase support for the selected supervisor and co-workers, and improve employee morale.
1. Employee Leasing
In employee leasing, the client company leases employees from a third party, not on temporary basis, but rather are leased as full-time, long term help. An interesting feature of this method is that the client company need not perform such personnel activities as hiring, compensation or record keeping. Employees already working elsewhere are leased. They are not directly employed by the company where they are working. The advantages of employee leasing are significant. The client is relieved of many administrative burdens, as well as the need to employ specialized personnel employees. Further, employees not recruited by one client are sent to another client company for employment.
Training and Development
Q) Meaning and Definition
A business' most important asset is often its people. Training and developing them can be one of the most important investments a business can make. The right training can ensure that your business has the right skills to tackle the future. It can also help attract and retain good quality staff, as well as increasing the job satisfaction of those presently with you - increasing the chances that they will satisfy your customers. Training and development refer to the imparting to specific skills’ ability and knowledge to an employee. A formal definition of training and development is: “… it is any attempt to improve current or future employee performance by increasing an employee’s ability to perform through learning, usually by changing the employee’s attitudes or increasing his or her skills and knowledge.” The need for training and development is determined by the employee’s performance deficiency, computed as follows: Training and Development need = Standard performance – Actual performance.
We can make a distinction among training, education and development. Such distinction enables us to acquire a better perspective about the meaning of the terms. Training, as was started earlier, refers to the process of imparting specific skills. Education, on the other hand, is confined to theoretical learning in the classrooms.
TRAINING AND EDUCATION DIFFERENTIATED:
TRAINING APPLICATION ORIENTED JOB EXPERIENCE SPECIFIC TASKS Narrow perspective EDUCATION Theoretical oriented Classroom learning General concepts Broad perspective
Development refers to those learning opportunities designed to help employees grow. Development is not primarily skill-oriented. Instead, it provides general knowledge and attitudes, which will be helpful to employees in higher positions. Efforts towards development often depend on personal drive and ambition. Development activities, such as those supplied by management development programmes, are generally voluntary. THE TRAINING PROCESS Organizational Objectives and Strategies
Assessment of Training Needs Establishment of Training Goals Devising Training Programme
Evaluation of Results
72 Implementation of Training programme
(1) ORGANIZATIONAL OBJECTIVES AND STRATEGIES:
The first step in the training process in an organization is the assessment of its objectives and strategies. What business are we in? At what level of quality do we wish to provide this product or service? Where do we want to be in the future? It is only after answering these and other related questions that the organization must assess the strengths and weaknesses of its human resources. (2) ASSESSMENT OF TRAINING NEEDS: Organizations spend vast sums of money on training and development. Before committing such huge resources, organizations would do well to assess the training needs of the employees. Organizations that implement training programmes without conducting needs assessment may be making errors. Needs assessment occurs at two levels: a) Individual b) Group Individual: An individual obviously needs training when his or her training falls short of standards, that is, when there is performance deficiency. Inadequacy in performance may be due to lack of skill or knowledge or any other problem. The problem of performance deficiency is caused by absence of skills or knowledge can be remedied by training. Faulty selection, poor job design, uninspiring supervision or some personal problem may also result in poor performance. Transfer, job redesign, improving quality of supervision, or discharge will solve the problem. Individuals may also require new skills because of possible job transfers. Although job transfers are as common as organizational personal demands vary, they do not necessarily require elaborate training efforts. Employees commonly require an orientation to new
73 facilities and jobs. Recently, however, economic forces have necessitated significant retraining efforts in order to assure continuous employment for many individuals. Group: Assessment of training needs occurs at group level too. Any change in the organization’s strategy necessitates training groups of employees. For example, when the organization decides to introduce a new line of products, sales personnel and production workers have to be trained to produce, sell and service the new products. Training can also be used when high scrap or accident rates, low morale and motivation, or other problems are diagnosed. Needs Assessment Methods: Several assessment methods for are available for assessing training needs. Some are useful for organizational level needs assessment and others for individual needs assessment.
NEEDS ASSESSMENT METHODS
Organizational goals and Performance Appraisal objectives Work sampling Personnel/skills inventories Interviews Organizational climate indices Questionnaires Efficiency indices Attitude survey Exit interviews Training progress MBO or work planning systems Rating scales Quality circles Customer survey/satisfaction
Benefits of Needs Assessment: Needs assessment helps diagnose the cause of performance deficiency of employees. Causes require remedial actions. There are specific benefits of needs assessment. Trainers may be informed about the broader needs of the training group and their sponsoring organizations. The sponsoring organizations are able to reduce the perception gap
between the participant and his or her data boss about their needs and expectations from the training programme. Trainers are able to pitch their course inputs closer to the specific needs of the participants.
(3) ESTABLISHMENT OF TRAINING GOALS:
Once the training needs are assessed, training and developmental goals must be established. With out clearly set goals, it is not possible to design a training and development programme and, after it has been implemented, there will be no way of measuring its effectiveness. Goals must be tangible, verifiable, and measurable. This is easy where skill training is involved. For example, the successful trainee will be expected to type 55 words per minute with two or three errors per page. But behavioral objectives like attitudinal changes can be more difficult to state. Nevertheless, clear behavioral standards of expected results are necessary so that the programme can be effectively designed and results can be evaluated. (4) DEVISING THE TRAINING AND DEVELOPMENT PROGRAMME Every training and development programme must address the following vital issues: Who are the trainees? Who are the trainers? What methods & techniques?
What should be the level of training?
What principles of learning?
Where to conduct the program?
Who are the trainees?
Trainees are selected on the basis of: Self Nomination Recommendations of the Supervisor By the HR Department itself
Whatever is the basis, it is advisable to have two or more target audiences. For example, rank-and-file employees and their supervisors may effectively learn together about a new process and their respective roles. It also helps facilitate group processes such as problem solving and decision – making. 1. Who are the trainers? Training and development may be done by: Immediate Supervisors Co – workers
75 Personnel Staff Specialists in other parts of the company Outside Consultants Industry Associations Faculty Members at Universities
Who among these are selected to teach, often depends on where the program is held and the skill that is being taught.
What Methods and Techniques of Training should be used?
A multitude of methods and techniques is used to train employees. Training techniques are the means employed in the training methods. Training methods are categorized into two groups – on-the-job methods and off-the-job methods. The most commonly used techniques are shown in the table given below.
METHODS & TECHNIQUES OF TRAINING
On-the-Job Method Orientation Training Job-Instruction Training Job Rotation Coaching
Simulation Case Study Vestibule Role Play
Lecture Films & Television Conference/Discussion Programmed Instruction
On-the-Job Method (OJT): Majority of industrial training is on the job training type. OJT method is mainly adopted while orienting new employees, introducing innovations in products & services and in special skills training. OJT is conducted at the work site and in the context of the job. Often, it is informal, as when an experienced worker shows a trainee how to perform the job tasks. Off-the-Job Training Method:
76 Off-the-job training is mainly adopted for orienting new employees, introducing innovations in products and services, special skills training, safety education, creative, technical & professional education and sales, administrative, supervisory and managerial education. The advantages and disadvantages of some of the important techniques of off-the-job methods are listed below: a) Lectures:
Lecture is a verbal presentation of information by an instructor to a large audience. This method can be made effective when combined with other means of training. b) c) Audio-Visuals: Programmed Instruction (PI): These include television slides, overheads, video-types, films and LCD Projectors. Training is offered without the intervention of the trainer. Information is provided to the trainee in blocks, either in a book form or through a teaching machine. PI involves: 1. Presenting questions, facts, or problems to the learner. 2. Allowing the person to respond. 3. Providing feedback on the accuracy of his or her answers. 4. If the answers are correct, the learner proceeds to the next block. d) Simulations: A simulator is any kind of equipment or technique that duplicates as nearly as possible the actual conditions encountered on the job. It is an attempt to create a realistic decision – making environment for the trainee. The advantage of simulation is the opportunity to ‘create an environment’ similar to real situations the managers incur, but without the high costs involved should the actions prove undesirable. The other techniques of training are: Leadership games: exercises to teach different styles of leadership. Skill Games: Tests to develop analytical skills. Communication Games: exercises to build bias – free listening and talking. Strategic Planners: Games to test ability to plan ahead. Team – building games: Exercises requiring collaborative efforts. Lateral Thinking: thinking randomly to come up with new ideas.
77 Cross – cultural training: Programmes to teach specifics of varied cultures.
78 2. What should be the level of learning? The inputs passed on to trainees in training and development programmes can be taught at three basic levels. Level I The trainee must acquire fundamental knowledge. This means developing a basic understanding of a field and becoming acquainted with the language, Level II Level III concepts and relationships involved in it. E.g. Orientation Training The goal is skill development, or acquiring the ability to perform in a particular skill area. Aims at increased operational proficiency. This involves obtaining additional experience and improving skills that have already been developed. All the inputs of training can be offered at the three levels. How effectively they are learned depends upon several principles of learning. 3. What should be the Principles of Learning? Training and development programmes are more likely to be effective when they incorporate the following principles of learning:
Transfer of Learning
Recognition of Individual Differences
Meaning of Material
SCHEDULES OF TRAINING
Knowledge of Results
Motivation: Motivation to learn is the basic requisite of making training and development programmes effective. Motivation comes from awareness that training fetches some rise in status and pay. Internal pressures (self-esteem, quality of life, job satisfaction) are the most powerful motivators. At the same time the individual must also have the ability to learn. Individual Differences:
79 Individuals enjoy varying learning stimuli. Ability varies from individual to individual and this difference must be considered while organizing training programmes. Practice Opportunities: People learn best through practice. The trainee should be given the opportunity to practice what is being taught. Practice is also essential after the individual has been successfully trained. Reinforcement: Reinforcement is anything that a) b) Increases the strength of response Tends to induce repetitions of the behavior that preceded the
reinforcement. Reinforcement could be positive and negative. Positive reinforcement strengthens and increases behavior by the presentation of desirable consequences. The reinforcement consists of a positive experience for the individual. Example: if an employee does something well and is complemented by the boss, the probability that the behavior will be repeated will be strengthened. In negative reinforcement, the individual exhibits the desired behavior to avoid something unpleasant. Example: an employee who does something to avoid incurring a reprimand from his boss. The effect of negative reinforcement is avoidance of learning. Knowledge of Results (feedback): Knowledge of results is a necessary condition for learning. Feedback about the performances will enable the learner to know where he or she stands and to initiate corrective action if any deviation from the expected goal has taken place.
Goals: Goal setting can also accelerate learning, particularly when it is accompanied by knowledge of results. Individuals generally perform better and learn more quickly when they have goals, particularly if the goals are specific and reasonably difficult. Schedules of learning:
80 One of the most well – established principles of learning is that distributed or spaced learning is superior to continuous learning. Schedules of learning involve: a) b) c) Duration of practice sessions Duration of rest sessions Positioning of rest pauses
All the three must be carefully planned and executed. Meaning of material: A definite relationship has been established between learning and meaningfulness of the subject learnt. The more meaningful the material, the better the learning process. Transfer of Learning: What is learnt in training must be transferred to the job. The traditional approach to transfer has been to maximize the identical elements between the training situation and the actual job. This may be possible for training skills such as maintaining a cash register, but not for teaching leadership or conceptual skills. Often, what is learnt in a training session faces resistance back at the job. Techniques for overcoming resistance include creating positive expectations on the part of trainee’s supervisor, creating opportunities to implement new behavior on the job, and ensuring that the behavior is reinforced when it occurs. Though, it is desirable that a training and development programme incorporates all these principles, seldom is such a combination effected in practice. 4. Where to conduct the programme? A training and development programme can be conducted: i. At the job itself ii. On site but not the job – for example, in a training room in the company. iii. Off the site, such as in a university or college classroom, hotel, a resort, or a conference center. (5) IMPLEMENTATION OF THE PROGRAMME: Once the training programme has been designed, it needs to be implemented. Implementation is beset with certain problems: a) Most managers are action oriented and frequently say they are too busy to engage in training efforts.
81 b) Availability of trainers is a problem. In addition to possessing communication skills, the trainers must know the company’s philosophy, its objectives, its formal and informal organizations, and the goals of the training programme. Training requires a higher degree of creativity than, perhaps, any other personnel specialty. c) Scheduling training around the present work is another problem. Programme implementation involves action on the following lines: a) Deciding the location and organizing training and other facilities b) Scheduling the training programme c) Conducting the programme d) Monitoring the progress of trainees (6) EVALUATION OF THE PROGRAMME: The last stage in the training and development process is the evaluation of results. Since huge sums of money are spent in training and development, how far the programme has been successful must be judged or determined. Evaluation helps determine the results of the training and development programme. In practice, however, organizations either overlook or lack facilities for evaluation.
Need for Evaluation:
The main objective of evaluating the training programmes is to determine if they are accomplishing specific training objectives, that is, correcting performance deficiencies. A second reason for evaluation is to ensure that any changes in trainee capabilities are due to the training programme and not due to any other conditions. Training programmes should be evaluated to determine their cost effectiveness. Evaluation is useful to explain programme failure, should it occur. Finally, credibility of training and development is greatly enhanced when it is proved that the organization has benefited tangibly from it. PRINCIPLES OF EVALUATION: Evaluation of the training programme must be based on the following programmes: a) Evaluation specialists must be clear about the goals and purpose of evaluation b) Evaluation must be continuous c) Evaluation must be specific d) Evaluation must provide the means and focus for trainers to be able to appraise themselves, their practices, and their products.
82 e) Evaluation must be based on objective methods and standards. f) Realistic target dates must be set for each face of the evaluation process. A sense of urgency must be developed, but deadlines that are unreasonably high will result in poor evaluation. There are various approaches to training evaluation. To get a valid measure of training effectiveness, the personnel manager should accurately assess trainee’s job performance two to four months after completion of training. Two writers have suggested that four basic categories of outcome can be measured. a) Reaction: evaluate the trainee’s reaction to the programme. Did he like the programme? Did he think it worthwhile? b) Learning: did the trainee learn the principles, skills and the fact that the supervisor or the trainee wanted him to learn? c) Behavior: Whether the trainee’s behavior on the job changed because of the training programme? d) Results: what final results have been achieved? Did he learn how to work on machine? Did scrappage costs decrease? Was turnover reduced? Are productions quotas have been met? Questionnaires or structured interviews with the immediate supervisors of the trainees are acceptable methods for obtaining feedback on training. The supervisor is asked to rate the former trainee on job proficiency directly related to the training objectives. Besides, pre-and-post tests be administered to the training groups. Prior to the training, a test related to the training material is applied, and the results of this pre-test are compared with results on the same or similar test administered after the programme has been completed.
Q) Objectives of Training and Development
Staying ahead in today's business world is more challenging than ever. Building trust and promoting teamwork are just two expectations of any business leader. Training and development programs are designed to keep an organization at the front of its industry maximize performance and energize every level of the organization. Training and Development is also seen to strengthen the tie between employee development and strategic operation objectives.
83 The objectives of Training and Development are as follows: the organization. Fewer accidents: Accidents, scrap and damage to machinery and equipment can be avoided or minimized through training. Even dissatisfaction, complaints, absenteeism, and turnover can be reduced if employees are trained well. Meeting manpower needs: Future needs of employees will be met through training and development programmes. Training serves as an effective source of recruitment. Training is an investment in human resource with promise of better returns in future. Improves quality: Better-informed workers are likely to make less operational mistakes. Quality of products or services will definitely increase. This can be well measured through the reduction in rejections. Personal growth: Training programmes also deal with personality development of the employees (through goal setting, motivation, leadership skills, etc.) thus they personally gain through exposure to training programmes. Obsolescence prevention: Training and development programs foster the initiative and the creativity of the employees and help to prevent the manpower obsolescence, which may be due to age, temperament, or the inability of the person to adapt himself to technological changes. • Versatility in operations: Training makes the employees versatile in operations. All rounders can be transferred to any job. Flexibility is therefore ensured. Growth indicates prosperity, which is reflected in profits every year. • Employee stability: Training contributes to employee stability in at least 2 ways. Employees become efficient after undergoing training. Efficient employees Efficiency: Employees become efficient after undergoing training. Efficient employees contribute to the growth of
84 contribute to the growth of the organization. Growth renders stability to the work force. Further trained employees tend to stay with the organization.
Q) EFFECTIVENESS AND EVALUATION OF TRAINING AND DEVELOPMENT
Effectiveness of Training
Training and Development programmes are most likely to be effective when they incorporate the following principles 1.Employee Motivation-motivation to learn is the basic requisite to make training and development programmes effective. Motivation comes from awareness that training fetches some rise in status and pay. Motivation alone is not enough; the individual must have the ability to learn. 2.Recognition of individual differences Regardless of individual differences, and whether a trainee is learning a new skill or acquiring knowledge of a given topic, the trainee should be given the opportunity to practice what he is taught. Practice is essential after individual is successfully trained. 3.Schedule of learning Duration of practice sessions, duration of rest sessions and positioning of rest pauses are the three schedules, which must be carefully planned and executed for an effective training programme. Besides, Training can be made effective, if action on the following lines is initiated: 1.It should be ensured that the management commits itself to allocate major resources and adequate time to training. This is what high performing organizations do. For example XEROX, invest 300 $ million annually or about 2.5% of its revenue on training. Similarly Hewlet Packard spends about 5% of its annual revenue to train 87000 workers. 2.It should be ensured that training contributes to competitive strategies of the firm. Different strategies need different HR skills for implementation. Let training help employees at all levels acquire the needed skills.
85 3.Ensure that a comprehensive and systematic approach to training exists, and training and retraining are done at all levels on a continuous and ongoing basis. 4.Training can be made effective by making learning as one of the fundamental values of the company. This philosophy should percolate down to all employees in the organization. 5.It should be ensured that there is proper linkage among organizational, operational and individual training needs. 6.And finally to make training effective a system to evaluate the effectiveness of training needs to be prepared so that the shortfalls can be easily looked at.
WHY TRAINING FAILS? The benefits of training are not clear to the top management. The top management hardly rewards the supervisors for carrying out effective training. The top management rarely plans and budgets systematically for training The middle management, without proper incentives from top management does not account for training in production scheduling Without proper scheduling from above, first line supervisors have difficulty in production norms if employees are attending training programmes. Trainers provide limited counseling and consulting services to the rest of the organization.
Evaluation of Training
Organizations are under pressure to justify various expenses. The training budget is, often, not exempted from this purview. There are a number of questions raised on the value derived from training programmes—both directly and indirectly. Business heads and training managers are under pressure to prove the effectiveness of training Thus it can be seen,
86 The last and one of the most important stages in the training and development process is the evaluation of results. Since huge sums of money are spent on training and development. how far the training has been useful must be judged/determined. Evaluation helps determine the results of the training and development programme. In practice is however seen, organizations either overlook or lack facilities for evaluation.
Need for evaluation: • The main objective of evaluating the training programme is to determine if they are accomplishing specific training objectives, that is correctible performance deficiencies. • Secondly training programme should be evaluated to determine their cost effectiveness. Evaluation is useful to explain programme failure, if it occurs. • And finally the credibility of training and development is greatly enhanced when it is proved that the organization has benefited tangibility from it.
Principle of evaluation Evaluation of training programme must be based ob following principles
1. The evaluation specialist must b clear about the goals and purposes of evaluation. 2. Evaluation must be continuous. 3. Evaluation must be specific. 4. Evaluation must provide the means and focus for trainers to be able to appraise themselves 5. Evaluation must be based on objective methods and standards. 6. Realistic target dates must be set for each phase of the evaluation process. A sense of urgency must be developed, but deadlines that are unreasonably high will result in poor evaluation. Criteria for evaluation. HR professionals should try to collect four types of data while evaluation training programmes. I. Measures of reaction.
87 Reaction measures reveal trainees’ opinions regarding the training programme. II. Learning Learning measures assess the degree to which trainees have mastered the concepts, knowledge and skills of the training.
III. Behavioural change
Behavior indicates the performance of the learners. IV. Organizational results The purpose of collecting organizational results is to examine the impact of training on the work group or the entire company.
Techniques of evaluation
Several techniques of evaluation are being used in organizations. It may be stated that the usefulness of the methods is inversely proportional to the ease with which the evaluation can be done. The following are the techniques of evaluation: 1.Experimental and control groups. Each group is randomly elected, one to receive training and the other not to receive training. The random selection helps to assure the formation of the groups quite similar to each other. Measures are taken of relevant indicators of success. (E.g.-words typed per minute, pieces produced per hour etc) before and after training for both groups. If the gain demonstrated by the experimental group is better than those by the control group, the training programme is labeled as successful. 2.Longitudinal or time series analysis Measurements are taken before the programme begins and are continued during and after the programme is completed. These results are plotted on a graph to determine whether changes have occurred and remain as a result of training effort. To further validate, that change has occurred as a result of training and not another variable, a control group can be included.
88 In order to conduct a thorough evaluation of a training programme, it is important to assess the costs and benefits associated with the programme. This is a difficult task, but it is useful in convincing the management about the usefulness of the training. Some of the costs that should be measured for a training programme include needs assessment costs, salaries of training department staff, purchase of equipment, programme development costs, trainers cost during the training period. The benefits to be compared to the costs are rupee payback associated with the improvement in trainee’s performance, their behavioral change and the longevity of the period during which the benefit would last.
Q) Follow – Up of Training
Following-up is the last step in the training process. Here, the training program is already completed and the trainees go back to their departments or positions and start doing the work assigned. However, the management feels that training / development is a means and not the end in itself. Training is essentially for achieving certain objectives. Management will like to know actual results / benefits of training. For this, follow-up of training in the form of evaluation training is essential. Management spent huge amount of money on training of employees and this expenditure should give positive return in terms of higher efficiency, productivity, high morale, cordial industrial relations and so on. For this, critical evaluation of training program is essential. This indicates the effectiveness of the training. Even suitable modification / improvement in the training program is possible after analyzing the results available from such evaluation. In brief, evaluation helps determine the results of training and development program. Unfortunately, many organizations overlook this important step in the training process. In some companies, suitable facilities required for evolution of training are not available. Follow-up is the key to ensuring that interventions improve performance. Various follow-up approaches in the work place are used to support trainers, supervisors, service providers and others responsible for implementing the performance improvement interventions. The follow up technique will increase the probability that learning and behavior changes will "stick" back on the job. These techniques are easy to use, don't require
89 large amounts of time or organizational integration and cost very little. They can be added on to existing training or designed with new training. On the whole, follow–up action is required to ensure implementation of evaluation report at every stage of training.
Q) Importance of Training and Development
Training and development programmes help remove performance deficiencies in employees. This is particularly true when (1) The deficiency is caused by a lack of ability rather than a lack of motivation to perform (2) The individual(s) have the aptitude and motivation needed to learn to do the job better, and (3) Supervisors and peers are supportive of the desired behaviors. There is greater stability, flexibility and capacity for growth in an organization. Training contributes to employee stability in at least two ways. Employees become efficient after undergoing training. Efficient employees contribute to the growth of the organization. Growth renders stability to the work force. Further, trained employees tend to stay with the organization. They seldom leave the company. Training makes the employees versatile in operations. All rounder can be transferred to any job. Flexibility is therefore ensured. Growth indicates prosperity, which is reflected in increased profits from year to year. Nobody else but well trained employees can contribute to the prosperity of an organization. Accidents, scrap and damage to machinery and equipment can be avoided or minimized through training. Even dissatisfaction, complaints, absenteeism, and turnover can be reduced if employees are trained well. Future need of employees will be met through training and development programmes. Organizations take fresh diploma holders or graduates as apprentices or management trainees. They are absorbed after course completion. Training serves as an effective source of recruitment. Training and development is an investment in human resources with a promise and it serves as an effective source of recruitment. Training and development is an investment in HR with a promise of better returns in future. A company’s training and development pays dividends to the employee and the organization. Though no single training programme yields all the benefits, the organization which devotes itself to training and development enhances its HR capabilities and strengthens its competitive edge. At the same time, the employee’s personal and career goals are furthered, generally adding to his or her abilities and value to the employer. Ultimately, the objectives of the HR department are also furthered. How to identify training needs?
Needs assessment diagnoses present problems and future challenges to be met through training and development. Organizations spend vast sums of money (usually as a percentage on turnover) on training and development. Before committing such huge resources, organizations would do well to assess the training needs of their employees. Organizations that implement training programmes without conducting needs assessment may be making errors. For example, a needs assessment exercise might reveal that less costly interventions (e.g. selection, compensation package, job redesign) could be used in lieu of training. Needs assessment occurs at two levels group and individual. An individual obviously needs training when his or her performance falls short of standards, that is, when there is performance deficiency. Inadequacy in performance may be due to lack of skill or knowledge or any other problem. The problem of performance deficiency caused by absence of skills or knowledge can be remedied by training. Faulty selection, poor job design, uninspiring supervision or some personal problem may also result in poor performance. Transfer, job redesign, improving quality of supervision, or discharge will solve the problem. Figure illustrates the assessment of individual training needs and remedial measures.
Lack of skill or knowledge
Non- training Measures
Assessment of training needs must also focus on anticipated skills of an employee. Technology changes fast and new technology demands new skills. It is necessary that the employee be trained to acquire new skills. This will help him/her to progress in his or her career path. Training and development is essential to prepare the employee to handle more challenging tasks. Deputation to a part-time MBA programme is ideal to train and develop such employees. Individuals may also require new skills because of possible job transfers. Although job transfers are common as organizational personnel demands vary, .hey do not necessarily require elaborate training efforts. Employees commonly require only an orientation to new facilities and jobs. Recently, however, economic forces have necessitated significant retraining efforts in order to assure continued employment for many individuals. Jobs have disappeared as technology, foreign competition, and the force of supply and demand are changing the face of our industry.
91 Assessment of training needs occurs at the group level too. Any change in the organization’s strategy necessitates training of groups of employees. For example, when the organization decides to introduce a new line of products, sales personnel and production workers have to be trained to produce, sell and service the new products. Training can also be used when high scrap or accident rates, low morale and motivation, or other problems are diagnosed. Although training is not a cureall, such undesirable happenings reflect poorly trained work force. Needs Assessment Methods: How are training needs assessed? Several methods are available for the purpose. As shown in Fig. 9.4, some are useful for organizational-level needs assessment and others for individual needs assessment.
Group or Organizational Analysis
Organizational goals and objectives Personnel/ skill inventories Organizational climate indices Efficiency indices Exit interviews MBO or work planning systems Quality circles Customer survey/satisfaction data Consideration of current and projected changes
INDIVIDUAL ANALYSIS Performance appraisal Work sampling Interviews Questionnaires Attitude survey Training progress Rating scales Benefits of Needs Assessment: As was pointed above needs assessment helps diagnose the causes of performance deficiency in employees. Causes require remedial actions. This being a generalized statement, there are certain specific benefits of need& assessment. They are: 1. Trainers may be informed about the broader needs of the training group and their sponsoring organizations. 2. The sponsoring organizations are able to reduce the perception gap between the participant and his or her boss about their needs and expectations from the training programme. 3. Trainers are able to pitch their course inputs closer to the specific needs of the participants.
Q) Give the meaning and definition of performance appraisal and its objectives?
In simple terms, appraisal may be understood as the assessment of an individual’s performance in a systematic way, the performance being measured against such factors as job knowledge, quality, and quantity of output, initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility, health, and the like. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. A formal definition of performance appraisal is: “It is the systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for development.” A more comprehensive definition is: “Performance appraisal is a formal, structured system of measuring and evaluating an employee’s job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organization, and society all benefit.” The second definition includes employee’s behavior as part of the assessment. Behavior can be active or passive. Either way behavior affects job results. The other terms used for performance appraisal are: performance rating, employee assessment, employee performance review, personnel appraisal, performance evaluation, employee evaluation, and merit rating. In a formal sense, employee assessment is as old as the concept of management, and in an informal sense, it is probably as old as mankind. Nor performance appraisal is done in isolation. It is linked to job analysis. Objectives of performance appraisal. Data relating to performance assessment of employees are recorded, stored, and used for several purposes. The main purposes for employee assessment are: 1) To effect promotions based on competence and performance 2) To confirm the services of probationary employees upon their completing the probationary period satisfactorily. 3) To assess the training and development need of employees. 4) To decide upon a pay raise. 5) To let the employees know where they stand insofar as their performance is concerned and to assist them with constructive criticism and guidance for the purpose of their development.
93 6) To improve communication. Performance appraisal provides a format for dialogue between the superior and the subordinate, and improves understanding of personal goals and concerns. This can also have the effect of increasing the trust between the rater and the ratee. 7) Finally, performance appraisal can be used to determine whether HR programmes such as selection, training, and transfer have been effective or not.
Q. What is the Performance Appraisal process?
The employee performance appraisal enables you to identify, evaluate and develop an individual's performance. It is a tool to encourage strong performers to maintain their high level of performance and to motivate poor performers to do better. Other important benefits of a formal appraisal process are:
• • • •
Validation of hiring practices — are the right people in the right positions? Provision of an objective measuring tool on which compensation decisions, and promotions can be based Identification of training needs — individually, departmentally and organizationally Identification of employees who have the potential for advancement or who might be better suited in other areas of the organization
1. Objectives Of An Appraisal: 1. Promotion, separation, and transfer decisions 2. Feedback to the employee regarding how the organization viewed the employee's performance 3. Evaluations of relative contributions made by individuals and entire departments in achieving higher level organization goals 4. Criteria for evaluating the effectiveness of selection and placement decisions, including the relevance of the information used in the decisions within the organization 5. Reward decisions, including merit increases, promotions, and other rewards 6. Ascertaining and diagnosing training and development decisions 7. Criteria for evaluating the success of training and development decisions 8. Information upon which work scheduling plans, budgeting, and human resources planning can be used
2. Establish Job Expectations:
94 Goals should be realistic, i.e., practical and achievable. Realistic goals provide a "balance" between what is hard and what is easy to achieve. Goals should motivate people to improve and to reach for attainable ends. For a goal to be motivational, the person must feel that the goal can be achieved. Impossible goals de-motivate and defeat the goal-setting process. Likewise, easy goals do not motivate any more than unattainable goals. You should review your goals on a quarterly or semi-annual basis to check your progress and to make any necessary adjustments. 3. Design An Appraisal Programme: (i) Formal versus Informal approach? • Many organizations encourage a mixture of both formal and informal approach. The formal approach is used as the primary evaluation, where as the informal approach is used more for performance feedback. (ii) Who are the raters? • (iii) (iv) (v) Immediate supervisors, specialists from the hr department, subordinates, peers, committees, clients, or a combination of many. What problems are encountered? • • • (vi) Leniency, severity, bias Train the raters and appraisers Quality, quantity, timeliness, cost effectiveness, need for supervision, interpersonal impact. When to evaluate? • Once in three months, once in six months or once a year How to solve the problems? What should be evaluated?
4. Appraise Performances: Use methods of appraisal such as psychological appraisals, assessment centers, ranking method, performance tests and observations, essay method etc. The formal performance appraisal process is one of assessing, summarizing and developing the work performance of an employee. The performance appraisal process should include at least two meetings convened by the supervisor with the employee. 5. Performance Interview: Once appraisal has been made of employees, the raters should discuss and review the performance with the ratees, so that they receive feed back about where they stand in the
95 eyes of the superiors. Feedback is necessary to effect improvement in performance. Performance interview has 3 goals: (i) (ii) (iii) To change the behavior of employees whose performance does not meet organizational requirements or their own personal goals To maintain the behavior of employees who perform in an acceptable manner To recognize superior performance behaviors so that they will be continued
6. Use Appraisal Data For Appropriate Purposes: The Hr department must use the data and information generated through performance evaluation. The employers offer significant rewards to employees in the form of: (i) (ii) (iii) Money to purchase goods and services, for luxury Opportunities to interact with other people in a favorable working environment Opportunities to learn grow and make full use of their potential etc.
Data & information outputs of a performance will be useful in the following areas of HRM: (i) (ii) (iii) (iv) (v) (vi) Remuneration administration Validation of selection programmes Employee training & development programmes Promotion, transfer & lay-off decisions Grievance & discipline programmes HR planning
Q)Methods of Evaluation of Performance Appraisal
Numerous methods have been devised to measure the quantity and quality of employee’s job performance. Each of the methods discuss could be effective for some purposes for some organization as different organizations different methods. Broadly all the approaches can be classified into past oriented and future oriented.
RATING SCALES This is the simplest and most popular method of appraising employee performance. The typical rating-scale system consists of several numeric scales, each representing a jobrelated performance criterion such as dependability, initiative, output, attendance, attitude and the like. Each scale ranges from excellent to poor. The rater checks the appropriate performance level on each criterion, then computes the employee’s total numerical score. The number of points scored may be linked to salary increases, whereby so many points equal a rise of some percentage. Rating scales offer the advantages of adaptability, relatively easy use and low cost. Nearly every type of job can be evaluated with the rating scale, the only requirement
96 being that the job performance criteria should be changed. This way a large number of employees can be rated in a short time, and the rater does not need any training to use the scale. The disadvantages of this method are several. The raters biases are likely to influence the evaluation, and the biases are particularly pronounced on subjective criteria such as cooperation, attitude and initiative. Furthermore, numerical scoring gives an illusion of precision that is really unfounded Man to Man comparison method: This technique was used by the US army, during the first world war. By this method certain factors are selected for the design by the rater for each factor. A scale of man is also created for each selected factor. Each man to be rated is compared with the man in the scale, and certain scores for each factor are awarded to him. So, instead of comparing a “whole man” to a “whole man” personnel are compared to the key man in respect of one factor at a time. This method s used in job evaluation and is called the factor comparison method. In performance appraisal it is not of much use because the designing of scales is a complicated task. 360-degree system of appraisal Where appraisal are made by peers, superiors, subordinates and clients it is called 360degree system of appraisal. First developed at GE, US in 1992, the system has become popular in our country too. GB (India), Reliance Industries, Crompton Greaves, Godrej soaps, Infosys, Thermax and Thomas Cook are using the method with greater benefits. The Arthur Anderson survey (1997) reveal the20% of the organizations use the 360degree method. Here, besides assessing performance, other attributes of the assessetalents, behavioural quirks, values, ethical standards, tempers and loyalty are evaluated by people who are best placed to do it. PEER APPRAISAL Peers are in a better position to evaluate certain facts of job performance which the subordinates or supervisors cannot do. Such facts include contribution to work group projects, interpersonal effectiveness, communication skills, reliability and initiative. Closeness of the working relationship and the amount of personal contacts place peers in a better position to make accurate assessments. Unfortunately, friendship or animosity may result in distortion of evaluation. Further, when reward allocation is based on peer evaluation, serious conflicts among co-workers may develop. Finally, all the peers may join together to rate each other high.
MBO The Management by objectives concept which was conceived by Peter Drucker, reflects a management philosophy which values and utilizes employee contributions. MBO wroks can be described in four steps:
97 1) The organization, superiors and subordinates together or just the superiors alone establish the goals of the employee. This goal usually the desired outcome to be achieved and it can be used to evaluate performance. 2) Second step involves involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done. 3) Then the actual level of goal attained is compared to the goals agreed upon. The evaluator figures out why the goals were not met and accordingly determines training needs. 4) The last step is establishing new goals and, possibly, new strategies for goals not previously attained. If the goals were succeeded the subordinate may have larger involvement in setting of his next goal otherwise the superior may have to do it alone. However, this method has been criticised for not being applicable to jobs with little or no flexibility, such as assembly-line work. It works well with managerial personnel and employees who have a fairly wide range of flexibility and self control in their jobs. And if this method is linked to employee rewards, the they are more likely to take up less challenging goals so that they are more likely to achieve them. Also if the rewards are semi annual or annual, then the employees may take up short term goals and neglect the important long term goals. L&T follows MBO style of evaluation Assessment centers: Mainly used for executive hiring, assessment centers are now being used for evaluating executive o supervisory potential. An assessment centre is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. The basic idea is to evaluate managers over a period of time, say one to three days, by observing and evaluating their behaviour across a series of selected exercises or work samples. Assesses are requested to participate in-basket exercises, work groups (without leaders), computer simulations, role playing, and other similar activities which require the same attributes for successful performance, as in the actual job. After recording their observations, the raters meet and discuss these observations. The decision regarding the performance of each assessee is based upon this discussion of observations. Self evaluation and peer evaluation are also thrown in for final rating.
Q)What are the uses of Performance Appraisal?
• Suitable Placement: Performance appraisal is useful for evaluating performance of subordinates and also for understanding their potentials. This information is available progressively and can be us purposefully for assigning duties to employees as per their merits and potentials. Thus, placement of staff and periodical adjustment in the placement can be made scientifically. Assistance in Self-improvement: Performance appraisal gives the details of plus points and weaknesses of employees. In addition, they are given guidance for removing their weaknesses and also for making their plus points more
98 conspicuous. In brief, performance appraisal assists the employees in selfdevelopment. This is possible through performance feedback to every employee periodically. • Incentive to Grown and Develop: Performance appraisal acts as an incentive to employees to improve their performance, develop new qualities and secure higher positions in the org. the employee with merit may be given special increments or promotion to higher position. This motivates others to improve their performance and qualities for similar benefits. Effective training programme: performance appraisal suggests the drawbacks and other weaknesses of employees. It is possible to remove such common weaknesses and deficiencies of employees by adjusting their training programmes accordingly. Introduction of Sound Personnel Policies: transfers, promotions, wage rates and dismissal are the different areas of personnel management. These personnel policies are directly connected with the performance appraisal of employees. Such policies become fair, impartial and acceptable to emp. When they are based on performance appraisal. Cordial Employer-Employees Relation: performance appraisal avoids or at least minimizes grievances of employees as regards promotions, transfers, increments etc. Employees develop a sense of confidence that injustice will not be done to any employee as performance appraisal system is based on sound principles. Management is also not in a position to make partiality/ favouratism when performance appraisal records are maintained properly and used when required. Human Resource Planning and Development: performance appraisal facilitates human resource planning and development. It suggests the type of manpower available. It is also possible to train or develop the existing manpower as per the future needs of the enterprise. This is possible through training and exec. Development programmes. Employee Communication: performance appraisal facilitates direct communication with the employees through appraisal interview and post appraisal interviews. Such communication guides emp. And also provides more info. to the mgmt. regarding the expectations and feelings of the employees. High Employee Morale: scientific and impartial appraisal gets the support from the employees. They feel that the mgmt. gives due importance to them and is genuinely interested I their career development and well being, this creates positive impact on the mental make-up of employees. They treat mgmt. as their friend, guide and well wisher. This raises the morale. Q)The meaning of Pay Structure
A company's pay structure is its method of administering its pay philosophy. The two leading types of pay structures are the internal equity method, which uses a tightly constructed grid to ensure that each job is compensated according to the jobs above and below it in a hierarchy, and market pricing, where each job in an organization is tied to the prevailing market rate.
A company needs job descriptions for positions such as executives, managers, technologists, entry-level people, and the like, so that people know where they fall within the organization. A pay structure helps answer questions about who's who, what each person's role is, and why people are compensated differently. It also helps human resources personnel administer fairly any given pay philosophy. For example, a company might want to pay everyone at market; or pay some people at market and some above it. Opportunities for incentives are also dealt with in the pay structure. For example, people with strategic roles will have opportunities for higher incentives. In most organizations wage and salary rates are still assigned to jobs. The relationships between the pay for jobs involve pay structure decisions. Although organizations often make pay level decisions (how much to pay) and pay structure decisions (pay relationship) at the same time, these decisions and the process by which they are reached require separate treatment. Actually, wage structures represent wage relationships of all kinds. Analysis of wage differentials of any kind (geographic, industry, community, or occupation) deals with wage structure issues. But because our primary focus is on pay decisions in organizations, our concern is with pay differences between jobs. In fact, determining the pay structure of an organization may be usefully described as putting dollar signs on jobs. Decisions on wage relationships among jobs within an organization are largely within the control of its decision makers. Wage level decisions are usually influenced more by forces external to the organization than are wage structure decisions. Some organizations pay for skills possessed by employees rather than for the jobs employees hold. The rationale is usually serious and continual skill shortages experienced by the organization. But most organizations measure employee contributions first in terms of the jobs employees hold. One interesting analysis of organizational compensation decisions is that pay structure decisions are intended to achieve retention of employees through prevention of dissatisfaction and encouragement of employee cooperation. Pay level decisions, in this analysis, are intended to attract employees. To this analysis could be added the statement that wage structure decisions are intended to encourage employees to make a career with the organization and to accept training in preparation for higherlevel jobs.
Lower-range — pay is between minimum pay and mid-range, is appropriate for employees in the learning and development phase of their job; this range is typically for employees new to a position and whose competencies are not yet fully developed. Entry level pay falls in this range.
Mid-range — pay is appropriate for employees who are fully proficient in their job. This is the target market-based competitive pay for employees who are fully competent, possess the full skill set necessary to perform their job well, meet job expectations, and consistently demonstrate skills needed and fulfill responsibilities and duties.
Upper-range — pay is appropriate for employees who serve as role models, exhibiting an exceptional skill set and consistently exceeding all job expectations. These employees exemplify the best way of doing their job, go the "extra mile," share their knowledge, and leverage their strengths to benefit the Organisation.
Q)The Meaning of Pay Level
The compensation and benefit level is the average compensation paid to employees. This has two implications. The first is external: how does the organization compare with other organizations? This question is a strategic one of how the organization wishes to position itself in the marketplace. The second implication is internal. The average compensation is a reflection of the total compensation bill of the organization. Labor is one of the claimants on organizational resources. The size of the compensation and benefits bill is a reflection of who gets what within the organization. The decision on compensation levels (how much will the organization pay?) may be the most important pay decision the organization makes. A potential employee's acceptance usually turns on this decision, and a large segment of the employer's costs are determined by it. Compensation decisions are typically micro (individual) or macro (total organization) focused. Although organizations are under no constraint to separate these decisions, a course of study should. In practice, most unsophisticated organizations make the decision on compensation level (how much to pay) and compensation structure (relationships to competitors) at the same time. More administratively advanced organizations realize that individual decisions within a proper administrative structure are more consistent, fair, and cost-effective over time. The compensation level decision may be considered the most important one for individuals. In terms of both employee attraction and cost considerations, it is often considered by most managers as a primary consideration. Also, it seems essential to recognize that compensation level decisions can never be completely separate from jobmix, hiring standards, personal decisions, and internal labor markets/relationships. For these reasons, compensation level decisions are typically the focus of a manager’s attention. From the organization’s perspective, however, one individual’s compensation decision typically goes unnoticed at the end of the year. Structure decisions (and the level of those structures) are what show up on an income statement.
101 The term compensation level simply means the average compensation paid to workers at some level of analysis, e.g. the job, the department, the employing organization, an industry, or the economy. The importance of the compensation level decision to organizations rests on its influence in getting and perhaps keeping the desired quantity and quality of employees. If the compensation level is too low, the applicant pool may dry up and recruitment efforts may meet with little success. Equally serious, some employees (often the best ones) may leave. At the extreme, the organization may experience difficulties with state and federal regulatory bodies administering minimum compensation laws and prevailing wage laws. Also, the organization may be confronted with concerted organizing drives if no union is present, or pressing compensation demands from existing unions. It is less apparent, but equally real, that a low compensation level may attract only less efficient workers, with the result that labor costs per unit of output rise. If, on the other hand, the compensation level is too high, equally undesirable results are likely. The competitive position of the organization may suffer. Turnover rates may drop below some desirable minimum so that the organization tends toward inflexibility or stagnation. Also, if compensation and salary levels are too high during periods of compensation controls by federal authorities, trouble may be forthcoming from these officials. Frequently, compensation and benefit level decisions are hidden in the type and structure of benefit, fringe, and retirement plans. Changes in compensation levels have the most drastic effects on total payroll. Of course, other compensation decisions have payroll effects, but usually not nearly as great. Substantial sums of money can be involved, and for this reason alone an organization must pay close attention to compensation levels (both competitively and internally). Nor are employees and their representatives any less concerned with compensation level decisions. It is here that the absolute amount of the compensation or salary rate is determined. Also, it is here that unions exert their major effect, and here that member loyalty is built or lost. Finally, consumers and the general public have major interests in compensation level decisions, the consumer because wages are a major element in prices, and the general public because wages and salaries represent the major portion of national income. Also, too frequent or too drastic changes in compensation levels affect the health of our economy.
Q) Explain the Concepts of wages.
While evolving the wage policy, three concepts of wages are generally considered, namely, 1. Minimum Wages, 2. Fair Wages, and 3. Living Wages. Minimum Wages
102 Minimum wage is the one that provides not merely the bare sustenance of life but also for the preservation of the efficiency of the worker. For this purpose, the minimum wage must also provide for some measure of education, medical requirements and amenities. Minimum wage may be tied by an agreement between the management and the workers, but is usually determined through legislation. This is more so in the unorganized sector where labour is unionised. In the fixation of minimum wages, besides the needs of workers, other factors like ability of the concern to pay, nature of the jobs, and so on, are also considered.
Fair wage is understood in two ways. In a narrow sense, wage is fair if it is equal to the rate prevailing in the same trade and in the neighbourhood for similar work. In a wider sense, it will be fair if it is equal to the predominant rate for similar work throughout the country and for traders in general. Irrespective of the way in which fair wage is understood, it can be fixed only by comparison with an accepted standard wage. Such a standard can be determined with reference to those industries where labour is well organized and has been able to bargain well with the employers.
Living wage is a step higher than fair wage. Living wage may be described as one which should enable the wage earner to provide for himself and his family not on the bare essentials of life like food, clothing and shelter, but a measure of frugal comfort including education for children; protection against ill health; requirements of essential social needs; and/or measure of insurance against the more important misfortunes including old age. A living wage must be fixed considering the general economic conditions of the country. The concept of living wage, therefore, varies from country to country. In the more advanced countries, living wage itself forms the basis for the minimum wage. In India, minimum wage is determined mainly for sweated industries under the provisions of the Minimum Wages Act, 1948. Fair wage is fixed for other industries considering prevailing rates of wages, productivity of labour, capacity of the employer to pay, level of national income and other related factors. Tribunals, awards and wage boards play major role in fair wage fixation. Many people are of the opinion that living wage is a luxury for a developing country like India and can therefore be deferred.
Human Resource Management Question 1 – Theories Of Remuneration
Vroom’s Expectancy Theory
The Three Influencing Factors
1. Valence: It refers to the strength of a person’s preference for receiving a reward, is unique to each employee and thus is a reflection of the concept of individual’s differences. Managers should determine what an individual employee’s preferences are, among a set of rewards. When a person prefers not attaining an
103 outcome, valence is a negative figure, and it goes without saying, that in this instance, the motivation is not at its highest level. 2. Expectancy: It is the strength of belief that one’s work-related effort will result in completion of a task. Expectancies are stated as probabilities. The employee’s estimate of the degree to which performance will be determined by the amount of effort extended. If individuals are efficient, they will believe that they have the necessary capabilities to perform a task, fulfil role expectations, or meet a challenging situation successfully. 3. Instrumentality: It represents the employee’s belief that a reward will be received once the task is accomplished, based on the probability that the organization will value the employee’s performance and will administer rewards suitably. If an employee sees that promotions are based on performance, instrumentality will be rated high. A low estimate of instrumentality will be made if the employee fails to see such linkages between performance and reward. The relationship between these three influencing factors is… Valence × Expectancy × Instrumentality = Motivation … where the combination that produces the strongest motivation, is high positive valence, high expectancy, and high instrumentality. The expectancy theory focuses on the link between rewards and behaviour. Motivation, according to the theory, is the product of valence, instrumentality and expectancy; therefore, remunerating systems differ according to their impact on these motivational components. Valence of pay outcomes remains the same under different pay systems. Expectancy perceptions often have more to do with job design and training than pay systems. Generally speaking, pay systems differ most in their impact on instrumentality – the perceived link between behaviour and pay.
Skinner’s Reinforcement Theory
Employees’ behaviour and the amount of effort they allocate to the various jobs, is very much a consequence of reinforcement. Positive Reinforcement provides a favourable consequence that encourages repetition of behaviour. An employee may find that when high-quality work is done, the supervisor gives a reward of recognition, and as a result, behaviour is reinforced and the employee tends to want to do high-quality work once again. Negative Reinforcement provides an unfavourable consequence that does not encourage
104 repetition of undesirable behaviour. For example, a strong disapproval can be shown towards tardy employees to make them aware if the fact that coming late to work is not allowed and not accepted. (However, it is also possible to motivate such an employee to come on time, if the manager expresses strong approval of each on-time or early arrival). Schedules of Reinforcement 1. Fixed Ratio: Schedule occurs when there is reinforcement after a certain number of correct responses, e.g. payment of bonuses after a sale of certain number of items, which encourages the employees to sell more items. 2. Fixed Interval: Schedule provides reinforcement after a certain period of time, e.g. a paycheck that arrives every two weeks, which an employee can always depend on, except in very unusual circumstances 3. Variable Ratio: Schedule is reinforced after a variable (but undisclosed) number of correct responses, e.g. payment of bonuses after a sale of certain number of items, but here the specific number is unknown, and this provokes interest. 4. Variable Interval: Schedules give reinforcement after a variety of time periods e.g. a company’s policies of making safety inspections of every department, four times a year, in order to encourage companies with safety regulations – the inspections are made on random basis, and the intervals between them vary. The reinforcement theory postulates that a behaviour, which has a rewarding experience, is likely to be repeated. The implication for remuneration is that high employee performance followed by a monetary reward will make future employee performance more likely. By the same token, a high performance not followed by a reward will make its recurrence unlikely in future. The theory emphasises the importance of a person actually experiencing the reward.
Adam’s Equity Theory
Employees work in a social system in which each is dependent to some degree on the others. Employees interact with one another on tasks and on social occasions. They observe one another, judge one another, and make comparisons. The equity theory builds on this notion of comparison, to add new dimensions to our overall understanding of employee motivation. Equity theory says that employees weigh what they put into a job situation (input) against what they get from it (reward), and then compare their input-reward ratio with the inputreward ratio of relevant others. One’s own rewards One’s own inputs compared to Others’ rewards Others’ inputs
If they perceive their ratio to be equal to that of the relevant others with whom they compare themselves, a state of equity is said to exist. They feel that their situation is fair, that justice prevails, and they will continue to contribute at about the same level. If the ratios are unequal, inequity exists; that is, the employees tend to view themselves as
105 under-rewarded or over-rewarded. When inequities occur, they will experience tension that will create the motivation to reduce the inequity, in an attempt to correct them. If employees feel over-rewarded, equity theory predicts that they will feel an imbalance in their relationship with their employer and seek to restore that balance. They might work harder, they might discount the value of the rewards received, they could try to convince other employees to ask for more rewards, or they might simply choose someone else for comparison purposes. Workers, who feel they have been under-rewarded, might lower the quantity or quality of their productivity, they could inflate the perceived value of the rewards received, or they could bargain for more actual rewards. Again, they could find someone else to compare (more favourably) with, or they might simply quit. In any event, they are reacting to inequity by bringing their inputs into balance with their outcomes.
Interpreting The Equity Model
Adam’s equity theory puts forward that an employee who perceives inequity in his or her rewards seeks to restore equity. The theory emphasises equity in pay structure on employees’ remuneration. A manager using the equity model should measure employee assessments of their inputs and outcomes, identify their choice of references and evaluate employee perceptions of inputs and outcomes.
The agency theory focuses on the divergent interests and goals of the organisation’s stakeholders and the way that employee remuneration can be used to align these interests and goals. Employers and employees are the two stakeholders of a business unit, the former assuming the role of principals and the latter the role of agents. The remuneration payable to employees is the agency cost. It is natural that the employees expect high agency costs while the employers seek to minimise it. The agency theory says that the principal must choose a contracting scheme that helps align the interest of the agents with the principal’s own interests. These contracts can be classified as either behaviour-oriented (e.g. merit pay) or outcomeoriented (e.g. stock option schemes, profit sharing and commissions). In fact, outcome-
106 oriented contracts seem to be the obvious solution, because as the profits go up, rewards also increase, and similarly, remuneration falls when profits go down.
Question 2 – Remuneration Plans & Business Strategy
The general practice in devising remuneration is to pay what competitors pay or to adhere to the ‘corporate policy’ but the actual remuneration plan should be integrated with the business strategy of every organization, and should not be strictly a matter of what is being paid in the market place. It should be an assessment of what must be paid to attract and retain the right people, what the organisation can afford, and what will be required to meet the organisation’s strategic goals.
Market Position & Maturity Rapid growth to maturity
Remuneration Strategy Stimulate entrepreneurship
Investing to grow
Manage earnings & protect markets
Normal growth to maturity
Reward management skills
Harvest earnings – reinvest elsewhere
No real growth or decline
Stress on cost control
Blend Of Remuneration High cash with above average incentive for individual performance. Modest benefits. Average cash with moderate incentives on individual, unit, or corporate performance. Standard benefits. Below-average cash with small incentive tied to cost control. Standard benefits.
In companies that are growing rapidly, business strategy focuses on investing to grow. The remuneration strategy should stimulate an enterprising and entrepreneurial style of management, with high cash payments, above-average incentives and modest benefits. In companies witnessing a normal growth to maturity, business strategy is oriented primarily towards managing earnings and protecting markets. The remuneration strategy should aim at rewarding management skills and should be a blend of average cash payments, moderate incentives and standard benefits.
107 In companies where there is no real growth or decline, the most appropriate strategy is to harvest earnings and reinvest them elsewhere. The remuneration strategy should stress on control of costs, with below-average cash payments, modest incentives are tied directly to control costs and standard benefits. Thus, companies do the following, viewing remuneration from a strategic perspective: 1. They recognise remuneration as a pivotal control and incentive mechanism that can be used flexibly by the management to attain business objectives. 2. They make the pay system an integral part of strategy formulation. 3. They integrate pay considerations into strategic decision-making processes, such as those that involve planning and control. 4. They view the company’s performance as the ultimate criterion of the success of the strategic pay decisions and operational remuneration programs.
Question 3 – a) Challenges affecting Remuneration & b) Concept of wages a) Challenges affecting Remuneration
People who administer wage and salary face challenges, which often necessitate adjustments to a remuneration plan. The more important of the challenges are: Skill-based pay: In the traditional job-based pay, employees were paid on the bases of jobs the do. In the skill-based system, workers are paid on the basis of number of jobs they are capable of doing. The purpose of this system was to motivate employees to acquire additional skills so that they become more useful to the organization. Skill-based pay systems work well when, a) HRM philosophy is characterized by mutual trust and the conviction that the employees have the ability and motivation to perform well. b) Technology and the organization structure changes frequently. c) Employee turnover is relatively high. d) Workers value teamwork and opportunity to participate. Pay Reviews: Pay once determined should not remain constant. It must be reviewed and changed often, but the question is “how often?” Pay reviews may be made on predetermined dates, anniversary dates or there could be flexible reviews. In fixed dates, wages and salaries of all the employees are reviewed and raised on a specific date of each year. In anniversary dates salaries may be reviewed at an interval of twelve months from the date when employee was hired. In organized industrial establishments pay reviews are held once in three years. In government departments this is done once every ten-fifteen years.
108 Pay-secrecy: Equity in remuneration is a significant factor in the employee performance. Perceived inequality in wages and salaries will demotivate and demoralize employees, which will lower employee performance. One way of avoiding this problem is to maintain pay-secrecy. Comparable worth: One of the popular principles in employee remuneration is equal pay for equal work. Under equal remuneration act, male and female workers are to paid same if their merit and seniority match. Beyond the concept of equal wages is the concept of comparable wages, which implies that if there are two employees under different jobs, but receive same points under a point ranking method of job evaluation they have to be paid the same. International Pay: In increasing globalization of business international pay assumes greater relevance. The amount of remuneration its composition and other factors pose serious challenge to HR manager.
Concept of wages
While evolving wage policy three concept of wages namely, I) Minimum wages, ii) fair wages and iii) Living wages are generally considered. Minimum wages: Minimum wages is the one, which provides not merely for bare sustenance of life, but also for the preservation of the efficiency of the workers. Minimum wages may be tied by an agreement between management and workers, but is usually determined through legislation. This is more in an unorganised sector where labour is unionised. Fair wages: It is understood in two ways. In narrow sense, wage is fair if it is equal to the rate prevailing in the same trade and in the neighbourhood for similar work. In wider sense, it will be fair if it is equal to the predominant rate for similar work through out the country. Living wages: It is described as one in which it enables the wage earner to provide himself and his family not only bare essentials of life like food, cloting and shelter but also education, essential social needs, medical help, insurance etc. A living wage must be fixed considering general economic conditions of the country. It varies from country to country.
Question 4 – Promotion policies and Career planning
Promotion means an improvement in pay, prestige, position and responsibilities of an employee within his organization. A mere shifting of an employee to a different job which has better working hours, better location and more pleasant working
conditions, does not amount to a promotion. The new job is a promotion for the employee only when it carries increased responsibility and enhanced pay. Issues relating to employee promotion often figure in the negotiations between employers and union leaders. But promotional matters rarely lead to a major confrontation between them.
Purposes of Promotion
The purpose of promotion may be outlined as follows: To motivate employees to higher productivity. To attract and retain the services of qualified and competent people To recognize and reward the efficiency of an employee To increase the effectiveness of the employee and of the organization. To fill up higher vacancies from within the organization. To build loyalty, morale, and a sense of belongingness in the employee. To impress upon others that opportunities are available to them too in the organization, if they perform well. A promotion represents the ultimate accomplishment for some employees 1) 2) 3) 4) 5) 6) 7)
The usual policy is to take merit into consideration. Sometimes length of service, education, training courses completed, previous work history, etc., are factors, which are given weight while deciding on a promotion. Although promotions are made on the basis of ability, hard work, co-operation, merit, honesty, many informal influences are powerful determinants of a promotion policy. For higher posts, persons are picked by the top executives: i. Who think and feel just as he does; ii. Who value loyalty to him and to the organization; and iii. Who have social, political, economic and religious interests similar to his own. Top executives tend to choose those who are carbon copies of themselves.
Seniority versus Merit:
“Seniority” refers to length of service in the company or its various plants, or in its departments, or in a particular position. Under straight plant wise seniority in all jobs, promotions go to the oldest employee, provided that he is fit for the job. Occupational seniority may be within a department, within a division or in the entire plant. Seniority offers certain rights and benefits. These are: a) Some rights are based on competitive seniority among employees. Rights to promotion, transfer lay-off, and recall are such examples.
110 b) Other benefits have nothing to do with one man relative to another, e.g. a man may be entitled to have 15 days casual leave in a year, a pension after thirty years and a certain amount of sick leave after six months service. There is a great controversy on the question of whether promotions should be given on the basis of seniority or ability. Trade unions are of the view that the promotions should be given on the basis of seniority. While managements favour promotions on the basis of merit and ability. If a promotion is given to a qualified man in recognition of his performance or with a view to creating an incentive for him, then it should be based on his ability. If on the other hand, promotion is given to recognize and reward senior employees, then it should be based on the basis of seniority. The most widely used basis for promotion combines both ability and seniority. The best policy would be to ensure that whenever there are two employees of the equal seniority, ability or merit should be the deciding factor in a promotion. However there are two employees of the most equal competency, seniority should be the decisive factor. Such a policy would satisfy the management, which prefers ability, and trade unions, which prefer seniority. CAREER PATH PLANNING If the organization (as well as the individual) does not have a through understanding of the requirements of available jobs and who jobs at succeeding levels relate to one another, effective carrer path planning is impossible. Career Management: organizations focusing on their own maintenance and growth. Ultimately, it is the top managements responsibility to develop and implement a cost effective career-planning program. The program must fir the nature of the business, its competitive employment practices, and the current (a desired) organization structure. This process is complex because organizational career management combines areas that previously have been regarded as individual issues: performance appraisal, development, transfer, and promotion. Before coaching and counseling take place, however it is important to identify characteristic career paths that employee tend to follow. Career paths represent logical and possible sequences of position that caould be held based on analysis of what people actually do in an organization. Career path should: • Represent real progression possibilities, whether lateral or upward, without implied “normal” rates of progress or forced specialization in a technical area. • Be tentative and responsive to changes in job content, work priorities organizational patters, and management needs. • Be flexible, taking into consideration the compensating qualities of a particular employee, managers, subordinates, or others who influence the way that work is performed. • Specify the skills, knowledge and other attributes required to perform effectively at each position among the paths and specify how they can be acquired (if specifications are limitd to educational credentionals, age, and expenses, some capable performance may be excluded from career opportunities.
111 Data derived from HRM research are needed to define career paths in this manner. Behaviorally based analysis that can be expressed in quantitative terms are well suited to this task since they focus directly on what people must do effectively in each job. Cluster of families of jobs requiring similar patters of behavior can then be identified. Once this is done, the next task is to identify career paths within and among the job families and to integrete the overall network of these paths into a single carrer system. This process is shown like this: • • • • STEP 1 Analyse jobs to determine and similarities and differences among them. STEP 2 Group jobs with similar behavioural requirements into job families. STEP 3 Identify career paths within and among job families STEP 4 Integrate the overall network of career paths into a single career system.
Question 5 – What are the components of employee
remuneration and fringe benefits?
Remuneration is the compensation an employee receives in return for his or her contribution to the organization. Remuneration occupies an important place in the life of an employee. His or her standard of living, status in the society, motivation, loyalty, and productivity depend upon the remuneration he or she receives. For the employer too, employee remuneration is significant because of its’ contribution to the cost of production. Besides, many battles (in the form of strikes and lock-outs) are fought between the employer and the employees on issues relating to wages or bonus. For HRM too, employees’ remuneration is a major function. The HR specialist has a difficult task of fixing wages and wage differentials acceptable to employees and their leaders. An average employee in the organized sector is entitles to several benefits –both financial as well as non-financial. To be specific, typical remuneration of an employee compriseswages and salary, incentives, fringe benefits, perquisites, and non-monetary benefits. We will now discuss them in detail:-
1.Wages and Salary
Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective of the number of hours put in by an employee. Wages and salaries are subject to annual to small increments. They differ from employee to employee, and depend upon the nature of job, seniority, and merit.
Also called ‘payments by results’, incentives are paid in addition to wages and salaries. Incentives depend upon productivity, sales, profit, or cost reduction efforts. These are:-I) individual incentive schemes and ii) group incentive programmes. Individual incentives are applicable to specific employee performance. Where a task demands group effort for completion, incentives are paid to the group as a whole. The amount is later divided among group members on an equitable basis.
These include such employee benefits as provident fund, gratuity, medical care, hospitalization accident relief, health and group insurance, canteen, uniform, recreation and the like. Other examples of fringe benefits are (A) Legally required payments i.e old age ,survivors, disability and health insurance, workers compensation fund, unemployment compensation.(B) Contingent and deferred benefits i.e. pension plans, group life insurance, group health insurance, guaranteed annual wage, prepaid legal expenses, military leave and pay, jury duty and bereavement paid leave, maternity leave, severence pay.(C) Payments for time not worked i.e vacations, holiday, voting pay allowances.(D) Other benefits i.e. travel allowances, company car and subsidies, moving
113 expenses, uniform and tool expenses, employee meal allowances, discounts on employer’s goods and services, child care facilities.
These are allowed to executives and include company car, club membership, paid holidays, furnished house, stock option schemes and the like. Perquisites are offered to retain competent executives.
These include challenging job responsibilities, recognition of merit, growth prospects, competent supervision, comfortable working conditions, job sharing and flexitime. The following diagram helps illustrate the above components better:-
Remuneration Indirect Non -Financial
Hourl y and month ly rated
Fringe Benefit Incentiv es,
Individual plans and group plans
Company car Club membership Paid holidays Furnished house Stock option Schemes etc
Challenging job Responsibilities Recognition Growth Prospects Supervision Working Conditions Job sharing etc
P.F Gratuity Environment Medical care Accident relief Health Insurance etc
Question 6 – Devising a Remuneration Plan
Any remuneration plan must be understandable, workable and acceptable. The remuneration scheme must have two components – a base rate and the scope for increasing the base rate. The remuneration plan must be determined keeping in mind the requisites and the components. The persons responsible for determining a remuneration plan are advised to employ sequential steps. (see figure ) as described below.
J o b
D e s c r i p t i o n
J o b
E v a l u a t io n
J o b
ie r a r c h y
P a y
S u r v e y
P r i c i n g
J o b s
I n d i v i d u a l P a y f o r E a c h J o b w i t h i n a R a n g e
Job Description: Job description are crucial in designing pay systems, for, they help to identify important job characteristics. They also help determine, define and weigh compensable factors (factors for which an organization is willing to pay-skill, experience, effort and working environment. Job Evaluation: The next step in pay fixation is to establish relative worth of jobs by employing job evaluation. A number of techniques are available to evaluate jobs. For example, in the point-ranking method of job evaluation, each job is analysed and defined in terms of the compensable factors an organization has agreed to adopt. Points are assigned to each degree of a compensable factor, such as responsibility. Job Hierarchy: The points assigned to all compensable factors are aggregated. The total points scored will help to establish the hierarchy of job worth, starting from the highest point total to the lowest point total. Pay Surveys: Job hierarchy being established, the next step is to establish pay differentials. Before fixing wage and salary differentials, prevailing wage and salary rates in the labour market need to be ascertained. Hence the relevance of pay surveys.
One way of collecting pay details is to conduct a survey. This requires that a sample of key jobs and a sample of companies need to be selected. Questionnaires could be mailed to select companies, requesting them to furnish pay details relating to key jobs. Information can also be collected over the telephone. There are also other sources of collecting pay details. Labour departments of the government, trade unions, and professional bodies, and consulting firms provide copious amount of information about the prevailing wage and salary rates. Job evaluation helps establish job hierarchy. Through surveys, the rate for key jobs in the labour market is also known. The next logical step is to determine pay structures. Pricing Jobs: In pricing jobs, the job evaluation worth is matched with the labour market worth. Two activities need to be performed: (i) establishing the appropriate pay level for each job, and (ii) grouping the different pay levels into pay grades. Pay levels: in order to set a pay level, the points assigned and the survey wage rates are combined through the use of a graph called scatter gram. In the figure below, the vertical axis represent pay rates. The horizontal axis is used for points. The total points and the wage rates for each key job are plotted to obtain the scatter gram.
W a g e s o r S a la r ie s
1 0 9 8 7 6 5 4
1 0 0
K e y
N o n - K e y J o b B J o b A W a g e -t r e n d L i n e
2 0 0
P o in t
3 0 0
V a l u e s
4 0 0
5 0 0
6 0 0
7 0 0
The development of a wage-trend line
116 Thus, each dot in the above figure represents the intersection of the point value and the market-determined wage rate fir a particular key job. For example, key job A is worth 500 points and is paid Rs. 60 per hour. Similarly, key job B earns 700 points and has a prevailing rate of Rs. 70 per hour. The dots that represent key jobs can be used to draw a wage-trend line as, close to as many points as possible, employing a statistical technique called least squares method of regression. This method relates point values to wage rates in the labour market. If the employer wants to lead or lag behind in the market rate by a given percentage, the wagetrend line can be moved up or down by the same percentage. Determining pay grades: A pay grade comprises jobs of approximately equal difficulty or importance. Where point-ranking method of job evaluation is used, the grade consists of jobs falling within a range of points. It is convenient to organize jobs into groups, also called classes, so that there are limited number of wage rates. Where individual jobs are retained, an organization will have hundreds of remuneration rates. The existence of hundreds of separate wage rates would be meaningless as differences between jobs might be just a few rupees. Where grouping of jobs is done, the wage-curve line is to be replaced with a series of ascending dashes, as shown in the figure below. Thus all jobs in the same class will receive the same wage rate. A job valued at 105 points, for example, receives the same pay as a job with 145 points.
A m o u n t, $ 0 0 1 0 0 I 1 0 1 1 5 0 II 1 5 1 2 0 0 III 2 0 1 2 5 0 IV 2 5 1 3 0 0 V 3 0 1 3 5 0 V I 3 5 1 4 0 0 V II
4 0 1 4 5 0 V II
The impact of job classes on the wage-trend line
Question 7 – Traditional Methods of Remuneration
Wages in the widest economic sense mean any economic compensation paid by the employer under some contract to his workers for the services rendered by them. Some of the traditional methods of remuneration are:
1. Time Rate Wage
This is the oldest and the most common method of fixing wages. Under this system, workers are paid according to the work done during a certain period of time, at the rate of so much per hour, per day, per week, per fortnight or per month or any other fixed period of time. The essential point is that the production of a worker is not taken into consideration in fixing the wages; he is paid at the settle rate as soon as the time contracted for is spent. Merits: It is simple, for the amount earned by the worker can be easily calculated. As there is no time limit for the execution of the job, workmen are not in a hurry to finish it and this may mean that they will pay attention to the quality of their work. All workmen employed for a particular kind of job receive the same wages, this prevent ill-will and jealousy among them. Demerits: It does not take into account the fact that men are of different abilities and that if all the persons are paid equally, better workmen will have no incentive to work harder and better. They will therefore be drawn to the level of the least efficient workman. As there is no specific demand on the worker that a piece of work needs to be completed in a given period of time, there is always the possibility of a systematic evasion of work by workmen.
118 As no record of an individual worker’s output is maintained, it becomes difficult for the employer to determine his relative efficiency for purposes of promotion.
2. Piece Rate Wage
Under this system, workers are paid according to the amount of work done or the number of units completed, the rate of each unit being settled in advance, irrespective of the time taken to do the task. This does not mean that a worker can take any time to complete a job because if his performance far exceeds the time, which his employer expects he would take, the overhead charge for each unit of article will increase. This is indirect implication that a worker should not take more than the average time. If he consistently takes more time than the average time, he does it at the risk of losing his job. Under this plan, a worker, working in given conditions and with given machinery, is paid exactly ni proportion to his physical output. He is paid in direct proportion to his output, the actual amount of pay per unit of service being approximately equal to the marginal value of his service in assisting to produce that output. This system is generally adopted in jobs of repetitive nature, where tasks can be readily measured, inspected and counted. Merits: It pays the workman according to his efficiency as reflected in the amount of work turned out by him. It satisfies an industrious and efficient worker for he finds that his efficiency is adequately rewarded. Supervision charges are not so heavy, for workers are likely to be while away their time since they know that their wages are dependent on the amount of work turned out by them. Demerits: In spite of the advantages accruing to the management as well as to the workmen, the system is not particularly favoured by workers. The main reason for this is that the fixation of piece rate by the employer is not done on a scientific basis. As the workers wish to perform their work at breakneck speed, they generally consume more power, overwork the machines, and do not try to avoid the wastage of materials. This results in a high cost of production and lower profits. Trade Unions are often opposed to this system, for it encourages rivalry among workers and endangers their solidarity in labour disputes.
3. Balance or Debt Method
This is a combination of time and piece rates. The worker is guaranteed an hourly or a day-rate with an alternative piece rate. If the earnings of a worker calculated at the piece rate exceed the amount, which he would have earned if paid on time basis, he gets credit for the balance, i.e., the excess piece rate earnings over the time rate earnings. If his piece rate earnings are equal to his time rate earnings, the question of excess payment does not arise. Where piece rate earnings are less than time rate earnings, he is paid on the basis of the time rate; but the excess which he is paid is carried forward as a debt against him to
119 be recovered from any future balance of piece work earnings over time work earnings. This system presupposes the fixation of time and piece rates on a scientific basis. The obvious merit of this system is that an efficient worker has an opportunity to increase his wages. At the same time, workers of ordinary ability, by getting the guaranteed time wage, are given sufficient incentive to attain the same standard, even though the excess paid to them is later deducted from their future credit balance. These are the traditional methods of Remuneration. These methods of remuneration are quantity based more than quality based. This where we see a major difference between Traditional and Modern methods of Remuneration.
Modern Methods of Remuneration
Pay is a motivator that rewards the contribution that employees make to an organization. Many organisations have devised pay methods that link individual or team performance to a pay system that rewards them. Alternatively, pay has been used to recognise such factors as individual development, responsibility, risk-taking and loyalty or experience. The various modern methods of remuneration are:
1. Market Based Pay
This system uses a direct market pricing approach for all of a firm’s jobs. This type of pay structure is feasible if all jobs are benchmark jobs and direct matches can be found in the market. Pay surveys can be used to determine the market prices of the jobs in question. This type of pay system may be used in entrepreneurial start-up firms, research and development units, and sales organizations. Larger firms with more diverse jobs, however, may have to rely on market pricing only for benchmark jobs and use job evaluation in order to price non-benchmark jobs.
2. Competency Based Pay or Skill or Knowledge based Pay
Under such a system, workers are paid not on the basis of the job they currently are doing but, rather, on the basis of the number of jobs they are capable of doing, that is, on the basis of their skills or their depth of knowledge, both of which are termed ‘competencies’. In a world of slimmed down big companies and agile small ones, the last thing any manager wants to hear from an employee is “It’s not my job.” To see how such a system might work in practice, consider Polaroid’s pay system. Competency based Pay at Polaroid Corporation Polaroid initiated a company wide, competency based pay system in April 1990. Polaroid employees are encouraged to form work teams and to redesign their work functions in order to make them more efficient. Although Polaroid’s system includes everyone from the mailroom clerk to the chief executive officer, it has been more effective in the manufacturing part of the business. Polaroid’s manufacturing employees have learned skills in a number of different areas, rather than focusing on a single job. In addition, the work teams have picked up some of the responsibilities of supervisors such as scheduling assignments and overtime. Employees who have succeeded at the new jobs have received more money. “Their pay has gone beyond what was traditionally the top”, said the manager. The focus of Polaroid’s white-collar employees has been on learning new technologies. But here, the process has not worked as smoothly. Part of the problem is that skills, or competencies, are not so easy to measure in managerial jobs. But that will not stop companies from attempting to apply this scheme to their white-collar workforces. “Slowly, but surely we’re becoming a skill-based society where your market value is tied
121 to what you can do and what your skill set is … In this new world, where skills and knowledge are what really count, it doesn’t make sense to treat people as jobholders. It makes sense to treat them as people with specific skills, and to pay them for those skills.”
3. Variable Pay
Variable pay links employees' earnings to how well or badly an organisation, department or unit/section performs. In a successful period the potential for employees to earn more could be substantive. However, where corporate performance is deemed to be poor the workforce has to take more responsibility for this and ultimately be prepared to face a financial penalty. The potential to be rewarded well can make variable pay attractive to employees. Employers are also attracted to the concept because of its ability to promote a common interest for improved performance between staff and management. In the private sector variable pay is often linked to profit sharing and share option schemes. Profit sharing links cash bonuses to organisational performance. Payments are made from a profit sharing pool that is determined by the Board of Directors. Typically individual payments are a fixed percentage of salary although under some schemes eligibility depends on individual performance. Share option schemes give employees the right to buy/ own shares in a company. It is claimed that this can assist recruitment in a competitive market by giving staff a chance to share in the wealth that they have created.
4. Team pay
Team pay is a method of linking the pay of employees to the level of performance that they have achieved in a team. By reinforcing group performance through the recognition of team working, it can harness the collective potential of employees. It is claimed that this should lead to improvement in service delivery areas. Team performance can only be improved by financial reward if the individuals within it are strongly motivated by money. However, an even more crucial factor is the amount of money that is available for this purpose. If employees deem that this amount is derisory it will have a limited impact as a mechanism for raising performance and productivity. Equally important is how team pay is to be awarded. A common method of linking pay to performance is to pay non-recurring bonuses. These can be shared with teams in a variety of ways including even cash sums, scaled or stepped cash sums or most popularly, as a percentage of basic salary.
Question 8 – What are the factors influencing remuneration?
A number of factors influence the remuneration payable to employees. They can be categorized into 1. External and 2. Internal factors.
External Factors: Factors external to an organization are labour, market, cost of
living, labour unions, government legislations, and the economy.
Demand for and supply of labour influence wage and salary fixation. A low wage may be fixed when the supply of labour exceeds the demand for it. A higher wage will have to be paid when the demand exceeds supply, as in the case of skilled labour. A paradoxical situation is prevailing in our country – excessive unemployement is being juxtaposed with shortage of labour. While unskilled labour is available in plenty, there is shortage of technicians, computer specialists and professional managers. Going rate of pay is another labour – related factor influencing employee remuneration. Going rates are those that are paid by different units of an industry in a locality and by comparable units of the same industry located elsewhere. Productivity of labour also influences wage fixation. Productivity can arise due to increased effort of the worker, or as a result of the factors beyond the control of the worker such as improved technology, sophisticated machines and equipment, better management, and the like. Greater effort of the worker is rewarded through piece – rate or other forms of incentive payments. While productivity can be measured in terms of any one of the several factors such as capital equipment, materials, fuel, labour, what matters most is labour productivity. Its is the relationship between the input of labour measured in man – hours and the output of the entire economy, or of a particular industry or plant measured in terms of money or in physical terms.
Cost of living: This criterion matters during periods of rising prices, and its forgotten
when prices are stable of falling. The justification for cost of living as a criterion for wage fixation is that the real wages of workers should not be allowed to be whittled down by price increases. A rise in the cost of living is sought to be compensated by payment of dearness allowance, basic pay to remain undisturbed.
Labour unions: The presence or absence of labour organizations, often determine
the quantum of wages paid to employees. Employers in non – unionized factories enjoy the freedom to fix wages and salaries as they please. Because of large – scale unemployment, these employers hire workers at little or even less then legal minimum wages. They employees of strong unionized companies too, have no freedom in wage and salary fixation. They are forced to yield to the pressure of labour representatives in determining and revising pay scales.
Some of the central laws which have a bearing on employee remuneration are the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; the Payment of Gratuity Act, 1972. The Payment of Wages Act was passed to regulate payment of wages to certain classes of persons employed in the industry. It also seeks to protect workers against irregularities in payment of wages and unauthorized deductions by the employers. The Minimum Wages Act enables the
123 central and the state governments to fix minimum rates of wages payable to employees in sweated industries. The Payment of Bonus Act provides for payment of a specified rate of bonus to employees in certain establishments. The Gratuity Act provides for payment of gratuity to employees after they attain superannuation. In addition to legal enactments there are wage boards, tribunals and fair wages committees, which aim at providing a decent standard of living to workers.
the last external factor that’s has its impact on wage and salary fixation is the state of economy. While it is possible for some organizations to thrive in a recession, there is no question that the economy affects remuneration decisions. Ex, a depressed economy will probably increase the labour supply. This, in turn, should serve to lower the going wage rate. In most cases the cost of living will rise in an expanding economy. Since the cost of living is commonly used as a pay standard, the economy’s health exerts a major impact upon pay decisions. Labour unions, the government, and the society are all less likely to press for pay increases in a depressed economy.
The Internal Environment: Among the internal factors which have an impact
on pay structure are the company’s strategy, job evaluation, performance appraisal, ands the worker himself or herself.
The overall strategy which a company pursues should determine the remuneration to its employees. Where the strategy of the enterprise is to achieve rapid growth, remuneration should be higher than what competitors pay. Where the strategy is to maintain and protect current earnings, because of the declining fortunes of the company, remuneration level needs to be average or even below average.
Job Evaluation and Performance Appraisal:
Job evaluation helps establish satisfactory wage differential among jobs. Performance appraisal helps award pay increases to employees who show improved performance.
The Employee: Several employee – related factors interact to determine his or her
remuneration. These include performance, seniority, experience, potential, and even sheer luck. Performance is always rewarded with a pay increase. Rewarding performance motivates the employee to do better. Managements prefer performance to effect pay increases but unions view seniority as the most objective criterion for pay increases. Experience makes an employee gain valuable insights and should therefore be rewarded. Potential is useless if it is never realized. Yet, organizations do pay some individuals based on their potential. Young managers are paid higher because of their potential to perform even if they are short of experience. Some people have luck to be at the right place at the right time.
Question 9 – Participative management a) Meaning and Definition b) Philosophy Meaning and Definition
International Labour Organization Definition for Participative management “Workers’ participation, may broadly, be taken to cover all terms of association of workers and their representatives with the decision making process, ranging from exchange of information, consultations, decisions and negotiations to more institutional forms such as the presence of workers’ member on management supervisory boards or even management by workers themselves as practiced in Yugoslavia”. Meaning – Participative management involves associating employees at every level in the decision making process. Participation may be at the board level, collective bargaining, job enlargement, job enrichment, suggestion schemes, quality circles, and empowered teams. Participative management is also called Employee involvement.
Philosophy of participation
In an organization there are 3 groups of managerial decisions, which directly affect the workers of that organization. They are social, personnel and economic decisions. Economic decisions include financial aspects, personnel decisions include recruitment and selection and other such aspects, and finally social decisions include welfare, safety health and other issues. But it is a debatable issue as to how much a worker must be allowed to participate and to what extent does he have a say in the decision making process. There are two different ways of looking at it. One is where workers should sit with management as equal members and contribute to the decision making process. And on the other hand the second option would be that the workers could only contribute to the decision-making through their representatives. Thus the scope of participation of the workers is a debatable issue in the organizations today. Given all the above, participative management emphasizes the pertinence of this approach to knowledge-based organizations, and the benefits derived from a management approach and organizational design that emphasizes and supports lateral networks, enhanced flexibility, and respect for worker knowledge and motivation. The workers’ self-esteem, job satisfaction, and cooperative with the management will also improve. The results often are reduced conflict and stress, more commitment to goals, and better acceptance of a change. Employees may also reduce turnover and absences when they begin to feel that working conditions are satisfactory and that they are becoming more successful in their jobs. They identify themselves with the work and this leads to an improved performance. Finally, the act of participation in itself establishes better communication, as people mutually discuss work problems.
The pros and cons of direct participation from different perspectives:
Question 10 – Definition, meaning & objectives of pay systems.
Pay is a key factor affecting relationships at work. The level and distribution of pay and benefits can have a considerable effect on the efficiency of any organisation, and on the morale and productivity of the workforce. It is therefore vital that organisations develop pay systems that are appropriate for them, that provide value for money, and that reward workers fairly for the work they perform. Pay systems are methods of rewarding people for their contribution to the organisation. Ideally, systems should be clear and simple to follow so that workers can easily know how they are affected. Pay systems provide the foundation for financial reward systems
126 Pay systems provide the bases on which an organisation rewards workers for their individual contribution, skill and performance. The hallmarks of success in pay systems are understandability, workability, and acceptability. The broad objective in developing pay systems is to assign a monetary value to each job in the organisation (base rate) and to develop an orderly procedure for increasing the base rate, i.e. based on merit, inflation, or a combination of the two. Pay systems can be an effective method to reward performance excellence and reinforce everyone’s alignment towards company goals. It is a key link between the company’s strategic direction and the people that make it happen. This ensures that high-performance workplace practices become part of your company’s coordinated organizational development. Pay systems fall into two main categories: • Those where pay does not vary in relation to achievements or performance, (basic rate systems), and • Those where pay, or part pay, does vary in relation to results/profits/performance (including the acquisition of skills). There are also systems where pay, and any enhancement, is related to the gaining of extra skills or competencies that can allow a worker to carry out a wider range of work, or work at a higher level, and provide opportunities for greater job satisfaction. Basic rate systems are the easiest to operate, and apply to many workers. The worker receives a fixed rate per hour, week or month. The traditional argument for other systems is that basic rate schemes provide only sufficient motivation to workers to achieve a certain level of performance. If there is a need to improve performance beyond that level some incentive may be needed. Substantial numbers of workers however, have part (though generally not all) of their pay based on incentive, or variable, systems. Their earnings can therefore vary according to their own performance, that of their team or group, or perhaps that of the enterprise as a whole.
Incentive schemes may be short or long-term. Schemes based on individual performance, such as weekly or monthly production bonuses or commission on sales, generally offer a short-term incentive. Longer-term schemes such as profit sharing and share option schemes may not provide as much incentive to individual workers as schemes based on personal performance. They can, however, help to generate in workers a long-term interest in the success of the organisation. It has long been recognized that pay is not the only factor that might produce enhanced
127 performance. As well as the job-related factors mentioned earlier, additional payments, non-contributory pension schemes, and non-cash benefits such as cars, life insurance, and assistance towards child care (e.g. workplace nurseries/crèches) may all play a part. Nevertheless, the prospect of higher pay for increased output/quality often provides an incentive and many schemes are introduced in the clear expectation that performance will thereby be improved. Organisations often use a combination of systems to provide greater flexibility in the pay package to address particular needs. For instance they may have a basic rate for the job, with a top-up increase that is self-financing, and an element for individual performance.
Objectives of pay systems:
• • • • • • • • • To increase productivity /quality and bring about operational excellence Control costs associated with labour and workforce To recruit, retain and motivate suitably qualified workers To align employees personal objectives with the company’s overall mission and goals. To build trust between the workers/employees and the top management. To link pay with company performance so that the company can afford its staff costs even in recessions. Changing the overall attitude & culture of the organisation To simplify existing systems and gaining employee confidence. To reduce ambiguity and conflicts between the management and staff related to pay.
The meaning of Pay Structure
A company's pay structure is its method of administering its pay philosophy. The two leading types of pay structures are the internal equity method, which uses a tightly constructed grid to ensure that each job is compensated according to the jobs above and below it in a hierarchy, and market pricing, where each job in an organization is tied to the prevailing market rate. A company needs job descriptions for positions such as executives, managers, technologists, entry-level people, and the like, so that people know where they fall within the organization. A pay structure helps answer questions about who's who, what each person's role is, and why people are compensated differently. It also helps human resources personnel administer fairly any given pay philosophy. For example, a company might want to pay everyone at market; or pay some people at market and some above it. Opportunities for incentives are also dealt with in the pay structure. For example, people with strategic roles will have opportunities for higher incentives.
128 In most organizations wage and salary rates are still assigned to jobs. The relationships between the pay for jobs involve pay structure decisions. Although organizations often make pay level decisions (how much to pay) and pay structure decisions (pay relationship) at the same time, these decisions and the process by which they are reached require separate treatment. Actually, wage structures represent wage relationships of all kinds. Analysis of wage differentials of any kind (geographic, industry, community, or occupation) deals with wage structure issues. But because our primary focus is on pay decisions in organizations, our concern is with pay differences between jobs. In fact, determining the pay structure of an organization may be usefully described as putting dollar signs on jobs. Decisions on wage relationships among jobs within an organization are largely within the control of its decision makers. Wage level decisions are usually influenced more by forces external to the organization than are wage structure decisions. Some organizations pay for skills possessed by employees rather than for the jobs employees hold. The rationale is usually serious and continual skill shortages experienced by the organization. But most organizations measure employee contributions first in terms of the jobs employees hold. One interesting analysis of organizational compensation decisions is that pay structure decisions are intended to achieve retention of employees through prevention of dissatisfaction and encouragement of employee cooperation. Pay level decisions, in this analysis, are intended to attract employees. To this analysis could be added the statement that wage structure decisions are intended to encourage employees to make a career with the organization and to accept training in preparation for higherlevel jobs.
— pay is between minimum pay and mid-range, is appropriate for employees in the learning and development phase of their job; this range is typically for employees new to a position and whose competencies are not yet fully developed. Entrylevel pay falls in this range.
Mid-range — pay is appropriate for employees who are fully proficient in their job.
This is the target market-based competitive pay for employees who are fully competent, possess the full skill set necessary to perform their job well, meet job expectations, and consistently demonstrate skills needed and fulfil responsibilities and duties.
— pay is appropriate for employees who serve as role models, exhibiting an exceptional skill set and consistently exceeding all job expectations. These employees exemplify the best way of doing their job, go the "extra mile," share their knowledge, and leverage their strengths to benefit the Organisation.
Question 11 – The Meaning of Pay Level
The compensation and benefit level is the average compensation paid to employees. This has two implications. The first is external: how does the organization compare with other organizations? This question is a strategic one of how the organization wishes to position itself in the marketplace. The second implication is internal. The average compensation is a reflection of the total compensation bill of the organization. Labour is one of the
129 claimants on organizational resources. The size of the compensation and benefits bill is a reflection of who gets what within the organization. The decision on compensation levels (how much will the organization pay?) may be the most important pay decision the organization makes. A potential employee's acceptance usually turns on this decision, and a large segment of the employer's costs are determined by it. Compensation decisions are typically micro (individual) or macro (total organization) focused. Although organizations are under no constraint to separate these decisions, a course of study should. In practice, most unsophisticated organizations make the decision on compensation level (how much to pay) and compensation structure (relationships to competitors) at the same time. More administratively advanced organizations realize that individual decisions within a proper administrative structure are more consistent, fair, and cost-effective over time. The compensation level decision may be considered the most important one for individuals. In terms of both employee attraction and cost considerations, most managers often consider it as a primary consideration. Also, it seems essential to recognize that compensation level decisions can never be completely separate from job-mix, hiring standards, personal decisions, and internal labour markets/relationships. For these reasons, compensation level decisions are typically the focus of a manager’s attention. From the organization’s perspective, however, one individual’s compensation decision typically goes unnoticed at the end of the year. Structure decisions (and the level of those structures) are what show up on an income statement. The term compensation level simply means the average compensation paid to workers at some level of analysis, e.g. the job, the department, the employing organization, an industry, or the economy. The importance of the compensation level decision to organizations rests on its influence in getting and perhaps keeping the desired quantity and quality of employees. If the compensation level is too low, the applicant pool may dry up and recruitment efforts may meet with little success. Equally serious, some employees (often the best ones) may leave. At the extreme, the organization may experience difficulties with state and federal regulatory bodies administering minimum compensation laws and prevailing wage laws. Also, the organization may be confronted with concerted organizing drives if no union is present, or pressing compensation demands from existing unions. It is less apparent, but equally real, that a low compensation level may attract only less efficient workers, with the result that labour costs per unit of output rise. If, on the other hand, the compensation level is too high, equally undesirable results are likely. The competitive position of the organization may suffer. Turnover rates may drop below some desirable minimum so that the organization tends toward inflexibility or stagnation. Also, if compensation and salary levels are too high during periods of compensation controls by federal authorities, trouble may be forthcoming from these officials. Frequently, compensation and benefit level decisions are hidden in the type and structure of benefit, fringe, and retirement plans. Changes in compensation levels have the most drastic effects on total payroll. Of course, other compensation decisions have payroll effects, but usually not nearly as great. Substantial sums of money can be involved, and for this reason alone an organization must pay close attention to compensation levels (both competitively and internally).
130 Nor are employees and their representatives any less concerned with compensation level decisions. It is here that the absolute amount of the compensation or salary rate is determined. Also, it is here that unions exert their major effect, and here that member loyalty is built or lost. Finally, consumers and the general public have major interests in compensation level decisions, the consumer because wages are a major element in prices, and the general public because wages and salaries represent the major portion of national income. Also, too frequent or too drastic changes in compensation levels affect the health of our economy.
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