Essentials of HRM OCR Course Material - Compressed

ESSENTIALS OF HRM
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C ON TENT S
CHAPTER NO. CHAPTER NAME PAGE NO.
1 Introduction to Human Resource Management 1
2 Human Resource Planning 21
3 Job Analysis and Job Design 49
4 Recruitment and Selection 81
5 Induction and Orientation 115
6 Competency Mapping and Assessment Centres 133
7 Training and Development 155
8 Human Resource Development 179
9 Career Planning and Succession Planning 199
10 Performance Management 221
11 Compensation and Rewards 249
12 HR Audit, and Accounting 279
13 Case Studies 303

ESSENTIALS OF HRM
Introduction to Human Resource Management: Human Resource Management (HRM)- Meaning

and Definition, Evolution, Objectives and Scope of HRM, Structure of the HRM Department, Func-
tions of HRM, Challenges of HRM, Personnel Management, Differences between HRM & PM, Stra-
tegic Management and HRM
Human Resource Planning: Human Resource Planning- Need, Objectives, Process of Human Re-
source Planning, Techniques of HR Demand Forecasting- Qualitative Methods, Quantitative Meth-
ods, Factors affecting HR Demand Forecasting, Benefits & Challenges of Human Resource Planning
Job Analysis and Job Design: Job Analysis: Definition, Scope ,Process of Job Analysis, Information
Collection for Job Analysis, Methods, Limitations and Effectiveness of Job Analysis, Job Description
- Need, Objectives, Features, Job Specification — Need, Objectives, Features, Job Design- Nature,
Process, Effectiveness of Job Design, Contemporary issues in Job Design, Job enrichment, Job en-
largement, Job rotation
Recruitment and Selection: Recruitment- Meaning & Definition, Purposes & Importance, Factors
governing recruitment, Sources, Methods of Recruitment, Selection, Differences between Recruit-
ment and Selection, Process of Selection, Merits and Demerits of the Interview Method, Steps for ef-
fective interviewing, Selection in India, Selection from a Global perspective, Outsourcing, Outsourc-
ing HR in India
Induction and Orientation: Induction- Need, Process, Merits and Demerits of Induction, Orienta-
tion- Purpose, Types, Process of Orientation Program Development, Effectiveness of Orientation
Program, Problems of Orientation
Competency Mapping and Assessment Centre: Competency Mapping, Developing Competency

Models, Uses of Competency Models, Future Trends in Competency Modelling, Assessment Centres,
History of Assessment Centres, Measurement Tools, Difference between Assessment Centre and De-
velopment Centre
Training and Development: Concept of Training, Training and Education, Need & Importance of
Training in Organizations, Stakeholders in Training, Process of Training, Needs assessment, Inter-
national training issues, How to make training effective, Types of Training, Cross-cultural training,
Team training, Orientation training, Training and Learning organizations, Concept of Development,

Need of Development in Organizations, Difference between training and development, Coaching and
Mentoring, Difference between coaching and mentoring, Process of Coaching and Mentoring, Imple-
mentation of Coaching and Mentoring in a firm
Human Resource Development: HRD- Meaning, Need, Objectives, Scope, Functions, Process of
HRD, Types of HRD Systems, Effectiveness of HRD
Career Planning and Succession Planning: Career Planning, What is career?, Career stages, Ca-
reer choices and preferences, Career Anchors, Career Planning- Objectives, Process, Merits and
Demerits , Succession Planning- Objectives, Process, Merits and Demerits
Performance Management: Performance Management- Nature, Significance , Performance Man-

agement Systems in India, Performance Appraisal- Goals, Process, Methods of Performance Ap-
praisal- Past Oriented & Future Oriented methods, 360 degree Feedback, Multi-rater Assessment,
Feedback systems or the performance appraisal meeting, Benefits of Performance Appraisal, Prob-
lems of Performance Appraisal, International performance appraisal, Potential Appraisal- Purpose,
Techniques
Compensation and Rewards: Compensation- Need, Uses, Components of compensation, Industry

compensation, Executive compensation, Compensation administration, International compensation,
Fringe Benefits and Fringe Benefit Tax (FBT), Reward Management- Need for Rewards, Goals of Re-
ward Management, Intrinsic vs. extrinsic rewards, Reward Systems- Types, Effectiveness of Reward
Systems
HR Audit and Accounting: HR Audit- Need, Objectives, Role, Significance, Process of HR Audit,
Benefits and Limitations of HR Audit, HR Accounting- Need, Objectives, Scope, Methods of HR Ac-
counting, Benefits and Limitations of HR Accounting, HR Information Systems (HRIS)- Need, Ob-
jectives, Scope, Components, Types of HRIS, Application of HRIS in HR Management, Benefits and
Limitations of HRIS

INTRODUCTION TO HUMAN RESOURCE MANAGEMENT
CONTENTS
1.1 Introduction
1.2 Human Resource Management (HRM)
Meaning and Definition
Evolution of HRM
Objectives of HRM
Scope of HRM
1.2.5 Structure of HR Department
Self Assessment Questions
Activity
1.3 Functions of HRM
Activity
1.4 Challenges in HRM
Activity
1.5 Personnel Management
1.5.1 Difference between HRM & PM
Activity
1.6 Strategic Management and HRM
Activity
1.7 International HRM and its Significance
1.8 Summary
1.9 Descriptive Questions
1.10 Answers and Hints
1.11 Suggested Readings & References

2 ESSENTIALS OF HRM
INTRODUCTORY CASELET
HRM AT FEDEX
FedEx Corporation, after its inception in 1997, has been provid-

ing services in four different segments: FedEx Express, FedEx
Ground, FedEx Freight and FedEx Services. FedEx has not just
marked its presence in transportation and communication but
has also been considered as one of the world’s most employee-
friendly companies. The company is regarded as among the 100
‘Best Companies to Work for’ in the US.
Innovative HR practices with open door policy and fair treatment

procedure at FedEx make the company being loved by its em-
ployees and set a benchmark for other companies in the industry.
The HR practices of the company include ‘People-Service-Profit’,
‘Survey-Feedback-Action (SFA)’ program and ‘Leadership Evalu-
ation and Awareness process’ (LEAP). The ‘People-Service-Profit’
policy is based on a philosophy that if employees are well taken
care, they provide effective services in return; thereby making the
business earn more profits. The SFA program at FedEx is a key
employee relations and satisfaction program.
Apart from this, at FedEx, an online survey is carried out once

in a year. The results of the survey are discussed with employees
regarding the satisfaction and dissatisfaction factors outside and
within the organisation. The LEAP program has been designed
to encourage non-managerial employees to move to the manage-
rial level. In this way, the company promotes in-house movement
within the hierarchy.

INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 3
N OT ES
@ LEARNING OBJECTIVES
After studying this chapter, you will be able to:

»— Explain human resource management
Define the functions of HRM
yy
List the challenges of HRM

Explain personnel management
rr
Relate strategic management and HRM
18S INTRODUCTION
“There is no magic in the success of Japanese companies in general and
Sony in particular. The secret of their success is simply the way they
treat their employees.”
-Ako Morita, the founder of Sony Corporation
Human resource can be defined as people who are employed in an

organisation and are responsible for carrying out operations. Every
organisation is made up of people and renders its services from them.
It is the skills, talents, creativity, and drive of human resource that
make it possible for an organisation to be successful. Thus, human
resource has now become an invaluable asset for organisations. It is
of paramount importance for organisations to manage employees well
so that they can better work toward the accomplishment of organisa-
tional goals and objectives.
Human Resource Management (HRM) is a comprehensive process of

acquiring, developing, motivating, and maintaining a pool of efficient
employees. The main aim of HRM is to ensure the right people with
the right skills for the right job position in an organisation. The key
functions of HRM include recruiting people, training them, appraising
their performance, motivating them, ensuring their health and safety,
managing workplace communication, and so on. Effective HRM en-
courages employees to work efficiently towards accomplishment of
organisational goals and objectives.
In the present day scenario, the scope of HRM is not confined to tra-
ditional personnel management and administration. HRM is now
expected to make optimum utilisation of employees’ skills and com-
petencies. Moreover, the broadened scope of HRM involves strategic
direction to attract and retain talent in an organisation. In this chapter,
you will study about the meaning and importance of HRM in detail.

4 ESSENTIALS OF HRM
N OT ES
iP HUMAN RESOURCE MANAGEMENT

To understand the concept of Human Resource Management (HRM),
let us first define the term human resource. Human resource is a
group of individuals that forms the workforce of an organisation. It
is responsible for executing various operations and functions of the
organisation. In today’s competitive business world, an organisation
cannot imagine to survive without efficient employees. Thus, human
resource has become one of the important assets for organisations. To
retain an efficient pool of employees, it is of paramount importance for
an organisation to manage its human resource effectively. Inefficient
management of human resource may create a number of difficulties
for an organisation like employee dissatisfaction, unclear organisa-
Human Resource Management can be defined as a comprehensive

process that involves acquiring, recruiting, and maintaining an effi-
cient pool of employees in an organisation. It focuses on employees
issues related to recruitment, selection, compensation, benefits, train-
ing and development. HRM is beneficial for both an organisation as
well as its employees. For the organisation, HRM aims at maintaining
an effective work culture and environment. On the other hand, HRM
provides a direction to employees to work towards organisational
goals and objectives, which, in turn, motivates employees to perform
efficiently.
1.2.1 MEANING AND DEFINITION
Human resource management can be defined as an organisational

function that aims at developing employees’ skills and attributes so
that they can serve their best to the organisation. Different manage-
ment experts have defined HRM differently. The following are some
popular definitions of HRM:
According to Invancevich and Gluek, HRM is concerned with the most

effective use of people to achieve organisational and individual goals. It
is the way of managing people at work, so that they give their best to the
organisation.
Dessler has defined HRM as The policies and practices involved in

carrying out the ‘people’ or human resource aspects of a management in-
cluding recruiting, training, screening and appraising the performance.
HRM helps employees in meeting their individual expectations,

which, in turn, encourages them to perform efficiently towards or-
ganisational goals and objectives. In this way, HRM enables an or-
ganisation to maximise the contribution of employees towards the
organisation.

N OT ES
1.2.2 EVOLUTION OF HRM

The evolution of HRM is attributed to drastic and continuous changes
in the external business environment over the years. The external
environment comprises legal, economical, technological, global, geo-
graphical, political and social forces. The changes in the external busi-
ness environment along with internal requirements of organisations,
such as increasing workforce size, advent of advanced technologies,
and the need for specialisation, have made HRM an important func-
tion in organisations.
Before the industrial revolution, guilds were the first that initiated
HRM movement in England. These guilds were the associations
formed by carpenters, masons, leather workers and other craftsman.
The initiative was taken to improve the working conditions of guilds
and enhance their bargaining power.
The next phase of the HRM evolution was the onset of the industrial
revolution that introduced the concept of factories. These factories
were the manufacturing plants of organisations that brought unre-
lated people together to create centralised workplaces. It was during
the industrial revolution that the working condition and social be-
haviour of the workforce became HR issues. These HR issues were
addressed differently by different organisations and nations across
the world. At that time, the HR policies of organisations focused on
the standard behaviour of workers. This phase lasted from 1780-1830.
The second phase that brought changes in HRM was the First World
War era from 1914 to 1918. This was the period when women were
recruited in large numbers so that the increased demand of the war
material could be met. This led organisations to revise their HR poli-
cies that best suit women workforce. During this period, HR policies
introduced the concepts of time-keeping and attendance.
The Second World War era (1939-1945) forced organisations to estab-
lish a separate personnel department that was responsible for the per-
formance and efficiency of the workforce. At that time, unions were
also formed and organisations started accepting their involvement to
maintain harmonious relations with them. Later, shift-based working
and training requirements were introduced in the organisations as
one of the activities of the personnel department. This led personnel
officers to play the dual role of line manager and personnel manager.
After the Second World War era, it was the industrial and human re-
lations movement era from 1950 to 1960. During this era, human rela-
tions movement and employee motivation gained momentum. Several
theories of HRM that are used in the present scenario were developed
during this era. For example, Theory X and Theory Y by Douglas Mc-
Gregor and Maslow’s hierarchy of needs theory. The concepts like job
enrichment and job enlargement were also introduced during this
era. These developments further enhanced the importance of person-
nel department in an organisation.

6 ESSENTIALS OF HRM
N OT ES
The HRM era was formalised from 1960-1980 just after the industrial
revolution and human relations movement. In this era, organisations
developed their own policies to manage personnel. These policies were
related to promotions, grievance handling, and disciplinary actions.
Similarly organisations also made policies related to recruitment and
selection, training and development, performance appraisal, wages
and benefits, etc. In the early 1970s, organisations began to look for
skilled workforce and started working towards retaining them. Conse-
quently, the term human resource management was introduced to de-
note the activities related to managing workforce in the organisation.
1.2.3 OBJECTIVES OF HRM
The primary objective of HRM is to ensure the availability of compe-

tent and skilful workforce in an organisation. The objectives of HRM
are broadly categorised into four types, which are listed in Figure1.1:
SR
Mise
NX
@ ___ Organisational Objectives |

qT
) @ Functional Objectives |
@ Personal Objectives
7
Figure 1.1: Objectives of HRM
Let us discuss these objectives in detail.

Q Societal objectives: HRM involves developing programs that meet
the economic, psychological, ethical, and social needs of employ-
ees. For example, equal opportunity programs, compensation and
benefits programs, disability employment programs, community
relations programs, etc. These programs aim at fulfilling the so-
cietal objectives of employees; thereby motivating employees and
retaining productive employees.
Q Organisational objectives: HRM ensures the availability of the
right number of employees at the right place with the right skills.
This helps an organisation in achieving its goals and objectives
within the stipulated time. Apart from this, HRM involves policies
for various work-related facilities and amenities for employees,
such as safe and clean workplace, technical guidance and support,
so that employees can perform effectively. HRM also helps an or-
ganisation in improving employee-employer relations by focusing
on fair compensation, better rewards and benefits, etc.

N OT ES
Q Functional objectives: The functional objective of HRM is to pre-

pare organisational policies in compliance with provisional/terri-
torial and federal laws related to human rights, employment eq-
uity, occupational health and safety, employment standards, and
labour relations. This helps organisations to maintain the quality
of work life and ensure ethical employee behaviour.
Q Personal objectives: The personal objective of HRM includes ac-
quiring, developing, utilising, and retaining efficient employees
in an organisation. This can be possible if employees are able to
accomplish organisational goals along with their individual goals.
For this, employees should be provided with adequate training
and feedback on their performance. This helps employees to iden-
tify the areas of improvements and rectify them.
1.2.4 SCOPE OF HRM
Earlier, HRM was limited to the selection and recruitment of employ-

ees. However, the scope of HRM nowadays has broadened to all ac-
tivities of employees’ working life starting from the time they enter in
the organisation till their exit. The American Society for Training and
Development (ASTD) has identified the scope of HRM in nine broad
areas, which are listed in Figure 1.2:
Human Resource b=... and

Staffing
_—_ ©
Training and isational Compensation and
Development ment Benefits
Employee Union etaboue || | oso : esearch

Relati and Information
Assistan
ons System
——
Figure 1.2: Scope of HRM
Let us discuss the scope of HRM in detail.

Q Human resource planning: Planning is one of the most important
activities involved in HRM. Human resource planning is a system-
atic process of determining the requirement of the workforce in
an organisation. To put simply, human resource planning prepares
human inventory for an organisation beforehand so that organisa-
tional operations can be carried out without any hindrances.

8 ESSENTIALS OF HRM
N OT ES
Q Job design: It involves defining the content and tasks of a partic-

ular job in an organisation. Job design consists of two main activi-
ties, namely job description and job specification. Job description
defines the roles and responsibilities of an employee for the job
assigned to him/her in the organisation. On the other hand, job
specification lists the necessary qualifications, skills, and experi-
ence required by the employee to perform that job.
Q Selection and staffing: It involves the recruitment and selection
of employees for particular job positions. For this, the skills and
competencies of candidates are matched with that of organisa-
tional requirements. Only those candidates are selected who best
match with the requirements of the organisation.
Q Training and development: HRM plays an important role in train-
ing and development of employees. Training and development
involves a set of activities aimed at improving employees’ under-
standing of organisational goals; thereby improving their perfor-
mance. The training and development program of an organisation
generally aims at improving the skills of existing employees and
developing the new skills of fresh hires. This helps employees to
better work towards achieving organisational goals and objectives.
Q Organisational development: HRM policies are aligned with
overall organisational goals and objectives. Therefore, successful
implementation of HRM policies leads to the development of an
organisation as a whole.
Q Compensation and benefits: This is the area where HRM deter-
mines the wages and salaries to be given to employees in exchange
of services rendered by them. Compensation and benefits involve
monetary and non-monetary benefits like leaves, flexible work
hours, retirement plans, higher education support for career de-
velopment, etc.
Q Employee assistance: It involves providing counselling sessions to
employees so that they can make independent personal and pro-
fessional decisions. This leads to better performance of employees.
Q Union-management relations: Labour unions can be defined as
organisations that are formed by the workers from similar fields.
These unions work for the common interests of their members.
They help members in resolving issues related to fairness in wages,
working hours, good working environment, and other benefits.
Healthy relations between labour unions and the management are
important for the smooth functioning of organisations. HRM plays
a vital role in maintaining these relations.
Q Personnel research and information system: In order to under-
stand the expectations, aspirations and behaviour of employees,
an organisation must have a database of all employees. This da-

N OT ES
tabase contains all relevant employee details like their names, ad-
dresses, backgrounds, qualifications, hobbies, etc.
1.2.5 STRUCTURE OF THE HR DEPARTMENT
Different organisations have different structures of their HR depart-

ment depending upon the size of their business and industry type.
Figure 1.3 shows the commonly found structure of the HR department
of an organisation:
HR
Department
as
I |
noe Staffing Organisational Binies and ae |
M. ement Management | Development
Figure 1.3: Structure of HR Department
As shown in Figure 1.3, the HR department is divided into various

sub-divisions. Each sub-division is responsible for performing a cer-
tain number of activities. Let us discuss the activities of each subdivi-
sion as follows:
Q Personnel transaction management: The activities under this
sub-division are:
# Centralised time keeping

¢ Benefits administration
¢ Analysis and tracking of HR metrics
¢ Payroll management
Q Staffing management: The staffing management activities are as
follows:
@ Recruitment
# Selection
¢ Hiring
¢ Transfers and promotions

Q Organisational development: The activities under this sub-divi-
sion are listed as follows:
¢ Talent management
¢ Employee assistance and referral

10 ESSENTIALS OF HRM
N OT ES
@ Employee performance and discipline

@ Equal employment opportunity
Q Ethics and labour: This sub-division is responsible for the follow-
ing activities:
¢ Labour relations
¢ Labour contract administration
@ Ethical conduct
@ Regulatory and statutory requirements
Q Training and development: This sub-division performs the fol-
lowing activities:
# Corporate learning
¢ Mandatory certification training
¢ Leadership conferences
ee SELF ASSESSMENT QUESTIONS

1. can be defined as an organisational function
that aims at developing employees’ skills and attributes so
that they can serve their best to the organisation.
2. Which of the following includes developing programs that
meet the economic, psychological, ethical, and social needs of
employees?
a. Societal Objectives
b. Organisational Objectives
ce. Functional Objectives
d. Personal Objectives
Visit a company in your nearby area and discuss with the HR man-
ager of the company about various HR functions followed there.
ee FUNCTIONS OF HRM
As discussed earlier, HRM ensures the availability of the right skills
for the right job at the right time so that organisational goals can be
met efficiently. HRM is often described as a function that integrates
different departments of the organisation. Apart from this, the follow-
ing are some other functions of HRM:

N OT ES
Q Manpower planning: It involves determining the present and

future requirements of human resource in an organisation. Man-
power planning is done on the basis of the:
¢ Attrition rate
# Sales forecasting
@ Level of productivity required and the actual level of workers
Q Job analysis: It is a process of collecting and examining informa-
tion related to content and the requirements of human require-
ments of jobs. It also involves identifying the skills and competen-
cies required to perform different jobs in an organisation.
Q Compensation management: It involves determining the wages
and salaries of employees at different levels and positions in an
organisation. The wages and salaries of employees are decided
based on the skills required for a job, risk factor involved, etc.
Q Recruitment and selection: The recruitment and selection pro-
cess involves the hiring people to fill vacant job positions in an
organisation. Recruitment involves attracting a pool of applicants
for a particular job position, while selection is a process of choos-
ing the suitable applicant from that pool. Post-selection activities
such as induction, orientation, and training also form the part of
the recruitment and selection process of an organisation.
Q Performance appraisal: It is a process of assessing the job perfor-
mance of employees after a fixed period of time. It is a continuous
process of collecting, analysing, and recording information about
the worth of an employee to the organisation. The main objective
of performance appraisal is to identify the areas of improvement
in employees’ job performance and increase the future potential of
employees.
Q Training and development: Training aims at developing the skills,
knowledge and abilities of both the new recruits and existing em-
ployees so that they can perform effectively. Training sessions can
be carried out for various purposes like orientation of new recruits,
introduction of new technology and processes, communication of
job roles, ete.
Q Employee welfare and motivation: Employee welfare involves
all those activities that are directed towards providing different
facilities and services to employees apart from wages or salaries.
These facilities include better working conditions, industrial har-
mony, insurance coverage against diseases and accidents, career
support, etc. Welfare boosts the morale and motivation level of em-
ployees; thereby contributing their best to the organisation.
Q Employee grievances: Sometimes employees develop a feeling
of dissatisfaction or injustice towards their jobs or management
policies. Employees may also have grievances from their seniors,
colleagues, and subordinates. These grievances may convert into

N OT ES
disputes if not resolved on time. The HRM function of an organisa-

tion focuses on addressing these grievances through face-to-face
interactions and counselling sessions.
& SELF ASSESSMENT QUESTIONS
3. Which function of HRM involves determining the wages and

salaries of employees at different levels and positions in an
organisation?
a. Manpower planning
b. Job analysis
Compensation management
9
Recruitment and selection

2
Using the Internet, find out the functions of HRM of some of the
renowned Indian manufacturing organisations.
1S CHALLENGES IN HRM
The HRM function of an organisation is largely affected by the changes
in the internal and external business environment. These changes
pose a number of challenges for the organisation. Some of these chal-
lenges are explained as follows:
Q Change management: Changing market demands often impel an or-
ganisation to make alteration in its policies. For this, the jobs and re-
sponsibilities of employees are to be changed in accordance with the
changes in the internal and external business environment. As the
business environment is subject to frequent changes, it may become
difficult for HR managers to make rapid changes in HR policies.
Q Employee acquisition and retention: An organisation can only be
successful if it has efficient and skilled employees especially in to-
day’s competitive business world. Similarly, in the market, there is a
pool of efficient people available. However, it is a challenge for an or-
ganisation not to just attract such pool of talent but also retain that.
Q Employee empowerment: It is a process of delegating authority to
employees to make independent decisions in order to meet organ-
isational goals and objectives. In such a case, it is challenging for
the HR department to decide the degree of authority to be given
to employees working at particular job positions. Moreover, if em-
ployees are independent to make decisions, it may give rise to a
number of conflicts, which is another challenge for HR managers.

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Q Workforce diversity: Globalisation has reduced the boundaries

among nations and has brought different people together. Employ-
ees from different nations have different values, social classes, and
mind-set. In such a case, it becomes a challenge for HR managers
to make policies that do not discriminate among employees and
serve them equally.
Q Business expansion: With the advent of globalisation, organisa-
tions are rapidly expanding their business through various modes,
such as mergers and acquisitions and joint ventures, to strengthen
their market position. In these cases, HR managers face challenges
related to training, development of new infrastructure, addressing
employee issues, building of transition teams, etc.
ef SELF ASSESSMENT QUESTIONS

4. What forces HR managers to face challenges related to
training, development of new infrastructure, addressing
employee issues, building of transition teams, etc.?
a. Workforce diversity
b. Business expansion
Employee empowerment
9
Change management
2.
What do you think would be HRM challenges for Facebook after

its recent acquisition of Whatsapp? Explain with the help of some
examples.
iy PERSONNEL MANAGEMENT
Similar to HRM, personnel management (PM) is an organisational
function that focuses on the wellbeing of employees in an organisation.
PM is more related to transactional and administrative aspects of HR
functions. In the words of Edwin B. 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 and societal objectives are
accomplished. The concept of PM was used by organisations before the
concept of HRM came into existence in the mid-1980s.
The two concepts PM and HRM are confused with each other. However,
there are certain differences between the two. HRM is a modern ap-
proach to people management while PM is a traditional one. Let us study
the differences between HRM and PM in detail in the next section.

N OT ES
15.1 DIFFERENCE BETWEEN HRM & PM
The main difference between HRM and PM is that HRM has a broader
scope in an organisation as compared to PM. This is because PM is
confined to employees, their payment, and established employment
laws, while HRM is concerned with the overall development of em-
ployees. Table 1.1 distinguishes between HRM and PM:
TABLE 1.1: DIFFERENCES BETWEEN HRM AND PM

Human Resource Management Personnel Management
HRM is proactive and PM is task-oriented in its approach as
people-oriented in its approach it focuses on staffing, payroll, contrac-
as it lays emphasis on teamwork. tual obligations, or other administrat-
ive tasks.
HRM is a modern approach that tional approach that gives
gives importance to values o norms, customs, and
mission. es practices.
It serves both the personal and It involves formulating and adminis-
professional needs of employees; trating personnel plans and policies.
thereby ensuring their contribu-
tion towards organisational goals
and objectives.
- Ww
It is co wl vating It motivates employees through
employ i rewards, compensation, and other
benefits.
It ensures a flexible work culture It focuses on the administration of
in an organisation. people.
oO employees to be an It assumes that employees can be re-
able asset. placed whenever required.
It promotes direct employee-em- It promotes indirect employee-em-
ployer communication. ployer communication.
‘It involves job design based on It involves job design based on the
teamwork. division of labour.
5. Personnel management is a proactive and people-oriented

approach as it lays emphasis on teamwork. (True/False)
Use the Internet, find out the differences between the functions of
PM and HRM in an organisation of your choice.
ike STRATEGIC MANAGEMENT AND HRM

A strategy can be defined as a set of actions that aims to achieve pre-
defined goals and objectives. A clear and focused strategy is of utmost

N OT ES
importance for the success of an organisation. Without an effective

strategy, organisations may not be able to achieve their goals and ob-
jectives. The human resource department and top management of an
organisation work together to achieve the business strategy.
Strategic human resource management (SHRM) is a framework that

defines an organisation’s direction to achieve its goals and objectives
through human capital. It can also be referred as the integration of
HRM into business strategy and its adaptation at all levels of an or-
ganisation. In the words of Wright and McMahan, “SHRM is the pat-
tern of planned human resource developments and activities intended
to enable an organization for achieving its goals.” In an organisation,
SHRM aims at:
Q Developing high quality workforce by hiring and retaining tal-
ented people
Enabling employee participation for achievement of the objectives
OU
Ensuring special motivational programs for employees

oO
Establishing performance targets for employees

oOo
Measuring the performance related to targets

o
Providing appraisal systems, training and development to

O
employees
Strategic thinking in HRM leads to increased productivity of an or-

ganisation, which further helps in gaining a competitive advantage.
6. A can be defined as a set of actions that aims

to achieve predefined goals and objectives.
Imagine yourself as an entrepreneur of a toys manufacturing or-

ganisation. You are now planning to expand your business. There
will new recruitments for various locations and job profiles. What
would be your HR strategy to carry out a successful expansion?
INTERNATIONAL HRM AND ITS

hi SIGNIFICANCE
International Human Resource Management (IHRM) can be defined
as the set of activities that manage and direct human resources at the
international level. With the advent of advanced technology and the
rising significance of human resources, organisations have ventured
beyond the countries in terms of their performance and prospects.

N OT ES
The progress of globalisation has created immense opportunities for

organisations to operate and expand their business in the internation-
al arena. As a result, HR functions demand an international perspec-
tive.
IHRM involves the process of procuring, allocating, and managing

the human resources effectively in an international business environ-
ment. In other words, IHRM can also be defined as the relationship
between three key HR dimensions namely, employees, HR activities,
and the countries of operation. The working environment of one coun-
try differs from another and thus it creates a big challenge for the
HR individuals. An international business should acquire, encourage,
retain, and utilise the services at both corporate office and at the for-
eign plants. Some of the key MNCs such as Ford Motor, Nike, Nestle
and Walmart have become very successful in utilising their human
resources at the international level.
Today, a large number of organisations conduct their businesses

across national boundaries. Therefore, there is an increasing need of
managing global human resources. It has become a challenge to pro-
cure, train, and retain employees for global organisations.
According to Pigors and Myers, International or domestic human re-

source management is a method of developing the potentialities of em-
ployees, so that they get maximum out of their work and give best efforts
to the business organisation.
In the words of Edwin B. Flippo, International or domestic HRM in-

volves the planning, organising, directing and controlling of the pro-
curement, development, compensation, integration and maintenance of
people for the purpose of contributing to organisational, individual and
social goals.
According to PB V. Morgan, International HRM is the result of interplay

among the three dimensions-human resource activities, types of employ-
ees, and countries of operation.
IHRM plays an important role in determining the success or failure

of an organisation in the international arena. Some aspects that make
THRM such a significant organisational practice are as follows:
Q Reduces the risks of international human resources such as cul-
tural risks and regional disparities
Q Manages diversified human capital in terms of acquisition and re-
tention
Q Focuses more on the level of employee selection for generating
quality output in the global market
Q Analyses the three key sources of IHRM namely Host Country
Nationals (HCNs), Parent Country Nationals (PCNS), and Third
Country Nationals (TCNs)

N OT ES
Q Utilises the international labour relations effectively

Q Ensures the organisation’s responsiveness towards the local needs
and requirements of the market.
Q Understands the cultural differences among different countries in
which the organisation operates.
Q Provides training and development to its employees with special
emphasis on cross cultural training and language training.
Q Devises appropriate strategies to attract and retain the expatriates
through competitive compensation packages.
Q Establishes a proper performance management system to moni-
tor the performance of the international units. This it helps these
international units into achieving long-term sustainability and im-
provement against a set of pre-established targets.
Q Establishes a system for maintaining harmonious relations among
the management and employees as well as with the government
and organisation in the international subsidiary.
Q Deals with the external environment such as political, financial,
geographic, and cultural factors
Q Implements and develops innovative international strategies for
the global market and resources
Q Maintains commitment to the employees in international career
path
Q Builds a global employee and industrial relations
Q Determines the critical success factors for future international
managers
Q Assists employees and their families to resettle comfortably back
into their home countries.
r7 SELF ASSESSMENT QUESTIONS

7. The country where the subsidiary is located is called the host
country. (True/False)
Select any MNC of your choice. Using the Internet, collect data on
various types of employees hired by that MNC. Make a presenta-
tion based on your findings.
iE SUMMARY
Q HRM isa process of attaining, developing, and retaining employ-
ees in an organisation.

N OT ES
Q HRM aims at developing skills and knowledge of employees along

with maintaining an effective work culture and environment.
Q The evolution of HRM can be dated back to the industrial revolu-
tion. Since then HRM has evolved in a number of ways.
Q Though the primary objective of HRM is to ensure the availabil-
ity of the right skills at the right place, but they are broadly cate-
gorised into four types, namely societal objectives, organisational
objectives, functional objectives, and personal objectives.
Q The HRM has a broader scope in the working life of an employee.
As per the American Society for Training and Development
(ASTD), the scope of HRM can be classified into nine different ar-
eas namely human resource planning, job design, selection and
staffing training and development, organisational development,
compensation and benefits, employee assistance, union-labour re-
lations, personnel research and information system.
Q An organisation is affected by various internal and external busi-
ness factors. These factors pose various challenges for HRM in an
organisation in terms of change management, employee acquisition
and retention, employee empowerment, and workforce diversity.
Q Personnel management is a traditional approach to people man-
agement while HRM is a new approach to people management.
Q SHRM can be defined as a framework prepared by an organisa-
tion to follow a particular direction in order to accomplish organi-
sational goals and objectives.
KEY WORDS
Q Bargaining power: An ability of a person, group, or organisa-

tion to make negotiations in order to achieve favourable deals
for themselves.
Q Compensation: Monetary and non-monetary benefits given to
employees in exchange of services provided by them.
Q Human resource management: A process of selecting, devel-
oping, motivating and maintaining human resource of an or-
ganisation.
Q Industrial revolution: An era between the 18th to 19th centu-
ries that brought a transitional shift in the manufacturing pro-
cesses of organisations.
Q Shift-based working: A working culture of organisations that
are operational for 24 hours a day. In such organisations, em-
ployees work in the shifts of 8 to 9 hours.

NOTES
DESCRIPTIVE QUESTIONS
1. What are the various objectives of HRM?
2. Explain different functions of HRM?
3. What are different challenges faced in HRM?
BU ANSWERS AND HINTS
ANSWERS FOR SELF ASSESSMENT QUESTIONS
Human Resource 1. Human resource manageme:

Management a
a. Societal Objectives
bo
Functions of HRM c. Compensation management,

> ie
rie
Challenges in HRM b. Business expansion
°o Ra
Personnel Management
Strategic Management and Strategy

HRM
Sucre
International HRM and its
aay
~
HINTS FOR DESCRIPTIVE QUESTIONS
1. The objectives of HRM are broadly categorised into four types,

namely societal objectives, organisational objectives, functional
objectives, and personal objectives. Refer to Section 1.2 Human
Resource Management (HRM).
2. The main function of HRM is to ensure the right skills at the right
place in an organisation. Refer to Section 1.3 Functions of HRM.
3. HRM functions are largely affected by the internal and
external business environment, which pose various challenges
for the HRM practices of organisations. Refer to Section
1.4 Challenges in HRM.
1885 SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Aswathappa, K. (2005). Human resource and personnel manage-
ment (1st ed.). New Delhi: Tata McGraw-Hill.
Q Durai, P (2010). Human resource management (1st ed.). Chennai:
Pearson.

N OT ES
Q Pande, S., & Basak, S. (2012). Human resource management (1st

ed.). New Delhi: Dorling Kindersley.
Q Randhawa, G. (2007). Human resource management (1st ed.). New
Delhi: Atlantic Publishers & Distributors.
E-REFERENCES
Q Heathfield, S. (2014). What Is Shift Work?. [online] About.com Hu-

man Resources. Available at: http://humanresources.about.com/
od/glossarys/g/shift_work.htm [Accessed 1 Jul. 2014].
Q Hrvs-rhsbe.ca, (2014). Compensation & Benefits | HR Toolkit | hr-
council.ca. [online] Available at: http://www.hrvs-rhsbce.ca/hr-tool-
kit/compensation-overview.cfm [Accessed 1 Jul. 2014].
Q Managementhelp.org, (2014). All About Human Resources and Tal-
ent Management. [online] Available at: http://managementhelp.
org/humanresources/ [Accessed 1 Jul. 2014].
Q = Onlinelibrary.wiley.com, (2014). Human Resource Management
- Wiley Online Library. [online] Available at: http://onlinelibrary.
wiley.com/journal/10.1002/(ISSN)1099-050X [Accessed 1 Jul. 2014].
Q Slideshare.net, (2014). Compensation and benefits. [online]
Available at: _ http://www.slideshare.net/hrsangam/compensa-
tion-and-benefits-7873902 [Accessed 1 Jul. 2014].

HUMAN RESOURCE PLANNING
CONTENTS
1 Introduction
2 Human Resource Planning
2.2.1 Need for Human Resource Planning
2.2.2 Objectives of Human Resource Planning
Activity
2.3 Process of Human Resource Planning
Activity
2.4 Techniques of HR Demand Forecasting
2.4.1 Qualitative Methods
2.4.2 Quantitative Methods
2.4.3 Factors Affecting HR Demand Forecasting
Activity
2.5 Methods of HR Supply Forecasting
Analysis of Current Management and Skill Inventories
2.5.2 Analysis of Internal Supply
2.5.3 Identifying External Sources of Supply
Activity
2.6 HR Action Plans after Demand/Supply Analysis
2.6.1 Strategies to Manage Shortage or Deficit of Manpower
2.6.2 Strategies to Manage Surplus Manpower
Activity
2.7 Benefits of Human Resource Planning
Activity

CONTENTS
2.8 Challenges in Human Resource Planning

Activity
Summary
Lo
~—
Descriptive Questions
Oo
&
bw
Answers and Hints

—
to _
tw
Suggested Readings & References

_~

HUMAN RESOURCE PLANNING 23
HUMAN RESOURCE PLANNING RECOMMENDATIONS

FOR ROYAL HANDLOOM (RHL)
Royal Handloom (RHL) is a weaving factory, having 10 handlooms

all over the country. It specialises in manufacturing and distribu-
tion of sarees, handkerchiefs, scarfs, ete. However, being such a
large organisation, it does not have a proper organisation struc-
ture. The owner of the organisation manages all organisational
levels be it top level, middle level or lower level. He acts as a top-
level manager, functional manager, and a lower-level executive.
There have been recommendations from experts that RHL should

maintain a systematic organisational structure. This shoul
done by delegating authority and responsibilities to people a
smoothly. Experts have also suggested that the

should make a plan of putting the right people into t
at the right level.

N OT ES
© LEARNING OBJECTIVES

Explain the concept of human resource planning
yy ry
Discuss the process of human resource planning
rr
Identify techniques of HR demand forecasting
Explain the benefits of human resource planning
Elaborate on the challenges of human resource planning
ram INTRODUCTION
Human Resource Planning (HRP) is a systematic process of determin-
ing an organisation’s future workforce requirements. These require-
ments include the number of people needed to perform a particular
job, the skills and abilities of potential employees, etc. The main objec-
tives of HRP are to fill vacant job positions, meet organisational goals
in the given time, and achieve the desired level of performance. More-
over, HRP enables an organisation to ensure that the right people with
the right skills for placed at the right job positions.
HR demand forecasting is the main component of HRP without which

the whole planning process may lead to a failure. HR demand fore-
casting is a process of predicting the right size of manpower in an or-
ganisation. Thus, it prevents the situations of manpower surplus and
shortage.
In addition, demand forecasting enables an organisation to cope with

changes in the level of competition, technology, government regula-
tions, etc. Such changes lead to changes in job content, skills, and de-
mand for human resource. In this chapter, you will study about HRP
its need, and objectives in detail.
(Was HUMAN RESOURCE PLANNING

The term planning can be defined as a process of finding out a course
of action for the accomplishment of organisational goals and objec-
tives. Planning is the first and foremost function of any organisation
without which all organisational activities would become meaning-
less. The process of planning starts with taking into consideration the
current operations of an organisation and finding out the areas of im-
provement for the upcoming year.
In a nutshell, planning can be defined as a process wherein an or-

ganisation envisions the results that it wants to achieve in the future
and identifies the way to achieve it. In the context of human resource,

N OT ES
planning becomes extremely essential. In the previous chapter, you

have studied that an organisation cannot imagine being successful
without efficient human resource. Therefore, it is important for an
organisation to plan its human resource in accordance with organisa-
HRP can be defined as a process of estimating the future human re-

source requirements and ensuring that the organisation’s objectives
are met by having the right people in the right job at the right time.
HRP has been defined differently by different management experts.
The following are some popular definitions of HRP:
According to James W. Walker, Human Resource Planning is the

process of analysing an organisation’s human resource requirements
under changing conditions and developing activities necessary to
satisfy these needs.
According to Beardwell and Claydon, Human Resource Planning is

the process for identifying an organisation’s current and future human
resource requirements, developing and implementing plans to meet these
requirements and monitoring their overall effectiveness.
D. N. Bulla and P. M. Scott has defined HRP as the process for ensur-
ing that the human resource requirements of an organisation are identi-
fied and plans are made for satisfying these requirements.
Dale S. Beach has defined HRP as a process of determining and as-

suming that the organisation will have an adequate number of qualified
persons available at the proper times, performing jobs which meets the
needs of the enterprise and which provide satisfaction for the individu-
als’ involved.
HRP is also called manpower planning as it involves putting the right

people at the right job at the right time so that organisational goals
and objectives can be met within the stipulated time. In an organisa-
tion, HRP enables managers to make efficient use of existing human
resource and acquire new talent; thereby achieving high levels of pro-
ductivity and winning over competitors. Let us now understand the
need for HRP in an organisation in the next section.
2.2.1 NEED FOR HUMAN RESOURCE PLANNING
HRP is an essential part of every organisation to ensure the availabil-

ity of human resource for carrying out different organisational activ-
ities. HRP is needed to address the problems of labour surplus and
shortage in organisations. We can take the incidence of many pub-
lic sector enterprises, like Hindustan Fertilizer Corporation Limited,
Eastern Coalfields Limited, Indian Telephone Industries Limited, etc.
These public enterprises employed excess people more than its re-

N OT ES
quirement. According to government statistics, during the year 1992-

1993, Hindustan Fertilizer Corporation Limited had 3988 surplus
staff, Eastern Coalfields Limited had 7800 surplus staff while Indian
Telephone Industries Limited had 4803 surplus staff. This problem
was due to lack of HRP in these public sector enterprises during that
period. These enterprises were overstaffed to the extent that closing
down of operations was also considered as a possible option. In such
a case, HRP could have addressed the issues of labour surplus by de-
termining the right number of staff for a particular job. HRP helps to
have a specific employee retrenchment plan, Voluntary Retirement
Schemes (VRS), etc.
Apart from this, the following points explain the need for HRP in or-
ganisations:
It is often observed that most organisations fail to fill up vacant job po-
sitions with required skills and competencies. This hampers the per-
formance of organisations. Effective HRP process helps organisations
to identify vacant positions and the skills and expertise required and
to attract people to apply for those positions. For example, according to
Public Enterprises Selection Board (PS.E.B.), there is a need to select
professional managers for Level 1 and Level 2 posts at various public
enterprises. The Government of India has also felt the requirement of
professional managers in major public sector enterprises like Bharat
Heavy Electricals Limited (BHEL), Steel Authority of India Limited
(SAIL), etc. HRP is needed to identify the skills and competencies of
these managers who might be selected either internally within a pub-
lic sector enterprise or externally from other public enterprises. The
external selection of managers takes place if there is no suitable can-
didate within a particular public enterprise.
Organisations operate in today’s dynamic business environment.

Changes can take place in the internal or external environment of or-
ganisations. The changes in the internal environment can be related
to size of business, business functions and operations, etc. On the
other, external changes can be related to government policies, labour
laws, economic conditions, level of competition, etc. It is important
for organisations to keep fast pace with these changes in order to stay
competitive. For this, organisations need skilled employees who can
effectively adapt to these changes. Obtaining these skilled employees
is possible through HRP
Sometimes organisations need to make alterations in their organisa-

tional structure in accordance with the changes in the external en-
vironment. These changes in the structure of organisations change
human resource requirements in organisations. HRP helps organisa-
tions to meet ever-changing manpower requirements.

N OT ES
Most organisations face high lead times between operations, which

create unnecessary delays in product delivery. These lead times can
be reduced if organisations have a competent workforce in place. Hir-
ing efficient workplace can be possible through effective HRP
2.2.2 OBJECTIVES OF HUMAN RESOURCE PLANNING
The main objective of HRP is to meet human resource require-

ments in an organisation so that organisational activities can be
carried out smoothly. Apart from this, the following are some other
objectives of HRP:
Q To make optimum utilisation of available human resource.
Q To monitor the progress of all employees in order to ensure that
organisational goals are achieved.
Q To enforce control measures whenever needed.
Q To ensure that the entry and exit of people in the organisation are
continually monitored and any problem occurring at any stage of
the process is immediately sorted.
Q To avoid conflicts of interests among employees.
The process of starts with taking into consideration

the current operations of an organisation and finding out the
areas of improvement for the upcoming year.
2. What is HRP also known as?
Collect information on the HRP objectives of two organisations us-

ing the Internet. Analyse the differences between the two.
PROCESS OF HUMAN RESOURCE

a3 PLANNING
HRP is an integrated, systematic process where human resource ob-
jectives are aligned with organisational goals and objectives. The HRP
process attempts to assess manpower requirements to perform differ-
ent organisational activities for a future period of time. The process
differs across organisations depending on their requirements, budget,
size of the business, etc. However, there are certain steps in the HRP

N OT ES
process that are common in every organisation. These steps are listed
in Figure 2.1:
Reviewing business
goals
Figure 2.1: Process of HRP
Let us now discuss these steps in detail.

1. Reviewing business goals: Before planning human resource
requirements, HR personnel study the organisational goals and
objectives. Based on the study, the personnel prepare a list of HR
activities and analyse jobs to be performed so that these goals
and objectives can be met within the stipulated time.
2. Scanning the environment: In this step, the HR personnel
determine the number of people required to meet organisational
goals and objectives. For this, the personnel identify the
gap between the available human resource and the actual
requirement of human resource (generally called HR demand
forecasting and supply). In order to determine human resource
requirements, the HR personnel consider various factors, such
as knowledge base and skills required, number of vacancies, and
eligibility.
To forecast HR demand and supply, the HR personnel need to
scan the internal and external business environments, which are
explained as follows:
¢ Internal scanning: It involves identifying the strengths and
weaknesses of the organisation. Changes in leadership struc-
ture, changes in organisational policies, changes in organisa-
tional structure, any operational changes, etc. are some of the

N OT ES
internal factors that affect HR demand and supply to a large

extent.
¢ External scanning: It is all about opportunities and threats

in the market. Some of the external factors that influence the
estimation of manpower demand and supply include the lev-
el of competition, government policies, talent available in a
particular geographical region, technological trends, and so
on.
Scanning the environment also involves HR supply forecasting,
which helps in determining the availability of human resource
both inside and outside an organisation. This is done to meet
HR demand. There are two sources of supply in an organisation,
which are as follows:
¢ Internal supply: It involves the existing workforce of an or-
ganisation. Promotions, transfers, increase in pay, training
and development programs, recruitment policies, ete. are
the factors that influence internal supply. Information from
succession planning and employee replacement charts help
in forecasting internal supply by projecting future person-
nel changes and identifying alternative human resources for
each department in an organisation.
¢ External supply: In order to meet HR demand, organisa-
tions sometimes need to recruit external employees. Exter-
nal human resource supply is forecasted by HR personnel
on the basis of labour market analysis, economic patterns,
industry trends, etc. Government statistical data on labour
force population, available from state and regional econom-
ic development offices, are also used to forecast external HR
supply.
It is of paramount importance for the HR personnel to consider
all internal and external business factors before planning human
resource requirements. Without doing so, the whole HRP process
of an organisation may lead to failure.
3. Balancing manpower demand and supply: This is one of the
most important steps of the HRP process. This step involves
bringing manpower demand and supply at an equilibrium
position. This is done to solve situations, such as human resource
shortage and surplus. In case of shortage, the HR personnel take
various actions, such as new hiring, promotions, overtime, and
training to improve quality. On the other hand, in the case of
overstaffing or manpower surplus, the personnel generally take
measures like layoffs, termination, voluntary retirement, etc.
4. Implementing and monitoring the HR plan: After equalising
demand and supply, the HR plan is to be taken into action. The
HR activities required for the execution of the HR plan include

N OT ES
recruitment, selection, placement, training and development,

etc. After the plan is executed well, the HR personnel need to
evaluate whether the HR plan is meeting organisational goals
and objectives. In case of deviations, necessary corrective actions
are taken by the HR personnel. Finally, all results of HRP are
recorded for future references.
3. The HRP process attempts to assess requirements

to perform different organisational activities for a future
period of time.
4, Which of the following is the second step in the HRP process?
a . Reviewing business goals
b. Scanning the environment
Balancing manpower demand and supply
9
Implementing and monitoring the HR plan

2
Collect information on the HRP process of a manufacturing com-

pany. Compile a report explaining the steps in the process in detail.
oy TECHNIQUES OF HR DEMAND
= FORECASTING
Human resource demand forecasting is an essential component of
HRP This is because the HRP process starts with forecasting human
resource requirements. HR demand forecasting is a process of antic-
ipating the number of people and skills required to perform different
jobs in an organisation with an aim to meet organisational goals and
objectives.
In an organisation, the demand for people is influenced by various fac-

tors, such as the type of organisational structure, organisational bud-
get, nature of business, technology used, effective of business strategy,
etc. For example, in globally dispersed companies like GE, Siemens,
Philips, etc., there is demand for highly skilled and knowledgeable
personnel as compared to small and medium-level companies. These
companies have to adopt the local culture of different countries and
hire local employees. In such cases, the demand for human resource
is influenced by the skills and abilities of local people. A detailed ex-
planation of the factors influencing HR demand forecasting is given
later in the chapter.

N OT ES
Organisations use different techniques for forecasting HR require-

ments depending on their needs. However, HR demand forecasting
techniques are broadly categorised into two parts, which are shown
in Figure 2.2:
Quantitative
Methods
Figure 2.2: Techniques of HR Demand Foreeasting
Let us now study these techniques in detail in the next sections.
2.4.1 QUALITATIVE METHODS
Qualitative methods are less statistical in nature as compared to quan-

titative methods. These methods consider the skills, potential levels,
and interests of all employees so as to meet the future HR needs of
an organisation. Figure 2.3 shows various qualitative methods of HR
demand forecasting:
Figure 2.3: Qualitative Methods of Demand Forecasting
Let us now study these qualitative methods in detail.

Q Expert forecasts: Sometimes HR personnel seek inputs from
professional HR experts regarding future staffing requirements
of their organisations. These experts forecast an organisation's
human resource requirements, skills required to meet organi-

N OT ES
sational goals and objectives, experience required, etc. Here, it

should be noted that these HR experts can be internal or external
to an organisation.
Q Management forecasts: This is an internal HR demand forecast-
ing method. In organisations, managers from different depart-
ments along with other knowledgeable people are responsible for
determining human resource requirements. They decide the num-
ber of people to be hired, skills required, etc.
Q Delphi technique: This is one of the most effective methods of
forecasting human resource demand. In this method, a group of
pre-selected experts is responsible for forecasting demand. These
experts provide their judgement on human resource requirements.
The responses given by these experts are summarised and a re-
port is prepared. This process keeps continuing until all experts
agree on the estimated human resource requirements. The Del-
phi technique attempts to reduce subjectivity in forecasting and
is suitable for organisations where frequent technological changes
largely affect staffing needs.
2.4.22 QUANTITATIVE METHODS
Quantitative methods give detailed and accurate HR demand fore-

casts as compared to qualitative methods. This is because quantitative
methods are based on various statistical and mathematical tools.The
following are the commonly used quantitative methods:
Q Trend analysis method: In this method, it is assumed that past
trends of employee movement in an organisation are steady and
suggest future trends of employee movement. This analysis is
based on information related to employee trends, such as trends
of hiring, retirements, productivity, turnover, etc. HR personnel
determine the future trends by analysing the past trends. For ex-
ample, as per the past employee records of an organisation, 10
per cent of its employees retire, 5 per cent of its employees resign,
and 5 per cent of its employees get sacked every year. Using these
trends, the HR personnel can forecast future HR demands of em-
ployees.Let us now study the steps involved in forecasting demand
using the trend analysis method as follows:
1. Firstly, a suitable business factor is selected based on which
HR needs are assessed. An example of a business factor can
be sales or value addition. Based on the sales target, an or-
ganisation determines its HR requirements.
2. Ahistorical trend of the business factor is plotted with respect
to the number of employees. From this, a labour productivity
ratio can be established, i.e., sales per employee, which can
be estimated by determining the ratio of total number of em-
ployees to total sales.

N OT ES
3. In this step, the current labour productivity ratio is compared

with the ratios of the last five years and the differences or
changes are noted.
4. In this step, HR demand is estimated by dividing total sales
(business factor) by the labour productivity ratio.
5. In the final step, HR demand is projected for the target year.
Q Ratio trend analysis method: This is a method used to forecast
HR demand based on the ratio of production level and the avail-
ability of workers. It takes into consideration previous ratios to
forecast future ratios. Let us take an example of this method.
The estimated production of an organisation the last year was
180000 units carried out by 600 employees. If the estimated pro-
duction the next year is 210000 units, calculate the estimated num-
ber of employees needed in the organisation.
Solution: Ratio of production to number of employees = 600:180000,
i.e. 1:300
This depicts that on an average, 1 employee is needed to produce
300 units per year.
Let us assume the estimated number of employees needed in the
organisation to be ‘d’
Therefore, based on the ratio-trend of 1:300, ‘d’ can be
calculated as:
1:300 = d:210000
i.e. d = 700
Hence, the estimated number of employees needed in the
organisation is 700.
Q Work study method: This method, also called work-load analysis,
is used to estimate total production and predict activities for a cer-
tain period in the future. This method is used when the estimated
workload is easily measurable. This method involves considering
the capability of human resource and converting the workload
into number of man hours required to produce each unit. There-
fore, this method helps to forecast HR demand through estimated
total production and each employee’s contribution in producing
each unit item.
Let us understand this method with the help of an example.
The estimated production of an organisation is 400000 units and the

standard manhours needed to produce each unit are 2 hours. Based
on the previous records, it is found that the working capacity of each
employee in man hours is 2000 hours per year. Calculate the estimated
number of employees needed.

N OT ES
Solution: Estimated total annual production = 400000 units
Standard man hours needed to produce each unit = 2 hours
Estimated man hours needed to meet estimated yearly production =

Estimated total annual production x Standard man hours needed to
produce each unit, i.e. 400000 x 2 = 800000 hrs
Work ability or contribution per employee in terms of man hour =

2000 hours
Estimated no. of workers needed

_ Estimated man hours needed to meet estimated yearly production
Work ability or contribution per employee in terms of man hour
_ 800000
2000
= 400
Hence, the estimated number of employees needed is 400.
Additionally, employee turnover rate, absenteeism, strikes, resigna-

tions, machinery breakdowns, power outages, etc. must also be con-
sidered while forecasting HR demand.
Apart from work study method, ratio trend analysis method and trend
analysis, modelling, multiple predictive techniques, optimisation
models, budget and planning analysis are some of the other useful
statistical methods used for forecasting HR requirements.
2.4.3 FACTORS AFFECTING HR DEMAND FORECASTING
As discussed earlier, HR demand forecasting is influenced by various

factors. Some of these factors are listed in Figure 2.4:
Factors Affecting
HR Demand
Forecasting
External Business Internal Business

Environment Environment
Figure 2.4: Factors Influencing HR Demand Forecasting

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These factors are explained in detail as follows:

Q External business environment: The external business environ-
ment of an organisation comprises various economic, political, le-
gal, social, and technical forces. These forces largely affect the HR
demand forecasts of organisations. For example, rapid technolog-
ical changes raise demand for highly skilled employees. In such
cases, demand for HR forecasted by organisations in the past may
have no relevance. Similarly, changes in government policies and
economic fluctuations also affect the demand forecasting process
of organisations. For instance, during recession, there is less de-
mand for human resource.
As organisations operate in an ever-changing environment, HR

forecasts of organisations should be flexible so that changes in the
environment can be easily adapted.
Q Internal business environment: It comprises the internal

strengths and weaknesses of organisations. The changes in the in-
ternal business environment of organisations largely influence HR
demand forecasting. For example, Fortis Healthcare has recently
performed high-level expert HRP to forecast its future staffing
needs by analysing changes in operations, technology, administra-
tive practices, and financial level.
In addition, demand forecasting is also affected by employee attrition

and absenteeism due to various reasons, such as illness, family issues,
retirements, and terminations. These factors are common in most or-
ganisations and influence demand forecasts of organisations. Apart
from this, future action plans of organisations also affect HR require-
ments. These changes are usually measured through surveys, market
analysis, technological parameters, ete.
5. HR demand forecasting is a process of anticipating the

number of people and skills required to perform different jobs
in an organisation with an aim to meet organisational goals
and objectives. (True/False)
6. Qualitative methods are less in nature as compared

to quantitative methods.
7. Which of the following techniques help to reduce subjectivity
in HR demand forecasting?
a. Delphi technique
b. Expert forecasts
c. Management forecasts
8. HR personnel determine the trends by analysing

the past trends.

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Collect information on HR demand forecasting techniques used by

two IT organisations. Compare the techniques used by them.
yee METHODS OF HR SUPPLY FORECASTING

HR supply forecasting is the process of assessing the availability of hu-
man resource for a particular job position. Supply forecasting is used
to determine whether the organisation will be able to procure the re-
quired number of personnel. In other words, it analyses the number
of people that could be available from within and outside the organi-
sation.
HR supply forecasting is counted as the next logical step, performed

after HR demand forecasting. HR demand forecast analysis provides
the ways of estimating the number and kind of required employees.
HR supply forecast analysis helps in analysing whether the organisa-
tion would be able to procure the desired number and types of person-
nel and the sources of such manpower procurement.
Supply forecasting helps an organisation in:

Q identifying the number of personnel and position expected to be
available in future
Q. defining possible staff mixes that will be in the future
Q examining current staffing level in different parts of the organisa-
tion
Q balancing the requirements of human resources, where and when
needed
Q controlling likely future compliance with legal requirements of job
reservations
The HR supply analysis involves assessing:

Q current human resources
Q internal sources of supply
Q > external sources of supply
Let us now discuss about these sources of HR supply in detail.
2.5.1 ANALYSIS OF CURRENT MANAGEMENT AND SKILL

INVENTORIES
Analysis of current management is greatly facilitated by HR audits,

which help in summarising each employee’s skills and capabilities.
Audits of non-managers and managers are respectively called skill
inventories and management inventories. Overall, these HR audits

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create an inventory catalogue, depicting each employee’s skills and

abilities. This helps HR planners to have a detailed understanding of
the capabilities that could be found within the organisation.
Skill inventories consist of information about non-managers within an

organisation. As the inventory includes information about each em-
ployee’s current job role, the information is often used as input for
transfer and promotion decisions. Basically, there are seven catego-
ries of information that are included in each skill inventory. These cat-
egories are:
1. Personal data: It includes information related with age, gender,
marital status, etc.
2. Skills: It includes information related to education, job
experience, training, etc.
3. Special qualifications: It involves details of special qualifications,
such as membership in professional bodies, special achievements,
etc., possessed by employees.
4. Salary and job history: It includes information related to
employee’s present and past salary, dates of salary increments,
various jobs held, ete.
5. Company data: It includes information on benefit plan data,
retirement information, seniority, ete.
6. Capacity of individual: It includes details pertaining to
employee’s score on psychological and other tests, health
information, etc.
7. Special preference of the individual: It involves details of
employee’s preferences regarding geographic location, type of
job, ete.
A well-designed skill inventory helps HR managers to identify em-

ployees with specific skills who could satisfy the changing needs of the
organisation.
Management inventories include the following data regarding the

managers:
Work history
OU
Strengths and weaknesses

Ooo DO
Previous management duties

COCO
Promotion potential
Total budget managed
oO
Current job performance

Career goals
Personal data

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Q Number and types of employees supervised

Q Educational background
Q Geographic preferences
Q Specialisation field
Q Job preferences
Q Anticipated retirement date
Q Personal history
2.5.2 ANALYSIS OF INTERNAL SUPPLY
The internal supply forecast essentially draws upon the number of

outflows and number of inflows of human resources in an organisa-
tion. Such outflows & inflows have to be mapped for individual jobs.
Some techniques, which are used for internal supply forecast, are:
Q Inflows and outflows: One of the simplest ways to forecast inter-
nal supply is the inflows and outflows method. Let us understand
this method, with the help of an example, illustrated in Figure 2.5:
Sources of No. of Sources of No. of

Inflows People Outflows People
— Resignations 13
Transfers in 12 > — Discharges 2
| Promotions in 10 — | Current Person- | _, Demotions 4
nel Level 250 .
Operators — Retirements 10
— Promotions 13
Total inflows 22 — Total Outflows 42
Current personnel level — outflows + inflows = internal supply of word processors
250 — 42 + 22 = 230 processors
Figure 2.5: Estimation of Internal Supply for a Word Processor’s Job
Figure 2.5 shows an analysis of manpower gain and loss for a word
processor’s job. The sources of losses and gains are calculated for
a specific period of time. Total losses, i.e. 42 are subtracted from
the current manpower strength i.e. 250 and total gains i.e. 22 are
added to calculate the expected no. of personnel at the end of the
planning period. This figure (230) is viewed in combination with
the anticipated demand for manpower to determine whether ad-
justments will be required and to ensure that the supply will be
equal to the demand. A major challenge associated with inflows
and outflows method is determination of the number of losses and
gains. This is because; it is not always possible to make an accurate
estimate just by examining the past records or judgements.
Q Turnover rate: It is the traditional method of forecasting inter-
nal supply. Turnover reflects the number of replacements, needed
during a year. It provides information about the possible availabili-

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ty of employees in the organisation. The turnover rate is calculated

with the help of following formula:
(Number of separations during one year/Average number of em-
ployees during the year) X 100
Based on the results of the turnover rate (for few continuous years),
an organisation can easily assess the availability of the employees
for upcoming years. Let us understand the concept of turnover
rate with the help of an example. Suppose, if in a year 300 out of
1500 labour (an average no. of labour during the year) leave an
organisation, then the turnover rate would be 20 per cent. Now, if
this trend continuous, then the organisation would require hiring
1100 labour during the next year to increase and hold the man-
power in 2000 that year. The count would include:
@ 500 extra labour
# 400 to replace the 20 per cent separations of the average 2000

labour
# 20 per cent to replace separations of the 900 hired labour
Q Analysis of absenteeism: Conditions of work and absenteeism also
help in internal supply forecast. Changes in working conditions,
such as working hours, overtime policies, holidays, retirement pol-
icies, shift systems, etc. are required to be analysed. Absenteeism
refers to illicit absence from work. It is calculated as:
{(Number of persons — days lost)/ (Average number of persons X
number of working days)} X 100
Absenteeism results in a reduced number of employees available
for work. For example, if 95 out of 100 employees are available for
work, then the absenteeism rate would be 5 percent. Organisa-
tions analyse the trends in absenteeism to understand its effect
on future supply of labour and identify the reasons and remedial
actions.
Q Analysis of productivity level: Analysing productivity level is im-
portant as any change in productivity would affect the number of
employees required to produce per unit of output. Increase in em-
ployee productivity will reduce the manpower requirement and
decrease in the same would increase the requirement. Take an ex-
ample of an assembly plant, where one person assembles 150 cars
in a month. If the plant has a monthly target of assembling 18,000
cars per month, the no. of employees would be 120 (18,000 divid-
ed by 150). Now, if productivity of each employee increases by 20
per cent, then one employee would assemble 180 cars in a month,
which means the plant would require only 100 (18,000 divided by
180) employees to achieve the given target of assembling 18,000
cars per month.

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2.5.3 IDENTIFYING EXTERNAL SOURCES OF SUPPLY
Apart from internal supply, an organisation also needs to identify ex-

ternal sources for finding prospective employees. External sources
help in:
Q finding new talent
Q replenishing gone personnel
Q obtaining additional number and varied types of employees
Sources of external HR supply vary from one industry to another, one

organisation to another and also from one geographical location to the
other one. For example, for some organisations; colleges and universi-
ties could be the best source for hiring future employees, while others
may depend on consultants or unsolicited applications for finding new
employees.
2&4 SELF ASSESSMENT QUESTIONS

9. consist of information about non-managers
within an organisation.
28 BXouai
en
Using secondary sources make a comprehensive list of skills that
an employee needs to possess for performing a managerial role in
a retail company.
or: HR ACTION PLANS AFTER DEMAND/

we SUPPLY ANALYSIS
Once an organisation analyses its personnel demand and supply, the
same must be balanced so that vacancies could be filled by the right
employee at the right time. Thus, the next action plan after demand/
supply analysis is to implement the HR plans. This requires initiat-
ing a series of action programmes, such as recruitment, selection and
placement, training and development, retraining and redeployment,
retention plan, redundancy plan and succession plan. Thus, the next
step is all about managing the outcome of demand and supply gap to
help organisation to achieve its goals.
For this purpose, an organisation requires devising effective recruit-

ment/ redundancy strategies. For example, if the organisation is facing
a shortage of employees, focus should be laid on career development,
flexible work options, remuneration and reward programmes. On the
other hand, if there is a surplus of manpower, the supply and demand
balancing strategies should focus on retirements, redundancies and
dismissals. Let us discuss in detail about the strategies, used to man-
age the shortage or surplus of manpower.

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2.6.1 STRATEGIES TO MANAGE SHORTAGE OR DEFICIT OF

MANPOWER
An organisation, in order to deal with a shortage of employees, can re-

cruit new employees or train current employees. For this purpose, or-
ganisations need to become more attractive employer through brand-
ing, remuneration scale rearrangements and a host of other methods.
Many organisations also try to manage such situation by being more
flexible on employment criteria and lowering their recruitment con-
ditions. Increasing pay levels, improving working conditions and
providing better career opportunities also help in attracting new em-
ployees and retaining the old ones. Following are certain strategic HR
initiatives that organisations use for managing manpower shortages:
Q Recruiting new employees
Re-hiring retirees part-time
O
Offering incentives to postpone retirement

Ooo oO
Making attempts to reduce turnover

vo
Outsourcing work to another organisation

o
Making current staff to work overtime

Hiring temporary employees
Redesigning job process so that fewer employees are needed
2.6.2 STRATEGIES TO MANAGE SURPLUS MANPOWER
Sometimes, organisations deal with the situation when there is a sur-

plus workforce. This situation may arise due to changes in technolo-
gy, changes in functions of the department, or changes in the nature
or amount of work handled by an organisation. In such cases, trim-
ming or downsizing of the workforce becomes necessary as there are
too many workers than an organisation needs for the demands of the
business.
To implement the downsizing plan, an organisation should focus on

following five points:
1. Who is to be made redundant and when?
2. What are the plans for re-development or re-training?
3. How to help redundant employees find new jobs?
zt How and when to declare redundancies and make redundancy
payments?
5. How and when to consult with unions or staff associations and
informing those affected?
Apart from redundancy, another strategic move to deal with surplus

labour is to retain all employees, but reduce working hours as well as

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remuneration. Depending upon the nature of surplus, an organisa-

tion can transfer or reassign employees to different departments of
the organisation that are still experiencing demand. An organisation
can also keep the excess workforce on the same payroll, if the loss in
demand is expected to be short-lived and the organisation believes
that the entire workforce would be required when the demand lifts
up. In such a case, the organisation could use the slack time to provide
cross-training to enhance workforce skills and flexibility.
Another method to manage surplus manpower is offering incentives

to employees who take early retirement. This is also known as the
Voluntary Retirement Scheme (VRS). Laying-off is another strategy,
used for managing surplus workforce. However, it is not very popular
as it not only results in joblessness in employees, but also negatively
affects the reputation of the employer.
Let us summarise the major strategic HR initiatives that organisations

use for managing manpower surplus:
Q Freezing the recruitment of new employees
Q Offering VRS
Q. Transferring the existing workforce to some other department/di-
vision that is still experiencing demand
Reducing work-hours and payment while maintaining the same
Oo
workforce size
Laying-off
UO
Reducing outsourced work

vO
Training employees to increase their skills and flexibility

oO
Expanding business operations

Oo
10. Anorganisation, in order to deal with of employees,

can recruit new employees or train current employees.
Using the Internet, find at least five examples of organisations in

India that went for downsizing plans to manage surplus manpower.
Write a short note on it.
BENEFITS OF HUMAN RESOURCE

ae PLANNING
HRP is not only confined to predicting future human resource re-
quirements of an organisation rather it also helps in finding out future

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action plans for all departments of the organisation. Apart from this,
the following are some other benefits of HRP:
Q HRP enables organisations to fulfil present and future human re-
source requirements so that organisational operations can be car-
ried out without any hindrance.
Q It ensures that the right people are placed at the right job at the
right time, which, in turn, helps organisations to mitigate various
business risks like change in technology, economic fluctuations,
etc.
Q HRP equalises the demand and supply of human resource in an

organisation by anticipating the situations of shortage and surplus
of human resource. Both the situations can be dangerous for the
organisation. This is because the shortage of human resource may
hamper the functioning of the organisation, while surplus would
incur unnecessary costs for the organisation.
Q HRP ensures that employees with desired skills and knowledge
are available to work under challenging situations, such as expan-
sion and diversification.
Q HRP serves the individual needs of employees through promo-
tions, transfers, training and development, ete.
Q HRP estimates the cost of human resource, such as salary and
other benefits; thereby formulating HR budget for various depart-
ments of an organisation. This ultimately helps in the preparation
of an overall organisational budget.
11. HRPis not only confined to predicting future human resource

requirements of an organisation rather it also helps in finding
out future action plans for all departments of the organisation.
(True/False)
12. HRP the demand and supply of human resource in
an organisation by anticipating the situations of shortage and
surplus of human resource.
Visit an organisation in your vicinity and discuss the benefits of

HRP with the HR manager of that organisation.
CHALLENGES IN HUMAN
RESOURCE PLANNING
There are a number of challenges associated with HRP such as
achievement of short and long-term organisational objectives; selec-

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tion of an appropriate demand forecasting method; and degrees of

variation in the thought process of HR planners. The following are
some major challenges in HRP:
Q Planning HR requirements involves high cost, time, and efforts.
However, HRP can be a challenge for organisations lacking in
funds.
Q HRP can bea great challenge in situations, such as employee attri-
tion, changes in government laws, change in technology, economic
conditions (like recession, inflation, depression, etc.), and so on.
The selection of the right demand forecasting technique can be
a major difficulty in HRP This is because the selection of a tech-
nique depends on various factors like organisational budget, level
of expertise available, stipulate time, etc.
Q A lack of proper coordination and cooperation between different
departments of an organisation can convert the entire HRP pro-
cess into a failure.
Q Another challenge of HRP is work culture shift in organisations.
Most employees prefer to keep working in the same manner. When
an organisation decides to take a new approach to HRP employees
may resist this change. In such a case, they may not make proper
utilisation of their skills.
&e SELF ASSESSMENT QUESTIONS

13. The of the right demand forecasting technique can
be a major difficulty in HRP
14.. When an organisation decides to take a new approach to HRB
employees easily accept this change. (True/False)
Prepare a report on the challenges faced by Siemens in planning its

human resource.
ES) summary
Q Planning is the first and foremost function of any organisation with-
out which all organisational activities would become meaningless.
Q HAP is also called manpower planning as it involves putting the
right people at the right job at the right time so that organisational
goals and objectives can be met within the stipulated time.
Q_ Effective HRP process helps organisations to identify vacant posi-
tions and the skills and expertise required and to attract people to
apply for those positions.

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Q The main objective of HRP is to meet human resource require-

ments in an organisation so that organisational activities can be
carried out smoothly.
Q HAP is an integrated, systematic process where human resource
objectives are aligned with organisational goals and objectives.
Q It is of paramount importance for the HR personnel to consider
all internal and external business factors before planning human
resource requirements.
Q Inan organisation, the demand for people is influenced by various
factors, such as the type of organisational structure, organisational
budget, nature of business, technology used, effective of business
strategy, etc.
Q As organisations operate in an ever-changing environment, HR
forecasts of organisations should be flexible so that changes in the
environment can be easily adapted.
Q HRP is not only confined to predicting future human resource re-
quirements of an organisation rather it also helps in finding out
future action plans for all departments of the organisation.
Q There are a number of challenges associated with HRP such as
achievement of short and long-term organisational objectives; se-
lection of an appropriate demand forecasting method; and degrees
of variation in the thought process of HR planners.
A KEY WORDS
Q Conflicts of interest: A clash between the personal and profes-

sional interests of an individual.
Q Lead time: The time duration between a start of a process and
the end of the process in an organisation.
Q = Layoffs: A situation where employee(s) of an organisation are re-
lieved of their duties, either temporarily or permanently.
Q Manpower surplus: A situation where there are more people
than available jobs.
Q Voluntary retirement: A situation where employee(s) of an organ-
isation retire earlier than their normal retirement time.
1. Explain the concept of HRP in detail.
2. Describe the steps in the process of HRP
3. Explain the methods of HR demand forecasting in detail.
I How internal and external business environment affect the HR
demand forecasting?

N OT ES
5. Elaborate on the benefits of HRP

6. List challenges in HRP
y-A8E ANSWERS AND HINTS
Topic (2 a oe Answers
Human Resource Planning Ie Planning
2. Manpower planning
Process of Human Resource lo on

Planning
4, b. Scanning the environment
Techniques of HR Dem: 5.
| True
Forecasting m™\\%
' Statistical
a. Sa wp . a. Delphi Technique
. Future
Metho Su 7 , Skill inventories

Forecas
HR Action Plans after 10. Shortage
Demand/Supply Analysis
en Resource 11. True
12. Equalises
“Challenges in Human ss Selection

Resource Planning
14. False

1. Human resource planning is one of the main features of human
resource management as it helps to determine the workforce
required by an organisation to meet its objectives. Refer to
Section 2.2 Human Resource Planning.
2. The steps involved in the process of HRP are reviewing business
goals, scanning the environment, balancing manpower demand
and supply and implementing and monitoring the HR plan.
Refer to Section 2.3 Process of Human Resource Planning.
3. Some of the important techniques used by organisations
to forecast HR demand are expert forecasts, management
forecasts, Delphi technique, trend analysis, etc. Refer to Section
2.4 Techniques of HR Demand Forecasting.

N OT ES
4. HR demand forecasting is mainly influenced by two factors,

namely external business factors and internal business factors.
Refer to Section 2.4 Techniques of HR Demand Forecasting.
5. HRP helps an organisation to plan for the future by considering
the workforce requirements, balancing the HR demand and
supply, cost, benefits, etc. Refer to Section 2.7 Benefits of Human
Resource Planning.
6. Some common challenges faced during HRP include difference
in the opinions of HR planners, economic changes, changes in
government policies, poor coordination and cooperation between
various departments of an organisation, etc. Refer to Section
2.8 Challenges in Human Resource Planning.
r-AVR SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Durai, P (2010). Human Resource Management (1st ed.). New Del-
hi: Dorling Kindersley (India) Pvt. Ltd.
E-REFERENCES
Q Citehr.com. (2014). Need for human resource planning - child
care. Citehr.com. Retrieved 03 July 2014, from: http://www.citehr.
com/4275-need-human-resource-planning-child-care. html
Q Management Education. (2013). Concept, objectives, scope, impor-
tance of human resource planning. Retrieved 03 July 2014, from:
http://managementation.com/concept-objectives-scope-impor-
tance-of-human-resource-planning/
Q Small Business - Chron.com. (2014). The importance of planning
in an organization. Retrieved 03 July 2014, from http://smallbusi-
ness.chron.com/importance-planning-organization-1137.html
Q Accountlearning.blogspot.in. (2014). Concept and meaning of
human resource planning | account-management-economics.
Retrieved 03 July 2014, from http://accountlearning.blogspot.
in/2013/01/concept-and-meaning-of-human-resurce.html
Q Profile, V. (2012). Human resource management: explain the need
for human resource planning. Retrieved 03 July 2014, from http://
mbahelpingsolutions.blogspot.in/2012/05/explain-need-for-hu-
man-resource.html
Q Small Business - Chron.com. (2014). Objectives of human resourc-
es planning. Retrieved 03 July 2014. from http://smallbusiness.
chron.com/objectives-human-resources-planning-4560.html
Q Managementstudyguide.com. (2014). Manpower planning - mean-
ing, its need and importance. Retrieved 03 July 2014, from: http://
www.managementstudyguide.com/manpower-planning.htm

JOB ANALYSIS AND JOB DESIGN
CONTENTS
Introduction
Job Analysis
Scope of Job Analysis
Process of Job Analysis
Information Collection for Job Analysis
Methods for Collecting Job Analysis Data
Effectiveness of Job Analysis
Limitations of Job Analysis
Activity
3.3 Job Description
3.3.1 Need and Objectives of Job Description
3.3.2 Process of Writing Job Description
3.3.3 Features of Job Description
Activity
3.4 Job Specification
3.4.1 Need and Objectives of Job Specification
3.4.2 Features of Job Specification
Activity
3.5 Job Design
3.5.1 Nature and Effectiveness of Job Design
3.5.2 Process of Job Design
3.5.3 Contemporary Issues in Job Design
Activity
3.6 Approaches to Job Design
3.6.1 Job Rotation
3.6.2 Job Enlargement

CONTENTS
3.6.3 Job Enrichment

3.6.4 Job Simplification
Activity
3.7 Summary

JOB ANALYSIS AND JOB DESIGN 51
JOB ANALYSIS AT AMERICAN AUTOMOBILE

ASSOCIATION OF ARIZONA (AAA ARIZONA)
AAA Arizona provides emergency road assistance and travel ser-

vices to the financial and insurance sector. Most projects in the
company are handled by branch office managers. Therefore, a
need was felt to improve the performance of branch office man-
agers so that they can give their best. For this, the company de-
cided to perform job analysis for the position of Branch Office
Manager. To do so, AAA Arizona hired an external agency named
GMarie Group Solution.
GMarie Group Solution has been providing clients with cu:

learning and perormance improvement solutions for over
Q = Identified performance gaps

Q Determined training needs
GMG collected information throug such as di-

rect observation, interviews, and do ent | sw. It provided
Q Specific needs for the Branck

Q Content and context o
Q = High level learni
As a result of the project, A A Arizona was able to effectively re-

structure the role of the Branch Office Manager and modify tal-
ent search criteria to primarily focus on finding applicants with
sound management skills.

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© LEARNING OBJECTIVES

Explain the concept of job analysis
yy ry
Define job description
rr
Describe job specification
Explain the concept of job design
List different approaches to job design
5am INTRODUCTION
Job analysis is a process of collecting and assessing information about
duties, responsibilities, necessary skills, outcomes, and work environ-
ment of a particular job in an organisation. It involves determining the
content of jobs, human resource requirements to perform those jobs,
and the context in which jobs are to be performed. The job analysis
process serves as an input for various HR activities, such as training,
selection, compensation, and performance appraisal. The data col-
lected in the job analysis process is compiled in two forms, which are
job description and job specification.
Job description is a written statement of tasks to be performed in a

particular job. It also involves information on the nature and scope of
a job, the degree of complexity involved, associated risks, and so on.
Job description provides a clear picture to a job analyst, supervisor, or
employees about different job roles and responsibilities.
Job specification transforms the job description in terms of human

requirements, such as skills and abilities, qualifications, physical and
mental characteristics required to perform a particular job. It intends
to serve as a guide in making decisions related to hiring and compen-
sation. In this chapter, you will study about job analysis, its scope, and
process in detail.
sya JOB ANALYSIS

A job may be defined as a collection of different tasks, duties, and re-
sponsibilities to be performed by individuals so that organisational
goals can be met within the stipulated time. In the words of Hertbert
G Herman, A job is a collection of tasks that can be performed by a sin-
gle employee to contribute to the production of some product or service
provided by the organization. Each job has certain specifications as per
the skills required to perform that job. To assign the right jobs to the
right people and maintain a flow of operations, it is important for an
organisation to analyse jobs.

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Job analysis is a systematic process of identifying and documenting

the important functions involved in a job, tasks required for the job,
and skills and abilities needed to perform those tasks. Different man-
agement experts have defined job analysis differently. The following
are some popular definitions of job analysis:
According to Michael J. Jucius, “Job Analysis refers to the process

of studying the operations, duties and organizational aspects of jobs
in order to derive specifications or as they are called by some, job
descriptions.”
According to Edwin B. Flippo, Job Analysis is the process of studying

and collecting information relating to the operations and responsibili-
ties of a specific job.
As per Dale Yoder, Job Analysis furnishes the facts which indicate what
is being done and what kind of employees are required.
Jean Jones and Thomas Decothis have defined job analysis as, A pro-
cess of getting information about jobs specially what the worker does;
how he gets it done; why he does it; skill, education and training required
and job relationships to other jobs; physical demands; environmental
conditions.
In the words of Cascio & Aguinis (2005) and Harvey (1991), Job anal-
ysis involves collecting data about observable job behaviors, and delin-
eating the knowledge, skills, abilities, and other characteristics needed
to perform the job.
Figure 3.1 shows the main components of job analysis:
re
YSIS
Methods Data Conducted
by
* Questionnaires * loyees * Job analyst (HR)
+ Interviews * Supervisors * Outside consultant
* Observation «Managers ¢ Supervisor/manager
* Logs/diaries + Job analyst
J Used for \
Job Descriptions Job Specifications
\ Used for p
* EEO/ADA * Performance
¢ HR planning * Management
¢ Recruiting * Health, safety,
* Selection and security
+ Compensation + Employee/labor
¢ Training * Relations
Figure 3.1: Different Components of Job Analysis

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Figure 3.1 shows various methods for performing job analysis, sources
of data required to analyse jobs, and people responsible for carrying
out the job analysis process. The by-products of the job analysis pro-
cess are job description and specification. Job analysis acts as an input
for various HR activities, such as recruitment, selection, human re-
source planning, compensation, training, performance management,
employee welfare management, industrial relations, and so on. A de-
tailed explanation of all the components of job analysis is given later
in the chapter.
3.2.1 SCOPE OF JOB ANALYSIS

Job analysis is an important part of the HRM function of an organisa-
tion. This is because job analysis helps in obtaining accurate, latest,
and reliable information about jobs as well as different HR activities;
thereby facilitating better decisions, increasing productivity, and com-
plying with government policies. Job analysis has scope in various HR
activities. Some of these activities are explained as follows:
Q Human resource planning (HRP): As discussed in the previous
chapter, the main aim of HRP is to get the right number of skilled
personnel into the right job at the right time. Job analysis provides
information on the number of people to be recruited to perform
different jobs. In this way, it helps in forecasting demand for hu-
man resource in an organisation.
Q Recruitment and selection: Job analysis provides a realistic pre-
view of the job. This further helps in attracting a pool of applicants
for particular job positions in an organisation and selecting those
who best match with the job requirements.
Q Training and development: Job analysis serves as an input for
designing training programs. In addition, it helps in identifying
training needs of employees by comparing their existing skills and
knowledge with job requirements.
Q Compensation and benefits: As discussed earlier, job analysis
provides information related to the roles, responsibilities, skills
and knowledge required to perform a particular job. This helps in
deciding compensation for employees based on the nature of a job,
skills and abilities required, associated risks, etc.
3.2.2 PROCESS OF JOB ANALYSIS
In an organisation, irrespective of its size, work assignments, tasks,

and job duties and responsibilities are subject to frequent changes.
Over a period of time, existing jobs may change and new jobs are es-
tablished. In such cases, it is of paramount importance for an organ-
isation to analyse new or revised jobs so that they can be performed
efficiently. Analysing a job involves a systematic process consisting of
six steps, which are listed in Figure 3.2:

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Step 1
Det a4 Step 2
the
re Purpose of Communica . Step 3
e objectives | Conducting job] Step 4

ae Developing Job | Step 5
description and |
job specification] Maintaining and
updating job
description and
job specification
Figure 3.2: Steps of the Job Analysis Process
Let us discuss these steps in detail.

1. Determining the purpose of job analysis: An organisation
performs job analysis for establishing new jobs or analysing
existing jobs or redesigning jobs to improve productivity. In
addition, job analysis is conducted to perform various HR
activities, such as deciding and analysing the compensation
structure, recruitment, and human resource planning.
Apart from this, this step also includes obtaining support from
the top management. In an organisation, the top management
allocates resources for different organisational activities. Thus,
taking consent of the top management for job analysis is essential.
2. Communicating the objectives: It is important that the objectives
of job analysis should be well communicated to managers and
employees. In this way, HR analysts get support from employees
and managers as well.
3. Conducting job analysis: In this step, the data for job analysis is
obtained from various sources. This raw data is then reviewed
and compiled into useful information.
4. Developing job description and job specification: From the
collected information, job description and job specification are
drafted. Job description defines the roles and responsibilities of
a job, whereas job specification defines the skills and knowledge
required for that job (A detailed explanation of job description
and specification is given later in the chapter.). Thereafter, job
description and specification are discussed with line managers
and employees to seek their suggestions, ideas, and opinions
before finalising them.
5. Maintaining and updating job description and job specification:
After the job description and job specification are finalised, it is

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important to record them for future references. These records

are updated periodically as per the changes in job requirements.
3.2.3 INFORMATION COLLECTION FOR JOB ANALYSIS
The job analysis process of an organisation aims at maintaining a

good job fit, establishing effective hiring processes, analysing training
needs, evaluating job performance, setting performance standards,
and so on. Meeting such aims requires adequate information about
different jobs. Information required for job analysis is broadly divided
into three categories, which are shown in Figure 3.3:
Figure 3.3: Information Required for Job Analysis
Let us discuss information required for job analysis in detail.

Q Job content: It comprises tivities involved in a particular job.
In other words, job content details the actions that an employee
needs to perform for a particular job position. Job content varies
depending on the nature and title of a job, concerned department,
etc. For example, the job content of a line worker will be different
from that of a marketing executive. Job content includes the fol-
lowing information:
¢ Duties of an employee
¢ Machines, tools, and equipment required
¢ Additional tasks to be performed
¢ Training required
Q Job context: It details the conditions under which an employee
needs to perform a particular job. Job context includes the follow-
ing information:
@ Working conditions
+ Risks and hazards involved
+ Physical and mental potential
+ Reporting authority
+ Judgement

NOTES
Q Job requirement: It details specific requirements that make an

individual to be an eligible candidate for the job. These require-
ments can be as follows:
¢ Educational qualifications such as diploma, degree, certifi-
cates, or licences.
¢ Specific skills such as IT skills, communication skills, motor

skills, and processing skills.
@ Abilities such as mathematical abilities, problem-solving abili-
ties and manipulative activities.
@ Personal traits such as aptitude, reasoning, and capability of
handling unexpected or urgent situations.
3.2.4 METHODS FOR COLLECTING JOB ANALYSIS DATA
Data for job analysis can be collected from various sources within and
outside an organisation. Main sources of data collection are employ-
ees, supervisors, managers, job analysts, and external HR consultants.
Apart from this, organisations use various methods of collecting job
analysis data. Some of these methods are listed in Figure 3.4:
=a.
a
_=
Participant’s Diary/Logs
Figure 3.4: Methods of Collecting Job Analysis Data
Let us discuss these methods in detail.
Q Interviews: In this method, an analyst asks a series of questions

from employees about the type of work performed by them, roles
and responsibilities involved, etc. It is a simple and more compre-
hensive method of collecting data. This is because the analyst can
identify even those job activities that may never appear in the writ-
ten form. However, it may be difficult for an employee to recall
every detail at the time of the interview, which may create discrep-
ancies in the job analysis process.

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Q Questionnaire: It is a written document containing detailed ques-

tions about a job. It is given to employees to be filled. There can be
two types of questionnaires, namely open-ended questionnaire and
structured questionnaire. The open-ended questionnaire involves
detailed description of duties and responsibilities performed by
employees. On the other hand, the structured questionnaire in-
volves a list of work activities performed by employees. Position
Analysis Questionnaire (PAQ) is a well-structured, quantitative
questionnaire having 194 items called elements. These elements
may or may not play an important role in a job. However, the an-
alyst decides the importance of these elements for each job. PAQ
is based on five activities that can be used for job analysis. These
activities are as follows:
+ Information inputs required
+ Mental abilities required to perform the job
¢ Physical activities to operate tools, vehicles and equipment
¢ Physical and social environment of the job
+ Time and pace required to perform the job
Questionnaire is an easy method of collecting data; however, de-
veloping and testing the reliability of a questionnaire is time con-
suming and expensive.
Q Observation: This method involves supervising and noting every
work activity performed by employees. After noting the results
of observation, the analyst interacts with a group of workers and
finally a survey is made on duty statements, instructions, safety
manuals, and quality charts. However, there are two major lim-
itations of this method. The first limitation is that observation is a
time consuming process as the analyst has to observe each and ev-
ery worker and analyse duties performed by him/her. The second
limitation is that it can create frustration among workers as it may
not be comfortable for employees being observed.
Q Participant’s diary/logs: Employees usually maintain a diary or
log of all the activities and tasks performed by them on a day to
day basis. These logs and diaries help in analysing the roles and
responsibilities involved in a job. One of the drawbacks of this
method is that the employees may exaggerate some activities while
underestimating the others.
3.2.5 EFFECTIVENESS OF JOB ANALYSIS
Job analysis is said to be effective if it facilitates the preparation of

sound HR practices and policies. It provides a clear understanding of
the behavioural requirements of a job. The following points explain
the importance of job analysis in an organisation:

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Q First-hand job information: The job analysis process provides

job-related data that helps job analysts to identify duties and re-
sponsibilities associated with a particular job and the skills and
abilities required for performing that job. In addition, it provides
knowledge about the risks and hazards involved in a job. This ulti-
mately helps in communicating job requirements to employees so
that they can perform their jobs effectively.
Q Job fit: Job analysis enables managers in matching job require-
ments with the skills, abilities, strengths, needs, and experience
of employees. In this way, it helps in establishing a good job fit or
culture in an organisation.
Q Performance evaluation: Job analysis helps in assessing the

actual performance of employees against the set performance
standards. This eventually helps in promoting and appraising
employees.
Q Training needs analysis: Job analysis helps in assessing training
needs by identifying gaps in the actual performance of employees
and the set performance standards.
3.2.6 LIMITATIONS OF JOB ANALYSIS
From the discussion so far, it can be said that job analysis plays an
important role in inculcating sound HR practices in an organisation.
However, it also has certain limitations associated with it. Some of
these limitations are explained as follows:
Q Time consuming: One of the major limitations of the job analysis
process is that it is takes a lot of time. This may pose a number of
challenges for organisations where there are frequent changes in
job requirements.
Q Personal biasness and inaccuracy of data: There are some in-
stances where the job analysis process is driven by the personal
likes and dislikes of job analysts. This may hinder the collection
of accurate and reliable data. The entire job analysis process may
turn into a failure without accurate data.
Q A lot of effort: Job analysts need to collect data on every detail of
a job and analyse all minute aspects of the job. This requires a lot
of human efforts and time.
Q Lack of skills: In case the job analyst does not have much experi-
ence in analysing jobs, it may lead to wrong conclusions related to
jobs. In this way, the purpose of the entire job analysis process will
not be met.
Q Subjectivity: Job analysis does not involve objectivity or fixed math-
ematical calculations. Different job analysts assess jobs differently
based on their mental abilities, intellect, and aptitude. Thus, a fixed

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set of standards cannot be established for analysing jobs, which cre-

ates a scope for subjectivity in the job analysis process.
The job analysis process results in two sets of data namely job description
and job specification. Let us study about them in the upcoming sections.
1. “Ajob is a collection of tasks that can be performed by a single

employee to contribute to the production of some product or
service provided by the organization.” Identify the speaker of
this statement.
a. Dale Yoder,
b. Hertbert G Herman
ce. Michael J. Jucius
d. Edwin B. Flippo
2. In which of the following method, an analyst asks a series of
questions from employees about the type of work performed
by them, roles and responsibilities involved, etc.
a. Interview
b. Questionnaire
c. Observation
d. Participant’s diary/logs
3. is a well-structured, quantitative questionnaire
having 194 items called elements.
Imagine yourself as a job analyst. You are invited by an automobile

company to perform job analysis for one of the job positions in the
company. Which method of job analysis would you use?
5 JOB DESCRIPTION
Job description is an organised factual statement that is prepared by
considering the data gathered in the job analysis process. Thus, job
description can be defined as a written record of the duties, respon-
sibilities, and requirements of a specific job. The following are some
popular definitions of job description:
According to Edwin B. Flippo, The first and immediate product of job

analysis is job description. As its title indicates, this document is ba-
sically descriptive in nature and constitutes a record of existing and
patient job facts.

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According to Pigors and Myres, Job description is a pertinent picture

(in writing) of the organizational relationships, responsibilities and spe-
cific duties that constitute a given job or position. It defines a scope of
responsibility and continuing work assignment that are sufficiently dif-
ferent from that of other jobs to warrant a specific title.
Job description is descriptive in nature and provides information on

the type of job to be performed, the way to perform it, and the in-
dividual responsible to perform the job. It divides a job into various
sub-jobs and explains the nature of each sub-job. The main aim of
job description is to differentiate a particular job from other jobs in
an organisation and decide the outer limits of that job. An organisa-
tion needs to prepare job description to announce a job vacancy. This
is because job description helps candidates in familiarising with the
nature and requirements of the job. Following is an example of job
description of an organisation:
JOB DESCRIPTION
Job Title:
Department:
Campus/Location:
Responsible to:
Purpose Statement:
Key Accountabilities:
1. Accountability
Duties and Responsibilities
2. Accountability
3. Accountability
(Most positions will have between 3 and 8 key accountabilities)
4. Accountability
(Month & Year)
3.3.1 NEED AND OBJECTIVES OF JOB DESCRIPTION
Job description plays a vital role in attracting and retaining skilled em-
ployees by providing them with a clear picture of job requirements and
duties. In addition, it references the skills, experience, and education
background required to perform a particular job. This makes the pro-

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cess of interviewing and hiring applicants much easier. Apart from this,
the following points explain the need and objectives of job description:
Q Job description helps in clearly communicating the expectations
of an organisation from employees.
Q It ensures that the duties and responsibilities of employees are
aligned with the organisation’s vision.
Q It provides a basis for deciding job structure and measuring job
performance.
Q Job description lays the foundation for fair pay and grading
systems.
Q = Itreduces the scope of arbitrary interpretation of job roles by man-

agers as it is based on factual information related to jobs.
Q Job description serves as an important reference tool in the case of
employee/employer disputes or any discipline issues.
Q_ It can be used to determine training and development needs when
expectations or requirements are not met.
3.3.2 PROCESS OF WRITING JOB DESCRIPTION
A precise and well-written job description provides a clear under-

standing to employees their roles and duties. The following are the
steps for writing an effective job description:
1. The first step involves noting down all the aspects of a job.
2. The next step is to decide the tasks to be included in the job.
3. In this step, various key responsibilities are identified from the
raw data.
4. After the roles and responsibilities are finalised, they are ranked
in an order based on their priority.
5. After the job description is written, it is checked by experts.
3.3.3 FEATURES OF JOB DESCRIPTION
As discussed earlier, job description provides an outline of the roles,

responsibilities, and qualifications required to perform a particular job.
Effective job description allows HR personnel to narrow down a pool
of applicants in order to find only the most qualified candidates. The
following are the features or components of effective job description:
Q Job title: It comprises the title of a job and the concerned depart-
ment. Some organisations also provide the code for the job. The
title identifies and designates the job in an organisation.
Q Job summary: It serves two purposes. It provides additional in-
formation in case the job title is not clear or precise. Moreover, it
briefs about the duties and tasks involved in the job.

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Q Duties: Job duties involve responsibilities to be undertaken by

an individual to perform a particular job. The duties section also
includes the frequency of occurrence and the percentage of time
required to perform various duties.
Q Machine tools and equipment: The machines, tools, and other
equipment that are required to perform a job are also given in job
description.
Q Relevance to other jobs: In this section, a job is represented in
the organisational hierarchy. This helps in locating the job in the
organisation.
Q Supervision: This indicates the number of people involved in a
particular job. Their job titles are also indicated along with the
level of supervision required for them.
Q Working conditions: This section defines the environment in
which employees are required to perform a particular job.
Q Hazards: Every job involves a certain degree of risks. These risks
along with their possibility of occurrence are defined here.

4, is an organised factual statement that is prepared by
considering the data gathered in the job analysis process.
5. Duties comprise the title of a job and the concerned
department. (True/False)
Visit an organisation in your area. Hold a discussion with the HR

manager about the features of job description prepared in the or-
ganisation. Prepare a report based on the discussion.
se JOB SPECIFICATION
Job specification, also known as employee specification, is a statement
that summarises the acceptable attributes of employees, such as their
experience, aptitude, educational qualifications, and skills, required
to perform a job. It is an extension to job description as it is always
accompanied with every job description. The following are some defi-
nitions of job specification:
According to Edwin B. Flippo, A job specification is a statement of min-

imum acceptable human qualities necessary to perform a job properly.
According to Dale Yoder, The job specification, as such a summary

properly described is thus, a specialized job description, emphasizing

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personnel requirement and designed especially to facilitate selection

and placement
Gary Desslar has defined job specification as, A list of job’s human re-
quirements that is the requisite education, skills, personality and so on.
From the above definitions, it can be concluded that job specification
helps in determining what type of people are required to fill particular
job positions in an organisation.
Following is an example of job specification of an organisation:
JOB SPECIFICATION
Job Title:
Purpose of the Job: (Provide an overview of the job, its context in
the company, and the contribution that it makes)
Duties & Responsibilities: (Outline the main daily duties, tasks and
responsibilities of the position)
Candidate: (E.g. will the person be working independently or in a
team environment)
Reporting to: (To whom will the person report)
Working Hours: (Full/Part Time; Contract/Permanent)
Salary: (Indicate what salary you want or are prepared to pay)
Benefits & Perks: (E.g. health insurance, subsidised canteen, car,
gym membership, etc.)
Probation: You may want to establish a probationary period (typi-
cally 3 or 6 months.)
Start Date:
Closing Date:
Person Specification
Knowledge: (e.g. If understanding of a defined system, practice,
method or procedure)
Essential:
Desirable:
Work Skills (Indicate what skills specific to the job are required, e.g.
language fluency, typing skills, etc)
Essential:
Desirable:
General Skills/ Attributes: (What more general characteristics are

required to do the job effectively, e.g., communication skills, writing
skills, ability to delegate, motivation etc.)
Essential:

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3.41 NEED AND OBJECTIVES OF JOB SPECIFICATION
Job specification explains the qualifications, skills, experience, and

attributes that a candidate must possess for a particular job position.
Thus, it acts as an important tool in comparing and evaluating the
suitability of job applicants. The following points explain the impor-
tance of job specification:
Q Identifying prospective candidates: Job specification helps in at-
tracting potential employees by matching their skills and abilities
with job requirements. This helps managers in preparing a list of
relevant questions for job interviews.
Q Attracting candidates: Job specification familiarises candidates
with the skills and abilities required to perform a particular job
in an organisation. Accurate and clear job specification helps in
attracting a large number of candidates.
Q Supporting an organisation’s competency: Job specification
helps an organisation to strengthen its core competency by clar-
ifying the skills and abilities required to perform different jobs in
an organisation.
3.4.22 FEATURES OF JOB SPECIFICATION
Job specification is said to be effective if it attracts the most suitable

candidates for different jobs and helps in performance reviews by set-
ting a clear link between employee and organisational outcomes. The
following are some features of effective job specification:
Q Physical specifications: Job specification mentions the physical
characteristics of people required to perform a particular job. Phys-
ical characteristics are not required to be defined for every job.
The physical characteristics of an individual include age, height,
weight, vision, capacity to operate machines and equipment, etc.
Q Emotional and social specifications: They are required to be
defined for the job positions of managers, supervisors, foremen,
etc. These specifications include emotional stability, adaptability
in human relationships, flexibility level, personal appearance in
terms of dress, posture, etc.
Q Mental specifications: These specifications involve ability to

perform complex calculations, interpret data, plan activities, etc.
These specifications also involve general intelligence and memory
level of an individual.
Q Behavioural specifications: These specifications involve research
ability, creativity level, teaching ability, maturity level, self-reli-
ance, dominance, etc. of an individual.

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6. Job specification is also known as

7. “A list of job’s human requirements that is the requisite
education, skills, personality and so on.” Who coined this
definition?
a. Edwin B. Flippo,
b. Dale Yoder,
9 Gary Desslar
Michael J. Jucius
a.
Job RXernsee
Using the Internet, find out job specification prepared in some In-
dian manufacturing organisations.
5 JOB DESIGN
Job design can be defined as a process of specifying and arranging
work activities of individuals or groups in an organisational setting.
The main objective of job design is to establish job structures in a man-
ner that they meet the organisation’s requirements as well as personal
and individual needs of jobholders. The following are some popular
definitions of job design:
In the words of Torrington et al. (2011), Job design is the process of

putting together a range of tasks, duties and responsibilities to create a
composite for individuals to undertake in their work and to regard as
their own. It is crucial: not only is it the basis of individual satisfaction
and achievement at work, it is necessary to get the job done efficiently,
economically, reliably and safely.
Buchanan (1979) has defined job design as, specification of the con-
tents, methods, and relationships of jobs in order to satisfy technological
and organizational requirements as well as the social and personal re-
quirements of the job holder.
The following are the decisions involved in job design:

Q Who: It involves decisions related to individuals responsible for
performing different jobs in an organisation as well as their physi-
cal and mental characteristics.
Q What: It comprises decisions related to the types of tasks to be
performed in order to meet organisational goals and objectives.
Q Where: It involves deciding the geographical location where dif-
ferent jobs are to be performed.

NOTES
Q When: It includes decisions related to the time to perform differ-

ent tasks.
Q Why: It involves the rationale and objectives of jobs and motiva-
tional level of workers.
Q How: It involves deciding the methods of performing different
jobs.
3.5.1 NATURE AND EFFECTIVENESS OF JOB DESIGN

In an organisation, job design is considered to be vital for boosting
the motivation level of employees. This is because if jobs are designed
well, employees would be keen to perform their jobs effectively. The
following points explain the nature and effectiveness of job design:
Q Job design helps in increasing the interest of employees towards
their jobs; thereby boosting their job satisfaction.
Q It motivates employees and increases productivity.
Q It improves and develops skills of employees by recognising their
training needs.
Q It promotes employee participation and enhances communication
within the organisation.
Q It prevents unnecessary levels of supervision, checking, and
control.
3.5.2 PROCESS OF JOB DESIGN

Job design is a systematic process that involves a number of steps.
Figure 3.5 shows the steps involved in the job design process:
Assessing Existing Work Practices
Vv
Analysing Tasks
V7
Designing Jobs
V7
Revaluating Job Design
Figure 3.5: Steps in Job Design

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1. Assessing existing work practices: In this step, the current
work practices are assessed to determine the requirement and
feasibility of job design. Thereafter, the objectives of job design
are discussed with managers and employees to obtain their
inputs.
2. Analysing tasks: This step involves determining the types of
tasks in a job and the ways to perform them. The resources
required to perform the job are also determined in this step. In
addition, the problem areas in the existing tasks are identified.
3. Designing jobs: In this step, the methods to perform the job are
decided. Once the methods are decided, the work schedule is
prepared. After that, work activities are coordinated depending
on the abilities of employees.
4. Revaluating job design: It involves making periodical
adjustments and alterations in the job design. These alterations
are made with changes in job requirements.
Let us now try to understand job design with the help of an example of
Optima Air Filter Company in North California which had to redesign
its job design after the area was hit by tropical storm Allison in 2001.
The storm hit the area so bad that many people died and others were
left homeless. The company decided to make a comeback after suffer-
ing the loss of both manpower and material. This made the company
to revaluate its job design. It was then realised that the company did
not have any job description but had to recruit three new crews to
regain its operations. Around 30 new people were recruited, among
which the 10 were old timers or experienced. After assessing its cur-
rent work practices, the company realised that there was confusion
among the new recruits that which function should be performed by
whom. Soon the storm became the past and the company was sur-
rounded by the demanding customers who were not ready to accept
any excuses. The company analysed its various tasks that need to be
performed by the employees so that the job design may be developed
to give employees a fair idea of their job roles and responsibilities.
Phill Mann, the owner of the company immediately took matter into
his hands and hired an external consultant, Linda Lowe a student at
a business school to help him in developing a job design for the com-
pany. Linda, after examining the situation decided to get a question-
naire filled by 10 experienced recruits about their job duties which they
used to perform before storm. This questionnaire helped the company
to find out various jobs and responsibilities of the workforce and a job
design was developed. However, the questionnaire also raised a point
of conflict between Phill and the experienced employees regarding
the job duties defined in the questionnaire.

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3.5.3 CONTEMPORARY ISSUES IN JOB DESIGN
From the discussion so far, it can be said that job design plays an im-
portant role in organising tasks, functions, roles and responsibilities
associated with a particular job. However, there are certain issues in
job design. These issues are explained as follows:
Q Jobs are designed as per the skills and abilities of individuals. In
the absence of a concerned worker, it becomes difficult to pass the
job to any other available workers as they may not possess skills
required for the job.
Q Designing jobs requires a lot of research work, which incurs high
cost and efforts of an organisation.
Q Once jobs are designed, they are performed repetitively till they
are updated. This may reduce the scope of improving the skills of
employees.
8. Job design helps in boosting the level of job satisfaction among

employees by increasing their interest in the job. (True/False)
9. In which step of job design, the current work practices are
assessed to determine the requirement and feasibility of job
design?
a . Assessing existing work practices
b. Analysing tasks
Designing jobs
Q
Revaluating job design

2
Suppose you are the HR manger in a service organisation that pro-

vides business consultancy services to the financial sector. What
process would you follow to design the jobs of financial consultants
in the organisation?
sx APPROACHES TO JOB DESIGN

There are a number of approaches used by organisations to design
jobs. However, these approaches differ across organisations depend-
ing on their requirements, budget, number of jobs, total staff, nature
of business, etc. Some common approaches to job design are listed in
Figure 3.6:

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Job Rotation
Job Enlargement
Job Enrichment
Job Simplification
Figure 3.6: Different Approaches to Job Design
Let us discuss these approaches to job design in the upcoming sec-

tions.
3.6.1 JOB ROTATION
Job rotation, one of the most commonly used job design approach,
involves shifting an employee from one job to another with an aim to
add variety and prevent monotony. Sometimes it also involves making
certain alterations in the existing job profile of an employee so that the
job does not appear repetitive.
Job rotation enables employees to bring out their creative instincts and
maximum potential. According to Herzberg, job rotation is an approach
that merely substitutes “one zero for another zero.” Figure 3.7 shows an
example of a job rotation program designed for an HR trainee:
WEEK-1 =p | WEEK-2 m= | WEEK3

e TASK-1 e TASK-2 e TASK-3
Managing Creating Updating
Employees Database of Present Status
Record Files Employees of All the
Employees
Figure 3.7: An Example of Job Rotation Program
In Figure 3.7, it is shown that the HR trainee (in the first week) is as-
signed a task to manage employees’ record files. In the second week,
the trainee is allotted a task of preparing employees’ database. The
trainee is given the responsibility of updating the present status of all
the employees in the third week. In this way, the trainee has been given
an opportunity to explore and develop his/her skills in different areas.

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ADVANTAGES OF JOB ROTATION
The following are the main advantages of job rotation:

Q It helps employees gain experience and develop skills by providing
a variety of jobs.
Q It reduces monotony of doing the same job repetitively.
Q It is often used as an effective training tool for new and inexperi-
enced employees.
Q It helps employees to be aware of responsibilities associated with
other jobs.
Q Ithelps the management to identify the actual potential of employees.
DISADVANTAGES OF JOB ROTATION
The following are the disadvantages of job rotation:

Q It may be difficult for employees to adjust with the new environ-
ment with the changes in their job role.
Q Productivity may be get affected if employees are made to switch
between jobs frequently.
Q Supervisors and managers may also have to spend more time in
guiding and making the employees understand new job roles.
Q Job rotation may sometimes demotivate employees who have the
skills and knowledge for a particular job.
3.6.2 JOB ENLARGEMENT
Job enlargement is a method of expanding the scope of a job with the

addition of some more tasks and duties to it. In the words of George
Strauss and L.R. Sayles, Job enlargement implies that instead of as-
signing one man to each job, a group of men can be assigned to a group of
jobs and then allowed to decide for themselves how to organize the work.
Such changes permit more social contacts and control over the work pro-
cess. The main aim of job enlargement is to make the existing profile
of the employees appealing.
The additional tasks or duties do not require new but can be per-
formed by using similar skills and efforts. For example, in an organi-
sation, the actual job profile of a clerk involves typing letters. This job
can be enlarged by adding similar tasks to the existing work profile,
such as sorting incoming mails and replying back to those mails.
ADVANTAGES OF JOB ENLARGEMENT
The technique of job enlargement has the following advantages:

Q It increases the diversity of jobs and boosts job satisfaction among
employees.

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Q It increases the knowledge base of employees for performing a

particular job.
Qs It tends to reduce the boredom involved in one particular job.
Q Employees become versatile as they are exposed to different jobs
at the same time.
DISADVANTAGES OF JOB ENLARGEMENT
The following are the disadvantages of job enlargement:

Q Job enlargement always results in high training cost as new jobs
are to be learned by employees.
Q = It may affect productivity as employees take time to adopt changes.
Q Employees may demand extra wages with increase in workload,
which can give a rise to disagreement between trade unions and
the management.
3.6.3 JOB ENRICHMENT
Job enrichment is a process in which employees are given opportu-

nities to utilise their abilities by participating the decision-making
process of an organisation. The following are some definitions of job
enrichment:
According to Richard W. Beatty and Graig Eric Schneider, Job en-

richment is a motivational technique which emphasizes the need for
challenging and interesting work. It suggests that jobs be redesigned so
that intrinsic satisfaction is derived from doing the job. In its best appli-
cations it leads to a vertically enhanced job by adding function from oth-
er organizational levels, making it contain more variety and challenge
and offer autonomy and pride to the employee.
In the words of PR. Robbins, Job enrichment refers to the vertical expan-
sion of the jobs. It increases the degree to which the worker controls the
planning, execution and evaluation of his work.
The concept of job enrichment was proposed by Herzberg in the 1950s

in his two-factor theory of motivation. According to him, a job can be
enriched when it involves the elements of enthusiasm, challenge, and
vision. Herzberg provided eight features of an enriched job, which are
as follows:
Q Personal accountability
Q Increased and direct feedback
Q New and unique learning
Q Power to plan own work

TTTCSC—C—“(:(SC(‘(U.(CO(«*;S;
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Q Control over resources

Q Encouraged participation
Q Client relationship
Q Authority of direct communication
ADVANTAGES OF JOB ENRICHMENT
The following are some advantages of job enrichment:

Q Job enrichment makes jobs more appealing and interesting.
Q It helps employees to be responsible and self-controlled by provid-
ing them autonomy of performing different tasks.
Q It encourages employees to develop new skills.
Q Job enrichment increases job satisfaction among employees.
Q It reduces the rate of attrition.
DISADVANTAGES OF JOB ENRICHMENT
As stated by Dunham and Newstrom, Even the strongest supporters

of job enrichment readily admit that there are limitations in its appli-
cation. There are certain disadvantages of job enrichment. Some of
them are given as follows:
Q Job enrichment requires high cost for its implementation.
Q It needs resources in long term that can be difficult for an organi-
sation to acquire them.
Q It creates anxiety among employees as they sometimes are unable
to adjust with new assignments and responsibilities.
1D 4s1=I0
Job Characteristics Model- Hackman and Oldman
The job characteristics model was designed by Hackman and Old-

man in 1975. The model is based on the idea that employee moti-
vation and productivity depends largely on the task itself. A bor-
ing and monotonous job decreases the level of motivation, whereas
a challenging job enhances the motivation level in an employee.
Thus, you can say that the nature and type of job influence the em-
ployee levels of productivity.
According to Hackman and Oldman, there are five job character-

istics, which have a direct influence on an employee and thereby
impacting their work performance. These characteristics include:

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1. Task identity: An employee must be able to identify the

assigned task as whole, meaningful and complete. While
working on task identity, an employer must consider the
following two questions:
¢ Is the task has clearly defined beginning, middle and end?
@ Does an employee know how and when he/she is supposed
to complete the task?
It has been observed that a task, providing a sense of
achievement to an employee, helps in increasing the
employee’s association with the task.
2. Task significance: Tasks that make an employee feel
significant; motivate them to put more efforts. In other words,
tasks that provide a sense of fulfilment to an employee, act
as a strong motivator of performance. While working on task
significance, an employer must consider the following three
questions:
@ Does the job has a significant impact?

¢ Will it matter to people, either within the organisation or
to society?
¢ Is this task meaningful?
3. Skill variety: A task that enables an employee to use multiple
skills, contributes to a sense of importance to the employee.
While working on skill variety, an employer must consider the
¢ How many different skills and talents does the job require
person?
@ Are employees asked to do a lot of different things, or is it

a monotonous, repetitive job?
4. Autonomy: It refers to an extent to which a job allows an
employee to use independent judgements. It provides them
with the sense that the management trust them and believes
in their talent. While working on autonomy, an employer must
consider the following two questions:
@ How much freedom does an employee have to accomplish
the task?
# Does this freedom include the ability to schedule work as
well as working out on how to get the tasks done?
5. Feedback: It gives an employee the information, which they
need to improve/sustain their performance level. While

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working on job feedback, an employer must consider the

@ Is an employee kept in the loop about their performance?
¢ Are they being told when they are performing good or bad?
Here, you should note that these job characteristics impact to the
three critical psychological states (meaningfulness of work, respon-
sibility and knowledge of outcomes) of an employee. The first three
job characteristics, namely task identity, task significance and skill
variety contribute to employee’s feeling that they are engaged in
meaningful work. The next two job characteristics, namely autono-
my and feedback give employees a sense of responsibility and own-
ership over the results.
Thus, you can say that there are five job characteristics that impact
three psychological states of an employee. This ultimately results in
high intrinsic motivation, high job performance, high job satisfac-
tion and low absenteeism and turnover. The following Figure illus-
trates the job characteristics model:
- > - >) (~ >
Critical
Core Job :
Characteristics Psychological ~~
States
NY AS A y,
> r > C )
Skill variety Work
Task Identity Meaningfulness motivation
L Task ‘ask signifi icance |
signi L =
- . - : Growth
satisfaction
Autonomy Responsibility
L J L J General
satisfaction
cr >) cr >
Feedback Knowledge Work
from Job of results effectiveness
\ J XY J
Figure: Job Characteristics Model
3.6.4 JOB SIMPLIFICATION
Job simplification is a process wherein a job is broken into smaller

tasks to make the job easier and interesting. The divided tasks are
assigned to employees as individual jobs. This improves the produc-
tivity of employees by reducing their mental and physical efforts. This
approach is implemented by using time and motion studies.

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ADVANTAGES OF JOB SIMPLIFICATION
The job simplification technique has the following advantages:

Q No specialised training is required to perform small tasks.
Q Employees are able to learn small tasks faster.
Q It increases the pace of a job as it is divided into smaller tasks.
DISADVANTAGES OF JOB SIMPLIFICATION
Besides its various advantages for an organisation, there are certain

limitations to job simplification, which are as follows:
Q Performing small tasks repeatedly may induce boredom and frus-
tration among workers.
Q The level of job satisfaction among workers is very low.

10. is one of the most commonly used job design approach
that involves shifting an employee from one job to another
with an aim to add variety and prevent monotony.
11. According to , ‘Job enlargement implies that
instead of assigning one man to each job, a group of men can
be assigned to a group of jobs and then allowed to decide for
themselves how to organize the work. Such changes permit
more social contacts and control over the work process.”
12. Job enlargement is a method of expanding the scope of a job
with the addition of some more tasks and duties to it. (True/
False)
13. is a process in which employees are given
opportunities to utilise their abilities by participating the
decision-making process of an organisation.
14. Job simplification is a process wherein a job is broken into
smaller tasks to make the job easier and interesting. (True/
False)
Imagine yourself as the HR manager of a manufacturing organisa-

tion. How would you approach job rotation? Explain with some real
life examples.

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sie SUMMARY
Q Ajob may be defined as the collection of different tasks, duties and
responsibilities to be performed by an individual in order to meet
organisational goals and objectives.
Q Job analysis is an important part of the HR function and helps in
obtaining accurate, reliable, and latest information about the job.
Q Analysing a job is a systematic process that involves a number of
steps like determining the purpose of job analysis, conducting job
analysis, etc.
Q Information required for the job analysis process is broadly di-
vided into three categories namely job content, job context, and
job requirement.
Q The main sources of data collection for the job analysis process are
employees, supervisors, and managers. Different methods can be
deployed for collecting job analysis data, such as interviews, ques-
tionnaire, observation and participant’s diary/logs.
Q Job description is a written statement that defines the roles, re-
sponsibilities, and requirements of a specific job.
Q Job specification, also referred to as employee specification, is de-
fined as the statement that summarises the basic skills and attrib-
utes that should be present in a person to perform a job.
Q Job design can be defined as a process of specifying and arrang-
ing work activities of individuals or groups in an organisational
setting.
Q There are a number of approaches used by organisations to design
jobs namely job rotation, job enlargement, job enrichment and job
specification.
KEY WORDS
Q Attrition: An organisation, it is referred to as the rate at which

employees leave an organisation due to various reasons.
Q By-products: The secondary products manufactured during
the synthesis of some other products.
Q_ Job profile: The description of a particular job in an organisa-
tion in terms of roles, responsibilities, and activities of a job.
Q Job structure: The general layout of a particular job in an or-
ganisation.
Q Supervision: An action where a group of people or a set of ac-
tivities are monitored by a responsible and authorised person.

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Explain the scope of job analysis?
What are the various methods of collecting job analysis data?
Aaa OWN
Explain the process of writing job description?
What are the different features of job description?
Pp
What is the need and objectives of job specification?
Explain the process of job design?
What is job enlargement?
sey ANSWERS AND HINTS
J kts a Cs Answers
Job Analysis _ b. Hertbert G Herman
2. a. Interviews
wW : Position analysis Question-

co
naire (PAQ)
Job Description 4, Job description
Gan V 5. False
Job Specification 6. Employee specification
Aa VY The ce. Gary Desslar

Job Design 8. True
9. a. Assessing existing work

> practices
Approaches to Job Design 10. Job rotation
11. Strauss and L.R Sayles

12. True
13. Job enrichment
14. True

1. Job analysis has its scope in various HR activities such as HRR
recruitment and selection, and training and development. Refer
to Section 3.2 Job Analysis.
2. Different organisations use different types of methods
depending upon its size and type. Different methods are

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interview, questionnaire and observation etc. Refer to Section

3.2 Job Analysis.
3. The process of writing job description is very simple and varies
from one organisation to the other. The process of job description
involves steps like noting down all aspects of a job, deciding the
tasks, etc. Refer to Section 3.3 Job Description.
4. The different features of job description include job title, job
duties, supervision, machines, tools and equipment, etc. Refer to
Section 3.4 Job Description.
5. Job specification explains the qualifications, skills, experience,
and attributes that a candidate must possess for a particular job
position. Refer to Section 3.4 Job Specification.
6. Job design is a process of structuring a job so that organisational
goals and objectives can be met effectively. The process involves
different steps, such as analysing tasks, designing jobs, and
revaluating job design. Refer to Section 3.5 Job Design.
7. Job enlargement is a method of expanding the scope of a job
with the addition of some more tasks and duties to it. Refer to
Section 3.6 Approaches to Job Design.
5B} SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Ellis, G. (1970). Job analysis, description, specification, and evalu-
ation of public school teaching positions (1st ed.).
Q Fine, S., & Cronshaw, S. (1999). Functional job analysis (1st ed.).
Mahwah, N.J.: L. Erlbaum Associates.
Q Hvide, H., & Kaplan, T. (2003). Delegated job design (1st ed.). Lon-
don: Centre for Economic Policy Research.
Q Hvide, H., & Kaplan, T. (2003). Delegated job design (1st ed.). Lon-
don: Centre for Economic Policy Research.
E-REFERENCES
Q Dic.erieri.com,. (2014). Chapter 10: Job Analysis. Retrieved 4 July
2014, from http://dlc.erieri.com/index.cfm?fuseaction=textbook.
chpt10
Q Untfair.com.au,. (2014). The Importance of Job Descriptions - Un-
fair Advantage. Retrieved 4 July 2014, from http://www.unfair.com.
au/the-importance-of-job-descriptions/

RECRUITMENT AND SELECTION
CONTENTS
4.1 Introduction
4.2 Recruitment
4.2.1 Meaning and Definition
Purposes and Importance
Factors Influencing Recruitment
Sources and Methods of Recruitment
2.5 Process of Recruitment
Activity
4.3 Selection
4.3.1 Difference between Recruitment and Selection
4.3.2 Process of Selection
4.3.3 Interview: A Method for Selection
4.3.4 Steps for an Effective interview
4.3.5 Selection in India
4.3.6 Selection from a Global Perspective
Activity
4.4 Outsourcing
4.4.1 Outsourcing HR in India
Activity
4.5 Summary

RECRUITMENT AND SELECTION POLICY

OF NOKIA SIEMENS NETWORK
Nokia Siemens Network (NSN) focuses strongly on employees’

career development and has a powerful recruitment and selection
policy in place. It prefers to hire its internal candidates during the
recruitment drive. However, in case there is a lack of availability
of suitable internal applicants, external candidates are consid-
ered. NSN always maintains diverse workforce with people from
all backgrounds and different skill levels and knowledge.
NSN follows a smooth and effe interviewing and selection

process after which the final deci gis taken depending
on the results collected from t ecruitment stages, in-
The concerned man-
agers and HR personnel at NS} eceiving the required ap-
provals finally make t + decision by sending out job offer
All these years, NS hi sly focused on internal recruitment

ment. It believed that their internal
candid pable of performing at higher levels and
filling cies easily due to their supreme talent, skills,
erest to fill up vacant positions or perform in new

any issues. However, in recent times, NSN has

RECRUITMENT AND SELECTION 83
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»— Explain the concept of recruitment
Describe the importance of recruitment
List the factors influencing recruitment
yy
Discuss the concept of selection

Distinguish between recruitment and selection
rr
Explain the concept and significance of outsourcing
ZS INTRODUCTION
The success or failure of any organisation depends a great deal on the
calibre of its most important asset, i.e., its human resource. An organ-
isation cannot progress without the contribution of its people. There-
fore, it is of utmost importance for the organisation to havea staff with
necessary skills, qualities, and expertise to perform its operations and
accomplish its goals. The staffing process of an organisation consists
of two broad concepts, which are recruitment and selection.
The two critical concepts recruitment and selection are often used in-
terchangeably. However, there is a fine line of difference between the
two. Recruitment is considered to be a positive process that involves
attracting and obtaining applications from potential job seekers. It
aims at generating a pool of capable people to apply for a particular job
position in an organisation. On the other hand, selection is regarded
as a negative process that involves sorting the appropriate candidates
for the job position from the generated pool.
Recruitment and selection play a crucial role in shaping the perfor-

mance of an organisation. This is because recruiting and selecting
people effectively minimises undesirable costs incurred on high la-
bour turnover, poor performance, etc. In this chapter, you will study
the concepts of recruitment and selection, their process, and impor-
tance in detail.
ER RECRUITMENT
Do you think it is logically possible for any organisation to continue
with its existing pool of employees? The answer is no. People work,
resign, retire and sometimes become incapable of performing the as-
signed jobs due to accidents and various professional and personal
issues. The workflow of an organisation cannot stop due to such rea-
sons. Thus, to maintain continuous workflow, the organisation re-
quires new people every time. The process of finding and attracting
talented applicants for a particular job position in an organisation is

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called recruitment. Recruiting new people helps organisations to get

jobs done in order to meet organisational goals and objectives and
improve its productivity. Thus, recruitment forms an integral part of
the HR department.
It is often observed that organisations with a strong recruitment pol-
icy are successful in attracting the right pool of candidates for a job va-
cancy. An effective recruitment policy focuses on providing clear job
details to candidates or prospective employees, establishing a positive
image of the organisation, and getting the best person for the vacant
job position.
Many leading IT companies like IBM, CTS, TCS, WIPRO, Infosys, etc.
have a well-formulated recruitment policy in place. These companies
have an effective employee referral system, strong links with man-
agement consultants, regular walk-in drives, etc. These companies
structure their recruitment programs in such a way that they create
the interest of many people at a time to apply for job openings. Now,
let us study the meaning and importance of recruitment in the next
sections.
4.2.1 MEANING AND DEFINITION
Recruitment is a process of attracting the most qualified and talented

candidates for a job from a large pool of interested candidates. Re-
cruitment focuses on catching the attraction of people by making them
apply for jobs; thereby facilitating the selection process. Recruitment
has been defined differently by various management experts. The fol-
lowing are some popular definitions of recruitment:
Q According to Edwin B. Flippos, Recruitment is a process of search-
ing for prospective employees and stimulating them to apply for jobs
in the organization.
Q According to Yoder, Recruitment is a process to discover the sources
of manpower to meet the requirements of the staffing schedule and to
employ effective measures for attracting that manpower in adequate
numbers to facilitate effective selection of an efficient working force.
Q Werther and Keith state that Recruitment is the process of finding
and attracting capable applicants for employment. The result is a
pool of applicants from which new employees are selected.
Q Dale S. Beach states that Recruitment is the development and
maintenance of adequate manpower resources and it involves the
creation of a pool of available labor upon whom the organization can
depend when it needs additional employees.
Q According to William F. Glueck, Recruitment is that set of activ-
ities which an enterprise uses to attract job candidates who have
the abilities and attitudes needed to help the enterprise achieve the
objectives.

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Q In the words of Plumbley, Recruitment is a matching process and

the capacities and inclinations of the candidates have to be matched
against the demands and rewards inherent in a given job or career
pattern.
Recruitment provides an opportunity to organisations to get in

touch with a large pool of knowledgeable and talented candidates.
The recruitment process differs across different organisations de-
pending on their size, business activities, and practices.
There are broadly two types of recruitment followed in organisa-
tions, namely centralised and decentralised. The centralised struc-
ture is generally followed in small and medium-scale organisations
where all recruitment activities are performed by the HR depart-
ment of the organisation at the head office. On the other hand, the
decentralised structure is followed by conglomerates or organisa-
tions with multiple branches at different geographical regions. In
these organisations, different departments have different needs;
thus, each department executes its own recruitment process.
4.2.2 PURPOSE AND IMPORTANCE
Recruitment is one of the most fundamental and value-added pro-

cesses of HRM. It helps organisations to identify the right candidates
from a large number of people. The following points explain the pur-
pose and importance of recruitment:
Q Recruitment brings forth a large pool of candidates and ensures
that the maximum of them applies for a job vacancy.
Q It lays a foundation for the selection of the right candidate for the
right job.
Q Recruitment helps in analysing both the current and future hu-
man resource requirements of the organisation.
Q It can be used as an indicator of future HR trends; for example,
changes in the job market.
Q Cooperation and coordination with colleges, universities, and var-
ious other educational institutes can be strengthened through re-
cruitment.
Q Recruitment helps HR personnel and managers to adapt to
changes taking place in the internal and external environment.
Q Recruitment helps managers and HR personnel to manage job va-
cancies.
4.2.3 FACTORS INFLUENCING RECRUITMENT
The recruitment process of organisations is influenced by various

factors. Broadly, there are two major factors that affect recruitment,
which are shown in Figure 4.1:

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Factors Influencing
Recruitment
Internal Factors External Factors
Figure 4.1: Factors Influencing Recruitment
Let us now study these factors in detail.

Q Internal factors: These are the factors that are under the control
of an organisation. For example, if an organisation plans to expand
its business locally, nationally or internationally, it would need to
recruit more people in order to carry out operations. Apart from
this, some other major internal factors influencing recruitment are
¢ Recruitment policy of an organisation: It outlines the objec-
tives of recruitment and provides a structure for a recruitment
program. The recruitment policy of an organisation focuses
on developing a system for the implementation of recruitment
programs and procedures by filling vacant job positions with
the right candidate.
# Size of the business: If an organisation plans to expand its
operations, it needs to recruit more personnel. For example, a
new location of the organisation would require the right num-
ber of people at the right job positions.
¢ Recruitment cost: There is a cost involved in recruiting a can-
didate. Thus, organisations tend to use the recruitment method
that incurs the lowest cost per candidate.
¢ Human Resource Planning (HRP): Effective HRP helps to
identify gaps in the existing workforce of an organisation. It
also helps to determine the number of people needed to fill
these gaps and ensure the right person gets the right job based
on his/her skills and competencies.
Q External factors: These are the factors that are beyond the con-
trol of an organisation. For example, if the supply of labour is more
in the market as compared to demand, organisations would not be
able to recruit people. This would affect the recruitment policy of
organisations to a large extent. Apart from this, some of the other
major external factors influencing recruitment are explained as
follows:

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¢ Labour market: The availability of labour in the location of the

organisation influences its recruitment policy to a large extent.
Organisations may find it difficult to recruit if there is a lack of
suitable people at that particular location.
¢ Image/goodwill: A positive image and goodwill of an organ-
isation helps to attract people easily. People tend to apply to
organisations, which have a good reputation and are well es-
tablished in the market.
Q Political-legal-social environment: Various government rules
and regulations prohibiting discrimination in recruitment have af-
fected recruitment practices in organisations.
¢ Level of competition: The high level of competition force or-

ganisations to change their recruitment policy. Organisations
need to constantly monitor and analyse recruitment strategies
of its competitors to stay competitive in the market.
4.2.4 SOURCES AND METHODS OF RECRUITMENT
Organisations perform recruitment using various sources or meth-

ods. Broadly, these sources are grouped into two categories, which are
shown in Figure 4.2:
Sources of
Recruitment
Internal External
Sources Sources
Figure 4.2: Sources of Recruitment
Let us now study these sources in detail.

Q Internal sources: These are the sources where applications are
invited for a job position within an organisation. Internal recruit-
ment is done using the following sources or methods:
¢ Promotion: It involves moving an employee to a higher posi-
tion with higher responsibilities, facilities, status, and salary
within the organisation according to his/her efficiency and
performance. Promotion is regarded as one of the most reli-

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able internal sources of recruitment. Recently, Indian IT giant,

Infosys, promoted a number of staff to boost the morale of staff
and increase their performance and productivity.
¢ Transfers: It involves shifting an employee from one job to an-
other, one department to another, or one branch to another. The
nature of work, salary, benefits and other parameters may remain
the same. Transfers can be helpful in preventing the surplus of
human resource in a particular department or plant. In recent
times, Ericsson India decided to transfer a number of its staff to
various sites in India to boost their efficiency and development.
¢ Internal advertisements/job posting: This refers to a job va-
cancy being advertised within an organisation. In such a case,
only internal candidates can apply for the vacant job. Organi-
sations post job details of all available positions, job specifica-
tions, the nature of work, skills required, etc. through e-mails,
memos, magazines, newsletters, etc. Interested employees in-
form their superiors if they want to apply for a particular posi-
tion. Thereafter, employees are intimated about different pro-
cedures that they need to follow for the same. Organisations
like GE, Siemens, Philips, etc. encourage its internal employ-
ees to apply for higher job positions through its internal job
posting.
¢ Former employees: In this method, retired management per-
sonnel are called up to perform a job for a certain period of
time. Sometimes, management personnel or senior employees
are recalled from their holidays, especially in emergency cases
or in extreme needs where it becomes difficult for the organ-
isation to fill a job post. In due course, when the vacancy is
finally filled up, the person is given the additional leave. For
example, 24/7 Customer Pvt. Ltd. is an Indian organisation that
uses this method of recruitment.
¢ Employee referral/recommendations: Sometimes the exist-
ing employees of an organisation refer their friends, relatives,
or other close acquaintances for a job vacancy. Although em-
ployee referral is an effective method of recruiting reliable
people, the question of following an unfair practice may rise
up. Private Indian banks, such as Axis Bank, HDFC, and ICICI
Bank, have a policy of employee referrals.
Q_ External sources: Sometimes, the recruitment requirements of an
organisation cannot be fulfilled from the internal sources of re-
cruitment. Therefore, the organisation uses external sources of re-
cruitment to meet its requirements. Some of the external sources
of recruitment are explained as follows:
¢ Management consultants: Management experts are consulted
to recruit and select prospective candidates for higher level
positions in an organisation. These experts charge a certain
amount of money from the concerned organisation depending

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on the type of services provided by them. For example, man-

agement consultants from Hay Group provide recruitment
consultancy services to ITC Limited.
¢ Public advertisements: Organisations resort to place job ad-
vertisements in newspapers, Internet, job portals, etc. These
advertisements provide all details related to a job vacancy.
These advertisements save time and efforts of organisations
as compared to other methods. However, one major disadvan-
tage of public advertisements is that they are quite expensive.
Many Indian public sector organisations like Steel Authority of
India (SAIL), Bharat Heavy Electricals Limited (BHEL), etc.
use public advertisements to post its job vacancies and recruit
candidates.
¢ Campus recruitment: It is referred to as the main source of
recruitment for entry-level positions. Generally, large organi-
sations or reputed industrial houses contact educational insti-
tutes, such as colleges, universities, and technical and manage-
ment institutes to get a list of prospective candidates. These
institutes provide the details of students, their specialisation,
the courses offered on campus, etc. to organisations. There-
after, organisations communicate their vision, business activ-
ities, products and services, plans, work culture, nature of the
job, and career growth opportunities to students.
Campus recruitment allows organisations to conduct inter-
views of all students at one place, which saves time and efforts.
Many reputed organisations, such as HCL, Hewlett-Packard,
Infosys, and Citibank, recruit candidates through campus re-
cruitment.
Q Deputation personnel: Organisations can also hire people who

are sent on deputation by the government or any financial institu-
tion. Professional personnel might have to travel abroad or have
to stay in another location to represent his/her organisation or do
the work on behalf of another person. HSBC is a leading company
making use of such a method.
Q Professional or trade associations: Many professional services
and trade associations coordinate with organisations to partic-
ipate in the recruitment process. They publish their job listings
in journals, magazines, newsletters, web portals, blogs, etc. Inter-
ested candidates whose knowledge and skills closely match the
organisation’s requirements are contacted for further screening.
International Association of Outsourcing Professionals help with
the recruitment services of leading organisations like Canon, Cap-
gemini, etc.
Q Public and private employment agencies: Public employment

agencies are government bodies that help organisations in the
recruitment process by attracting part-time or shift-based candi-

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dates. Candidates are required to register their details with these

agencies. Whenever a job vacancy comes up in any organisation,
the agency informs the interested candidate immediately. National
Employment Service provides recruitment information on many
Indian organisations like GAIL (India) Ltd., Canara Bank, etc.
On the other hand, private employment agencies contact the suit-
able candidates, provide job details to the candidates, fix up inter-
views on the behalf of their client organisations, etc. These agen-
cies charge a minimum fee either from the successfully placed
candidate or the organisation. itForte is a leading private employ-
ment agency that provides recruitment services to organisations
like McGraw-Hill, Huawei, Essel Group, etc.
Q Executive search firms: These firms provide recruitment services
for high-level management positions and their service charges are
comparatively higher than public and private employment agen-
cies. Organisations like TATA, Mahindra, Hero, etc. have taken
assistance of GlobalHunt, a leading executive search firm, for its
recruitment services.
Q Special events: Organisations sometimes organise special events,
for example, job fairs. These events provide recruitment services
to potential candidates and give a glimpse of what organisations
have to offer. Organisations can also establish their image in the
public forum and invite people to visit their stalls in job fairs to
get a closer view on the nature of work and opportunities avail-
able. Job fairs are usually sponsored by government agencies, ed-
ucational institutes, etc. Organisations like Actozen, Intel Serve
IT Solutions, Siam Computing, Softlogic Group, Teamware Solu-
tions, etc. participated in the Institution of Engineering and Tech-
nology (IET) Advantage Job Fair 2014 to recruit candidates.
Q Vocational guidance counsellors: These are professional people
who help interested candidates to choose their career pathways
based on their interest levels, knowledge, and skills. These coun-
sellors have a good connection with top employers and operate in
schools, colleges, and universities. They guide people by providing
them important inputs on their career in the future. For example,
vocational guidance counsellors have good links with many lead-
ing educational institutions like ITT, IIM, etc.
Q Self-initiated walk-ins and write-ins: Organisations also provide
opportunities to interested candidates to apply for a job vacancy
by writing or applying online or registering their interest via e-
mail. They also conduct walk-in drives to encourage people to ap-
proach directly to the organisation and undertake the recruitment
rounds. Organisations such as Genpact, HCL, and others conduct
walk-in drives to recruit candidates.

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Q Computer databases: Organisations also store the details of all

potential applicants in their computer databases. This helps or-
ganisations to browse through any candidate’s data whenever
required and proceed with the recruitment process accordingly.
Aspiring Minds is an Indian organisation that makes use of this
recruitment method.
Apart from the abovementioned methods of recruitment, organisa-
tions use many current and innovative practices of recruitment, such
as e-recruiting. Organisations use job boards, their own websites, and
other professional websites to attract candidates. For example, organ-
isations that require HR personnel post their HR-related jobs on pro-
fessional HR sites, such as Society for Human Resource Management
(SHRM). Some of the other modern recruitment practices adopted by
organisations are as follows:
Q Corporate talent networks: With the advent of social networking
sites like Facebook, Twitter, etc., many organisations have started
using talent networks where they not only post jobs but also in-
tends to attract potential candidates. These networks act as essen-
tial product and service communities where customers, partners
and prospective employees are attracted. These networks are built
by various vendors like Smashfly, Avature, ete.
Q Social sourcing: LinkedIn and other social networks along with
technology tools such as RemarkableHire, TalentBin, Gild and En-
telo help organisations obtain information about prospective em-
ployees. Organisations can create a profile of prospective employ-
ees and map their competency levels based on personal, social and
professional data provided by candidates on social sites.
Q Modern employment brand: In recent times, organisations have
started building a ‘modern employment brand’ whereby it can
attract a large pool of interested candidates easily. Organisations
promote their job vacancies on the first page of their website apart
from the ‘Careers section’. TMP and Futurestep Pinstrip are the
firms that help organisations build this modern talent brand,
which narrows down the search for the right candidates.
Q Applicant tracking systems: Modern software systems, built by
Kenexa (IBM), Taleo (Oracle), Bullhorn, etc. help organisations
manage their overall recruitment process. The software stores im-
portant data on prospective candidates and helps recruiters anal-
yse information as needed for the recruitment process.
Q Other innovative services: Firms like Broadbean, eQuest, etc.
provide essential data and services to organisations so as to help
them analyse and enhance their recruitment process. In order to
recruit the right people for the right job, organisations take the
help of these firms to obtain essential analytical tools to measure
its recruitment process.

NOTES
4.2.5 PROCESS OF RECRUITMENT
Recruitment involves attracting a large number of candidates to apply

for ajob in an organisation. In order to ensure the right candidate gets
recruited for the right job, the HR personnel follow a systematic pro-
cess of recruitment. This process of recruitment involves five steps,
which are listed in Figure 4.3:
Recruitment
L Planning
Development—
7 Streening
j
Evaluation and
Control
Figure 4.3: Process of Recruitment
Let us study these steps in detail.

1. Recruitment planning: This is the first step in the recruitment
process wherein the HR personnel determine the number of
people needed for a particular job as well as the skills required
to perform that job.
Many employers use a recruiting yield pyramid to estimate the
number of applicants they must generate for recruiting the
desired number of new employees. Recruiting yield pyramid
reflects the percentage of job candidates at the beginning of a
step in the recruitment/selection process who moves on to the
next step in that process (Breaugh, 1992).
Let us take an example to understand how recruiting yield
pyramid works. Suppose a marketing organisation wants to hire
500 new salesmen. Based on past experience, the organisation
has the following details:
@ The ratio of offers made to actual new hires is 2:1
@ The ratio of candidates interviewed to offers made is 3:2

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@ The ratio of candidates invited for interviews to candidates

actually interviewed is 4:3
¢ This gives the organisation a fair idea that out of 60 leads,
only 10 applicant is invited for an interview (thus the ratio
is 6:1)
Considering the ratios, the organisation would know that it needs
to generate 12000 leads to invite 2000 candidates for interviews.
From these invited candidates, the organisation will then get
to interview 1500 candidates and from these it will make 1000
offers. From these 1000 offers, nearly 500 will be accepted by the
candidates. Figure 4.4 shows the recruiting yield pyramid for the
given example:
(New Hires)
100 (Offers
Made-— 2:1)
1500 (Candidates
Interviewed-— 3:2)
/ 2000 (Candidates Invited— 4:3) \
/ 12000 (Leads Generated- 6:1) \
Figure 4.4: Reeruiting Yield Pyramid
2. Strategy development: In this step, the HR personnel formulate

a recruitment strategy, which focuses on where, how, and when
to search for the right people.
3. Searching: In this step, a large number of people are grouped
together in order to screen the right candidate later.
4. Screening: This is one of the most crucial steps wherein the HR
personnel consider organisational objectives, and job description
and specification and match them with candidates’ profiles. This
helps in contacting the most suitable candidates for the vacant
job.
5. Evaluation and control: This is the last step of the recruitment
process. In this step, the entire recruitment is monitored to
identify loopholes. Corrective measures are taken in case of any
deviations.

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1. The process of finding and attracting talented applicants for a

particular job position in an organisation is called
2. Itisoften observed that organisations withastrong recruitment
policy are successful in attracting the right pool of candidates
for a job vacancy. (True/False)
3. What are the two types of recruitment followed in
organisations?
4. Internal factors are beyond the control of an organisation.
(True/False)
5. Which of the following involves shifting an employee from one
job to another, one department to another or one branch to
another?
Recommendations
2
Former employees
F
Promotions
ae
Transfers
6. Which of the following are government bodies that help
organisations in the recruitment process by attracting part-
time or shift-based candidates?
a. Private employment agencies
b. Executive search firms
ec. Public employment agencies
d . Professional or trade associations
Using the Internet, find out information on the recruitment process

of loan officers at HDFC Bank.
2 SELECTION
After a pool of candidates is attracted in the recruitment process, they
are considered for the final selection based on their suitability to the
organisation. Selection is a process of choosing candidates who have
the required knowledge and skills to do a particular job. This process
is usually carried out from a large group of potential job applicants.
The following are some popular definitions of selection:
According to Cooper et al. (2003), Selection involves the sorting out of

applicants for a vacant job and the elimination of those applicants who
do not fit the requirement of the job and/or the organisation.

NOTES
C. S. Venkata Ratnam states that“Selection is a deliberate effort of or-

ganisations to select a fixed number of personnel from a large number
of applicants.
According to Thomas, Selection is the process of differentiating be-

tween applicants in order to identify those with greater likelihood of
success in the job.
The main purpose of selection is to find out the best candidate available
from a large group of people to do the required job successfully. Most
people view selection as a negative process because there are a lot of
candidates who are rejected in this process. Sometimes due to the neg-
ligence and lack of skills and experience of HR personnel, talented can-
didates are denied the opportunity to work in an organisation. Thus,
organisations need to have capable HR personnel who can ensure the
right people with the right potential. Organisations can grow and ex-
pand in the future if they have efficient people. Having the right people
in place is not possible without an effective selection process.
4.3.1 DIFFERENCE BETWEEN RECRUITMENT

AND SELECTION
The two terms recruitment and selection are often used synony-
mously. However, these are two different concepts altogether. Table
4.1 shows the differences between the two:
TABLE 4.1: DISTINGUISHING BETWEEN RECRUITMENT

AND SELECTION
S. No. Recruitment Selection
1 Recruitment is a searching Selection is a process of choos-
process where employees are ing the best candidate among
encouraged to apply for a job. the group of interested applic-
ants to fill a job vacancy.
2 Recruitment provides a large Selection happens after

pool of candidates from which recruitment and the most suit-
only those candidates are shortl- able person is chosen from a
isted by the HR personnel whose large group of people provided
skills and qualifications closely | by the recruitment process.
match with the organisation’s
job requirements.
3 A large number of people can The best candidate is selected
apply at this stage foracertain at this stage after screening
job position. out of other candidates.
4 No contracts or terms and condi- Contracts or terms and condi-

tions are present in the recruit- _ tions are usually present once
ment stage. the candidate is selected.
Now let us study the steps involved in the selection process.

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4.3.2 PROCESS OF SELECTION
The process of selection is different from one organisation to the other

depending on the nature of work, jobs involved, etc. However, there
are a few common steps in the selection process. These steps are listed
in Figure 4.5:
Conducting preliminary
interviews
cting employment
| interviews
Performing reference
checks
og
Conducting physical
examinations
es
Offering the
appointment letter
es
Making final
selection
Figure 4.5: Process of Selection
Let us study these steps in detail.

1. Conducting preliminary interviews: This is the first step of the
selection process which involves conducting interviews with the
pool of candidates in order to eliminate non-suitable applicants

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based on the information given in their profiles. It is also known

as an initial ‘meet and greet’ step.
2. Filling an application blank: After a preliminary interview, an
application form is filled up by candidates. The form usually
asks for details, such as personal information, educational
background, work experience, etc. to be filled up by candidates.
After that, application forms are screened to eliminate all
unwanted applications. Candidates whose application forms are
screened successfully are called up for the employment test.
EXHIBIT
Sample Application Blank

Personal Information
Name: Mr./Mrs./Miss
Father’s/Husband Name:
Date of Birth:
Marital Status:
Residential Address:
Phone Number (Res):

Education
a. Highest Degree
b. BA/B.Sc/B.Com
ce. BE/B.Tech/M.Tech
d. MA/M.Sc/MBA/M.Com
e. Any Other
College/university last Attended:
High School:
Work Experience (List most recent first)

Q Name of the organisation:
Q Date ofemployment: From to
Q Job Designation:
Q CTC:
(annual be sure to include any bonuses or commissions earned)
Name of the supervisor:
u
Reason(s) for leaving:

u

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Name of the organisation:
OovovO
Date ofemployment: From to
Job Designation:
CTC:
OU
OU
Name of the organisation:

Ooovo
Date ofemployment: From to

Job Designation:
CTC:
Oo

Oo
Q Work Skills
1. List the languages you are able to speak or write:
a.
b.
c.
d.
2. List any job-related clerical or technical skills that you
have (such as typing or computer programming)
a.
b.
c.
d.
Additional Information, If any
Q
Q Declaration
I understand that falsification of information is grounds for dis-
missal and in the event of its being found incorrect at any stage;
I may be disqualified from service.
I understand that my employment with the company may be
discontinued at any time for any reason, either by myself or the
company.
I agree to submit a drug or alcohol test as a condition of em-
ployment.
Q Date: Signature:

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3. Conducting employment tests: The candidates whose

applications forms are successfully screened are invited to
participate in employment tests: for example, ability tests,
aptitude tests, personality tests, graphology tests (handwriting),
psychometric tests, etc. These tests help the HR personnel
to judge whether the candidate would be able to perform the
required job. The tests are framed according to the organisation’s
requirements and the nature of job.
EXHIBIT
Types of Employment Tests and Their Significance
Recruiters use one or more of employment tests depending upon

the kind of job for which they are selecting the candidates. Major
employment tests are:
Q Ability/achievement/trade tests: The ability tests measure how

well a candidate can perform the tasks of a particular job. In
other words, it is a proficiency test of a candidate. Ability test
may also be called achievement tests or trade tests. The compo-
sition of such tests shall differ from job to job however all such
tests shall be directed at confirming the claims of the candidate
regarding his/her ability.
Q Aptitude tests: All candidates do not come with prior experi-
ence or proven track-record of their abilities. In such cases ap-
titude tests prove to be very effective. Aptitude tests attempt to
find out the latent potential of a candidate towards a particular
job; not only in terms of performing it in the future but also
learning the same. Aptitude tests are of various types:
¢ Intelligence tests: These tests try to measure the overall in-
telligence of the person to do the job and solve various prob-
lems that he/she might encounter while doing the job.
¢ Mechanical aptitude tests: These tests measure orientation
of a person to perform a mechanical job.
¢ Skill tests: Such tests attempt to determine whether the
skill of the person in doing a particular job is at compilation
(just acquired skill) or at automaticity (expertise) level.
Q Situation tests: Situational tests are thought to be very effec-
tive in the selection process as they exhibit a candidate’s ability
to think, ideate, his/her decision-making ability and many-a-
times a reflection of their attitude and approach. In situation
tests candidates are given scenarios that are close to real-life
ones and then tested on how they react to the same. Some ex-
amples of situation tests are:
¢ Role plays: In ‘role plays’ a group of candidates are provid-

ed a situation, usually a problem, which they have to enact
and find solutions for the same.

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¢ Group discussion: A group of candidates is provided a topic

on which they are supposed to discuss, explore multiple per-
spectives and comment. In the process they are expected to
develop a solution or possible alternatives.
¢ In-basket exercises: A candidate is given a series of tasks
that he/she has to complete in a fixed period of time, for ex-
ample, issuing a warning letter, memo, writing to supplier,
commenting on a new policy by the company, reviewing re-
quests by some employees, etc. The speed and proficiency
with which a candidate deals with each of such items in the
basket are recorded and the data is used in selection pro-
cess.
Q Interest tests: A candidate’s interest towards a particular ca-
reer or occupation may be at times tested by the employers,
since a genuine interest is seen as a precursor to someone doing
a good job.
Q Personality tests: Most jobs demand a certain set of personality
traits for example a sales person must be extrovert and social.
Similarly, a BPO executive must know how to avoid early burn-
out. Some employers use personality test to ensure a better can-
didate-job fitment.
Q Projective tests: These tests are designed to test the interpre-
tation that a candidate makes about photos or pictures that he/
she is confronted with. It is a type of personality test designed to
let a person respond to ambiguous stimuli, presumably reveal-
ing hidden emotions and internal conflicts. Unlike an “objective
test” in which responses are analysed according to a universal
standard (for example, a multiple choice exam), the responses
to a projective test are analysed in subjective manner.
Q Graphology test: Graphology test is essentially a test of a per-
son’s handwriting. Graphology test can tell a lot about the per-
son — his emotions, his ego, his idiosyncrasies, his attitude, per-
ception etc. The choice of selection test/tests to be employed by
the employer in the selection process shall depend upon need,
applicability, feasibility and cost to be incurred in administering
a test.
Organisations, usually receive a number of applications for a

particular job position. Employment tests help in selecting the
suitable candidates having required characteristics for the posi-
tion. In other words, these tests provide a cut-off point to the or-
ganisation above which it may call candidates for the interview.
Employment tests are standardised and unbiased method of select-

ing candidates. Moreover, these tests provide information about the
abilities, quality and potential of prospective employee, which can-
not be predicted through other methods.

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4. Conducting employment interviews: Candidates who qualify

employment tests are called up for interviews. These interviews
are managed by the HR personnel of the organisation.
Employment interviews used for the selecting candidates can
be structured or unstructured. In structured interviews, the
questions are prepared well in advance that have to be asked in
interview from the applicants. On the other hand, non-directive
or unstructured interview does not have a specific format or
sequence for asking questions. Let us discuss the various types
of employment interviews:
¢ Situational interview: In this type of interview, a candidate
is given a hypothetical or real-life situation that he/she might
have encountered on the job and then is asked to explain the
actions that he/she have taken to handle the situation.
¢ Behavioural interview: Behavioural interview questions are
based on the ground that past behaviour is the most accurate
predictor of future behaviour. In this type of interview, a can-
didate is asked questions related to an actual situation that
he/she had encountered in the past. These questions reveal
things about the candidate’s skills, abilities, and personality.
The behavioural interview questions try to interpret that how
a person behaved in the past reflects how he/she will behave
in the future.
¢ Stress interview: Stress interviews assess a candidate’s
stress tolerance level. In this, interview type, a stressful sit-
uation is given to the candidate and is asked to respond ac-
cordingly.
¢ Personal interview: It is a face-to-face method of taking an
interview. It is conducted in a form of a conversation where
questions are asked by the interviewer and answers are given
by the interviewee. Thus, personal interviews refer to one-to-
one interview method where the interviewer and the inter-
viewee are the only two participants.
¢ Sequential interview: Sequential interview follows a se-
quence or process where several persons interview a candi-
date separately before taking final decision.
¢ Board interview: Board interview involves a panel or board
of interviewers, who interview a single candidate. The inter-
viewers arrive at a final decision by combining the scores of
all the interviewers.
Employment interviews provide an opportunity for the
organisation to get more information about the candidate by
meeting face to face with him/her. An organisation by means
of interview can obtain information of candidates on various
aspects, such as knowledge, attitude and communication ability.

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The main purpose of the interview is to find out the suitability

of the candidate for the job and to give him/her details about the
terms and conditions of employment.
5. Performing reference checks: It involves checking the previous
employment records, qualifications, and various other personal
details of candidates who get through the employment interview.
This is done to verify the information given by the candidates.
Reference checks are generally performed by contacting the
superiors of candidates in their present organisations, their family
members, friends, etc. through letters, telephone, and e-mail.
6. Conducting physical examinations: In this step, candidates are
required to proceed for a physical examination. Most organisations
require a medical certificate from a known doctor or a hospital to
ensure that the candidate is physically fit to do the job.
7. Offering the appointment letter: An appointment letter is
given to candidates who have been successful in all the previous
rounds. The appointment letter mainly includes the date by
which the candidate must join the job. It is essential that the
appointment letter should have a provision for the reasonable
time for reporting for the appointee. This provision provides
adequate time to the new appointee to prepare for the relocation
as required by the job or to obtain a relieving certificate from the
previous employer, if the candidate is already in employment.
EXHIBIT
Sample Appointment Letter
Date:
To,
Mr/Ms. <Name>,
Welcome to <Company Name>
Sub: Letter of Appointment
I am pleased to offer you employment in the position of <designa-

tion> with <company name>.
I am eager to have you as part of our team. I foresee your potential
skills as a valuable contribution to our company and clients. Your
appointment as <designation> will commence on <date>.
As <designation>, you will be entitled to a monthly starting remu-

neration of f 00,000/- (Rupees............. only) which indicates cost to
company. You will be on probation for a period of six months.

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Regular performance review will be conducted to assess your per-

formance and suitability. Your continued employment at <company
name> is dependent on your successful completion of the proba-
tion period. Your salary will be reviewed after a period of 6 months
and thereafter every 12 months. You will be entitled to all allowanc-
es and benefits whatsoever decided by the management.
You shall receive your payment before 5th of every month. Leave
and other company policies are available at <website link>. These
policies are reviewed and posted at our website from time to time
by the management of <company name> for your benefit.
Your signing this appointment letter confirms your acceptance of
the terms and conditions and that you would be joining <company
name> on the given date. Please sign and return duplicate copy of
this letter in token of your acceptance.
I am looking forward to working with you.
Yours truly,
<Name>,
<Designation>
<Company name>
<Date: dd/mm/yyyy>
8. Making final selection: This is the final step in which the

candidate is selected after he/she handed in the signed and
accepted appointment letter and is now ready to join the
organisation.
4.3.3 INTERVIEW: A METHOD FOR SELECTION
The term interview can be defined as a conversation between two or

more people wherein a series of questions are asked from one per-
son in order to collect information about the person. It can take place
through various modes, such as face-to-face interaction, telephone,
and video chats. According to Jucius Michael, An interview is a face-
to-face, oral, observational, and personal appraisal method. The person
who asks questions is called the interviewer while the person who
responds to the questions is called the interviewee.
Interview is used an effective selection method as the interviewer as-

sesses the interviewee and decides whether the person is suitable to
perform the job. There can be one or more persons in the interview
panel and the questions are framed by HR personnel in consultation

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with managers. An interview involves questions related to personal,

technical, or professional matters of the candidate. The interview
helps the employer to evaluate the ability, knowledge, qualifications,
expertise, and aptitude of the candidate.
The following are the advantages of the interview method:

Q Interviews can assess the candidate’s communication and social
skills.
Q The interviewer can get additional information about the candi-
date apart from the details given in the application form and re-
cruitment results.
Q_ Interviews help to assess the applicant's job knowledge.
Q = Itisa useful selection tool to select the best candidate from a group
of talented candidates.
Q Interviews help managers and HR personnel to find out if there is
any connection between the candidate and the existing employees.
However, the interview method has certain disadvantages. Some of

them are as follows:
Q Interviews are subjective in nature.
Q Sometimes, quick decisions have to be taken with regards to se-
lecting the candidate.
Q. Incorrect information may considered to be correct in some instances.
Q. Interviews are not as reliable as employment tests.
4.3.4 STEPS FOR AN EFFECTIVE INTERVIEW
There are mainly two major phases of an effective interviewing, which

are listed in Figure 4.6:
Preparing for the Interview
Conducting the Interview
Figure 4.6: Major Phases of an Effective Interview
Let us now study these phases in detail.

1. Preparing for the interview: The interviewer must prepare for
the interview before actually conducting it. Preparing for an
interview involves the following steps:
i. Going through the job details, application blanks, and other
relevant documents.

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ii. Planning questions, which involves deciding the number of

questions to be asked, time taken for each question, nature of
questions to be asked, relevance of questions to the job, etc.
iii. Preparing ways to answer possible questions put up by the
candidates.
iv. Finding any additional information to be given to candidates.
2. Conducting the interview: After preparation, finally the
interview is conducted by the interviewer. The interview needs
to be conducted in a peaceful environment where there are
no disruptions and the interviewee finds the confidence to
answer questions freely. The interview should be started if all
necessary arrangements are made. Here, it should be noted
that the main objective of an interview is to gather as much
information as possible from the candidate. Thus, it is important
for an interviewer to put up only those questions that can help in
collecting information about the candidate. The interview should
follow the steps given below while conducting an interview:
i. A brief introduction of all the members of the interview panel
as well as of the organisation should be given to the candi-
date.
ii. Questions should be asked in a structured pattern.
iii. The answers given by the candidate should be listened prop-
erly and the notes should be taken for important points.
iv. The interviewer should ensure that the candidate is aware
of the terms and conditions and all relevant details about the
job.
v. The candidate should be informed about the organisation’s
final decision.
4.3.5 SELECTION IN INDIA
Selection practices spread across various sectors in India, for example,

IT, judicial, oil and gas, manufacturing, healthcare, engineering, hos-
pitality, etc. In the IT sector, many IT companies used the structured
interviews and reference checks in their selection process. Many IT
companies combined both structured and unstructured interviews to
obtain greater flexibility and evaluate a candidate’s personal attributes
better. Research studies have found that IT companies focused more
on behavioural description interviews than situational interviews due
to its greater validity and flexibility. Reference checks are also carried
out by IT companies to verify information on a candidate’s resume.
Reference and background checks were outsourced to external agen-
cies by IT companies in order to save time and ensure quality.

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Indian Oil, a top public sector oil and gas corporation, uses application
blanks, resumes, mental ability tests, work samples, personality tests,
etc. as a part of its selection practices. Indian Oil also uses structured
(behavioural and situational), semi-structured and unstructured in-
terviews. However, due to greater reliability and validity, structured
interviews are mostly used by Indian Oil.
Various personality tests and structured interviews are used as a part

of best selection practices by Indian manufacturing companies. Struc-
tured interviews are used by Indian companies in other sectors like
healthcare, engineering, hospitality and education, etc. This is mainly
due to high reliability and validity levels.
Let us understand how selection happens in the Indian judicial sector

with the help of an example. In India, the judges of district courts,
high courts, and supreme courts are selected differently. The eligibil-
ity criterion for the selection of a high court judge is that the person
should have worked as a judge in a district court for a minimum peri-
od of 10 years.
Generally, vacancies for the post of high court judges, the chief jus-
tice, and other senior-level positions are drawn up from within the
judicial system, which implies that these vacancies are not advertised
externally. The Chief Justice of High Court forwards the names of the
potential candidates to the Chief Justice of India to get confirmation
about their selection. The confirmation is done based on the knowl-
edge, intelligence, skill levels, and work experience of the candidates.
After the Chief Justice of India (along with four other senior judges of
the Supreme Court) approves the names of the potential candidates,
these names are sent to the President of India for approval via the
union government. However, the Chief Justice of India and the team
of members at the apex court have authority to reject the selected
names in case they find they are not appropriate for selection.
The judges of the Supreme Court are selected from the chief justices
of high courts of different states or the presiding judge who is the se-
nior most in various states.
4.3.66 SELECTION FROM A GLOBAL PERSPECTIVE
Most of the organisations around the world use processes of selection

which are not much different from each other. For example, in the US,
there is a process of ranking candidates based on their performance
in interviews. This process is also adopted by many European coun-
tries where the knowledge, skills, experience, and intelligence of can-
didates are tested during the selection.

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Global organisations face some major problems during the selection

of potential candidates. One such major problem is cultural variations
among nations. For example, the culture in China, Japan and other
south-east Asian countries are strikingly different from the American,
European, or Australian culture. The working patterns, lifestyle and
the overall environment are also quite different in all these nations.
Each country has their selection styles. For example, in Mexico, there
is a strong need to have the right connectivity levels in order to select
candidates. Likewise, in China, Korea and Indonesia, employee tests
take place which are not so common in other countries. Similarly, in
Japan and Taiwan, potential candidates are selected by judging how
well they manage to work cooperatively with others, which is again
not so common in other countries. Moreover, some countries prioritise
certain selection trends while other countries take alternative routes.
7. is a process of choosing candidates who have the

required knowledge and skills to do a particular job.
8. Most people view selection as a positive process because there
are a lot of candidates who are rejected in this process. (True/
False)
9. The process of selection is different from one organisation to
the other depending on the nature of work, jobs involved, etc.
(True/False)
10. Which of the following is the first step in the selection process?
a. Filling an application blank
b. Conducting employment tests
ce. Conducting employment interviews
d. Conducting preliminary interviews
11. The person who asks questions is called the
while the person who responds to the questions is called the
12. Name the two stages for an effective interview?
Using various sources, such as employment newspapers, job por-

tals, etc., collect information on the selection process of senior lab
technicians at AIIMS.

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ZS OUTSOURCING
With the advent of advanced technologies, there is a drastic change in
the business world. For example, different telecommunication tech-
nologies have diminished the barriers to distance and communication
among different organisations around the world. Apart from this, the
cutting-edge information technology has shrunk the geographical lim-
itations for business practices. Technology has enabled organisations
to avail services from any part of the world. This act of business organ-
isations is termed as outsourcing.
Outsourcing has become a buzzword in today’s globalised world. It

is a process of hiring another organisation for performing some part
of an organisation’s business operations. For example, organisations
outsource their services, such as system maintenance, system opera-
tions, site development plans to IT companies like IBM, HP etc. Apart
from this, financial organisations also outsource services like bill col-
lection, customer care, ete. to external agents, consultants or client/
partner companies.
It is a universal fact that resources are not in equal quantity in all the
parts of the world. For instance, India is a labour-intensive country,
while Japan is a technology intensive country. Outsourcing has en-
abled business enterprises to acquire all types of physical and intel-
lectual resources from around the world to carry out their operations.
Thus, it can be said that outsourcing is a way through which organisa-
tions can execute business activities profitably.
There can be various reasons for outsourcing but the common ones
are given as follows:
Q Outsourcing helps organisations to maintain low costs as a major
part of the business is allocated to external organisations.
Q It enables organisations to focus on core competencies by out-
sourcing a non-value adding part of the business to external par-
ties.
Q Outsourcing leads to an increase in the productivity and flexibility

level of organisations by enabling them to adapt to the changing
business environment.
Q_ It enables organisations to incorporate effective budgetary control

and gain international exposure.
There are mainly four stages of outsourcing, which are listed in

Figure 4.7:

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Strategic thinking
Evaluation
and selection
Contract
development
Outsourcing mana-
gement or governance
Figure 4.7: Stages of Outsoureing
Let us now study these stages in detail.

1. Strategic thinking: At this stage, an organisation determines the
purpose of outsourcing its processes to external organisations.
An organisation outsources its processes due to various reasons
like achieving cost effectiveness, focusing on core competencies,
increasing productivity, etc.
2. Evaluation and selection: This stage involves deciding the
work location, the projects to be outsourced, and by whom the
outsourcing needs to be done.
3. Contract development: All necessary Service Level Agreements
(SLAs), terms and conditions, costs, etc. are negotiated and
finalised at this stage.
4. Outsourcing management or governance: This stage involves
reviewing and further improving the organisation’s and client
relationship.
The outsourcing process can only be successful if organisations
provide support and maintain a continuous communication
flow with the client outsourcing firms. Similar to other services,
organisations nowadays are also outsourcing their HR practices
to external organisations. Let us study about the outsourcing of
HR practices in detail.

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44.1 OUTSOURCING HR IN INDIA
Human resource outsourcing in India is currently becoming popular

among the masses. Big to small-scale firms are getting into this recent
trend. The latest size of outsourcing of HR practices in India is about
$2 billion, the current market of $27 million, and the growth rate of
about 50 per cent. Although these figures suggest that outsourcing of
HR practices in India is the recent craze, many organisations are hav-
ing a lethargic attitude to implement the process.
Foreign multinational companies outsource their HR activities in In-

dia due to various reasons, such as easy availability of workers, low
costs, achievement of top quality services, presence of good facili-
ties, high-class processes, etc. Companies like IBM, HP Fidelity, GE,
Hewitt, etc. also provide HR outsourcing solutions, which has led to
the generation of a large number of job opportunities in India.
13. is a process of hiring another organisation for

performing some part of an organisation’s business operations.
14. Outsourcing has enabled business enterprises to acquire all
types of physical and intellectual resources from around the
world to carry out their operations. (True/False)
Using the Internet, find out the outsourcing process followed at

Genpact India.
Ze SUMMARY
Q = The process of finding and attracting talented applicants for a par-
ticular job position in an organisation is called recruitment.
Q The recruitment process differs across different organisations de-
pending on their size, business activities, and practices.
Q Recruitment is influenced by various internal factors, such as, re-
cruitment policy of the organisation, the size of business, growth
and expansion plans of the organisation, and recruitment cost;
and external factors like labour demand and supply; political, so-
cial, and legal environment; level of competition; etc.
Q There are various internal and external sources of recruitment,
namely promotions, transfers, job posting, employee referrals,
management consultants, public advertisements, etc.
Q In order to ensure the right candidate gets recruited for the right
job, the HR personnel follow a systematic process of recruitment.

NOTES
Q Selection is a process of choosing candidates who have the re-

quired knowledge and skills to do a particular job.
Q The process of selection is different from one organisation to the
other depending on the nature of work, jobs involved, etc.
Q The term interview can be defined as a conversation between two
or more people wherein a series of questions are asked from one
person in order to collect information about the person.
Q The person who asks questions is called the interviewer while the
person who responds to the questions is called the interviewee.
Q Outsourcing has enabled business enterprises to acquire all types
of physical and intellectual resources from around the world to
carry out their operations.
KEY WORDS
Q Budgetary control: A process of using monitoring and perfor-

mance standards for controlling the income and expenditure of
an organisation.
Q Interview panel: A group of interviewers who interview the
candidate for a job vacancy.
Q Labour-intensive country: A country where organisations re-
quire a large amount of labour for the production of their goods
and services.
Q Outsourcing: A cost-saving method where organisations give
out contracts for their business to a third-party member.
Q Promotion: A movement of an employee to a higher rank from
the current position in an organisational hierarchy.
Q Reference checks: A process of authenticating the information
provided by a candidate. This information can be related to ed-
ucational background, personal details, work experience, etc.
Explain the concept of recruitment.
oe NP
Discuss the methods of recruitment.

oP
Explain the process of recruitment.

Explain the process of selection.
Discuss the advantages and disadvantages of the interview
method.
6. Elaborate on outsourcing HR in India.

NOTES
ZW ANSWERS AND HINTS
Topic 2 a Cos Answers

Recruitment He Recruitment
2. True
3 Centralised and Decentralised

4, False
5. ce Transfers
6. c. Public employment agencies
Selection Selection
AAO ~-
8. False
10. d. Conducting preliminary

interviews
a. _ a. Interviewer, interviewee
12. Preparing for the interview and
Conducting the interview
Outsourcing 13. Outsourcing
14. True

1. Recruitment is a process of attracting a large pool of candidates
with a view to fill up a particular job position in an organisation.
Refer to Section 4.2 Recruitment.
2. There are two methods of recruitment: internal and external. The
internal methods can be promotions, transfers, job posting, etc.
The external methods can be campus recruitment, management
experts, and public and private employment agencies. Refer to
Section 4.2 Recruitment.
3. The recruitment process consists of five steps, which are
recruitment planning, strategy development, searching, screening
and evaluation and control. Refer to Section 4.2 Recruitment.
4. The process of selection varies from one organisation to another
depending on the nature of work, jobs involved, etc. Refer to
Section 4.3 Selection.
5. The interview method has a number of advantages, such as it
helps to assess a candidate’s communication skills. However, it is
very subjective in nature. Refer to Section 4.3 Selection.

N OT ES
6. HR outsourcing in India has become very popular in recent years

due to its cost effectiveness and quality services. Refer to Section
4.4 Outsourcing.
EI SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
Q Armstrong, M. and Taylor, S. (2014). Armstrong’s Handbook of Hu-

man Resource Management Practice. (13th ed.). New Delhi: Ko-
gan Page Publishers.
Q Dwivedi, R. S. (2009). A Textbook of Human Resource Manage-
ment. (1st ed.). New Delhi: Vikas Publishing House Pvt. Ltd.
E-REFERENCES
Q Careerride.com. (2014). Human resources recruitment interview

questions and answers. Retrieved 08 July 2014, from: http://career-
ride.com/Interview-Questions-HR-Recruitment.aspx
Q Akrani, G. (2014). Internal and external sources of recruitment -
merits demerits. Retrieved 08 July 2014, from: http://kalyan-city.
blogspot.com/2011/07/internal-and-external-sources-of.html
Q Jpk.tjtc.edu.cn. (2014). Chapter 4 recruitment. Retrieved 08 July
2014, from: http://jpk.tjtc.edu.cn/08/jiudian/3_Lect/d04.htm
Q Studyvalue.com. (2014). Define selection of employees in hrm, pro-
cess of selection. Retrieved 08 July 2014, from: http://studyvalue.
com/_ management_sciences/ hrm/define_ selection
Q = Citeman.com. (2014). Global differences and similarities in hr prac-
tices. Retrieved 08 July 2014

INDUCTION AND ORIENTATION
CONTENTS
5.1 Introduction
Induction
Need for Induction
Process of Induction
Merits and Demerits of Induction
Activity
5.3 Orientation
5.3.1 Purpose of Orientation
5.3.2 Types of Orientation
5.3.3 Process of Orientation
5.3.4 Effectiveness of Orientation Program
5.3.5 Problems of Orientation
Activity
5.4 Summary

INDUCTION AT NIIT
NIIT Ltd is a global talent development company that offers

training and educational solutions to individuals, corporates, and
schools in various fields, such as information technology, business
process outsourcing, banking finance and insurance, manage-
ment education, school education, professional life skills, voca-
tional skills, etc.
Being a technology driven company, NIIT has developed a unique

induction program to address new employees at different loca-
tions at the same time. The induction program at NIIT begins
centre called School for Empl« : ion and Development

(SEED) where its induction progra nducted. The induc-
In 2007, NIIT co 1 NIP IT Induction Program) that cre-

ated a breakthrough in tl nduction was done. This session
was a first of i ITians simultaneously attended
ive cities on a synchronous learning
ucting induction that aims at making em-

ae company’s values irrespective of their busi-
or the leadership team consisting of senior managers of

mpany. The program is referred to as Immersion. The new
ers are introduced with the employees with whom they will
be closely working and who are already present in the organisa-
tion. This is how NIIT conducts the induction of new employees
introducing them to the organisation and the existing employees.

INDUCTION AND ORIENTATION 117
NOTES
©@ LEARNING OBJECTIVES
After studying this chapter, you would be able to:

»— Explain the concept of induction
Describe the need for induction
yy
Discuss the concept of orientation

Explain the process of orientation
rr
Elaborate on the importance of orientation
sei INTRODUCTION
Orientation and induction are the two most important activities of the
HRM function of an organisation. These two activities aim at famil-
iarising newly appointed employees to the work environment of the
organisation and the fellow employees. The two terms orientation and
induction are often used synonymously. However, there are certain
differences between the two.
Induction is a socialising process wherein an organisation introduces

new employees to its policies, rules, regulations, work culture, etc. On
the other hand, orientation involves communicating job roles and re-
sponsibilities to new employees. Induction and orientation can take
place through various modes, such as classroom lectures, discussions,
handbooks, and manuals.
Both induction and orientation builds up the confidence of new em-

ployees, develops a feeling of loyalty towards the organisation, and
fosters a close and cordial relationship among employees. Moreover,
they ensure that new employees do not form a false impression and
negative attitude towards the organisation or the job. In this chapter,
you will study about induction and orientation in detail.
swag INDUCTION
When an employee joins a new organisation, it takes time for both
the employee and the organisation to adjust with each other. This is
because the employee may feel anxious or excited or even a little con-
fused on the very first day of the job. On the other hand, for the organ-
isation, it is about creating the first impression on the employee. In
such a case, it is important for the organisation to form a connection
with the employee so that he/she can feel comfortable, get along with
people, and adjust with the work environment. For this, the organisa-
tion conducts a welcome program that involves formally introducing
the employee to the work culture of the organisation. Such formal in-
troduction program is called induction.

N OT ES
Induction is a formal process of introducing new employees to the

work environment. The process begins with the entry of employees
into the organisation which later fuses with the training and develop-
ment process. According to R. P. Billimoria, Induction is a technique
by which a new employee is adjusted into the changed surroundings and
introduced to the practices, policies, and objectives of the organization.
Thus, induction is believed to motivate employees to quickly adapt to
the organisation, which, in turn, increases their productivity.
The main aim of induction is to familiarise newly appointed employ-

ees with the organisation’s vision, mission, goals, and objectives. An
induction generally provides a brief introduction about the history,
culture, values, functions, processes, products and services, and pol-
icies and standards of the organisation to new employees. Moreover,
employees are communicated the expectations of the organisation
from them.
Induction is not limited to new employees only rather it can be con-

ducted for those who are promoted to higher ranks and transferred
to other locations.
5.2.1 NEED FOR INDUCTION
An effective induction program lays a foundation for a strong employ-

ee-employer relationship. This in turn makes new employees be pre-
pared for their contribution towards the growth and development of
the organisation. The need for induction can be understood from two
perspectives, which are given in Figure 5.1:
Organisation's Perspective
Employee's Perspective
Figure 5.1: Need for Induction
Let us study about these two perspectives in detail.

Q Organisation’s perspective: The need for induction from the or-
ganisation’s perspective is explained in the following points:
¢ Reduces start-up cost: Induction helps new employees to get
familiar with the organisation’s vision, mission, and expecta-
tions. This in turn enables employees to quickly adapt to the
work culture of the organisation; thereby saving start-up cost
involved in learning a new job.

N OT ES
¢ Reduces employee turnover: Employees tend to leave if they

are not comfortable in the organisation or find it difficult to
strike a balance. A well-designed induction program intends
to inform employees that they are valued by the organisation.
It also makes employees aware of career growth opportunities
possible for them in the organisation. This induces a sense of be-
longingness in employees; thereby reducing employee turnover.
¢ Saves time for supervision: As the induction program edu-
cates employees about various important aspects of the organ-
isation, it saves a lot of time of supervisors and managers in
training them. Moreover, employees are able to better co-ordi-
nate their tasks.
Q Employee’s perspective: The following points discuss the need for
induction from the perspective of employees:
¢ Reduces anxiety: An induction program not only introduces
employees to the organisation’s functioning but also addresses
their concerns that they may have about the organisation. This
is done by creating a memorable and positive impression of the
organisation on employees on the first day of their job.
¢ Increases job satisfaction: An induction program aims at in-
forming employees about the organisation’s policies related to
work hours, leaves, benefits, and code of conduct. This develops
a positive and realistic impression of an organisation on employ-
ees, thereby boosting the level of job satisfaction in employees.
5.2.2 PROCESS OF INDUCTION
Induction is a systematic process that aims at informing employees

about every aspect of the organisation that they should know to per-
form their jobs effectively. The induction process differs across organ-
isations depending on their requirements. However, there are certain
steps that are common in the induction process of all organisations.
These steps are listed in Figure 5.2:
Step1
Collecting Step2
information [ening be[_SteP3
sectives of
theinduction | Definingthe | __ Step
program audience Deciding the Step 5
content and
mode
of delivery] Providing
feedback
Figure 5.2: Steps in the Induction Process

N OT ES

1. Collecting employee information: This is the first step in the
process of induction wherein employees’ details, such as their
name, contact details, location, the concerned department or
division, are recorded. Generally, the complete information
of the employee is acquired through various sources, such as
application blank, resume, job portals, etc.
Identifying the objectives of the induction program: It is
important that an induction program should have clear objectives
so that it can better serve its purpose. To develop the objectives of
the induction program, HR personnel can seek suggestions from
departmental heads and other concerned senior employees to
understand their needs and expectations from new employees.
This helps the HR personnel to decide the content that should
be present in the induction program.
Defining the audience: The HR personnel must be aware of the
audience who should be attending the induction program. For
instance, the new joiners can be fresh graduates or experienced
managers. In this case, it is important to identify the diversity
or similarity between the groups of new employees so that the
induction program can be planned accordingly.
Deciding the content and mode of delivery: In this step,
the content and the mode of delivery is decided based on the
objectives of the induction program and the target audience. The
program may be formal or informal, stable or variable, group or
individual oriented, or sequential or non-sequential. Depending
on the requirements and resources, the HR personnel can select
from a variety of delivery modes, such as face-to-face interaction
with each employee, classroom sessions, e-learning sessions for
multiple audience at various centres, off-site sessions, etc.
Providing feedback: In this step, the HR personnel seek
feedback from the audience to know the effectiveness of the
induction program. The feedback helps the HR personnel in
keeping an updated content for the induction program for every
session. Moreover, it enables the personnel to discover the areas
of improvement and rectify them. It is generally suggested that
feedback should be taken twice; one at the end of the program and
another after 90 days of the induction program when employees
have been in the job for quite some time.
EXHIBIT
Induction at Mahindra and Mahindra
Corporates are adopting new methods of inducting their new re-

cruits, thus the induction programs are no longer the same they

N OT ES
used to be in earlier times. Corporates are aggressively coming out

with new ideas and methods of induction. One such example is Ma-
hindra and Mahindra that took more than 25 of its new recruits on
‘Bharat Darshan’ as a part of their induction program. For this, the
trainees visited MVML Pune Factory in Chakan, Mahindra retail in
Bangalore, Mahindra Satyam in Hyderabad, M&M Development
Centre in Nasik, Mahindra Holidays in Chennai and club Mahin-
dra resort in Pondicherry. Along with this, the trainees also got an
opportunity to interact with Anand Mahindra, Vice-Chairman and
Managing Director of Mahindra and Mahindra.
The trainees who had undergone the induction program felt it as an

eye-opener for them about the organisation. They were able to know
and understand the similarities and differences among the group
and counterparts and the work culture at different locations of the
organisation. The employees felt that they couldn’t have understood
these facts sitting and working in the office of their joining location.
After visiting different locations, employees were able to know the
communication network of the organisation, how the centralisation
and decentralisation of decision making is done and how the organi-
sation is able to provide various growth options to its employees.
5.2.3 MERITS AND DEMERITS OF INDUCTION
Without an effective induction program, employees would need to learn

about the functioning of an organisation on their own. This may utilise
more time and resources of the organisation than required. Moreover,
employees may have low morale and can find it difficult to work in a
team. Thus, it is important that an effective induction program should
be in place in the organisation. The following are some advantages of
induction:
Q It is observed that the employee turnover rate during the early
months of joining is higher among employees. An effective induc-
tion program helps employees to get comfortable with the organi-
sation and hence reducing the turnover rate.
Q An induction program also presents the worth of the organisation
to employees. This wins loyalty and commitment of employees to-
wards the organisation.
Q An induction program provides employees with an opportunity to
know and connect with fellow employees.
Q An induction program allows an organisation to inform employees
about its expectations regarding behaviour, attitude, and code of
conduct.

N OT ES
However, there are certain demerits of the induction program. Some

of them are explained as follows:
Q Sometimes an induction program provides too much information
to employees, which is not even required by them.
Q Ifan induction program is not designed properly, employees may
not have a clear understanding of an organisation’s functioning.
This may demoralise employees.
Q Employees would not be able to show dedication or become a part
of a team in case they are not inducted properly.
Q If an employee leaves the organisation, the time, money, and ef-
forts spent on the induction process gets wasted.
1. is a formal process of introducing new employees

to the work environment.
2. Which of the following is the first step in the process of
induction?
a. Identifying the objectives of the induction program
b. Collecting employee information
c. Defining the audience
d. Deciding the content and mode of delivery
3. To develop the objectives of the induction program, the HR
personnel can seek suggestions from departmental heads and
other concerned senior employees to understand their needs
and expectations from new employees. (True/False)
Visit an organisation in your area. Discuss with the HR manager

the merits of the induction program he/she has observed in the or-
ganisation. Based on the discussion, prepare a report on the merits
and demerits of an induction program.
sy ORIENTATION
In the previous section, you have studied about the induction program
where employees are introduced to the work culture of an organisa-
tion. However, it is not sufficient for employees to be only aware of
work culture of the organisation to perform effectively. Employees
need to have a clear understanding of their job roles and responsibil-
ities. A process of briefing the job roles, responsibilities, and duties to
employees is called orientation. The following are some popular defi-
nitions of orientation:

N OT ES
According to Michael Armstrong, Orientation is the process of re-

ceiving and welcoming employees when they first join the company and
giving them the basic information they need to settle down quickly and
happily and start work.
In the words of Robert L. Mathis, Orientation is the process of planned

introduction of employees to their jobs, their co-workers, and the organ-
isation
As per Gary Dessler, Orientation is a procedure for providing new em-

ployees with basic background information about the firm.
An organisation should have a comprehensive orientation program

that can educate employees about various aspects related to their job,
such as roles and responsibilities, working conditions, working meth-
ods, precautions, and safety measures. The duration of the orientation
program may vary from few hours to several months depending on job
requirements and organisational policies.
5.3.1 PURPOSE OF ORIENTATION
To survive in today’s highly competitive market, it is important for an

organisation to quickly adapt to the changes that occur in the business
environment. This can be possible if an organisation has efficient em-
ployees. For this, employees should be well aware of their job roles and
responsibilities. This is where the role of orientation comes into play.
The following points explain the purpose of orientation in an organisa-
tion:
Q To welcome employees: An orientation program is often considered
to be a platform to formally welcome employees to their job profile.
It helps employees to form a rapport with their work atmosphere.
Q To overcome hesitation of new employees: An orientation pro-
gram helps in overcoming nervousness and hesitation that em-
ployees may have about their job roles when they join an organisa-
tion. This in turn enables employees to perform efficiently at their
new workplace.
Q To exchange information: An orientation program focuses on
clearly communicating the job profile, reporting authorities, and
roles and responsibilities to employees. This encourages employ-
ees to better perform their jobs.
Q To control cost: Without an orientation program, employees need
to learn new jobs on their own. This increases the learning cost of
an organisation and slows down the productivity as the employees
may take longer to understand their jobs.
Q Todevelop team spirit: When employees are aware of their job roles,
it is easier for them to work collectively towards organisational goals
and objectives. This inculcates team spirit among employees.

N OT ES
5.3.2 TYPES OF ORIENTATION
An orientation program differs across organisations depending on the

number of employees attending the program, the nature of jobs, size
of the business, etc. Figure 5.3 lists different types of orientation pro-
grams that take can be conducted in an organisation:
General or Specific Orientation
Traditional or Modern Orientation
Figure 5.3: Types of Orientation Programs
Let us discuss different types of orientation programs in detail.

Q General or specific orientation: A general orientation program
is conducted for all new recruits irrespective of their departments
and profiles. In such a program, employees are made aware of the
dos and don'ts of their jobs, general safety measures, precautions
to be taken while performing their jobs, etc. The information about
incentives and benefits schemes is also provided to employees in
this type of orientation. On the other hand, a job-specific orien-
tation program aims at providing employees with specific infor-
mation about their job profile. The information includes rules and
regulations related to the specific department, reporting author-
ity, the flow of communication, etc. The HR personnel generally
conduct this type of orientation program in association with con-
cerned supervisors and managers.
Q Traditional and modern orientation: The orientation program
may be classified as traditional and modern depending upon the
purpose and the content of the orientation program. In the tradi-
tional orientation program, organisations use general and repeated
orientation material. It is considered to be a ritual and one-time
exercise. The primary aim of traditional orientation program is to
keep the newly joined employees occupied on their first day on the
job. On the other hand, a modern orientation program is updated
as per changes in job requirements. It is a continuous process that
aims at converting employees into an asset for the organisation. It
focuses on inculcating team spirit, retaining employees, increasing
job satisfaction, and enhancing productivity.
5.3.3 PROCESS OF ORIENTATION
Organisations usually conduct an orientation program to develop con-

nectivity with employees and bring out their best potential. Orienta-

NOTES
tion is a systematic process that involves a number of steps, which are

listed in Figure 5.4:
Step 1
Reviewing the| _ Step 2
expectations | NeoPlectives! termining |__Step 4

orientation | te ae of | Deciding the Step 5
program out 10m mode of Taking
. delivery feedback |
Figure 5.4: Process of Orientation

1. Reviewing the organisation’s policy and expectations: This
is the first step of the orientation process wherein the HR
personnel consider the policy of the organisation regarding
specific job profiles. Based on the policy, the personnel decide
the information to be provided to employees related to their job
roles.
2. Determining the objectives of the orientation program: In
this step, the personnel identify the objectives of the orientation
program. These objectives can be providing a clear picture of job
accountabilities to employees, developing team spirit, reducing
the rate of attrition, enhancing productivity, etc.
3. Determining the type of orientation program: As discussed
earlier, orientation can be general or specific or traditional or
modern. While determining the type of the orientation program,
the HR personnel must consider factors, such as objectives of
the program, the allotted budget, the type of information to be
provided to employees, etc.
4. Deciding the mode of delivery: The orientation program can
be based on classroom or multimedia instructions or on-the-job
learning. The selection of a particular type of mode depends on
factors such as number of participants, category of participants,
infrastructure, nature of job profile, and so on.
5. Taking feedback: A feedback is taken from the participants in
order to identify the areas of improvement and rectify them. It
can be taken in the form of a checklist where employees may
be asked different questions regarding the orientation program,

N OT ES
such as the clarity of information provided in the program, issues

addressed in the program, etc. The feedback helps in analysing
the success of the orientation program.
5.3.4 EFFECTIVENESS OF ORIENTATION PROGRAM
An orientation program is an attempt to motivate employees, retain

them, and improve organisational effectiveness. However, an inef-
fective program may lead to the wastage of time, cost, and efforts of
an organisation. Therefore, it is of paramount importance for the HR
personnel to ensure the effectiveness of the orientation program. The
following are the features of an effective orientation program:
Q Clear objectives: The aims of an orientation program must be
clearly stated. These aims can be providing a clear understanding
of job roles to employees, improving organisational performance,
enhancing productivity, ete. Without clear objectives, the orienta-
tion program may not meet its purpose.
Q Well-defined audience: While designing the orientation program,
the HR personnel must clearly define the participants of the orien-
tation program, the concerned department of the participants, job
profiles of the participants, etc.
Q Accurate information: An effective orientation program is said
to be one that addresses the first-day concerns of employees by
providing them accurate information about their job profiles. This
enables employees to feel comfortable with the new organisation.
Q Appropriate methodology: While designing the content of the ori-
entation program, the HR personnel must take into consideration
the norms and policies of the organisation. Moreover, the person-
nel should select the mode of delivery on the basis of the target
audience.
EXHIBIT
Employee Benefits and Job Duties
Employee benefits and job duties are two of the key areas of con-
cern in an orientation program. When an orientation of employees
is conducted, the employees are benefitted from it in the following
ways:
Q The employees are able to understand organisational culture,
values, and diversity.
Q The orientation program allows employees to make adjust-
ments with the existing employees and working atmosphere in
the organisation.

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Q Orientation shortens the learning time span of employees by

providing a better understanding of the organisation’s goals
and objectives.
Q_ The knowledge of organisational vision, mission, and objectives
helps in developing a positive attitude in employees about the
organisation.
The orientation program made employees aware of various factors

related to the job such as:
Q Various tasks and activities that need to be performed by them
Q Reporting authorities
Q Safety measures and precautions that need to be taken while
performing jobs
Q Security measures involved and breach of security
5.3.5 PROBLEMS OF ORIENTATION
Sometimes the orientation program does not serve its desired purpose
due to various problems. Figure 5.5 lists the problems of orientation:
Data Overload }+—_
Boredom and Rigidity

.
Lack of Time and Training
Risk of Failure and Counter-effects
Lack of Diversity
Figure 5.5: Problems of Orientation
Let us discuss the problems of orientation in detail.

Q Data overload: The basic purpose of orientation is to provide in-
formation to the employee about their job profile. However, some-
times employees are overloaded with information. This generally
happens when the orientation program is not carefully designed.
The overloading of information may divert the attention of em-
ployees from job roles.

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Q Boredom and rigidity: Sometimes the orientation program be-

comes too passive and lacks interaction with employees. This cre-
ates boredom and rigidity among participants during sessions.
This may affect the understanding of employees about their job
roles and responsibilities.
Q Lack of time and preparation: In the case of job-specific orienta-
tion (where line managers and supervisors are involved in the pro-
gram) there can be time constraints. These managers and supervi-
sors are involved in daily operations and functions, which may not
allow them to prepare well for orientation.
Q Risk of failure and counter-effects: A well-designed orientation pro-
gram leads to high employee motivation and performance. However,
the chances of failures and counter-effects are also there. Irrespective
of the reason for failure, it leaves a negative impact on employees.
Q Lack of diversity: In an organisation, employees come from differ-
ent backgrounds. They may have a different level of understand-
ing and pace of learning. Sometimes the orientation program is
unable to address these differences. As a result, employees may
not grasp the information properly. This defeats the purpose of
orientation.
4. “Orientationistheprocess ofplannedintroductionofemployees
to their jobs, their co-workers, and the organisation”. Identify
the speaker.
5. A program is conducted for all new recruits
irrespective of their departments and profiles.
6. While determining the type of the orientation program, the
HR personnel must consider factors, such as objectives of the
program, the allotted budget, the type of information to be
provided to employees, etc. (True/False)
7. While designing the orientation program, the HR personnel
must clearly define the of the orientation program.
Imagine you are the HR manager of an organisation and want to

develop an orientation program. How would you identify and re-
solve the problems with the orientation program?
oe SUMMARY
Q Induction is a formal process of introducing new employees to the
organisation and making them confortable to adapt to the working
atmosphere.

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Q Induction may also be conducted for existing employees who are

promoted and transferred.
Q = The need for induction can be understood from the perspective of
both the organisation and employees.
Q The steps in the process of induction include collecting employees’
information, defining the audience, providing feedback, etc.
Q An effective orientation program helps employees to overcome
hesitation, informs them about their job roles, and develops team
spirit among them.
Q An orientation program is broadly classified into general or spe-
cific and traditional or modern.
Q The steps in the process of orientation include determination of
program’s objectives, selection of the mode of delivery, feedback,
etc.
Q The features of an effective orientation program include clear ob-

jectives, well-defined audience, accurate information, and appro-
priate methodology.
Q There can be various problems in the orientation program, such as
data overload, boredom and rigidity, lack of time and preparation,
risk of failure and counter-effects, ete.
KEY WORDS
Q Code of conduct: A set of rules and regulations that defines the

behaviour expected from employees to be followed in the or-
ganisation.
Q Employee Turnover: A rate at which employees leave an organ-
isation or the organisation replaces an employee with another
employee for various reasons.
QQ. Flow of communication: The flow of information between em-
ployees, their seniors and the management.
Q Learning cost: A direct or indirect cost incurred on training
new employees.
Q Reporting authority: A person in an organisation to whom em-
ployees are answerable regarding their jobs.
1. Explain the need for induction from both the organisational and
employee’s perspectives.
2. Explain the types of orientation.
3. Discuss the process of orientation.

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ssi ANSWERS AND HINTS
Topic Q. NO Answers
Induction 1. Induction
2. b. Collecting employee information
3. True
Orientation 4. Robert L. Mathis
Ee General orientation
6. True
7. Participants
1. Whenan employee joins an organisation, it is difficult for both the
employer and the employee to adjust with each other. Therefore,
an induction is conducted. Refer to Section 5.2 Induction.
2. Anorientation program is different in different organisations and
is broadly divided into two categories, namely general or specific
and traditional or modern. Refer to Section 5.3 Orientation.
3. Theprocess of orientation consists of various steps like reviewing
the organisation’s policy, deciding the mode of delivery, taking
feedback, etc. Refer to Section 5.3 Orientation.
SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
Pearson.
Q Fowler, A., & Fowler, A. (1996). Employee induction (1st ed.). Lon-
don: Institute of Personnel and Development.
Q Lawson, K. (2006). New employee orientation training (1st ed.). Ox-
ford: Pergamon Flexible Learning.
Q Pande, S., & Basak, S. (2012). Human resource management (1st
ed.). New Delhi: Dorling Kindersley.
Q Randhawa, G. (2007). Human resource management (1st ed.). New
Delhi: Atlantic Publishers & Distributors.

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E-REFERENCES
Q Canberra.edu.au,. (2013). Induction and Orientation : Human Re-
sources : University of Canberra. Retrieved 10 July 2014, from
http://www.canberra.edu.au/hr/induction/induction
Q Human Resources Management,. (2010). Induction. Retrieved 10
July 2014, from http://corehr.wordpress.com/recruitment/induc-
tion/
Q Leadingpoint.co.uk,. (2014). Induction & Orientation Training Pro-
grams. Retrieved 10 July 2014, from http://www.leadingpoint.co.uk/
index.php?option=com_content&view=article&id=146%3Aind-
uction-a-orientation-training-programs&catid=42&Itemid=152
Q Small Business - Chron.com,. (2014). Employee Induction & Ori-
entation. Retrieved 10 July 2014, from http://smallbusiness.chron.
com/employee-induction-orientation-11754.html

COMPETENCY MAPPING AND ASSESSMENT CENTRES
CONTENTS
6.1 Introduction
6.2 Competency Mapping
6.2.1 Developing Competency Models
6.2.2 Uses of Competency Models
6.2.3 Future Trends in Competency Modelling
Activity
6.3 Assessment Centres
6.3.1 History of Assessment Centres
6.3.2 Measurement Tools
6.3.3 Differences between Assessment Centre and Development Centre
Activity
6.4 Summary

COMPETENCY MAPPING OF ECOPETROL
Ecopetrol, a South American Energy Company, and its consultant

RWD, LLC started an initiative to determine the skills used by
engineers working in a refinery. Ecopetrol uses a grid format to
determine competence, find out any skill gaps, and assess train-
ing requirements of engineers. The organisation follows a simple
approach to map the competencies of engineers. It uses two map-
ping parameters, which are:
Q Outcome/Experience (O/E) Map
Q Knowledge/Capability (K/C) M on the x and y axes of a
two-dimensional grid
These parameters were designed in : a way that they can be

used jointly to analyse
combination provided a ¢ o Ecopetrol about the ex-
pected outcomes of i competencies are mapped
level and the expected out-
g competency level is denoted
consists of four steps. The first step involves

ps. There has to be two completed ‘to be’ maps
arly mentioning the category of each job for a cer-
the Outcome/Experience map. For all resources,
levels are placed on the Knowledge/Capability map.
cond step involves engineers to map their present expe-
and competency levels on the Knowledge/Capability map
and these are the ‘as is’ maps. The third step includes comparing
the two maps, i.e. the ‘to be’ maps and the ‘as is’ maps to find out
any gaps in the engineers’ competency levels. The final step in
the process comprises chalking out action plans for engineers to
bridge those performance gaps.

COMPETENCY MAPPING AND ASSESSMENT CENTRES 135
NOTES
©@ LEARNING OBJECTIVES

Explain the concept of competency mapping
yy ry
Discuss the importance of competency models

rr
Explain the concept of assessment centres

List measurement tools used in assessment centres
Differentiate between assessment centre and development
centre
‘Bi INTRODUCTION
In today’s global economy, organisations need to continuously invest
in human capital. This has brought drastic changes in the functioning
of HR departments in organisations over the years. While HR depart-
ments continue to focus on their personnel functions, such as hiring,
payroll, and benefits, there has been a recent shift toward attracting
top talent. This is because it is an organisation’s talent that can pro-
vide a steady edge over competitors. Talent management is a process
of implementing integrated processes to attract, develop, retain, and
utilise people with the required skills in order to meet an organisa-
tion’s current and future business needs.
The concept of talent management has gained popularity in recent

years when organisations felt a need for efficient workforce to survive in
the competitive market. According to the Talent Management Survey
Report published by the Society for Human Resource Management
(SHRM) in 2006, “53% of organizations have specific talent management
initiatives in place. Of these companies, 76% consider talent management
a top priority. In addition, 85% of HR professionals in these companies
work directly with management to implement talent management strat-
egies.” Organisations generally use two main talent acquisition tools,
namely competency mapping and assessment centres.
Competency can be defined as the knowledge, skills, attitudes, and

other capabilities of employees required for effective performance ina
job. Competencies are the skills, behaviours, and attitudes of employ-
ees that lead to high job performance. Competency mapping is a pro-
cess of evaluating whether an employee is fit for a particular job. On
the other hand, assessment centres help to identify a need for change
in job positions, especially at higher levels. In this unit, you will study
about the concepts of competency mapping and assessment centres
in detail.
5] COMPETENCY MAPPING
Competency is a set of knowledge, skills or behaviour that an individ-
ual needs to demonstrate to perform a particular work successfully.

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According to Boyatzis (1982), competency is an underlying character-

istic of a person in that it may be a motive, trait or skill aspect of one’s
self-image or social role or body of knowledge. Employees in an organ-
isation need to use their competencies in varied fields besides their
core job in the form of their knowledge, skills, and abilities. Organisa-
tions need to have a competent workforce in order to improve its pro-
ductivity, better serve customers, maintain an effective work culture,
manage diversity, and so on.
Robert L. Katz in one of his famous articles, published in the Harvard

Business Review in 1994, mentioned four types of competencies of
workforce, which are listed in Figure 6.1:
Types of
Competencies
| | |
Technical 0 isational | Behavioral Conceptual
Figure 6.1: Different Types of Competencies
Let us discuss these different types of competencies in detail.

Q Technical competency: This competency is related to technical
skills or having subject knowledge that a person expresses at the
required moment. For example, an IT person uses his/her techni-
cal knowledge and skills to resolve various technical problems.
Q Managerial/ organisational competency: Planning, organising,
coordinating and similar skills of individuals form their manage-
rial/organisational competency. In an organisation, it is always en-
sured that people combine their managerial skills and knowledge
to achieve the mission of the organisation.
Q Human/ behavioural competency: It involves how a person be-
haves individually and in a group. The knowledge, skills, and work
performance are characterised by a person’s behaviour. An organ-
isation’s success depends on how employees behave in a particular
situation related to their jobs.
Q Conceptual competency: Thinking, forming, and developing as-
pects are included in the conceptual competency. Managers or
senior leaders of the organisation use their leadership qualities
to think conceptually and take decisions on how a particular job
needs to be taken forward or in which direction the organisation
needs to proceed.

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It is of utmost importance for an organisation to evaluate the com-

petencies of all its employees in order to identify whether they are
suitable for a particular job or they are performing the assigned jobs
well. Evaluating competencies of employees enable organisations to
determine the areas where employees need to improve and outline
problems they face while performing their jobs.
Competency mapping is a process of assessing the strengths of em-

ployees in an organisation and judging whether they are fit for a par-
ticular job. According to Solomon (2013), Competency mapping is a
process of identification of competencies required to successfully per-
form a particular job or role or a set of tasks at a given point of time.
Competency mapping enables both the organisation and employees to

identify the areas of improvement of employees’ performance. These
areas of improvement can be related to problem-solving skills, deci-
sion-making skills, teamwork, discipline, leadership, management,
etc. Competency mapping provides insight to employees into their ca-
reer prospects.
The following are the benefits of competency mapping in an organi-

sation:
Q Competency mapping helps in clearly stating the roles of an indi-
vidual in the organisation.
Q It helps in identifying gaps in skill and knowledge levels and bridg-
ing them.
Q Competency mapping enables organisations to determine training
and development requirements of employees.
Q It allows organisations to communicate its expectations to employ-
ees so that they can better work towards organisational goals and
objectives.
6.2.1 DEVELOPING COMPETENCY MODELS
A competency model is a framework that highlights the knowledge,

skills, and attitudes people need to possess to improve their job per-
formance. In an organisation, a competency model acts as an input
for recruitment and selection processes, training and development
programs, HR development plans, performance evaluation, etc. The
first competency model was introduced by HP in 2004 with an aim to
enhance the job performance of its employees. The model focused on
every job in the organisation and segregated competencies into three
key levels, which are foundational competency, core competency, and
role excellence.
Every organisation develops its unique competency model depending

on its requirements. While developing a competency model, an organ-

N OT ES
isation should ensure that competencies to be considered in the model

must match with the organisation’s needs, rules, regulations, policies,
nature of job, size of business, etc. Developing a competency model is
a systematic process that involves a number of steps. These steps are
listed in Figure 6.2:
—————————————.
Preparing for
the Model
_se Collecting
Information
Building the
Model
Implementing
the Model
Evaluating and
Updating the Model
Figure 6.2: Process of Developing Competency Models
Let us now study these steps in detail.

1. Preparing for the model: This is the first and foremost step
in the process of developing a competency model wherein the
purpose of the model is defined. In an organisation, a competency
model can be developed for various purposes, such as filling a
job vacancy, evaluating employees’ performance, and deciding
compensation.
Apart from this, this step also involves forming a competency
team comprising people who would be the users of the model.
In this step, the consent of the sponsor is also taken. A sponsor
can be the head of a department, project manager, executive,
or board member of an organisation. He/she supports the
competency model development process and provides all
relevant information.
2. Collecting information: This step involves gathering information
related to job roles and responsibilities. The effectiveness of the
model depends on the accuracy of the information collected.
Thus, information should be collected from authentic sources.
Information can be accumulated through observations,

N OT ES
interviews, questionnaires, job descriptions, human resource

demand and supply forecasts, etc.
3. Building the model: This step involves grouping and sub-
grouping skill sets into competencies; for example, decision-
making, problem-solving, interpersonal skills, etc. Thereafter,
competencies are named to represent each group and sub-
group. For example, general management competencies can be
grouped and sub-grouped into supervising and leading skills,
project management skills, and so on.
Competencies are then validated and revised to determine
whether they are adequate to achieve effective work performance.
For example, behavioural competencies of employees are
validated through surveys and questionnaires.
4. Implementing the model: This step involves putting the
established model into practice. This is done by linking the
model with the business objectives of the organisation and
communicating it to all employees. This helps in determining
whether the existing employees of the organisation possess the
identified competencies. Incase of gaps, training anddevelopment
requirements are identified. In case of new employees, the model
is considered for recruitment and selection purposes.
5. Evaluating and updating the competency model: This is the
final step in the competency model development process where
a thorough evaluation is carried out to assess how much are the
resultant competencies beneficial to the organisation. Further,
based on the evaluation, the model should be updated so that
it remains valid and reliable with the changes in the business
environment.
6.2.2 USES OF COMPETENCY MODELS
A competency model is a combination of competencies of all employ-

ees, which leads to high performance and productivity of an organ-
isation. All key HRM functions, such as recruitment and selection,
training and development, and performance management, rely on
competency models. The following points explain the usefulness of
competency models:
OQ Competency models improve the selection process in organisa-
tions as these models help in assessing the competencies of candi-
dates and deciding whether they are fit for a particular job.
Q These models help in performance appraisal as competencies of
employees are measured to identify their strengths and weaknesses.
Q Competency models enable HR personnel to establish an effective
structure for training and development by providing insight into
the existing competency level of employees.

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Q These models facilitate career orientation in organisations by de-

fining a career pathway for employees. Moreover, they enable or-
ganisations to focus on their core competencies by making effec-
tive utilisation of employees’ skills and abilities.
Q These models help in clearly communicating the organisation’s ex-
pectations mission, vision, and core values to employees so that they
can work toward achieving organisational goals and objectives.
EXHIBIT
Competency Mapping of Mr. Arnold Hopkins
Mr. Arnold Hopkins works as a Director Consultant in a strategic

consulting group. Let us make a list of functional and behavioural
competencies and rate them at five levels:
1 _ Yet to demonstrate
2 Learner
3 _ Practitioner
sg WA ee
4 Leader
Let us now rate the various functional competencies of Mr. Hop-

kins:
jon- 1 2 3 4 5
ess
Client Minimal Formation Devel- Client Forming
partner- client rela- of client opment servicing Strategic
ship tion relation of client partner-
networks ship with
client or-
ganisation
Brand No in- Basic Brand Strategic Brand
strategy volvement insights manage- brand equity
planning into brand ment manage- measure-
planning ment ment and
metrics
Business No busi- Building Initiate Develop- New
develop- ness devel- database talk with ing busi- business
ment opment clientand nessfrom develop-
followup the leads ment and
for meet- getting
ing business
from old
clients

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Functional 1 2 3 4 5
competen-
cies
Research Basic Knowledge Knowledge Using Analys-
skills knowledge ofprimary/ of prima- research ing the
ofresearch secondary ry and methodol- research
research secondary ogywhile and giving
research research feedback
or new
initiatives
Brand po- Minimal Utilising Develop- Analysing Strate-
sitioning knowledge branding ingbrand brandpo- gically
models identity sition with aligning
matrices relationto the brand
competitor mantra
with p
uct .
Negotia- No involve- Basic Negotiat- Negotia- Strategic

tion skills = ment insight into ing with tion with negotia-
negotia- vendors business tion with
tions partners affiliates,
with links
to bottom
line
Let us now rate the various behavioural competencies of Mr. Hop-

kins:
Behaviour- 1 2 > 5
al compe-
tencies
Time man- Not re- Basictime Isrespon- Develop- Developing
agement sponsible manage- sible for ment of new meth-
for time ment mainte- time stand- ods of time
or quality related nance ards and manage-
control to project of time implemen- ment
functions standards tation of
in project thesamein
manage- the organi-
ment sation
Team devel- Not re- Isrespon- Crossfune- Organising Strategic
opment sponsible _ sible for tionalteam teamper- team de-
forteam basicteam develop- formance velopment
controlor devel- mentand metricsfor frame-
develop- opment manage- intra-or- works with
ment activities ment ganisation- continuous
like team alefficien- emphasis
lunches, cy on bottom
trips, ete. line

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Behaviour- 1 2 3 4 5
al compe-
tencies
People Nota Isrespon- People Develop- Developing
manage- major part sible for management of a people
ment of con- managing ment various manage-
trolling the various through cross-fune- ment
and depart- imple- tional goals system
directing mental mentation toensure using the
workers employees analysis employee company
and review perfor- Intranet
ofemploy- mance for contin-
ee perfor- uous moni-
mance toring
Communi- Develop- Strategic
cation skills ment of commu-
communication
nication frame-
to foster works for
inter-com- partnering
pany inter- with other
action for business
business
develop-
ment
Let us now evaluate the desired and displayed proficiency levels

of Mr. Hopkins on various competencies and identify the compe-
tency gap:
Competencies Desired Displayed Gap

Time management 4 4 0
‘Team development 3} 3 0
People management 4 5 0
‘Communication skills 5 5 0
Client partnership 5 5 0
Brand strategy plan- 5 4 0
ning
Business development 4 3 1
Research skills 3 3 0
Brand positioning 5 4 1
Negotiation skills 4 4 0
6.2.3 FUTURE TRENDS IN COMPETENCY MODELLING
Over the years, organisations around the globe have become too com-
petitive that they want to be market leaders and stay distinguished
from the pile. For this, they need to strive hard to attract a large cus-
tomer base and offer high-quality products and services in the mar-

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ket. In order to achieve such positive results, organisations need to

raise the competence levels of their employees.
Various IT giants, such as IBM, HB and Dell, have achieved high

levels of performance due to the implementation of their effective
competency models. It is predicted that in the future, many medium
and small-scale IT companies will also learn from these big IT giants
and develop successful competency models which will have greater
impact on their workforce. These companies will incorporate their
software applications with career development plans, training and
development plans, performance measurement tools so that a single
competent system is developed where information can be exchanged
interchangeably with ease.
& SELF ASSESSMENT QUESTION
1. is a set of knowledge, skills or behaviour that an

individual needs to demonstrate to perform a particular work
successfully.
2. Which type of competency is characterised by planning,
organising, and coordinating skills of an individual?
a. Technical competency
b. Managerial/organisational competency
Human/behavioural competency
9
d. Conceptual competency
3. is a process of assessing the strengths of employees
in an organisation and judging whether they are fit for a
particular job.
4. Competency mapping provides insight to employees into their
career prospects. (True/False)
5. Which of the following is the second step in the process of
developing a competency model?
a. Building the model
b. Implementing the model
ce. Evaluating and updating the model
d. Collecting information
6. Competency models help in performance appraisal as
competencies of employees are measured to identify their
and
7. It is predicted that in the future, many medium and small-
scale IT companies will also learn from these big IT giants
and develop successful competency models which will have
greater impact on their workforce. (True/False)

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Bd BXerun
se
Using various sources, find out the features of the competency
model used by Axis Bank. Prepare a report on how this model af-
fects the job performance of employees in the bank.
si ASSESSMENT CENTRES
An assessment centre is a technique used in the selection process for
identifying the skills and abilities of candidates. This technique is ap-
plied to collect information on the competencies of candidates that
cannot be gathered in interviews alone. According to a report pre-
pared by Ernst and Young, an assessment centre is A selection tool
which allows the employer to test candidates in a variety of different
situations. In organisations, assessment centres are generally used for
the selection of senior-level personnel like managers, supervisors, ex-
ecutives, and other higher management personnel.
In assessment centres, candidates (who apply for higher positions) are
given real-life exercises. For example, they are given problems related
to the current working environment. The candidates are then asked
to solve these problems by demonstrating their best abilities and they
are judged based on the way they handle these problems. Assessment
centres may include individual or group activities, real-life simula-
tion games, a series of tests and interviews, which helps in evaluating
whether an applicant would be able to perform a particular job suc-
cessfully.
6.3.1 HISTORY OF ASSESSMENT CENTRES
Assessment centres were first used in 1942 in the UK by War Office

Selection Boards for solving discipline and behavioural issues of of-
ficers and selecting the right candidates for major roles. The main
activities involved in these assessment centres were simulation exer-
cises, tests, and interviews. Consequently, the number of officers who
were found to be unsuitable to do a particular job reduced and there
was a significant increase in the number of efficient officers. Assess-
ment centres in the UK gained popularity in 1986 when industries
employing 500 and more people used assessment centres. Going by
the current trends, many industries in the UK have now started using
assessment centres.
The US had a very infamous history of using assessment centres.

During the early days, the Office of Strategic Studies in the US used
assessment centres to appoint spies during the Second World War. In
the following years after the Second World War, various American pri-
vate companies started using assessment centres to select people, no-
tably, American Telephone and Telegraph Company (AT&T) in 1956.
Other large American companies, such as IBM, GE, and Sears, also
started using assessment centres in their selection process.

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Gradually, assessment centres considered to be an effective technique

for selecting employees by organisations across the globe. Not only
this, assessment centres help organisations in setting career paths for
employees and improving their performance and productivity.
6.3.2 MEASUREMENT TOOLS
As discussed earlier, an assessment centre is a technique to judge the

competencies of employees to be joining at senior levels in an organ-
isation. In assessment centres, the competencies of employees are
evaluated using various measurement tools. However, the selection of
a particular tool depends on an organisation’s requirements, budget,
criticality of the job position, etc. Figure 6.3 shows three commonly
used measurement tools:
Measurement
Tools
Simulations Tests | Interviews
Figure 6.3: Different Measurement Tools
Let us now study about these measurement tools in detail in the next
sections.
SIMULATIONS
Simulation is an act or process of pretending something from real life.

In simulations, candidates are asked to act out a play, take part in de-
bates and discussions, and solve real-life situations. Thereafter, the
candidates are judged based on the way they approach a particular
topic and demonstrate their skills. Figure 6.4 lists some of the simula-
tion tools:
Simulation
Tools
|
PesceExerci
roup Role Playing}
ying | Pr oes
tati Tn-bas ket Work Sample
Exercis e P
Figure 6.4: Simulation Tools

N OT ES
Let us now study these simulation tools in detail.

Q Leaderless group exercise: A leaderless group means a group
where every member is treated on equal terms with no specific
individual being the leader. This exercise focuses on assessing the
leadership skills of candidates. Assigned and non-assigned roles
are the two areas that characterise a leaderless group exercise. As-
signed roles are a set of tasks that are previously given to group
members, while non-assigned roles are a group of activities that
are not previously given to group members and they have to per-
form them on their own. In these group exercises, a goal is pre-
defined and the group members are encouraged to work in such a
way so that the ultimate goal is achieved. This enables assessors to
identify future leaders for the organisation.
Role playing: Role playing is one of the most important tools used
by HR personnel to perform various activities like selection, train-
ing and development, ete. In role playing, candidates are given a
real-life situation and are asked to enact the roles played by people
in such situation. Thus, role playing involves impersonating some-
one in terms of behaviour, attitude, style, etc. to perform a partic-
ular task. Candidates are judged based on the skills and abilities
they demonstrate during role play.
Presentation: It is one of the most effective simulation tools
wherein potential candidates are required to give presentations
on a given topic, which generally lasts for about five to seven min-
utes. Thereafter, a discussion or debate is conducted in order to
judge the negotiation skills, communication skills, problem-solv-
ing skills, etc. of employees.
In-basket exercise: An in-basket exercise is a test used by organ-
isations to hire new employees or promote existing employees by
judging their competencies. It helps to determine whether an em-
ployee will be able to perform his/her task effectively. An in-basket
contains letters, memos, reports, email print-outs and other doc-
uments used by organisational leaders. Candidates are required
to take a cue from these in-basket documents and plan meetings,
conferences, discussions, etc. just like the way leaders would act.
In this way, an in-basket exercise helps candidates to identify the
competencies they have to improve upon.
Work sample: During this exercise, candidates are allotted a par-

ticular task that they have to perform within a period of two to
three hours. This is followed by an hour’s interview by the assessor.
The rate of work done together with its quality reflects whether a
candidate can perform as a top-level manager or leader. As this
activity takes quite some time to get completed, this provides a
good opportunity to the assessor to judge people’s durability and
commitment levels.

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TESTS
A test can be defined as a task or a series of tasks used to identify an

individual’s cognitive ability, integrity, knowledge of the job, personality
and physical ability. The following are the important elements of a test:
Q Cognitive ability: This refers to an individual’s ability to learn and
understand the details of the given task quickly, solve problems
related to the task, find logical reasoning in the task, etc.
Q Integrity: This refers to an individual’s honesty, trustworthiness,
dependability, reliability, and attitude towards work. An individu-
al’s ethics and moral values are reflected in this element. Integrity
also provides insight into how a person would react to a given task
and what are his/her interests.
Q Job knowledge: This refers to the level of knowledge a person
has regarding a particular job. Organisations use a series of mul-
tiple-choice or subjective questions to test a person’s technical or
subject knowledge. This helps in determining whether the person
would be able to perform a particular job.
Q Personality: It reflects a person’s behaviour, attitude, way of com-
municating, pro-activeness, and emotional quotient. Organisa-
tions use various personality tests, such as Myers-Briggs Founda-
tion Trust tests, to determine whether a person can handle work
pressure, interact in a group, work in a team, confront difficult
situations, etc.
Q Physical ability: This refers to an individual’s physical strengths,
speed of performing a given task and abilities to undertake addi-
tional tasks with enthusiasm.
INTERVIEWS
Interviews are formal meetings in person where qualifications, knowl-

edge, and skills of an applicant are assessed by the hirer. These in-
terviews provide an opportunity to HR personnel to collect essential
information from the applicant and determine whether he/she is suit-
able to perform the job. Not only this, interviews also enable the appli-
cant to have a fair idea of the job requirements.
However, the effectiveness of interviews largely depends on the type of
questions asked. Thus, interview questions must be designed in such
a way that they provide adequate job-related information to candi-
dates. The following are the three main steps in the interview method:
1. Preparing for the interview: It involves enabling a candidate to
feel comfortable before the question-answer rounds starts.
2. Conducting the interview: The interviewer then asks questions
from the candidate related to the specific job.

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3. Noting down responses: After asking questions, the interviewer

takes notes of information collected about the candidate through
answers given by him/her. This input acts as an input for further
selection procedures.
Let us now look at an example of assessment centre.

A newly opened Indian subsidiary of a large US-based IT consultancy
firm requires a training and organisational development manager.
The characteristics of a job and organisational objectives should be
kept in mind while selecting candidates. In order to ensure the right
candidate is selected for the job, certain competencies and their mea-
surement through assessment tools are identified. These competen-
cies and their tools are shown in Table 6.1:
TABLE 6.1: COMPETENCIES AND THEIR MEASUREMENT

THROUGH ASSESSMENT TOOLS
Competency f Measurement of
a! Competency
Communication Role plays and These tools enable recruiters to
presentations judge the verbal, non-verbal, and
other aspects of communication
skills of candidates. In addition,
they help in testing the creativity,
non-ethnocentrism and ability of
the candidate to work with peo-
ple from different cultures.
Role plays and These tools help recruiters
assigned group determine the analytical and
exercises decision-making skills of eandi-
dates in a given situation, using
a consulting approach to decide
and design the solution.
Leadership and Assigned and These tools help recruiters
decision-making leaderless group determine a candidate’s abili-
exercises ty to synchronise two different
cultures and balance democratic,
directive, and assertive leader-
ship styles. This helps recruiters
to measure leadership and deci-
sion-making skills of candidates.
Problem-solving Leaderless group The effectiveness of a candidate’s
and in-basket ability to gather, analyse, and
exercises interpret the data to identify
potential solutions to problems is
judged through this tool. These
tools also help in determining the
ability of candidates to take time-
ly decisions, respond to queries
on-time, ete.

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Competency Assessment Measurement of

Tools Competency
Adaptability Structured inter- These tools enable recruiters to
views and psy- assess the candidate’s behaviour
chometric tests and psychological stress factors
in adapting to a new place, ad-
justing to the local environment,
lifestyle, culture, ete.
Emotional Intelli- | Psychometric These tools help in measuring
gence (EI) tests and situ- a candidate’s ability to meet the
ational judge- demands of the working envi-
ment tests ronment. In addition, these tools
help in determining whether th
candidate is able to demonstr;
EI in the Indian cultural en
ment. a
Cross-cultural Situational Using these tools, behavioural
competency judgement tests based questions can be asked to
and structured candidates on the Indian culture.
interviews This enables recruiters to know
the knowledge and understand-
ing of candidates with regard to
Indian culture, building close
relationships, ete.
6.3.3 DIFFERENCES BETWEEN ASSESSMENT CENTRE AND

DEVELOPMENT CENTRE
In most cases, assessment centres and development centres are con-

fused with each other. However, there are certain differences between
the two. An assessment centre is a process of acquiring new talent in
an organisation, while a development centre is all about transforming
the existing talent, identifying potential, and establishing individual
objectives related to development needs. Table 6.2 distinguishes be-
tween an assessment centre and a development centre:
TABLE 6.2: DIFFERENCES BETWEEN ASSESSMENT

CENTRE AND DEVELOPMENT CENTRE
Assessment Centre Development Centre
Pass/fail criterion is present. Pass/fail criterion is not present.
A job position is filled up. Development of people takes place.

Short-term organisational needs are Long-term organisational needs are
addressed. addressed.
There can be a large number of can- There is a 1:1 ratio of assessors to
didates. However, the number of as- candidates.
sessors is less.
Line managers can be assessors. Line managers cannot be assessors.

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Assessment Centre Development Centre

There is less focus on self-assess- There is more focus on self-assess-
ment. ment.
There is focus on what participants There is more focus on the parti-
ean do in the current situation. cipant’s potential levels.
Organisational needs have to be met. Both organisational and individual

needs have to be met.
Assessors act as judges. Assessors act as facilitators.
Selection is the primary focus while Developmental feedback or fol-

developmental feedback or follow-up is the primary focus while se-
low-up takes the backseat. lection takes the backseat.
Feedback is given later. Feedback is given immediately.

Organisations have greater control Participants have greater control on
on the collected information. the collected information.
It is generally used e >: is used for internal candidates.

ployees.
4 SELF ASSESSMENT QUESTION

8. An is a technique used in the selection process for
identifying the skills and abilities of candidates.
9. When was assessment centres first used in the UK?
a. 1940 b. 1942
ec. 1947 d. 1950
10. Simulation is an act or process of pretending something from
real life. (True/False)
11. In which of the following activity, every member is treated on
equal terms with no specific individual being the leader?
a. Role play b. In-basket exercise
ce. Work sample d. Leaderless group

exercise
12. Which of the following refers to an individual’s honesty,
trustworthiness, dependability, reliability, and attitude
towards work?
a. Cognitive ability b. Integrity
c. Personality d. Physical ability
13. are formal meetings in person where qualifications,
knowledge, and skills of an applicant are assessed by the hirer.
14. Preparing for an interview is the second step in the interview
method. (True/False)

COMPETENCY MAPPING AND ASSESSMENT CENTRES byl
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Form a group of five friends. Ask one of the members to play the
role of a salesperson and the others to act as customers. The sales-
person has to convince the customers to buy toothpaste. The play
should not take more than 10 minutes.
9 summary
Q Organisations need to have a competent workforce in order to im-
prove its productivity, better serve customers, maintain an effec-
tive work culture, manage diversity, and so on.
Q Evaluating competencies of employees enable organisations to de-
termine the areas where employees need to improve and outline
problems they face while performing their jobs.
Q Competency mapping enables both the organisation and employ-
ees to identify the areas of improvement of employees’ perfor-
mance.
Q A competency model is a framework that highlights the knowl-
edge, skills, and attitudes people need to possess to improve their
job performance.
Q Every organisation develops its unique competency model depend-
ing on its requirements. While developing a competency model, an
organisation should ensure that competencies to be considered in
the model must match with the organisation’s needs, rules, regula-
tions, policies, nature of the job, size of business, etc.
Q All key HRM functions, such as recruitment and selection, train-
ing and development, and performance management, rely on com-
petency models.
Q Inassessment centres, candidates (who apply for higher positions)
are given real-life exercises.
Q Assessment centres may include individual or group activities,
real-life simulation games, a series of tests and interviews, which
helps in evaluating whether an applicant would be able to perform
a particular job successfully.
Q In simulations, candidates are asked to act out a play, take part in
debates and discussions, and solve real-life situations.
Q A test can be defined as a task or a series of tasks used to identify
an individual’s cognitive ability, integrity, knowledge of the job,
personality and physical ability.
Q Interviews are formal meetings in person where qualifications,
knowledge, and skills of an applicant are assessed by the hirer.
Q An assessment centre is a process of acquiring new talent in an
organisation, while a development centre is all about transforming

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the existing talent, identifying potential, and establishing individ-

ual objectives related to development needs.
KEY WORDS
Q Core competency: The unique characteristics of a person or

specific features of a business that distinguishes itself from
others.
Q Diversity: The uniqueness of a person in terms of his/her age,
race, cultural background, capabilities, etc.
Q Emotional quotient: An individual’s intelligence to understand
and use his/her emotions positively at a workplace in order to
obtain productive results.
Q Negotiation skills: Skills used by people to come to a settle-
ment while avoiding arguments.
QO Questionnaires: A set of questions with multiple choice an-
swers, used for the purpose of a survey or statistical study.
Explain different types of competencies.
Discuss the process of developing competency models.
a:
List the uses of competency models.

2a
Explain the history of assessment centres.

Discuss various measurement tools used in assessment centres.
Distinguish between an assessment centre and a development

centre.
0) ANSWERS AND HINTS

J kyle 12 a Cos Answers

Competency Mapping NE Competency
2. b. Managerial/organisational
competency
Competency mapping
ae
True
d. Collecting information
Re
Strengths, weaknesses
o>
True
Assessment Centres Assessment centre

N OT ES
Topic (2 a Cos Answers

9. 1942
10. True
11. d. Leaderless group
12. b. Integrity
13. Interviews
14. False

1. There are four types of competencies of workforce, i.e. technical,
managerial/organisational, human/behavioural and conceptual.
Refer to Section 6.2 Competency Mapping.
2. The steps in developing a competency model involve preparing
for the model, collecting information, building the model,
implementing the model, and evaluating and updating the
model. Refer to Section 6.2 Competency Mapping.
3. Competency models play a crucial role in various HR processes,
such as selection, training and development, career planning,
and performance appraisal. Refer to Section 6.2 Competency
Mapping.
4. Assessment centres first originated in the UK in 1942 and were
used by UK War Office Selection Boards. Later, it was used in the
US during the Second World War and gradually across the globe.
Refer to Section 6.3 Assessment Centres.
5. There are three measurement tools used in assessment centres,
namely simulations, tests, and interviews. Refer to Section
6.3 Assessment Centres.
6. An assessment centre is often confused with a development
centre; however, there lies some differences between the two.
An assessment centre focuses on identifying new talent while
a development centre transforms the existing talent. Refer to
Section 6.3 Assessment Centres.
wi SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Sahu, R. K. (2009). Competency Mapping. (1st ed.). New Delhi:
Excel Books.
Q Sanghi, S. (2007). The Handbook of Competency Mapping.
(272 ed.). New Delhi: Response Books.

N OT ES
E-REFERENCES
Q Srinivasa Rao, K. & Pratibha, S. (2012). Competency based human
resource development mechanism: a case study of NTPC. 1 (2),
165-169. Retrieved 15 July 2014, from: http://pezzottaitejournals.
net/index.php/IJOBMP/article/view/239
Mindtools.com. (2014). Developing a competency framework:
linking company objectives and personal performance. Retrieved
15 July 2014, from: http://www.mindtools.com/pages/article/
newISS _91.htm
Hr-catalyst.com. (2014). Competency modeling, leadership devel-
opment, management training & more - atlanta, ga - hreatalyst,
inc.. Retrieved 15 July 2014, from: http://hr-catalyst.com/compe-
tency.modeling.php
HR management. (2010). Competency modeling. Retrieved 15 July
2014, from: http://www.humanresources.hrvinet.com/competency-
modeling/
Edweb.sdsu.edu. (2014). The competency modeling approach. Re-
trieved 15 July 2014, from: http://edweb.sdsu.edu/people/arossett/
pie/interventions/career_1.htm
Atiitya.com. (2014). Competency mapping & assessments - ati-
itya. Retrieved 15 July 2014, from: http://www.atiitya.com/train-
ing-learning-solutions/competency-mapping-assessment-pro-
gram.aspx
Asme.org. (2014). Off the grid: how to map engineering compe-
tency - asme. Retrieved 15 July 2014, from: https://www.asme.org/
career-education/articles/management-professional-practice/off-
the-grid-how-to-map-engineering-competency
Siop.org. (2014). Types of employment tests. Retrieved 15 July
2014, from: http://www.siop.org/workplace/employment%20test-
ing/testtypes.aspx

TRAINING AND DEVELOPMENT
CONTENTS
7.1 Introduction
7.2 Concept of Training
<= Training and Education
LS
Need and Importance of Training

t
Stakeholders in Training
Process of Training
International Training Issues
2.6 Factors Influencing the Effectiveness of Training
Activity
7.3 Types of Training
Activity
7.4 Methods of Training
Activity
7.5 Training and Learning Organisations
Activity
7.6 Concept of Development
7.6.1 Need for Development in Organisations
7.6.2 Difference between Training and Development
Activity
7.7 Summary

TRAINING AND DEVELOPMENT AT TESCO
Tesco is the largest retailer in Britain and holds a third position in

the world having its stores in Europe, Asia, and the US. Since the
opening of its first store in 1929, the company has been constantly
fulfilling the needs of its customers. The primary aim of Tesco is to
keep customers happy by serving them in the best possible way. The
company believes that if customers are happy, the company will have
repeat business. Consequently, Tesco has expanded its business into
various fields, such as banking, insurance, electronics products, and
telephone equipment besides grocery products and general mer-
chandise.
With the expansion of the company’s business, its workforce has
also increased approximately 2, 80,000 employees in the UK and
more than 4, 60,000 across the globe. To serve such a large cus-
tomer base, the company needs flexible and well-trained staff to
perform various store and non-store functions, such as customer
assistance, warehouse management, back office activities, logis-
tics, billing, ete. The company believes that its continuous growth
depends on increased knowledge, improved skills, and job satis-
faction of employees.
Tesco has adopted a flexible and structured approach to train-
ing and development. The training and development practices of
the company focus on individual employee needs. The company
offers both on-the-job and off-the-job training to its employees.
The on-the-job training includes learning by observing and fol-
lowing trained employees, coaching from managers or designated
colleagues, mentoring from employees working at the same po-
sitions. On the other hand, off-the-job training involves exter-
nal courses by professional training institutes or qualified Tesco
training staff. On-the-job training is directly related to the job
roles of employees, while off-the-job training is concerned with
developing communication skills, decision-making skills, etc. of
employees.
Just like training, Tesco takes equal responsibility in the devel-
opment of employees through its options program. This program
involves workshops on both leadership behaviour and operating
skills of employees. Tesco also uses an informal approach to de-
velopment where employees are asked to find out their strengths
and weaknesses. Not only this, the company maintains highly
structured monitoring and evaluation of training and development
programs. It prepares checklists that are used to measure the im-
provement in the job performance of employees after training and
development. The training and development practices of Tesco
help in retaining customers, which is vital for its expansion and
business growth.

TRAINING AND DEVELOPMENT 157
N OT ES

»— Explain the concept of training
Discuss different types of training
rrr y
List the methods of training

Discuss training and learning organisations
Explain the concept of development
Elaborate on the need for development in organisations
rr
Differentiate between training and development a
(AS INTRODUCTION
Traditionally, organisations viewed training and development as routine pro-
cesses that could not help in creating value and dealing with competi-
tive challenges. However, now, this view of organisations has changed.
Over the years, it has been found that organisations which use innova-
tive training and development practices are most likely to achieve bet-
ter financial performance and attract and retain talented employees
at all levels. Therefore, organisations nowadays invest a huge amount
on maintaining effective training and development processes.
Effective training and development practices help employees to

strengthen their skills and abilities and promote new and innovative
ideas. This in turn results in overall quality, improved customer ser-
vice, enhanced productivity, organisational effectiveness, and so on.
Apart from this, training and development build an organisational
culture where there is cordial employee-employer relationship, team-
work, collaboration among different sub-units, and dynamism. Al-
though training and development serve a common purpose, there are
certain differences between the two.
Training is an organised activity for enhancing or developing the skills

and knowledge base of employees to improve their current job perfor-
mance. Development, on the other hand, is a process of building the
competencies of employees for future performances. Thus, training
is job oriented and has a short-term perspective, while development
is career centred and has a long-term viewpoint. The need for train-
ing arises when there is a lack of skills among employees, whereas
development is a personal drive or ambition. In this chapter, you will
study about the concept and importance of training and development
in detail.
(P= CONCEPT OF TRAINING

Hiring skilled and qualified personnel is of paramount importance
to any organisation. However, to achieve success in the long run, it

N OT ES
is essential for an organisation to train and educate its employees to

increase their knowledge base and develop new skills. This not only
leads to the development of employees but also increases their pro-
ductivity; thereby leading to organisational effectiveness.
Training is an organised process that involves teaching or providing

instructions with an aim to improve the performance of recipients or
help them to achieve a required level of knowledge or skill. The fol-
lowing are the popular definitions of training:
Q According to Terry L. Leap, Training is the creation of an envi-
ronment where employees may acquire or learn specific, job-related
behaviour, knowledge, skills, abilities and attitudes.
Q In the words of Edwin Flippo, Training is the act of increasing the
knowledge and skills of an employee for doing a particular job.
Q As per Michael Armstrong, Training is the formal and systematic
modification of behaviour through learning which occurs as a result
of education, instruction, development and planned experience.
Q According to Michael J. Jucius, Training is any process by which
the attitudes, skills and abilities of employees to perform specific jobs
are improved.
Q In the words of Gary Dessler, Training refers to the methods used
to give new or present employees the skills they need to perform their
jobs.
7.2.1 TRAINING AND EDUCATION
The two terms training and education are often confused with each
other. However, training and education are complementary to each
other. Employees are selected or hired in an organisation on the ba-
sis of their education. On the other hand, training presumes that em-
ployees have a particular level of education. Thus, it can be said that
training cannot be conducted without formal education, and educa-
tion is not complete without practical training. Table 7.1 distinguishes
between training and education:
TABLE 7.1: DISTINGUISHING BETWEEN

TRAINING AND EDUCATION
Purpose It aims at developing the It aims at developing
mindset of individuals. new skills and know-
ledge of individuals.
Level of learning Individuals may find it It is easier to learn.
difficult to learn.
Measure of success Education is based on It is based on certific-
the system of scores and ates and job perform-
grades. ance.

N OT ES
TABLE 7.1: DISTINGUISHING BETWEEN

TRAINING AND EDUCATION
Length of process _It may extend to one to It generally lasts for one
three years. to five days or some-
times for a few weeks.
Changes The learner becomes more The participant be-
radical and skilfulin gen- — comes skilful in a par-
eral thinking. ticular job.
EXHIBIT
Training at Wipro
Wipro being an information technology, consulting, and outsoure-

ing company provides a comprehensive training culture. With the
belief in overall training and development, the company has part-
nership with various elite universities that prepare students to
become programming professionals. Wipro Academy of Software
Excellence (WASE) is one such educational institution held by the
company and is first of its kind in India. WASE, established in 1995,
is an initiative for higher education in India. The WASE program
at Wipro offers an opportunity for BCA, B. Se and BCM students to
pursue MS in Computer Science without even having an engineer-
ing degree. Students are exposed to industry experience during
the course duration, which help in developing their technical skills
by having an opportunity of working on live projects on weekdays.
Similarly, Wipro Infotech Master of Science (WIMS) is another em-
ployment model offered by Wipro that also prepares fresh BCA and
B. Sc. graduates for IT infrastructure management services.
Besides providing industry experience to graduates and imparting

higher studies to them, Wipro also brings out leaders in employ-
ees through its leadership program. The company defines various
qualities in terms of skills, abilities, qualifications and experience
that must be present in Wipro’s leaders. This leadership program
is referred as WIBGYOR which stands for “Wipro’s Career Bands
Gives You Opportunities & Responsibilities.”
(Source: http://eareers.wipro.com/it/eampus/india/wase.htm
http://eareers.wipro.com/why_wipro/leaders_program.htm)
7.2.2. NEED AND IMPORTANCE OF TRAINING
In an organisation, the main purpose of a training program is to im-

prove the performance of employees. Training is not limited to new
employees but also extends to the existing employees of an organi-
sation. Organisations nowadays invest a huge amount on conducting
training programs to develop the skills of their existing employees.
This helps employees to quickly adjust with the changing business

N OT ES
environment. The following points explain the need and importance

of training:
Q Training is required to make new employees aware of their job
roles and duties, organisational processes and functions, etc. This
enables new employees to adapt to the work culture of the organ-
isation.
Training leads to the building of efficient and effective teams;
thereby enabling the organisation to quickly respond to changes
in the business environment.
It motivates employees to work toward the accomplishment of or-
ganisational goals and objectives by providing them a clear picture
of the organisation’s expectations.
It improves the knowledge of employees about their job roles, which
leads to enhanced productivity and organisational effectiveness.
Training focuses on developing the intellect and personality of em-
ployees so that they can perform effectively.
Training inculeates a sense of team spirit, teamwork, and in-
ter-team collaboration, which helps employees to adapt to team
culture.
Training enables employees to identify their strengths and use
them as well to recognise their weaknesses and correct them.
7.2.3 STAKEHOLDERS IN TRAINING
A stakeholder is an individual or a group of individuals who affect or

get affected by the growth and development of a business. In a train-
ing program, stakeholders can be the top management that sponsors
the training program; participants who attend the training program;
and the trainer who conducts the training program. Let us discuss
about these stakeholders as follows:
Q Top management: A training program cannot be conducted with-
out the consent of the top management. This is because it is the
top management that allocates resources for conducting any train-
ing program. Moreover, the top management decides why training
is required; which type of training is required; what should be the
budget of the training program; what should be the mode of train-
ing; who will conduct the training; when and where the training
should be conducted; and so on.
Participants: They comprise the target audience of a training pro-
gram. Participants strive to achieve the learning goals and objec-
tives of the training program and apply this learning while per-
forming their jobs. Until participants are not interested to learn
from the training program, the role of the other two stakeholders
(top management and trainer) would not be fulfilled. Thus, the
willingness of participants to attend the training program is di-

NOTES
rectly proportional to the success of the training program. Irre-

spective of how good a training program is, it is the improvement
in participants that decides the success of the program.
Q Trainer: A trainer plays a crucial role in motivating and inspiring
participants by making training sessions interesting and informa-
tive. The role of a trainer is not just limited to conduct the training
program but also broadens to devise the training schedule, super-
vising the mode of delivery, conducting post-training evaluation,
and so on. For this, a trainer needs to possess strong communication
skills, management skills, interpersonal skills, listening skills, etc.
7.2.4 PROCESS OF TRAINING
An organisation needs to focus on maintaining a pool of efficient em-

ployees so that it can meet its goals and objectives within the stipu-
lated time. Therefore, the organisation must have a successful train-
ing program that can improve the knowledge and skills of employees
and increase their productivity. Training is a sequential process that
involves a number of steps, which are listed in Figure 7.1:
~~
Reviewing eee Deciding
Organisational _ »> Training
Objectives aaa eas Objectives
. Implementing Designing the

Evaluating ie € “ = Training
gram Program
Figure 7.1: Steps of the Training Process

1. Reviewing organisational objectives: This is the first step
wherein the trainer studies the predefined objectives and the
business strategy of the organisation. In this step, the trainer
considers the following questions:
@ What is the nature of the organisation’s business?
@ What level of quality does the organisation desire to
maintain?
@ What are the future aspirations of the organisation?
@ What are the strengths and weaknesses of the organisation?
Considering these questions helps the trainer in deciding the
purpose of the training program and determining the training
needs of employees.

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2. Assessing training needs: In this step, the requirements of

training are identified by comparing the actual performance of
employees with the desired performance. The existence of gaps
in the performance of employees signifies the need for training
so that employees can perform efficiently. Sometimes changes in
organisational policies and functioning also require employees
to undergo training to better adapt to the changes.
EXHIBIT
Training Need Assessment
Training need assessment (TNA) is a process of identifying gaps be-

tween the desired performance and the actual performance of em-
ployees. The main aim of TNA is to identify the performance require-
ments of an organisation. Sometimes organisations do not perform
TNA before planning the training program, which leads to the fail-
ure of achieving the desired output. There are three levels in TNA,
which are shown in the following figure:
| Organisational Assessment
| Occupational Assessment
Personal Assessment
Figure: Levels of Training Need Assessment
Let us discuss about these three levels of TNA.
Q Organisational assessment: At this level, the performance that

an organisation desires to achieve in the future is determined.
This level also involves identifying the strengths and weak-
nesses of the organisation so that proper training can be im-
parted to exploit strengths and correct weaknesses.
Q Occupational assessment: Occupational assessment deter-
mines the skills, knowledge, and abilities required to perform a
particular job in the organisation. It identifies the occupational
discrepancy that needs to be improved.
Q Personal assessment: Personal assessment analyses the capacity
and efficiency of employees to perform a particular job. This anal-
ysis provides information on the areas where employees need to
improve. This information is used in planning and designing the
training program.

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3. Deciding training objectives: After the training needs are

identified, the next step is to identify the objectives of the training
program. This is one of the most important steps in the entire
process. This is because without clear objectives, the training
program may lead to failure. The following can be the objective
of a training program:
Improved productivity
HmlU OH hh O
o“-ffefthUh
Increased level of quality

Better HR planning
Enhanced employee morale and motivation
Personal growth
Effective health and safety measures
Training objectives are generally derived from organisational
objectives and policies. The objectives must be tangible, realistic,
and justified so that they can be achieved by the participants
after going through the training program.
4. Designing the training program: This step involves deciding the
type of training to be imparted and selecting a suitable method
of training. This is done by taking into consideration various
factors, such as training objectives, target audience, and skills
of the trainer. A detailed explanation of the type of training and
methods of training is given later in the chapter.
5. Implementing the training program: This involves putting the
designed program into practice so that training objectives can be
met. It involves preparing a training schedule, communicating to
the participants about the program, conducting and monitoring
program, etc.
6. Evaluating the program: This is the last step in the training

process where various tools and metrics are used to measure the
effectiveness of training. It is the job of the trainer to ensure that
the training program meets its desired goals. A training program
is generally evaluated by taking feedback from participants.
The feedback helps the trainer in determining the gaps in the
training program and correcting those gaps.
7.2.5. INTERNATIONAL TRAINING ISSUES
Globalisation has reduced national boundaries and made it easier for

organisations to recruit people across the world. This has also given
rise to international training where employees from different back-
grounds and beliefs are trained to achieve common goals and objec-
tives. International training not only helps organisations to develop
the skills of employees but also manage cultural diversity.

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Though international training has its advantages for the organisation,

there are certain issues associated with international training:
Q Sometimes organisations are not interested in bearing the extra
cost incurred on international training. The cost and infrastruc-
ture of international training is comparatively higher.
Many organisations find it difficult to look for a trainer who has
skills to train people from different backgrounds.
Determining the type and design of the training for a diverse audi-
ence is also sometimes difficult.
7.2.66 FACTORS INFLUENCING THE EFFECTIVENESS

OF TRAINING
An effective training program is one that provides a learning experi-

ence to participants and improves productivity. However, there are
certain factors that influence the success of a training program. These
factors are listed in Figure 7.2:
' 7 Management Support
| Acceptance of Participants
| Adoption of Continuous Process

\. J
Technological Advancement
Type and Time of Training
Figure 7.2: Factors Affecting a Training Program
Let us discuss these factors in detail.
Q Top management support: As discussed earlier, top management

is the sponsor of a training program in the organisation. If top man-
agement does not show any interest in the training program, the
purpose of the entire training program would be defeated. Thus,
a trainer should ensure that the consent of the top management is
taken before designing a training program.
Q Acceptance of participants: The organisation must nurture the
positive impact of a training program among participants so that
they can learn out of it. Without the acceptance of participants, it
would be difficult for them to achieve the desired goals of training.

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Thus, the objectives of training should be well communicated to

participants.
Q Adoption of continuous process: In order to achieve the objec-
tives of training, a continuous and systematic approach should be
followed towards its design and development. This is because if a
training program is designed in a haphazard manner, it may not
achieve its desired objectives.
Q Technological advancement: Technology influences the mode of
delivering training to a large extent. Over the years, the use of com-
puters and presentations has changed the way training had been
conducted in the past. Therefore, it is of utmost importance for an
organisation to make the best use of technology wherever possible.
Q Type and time of training: With an increase in competition, it has
become necessary for the organisation to conduct training on a
regular basis. For this, it is important for a trainer to select the
type of training that best matches the organisation’s requirements.
Moreover, the selection of proper timing largely influences the ef-
fectiveness of a training program. This is because if the duration
of the program is too long, it may waste the participants’ time and
affect their job performance.

1. “Training is the creation of an environment where employees
may acquire or learn specific, job-related behaviour,
knowledge, skills, abilities and attitudes.” Who is the speaker
of these words?
a. Edwin Flippo b. Michael Armstrong
ce. Terry L. Leap d. Michael J. Jucius
Who are the stakeholders of a training program?
Without the acceptance of , it is difficult to
achieve the goals and objectives of the training program.
Make a visit to an organisation in your area. Discuss with the HR

manager that how training need assessment is being carried out in
the organisation. Based on the discussion, prepare a report on the
strengths and weaknesses of the training need assessment process
of the organisation.
(= TYPES OF TRAINING
In an organisation, there can be different types of training programs

imparted to employees. However, the selection of a particular type of

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program depends on the objectives that an organisation desires to

meet after conducting the program.
Figure 7.3 lists different types of training programs:
Induction Training
Job Training or Orientation
Apprenticeship Training
Internship Training
Training for Promotion
Figure 7.3: Types of Training
Q Induction training: This type of training is conducted for new ap-

pointees. Induction training focuses on introducing new employ-
ees to organisational procedures, functioning, policies, culture,
rules, and regulations. It is generally shorter in duration and is
conducted right after recruitment (may be on the first day of em-
ployees in the organisation).
Q Job training or orientation: This training is given to both new
and existing employees. Orientation aims at making employees
aware of job roles, responsibilities, and accountabilities. This type
of training enables employees to perform their job efficiently.
Q Apprenticeship training: This is a hybrid form of job training
and classroom teaching where trainees are trained about both the
knowledge and the skills required in performing a particular job.
During this training, participants receive stipends while learning
and developing skills. This type of training is most desirable in the
construction and manufacturing industries where workforce with
particular skills and knowledge is constantly required.
Q Internship training: In this type of training, vocational and edu-
cational institutes enter into a formal contract with organisations
to provide practical training to their students. This type of training
is required to facilitate formal education with practical training.
For example, engineering and medical students need to work with
engineering firm and hospitals respectively to get practical experi-
ence. The period of internship trainings can vary from two months
to two years. Unlike apprenticeship training, in internship train-
ing, trainees do not belong to organisations. However, organisa-

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tions have an option of absorbing the interns after the completion

of their training by offering them a suitable job.
Q Training for promotion: There are some employees in organi-
sations who tend to perform better than their existing job roles.
Many organisations identify and appreciate these employees by
giving them special training that can prepare them for the next
promotion. As promotion leads to changes in job roles and respon-
sibilities of employees, training needs to be given. In this way, em-
ployees are trained to get promotion and perform efficiently.
4. In which type of training, the participants receive stipends

while learning and developing their skills?
a. Apprenticeship training
b. Internship training
Induction training
9
d. Job training or orientation

5. training is required to facilitate formal education with
practical training.
6. In apprenticeship training, vocational and educational
institutes enter into a formal contract with organisations to
provide practical training to their students. (True/False)
Imagine yourself as the HR manager of an organisation. Some new

employees have joined the organisation and you are asked to con-
duct their induction training. What would the goal and objectives of
your training program?
(2S METHODS OF TRAINING
An organisation uses various training methods to train its employees.

It is the responsibility of a trainer to consider the merits and demer-
its of each method before actually selecting it. Training methods are
broadly classified into two groups, which are:
Q On-the-job training method: It is a method wherein training is im-
parted to employees when they are actually performing their jobs
at a workplace. This method is generally used by organisations to
train employees for performing various operative functions. The
on-the-job training method can be successfully implemented if the
trainer is efficient. Therefore, it is important for an organisation to

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be careful in selecting the trainer. Some of the on-the-job training

methods are as follows:
@ Coaching and mentoring: Coaching and mentoring is the most
commonly used on-the-job training method. In the coaching
process, employees receive feedback on their performance and
guidelines to perform better, from their supervisors regularly.
Mentoring is a form of coaching used by executives to train
their subordinates. It involves one-to-one coaching that con-
tinues until the employee becomes capable enough to surpass
his/her mentor.
Coaching and mentoring help employees to learn quickly
through one-to-one interaction. Moreover, it enables organisa-
tions to keep track of the performance of employees and make
optimal utilisation of their skills. However, it may create a feel-
ing of discontent among employees who are unable to produce
desirable results. In addition, it leads to unwanted favouritism
if mentors form strong bonds with trainees. This can demor-
alise other employees.
Though both coaching and mentoring are the on-the-job meth-
ods of providing training, they are different from each other.
The following points explain the differences between the two:
Y Coaching is task oriented and focuses on concrete issues
such as efficiency and effectiveness, whereas mentoring fo-
cuses on both personal and professional success.
Y Coaching is a short-term process and gets over once the em-
ployee understands the job. On the other hand, mentoring
is a long-term process that aims at creating a trustworthy
environment for the mentee.
Y Coaching is performance driven, while mentoring is devel-

opment driven.
# Understudy: It refers to a method, in which trainees are pre-
pared to perform the work or fill the position of their superiors
who are about to leave the job due to promotion, retirement
or transfer. In this method, a trainee is called an understudy
and is likely to perform the duties and responsibilities of the
job position currently held by his/her superior. For instance, a
departmental head picks up one of store employees to become
his/her understudy. This will give the understudy an opportu-
nity to learn various skills while being on-the-job.
¢ Job rotation: It is a practice wherein organisations rotate their
employees’ assigned jobs throughout their employment. This
enables employees/trainees to learn new skills and understand
how different functions and processes are performed within
the organisation. Apart from releasing boredom, job rotation
allows employees to build a rapport with different teams/de-
partments within the organisation. Moreover, the cross-trained

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workforce provides a great amount of flexibility to the organi-

sation.
Job rotation, however, may also consist of several drawbacks.
When an employee is frequently shifted to various jobs, he/she
does not get enough time to spend in any particular operation
and thereby failing to develop strong expertise in any specific
area. Moreover, if the employee is a slow learner, it would be
difficult for him/her to integrate resources properly. Further-
more, it sometimes results in chaotic situations for employees
when they are exposed to rotating managers, having contrast-
ing styles of operation.
@ Special projects assignments: It is one of the highly useful on-
the-job training methods, under which trainees are assigned a
project that is closely related to their current job. Sometimes,
a number of trainee executives are put together to work on a
project, directly related to their functional areas. Trainees anal-
yse the problem and submit the written recommendation upon
it. This helps them in gaining experience of how to deal with a
particular problem. These special project assignments educate
the trainees about the organisational relationship of the prob-
lem from different angles. When a trainee works as a member
of a team, he/she not only acquires knowledge but also learns
how to work with people, having different viewpoints.
@ Selective readings: It is an individual self-development pro-
gramme, meant especially for executives. Some organisations
have a planned reading programme, under which the exec-
utives read books, journals, articles and notes and exchange
their views with others.
# Multiple management: In this method, a board of young exec-
utives is constituted and is given the responsibility of analysing
major problems. This board submits its recommendations to
the board of directors after analysing the major problems. This
method helps the young executives to learn decision-making
skills. On the other hand, the board of directors receive the
benefit of wisdom of the executive team. Moreover, if any va-
cancy arises in the board of directors, it can be filled by the
members of this board.
¢ Apprenticeship training: It is a practice where, trainees serve
as apprentices under a trained instructor. Such training is
provided mainly in occupations where skilled labour, such as
plumbers, electricians and bakers are required. In this meth-
od, trainees are kept under the supervision of an experienced
person who teaches them the essential skills and observes their
performance.
¢ Self-instructional mode: It involves learning through self-guid-
ance by using various resources, such as audio-visual instruc-

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tions. It is a self-initiated process, in which the trainees learn

at their own pace without having face-to-face communication
with the trainer.
The aforementioned on-the-job training techniques are cost effec-
tive, as the employees actually work while they learn. Moreover,
on-the job training techniques provide immediate feedback to
trainees that motivate them to learn the right way of doing things.
Now, let us explore off-the-job training techniques.
Q Off-the-job training methods: In this method, trainees are sent
to the location outside the actual workplace to acquire new skills
and knowledge. Off-the-job training may be provided by certified
trainers within the organisation or external trainers. Some of the
common off-the-job training methods are as follows:
+ Special courses: These training courses are formally organised
by the organisations with the help of experts from educational
institutions in form of management programmes, workshop or
seminars.
Case study: Case studies are descriptions of problems in organ-
isations and strategies to deal with those problems. Case study
improves the analytical and logical thinking of employees and
helps them approach the problem from a unique perspective.
It also engages participants in coming out with suggestions
and actions required to solve the problem at hand.
Role play: Role play is a powerful and significant learning op-
portunity based on practice (Robinson). The importance of
role play as a training method is in the fact that it is a very in-
teractive method and creates a greater degree of involvement
among participants. Role plays help uncover hidden habits and
invites constructive criticism and comments. They enhance
practical learning and an opportunity for participants to use
their creativity.
Conferences/discussion approach: This method is often used
as problem-solving approach where a group is formed to dis-
cuss on specific problems or issues that require a common
consensus on statements or solutions. In this method a trainer
delivers lecture and initiates discussion with trainees, so that
their doubts regarding the job could be clarified.
Simulation exercises: Replicating a real job like the situation
in the training room is known as simulation. Simulations help
in making training content and environment closer to actual
job conditions, thereby increasing its relevance. Simulations
assist trainees in improving their skills and understand appli-
cation of their learning.
Computer based training (CBT): It is high tech training in-
volving delivery of training via CD-ROMs intranets, internet,

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virtual classrooms etc. CBT may/ may not require an instruc-

tor’s assistance. CBT is interactive and self-paced. It allows
multiple iterations and can combine practice. Computer based
training can mix audio, video, graphics, animations, text etc. to
create video simulations or virtual tours and experiences for
the trainees.
¢ Sensitivity training: This training was developed by Kurt
Lewin, a German-American psychologist. In this method, the
trainees come together for an open discussion, wherein they
discuss about various issues. The discussion is directed by a
behavioural expert who helps the members to express their
ideas, beliefs and attitudes. This training is designed to make
people more aware of group dynamics, their own behaviour,
interpersonal traits and their role within the group. It helps the
members to learn how the group actually works.
¢ Programmed instructions: This method uses instructions and
programmed learning materials, such as books, illustrations,
diagrams, etc. to teach trainees about how to operate machines.
The core feature of this method is that it involves active par-
ticipation by trainees and provides them immediate feedback,
which helps the trainees in evaluating their performance.
@ In-basket exercise: It is method, where a trainee is given a
series of tasks that he/she has to complete in a fixed period
of time, for example, issuing a warning letter, memo, writing
to supplier, commenting on a new policy by the company, re-
viewing requests by some employees, etc. The speed and pro-
ficiency with which a trainee deals with each of such items in
the basket are recorded and the data is used in evaluating the
trainee’s efficiency.
¢ Vestibule training: It is a process in which employees are
trained in the realistic job setting but at a place different from
the one in which they actually work. The training is provided
by qualified instructors with an imitation of the actual work
conditions. This method of training is suitable when a large
number of employees are to be trained at the same time and
for the same kind of work. It does not interfere with the regular
process of production. Trainees can fully concentrate on the
learning process, as they are not under any work pressure.
@ Classroom training: Classroom training involves theoreti-
cal instructions for trainees through the joint efforts of the
employers and the educational institutions. The purpose of
classroom training is to provide advanced knowledge to em-
ployees in specific areas related to their jobs. Employers send
their employees to the technical or vocational training insti-
tutes to learn specific skills that are required to perform their
jobs. Such training is suitable where expert knowledge, clarity

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of concept and problem-solving ability are needed to be devel-

oped for employees.
ef SELF ASSESSMENT QUESTIONS

7. Training methods are broadly classified into and
8. Coaching and mentoring is the most commonly used off-the-

job training method. (True/False)
Imagine you are working in a manufacturing organisation that pro-

duces automobile parts. A new employee joins your department
and you are asked to provide him on-job-training as his mentor.
Which method of training would you use to train him?
TRAINING AND LEARNING

a9 ORGANISATIONS
The concept of learning organisation has become a buzzword in mod-

ern organisations be it a large multinational or a small-scale venture.
A learning organisation is one that focuses on acquiring knowledge
and encouraging innovative ideas with an aim to survive in a rapidly
changing business environment. The following are the features of a
learning organisation:
Q A learning organisation creates an environment that supports em-
ployees in their learning and critical thinking and encourages new
ideas.
Q It values the contribution of employees and provides a room for
mistakes in order to learn.
Q It encourages improving the knowledge base of employees while
they perform jobs.
Q A learning organisation believes in recognising and rewarding the
best performance.
Q It focuses on maintaining effective communication within the or-
ganisation.
As a learning organisation promotes constant learning, training plays

an important role in the growth of the organisation. Training helps a
learning organisation in the following ways:
Q Training helps in motivating and encouraging employees by pro-
viding a clear picture to employees about their job roles and re-
sponsibilities and making their jobs interesting.

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Q It develops the skills and knowledge base of employees so that

they can achieve the goals and objectives of the organisation and
quickly adapt to changes that take place in the organisation.
Q Ifatraining program is effective, it persuades employees to come
up with new ideas; thereby promoting organisational growth.
Q Training develops team spirit among employees which leads to ef-
fective coordination of work activities.
Q Training develops an effective flow of communication which is an
essential feature of a learning organisation.
Q Regular training programs reduce the number of repetitive mis-
takes and problems at the workplace, which results in improved
productivity.

9. A is one that focuses on acquiring knowledge
and encouraging innovative ideas with an aim to survive ina
rapidly changing business environment.
10. Training plays an important role in the growth of the
organisation. (True/False)
Using the Internet, find out the real-life examples of some learning
organisations.
(2: CONCEPT OF DEVELOPMENT
In the previous sections, you have studied about training that focuses
on sharpening the skills and knowledge of employees with an aim to
improve their current job performance. However, preparing employ-
ees only for current job performance is not sufficient for an organi-
sation in order to achieve success in the long run. The organisation
needs to constantly ensure the availability of a skilled and willing
workforce for handling different job positions in the future.
Development is a long-term process that aims at the overall improve-

ment of employees for future job performance. It focuses on enhanc-
ing the conceptual and theoretical knowledge of employees for a par-
ticular job position that they may hold in the future. For example, if
an employee has instinct leadership qualities, he/she may be prepared
for the position of a manager or team leader through proper education
or mentoring. Sometimes employees are asked to handle some of the
tasks related to their future job position. For instance, an employee
may be asked to handle a team in case he/she has been considered for

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a team leader in the future. In the next section, let us study the need
for development in organisations in detail.
7.6.1 NEED FOR DEVELOPMENT IN ORGANISATIONS
Just like training, development is also crucial to organisational growth.

The following points explain the need for development in organisations:
Q Increased efficiency and reduced wastage: Development aims
at strengthening the skills and competencies of employees for fu-
ture job performances. When employees acquire better skills and
knowledge, they tend to commit fewer mistakes and work effi-
ciently. In this way, development reduces the possibility of acci-
dents and mishaps; thereby reducing wastage and increasing ef-
ficiency.
Q Increased employee morale: Just like training, development also
improves the morale of employees by improving their knowledge
base, skills and abilities. High morale of employees is reflected in
their level of enthusiasm, willingness, and interest in the job.
Q To improve industrial relations: Effective development practices
lead to strong interpersonal skills, discipline, and regularity. This
leads to healthy relationships between employees and the man-
agement and between the organisation and various external par-
ties like suppliers, customers, shareholders, etc.
Q Optimum utilisation of resources: Development enables employ-
ees to make better utilisation of organisational resources. This
prevents the wastage of resources, which, in turn, reduces the or-
ganisation’s cost and increases profitability.
Q Fast response to change: Today’s business environment is subject
to dynamic changes. It is of utmost importance to an organisation
to quickly adapt to these changes in order to stay ahead of com-
petition. Development programs prepare employees to embrace
changes wholeheartedly by identifying their strengths and utilis-
ing them and improving their weaknesses.
7.6.22 DIFFERENCE BETWEEN TRAINING AND

DEVELOPMENT
Although training and development are closely related to each other,

there are certain differences between the two. Lawrence L. Stein-
metz stated that Training is a short-term process utilising a systemat-
ic and organised procedure by which non-managerial personnel learn
technical knowledge and skills for a definite purpose, while development
is a long-term educational process utilising a systematic and organised
procedure by which managerial personnel learn conceptual and theoret-
ical knowledge for general purpose. Table 7.2 differentiates between
training and development:

NOTES
TABLE 7.2: DIFFERENCES BETWEEN TRAINING

AND DEVELOPMENT
Point of Training Development
Difference
Scope It is a narrow concept. It is a broad concept. Training
is a part of development.
Validity or Training has its validity Development is valid for cur-
suitability for the present job only. rent as well as the future jobs.
Applicability Training is applicable for Development is not job spe-
a particular job. cific.
Target It is applicable to Development is generally ap-
audience employees working at plicable to employees worki
operating level. at middle and top manage-
ment levels.
Methods Mostly on-the-job training Mostly off-the-job training
methods are used. methods are used.
Skills and Training develops the Development i
knowledge physical and mental skills _ tellectual ab
of employees to performa leadership s
current job. skills,
skills 0
them for
11. is a short-term process while is a long-

term process.
12. Training has narrow scope, while development is a broad

concept. (True/False)
13. is applicable for a particular job.
14. Mostly on-the-job training methods are used in the
development process. (True/False)
Assume yourself as the marketing head at an organisation that

provides telecommunication services. How would you design the
development program for your department in order to prepare em-
ployees for future marketing managers?
(7 SUMMARY
Q Training is an organised process of imparting skills and knowl-

edge to employees with an aim of improving their productivity.

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Q Training and education are complementary to each other. An or-

ganisation selects employees on the basis of their education. How-
ever, while imparting training, it is presumed that employees have
a certain level of education.
Q There are different factors that create a need for training in an
organisation, such induction of new employees, performance im-
provement, and employee morale.
Q Top management, participants and the trainer are the important
stakeholders of a training program.
Q The process of training involves various steps, such as reviewing
organisational objectives, assessing training needs, and evaluating
the training program.
Q There are different types of training imparted in organisations.
Some of them include induction training, apprenticeship training,
training for promotion, ete.
Q Methods of training are broadly classified into two categories on-
the-job training and off-the-job training.
Q Development is a long-term process that aims at improving inter-
personal and leadership skills of individuals from a future per-
spective.
Q Though training is a part of development, both the processes are
different from each other in their scope, validity, applicability, etc.
A KEY WORDS
Industrial relations: Relationships of an organisation with its

internal and external stakeholders.
Q Interns: The students who undergo post-educational training
with organisations that maintain contracts with institutions.
Q Cultural diversity: Differences in the cultural backgrounds of
employees in an organisation.
Q Occupational discrepancy: A lack of skills and abilities re-
quired to perform a job.
Q Stipends: A form of salary given to apprentices when they take
practical training in an organisation.
1. Differentiate between training and education.
2. Write a short note on internship training.
3. Explain the two methods of training.

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4. What are the features of a learning organisation?

5. How does training help a learning organisation?
6. How development is different from training?
(1 ANSWERS AND HINTS
Topic (2 a os Answers
Concept of Training 1. e. Terry L. Leap aa
Top management, participants
and the trainer
Se Participants a. wwe
Types of Training 4. a. Apprenticeship training
ie Internship) Ya
6. False
Methods of Training 7. Orr th ai RP
Job tr
8. False
Training and Learning 9. QF
Organisations haa
10. True
Concept of Develop- @ Qe
ment
Sas trainin
2. True
14. False

1. Training and education are complementary to each other. An
organisation hires employees on the basis of their education and
at the same time employees require practical training post their
education. Refer to Section 7.2 Concept of Training.
2. In internship training, students from vocational and educational
institutes undergo training with organisations that hold formal
contracts with institutions. Refer to Section 7.3 Types of Training
3. Training methods are broadly classified into two categories
namely on-the-job training and off-the-job training. Refer to
Section 7.4 Methods of Training.
4. Alearning organisation creates an environment for employees to
come up with innovative ideas and learn from mistakes. Refer to
Section 7.5 Training and Learning Organisation.

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5. A learning organisation accepts and welcomes changes in the

business environment and training helps the organisation in
adapting to those changes. Refer to Section 7.5 Training and
Learning Organisation.
6. Though training leads to the development, both the processes
differ from each other in terms of scope, applicability, target
audience, purpose, etc. Refer to Section 7.6 Concept of
Development.
(Aly SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Kubr, M., & Prokopenko, J. (1992). Risorse wmane e sviluppo azien-
dale. Lanalisi del fabbisogno di formazione manageriale (1st ed.).
Venezia: Regione Veneto.
Laird, D., Naquin, S., & Holton, E. (2003). Approaches to training
and development (1st ed.). Cambridge, Mass.: Perseus Books Group.
Rudani, R. (2013). Principles of management (1st ed.). New Delhi:
McGraw Hill Education (India).
Q Tripathi, P, Tripathi, P, & Reddy, P (2008). Principles of manage-
ment (1st ed.). New Delhi: Tata McGraw-Hill Pub.
E-REFERENCES
Q Businesscasestudies.co.uk,. (2014). Introduction - How training and
development supports business growth - Tesco | Tesco case stud-
ies, videos, social media and information | Business Case Studies.
Retrieved 18 July 2014, from http://businesscasestudies.co.uk/tesco/
how-training-and-development-supports-business-growth/intro-
duction. html#axzz372xOquNC
Smallbusiness.chron.com,. (2014). Retrieved 18 July 2014, from
http://smallbusiness.chron.com/difference-between-training-man-
agement-development-40117.html
Traininganddevelopment.naukrihub.com,. (2014). Training and
Development. Retrieved 18 July 2014, from http://www.trainin-
ganddevelopment.naukrihub.com/

HUMAN RESOURCE DEVELOPMENT
CONTENTS
Introduction
Meaning of Human Resource Development
Need for HRD
Objectives of HRD
Scope of HRD
Activity
8.3 Functions of HRD
Activity
8.4 Process of HRD
Activity
8.5 Types of HRD Systems
Activity
8.6 Effectiveness of HRD
Activity
8.7 Summary

LARSEN & TOUBRO COMPANY
The Human Resource Development (HRD) evolved as a separate

entity in India in 1975 and all credit must be given to Larsen &
Toubro (L & T) Company for making HRD an integrated system.
Since 1975, other organisations in India have also separated HRD
from other functions of an HR department. L & T introduced the
concept of HRD in India and currently other organisations have
taken a cue from the organisation to meet their requirements.
In 1975, L & T, a well-established engineering firm in India, ap-

pointed a couple of consultants, Pareek and Rao, from the Indian
Institute of Management (IIM), Ahmedabad, to review the organ-
isation’s performance appraisal policy and suggest improvements
in the policy. While reviewing various appraisal policies through
interviews, surveys, etc., Parrek and Rao suggested that L & T
should have a separate new HR system called HRD system. They
were of the opinion that various functions, such as performance
appraisal, coaching, mentoring, counselling, training and devel-
opment, organisational development, and career development,
can be clubbed under this new system.
In 1977, Pareek and Rao produced their second recommenda-

tion report to L & T. They suggested that the personnel function
should be considered to be Human Resources Function (HRF)
while Personnel Administration, HRD and Worker Affairs should
be regarded as a trifurcated function. Pareek and Rao separated
HRD from other HRF elements and integrated HRD structurally
by inter-linking various HRD sub-systems. The integration pro-
cess of HRD and various sub-systems were in line with organi-
sational objectives. Based on the consultants’ recommendations
and other feedback and reports, L & T successfully integrated all
its HRD programs and ensured that the HRD process is imple-
mented successfully.

HUMAN RESOURCE DEVELOPMENT 181
NOTES

Explain the concept of HRD
Discuss the functions of HRD
yy
List the stages involved in the HRD process

Discuss the types of HRD systems
rr
Discuss the effectiveness of HRD
(i INTRODUCTION
Human Resource Development (HRD) is an important component
of the Human Resource Management (HRM) function that lays em-
phasis on building competencies of employees, achieving their com-
mitment, and creating a learning culture in organisations. The main
aim of HRD is to bring in competitive advantage in organisations and
achieve business excellence. HRD focuses on enhancing the problem-
solving capabilities and diagnostic skills of employees so that overall
organisational health can be improved.
HRD helps organisations to maintain a competent pool of employees

and facilitate the change process. HRD helps employees to realise
their full potential and contribute their best towards different roles
they are expected to perform in an organisation. Apart from this, it
maximises individual autonomy through increased responsibility;
thereby facilitating decentralisation and participative decision-mak-
ing in the organisation. This ultimately leads to shared knowledge,
resources, and learning in the organisation.
HRD lays emphasis on developing employees in such a manner that

they prove an asset to the organisation. This prepares the organisa-
tion to face various challenges in the future, such as rapid changes
in technology, fierce competition, product innovations, mergers, take-
overs and acquisitions, etc. In this chapter, you will study about HRD
in detail.
MEANING OF HUMAN RESOURCE

DEVELOPMENT
HRD is a framework used by organisations to help employees develop
their knowledge, skills, and abilities so that they can perform efficient-
ly in their job. HRD provides employees various opportunities, such as
training and development, career planning, coaching and mentoring,
performance management, etc. These programs help organisations
to build a strong workforce where employees work in a productive
manner to achieve organisational goals and ensure excellent custom-
er service.

N OT ES
HRD has been defined by various management experts. Some of these

definitions are as follows:
According to the American Society of Training and Development

(ASTD), HRD is the integrated use of training and development, orga-
nizational development, and career development to improve individual
group, and organizational effectiveness.
Nadler (1970) stated HRD as a series of organised activities conducted

within a specific time and designed to produce behavioural change.
Jones (1981) defined HRD as a systematic expansion of people’s

work-related abilities, focused on the attainment of both organisation
and personal goals.
According to Gilley and Eggland (1989), HRD is organised learning

activities arranged within an organisation to improve performance and/
or personal growth for the purpose of improving the job, the individual
and/or the organisation.
McLagan (1989) defined HRD as the integrated use of training and de-
velopment, career development and organisational development to im-
prove individual and organisational effectiveness.
Megginson et al. (1993) defined HRD as an integrated and holistic ap-

proach to changing work-related behaviour using a range of learning
techniques.
According to Stead and Lee (1996), HRD is a holistic societal process of

learning drawing upon a range of disciplines.
HRD isa continuous process that aims to improve overall productivity

through:
Q Investment in human resource: From an organisation’s perspec-
tive, output can be enhanced by investing in the development of
skills and abilities of human resource. From an employee’s perspec-
tive, investment in human resource enables them to meet their per-
sonal and professional needs. Organisations invest on human re-
source by providing them with better education, health facilities,
accommodations, etc. This is done with an aim to increase the sat-
isfaction level of employees and motivate them to work towards or-
ganisational goals and objectives; thereby increasing productivity.
Q Optimum utilisation of human resource: Organisations strive to
make effective utilisation of human resource on which they invest
in a planned manner. The main aim of HRD programs is to im-
prove the knowledge base, skills, and abilities of human resource
and mould their behaviour and attitude towards higher perfor-
mance and productivity. This helps an organisation to utilise the
right human resource at the right time at the right place.

N OT ES
Q Participation of human resource: Employees are motivated if

they are encouraged to participate in the decision-making process
of an organisation, which ultimately boosts productivity. HRD pro-
grams focus on total participation of employees by conducting var-
ious team building activities.
8.2.1 NEED FOR HRD
Changes are inevitable in any organisation be it a small-scale firm ora

large multinational. Organisations can better respond to these changes
if employees quickly adapt to these changes. For this, employees need
to develop their skills and competencies from time to time in order to
be prepared for any sudden changes that may take place in the busi-
ness environment. This raises a need for HRD in organisations. The
following points explain a need for HRD in an organisation:
Q Changes in the business environment: Various changes take
place in the internal and external business environment of organ-
isations from time to time. Employees have to learn new skills and
competencies to respond quickly to these changes. HRD programs
of organisations focus on developing the skills and abilities of em-
ployees.
Q Poor performance: If employees lack the required skills and are
demotivated, they would not perform as per the expectations,
which adversely affect the organisation’s productivity. These per-
formance issues of employees can be addressed through effective
HRD programs; thereby improving organisational performance.
Q Launch of new products: Organisations need to introduce new
products from time to time to stay ahead of competition. Before
launching new products, organisations should ensure that their
employees are well aware of the need of new product launches.
Moreover, employees should also be aware of the skills and abili-
ties required to respond to such changes. This is where the role of
HRD comes into the picture.
Q Higher performance standards: Organisations generally estab-
lish high performance standards for their employees. Employees
have to improve their knowledge and skills to be able to perform
according to the set standards. HRD programs enable employees
to achieve performance targets by focusing on the areas they need
to improve. A high performance rate leads to high productivity
and ensures the long-term success of an organisation.
Q Career progression requirements: Employees always aspire to
move to the next level of their jobs. HRD programs focus on career
planning, career management, and overall career development
of employees. In addition, these programs help in improving em-
ployees’ attitude, behaviour, skills, and knowledge that can enable
them to progress successfully in their career.

N OT ES
In an organisation, the need for HRD arises at three levels, which are
Levels of
HRD
Needs
Organisati- Work Personal

onal Level Level Level
Figure 8.1]; Levels of HRD Needs
Let us now study these needs in detail.

Q Organisational level: The need for HRD arises at the organisa-
tional level when an organisation alters its business strategy with
respect to the changes in the business environment. It is of utmost
importance for an organisation to quickly adapt to these changes
to win over its competitors. This can only be possible if an organ-
isation focuses on developing the skills and competencies of em-
ployees.
Q Work level: The work performance of employees can be enhanced
if organisations focus on developing the existing skills and knowl-
edge of employees. Improved work performance helps organisa-
tions to achieve productivity and gain high market share. HRD
programs aim to increase the competencies of employees, which,
in turn, enhance organisational output.
Q Personal level: Employees are motivated to perform effectively if
they have the right attitude and a high level of motivation and sat-
isfaction. HRD programs ensure that employees are personally at
a comfortable position to perform well. This in turn ensures high
performance levels and productivity. An effective HRD interven-
tion builds a positive outlook to changes in the business environ-
ment among employees.
Generally, an organisation requires HRD at the time of diversifica-

tion, declining profits and intensive growth. Different organisations
needed an HRD program under different circumstances. The follow-
ing are some examples:
Q Imperial Tobacco Company of India Ltd. (ITC) required HRD during
diversification of its business from cigarette manufacturing to other
products. The organisation focused on enhancing its training and
performance appraisal systems so that the skills and competencies of
managers can be identified and developed for new assignments.

N OT ES
Q Crompton Greaves needed HRD at a time when its business was

down and it had to start additional assignments at new places.
HRD helped in enhancing performance appraisal systems and
clarifying the roles of all the employees of the organisation.
Q Larsen & Toubro (L & T) required HRD when changes in organ-
isations were taking place. Planned HRD interventions helped
employees better adapt to rapid changes in the organisation and
improve overall organisational performance.
Q State Bank of India (SBI) needed HRD at a time when it had to re-
structure its organisation and maintain continuous growth. HRD
at SBI helped to improve its training and performance appraisal
systems.
Q Life Insurance Corporation of India (LIC) required HRD during

its reorganisation and to maintain continuous growth. HRD at
LIC helped to enhance its training and development and perfor-
mance appraisal systems along with improving employees’ quality
of work life.
8.2.2 OBJECTIVES OF HRD

The main objectives of HRD are to develop the competency levels of
employees, motivate employees towards building a successful career,
help employees to contribute largely to the growth of the organisation,
etc. HRD also enables HR personnel to identify gaps in the perfor-
mance of employees and plan future development programs accord-
ingly. Apart from this, the following are some other objectives of HRD:
To respond quickly to the changing business environment. For this,
employees have to learn new business trends and develop their com-
petencies in such a way that they can perform better and help organi-
sations to stay competitive through increased productivity.
To identify the strengths and weaknesses of employees. This helps in
making effective utilisation of employees’ strengths and correcting
their weaknesses in order to ensure their career growth.
To improve organisational performance by developing the skills,
knowledge base, and competencies of employees. This also motivates
employees to work toward the accomplishment of organisational goals
and objectives within the stipulated time.
8.2.3 SCOPE OF HRD
HRD has scope in various HRM functions, such as training and develop-
ment, career planning, and performance appraisal. In addition, it serves
as an input for various decisions related to placements, promotions,
transfers, etc. The following points explain the scope of HRD in detail:
Q Training and development: HRD programs are designed to train
employees in particular jobs. Moreover, these programs help in de-
veloping their skills, knowledge base, and competencies from time

N OT ES
to time so that they can identify and better utilise career opportu-
nities in the future. This also helps employees to quickly adapt to
the changes that take place within and outside the organisation.
Q Organisational development: HRD helps in organisational de-
velopment by ensuring that cordial relationships are maintained
among employees, conflicts are avoided, and employees are moti-
vated to work towards organisational goals and objectives.
Q Career development: Employees always seek to progress in their
career and transform themselves into highly competent individu-
als. HRD programs of organisations lay emphasis on career plan-
ning so that they can have a sustainable future. These programs
also involve learning support and career counselling for employ-
ees by trained experts.
Q Performance appraisal: This is one of the most important func-
tions in an organisation wherein the actual performance of em-
ployees is compared with and the desired performance. HRD pro-
grams are implemented to bridge gaps in the actual and desired
performance of employees. This leads to high performance of em-
ployees in the future.
Q Placement, promotions and transfers: Depending on the ap-
praisal reports, employees are placed in other departments, pro-
moted to the next level from their current level, or transferred to
a new location. When existing employees are promoted, placed or
transferred, it provides a financial boost to them and encourages
them to work better in the future. HRD programs
Q Employee motivation: HRD encourages employees to perform bet-
ter in their jobs by serving as a motivational tool. Its various func-
tions, such as training and development, career development, etc.
motivates employees to improve their learning and competencies.
ee SELF ASSESSMENT QUESTIONS

1. Employees are motivated if they are encouraged to participate
in the process of an organisation, which ultimately
boosts productivity.
2. Before launching new products, organisations should ensure
that their employees are well aware of the need of new product
launches. (True/False)
3. Which of the following refers to an organisation altering its
business strategy with respect to the changes in the business
environment?
a. Personal level need
b. Work level need

c. Organisational level need

N OT ES
Assume yourself as the senior HR executive of a manufacturing

organisation. You need to communicate the scope of an HRD pro-
gram to an employee who has recently been inducted. How will you
do that?
i FUNCTIONS OF HRD
HRD prepares employees towards achieving high productivity. The
objective is to help current employees perform better in their pres-
ent jobs and accept future challenges wholeheartedly by developing
their skills and competencies. In an organisation, an HRD program is
carried out through various functions. Figure 8.2 lists the three main
functions of HRD:
Functions of
HRD
Training and Organisational Career

Development Development Development
Figure 8.2: Functions of HRD
Let us now discuss about these functions in detail.
Q Training and development: This function of HRD focuses on

changing or improving the knowledge base, skills, and abilities
of employees. As discussed in the previous chapters, training and
development are two different functions; however, they are often
used synonymously. Training focuses on improving the skills of
employees so that they can perform their current jobs effectively.
On the other hand, development has a long-term approach to pre-
pare employees for future work responsibilities and increase their
potential. In an organisation, training and development is carried
out through employee orientation, counselling sessions, skills and
technical training programs, etc.
Q Organisational development: This function of HRD focuses on
improving the overall performance of an organisation and the
well-being of its members through planned interventions. This
is done by preparing employees to quickly adapt to the changes
taking place in the organisation. The organisational development

N OT ES
function is carried out through various team building activities,

counselling sessions, etc.
Q Career development: It is an important process that is meant to
make employees realise their work potential. In this process, an
employee goes through a series of stages, each containing differ-
ent tasks and issues. Career development consists of two parts,
namely career planning and career management. Career planning
is a continuous activity wherein employees are required to assess
their interests, values, skills, and preferences; explore work and
learning options available to them; and determine whether they fit
for their current jobs. This helps employees to be prepared for the
next level of their career. On the other hand, career management
involves shaping the progression of employees in an organisation
with respect to organisational needs and objectives, performance
standards, employees’ potential, and so on.

4. Organisational development focuses on improving the overall
performance of an organisation and the well-being of its
members through planned interventions. (True/False)
5. Which of the following HRD function is meant to make
employees realise their work potential?
a. Career development
b. Organisational development
ce. Training and development
6. Name the two parts of career development.
Your colleague at NIIT’s HR department, who has recently joined

the organisation, is unclear about the career development function.
How would you, being an experienced HR employee, help your col-
league by explaining the importance of this function?
EEY¥] PROCESS OF HRD

HRD is an organised process that involves skilful planning towards
formal and informal learning and knowledge processes and experi-
ences with an aim to achieve organisational performance. The HRD
process involves a number of phases, which are listed in Figure 8.3:

N OT ES
Needs
Assessment
. Design
|‘ ‘ Implemention
Evaluation
Figure 8.3: Phases in the HRD Process
Let us discuss these phases in detail.

1. Needs assessment: This is the first step that involves determining
the need for an HRD program in an organisation. This is done
by identifying gaps in the performance of employees. Thereafter,
needs are prioritised based on organisational requirements. This
helps in identifying the objectives of an HRD program.
2. Design: After the objectives are identified, the next step is that the
program should be designed in sucha way that the set objectives
can be met effectively. For example, if knowledge and skills of
employees are to be developed as identified in needs assessment,
suitable training and development programs are designed.
3. Implementation: This is the next phase of the HRD process
where the designed HRD program is put into practice so that the
identified objectives can be met. Implementation of the designed
HRD program is done by trainers, managers, experts, etc.
4. Evaluation: This is the final step of the HRD process where
the effectiveness of the designed HRD program is measured.
In this step, it is checked whether the designed HRD program
has met the set objectives. Sometimes evaluation is carried out
ineffectively or not done at all. This may happen because of the
wrong assumptions of managers that the designed HRD program
would work as desired.
These four phases of the HRD process together referred to as ‘A DImE’

framework, which is shown in Figure 8.4:

N OT ES
Design Implementation Evaluation

Assessment
Assess
Needs
v
Define Select
sien > .
-
Objectives
. . $j»
Evaluation
nee
\ Criteria
Develop Y
| Lesson Plan
Determine
Evaluation
~ Develop/Acuire Design
Materials
ois
o
I
Conduct
SMart a ge
= bop .
Geriits. 2OF > Evaluation
>
a oe ) Fe a 2 of Program or
QA a = Intervention
Ly Select Methods m° 1
and Techniques
Interpret
Results
Schedule the Prog-
ramme/ Intervention] _/
.
md
Figure 8.4: ‘A DImE’ Framework
7. HRD is an organised process that involves skilful planning

towards and learning and knowledge
processes and experiences with an aim to achieve
organisational performance.
8. Which of the following is the second phase of the HRD process?
a. Evaluation b. Implementation
ce. Design d. Needs Assessment
9. In the Implementation phase of the HRD process, it is
checked whether the designed HRD program has met the set
objectives. (True/False)
Suppose you are the assistant HR manager of TATA Motors. You

have to design and develop a new HRD program for your employ-
ees. Follow a systematic HRD process during this activity.

N OT ES
ce TYPES OF HRD SYSTEMS

An HRD system is a framework wherein the skills and competencies
to be developed in employees are defined so that they can perform
their jobs effectively. There can be different types of HRD system in an
organisation. Some of them are listed in Figure 8.5:
Career System
Work System
Development System
Self-renewal System
Culture System |
Figure 8.5: Types of HRD. Systems
Let us now discuss different types of HRD systems in detail.

Q Career system: This system focuses on attracting new employees
and retaining the existing ones so that an organisation can contin-
uously achieve its performance. To do so, the organisation needs
to perform various activities such as manpower planning, recruit-
ment, career planning, succession planning, and retention. Punjab
National Bank (PNB) uses an effective career system.
Q Work system: HRD ensures that the employees are attracted and
retained effectively so that the organisational objectives are met.
The set objectives can be achieved through improved work per-
formance of employees which will lead to high productivity. Var-
ious HRD sub-systems, such as performance plan, performance
appraisal, guidance, feedback and role analysis, etc. help to im-
prove the overall quality of work in organisations. An example of
an effective work system being followed is that of Allahabad Bank.
QO Development system: The business environment changes quite
rapidly and organisations need to adapt to changes to stay compet-
itive in the market. Thus, the skills and competencies of employees
are continuously developed to meet the increasing demands of the
business. This is done through training, self-learning mechanism,
development activities, coaching and mentoring, counselling, etc.
Bank of Baroda uses an effective development system.

N OT ES
Q Self-renewal system: An organisation needs to revive its business

and products and services from time to time so that it can with-
stand the increasing challenges of the changing business environ-
ment. This is done through surveys, action research, organisa-
tional development interventions, etc. An example of an effective
self-renewal system being followed is that of State Bank of India
(SBI).
Q Culture system: Employees in an organisation belong to differ-
ent cultural backgrounds and have different mind-sets. HRD fo-
cuses on creating a work culture where employees can work with
a sense of togetherness to achieve organisational goals and objec-
tives. This is done through effective communication, get-together
events, team-building activities, and so on. Reserve Bank of India
(RBI) uses an effective culture system.

10. The work system focuses on attracting new employees
and retaining the existing ones so that an organisation can
continuously achieve its performance. (True/False)
11. The business environment changes quite rapidly and
organisations need to adapt to changes to stay in
the market.
12. Employees in an organisation belong to different cultural
backgrounds and have different mind-sets. (True/False)
Assume yourself as a junior associate of the HR department in Ex-

ide. You have been asked by your seniors to plan a get-together
event for all employees in the organisation. Prepare a plan to en-
sure this event is highly successful which will help to improve the
culture within the organisation.
[EQ] EFFECTIVENESS OF HRD

The effectiveness of HRD is reflected through the improvement in the
job performance of employees. An HRD program is said to be effective
if it enables employees to perform their jobs effectively. The following
factors contribute to the effectiveness of HRD:
Q Effective linkage: An HRD program can be effective if all HRD
functions, such as performance appraisal, training, and career de-
velopment are aligned with each other. For example, if there are
certain gaps identified during the performance appraisal of an
employee, immediate training must be given to the employee to
bridge such gaps. On the contrary, if gaps are not bridged and the

N OT ES
employee has been taken to the career planning stage, he/she may
not be able to perform efficiently and the entire HRD program
would lead to a failure.
Q Clear objectives: An HRD program must follow a set of clearly
defined objectives in order to be effective. It is essential that HRD
objectives must be defined based on the needs of employees, or-
ganisational requirements, and changes in the external and inter-
nal business environment. If these objectives are ambiguous or
unclear, overall organisational productivity cannot be enhanced,
which is the main aim of an HRD program.
Q Effective communication: Communication is a key factor in de-
termining the effectiveness of an HRD program. For example, if
employees need to develop their skills and competencies, a train-
ing and development program is required to be conducted. For
this, employees need to be clearly communicated the areas they
need to improve upon so that the purpose of the program can be
met.
Q Feedback from employees: An effective HRD program always

has room for feedback so that the loopholes of the program can
be identified and corrected. A feedback can be conducted through
surveys, questionnaires, etc. to get the opinions of employees on
how effective was the HRD program and to what extent it helped
them to improve their skills.
Coal India Limited (CIL) has an effective HRD program in place

which focusses on developing existing human resources. The main
objective of this program is to enhance the skills and competencies of
employees by providing training in different areas like technical, man-
agement, etc. for their future growth and development. The HRD pro-
gram at CIL focuses on recent technological changes so that employ-
ees are comfortable using the latest technology necessary to fulfil high
production demands. Thus, in order to achieve high employee perfor-
mance and productivity, CIL integrates its annual HRD plan with the
HRD programs in all its 26 training centres across the country.
EXHIBIT
Role of an HRD Manager
An HRD manager is a person who is involved in organising activ-

ities to improve employees’ performance. The roles played by an
HRD manager are explained as follows:
Q Evaluator: An HRD manager acts as an evaluator to under-
stand the effects of organisational efficiency. An HRD manager
also evaluates organisational development and training and de-
velopment programs.

N OT ES
Q Manager of the organisational learning system: An HRD man-

ager plays an important role in the management of learning in
the organisation by developing and implementing learning pro-
grams. He/she must be knowledgeable in program planning, de-
signing, implementing, and evaluating. An HRD manager should
also understand the importance of training and development,
organisational development, and career development and how
they can be a part of the organisational learning system.
Q Operational manager: An HRD manager plays the role of an
operational manager through strategic planning, recruiting and
selecting candidates, formulating HRD policies and procedures,
and controlling HRD costs. He/she is also involved in marketing
and managing HRD products as well as supervising employees
and operations.
Q Organisational integrator of HRD: Integrating HRD into the
core of the organisation is a role that the HRD manager should
aim for. The measurement of the impact of HRD on the organ-
isation is carried out by HRD managers through cost-benefit
analysis; and strengths, weaknesses, opportunities, and threats
(SWOT) analysis. An HRD manager must aim to improve em-
ployee performance and organisational productivity through
the integration of learning and development programs.
OQ Marketing specialist: An HRD manager aims to promote the
usefulness of HRD in an organisation by attending management
meetings, writing articles, presenting and publishing reports on
the growth of HRD, etc. An HRD manager promotes the value
and contribution of HRD to organisational development within
the organisation as well as to external parties.
18. AnHRD program must follow a set of clearly defined objectives

in order to be effective. (True/False)
14. A can be conducted through - surveys,
questionnaires, etc. to get the opinions of employees on how
effective was the HRD program and to what extent it helped
them to improve their skills.
You and your colleague in the HR department have designed and

developed two HRD programs for employees. Discuss with your
colleague which HRD program is more effective. Remember the
factors that determine the effectiveness of HRD program during
your discussion.

N OT ES
wi SUMMARY
Q HRD isa framework used by organisations to help employees de-
velop their knowledge, skills, and abilities so that they can perform
their jobs efficiently.
Q HRD includes various activities, such as training and develop-
ment, career planning, coaching and mentoring, performance
management, etc.
Q HRD isa continuous process that aims to improve overall produc-
tivity through investment in human resource, optimum utilisation
of human resource, and participation of human resource.
Q In organisations, the need for HRD arises at three levels, viz. or-
ganisational level, work level, and personal level.
Q > The main objectives of HRD are to develop the competency levels
of employees, motivate employees towards building a successful
career, help employees to contribute largely to the growth of the
organisation, etc.
Q HRD has scope in various HRM functions, such as training and
development, career planning, and performance appraisal. In ad-
dition, it serves as an input for various decisions related to place-
ments, promotions, transfers, etc.
Q In an organisation, an HRD program is carried out through var-
ious functions, such as training and development, organisational
development and career development.
Q The HRD process involves a number of phases, i.e. needs assess-
ment, design, implementation, and evaluation.
Q The different HRD systems in organisations include career, work,
development, self-renewal and culture systems.
Q The effectiveness of HRD is reflected through the improvement in
the job performance of employees. An HRD program is said to be
effective if it enables employees to perform their jobs effectively.
KEY WORDS
Q Action research: A process of using various evaluative, objec-

tive and analytical techniques to solve a problem and is gener-
ally used in research studies.
Q Career development: A life-long learning and development
process that helps to plan and manage an individual’s work ca-
reer,
Q Career planning: A process wherein individuals making plan
regarding their choice of career and future growth.
Q Organisational development: A systematic approach to im-
prove the performance and effectiveness of organisations.
Q Team building activities: Activities that intend to improve the
morale and performance of a team as well as individual mem-
bers.

N OT ES
Explain the levels of HRD needs.
Elaborate on the scope of HRD.
NM
Discuss the functions of HRD.
YP
Explain the process of HRD.
PF
rT Elaborate on the type of HRD systems.
Explain the effectiveness of HRD.
eo
EEX] ANSWERS AND HINTS

Meaning of Human Decision-making

Resource Develop
2. True
a wa wy 3. Organisational level need
Functions of HRD 4, True
haa LX N Vv se a. Career Development
6. Career Planning and Career
Management
Process of HRD 7. Formal, informal
8. ce. Design
Dp 9. False
Types of HRD Systems 10. False
» 11. Competitive
12. True
Effectiveness of HRD 13. True
14. Feedback

1. The need for HRD arises at three levels, i.e. organisational level,
work level and personal level. Refer to Section 8.2 Meaning of
Human Resource Development.
2. HRD has a scope in different areas such as training and
development, career development, organisational development,
placement, promotions, and transfers. Refer to Section
8.2 Meaning of Human Resource Development.
3. In organisations, HRD programs are carried out through three
main functions, viz. training and development, organisational

N OT ES
development and career development. Refer to Section

8.3 Functions of HRD.
4. There are a number of phases in the HRD process, i.e. needs
assessment, design, implementation and evaluation. Refer to
Section 8.4 Process of HRD.
5. The various types of HRD systems in organisations are career,
work, development, self-renewal and culture systems. Refer to
Section 8.5 Types of HRD Systems.
6. The effectiveness of an HRD program is characterised by a
number of important factors, such as effective linkage, clear
objectives, effective communication, and feedback from
employees. Refer to Section 8.6 Effectiveness of HRD.
eet SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Werner, M. J. and DeSimone, L. R. (2012). Human Resource Devel-
opment. (6th ed.). Mason: South-Western Cengage Learning
Q Krishnaveni, R. (2008). Human Resource Development: A Re-
searcher’s Perspective. (1st ed.). New Delhi: Excel Books
Q Fisher, D, C. (2009). Human Resource Management. (6th ed.). New
York: Houghton Mifflin Company
E-REFERENCES
Q Heathfield, S. (2014). Guide to Human Resource Development.
About.com Human Resources. Retrieved 25 July 2014, from http://
humanresources.about.com/od/glossaryh/f/hr_development.htm
Q Small Business - Chron.com. (2014). What Are the Aims & Ob-
jectives of HR Development? Retrieved 25 July 2014, from http://
smallbusiness.chron.com/aims-objectives-hr-development-10943.
html
Q Megmtys.blogspot.in. (2014). Objective of HRD. Retrieved 25 July
2014, from __http://mgmtys.blogspot.in/2010/10/objective-of-hrd.
html
Q Akrani, G. (2014). Human Resource Development HRD - Defini-
tion Features. Kalyan-city.blogspot.com. Retrieved 25 July 2014,
from http://kalyan-city.blogspot.com/2011/04/human-resource-de-
velopment-hrd.html
Q Mbaofficial.com. (2013). What is human resource development and
what are the functions of HRD? | Total MBA Guide. Retrieved
25 July 2014, from http://www.mbaofficial.com/mba-courses/hu-
man-resource-management/human-resource-planning-and-de-

NOTES
velopment/what-is-human-resource-development-and-what-are-
the-functions-of-hrd/
Q Explorehrorg. (2014). Best website on HRM - Excellent HR Tools
and HR Presentation Slides - HR ppt - Human Resource Manage-
ment. Retrieved 25 July 2014, from http://www.explorehrorg/arti-
cles/HR_Planning/Critical_ Elements_of HRD _Effectivenss.html
Q Slideshare.net. (2014). Human Resource Development (HRD). Re-
trieved 25 July 2014, from http://www.slideshare.net/poonambhul-
lar/human-resource-developmenthrd

CAREER PLANNING AND SUCCESSION PLANNING
CONTENTS
9.1 Introduction
9.2 Definition of Career
9.2.1 Career Stages
9.2.2 Career Anchors
Activity
9.3 Career Planning
9.3.1 Objectives of Career Planning
9.3.2 Process of Career Planning
9.3.3 Merits and Demerits of Career Planning
Activity
9.4 Succession Planning
9.4.1 Objectives of Succession Planning
9.4.2 Process of Succession Planning
9.4.3 Merits and Demerits of Succession Planning
Activity
9.5 Summary

ABSENCE OF SUCCESSION PLANNING AT FEDERAL

RESERVE BANK OF KANSAS CITY
Organisations often experience departure or separation of per-

sonnel having key positions. Some organisations are prepared
with the replacement plans while others suffer the loss. Some-
thing similar happened to Federal Reserve Bank of Kansas City
when one of its senior executives resigned from her services and
the organisation wasn’t prepared with the succession plan to
make the replacement. The executive left as she had accepted the
offer in another organisation and believed that the operations of
the bank will continue without any pr¢
After her departure, with the iccession planning, the

board room of Federal Rese ‘Kansas City suddenly had
a number of concerns like:
Q Should the position yr executive filled from outside or
d 7 months on holding long discussions,

eetings before successfully appointing a new
turned as an experience for the bank on how im-
have a succession plan ready in place so that it
emented in case of any vacancy is created at a key

CAREER PLANNING AND SUCCESSION PLANNING 201
NOTES
After studying this chapter, you would be able to;

»— Define the term career
Explain various career stages
yy
List various career anchors

Discuss the concept of career planning
rr
Explain the concept of succession planning
HB INTRODUCTION
A career is a sequence of an individual’s experience on different jobs
over a period of time. In other words, it can be defined as a sequence
of positions held by an individual during the course of his/her work
life. In today’s highly competitive environment, individuals have high
expectations about their jobs besides income. They nowadays are
more concerned towards the quality of work life. This is where the
role of career planning comes into the picture that enables organisa-
tions to make optimum utilisation of their human resource to meet
future challenges.
Career planning is a process of identifying individuals’ goals, skills,

interests, and knowledge with an aim to find out career choices for
them. The main objective of career planning is to match the potential
of employees with organisational requirements. This enables organ-
isations to ensure the availability of the right people with the right
skills and identify training and development requirements in case of
any deviations. It eliminates factors, such as job stagnation, monot-
ony, obsolescence, and dissatisfaction. However, the human resource
needs of organisations change rapidly; thus they need to ensure the
continuity of a talent pool.
Succession planning is a process of ensuring a suitable supply of suc-

cessors for future key jobs in an organisation. In other words, it is
a process of recognising and developing the potential of employees
within the organisation with an aim to fill key job positions. Succes-
sion planning and career planning are complementary to each other.
This is because in the absence of career planning, successors cannot
be identified for future job positions. On the other hand, without suc-
cession planning, career planning would turn into a roadmap having
no direction. In this chapter, you will study about career planning and
succession planning in detail.
[EE] DEFINITION OF CAREER

A career is a sequence of jobs taken up by an individual throughout
his/her lifetime. It encompasses formal education, practical training,

N OT ES
and occupational experiences received by the individual. In other

words, career can be defined as changes that take place in the work
attitude of individuals when they pass through the different stages of
life. This is the subjective view of the word career. However, there is an
objective view of career as well. According to the objective view, an in-
dividual’s career is composed of a sequence of work-related activities
that gives meaning and stability to his/her life. The following are some
popular definitions of career given by experts:
Q Schein has defined career as, A sequence of positions held by a
person during the course of a lifetime. It comprises series of work
related activities that provide continuity, order and meaning to a
person’s life.
Q In the words of Hall, Career consists of the changes in values, atti-
tudes, and motivation that occur as persons grow older.
Q According to Sullivan, A person’s career is shaped by many com-
plex factors, e.g., performance, education, experience, influential
parents, caste links, and a certain amount of luck.
Q According to Wilensky, A career denotes a succession of related
jobs, arranged in a hierarchy of prestige, through which persons
move in an ordered, predictable sequence.
An individual passes through various stages throughout his/her ca-

reer. In the next section, let us discuss various career stages.
9.2.1 CAREER STAGES
The career of individuals passes through certain stages irrespective of

the type of work they do. Each stage analyses the development of an
individual’s career. These stages are listed in Figure 9.1:
Exploratory Stage :
Establishment Stage 2
Maintenance Stage »
Decline Stage
Figure 9.1: Stages of Career
Let us now discuss these stages in detail.

1. Exploratory stage: This is the pre-employment stage that takes
place before individuals get into any job. This stage generally

N OT ES
ends in early and mid-twenties for most people. This stage is

crucial for individuals as it is the period when individuals explore
and analyse their goals and objectives and prepare their mind-
sets accordingly. It is about self-exploration where individuals
identify their goals and interests. Career objectives in this stage
are often influenced by parents, teachers, and peer groups.
2. Establishment stage: This stage normally begins when
individuals join their first job. They make mistakes and are
full of anxiety about their professional life. As it is the first job
experience for individuals, they strive to establish a position in
the society and get recognised for their work.
3. Maintenance stage: After individuals enter into their professional
life, they strive to maintain stability in their jobs. Thus, this stage
is referred to as the maintenance stage. This stage is further
divided into the mid-career stage and late-career stage. During
the mid-career stage, individuals often face middle-life crisis
(for example, health issues, family responsibilities, etc.) that
sometimes reflects on their job performance as well. In addition
to that, individuals also experience stagnation in their career,
which leads to the decline in their job performance. On the other
hand, the late-career stage is characterised by both growth and
stagnation. It comes with rewards and recognition and greater
responsibilities, such as guiding, mentoring and teaching others.
Those who perform well in their mid-career stage often tend to
do well in the late-career stage too.
4. Decline stage: This is the last stage of individuals’ career where
they retire and take leave from their organisations to provide
job opportunities to successors. Irrespective of having a glorified
career or dismissal one, this stage comes to every individual.
Different people react differently to this stage. For some, it is the
end of creativity and being active, while others welcome it as a
relief from work pressure and stress. Many people also consider
this stage as an opportunity to socialise with their friends and
family members.
9.2.2 CAREER ANCHORS
It has been often observed that certain competencies, motives, and

values are developed during the early life of individuals, which guide
them throughout their work life. These competencies, motives, and
values anchor individuals to one or a few types of career choices; thus,
they are referred to as career anchors. These anchors provide a basis
for assessing what goals individuals want to achieve in their lives. Fig-
ure 9.2 lists some of the career anchors:

N OT ES
General Managerial
Technical/Functional
Security/Stability
Entrepreneurial Creativity
Service/Dedication to a Cause
Pure Challenge
Autonomy/Independence
| Lifestyle
Figure 9.2: Different Career Anchors
Let us now discuss about these career anchors in detail.
Q General managerial: Individuals whose career anchor is placed

on managerial quality tend to take responsibility and ability to in-
fluence and motivate others. People with this career anchor are
responsible and accountable for the output and the results. They
also align their own performance with the success of the organisa-
tion. People with general managerial career anchor are generally
managers and leaders in organisations.
Q Technical/functional: It is an expert-level quality in individuals
related to technical and functional knowledge about the job. Indi-
viduals with this career anchor may manage their technical team
but prefer to avoid administrative and managerial outlook. These
people are self-motivated to expand and develop their skills to
even higher levels.
Q Security/stability: Individuals having this career anchor have an
urge for security and stability as a primary requirement of work
life. They avoid taking risks and have a play-safe attitude to-
wards their work and life. People with this ability looks for calm-

N OT ES
ness, stability, and consistency in work. These security-focused

individuals generally aim for stable companies with emphasis
on context of the job rather than content of the job. In simple
words, these people give top priority to remuneration, benefits,
and work environment.
Q Entrepreneurial creativity: The entrepreneur creativity career
anchor makes individuals to always look for an opportunity of
setting up their own organisation. People with this quality have
creative skills, are eager to invent new things, and are willing to
start new projects. People having entrepreneurial creativity feel
successful with the accumulation of wealth; thus monetary bene-
fits are the driving factors for them of a successful career. People
having this career anchor may work for an organisation for learn-
ing and to have access to future opportunities.
Q Service/dedication to a cause: Individuals with this career an-
chor work for a cause, such as solving social and environmental
problems, helping others, and maintaining harmony among peo-
ple around. These individuals are driven by personal values and
causes. People with these qualities tend to do well in service-ori-
ented professions or social services. They also fare well in services
such as human resource and consultation.
Q Pure challenge: Those who have pure challenge as their career
anchor are inclined to work where solutions seem impossible and
relate their success by achieving the impossible. For some people,
a challenge could be intellectual such as difficult engineering de-
signs. On the other hand, for some, the challenge may be a multi-
faceted and complex market situation. These people continuously
test their abilities and skills and believe in overcoming obstacles
and conquering problems.
Q Autonomy/independence: People with this career anchor prefer
to work on their own terms and conditions. They strive to prove
their own work in their own way. Whether they are own a busi-
ness or work for an organisation, they prefer to work according to
their convenience in terms of when and how to work. These people
even turn down on promotions and advancements in order to re-
tain their autonomy.
Q Lifestyle: People with lifestyle as their career anchor want all ma-
jor things in their life to work together in an integrated manner.
Lifestyle refers to the person’s philosophy that focuses on balanc-
ing professional and personal life. They may even sacrifice some
of the career aspects such as geographical movement or higher
remunerations. These people do not believe in living to work, in-
stead they work to live. Therefore, these people strive for organi-
sations that motivate and provide work life balance.

N OT ES
1. Career consists of the changes in values, attitudes, and

motivation that occur as persons grow older.” Identify the
speaker.
2. Which of the following career stages is the pre-employment
stage?
a. Exploratory stage b. Establishment stage
c. Maintenance stage d. Decline stage
3. stage begins when individuals join their first job.
4. Maintenance stage is the last stage of individuals’ career
where they retire and take leave from their organisations.
(True/False)
5. The people with as their career anchor are inclined
to work where solutions seem impossible and relate their
success by achieving the impossible.
a. Service/Dedication toa Cause b. Pure Challenge
ec. Autonomy/Independence d. Lifestyle
Where is your career anchor placed? List some examples from your
life to support the answer.
Hs CAREER PLANNING
People always come across a phase when they feel overwhelmed by a
job or career they are into. In such a case, they generally fail to plan the
changes they need to make for their career growth and development.
Career planning is a practice or exercise where individuals identify
their work related objectives, strengths, and weaknesses so that they
can select an occupation or profession of their choice. It is a structured
process of analysing the skills and interests of individuals, deciding
their career goals, and formulating strategies to achieve them. The
following are some popular definitions of career planning:
According to Wrether and Davis career planning is the process by

which one selects career goals and path to these goals.
Similarly in the words of Armstrong, Career planning shapes the pro-

gression of individuals with an organization in accordance with assess-
ments of organizational needs and the performance, potential and pref-
erences of individual members of the enterprise.

N OT ES
The main aim of career planning is to enable individuals to making

right career choices. However, career planning is influenced by vari-
ous factors. Some of these factors are explained as follows:
Q Skills and abilities: The skills and abilities of an individual play an
important role in his/her career planning. The chosen education
and training program must be in sync with the actual skills and
capabilities of an individual. A lack of syne between the education
and actual skills may result in making wrong career choices.
Q Values and interests: Career planning is highly influenced with
one’s areas of interests. Different individuals have different areas
of interests based on which they look for suitable career options.
For example, some may value remuneration, while some may value
job profile or work life balance. Any mismatch between the areas
of interests and career options largely affect the career planning
process.
Q Salary expectations: Individuals have certain expectations re-
garding remunerations they would be getting in exchange of their
services. For some individuals, remuneration may be a deciding
factor to choose a particular career option, while for others; it may
one of the factors in selecting the career option. Thus, career plan-
ning must address the salary expectations of individuals.
Career planning does not end after an individual starts working rather
it is a continuous and cyclic process. After individuals start working,
they generally analyse their jobs in terms of scope and future require-
ments. Sometimes individuals feel the need for career transition. In
such a case, they again undergo the career planning process.
EXHIBIT
Career Plan at ABC Pvt Ltd.
ABC Pvt Ltd. is a software company that develops different soft-

ware programs for various engineering companies. Along with pro-
viding complete software solutions to its customers, the company
also provides career development opportunities to its employees.
For this, the company has developed a career plan to motivate em-
ployees for their personal growth and development within the com-
pany. The career plan of the company has been designed on the
basis of the following questions:
Q Where an employee sees himself/herself in the company after 5
to 10 years?
Q What skills does an employee has and what skills will be re-
quired to create and analyse opportunities within the company?
Q What is the mission and vision of the company and how does it
provide opportunity for employee’s development?

N OT ES
Q Is an employee comfortable with the work environment of the

company?
The company has separate plans for high performers and others.
The career plan of the company analyses the skills and interests
of employees so that suitable training programs can be developed.
Various skills that the company looks for in employees are analyti-
cal, self-driven, perceptive, creative, team player, linguistic, system-
atic, etc. The career plan of the company also analyses educational
aspects and working experience of employees.
9.3.1 OBJECTIVES OF CAREER PLANNING
The objectives of career planning can be defined from two perspec-

tives, namely from the employees’ perspective and the organisation’s
perspective. For employees, it is an opportunity to grow, meet their
goals and objectives, and achieve success. On the other hand, for
organisations, it is an opportunity to show interests in employees’
growth and development in order to retain efficient and loyal employ-
ees. Apart from this, the following are some other objectives of career
planning:
Q Career planning helps in attracting and retaining skilful and tal-
ented employees. This is because organisations today do not offer
a job but a career which is of greater interest for people.
Q It boosts employees’ motivation and morale. This reduces em-
ployee turnover as motivated employees tend to stay longer with
the organisation.
Q Agood career plan not only helps individuals in their career growth
but also helps the organisation in meeting its goals and objectives.
Q When an organisation takes an interest in employees’ growth and
development through career planning, it increases job satisfaction
among employees. This results in reducing absenteeism of em-
ployees from work.
9.3.2 PROCESS OF CAREER PLANNING
Career planning is a lifelong process where individuals keep locating

various opportunities for continuous career growth. The duration of
career planning is not defined and varies from one person to the other.
For some individuals, it may happen once ina lifetime while some in-
dividuals may keep redefining their goals and objectives as they gain
experience. The process of career planning is divided into various
steps, which are listed in Figure 9.3:

N OT ES
Performing Self-assessment »
Identifying Career Choices and Preferences 2
Aligning Needs and Opportunities »
Formulating Action Plan :
[ Evaluating the Process
Figure 9.3: Process of Career Planning

1. Performing self-assessment: In this, individuals collect
information about their interests, personality type,
characteristics, preferred environment, aptitudes, development
needs, and so on. The purpose of obtaining this information is to
find out career options that are suitable to individuals. Sometimes
individuals do not have an idea about their aspirations, goals,
and objectives. In such a case, they seek advice from people
around them, such as parents, teachers, peer groups and career
planning professionals.
2. Identifying career choices and preferences: Based on the
collected information, a number of career options are explored for
individuals and the relevant data about each option is collected.
This data is related to the education and training required for a
particular career option, its future scope, remuneration offered,
roles and responsibilities involved, etc. In this way, individuals
can identify various career choices and make preferences as per
their needs.
3. Aligning needs and opportunities: In this step, the needs of
individuals are aligned with career opportunities explored in
the previous step so that individuals can select the most suitable
career options. This is done by considering both short-term and
long-term options and finding out career alternatives.
4. Formulating an action plan: In this step, individuals are required
to bring the career plan into action and move forward to pursue
their career goals and objectives. Career planning is a circular
process, which implies that individuals may be required to start
from the beginning of their career or at some point of time they
may have to redefine their career goals and objectives.

N OT ES
Evaluating the process: This is the last step in the career planning
process wherein individuals ensure that they are moving in the
right direction. This helps them in determining whether the
chosen career is leading them towards growth and development
and taking corrective measures in case of any deviations.
9.3.3 MERITS AND DEMERITS OF CAREER PLANNING
From the discussion so far, it can be said that career planning helps
individuals in shaping their future career plans. The following are the
merits of career planning:
Q Career planning provides individuals with knowledge about avail-
able career opportunities and their priorities.
Q It aids individuals in making selection of their career, which is ap-
propriate to their preferences and scope of development.
It helps an organisation in identifying a talented and competent
pool of employees who can be promoted to the next level in the
organisation.
It ensures employees of their future growth in the organisation.
This makes employees to stay in the organisation to enjoy their
growth instead of switching to other jobs.
Q It contributes towards the successful accomplishment of individ-
ual and organisational goals.
However, there are certain demerits of career planning. Some of these

demerits are given as follows:
Q Sometimes career growth is limited in an organisation, which
makes career planning an unrealistic process.
Q Prejudice and interventions make systematic career planning a
difficult process. For instance, individuals are influenced by their
peer groups instead of pursuing their own aspirations. Similarly,
in an organisation, sometimes promotions are the results of fa-
vouritism.
Decline in career opportunities also affects career planning. The
decline may occur because of changes in internal and external
business environment of an organisation. For example, with the
advent of computers, the career opportunities for clerks declined.
The decline generally results in career shifts.
A lack of knowledge about one’s aspirations and interests leads to
the mismatch of needs and opportunities. This results in career
complications.

NOTES
6. According to , career planning is “the process by

which one selects career goals and path to these goals.”
7. The skills and abilities of an individual play an important role
in his/her career planning. (True/False)
8. The process of career planning comprises steps.
9. Inwhichstepofcareerplanning,
individuals collectinformation
about their interests, personality type, characteristics,
preferred environment, aptitudes, development needs, and so
on?
a. Performing self-assessment
b. Identifying career choices and preferences
ce. Formulating action plan
d. Evaluating the process
10. Career planning provides individuals with knowledge about
available career opportunities and their priorities. (True/
False)
Draft a plan for your career considering the above process of career
planning.
EEY9) SUCCESSION PLANNING

With the passage of time, every organisation needs successors for var-
ious key positions in an organisation. In order to meet their future
demand, organisations follow a process to identify and develop em-
ployees to fill various key positions. Succession planning is a process
of finding a successor for key positions in an organisation. It aims at
identifying and developing the existing people who have potential to
fill key positions in the organisation.
A productive and successful succession planning ensures the avail-

ability of experienced and capable employees in an organisation. In
order to have an effective succession planning, an organisation must
approach succession planning as an integrated process that aims at
both organisational and individual development. Therefore, it can
also be explained as a process of finding a replacement for key po-
sitions of the organisation. This helps the organisation in generating
greater revenues, improving its market image, and achieving compet-
itive advantage.

N OT ES
One of the good examples of having succession planning well in line

is Infosys. It grooms its future leaders gradually through long-drawn
and meticulous succession planning. Its succession planning process
works in compliance with the company’s vision statement ‘To be a
globally respected corporation that provides best-of-breed business
solutions, leveraging technology, delivered by best-in-class people.’
This is the reason that when company’s chief mentor and chairman, N
R Narayana Murthy, retired in 2006, the company was well prepared
for the smooth transition of the leadership and authority.
The company runs Infosys Leadership Institute (ILI) at its Mysore

campus which prepares future leaders for the company. ILI has helped
the company in identifying around 400 leaders from different loca-
tions across the globe, depending upon their performance throughout
their tenure. This is a mentoring process that consists of three-tier.
Tier-1 consists of a board of directors of the company that mentors
the tier-2 comprising leaders who in turn mentor tier-3 group that
includes workforce of the organisation. The members of these tiers
undergo training through the company’s personal development pro-
grams (PDP). The leadership development programs at Infosys de-
pends upon nine pillars which are developed from combining employ-
ees’ needs to grow and the company’s sensitivity to those needs. They
are referred to as ‘nine pillars for leadership development in Info-
sys’ and comprises ‘360 degree feedback’, ‘development assignmnets’,
‘Infosys culture workshops’, ‘development relationships’, ‘leadership
skills training’, ‘feedback intensive program’, ‘systemic process learn-
ing’, ‘action learning’ and ‘community empathy’.
This exclusive, comprehensive and intensive succession planning

process has made Infosys to adhere to its ability to achieve profitable
growth legally and ethically.
9.4.1 OBJECTIVES OF SUCCESSION PLANNING
Succession planning helps an organisation in finding successors for

its vital job positions. Succession should not solely aim at finding re-
placement but also provide an opportunity to the existing potential
employees to grow and develop in their career. The following are some
of the objectives of succession planning:
Q = To identify key positions in the organisation and evaluate the skills
and abilities of employees to fill such positions.
Q Tocreate immediate back-up plans for filling short-term vacancies.
Q To give a quick response to organisational changes that may take
place in the future.
Q To develop employees through comprehensive training and per-
formance management programs.
Q To facilitate individual career development in the organisation.

NOTES
9.4.2 PROCESS OF SUCCESSION PLANNING
Succession planning is a systematic process of identifying potential

employees who could take a certain job position in the future. The
process consists of a number of steps, which are listed in Figure 9.4:
Identifying Key =» Identifying the =» ae

Positions Talent Pool .
Strategies
Evaluating Implementing .
the Plan Succession
Strategies
Figure 9.4: Process of Succession Planning

1. Identifying key positions: In this step, key positions to be filled
in the future in an organisation are identified. For this, the
structure of an organisation is considered in order to compare
current and future vacancies. Key positions are ones that are
strategically and operationally essential for an organisation,
such as general managers, president, director, CEO, etc.
2. Identifying the talent pool: When key positions in the
organisation are identified, need analysis is performed so that
the pool of potential employees can be obtained. In this step, the
knowledge base, skills, and abilities of current employees are
analysed as per the position for which the successor is required.
This is done by performing two main activities namely workforce
skill analysis and job analysis. Workforce skill analysis involves
determining the skills and abilities that would be required in the
future for key positions. On the other hand, job analysis helps
in finding out competent employees who can be trained and
prepared for key positions.
3. Developing succession strategies: This step includes forming and
deciding different strategies to develop and prepare successors.
These strategies include planned job assignments, coaching
and mentoring, action learning projects, retention bonuses and
various programs related to quality of work life. Most of these
strategies are prepared and implemented by the HR department
of the organisation with active involvement of top management.
These strategies are formed in such a way that they can integrate
both organisational development and employees’ growth.

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4. Implementing succession strategies: In this step, the developed

strategies are brought into action so that employees can be trained
to develop the skills that would be required for key positions in
the future. Thereafter, a time frame in which a successor could
be ready to take up the new challenge is decided.
5. Evaluating the plan: It is the final and the important step of the
succession planning process. In this step, succession planning
strategies are monitored in order to evaluate whether succession
planning yields the desired results. This can be done by taking
feedback from employees and top management and monitoring
the performance of successors.
EXHIBIT
Failure of Succession planning at Reliance

Industries Ltd (RIL)
Sometimes companies fail to have a comprehensive and detailed

succession planning process and thus fail to implement the transi-
tion of the suecessor when a leader left or take retirement. Some-
thing similar happened to RIL after the death of Dhirubhai Am-
bani, the founding patriarch, in 2002. The reliance was not ready
with a comprehensive succession plan assuming the next successor
in the family will be the successor of the group as well. However,
the family dispute that followed the death of Dhirubhai Ambani,
highlights the importance and role of succession planning even in
family businesses. It becomes more important in family businesses
as legal and institutional arrangements to regulate the entities and
governance activities of the organisation are yet to be developed.
The dispute originated over the roles and duties of the two brothers
in various business activities. A lack of succession planning went
beyond souring personal relations. Being one of the most largest
and successful companies, it affected the stock of the company and
the wealth of shareholders.
Finally a ceasefire agreement was made between the brothers.

Kokilaben, wife of Dhirubhai Ambani, played an important role in
bringing her sons to this agreement. During the dispute and un-
til the agreement was signed, RIL empire already suffered erosion
of its values, diversification benefits, synergies, economies of scale
and complementarities and was split between the two brothers.
9.4.33 MERITS AND DEMERITS OF SUCCESSION PLANNING
Organisations nowadays are using succession planning to identify

and guide those who are capable of succeeding key positions. This
provides continuity to the organisation by meeting current and future
staffing needs. The following are some merits of succession planning:

N OT ES
Q It helps individuals in realising their career plans and aspirations

in the organisation.
Q Succession planning helps in developing a pool of qualified and
experienced people within the organisation.
Q It identifies employees’ renewal needs so that employees can be
prepared for future challenges through required training and de-
velopment programs.
Q It enables successors to respond to rapid changes in the
organisation.
Though succession planning is beneficial for both individuals and the

organisation, it also leads to certain unfavourable consequences if not
performed correctly. Some of these consequences are given as follows:
Q It may lead to the appointment of wrong successors, which ad-
versely affects organisational growth and development.
Q It may have the wrong timing of implementation when the organ-
isation is still immature. This will induce disharmony among em-
ployees leading to poor business growth.
TO 4st
Replacement Charts and Succession Planning
Replacement charts can be defined as a forecasting technique used

in succession planning to help organisations in identifying key job
roles, existing employees who are positioned in those roles, their
competencies, and current and future vacancies.
Against each vacant position, the competencies required for the

position are mapped. After this, employees with the desired com-
petencies are tagged to those positions to identify the potential re-
placements. The details of potential employees, such as their age,
competencies, skills, experience, etc. are listed on the chart. It is fol-
lowed by a comparative analysis of the candidates with who can fill
the position in the future. Replacement charts help organisations
in organising succession planning in a more structured manner by
identifying internal KSAs (Knowledge, Skills and Abilities).
Replacement charts categorise employees into four groups, which

are:
1. Employees, ready for promotion
2. Employees who would be ready for future promotions if given
additional training
3. Employees, performing satisfactorily but need motivation and
further improvements
4. Employees who are not fit for the job and need to be replaced

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The replacement charts help in providing information on the fol-

lowing:
Q Organisational history of an employee and the competencies
that the employee possesses.
Q The most eligible replacement options for a vacant position.
Q The benefit of selecting a particular employee relative to anoth-
er employee.
The following Figure shows a specimen of a replacement chart:

General Manager Key
V.K Garg Names given are replacement
AR candidates
PAto A. Promotable now
General Manager B. Needing development
L. Mathews Bl C. Not suitable to position
1. Superior Performance
Assistant General Manager 2. Above Average Performance
RK. Arora AP 3. Acceptable Performance
BK. Nehru BB 4. Poor Performance
| | | |
ce Division Division
HR Maneser Accounting & Planning M ‘Technical Advi
CP ana ; Ma Taxation Manager AN.Gupta A/1 N.R. Murthy B/S
. A.T. Roy c/2 K.P Rao B/l
I | I |
Northern Region Central Region Southern Region .
Manager Manager Manager Basteri een
L.C. Srivastay A/2 SP Kumar A/1 A.Subramanyam B/2 R. Krishna B/3
AThapar C/4 R.Pandey B/3 B.K. Menon B/l .
11. With the passage of time, every organisation needs for

various key positions in an organisation.
12. A productive and successful succession planning ensures
the availability of experienced and capable employees in an
organisation. (True/False)
18. Which step of succession planning includes forming
and deciding different strategies to develop and prepare
successors?
a. Identifying key positions
b. Identifying the talent pool
Developing succession strategies
e
d. Implementing succession strategies

14. In step, the developed strategies are brought into
action so that employees can be trained to develop the skills
that would be required for key positions in the future.
a. Identifying the talent pool

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b. Developing succession strategies

c. Implementing succession strategies
d. Evaluating the plan
Assume yourself as the HR manager of an organisation. Develop a suit-

able succession plan for any of the key position in your organisation.
Ho SUMMARY
Q A career is a sequence of activities taken up by an individual
throughout his/her work life in terms of formal education, practi-
cal training, and job experience. This leads to changes in an indi-
vidual’s life making his/her life better.
Q Career is divided into different stages, namely exploratory stage, es-
tablishment stage, maintenance stage, and decline stage. Each of
these stages has different relevance and significance in one’s career.
Q There are certain competencies and values developed during the
early life of an individual. These values and competencies moti-
vate the individual towards a particular career; and thus they are
referred to as career anchors.
Q Different career anchors are general managerial, technical/func-
tional, security/stability, entrepreneurial creativity, service/dedication
to a cause, pure challenge, autonomy/independence, and lifestyle.
Q In order to have a good career, individuals must identify their ob-
jectives, strengths, and weaknesses so that they can select the most
suitable occupation or profession. This process of self-assessment
and career option selection is referred to as career planning.
Q Skills and abilities, values and interests, and salary expectations
are the factors that influence the career planning of an individual.
Q The process of career planning comprises five steps namely per-
forming self- assessment, identifying career choices and prefer-
ences, aligning needs and opportunities, formulating an action
plan, and evaluating the process.
Q Just like career planning, an organisation prepares a replacement
plan for its key positions. The process of preparing such a plan is
called succession planning. It prepares organisations to fill the va-
cancies of their key positions.
Q The process is divided into five steps namely identifying the posi-
tions, identifying the talent pool, developing succession strategies,
evaluating the plan, and implementing succession strategies.

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KEY WORDS
Q Career shift: A change in one’s career.

Q Mentoring: The on-the-job training of new employees under a
senior or an experienced employee.
Q Peer group: A group of people of the same age sharing the same
interests.
Stability: The state of being stable such as career stability, per-
sonal stability, etc.
Succession strategies: Strategies that organisations formulate
to carry out their succession plan successfully.
[EG] DESCRIPTIVE QUESTIONS

1. What are different career stages?
2. What are career anchors and how do they direct the inclination
of individuals towards particular career options?
3 Define career planning and explain its various objectives.
4 Explain the process of career planning.
5. What do you understand by the term succession planning?
6 Explain the process of succession planning.
swe ANSWERS AND HINTS
Topic Answers
rs
©
)
Definition of Career Hall

a. Exploratory stage
A
Establishment stage
ae
False
b. Pure Challenge
| Be
Career Planning Wrether and Davis

True
Five
“) Ba
a. Performing self-assessment
True
Succession Planning Successor
True

N OT ES
J kyu Q. No Answers
13. ec. Developing succession
strategies
14, ec. Implementing succession
strategies

1. Career is divided into different stages, namely exploratory stage,
establishment stage, maintenance stage, and decline stage. Refer
to Section 9.2 Definition of Career.
2. Career anchors are the values and attitudes that individuals
develop during their early years of life. Refer to Section
9.2 Definition of Career.
3. Career planning is a process of identifying objectives, strengths,
and weaknesses in order to find the most suitable career option.
Refer to Section 9.3 Career Planning.
4. The process of career planning comprises five steps, namely
performing self-assessment, identifying career choices and
preferences, aligning needs and opportunities, formulating
an action plan, and evaluating the process. Refer to Section
9.3 Career Planning.
5. The process of finding successors for key positions in an
organisation is referred to as succession planning. Refer to
Section 9.4 Succession Planning.
6. The process of succession planning is divided into five steps,
namely identifying key positions, identifying the talent
pool, developing succession strategies, evaluating the plan,
and implementing succession strategies. Refer to Section
9.4 Succession Planning.
[EE] SUGGESTED READINGS & REFERENCES

SUGGESTED READINGS
Q Burke, A. (2002). Career planning (1st ed.). Hollywood, FL: Freder-
ick Fell Publishers.
Q Ohlsson, H., & Borg, H. (2010). Career development (1st ed.). New
York: Nova Science Publishers.
Q Rothwell, W. (2005). Effective succession planning (1st ed.). New
York: American Management Association.
E-REFERENCES
Q Aiwmindia.com,. (2014). What is Career Planning. Retrieved 28
July 2014, from = http:/www.aiwmindia.com/index.php/career-
tips/107-what-is-career-planning.html

N OT ES
Q Cwu.edu,. (2014). Human Resources | Succession Planning. Re-

trieved 28 July 2014, from http://www.cwu.edu/hr/succession-plan-
ning
Q Fresnostate.edu,. (2014). Career Planning. Retrieved 28 July 2014,
from _http://www.fresnostate.edu/studentaffairs/careers/students/
exploration/planning.html
Q Www2.gnb.ca,. (2014). Succession Planning - A 5 Step Process.
Retrieved 28 July 2014, from http:/$www2.gnb.ca/content/gnb/en/
departments/human_resources/career_development/content/suc-
cession_planning/five step process.html

PERFORMANCE MANAGEMENT
CONTENTS
10.1 Introduction
10.2 Concept of Performance Management
Nature of Performance Management
Significance of Performance Management
Performance Management Systems in India
Activity
10.3 Meaning of Performance Appraisal
10.3.1 Objectives of Performance Appraisal
10.3.2 Process of Performance Appraisal
10.3.3 Methods of Performance Appraisal
10.3.4 Benefits of Performance Appraisal
10.3.5 Problems of Performance Appraisal
10.3.6 International Performance Appraisal
Activity
10.4 Concept of Potential Appraisal
10.4.1 Purpose of Potential Appraisal
10.4.2 Techniques of Potential Appraisal
Activity
10.5 Summary

ESTABLISHING NEW PERFORMANCE APPRAISAL

SYSTEM AT XEROX CORPORATION
During the mid-1980s, Xerox Corporation faced a critical situation

at workplace due to its ineffective performance measurement sys-
tem. Most of the employees of the organisation were demoralised
and dissatisfied with the performance measurement system that
was ineffective and failed to stimulate their performance levels.
The original performance appraisal system of Xerox Corporation
was based on the following principles:
Q The performance was measured only once in a year.
Q The employees of Xerox Corporation were required to outline
their accomplishments.
Q The managers were assigned to deliver a written and descrip-
tive appraisal report.
Q Rating was given on the 1 to 5 numeric rating scale, where 1
stands for unsatisfactory and 5 for exceptional.
Q The performance rating was on forced distribution controlled
at 3 levels or below.
Q Theunderperformers were rigidly counselled and terminated.
This performance measurement system was regarded as inad-

equate by the employees and became a major reason for their
dissatisfaction. In 1983, the main copier division of Xerox-Re-
prographic Business Group (RBG) reported that though 95 per
cent of its employees received 3 or 4 level on appraisal system, the
merit raise for employees in these two categories only varied by 1
to 2 per cent.
Instead of improving its existing appraisal system, the HR de-

partment decided to implement a new result-oriented system. For
this, it formed a new team that worked closely with HR profes-
sionals and project supervisors. The team designed the new mea-
surement system with the following features:
Q Half-year feedback and performance development system
Q Refrained numeric rating system
Q Defined level of quality performance standard for each
employee
QO Self-assessment and checklist methods
Q Scope of discussion between manager and employees regard-
ing the performance

PERFORMANCE MANAGEMENT 223
In contrast to the old appraisal system that was a one-step pro-

cess, the new appraisal system has three stages, which are spread
out during the course of a year.
The first stage starts at the beginning of the year. In this stage,
managers meet employees and work with them for deciding the
employees’ goals, objectives and plans for the year. Standards are
set and performance measurement methods are clearly commu-
nicated to the employees.
The second stage begins in mid-year wherein required feedback is

given to employees and discussion sessions are held between t
employees and their concerned managers. They together di
the progress towards organisational objectives and the pos
means of improving performance in the future. In othe
this phase analyses the positive and negative aspect
ployees’ performance and suggests measures for the
The third stage comes at the end of the year w

and the employees prepare a document con
performance level of employees against t
standards. The stage focuses on provi
ment measures. This stage also focu
need for growth perspective.
After the third stage, disc

takes place where emplo n specific reasons for salary
raise amount, prom i
Before implementing the r system in the upcoming projects,

Xerox conducted an emplo survey for further improvement in
the new system. Based on the result of the survey, Xerox included
the following aspects in the new system:
Q Proper training and education for the taskforce
Development of relationship between peers
UOUocoo vo
Involvement of quality circles

Creation of employee’s career prospect
Reward and recognition for motivating employees
Instant feedback to the poor performers with corrective
measures

N OT ES

»— Explain the concept of performance management
Discuss the concept of performance appraisal
yy
List the steps involved in performance appraisal
Discuss the concept of potential appraisal
rr Describe the techniques of potential appraisal
1Use INTRODUCTION
With the ever-increasing competition, the success of organisations can
only be ensured if they manage their overall performance from time
to time. Performance management is a process of determining, assess-
ing, and sustaining the performance of all the aspects of an organisa-
tion, such as processes, departments, and human resource. In other
words, performance management is the systematic analysis and mea-
surement of the overall performance of an organisation. The main aim
of this process is to improve organisational performance over time.
As discussed in the previous chapters, employees are the valuable as-

sets of an organisation. This is because the success of organisations
largely depends on the performance of their employees; poor perfor-
mance is detrimental to the growth of organisations. Thus, it is impor-
tant for organisations to manage the performance of their employees
and take continuous measures to improve their performance in order
to attain sustained growth.
Performance appraisal is an on-going process of assessing the perfor-

mance of employees. It involves comparing the actual performance of
employees with the established standards which are already commu-
nicated to employees. In case of deviations, feedback is provided to
employees about their performance level and suggestions are given
on improving their performance. In this chapter, you will study about
performance management and performance appraisal in detail.
CONCEPT OF PERFORMANCE
oie MANAGEMENT
Performance management is a process that comprises a set of activi-
ties performed to ensure that organisational goals are met successful-
ly. It is a broad concept that focuses on managing total performance
within an organisation be it departments, employees, processes, prod-
ucts, or services. The term performance management was coined by

N OT ES
Dr. Aubrey Daniels in the late 1970s to describe a technology used for
managing the two critical elements of performance, behaviour and re-
sults. According to Daniels, Performance management is a scientifical-
ly based, data-oriented management system. It consists of three primary
elements: measurement, feedback and positive reinforcement.
Performance management is of utmost importance for an organisation

in order to assess its progress. Thus, it is essential for the organisa-
tion to measure its performance periodically. Measuring performance
requires careful supervision and thoughtful consideration. Any accu-
racy in performance management may result in the failure of imple-
mentation of improvement efforts.
In order to improve overall organisational capability, the performance

management approach should also focus on improving individual ca-
pabilities. In the context of HRM, performance management aims at
improving, developing, and managing employees’ performance and
aligning them with organisational objectives. By managing employee
performance, an organisation can maintain a pool of efficient employ-
ees. In a nutshell, as a forward-looking approach, performance man-
agement is primarily concerned with developing people in such a way
that sustained growth of an organisation can be ensured.
10.2.1 NATURE OF PERFORMANCE MANAGEMENT
In a modern competitive business environment, organisations need

to constantly check how well they are doing to survive in the mar-
ket. Performance management helps organisations to evaluate their
performance from time to time and ensure better productivity. With-
out effective performance management, accurate decisions cannot
be made. An effective performance management has the following
benefits:
Q Performance management works as a tool that helps in developing
employee performance
Q It identifies training and development needs of employees to en-
sure skilled, competent, and motivated workforce.
Q Performance management helps an organisation in setting goals,
developing human resource, and rewarding employee perfor-
mance.
Q It focuses more on improving future performance rather than as-
sessing the past performance.
Q It leads to self-development of employees at all the levels of the

organisation.
Q Performance management helps in providing constructive feed-
back to employees to improve their future performance.

N OT ES
10.2.2. SIGNIFICANCE OF PERFORMANCE MANAGEMENT
Effective performance management helps in assigning the right tasks

to the right employees based on their competencies and project prior-
ities. This ultimately leads to cordial relationships between employees
and the employer. Apart from this, effective performance manage-
ment also helps in:
Q Performance management helps in encouraging employees to par-
ticipate in the decision making process.
Q It assesses the training and development requirements of the em-
ployees and helps in improving their performance.
Q It helps in establishing meaningful work targets for employees.
Q It sets performance standards based on which the evaluation is
done.
Q It carries out a career development program for employees.
10.2.3 PERFORMANCE MANAGEMENT SYSTEMS IN INDIA
Today, India is acknowledged as one of the foremost economies in the

world with strong and stable growth rates, foreign exchange reserves,
and foreign direct investment. The economic growth has encouraged
many Indian organisations to bring positive changes in their policies
and practices to improve their overall performances. As numerous
multinational corporations (MNCs) have started their operations in
India, the level of competition has increased manifolds in the Indian
market. This has eventually led Indian organisations to reform their
performance level with an objective of being competitive.
The concept of performance management was introduced in India in

1940 by some well-known private sector organisations like Union Car-
bide, Tata Iron and Steel Company, Bata, and Voltas. On the other
hand, public sector organisations adopted a confidential reporting
system to evaluate their employees. In the mid-1970s, Rao and Pareek
developed an open ended performance appraisal system for Larsen
and Toubro that included performance planning and analysis, identi-
fication of development needs, participatory planning, culture build-
ing, competence building, and upward appraisal system.
In the late 1970s and early 1980s, many Indian organisations start-
ed using performance appraisal to evaluate employee behaviour and
develop employee capabilities. Later, organisations started incorpo-
rating quality-related aspects in their performance appraisal systems.
For example, Xerox (India) was one such organisation that incorporat-
ed quality dimensions into their review systems. By the late 1980s, a
shift took place from closed and confidential evaluation to open ended
and discussion based system.

N OT ES
However, it was only in the early 21st century that many Indian organ-
isations started focusing on the development of an effective perfor-
mance management system. By 2004, multiple organisations, such as
Infosys, Titan, Tata Steel, Bharat Petroleum, Dr. Reddy’s Lab, and the
National Stock Exchange started using some of the most sophisticated
forms of performance management systems. These systems included
peer ratings, assessment of values and potential, use of open-ended
communication and counselling. Nowadays, performance manage-
ment is regarded as a tool for transforming an organisation by pro-
moting high performance. Furthermore, many private and public
sector organisations in India nowadays have started considering per-
formance management as a key to effective decision making.

1. is the systematic analysis and measurement
of the overall performance of an organisation.
2. What are the three primary elements of performance
management?
3. Performance management helps in providing constructive
feedback to employees to improve their past performance.
(True/False)
4. Measuring performance requires careful supervision and
thoughtful consideration as any in performance
management may result in the failure of implementation of
improvement efforts.
5. Performance management is a backward-looking approach
that is primarily concerned with developing people with
sustained growth of an organisation. (True/False)
Visit an organisation in your vicinity and discuss the signifi-

cance of performance management with the HR manager of that
organisation.
Te MEANING OF PERFORMANCE
wy APPRAISAL
Employees are the most important and valuable sources for an or-
ganisation’s growth and progress. Therefore, an organisation needs
to motivate and reward its employees from time to time in order to
ensure their continuous performance. Performance appraisal is one
such mechanism that not only helps an organisation to understand

N OT ES
the abilities and competencies of its employees but also motivates

them for improving their current performance level. It is a process
of analysing the past performance and future potential of employees.
The performance of employees can be analysed on the basis of various
parameters, such as hard work, quantity of output produced, the qual-
ity of work done, responsibilities undertaken, initiatives, regularity,
and punctuality. Performance appraisal is also known as performance
assessment, performance evaluation, merit rating, merit evaluation
and performance management. The following are some popular defi-
nitions of performance appraisal:
As per Dale Yoder, Performance appraisal includes all formal proce-

dures that are used to evaluate the personalities, contributions and po-
tentials of group members working in an organisation. It is a continuous
process to secure the information necessary for making the correct and
objective decisions for employees.
According to Flippo, Performance appraisal is the systematic, periodic

and an impartial rating of an employee’s excellence in the matters per-
taining to his/her present job and potential for a better job.
According to the Douglass, Performance appraisal is a method of ac-

quiring and processing the information needed to improve an individual
employee’s performance and accomplishments.
In the words of Newstrom, Performance appraisal is the process of

evaluating the performance of employees, sharing that information with
them and searching the ways to secure the information necessary for
making correct and objective decisions for employees.
Ina nutshell, performance appraisal helps an organisation to measure

the current job performance of employees and determine the areas
where they need to improve. In other words, it helps employees in
identifying their strengths and weaknesses so that they may improve
upon their deficiencies and further develop their capabilities. Let us
now discuss the objectives of performance appraisal in the next sec-
tion.
10.3.1 OBJECTIVES OF PERFORMANCE APPRAISAL
As discussed earlier, the main purpose of performance appraisal is to

evaluate the performance of employees and acknowledge their con-
tribution in achieving organisational goals. In addition, performance
appraisal also helps employees to improve their existing skills and
develop new ones. Organisations generally evaluate the performance
of their employees to make decisions related to remuneration or pro-
motion. The following are some main objectives of performance ap-
praisal:
Q Performance appraisal helps in determining the training and de-
velopment needs of employees by assessing performance gaps.

N OT ES
Q It helps an organisation to achieve its strategic goals by improving

the overall performance of employees.
Q It is a future-oriented activity that focuses on developing new
skills of employees so that they may hold various key positions in
the future.
Q Performance appraisal provides an effective feedback to employ-
ees, which, in turn, helps them to improve their performance.
Q It lays a foundation for various employee policies related to trans-
fers, promotions, layoffs, or terminations.
Q Performance appraisal helps in reducing internal conflicts and
grievances among employees.
Q It helps an organisation to decide the compensation and incentives
to be paid to its employees.
10.3.2 PROCESS OF PERFORMANCE APPRAISAL
Performance appraisal is a systematic process that involves a number

of steps. However, the implementation of the performance appraisal
process varies across organisations depending on their requirements
and performance standards. Figure 10.1 shows the steps involved in
the performance appraisal process:
Establishing Performance Standards

“|
™~N Za
Communicating the Standards
—
NL
Determining Personnel Responsible for Conducting
Performance Appraisal
|
NY
Measuring the Performance
| |
NY
Communicating the Results of Appraisal to the
Concerned Employees
YH
Taking Corrective Actions
| |
NY
Figure 10.1: Steps in the Performance Appraisal Process

N OT ES
Let us discuss these steps in the performance appraisal process in

detail.
1. Establishing performance standards: This is the first and
foremost step of the performance appraisal process wherein the
performance standards are developed. These standards are used
to compare the actual performance of employees with the desired
one. These standards are usually precise and job specific. For
example, achieving a particular volume of sales may be a relevant
performance standard for a sales executive but not for an HR
executive. The performance standards are different in different
organisations. However, these standards are generally trait
based (employees’ attitude, creativity, initiative and willingness
to learn), behaviour based (employees’ behavioural patterns
and soft skills), and performance based (projects handled by
employees). For example, performance standards of a sales
manager at an insurance company are based on his/her ability to
analyse statistical data, such as mortality, accident, sickness, and
disability rates, etc. of the target audience. In addition, he/she is
also judged by the capability of constructing probability tables to
forecast risks and liability for the payment of future benefits. He/
she should also know how to ascertain premium rates required
and cash reserves necessary to ensure the payment of future
benefits.
2. Communicating the standards: After deciding the expected level
of performance, goals, and targets, it is essential to convey these
standards to employees. Clear communication helps employees
to understand the expectations of the organisation from them.
In addition, clear communication also motivates employees to
resolve their queries and work in the direction of achieving the
set targets.
3. Determining personnel responsible for conducting performance

appraisal: In this step, a decision is made regarding the selection of
an appraiser. The immediate superior of employees is considered
as the most suitable person for appraisal as he/she is more familiar
with employees’ performance. However, some organisations
believe in 360-degree appraisal wherein feedback on employees’
performance is taken from all stakeholders from whom employees
deal throughout their tenure. These stakeholders can be superiors,
subordinate, peers, customers, and so on.
4. Measuring the performance: This step involves judging the actual
performance of employees against the desired performance. This
helps in assessing whether or not the employees have met the set
performance standards. In case, the performance is below the
set standards, an organisation provides training and guidance
to the employees so that they can improve their weak areas. On
the other hand, if the performance exceeds the standards, the
employee may be awarded or promoted to higher positions.

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5. Communicating the results of appraisal to the concerned

employees: This step involves discussing the results of appraisal
with the concerned employee. It is the responsibility of the
reporting authority to communicate the results of the appraisal
to the employees, provide constructive feedback on their
performance, specify their weak areas, and suggest ways to
improve their performance. This makes employees get aware of
positive areas of contribution and rectify their weak areas.
6. Taking corrective actions: This is the last step of the performance
appraisal process. In this step, an organisation takes corrective
measures to improve the performance of its employees. For this,
an organisation uses various methods, such as coaching, guiding,
counselling, training, etc.
EXHIBIT
Setting Objectives in Performance Appraisal
The performance appraisal process considers the objectives of each

individual employee in alignment of the objectives of the respective
teams, department units and consequently with the organisation as
a whole. These objectives could be classified as:
Key Result Areas (KRAS), Key Responsibility Areas and Key

Performance Indicators (KPIS)
Key Result Areas (KRAs) are the identified areas of performance

that support the organisation’s goals which are to be accomplished
during the performance year. They should be ideally aligned to
function or Business and should be cascaded from the business/
Function scorecard.
Key Responsibility Areas denote to the tasks and duties, assigned

to an employee. Every employee in an organisation has specific Key
Responsibility Areas for which he/she is exclusively responsible.
Identification of Key Responsibility Areas helps employees in clar-
ifying their roles in the organisation. It also helps them in prioritis-
ing their work and improving the management of time.
Key Performance Indicators (KPIs) can be defined as a perfor-

mance measurement that helps an organisation in understanding
how the organisation/department/employee is performing. Take
an example of a retail organisation that aims at providing superior
customer service. In such a case, a KPI may target the number of
customer service requests that remain unsatisfied by the end of a
month. By monitoring the data, one can easily measure how well
the organisation is performing in terms of customer service. Simi-
lar KPIs can be set for measuring a department’s or an employee’s
performance. A good KPI acts as a compass and shows the right
path to achieve the goals.

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Core Responsibilities (CRS)
Core Responsibilities (CRs) are on- going tasks or outcomes based

on day-to-day work of an individual and do not have any pre-de-
termined targets at the beginning of a performance period. They
may be qualitative or quantitative at times and generally provide
opportunity to measure how well the job/ responsibility assigned is
performed.
Individual Contribution Areas (ICAS)
Individual Contribution Areas (ICAs) measure the contributions

that go beyond the expected realms of performance. They are out-
come based and measurable however are not cascaded from the
strategy of the business. They could be special projects, develop-
mental activities/lead indicators or other job responsibilities.
Such a performance plan created for every employee must include:

Q Setting SMART (Specific, Measurable, Attainable, Relevant &
Time bound) goals in consultation with your staff.
QO Assigning weightages to KRAs, CRs and ICAs as per the role
and structure.
QO Defining targets for each KRA that quantifies or verifies the ex-
tent of achievement in a given time frame.
Q Checking that the targets defined are aligned vertically and hor-
izontally to the goals of the department division & organisation,
and,
Q Developing Action Plan i.e., initiatives to support the goal
agreed upon.
10.3.3 METHODS OF PERFORMANCE APPRAISAL
There are numerous methods that are used by organisations for per-
formance appraisal. These methods can be broadly grouped into two
categories, as shown in Figure 10.2:
Performance
Appraisal
Methods
Past-Oriented Future-Oriented
Methods Methods
Figure 10.2: Methods of Performance Appraisal

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Let us discuss these methods in detail.
Q Past-oriented methods: These are the oldest techniques of perfor-

mance appraisal. Past-oriented methods are based on a trait-ori-
ented approach wherein the performance of employees is eval-
uated on the basis of established standards of traits or qualities
of employees, such as personality, attitude, initiative, ability to
judge, versatility, leadership, commitment, domain knowledge,
and punctuality. Some of the important past-oriented methods are
¢ Confidential report: In this method, a descriptive report is
prepared by the immediate reporting authority of the em-
ployee being appraised, usually at the end of the year. This
report outlines the strengths and weaknesses of the employ-
ee, without giving any suggestion to him/her. This method is
commonly used in government organisations. Thus, the em-
ployee is not given a chance to improve his/her performance
as the feedback is kept confidential and not discussed with
the concerned employee.
@ Essay method: In this method, an appraiser writes an essay or
a short narration about the performance of the employee being
appraised. It includes a written form mentioning the strengths
and weaknesses of the concerned employee. The main demerit
of this method is that essays are subjective and thus, there are
chances that the supervisor may write biased essays if he/she
does not like the employee.
¢ Critical incidents method: In this method, an employee is ap-
praised by taking the job-related critical incidents and the re-
lated behaviour of employees into account. It reveals either the
positive or negative aspects of the employee’s performance.
Managers periodically record the negative and positive be-
haviour of employees while they are performing on their work.
For instance, on a particular day, an employee managed to re-
solve all customer complaints within the turnaround time, as-
suring 95% quality in resolution. Similarly, a critical bad inci-
dent may be such that when the employee refuses to help his/
her fellow workers and could not resolve customer complaints
timely. At the end of the stipulated period, these recorded crit-
ical incidents are used in the evaluation of the employee’s per-
formance.
In the banking industry, the critical incidents method can be
used for identifying and elucidating the difficulties that loan of-
ficers face in decision making of commercial loans. Let us now
take an example of a bank where the critical incidents method
was used for judging loan officers while making decision re-
lated to commercial loan applications. After analysing criti-
cal incidents, it was concluded that the primarily factor that
was used while making decisions is based on the deliberation

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and less intuition. Second, it was found that loan officers had
greater difficulty in making decisions that involved soft infor-
mation, such as client relationships, as compared to decisions
that involved hard information, such as financial information.
Third, most decision making situations involved older clients
rather than new ones as well as low risk levels rather than
higher levels. Lastly, it was concluded that organisational fac-
tors, such as lending practices, put significant impact on lend-
ing decisions.
@ Checklist method: In this method, the appraiser provides a
rating to the employee about his/her behaviour at the work-
place. A checklist includes a set of objective (yes or no) or de-
scriptive questions which the appraiser is required to answer.
Each question carries a specific weightage. After the checklist
is filled, a final score is calculated which helps the appraiser to
evaluate the performance of the employee. The checklist con-
tains questions related to the personal and professional traits
of the employee. The main demerit of this method is that the
superior may be biased towards the subordinate, due to which
rating may also suffer.
¢ Forced choice method: This method requires the appraiser to
provide rating to an employee from a set of descriptive state-
ments. These statements are given in the form of pairs that
denote two opposite ends; one is in favour (positive aspect of
employee’s behaviour) of the employee and the other is against
the employee (negative aspect of employee’s behaviour). The
appraiser selects the one that is appropriate to the concerned
employee. Table 10.1 shows a sample of the statement that is
prepared in the forced choice distribution method:
TABLE 10.1: ILLUSTRATION OF FORCED CHOICE

DISTRIBUTION METHOD
Least Qualities Most
A The employee has leadership skills A
B Devoted worker B
Cc Always ready to help fellow workers Cc
D Learns things quickly D
¢ Paired comparison method: It is a method in which the ap-

praiser compares the performance of each employee with the
other employees one at a time. For example, there are five em-
ployees named A, B, C, D, and E. The appraiser compares the
performance of A with the performance of B and determines
whose performance is better. Thereafter, the performance of A
is compared with C, D, and E in that order. This is repeated for
all employees within the selected group. The performance of
employees can be compared by using the formula, N (N-1)]/2,

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where, N stands for the number of employees to be compared.

If there are 50 employees, the number of comparisons will be
[50(50-1)]/2=1225. After the comparison, the appraiser summa-
rises the results in a table and creates a rank from the number
of times each person is considered to be superior.
@ Forced distribution method: In this method, the performance
level of employees is matched with a normal statistical distri-
bution. In the forced distribution method, the appraiser has
to group the performance of employees in specified categories
of ratings. For example, classification is done according to the
performance of employees—excellent 10%, good 20%, average
40%, below average 20%, and unsatisfactory 10%.This situa-
tion is explained with the help of Figure 10.3:
~
Number of
Employees
mm es |
10% 20% 40% 20% 10%
Scores | L Excellent
Good
Average
Below Average
Unsatisfactory
Figure 10.3: Representation of Forced Distribution Method
The main demerit of this method is that it is based on an as-

sumption that each employee’s performance level always con-
forms to a normal distribution. Moreover, the appraiser may
resist placing employees in the lowest or the highest group. In
addition, the appraiser may face difficulties while justifying the
scores that have been given to a particular employee, as well as
the reason of placing that employee in a particular group.
Apart from the aforementioned methods, some other past-oriented
methods include forced-choice method, ranking method, graphic
rating scales method, field review method, and group appraisal
method.
Q Future-oriented methods: With rapid changes in technology, ap-
praisal methods in an organisation have also got modified. Now-

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adays, organisations use various future-oriented appraisal meth-

ods. Some of the future-oriented methods are discussed as follows:
+ Human resource accounting method: In this method, the rel-
ative worth of an employee is determined in terms of money.
It calculates the cost incurred on an employee in the form of
recruitment, training, development and compensation. In ad-
dition, it evaluates the contribution of the employee in terms
of his/her productivity to the organisation. Thereafter, the per-
formance of the employee is evaluated by calculating the dif-
ference between his/her contribution to the organisation and
the cost incurred by the organisation on the employee. If this
difference is positive, the performance is considered to be pos-
itive, otherwise negative.
Assessment centre method: In this approach, employees are
asked to complete the tests and exercises related to the activ-
ities they might encounter on their jobs. The performance of
employees is judged on the basis of the behaviour they reflect
while performing the given tests and exercises. A detailed ex-
planation on the assessment centre method is given in detail in
the previous chapters of the book.
Management by Objectives (MBO) method: This is one of
the commonly used performance appraisal approach in which
employees are asked to establish goals for themselves in assis-
tance with their superiors. At the end of each year, employees
discuss these goals with their superiors to identify their prog-
ress towards the accomplishment of goals. This mutual goal
setting approach leads to high employee satisfaction, strong
job commitment, and enhanced motivation level.
360-degree appraisal method: This method provides an organ-
isation with a more comprehensive picture of an employee’s
performance. In this method, the organisation appraises an
employee based on the feedback received from various sources,
such as superiors, subordinates, colleagues and the employee
himself/herself. The feedback provided by these sources is
kept anonymous to appraise the employee without any bias.
In addition, the feedback received from multiple sources helps
employees to identify their strengths and weaknesses and ex-
ploit opportunities for their self-development. Many large cor-
porations, such as SBI, Infosys, Wipro, Aditya Birla Group, and
Thomas Cook use this method of appraisal for evaluating the
performance of their employees.
Behaviourally Anchored Rating Scales (BARS): This method
represents the combination of traditional rating scales and
critical incident methods. BARS rating comprises a certain
number of dimensions, such as customer service skills, job
knowledge, and interpersonal skills. Each BARS is usually in
the form of a seven or nine point (in behavioural terms) on a

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vertical scale. Point one on the scale represents poor job per-
formance and the highest scale point represents the best job
performance. Although this method is job-specific, it is time
consuming and expensive.
10.3.4 BENEFITS OF PERFORMANCE APPRAISAL
From the discussion so far, it can be said that performance appraisal

is important for evaluating the performance of employees and setting
the standards for their desired performance. Apart from this, there
are some other benefits of performance appraisal:
Q Human Resource Planning (HRP): It is a process of developing
and determining objectives, policies, and programs to procure, de-
velop, utilise, and retain human resources for achieving the or-
ganisational goals. It further helps an organisation to collect in-
formation on the skills, strengths, weaknesses, and calibre of its
employees. This information is gathered through performance
appraisal and can be used for developing succession plans, future
workforce planning and replacement charts.
Q Recruitment and selection: Recruitment is a process that involves
attracting and obtaining applications from potential job seekers. It
aims at creating a pool of qualified and competent workforce re-
quired by an organisation. On the other hand, selection includes
staffing the right type of candidates for various positions in the
organisation. In the recruitment and selection process, the per-
formance standards set in the performance appraisal process are
considered. The recruitment and selection process can be success-
ful if the selected employees perform their jobs as per the set stan-
dards and expectations.
Q Personnel decisions: These decisions are regarding the promo-
tion, transfer and termination of employees. These decisions can-
not be taken in the absence of information about the performance
of employees on their jobs. Thus, the data collected through the
performance appraisal process helps the organisation to make
personnel decisions easily.
Q Training and development programs: These programs help in
bridging the gap between the existing and the desired job skills of
an employee. An organisation can identify the training and devel-
opment needs of its employees by evaluating their performance.
Q Feedback and self-development: It helps employees in identify-
ing their strengths and weaknesses and improving their efficiency.
Employees receive feedback on their performance at the end of a
stipulated time period. This feedback is given to them after assess-
ing their performance.
Q Employee motivation: In performance appraisal, employees are
given feedback on their positive and negative aspects and pro-
vided opportunities to improve their negative ones. If employees’

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performance is found to be exceeding the desired performance,

they are given rewards or promoted to higher positions; thereby
boosting their motivation level.
Career planning and development: In performance appraisal,
feedback is given on strengths, weaknesses and potentials of em-
ployees. This helps in developing career plans for them. In addi-
tion, employees can realise growth opportunities in the future by
identifying their potential.
Compensation and reward: An organisation decides remuneration
of employees and rewards them on the basis of their performance.
The decisions regarding compensation of employees, rewards, and
incentives cannot be taken without performance appraisal data.
10.3.5 PROBLEMS OF PERFORMANCE APPRAISAL
Although there are a number of benefits of performance appraisal,

there are various issues that an organisation experiences while ap-
praising the performance of employees. The following are some main
problems associated with performance appraisal:
Q Design and implementation problems: These problems arise due
to poorly specified performance criteria, use of inappropriate per-
formance appraisal methods, lack of top management support, etc.
Thus, it is important to design an effective performance appraisal
system so that design and implementation problems can be avoided.
Biasness: These problems occur when the values and prejudices
held by the appraiser distort the rating of the appraisee. For exam-
ple, a punctual employee may be rated higher in team participa-
tion as well. Therefore, the appraiser should exercise objectivity
and fairness in evaluating employees.
Resistance: These problems arise when the performance stan-
dards are not clearly communicated and explained to employees.
In such a case, employees may not accept the standards easily and
perform accordingly. Therefore, performance standards should be
clearly conveyed to employees.
Incompatible work environment: These problems occur within
the organisation when employees perform their duties sincerely
and efficiently but do not get sufficient rewards in lieu of their
work. Such employees get dissatisfied, demotivated to work, thus,
does not contribute positively towards organisational goals.
The leniency biasness: It denotes a situation where the manager
is more easy-going than his/her peers, while rating employees.
Such situation may also arise when the manger is more lenient
with one employee as compared to another. This may result in in-
flated and inaccurate ratings. In addition, it hinders the scope of
performance improvement.

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Q Recency effect: It denotes a situation when the manger tends to

rate employees by the most recent behaviour shown by them and
ignores their commonly demonstrated behaviours during the en-
tire appraisal period.
10.3.6 INTERNATIONAL PERFORMANCE APPRAISAL
In the global scenario, performance appraisal depends a lot on both

inter-cultural and intra-cultural differences and interpretation of the
term ‘performance’ by employees working in various countries. For
example, in an individualistic culture, emphasis is given more on indi-
vidual efforts and the quantifiable performance criteria. On the other
hand, in the collectivist culture, focus is given more on rewarding
group loyalty, conformity, and harmonious relationships. Therefore,
performance is viewed differently in different cultures. For example,
getting feedback on one’s performance is viewed as an important step
in countries having individualistic culture like the U.S. On the other
hand, such step is regarded highly inappropriate in countries having
collectivist culture like Japan and China. Moreover, the performance
appraisal system in the U.S. focuses more on individual rewards to
motivate employees. On the other hand, in collectivist culture, perfor-
mance appraisal focuses more on developing long-term potential of
employees to enhance their skills and competencies.
Traditionally, the performance appraisal system depends on data re-

garding the dimensions and level of performance criteria, task and
role definition, and other aspects of the appraisal system. This data
is used to determine pay and promotion and fulfil training and re-
cruitment requirements. However, there are differences in the way
the performance appraisal process is handled in various countries.
For example, in Germany and Sweden, it is essential for employees to
provide input on setting job goals. On the other hand, in countries like
the U.S., job goals are simply assigned by superiors and employees
have no role in setting their job goals.
Moreover, at a global level, performance appraisal is done based on

parameters, such as profits, return on investment, cash flows, pro-
ductivity, sales per employee, punctuality, and rate of customer com-
plaints etc. Some MNCs also use qualitative parameters, such as in-
novativeness, leadership, motivation, judgment, adaptability, etc. for
performance appraisal.
EXHIBIT
Performance Appraisal at Hindustan Unilever Limited
Hindustan Unilever Limited (HUL) is a renowned Fast Moving Con-

sumer Goods (FMCG) organisation. At HUL, the basic purpose of
performance appraisal is to inspire employees to deliver their best

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potential every day by setting striving goals and having self-mo-

tivation to deliver them. HUL has a robust employer value propo-
sition, rooted in its unique positioning as a “Leadership Factory”
that helps an employee not only in getting big job roles at the very
nascent stage of career but also provides them rich cross-function-
al exposure. HULs performance management and reward pro-
cesses aim to build a “Performance and Execution” focused work
culture. The organisation uses a number of tools and processes to
drive transparency and consistency while assessing and develop-
ing people. For example, employees are plotted on Leadership Dif-
ferentiation Tool (LDT), which not only assesses the ‘What’ of their
performance but also the ‘How’ of their performance. In addition,
tools, such as 360-degree appraisal system, provide feedback from
superiors, peer groups, and subordinates to provide the employee a
holistic and objective evaluation. Assessment on potential is commu-
nicated transparently to all employees separately and career paths
are shared with them to improve their performance in the future.
6. helps an organisation to measure the current

job performance of employees and determine the areas where
they need to improve.
7. Name any four parameters that can be used for analysing the
performance of employees.
8. In which of the following step, a decision is made regarding
the selection of an appraiser?
a. Communicating the standards
b. Establishing performance standards
c. Determining personnel responsible for conducting perfor-
mance appraisal
d. Measuring and comparing the actual performance
9. In which of the following method, a descriptive report
is prepared by the immediate reporting authority of the
employee being appraised, usually at the end of the year?
a. Essay method
b. Confidential report
Critical incidents method
9
d. Checklist method
10. In method, the organisation appraises an

employee based on the feedback received from various
sources, such as superiors, subordinates, colleagues and the
employee himself/herself.

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Using various sources like the Internet, magazines, newspapers,

etc., find out the methods used by Hindustan Unilever for perfor-
mance appraisal.
eS CONCEPT OF POTENTIAL APPRAISAL

Potential appraisal is a holistic approach to study the qualities of an
employee in terms of personality, character and intellect. It helps an
organisation in identifying the potential of employees for higher job
positions and larger responsibilities. Potential appraisal is a technique
that informs employees about various aspects like succession plans,
future prospects, training and development needs, improvement ar-
eas, and so on.
While doing the potential appraisal of employees, an organisation

needs to define their job roles and functions clearly. The potential ap-
praisal process involves collecting information on employees’ perfor-
mance in their previous jobs and capabilities utilised, such as ability
to take initiatives, creativity level, and risk taking ability. This infor-
mation helps the organisation in determining whether the employee
could fit into the new job role. The potential of employees is deter-
mined by considering their following qualities:
Analytical power
Oooovo do
Creative imagination
Leadership ability
Sense of reality
Strength of character
Ability to work under pressure
Q Personal drive and emotional stability
In addition, potential appraisal data is also used in various HRM ac-

tivities, such as employee placement, career planning, training and
development, etc. This data also helps in matching the potential of an
individual with the requirements of future roles and responsibilities.
10.4.1 PURPOSE OF POTENTIAL APPRAISAL
Potential appraisal forms an important part of HRM as it unveils the

hidden talents of employees. The following points explain the purpose
of potential appraisal:
Q Potential appraisal evaluates the capacities of employees, which,
in turn, helps employees to perform efficiently.

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Q It assesses an organisation’s ability to develop future managers.

Q It assesses the analytical power of employees, which indicates the
ability to analyse problems and examine them critically.
Q It builds the creative imagination of employees.
Q Potential appraisal develops the sense of reality among employees,
which refers to an individual’s way of interpreting a situation.
Q It helps in developing leadership skills among employees, which
refer to abilities to direct, control, and harmonise with people.
10.4.2 TECHNIQUES OF POTENTIAL APPRAISAL
Potential appraisal helps both the organisation and its employees in

identifying the future trends that can be used for guiding and direct-
ing performance towards the achievement of individual and organi-
sational goals. The various techniques that can be used for potential
appraisal are shown in Figure 10.4:
| Self-appraisal
| Psychometric Tests
} Management Games
Leadership Exercises
Figure 10.4: Techniques of Potential Appraisal
Let us discuss these techniques of potential appraisal in detail.

Q Self-appraisal: In the self-appraisal technique, employees are re-
quired to provide their own performance feedback on various pa-
rameters. While filling the performance appraisal form, employees
should cover all the aspects of their current performance and fu-
ture responsibilities.
Q Psychometric tests: These tests include a wide array of evaluation
techniques that aim to measure one’s knowledge, abilities, and
personality. These tests can be of two types, which are:
Q Psychometric aptitude tests: They judge verbal reasoning, nu-
merical reasoning, and abstract reasoning of individuals.
Q Behavioural psychological tests: They include competency based
interviews, personality questionnaires, and assessment centre ex-

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ercises like group exercises, role play exercises, situational judg-

ment tests, and so on.
Q Management games: Management games, such as role plays focus
on changing one’s behaviour by assuming a role. It helps partici-
pants in understanding the future roles and responsibilities in a
better way.
Q Leadership exercises: These exercises include multiple activities
that help participants in understanding the roles and responsibil-
ities of a leader in an effective manner. A leader represents one
who is committed towards organisational goals and objectives, del-
egates tasks, and encourages others to work as a team. Leadership
exercises help the participants in understanding the significance
of leadership by considering various functions performed by lead-
ers from task initiation to closure.
Apart from this, a few other techniques that can be used for poten-
tial appraisal are peer appraisal, superior appraisal, and MBO. These
techniques have already been discussed in the chapter.
11. is a holistic approach to study the qualities of

an employee in terms of personality, character and intellect.
12. judge verbal reasoning, numerical reasoning,
and abstract reasoning of individuals.
13. Potential appraisal data helps in matching the potential
of an individual with the requirements of future roles and
responsibilities. (True/False)
14. In the technique, employees are required to
provide their own performance feedback on various parameters.
Prepare a report on the significance of potential appraisal in Indian

IT organisations.
ey SUMMARY
Q Performance management is a process that comprises a set of ac-
tivities performed to ensure that organisational goals are met suc-
cessfully.
Q Asa forward-looking approach, performance management is pri-
marily concerned with developing people in such a way that the
sustained growth of an organisation can be ensured.

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Q Performance appraisal is a process of analysing the past perfor-

mance and future potential of employees.
Q The main purpose of performance appraisal is to evaluate the
performance of employees and acknowledge their contribution in
achieving organisational goals.
Q The steps involved in the performance appraisal process include
establishing performance standards, communicating the stan-
dards, determining personnel responsible for conducting perfor-
mance appraisal, measuring the performance, communicating the
results of appraisal to the concerned employees, and taking cor-
rective actions.
Q The methods of performance appraisal can be broadly grouped into
two categories, past-oriented methods and future-oriented methods.
Q Past-oriented methods are based on a trait-oriented approach
wherein the performance of employees is evaluated on the basis
of established standards of traits or qualities of employees, such as
personality, attitude, initiative, ability to judge, versatility, leader-
ship, commitment, domain knowledge, and punctuality.
Q Some of the important past-oriented methods include confidential re-
port, essay method, critical incidents method, and checklist method.
Q Some of the important future-oriented methods include human re-
source accounting method, assessment centre method, management
by objectives (MBO) method, and 360-degree appraisal method.
Q Performance appraisal helps in various activities, such as human
resource planning (HRP), recruitment and selection, personnel
decisions, training and development programs, feedback and
self-development, employee motivation, career planning and de-
velopment, and compensation and reward.
QO Some main problems that are associated with performance ap-
praisal include design and implementation problems, biasness,
resistance, and incompatible work environment.
Q In the global scenario, performance appraisal depends a lot on both
inter-cultural and intra-cultural differences and interpretation of
the term ‘performance’ by employees working in various countries.
Q Potential appraisal is a holistic approach to study the qualities of
an employee in terms of personality, character and intellect.
Q The various techniques that can be used for potential appraisal
include self-appraisal, psychometric tests, management games,
leadership exercises, peer appraisal, superior appraisal, and MBO.
KEY WORDS
Q Abstract reasoning: One’s ability to analyse information and

work out on new concepts and abstract ideas without having
prior knowledge.

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Q Creative imagination: An ability of an individual to present an

existing thing in an unconventional and new manner.
Q Layoffs: A provisional or permanent release of a worker or work-
ers (with or without notice) by the employer or management.
Q Management by objectives: A management model that focuses
on improving the performance of an organisation by clearly de-
fining the goals and objectives to be mutually attained by both
management and employees.
Q Multinational corporations: Organisations that own or control
facilities or other assets in one or more countries other than its
home country.
Q Quantifiable performance criteria: Quantitative indicators
that can be measured in terms of facts and numbers.
1. What do you understand by performance management?
Explain the steps involved in the performance appraisal process.
bo
Discuss various methods of performance appraisal.

&
Discuss the benefits of performance appraisal.

PF
Write a short note on potential appraisal.

nt
What are the various techniques of potential appraisal?

oa
ve ANSWERS AND HINTS
Topic 12a Answers

Concept of Perform- I Performance management
ance Management
Measurement, feedback, and
to
positive reinforcement
3. False
4, Inaccuracy
5 False
Meaning of Perform- 6. Performance appraisal
ance Appraisal
Ue Hard work, quantity of output
produced, quality of work done,
and responsibilities undertaken.

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J kyu Q. No Answers
8. ce. Determining personnel
responsible for conducting
performance appraisal
9. b. Confidential report
10. 360-degree appraisal method
Concept of Potential 11. Potential appraisal
Appraisal
12. Psychometric aptitude tests
13. True
14. Self-appraisal

Q Performance management is a process that comprises a set of activ-
ities performed to ensure that organisational goals are met success-
fully. Refer to Section 10.2 Concept of Performance Management.
The steps involved in the performance appraisal process include
establishing performance standards, communicating the stan-
dards, determining personnel responsible for conducting perfor-
mance appraisal, measuring the performance, communicating
the results of appraisal to the concerned employees, and taking
corrective actions. Refer to Section 10.3 Meaning of Performance
Appraisal.
The methods of performance appraisal can be broadly grouped
into two categories, past-oriented methods and future-orient-
ed methods. Refer to Section 10.3 Meaning of Performance
Appraisal.
Performance appraisal helps in various activities, such as hu-
man resource planning (HRP), recruitment and selection, per-
sonnel decisions, training and development programs, feedback
and self-development, employee motivation, career planning and
development, and compensation and reward. Refer to Section
10.3 Meaning of Performance Appraisal.
Potential appraisal is a holistic approach to study the qualities of
an employee in terms of personality, character, and intellect. Refer
to Section 10.4 Concept of Potential Appraisal.
The various techniques that can be used for potential appraisal
include self-appraisal, psychometric tests, management games,
leadership exercises, peer appraisal, superior appraisal, and MBO.
Refer to Section 10.4 Concept of Potential Appraisal.

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UF SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Aswathappa, K., & Dash, S. (2008). International human resource
management (1st ed.). New Delhi: Tata McGraw-Hill Pub.
Q Gilmore, S., & Williams, S. (2009). Human resource management
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Q Mondy, R., Noe, R., &Gowan, M. (2005). Human resource manage-
ment (1st ed.). Upper Saddle River, N.J.: Pearson Prentice Hall.
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hrguidearticle/chapter-7-performance-management/

COMPENSATION AND REWARDS
CONTENTS
11.1 Introduction
11.2 Concept of Compensation
11.2.1 Significance of Compensation
11.2.2 Components of Compensation
11.2.3 Theories of Compensation
11.2.4 Industry Compensation
11.2.5 Executive Compensation
11.2.6 Compensation Administration
11.2.7 International Compensation
11.2.8 Concept of Remuneration
Activity
11.3 Fringe Benefits and Fringe Benefit Tax (FBT)
Activity
11.4 Reward Management
11.4.1 Need for Rewards
11.4.2 Intrinsic and Extrinsic rewards
Activity
11.5 Reward Systems
11.5.1 Types of Rewards Systems
11.5.2 Effectiveness of Reward Systems
Activity
11.6 Recognition
Activity
11.7 Summary

COMPENSATION PLANNING THROUGH SALARY.COM
Salary.com is a leading organisation providing employee compen-

sation data, software, and services to other businesses and indi-
viduals. It offers compensation software solutions that provide
decision-ready data and analytical tools to help client organisa-
tions in managing their compensation expenditures. Salary.com’s
website is also a recognised platform for organisations seeking
reliable information related to employee pay levels and compen-
sation-related best practices, trends, and policies.
One of the clients of Salary.com i ading healthcare organisa-

tion that was facing problems in ing compensation plans
and policies for its vast wor .
HR head of the healthcare a 1 ided to seek advice
tion-related issues. ded the healthcare organi-

sation with its HR tManager, which enabled the
and administering employee
ategic objectives, and enforcing
1 policies. With the help of TalentMan-

COMPENSATION AND REWARDS 251
NOTES

»— Define the concept of compensation
Discuss fringe benefits and fringe benefit tax
yy
Describe reward management

Explain reward systems
rr
Discuss the concept of recognition
8B INTRODUCTION
The term compensation can be defined as a complete pay package that
employees get in exchange of services rendered by them to an organ-
isation. It includes all forms of money, benefits, services, and in-kind
payments. Earlier, by the term compensation, people meant how em-
ployees are paid. However, over the years, this viewpoint has changed.
Compensation now has become a motivational factor to make employ-
ees feel how they are valued by an organisation.
Compensation can be direct or indirect or non-monetary. Direct com-
pensation is referred to as a basic pay can that an employee receives
on an annual, monthly, weekly, or hourly basis. Indirect compensation
includes benefits, such as health insurance, retirement programs, paid
leave, child care, travel allowance, ete. Non-monetary compensation
is an intangible form of compensation that involves all rewards and
recognitions that employees receive based on their performance. In
today’s competitive business scenario, it is of paramount importance
for organisations to maintain an effective compensation structure. In
the absence of a fair compensation system, employees may switch to
other jobs with better packages. Thus, organisations should manage
their compensation systems from time to time.
Compensation management is a set of activities that aim at estab-
lishing internally equitable and externally competitive strategies for
paying employees. It involves ensuring that an organisation’s com-
pensation strategies and policies are aligned with competitive trends;
allowances and benefits are linked to corporate objectives and their
realisation; etc. In this chapter, you will study about compensation
and its importance in detail.
ibe CONCEPT OF COMPENSATION
In an organisation, employees work to receive optimum benefits in re-

turn. These benefits are generally offered in the form of wages and sal-
aries to keep the workforce motivated. These wages and salaries given
to employees decide the compensation structure of an organisation.
Compensation can be defined as any form of payment made to an em-

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ployee for services rendered by him/her by an employer. In other words,

compensation can be defined as monetary and non-monetary rewards
offered to employees by their employer in exchange of their services.
In an organisation, compensation acts a motivational tool; without
compensation, employees may feel demoralised and can be reluctant
to accept challenges. In every organisation, employees offer their ser-
vices in return of appropriate payment that matches their skills and
requirements. Thus, compensation is essential to retain employees for
a long time in an organisation.
Compensation differs from one organisation to the other depending

on the nature of job, required skills, associated risk, complexity of the
job, and so on. With the term compensation, most people mean ‘what
a person is paid.’ However, compensation includes not only salary and
wages, but also the direct and indirect rewards and benefits. The fol-
lowing are the different forms of compensation:
Q Direct financial compensation: It mainly includes pay received
by an employee in the form of wages, salaries, bonuses, and com-
missions at regular intervals.
Q Indirect financial compensation: It mainly includes financial re-
wards that are not a part of direct compensation, such as benefits,
leaves, retirement plans, and educational facilities.
Q Non-financial compensation: It mainly includes opportunities of-
fered by an organisation to employees for career development and
advancement. It also includes opportunities for recognition as well
as the work environment and conditions.
11.2.1 SIGNIFICANCE OF COMPENSATION
In an organisation, compensation plays a crucial in motivating em-

ployees, developing a feeling of belongingness among them, and gain-
ing their commitment towards organisational goals and objectives.
The following points explain the significance of compensation in an
organisation:
Q Facilitating recruitment and selection: A fair compensation
system helps an organisation in attracting qualified and skilled
candidates and selecting the best ones as per organisational re-
quirements. This is because candidates are always interested in
applying for or joining jobs in organisations having a well-de-
signed compensation system. Thus, recruiting and selecting the
right type of talent requires an effective compensation structure
that is aligned with current industry norms.
Q Retaining employees: In case of inadequate compensation, an or-
ganisation finds it difficult to retain its competent staff as employ-
ees switch to other jobs with better packages. Thus, organisations
should provide various benefits like effective retirement plans,
employee stock options, health insurance, etc. apart from salaries

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and wages. This would motivate employees to stay longer with the
organisation.
Q Boosting employee motivation: In organisations, low motivation
level has been found as one of the major reasons for high employee
turnover. Fair compensation always acts as a motivating factor for
employees to work towards organisational goals and objectives.
Thus, organisations should offer various performance-based in-
centives in order to encourage employees towards better perfor-
mance.
Q Eliminating pay discrimination: By designing an effective com-
pensation structure, an organisation assures employees that their
skills are adequately paid off at market rates. An unfair compensa-
tion system may create a feeling of discrimination among employ-
ees, which may lead to high labour turnover. Thus, there should
be an effective compensation structure in place in an organisation.
Q Defining job hierarchies: Another important use of compensation
rests in defining job hierarchies. Through a well-defined compen-
sation structure, allocation of jobs can be precisely defined. For
instance, the compensation of managers can be broken into dif-
ferent grades. Based on the managerial position an employee is
holding, he/she would be provided grade.
11.2.2 COMPONENTS OF COMPENSATION
As discussed earlier, compensation consists of wages and salary, in-

centives, fringe benefits, perquisites, and other non-monetary bene-
fits. Figure 11.1 shows various components of compensation:
Basic Pay:
Wages and Salary
Allowances:
Base Compensation TA, DA, HRA
Direct Incentives:
Commission, Bonus, Long terms Incentives
Compensation
Fringe Benefits:
Supplementary Retirement, Safety, Security Benefits
Compensation Indirect Incentives:
Perquisites, Employee Stock Options
Figure 11.1: Different Components of Compensation
Let us discuss these components in detail.

Q Base compensation: It involves benefits that are directly paid to
employees. It includes the basic payment comprising wages and
salary of employees along with travel allowance, dearness allow-
ance, and house rent allowance at a rate determined by the em-

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ployer as per industry norms and government rules. Moreover, it

includes direct incentives paid to an employee as part of the fixed
pay at regular interval of service period such as commission, bo-
nus, and long-term benefits.
OQ Supplementary compensation: It includes rewards that are paid
indirectly to employees along with their salary. Supplementary
compensation is paid in the form of fringe benefits (such as retire-
ment, safety, and security benefits) and indirect incentives (such
as perquisites and employee stock options).
11.2.3 THEORIES OF COMPENSATION
To enhance the productivity of employees, an organisation needs to

provide effective compensation followed by monetary rewards and
benefits. An attractive compensation becomes a motivational factor
for an employee to perform efficiently. For deciding appropriate com-
pensation, the organisation must understand the role of compensa-
tion in increasing the productivity of employees and boosting their
motivation level. There are various motivational theories provided by
numerous psychologists, such as Victor Vroom, J. Stacy Adams, and
Edward to provide a better understanding of how compensation can
motivate employees to improve their performance. The two most im-
portant theories that have been developed are reinforcement theory
and equity theory. Let us discuss these two theories in detail.
Q Reinforcement Theory: The reinforcement theory was propound-
ed by B.F Skinner (a behaviourist) and is based on the fact that
the behaviour can be changed by repeating any internal or exter-
nal stimulus. For example, in an organisation, employees plan the
project manually. Suppose, the employer starts awarding a posi-
tive or a negative marking to employees based on the time taken
to plan the project, the employees may begin to use business and
planning tools for completing the job fast. Consequently, a signif-
icant change would be brought in their behaviour pattern too. In
this scenario, the desire to be acknowledged and rewarded is likely
to recur in the future too. Therefore, reward systems appropriate-
ly can result in high employee performance time and again. One
pivotal element of this theory is time. The compensation can be
reinforced at various time intervals, which are:
@ Fixed interval: It refers to reward reinforcement provided af-
ter a fixed period of time. For example, employees are provided
monthly salary.
@ Fixed ratio: It refers to reward reinforcement provided after a
certain desired behaviour of employees occurs. For example,
giving a specific bonus when a certain sales target is achieved.
@ Variable interval: It refers to reward reinforcement provided
after a special period. For example, employee promotions after
six months when an assignment get complete.

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@ Variable ratio: It refers to reward reinforcement provided

after varying occurrences of behaviour. For example, special
awards and incentives for performing a special task.
Q Equity theory: John Stacey Adams (1963) propounded the equity
theory wherein “every employee wants to arrive at equity in the
rewards provided to him or her”. This theory holds the meaning of
equity in terms of the perception of an employee not the employer.
When people in an organisation feel fairly treated and paid they
are more likely to be motivated to perform; on the other hand, un-
fair treatment in rewards and payment tends to bring feelings of
disaffection and demotivation among employees. Employees be-
lieve that their payment should be a fair return of their work. In
the equity theory, there are three categories of equity:
¢ Internal equity: It refers to fairness perceived by an employee
in relation with the work performed inside an organisation.
Employees must accept that differentials of payments are
based on various factors, such as complexity of job and senior-
ity level of an employee.
¢ External equity: It refers to fairness perceived by an employee
in relation with the work performed outside the organisation.
For example, the compensation offered by competitors for the
same job profile.
@ Individual equity: It refers to fairness perceived by an em-
ployee in relation with differentials existing among individuals
within an organisation. For example, salary packages offered
to other individuals for the same work profile.
11.2.4 INDUSTRY COMPENSATION
Organisations sometimes need to compare their compensation struc-

ture with that of other organisations in the industry in order to gauge
whether their employees are overpaid or underpaid. For this, organ-
isations need to consider data on the labour market, labour demand
and supply, and other data relevant to labour law. Apart from this, in-
dustry compensation is also important from the employees’ perspec-
tive. It empowers employees with industrial benchmarking standards
to compare their compensation with various industry domains and
functional groups both in their native countries and global markets.
In addition to this, industry compensation provides relevant informa-

tion on salary trends, working conditions, minimum wages and oth-
er work-related issues to employees, employers, and trade unions.
On the other hand, it provides a fair idea to jobseekers on how much
would their prospective employer can pay them and enables them to
select the best offer among all available job offers.

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11.25 EXECUTIVE COMPENSATION
Executive compensation are the monetary and non-monetary bene-

fits given to employees working at upper level management of an or-
ganisation, such as president, vice presidents, chief executive officers
(CEOs), chief financial officers (CFOs), and directors. Executive com-
pensation differs from the compensation for middle and lower level
employees. The effectiveness of overall business strategy depends
on the efficiency of top level executives. If they are not motivated to
perform, this would be detrimental to the organisation’s growth. The
compensation of executives mainly depends on the following factors:
Q Experience: The know-how of various managerial aspects is a key
factor in designing the compensation for executives. The compen-
sation package is generally higher for experienced managers.
Q Accountability: It refers to the responsibility associated with a
particular executive job position. If executives are accountable for
many roles, the compensation package for them is high.
Q Analytical capacity: It refers to the problem-solving ability of ex-
ecutives. If the analytical capacity of an executive in solving prob-
lems is high, the compensation package offered would be higher.
Executive compensation varies across organisations depending on

organisational requirements, roles and responsibilities to be handled
by executives, overall budget, and so on. Figure 11.2 shows the main
components of executive compensations:
Cash Compensation
JUUUU
Long-Term Incentive Plans
Short-Term Incentive Plans
rm Executive Benefits
Perks
Figure 11.2: Different Components of Executive Compensation
Let us discuss these components in detail.

Q Cash compensation: It refers to the sum of all monetary benefits
received by executives. Cash compensation comprises base salary
and other allowances, such as dearness allowances, house rent al-
lowances, etc. It is decided by analysing the data obtained through
salary surveys and performance records of executives of similar
organisations in the industry.

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Q Long-term incentive plans: These incentives contribute max-

imum to the executive compensation. The aim behind adopt-
ing long-term incentive is to reward those executives who have
contributed maximum to the achievement of the organisation’s
strategic objectives that increases shareholder value. Long-term
incentives are often provided in the form of stock-based compen-
sation, such as stock options, performance shares, etc. These in-
centives are provided to executives after they have achieved the
targeted level of performance.
Q Short-term benefits: These benefits include incentives given to ex-
ecutives in the form of bonus annually. Such short term benefits are
offered to keep executives motivated towards better performance.
Q Executive benefits: These benefits are offered to executives based
on their income level. For example, life insurance, disability insur-
ance, pension plans, etc.
Q Perks: These include various privileges offered to executives, such as
provision of a private jet, travel reimbursements, and other rewards.
11.2.6 COMPENSATION ADMINISTRATION
As discussed, compensation forms an important part of an organisa-

tion. However, compensation cannot be managed on its own. Compen-
sation administration, a part of HRM, focuses on planning, organis-
ing, and controlling payments (direct or indirect) made to employees
in exchange of services provided by them. In simple words, it can be
defined as the management of compensation costs incurred in an or-
ganisation. Compensation administration is a systematic process that
involves a number of steps, which are shown in Figure 11.3:
—_
Job Analysis
OES
re
I
EE sl
Job Evaluation
7
I
sl
OOOO
Pay Structure Development

iE
I
ron
Wage and Salary Survey

eS
I
Job Pricing
e——Y
SS. «a
I
VY
Compensation Revision and Control
Figure 11.3: Compensation Administration Process

1. Job analysis: The first step in the compensation administration
process is to collect information about the existing duties,
responsibilities, required skills, outcomes, and work environment

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of a particular job. This helps in understanding the nature of jobs.

Based on the analysis of job, the job description is prepared.
2. Job evaluation: In this step, a job is evaluated on the basis of
collected information in the previous step to determine the
value of a job in an organisation. Job evaluation is a process of
determining the relative worth of various jobs in an organisation.
It involves ranking different jobs on the basis of various
compensable factors and then assigning a pay grade to that job.
In short, job evaluation process helps in determining price for
a job relative to other jobs in the organisation. Job evaluation
serves the following objectives:
@ It helps in setting standards of pricing the jobs in the organ-
isation. The same set of standards shall be used to evaluate
different jobs in the organisation.
# Since the same standards are applied in all the jobs in an or-
ganisation, the inequities and inequalities amongst various
jobs can be minimised.
@ Job evaluation also helps to distinguish closely-linked jobs in
an organisation.
# Often specialisation results in hundreds of similar jobs in an
organisation. Job evaluation also helps to eliminate unneces-
sary specialisation that might have resulted from long time
functioning of the organisation.
@ It helps an organisation to know various jobs in detail and
also appreciate their relative importance. Hence an organisa-
tion can understand which jobs are critical.
# New jobs are assimilated in the earlier set of jobs in an organ-
isation, with ease.
@ Job evaluation technique impersonalises the basic price de-
termination a job. This has two advantages — one bias for an
individual would be minimised. Second, a job is not import-
ant or unimportant because of the individual who occupies
the position.
Success of job evaluation hinges on the degree of acceptance of
this process from the employees. Such buy-ins can be created
by communicating and involving the employees in this very
important process. A job evaluation committee is identified and
that committee does the actual job evaluation.
3. Pay structure development: In this step, the pay structure
is developed wherein the amount to be paid to an individual
performing a specific job is determined. For this, the relationship
between various jobs is ascertained to understand and determine
the required skills to perform them. In addition, it the level of
difficulty in performing a job is determined.

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4. Wage and salary survey: In this step, the organisation conducts

a survey to collect information about compensation that is
offered by its peers in the industry. The survey is conducted in
the labour market with an aim to ensure that external equity
(it can be defined as the perception of employees with regard
to compensation being offered in other organisations in the
industry) is maintained. An organisation can also refer to
the results of salary surveys conducted by other professional
agencies.
5. Job pricing: Based on the results of job evaluation and salary
surveys, an organisation defines wage rates for the existing jobs.
For this, the organisation needs to determine the worth of a job
and decide wage rates to be given to employees accordingly.
6. Compensation revision and control: In this step, the organisation
reviews the existing compensation structure to determine its
effectiveness. This helps the organisation to identify loopholes
in the existing compensation structure and take corrective
measures.
EXHIBIT
Job Evaluation Methods
Job evaluation methods can be categorised as non-quantitative and

quantitative. Let us discuss about these methods in detail.
Non-Quantitative Methods of Job Evaluation

1. Ranking method: In this method a job is ranked related to
other jobs in an organisation. First, detailed information about
various jobs in an organisation is obtained, and then jobs are
grouped based on their similarity and difference. Thereafter
the compensable factors are selected, after which the jobs are
ranked.
2. Job classification method: In job classification method the
committee groups similar jobs together in groups or classes
based on the amount or degree of compensable factors that
they contain. These groups or classes then help in determining
the value of different jobs. Job classes could be at times be
prepared on the basis of their difficulty level, such as:
@ Very simple tasks
Simple tasks directive in nature
“ete ¢
Simple task but difficult process

Tasks calling for judgment by individual
Regular tasks with accountability

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@ Non-regular tasks
@ Complicated tasks requiring specialisation
@ Creative, entrepreneurial tasks
Quantitative Methods of Job Evaluation

1. Point method: Point method of job evaluation is used widely
and consist of the following steps:
i. Identifying compensable factors for the benchmark jobs:
Benchmark jobs are those that are commonly found in the
market.
ii. Assigning point values to compensable factors: There
after the job evaluation committee determines the relative
weight-age of various compensable factors and assigns
point values to them. The following Table shows an example
of compensable factors, weightage and point values for a
retail store employees:
DeereCompensable factors
Guu v
Weightage 1 2 3 4 5 Min. Max.
at A ©
(%) pts. pts.
Education 7.43 20 40 60 80 100 20 100

Work experience
9 5.57 15 30 45 60 75 15 15
Judgement 4.46 12 24 36 48 60 12 60
‘Decision making 4.46 12 24 36 48 60 12 60
Trouble shooting 3.71 10 20 30 40 50 10 50
"Responsibilities
Supervision 3.71 10 20 30 40 50 10 50
“Leadership 5.57 15 30 45 60 7% 15 15
Financial 5.57 15 30 45 60 75 15 75
Liasioning 4.46 12 24 36 48 60 12 60
Confidentiality 5.20 14 28 42 56 70 14 70
Effort
Job complexity 6.69 18 36 54 72 90 18 90
Mental demand 7.43 20 40 60 80 100 20 100

Physical demand 3.71 10 20 30 40 50 10 50
Emotional demand 4.46 12 24 36 48 60 12 60
Error cost 3.71 10 20 30 40 50 10 50
Working conditions
Environment 5.57 15 30 45 60 75 15 75
Loeation/Mobility 4.46 12 24 36 48 60 12 60
Hazards 5.57 15 30 45 60 75 15 75
Supervision received 4.46 12 24 36 48 60 12
Co-workers 3.71 10 20 30 40 50 10 50

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iii. Collecting job information: Detailed information about

jobs is obtained using job analysis techniques. Tools like
Position Analysis Questionnaire (PAQ), Management
Position Description Questionnaire (MPDQ) etc. may
be used for this purpose. The job description and job
specification reports help in understanding the job and the
ideal candidate better.
iv. Rate each job using point table: Each job is then rated
using the point table and the total points are calculated.
v. Plotting points & wage rate: The points of the benchmark
jobs so obtained are plotted with the market wage rates for
these jobs. Point values of benchmark jobs are taken on
X-axis and market wage rates for these jobs are taken on
Y-axis.
A line of best fit is drawn from the plot through the use of
scattergram. This line is known as the wage trend line, drawn
using a statistical technique known as least squares method of
regression.
Point values of other jobs can be plotted on this line and
pay-rates can be obtained. The employer has a choice of
being the best paymaster, average pay master or pay-at-par
with the market. It all depends on employer’s compensation
philosophy. There are companies who deliberately want to
be at par or average pay master because they offer very good
benefits and culture. The following Figure shows point values
of jobs and pay rates for a retail store:
8) |@lp elElz|s
- Z|
3|%
5
APE
o
&
|e
3 w = =
2/2HHA
|P/=E/e A |= B
5
S
2/2
S ISIE
eS
| S/aVSIBIS
1-5
[SE
LlE/S
lsia/s/ole/si
gilal/e/L£/sla leis =
=l./3/2
#3 2/82 aie ie [3 |2/e

3 |S
[6 [2 [2/2155
oan
s/213 6
[2/82
|s
(2/8
E
5 2
Area Degree |}3 |3 (4 | 4 /3 /3 (4 )4 |]4 ]3 ]3 13 |2 |3 |4 ]}3 )3)2)2)2

manager | Point 60/45) 48] 48] 30} 30) 60) 60 }48)42 | 54) 60) 20 | 36| 40] 45) 36) 30) 24) 20
Store Degree |2 |2 (3 | 4 [4 |3 (3 |2 |3 J2 |2 [2/3 [3 [3 |3 }3)2 )3)3

Manager | Point 40 | 30) 36] 48] 40 | 30) 45) 30 | 36/28 | 36 | 40/30 | 36] 30 | 45) 36 30) 36) 30
Asst. Store | Degree |2 | 1 |2 | 3 |3 |3 |2 (2 |3 J]2 [2 |2 |3 [3 [2 |3 4/3 )2 |3 42

Manager | Point 40/15) 24) 36] 30] 30) 30) 30 | 36] 28 | 36 | 40/30 | 36} 20} 45) 36) 30) 36 20
2. Factor comparison method: It is another quantitative

approach for job evaluation. It uses wages of the existing key
jobs, which provide standard against which all other jobs
are compared. The factors used for analysis and evaluating
jobs are: (1) skill, (2) mental effort, (3) physical effort, (4)
responsibility and (5) working conditions. A composite score
is obtained for all factors. The jobs under consideration are

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evaluated using factor-byfactor in relation to the key jobs on job

comparison scale. Then each job is evaluated and compared
with other jobs in terms of each factor. Pay is then assigned by
comparing the weights of the factors required for each job, i.e.,
the present wages paid for key jobs may be divided among the
factors weighed by importance. All other jobs are compared
with the list of key jobs and wage rates are determined. The
following Table shows an example of job evaluation (of a retail
store employees) through the factor comparison method:
Job Hourly Rate Factor1 Factor2 Factor 3

Area Manager 100 50 X30 X20
Store Manager RIB ee 245 X20 X15
Asst. Store Manager 50 X25 X15 X10
11.2.7 INTERNATIONAL COMPENSATION
With the increasing influence of globalisation, individuals are no lon-

ger restricted to their native countries. Individuals nowadays are
willing to relocate to new areas in search of good opportunities. One
important factor that has affected the willingness of people to shift
to foreign countries is attractive international compensation. Interna-
tional compensation can be defined as the combination of monetary
and non-monetary rewards that are offered to expatriates (profes-
sional or skilled workers living in a foreign country) for their perfor-
mance. International compensation is generally kept attractive in or-
der to entice competent and skilled people from different countries.
International compensation is developed keeping in mind the inter-

ests of both organisations and employees coming from different coun-
tries. The main components of internal compensation are base salary,
incentives, and various other benefits. Apart from this, the following
are some other components of international compensation:
Q Allowances: Some common allowances offered under interna-

tional compensations are cost of living allowance, housing allow-
ance, travel allowance, education allowance, relocation allowance,
etc.
Q Taxes: This component of international compensation is all about

protecting expatriates as well as organisations from paying addi-
tional taxes. One commonly used approach to tackle the issue of
taxation is tax equalisation, which implies the offsetting of differ-
ence of taxes between the parent country of an individual and the
foreign country where he/she is working, so that working abroad
becomes tax neutral for the worker.

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Q Spousal assistance: There are times when expatriates face prob-

lems due to the unemployment of their spouses in foreign countries.
This leaves spouses depressed and demotivated. As a result, expa-
triates may be forced to return to their home countries, which also
incur huge costs of organisations too. To overcome such problems,
many organisations offer spousal assistance, wherein the spouses of
expatriates are given support in settling at new locations. Moreover,
organisations help the spouses of expatriates with visa issues.
International compensation is influenced various internal and ex-
ternal factors of multinational corporations. These factors are ex-
plained as follows:
Internal factors
OH OHO
“-fftmhUhcHlU
Goal orientation of organisations

Paying capacity of organisations
Competitive strategy of organisations
Organisational culture
Workforce characteristics, such as age, level of education, qual-
ifications, and experience.
External factors
>
# Cultural values, beliefs, and prevalent compensation in the na-

tive country of the expatriate.
@ Demand and supply in the labour market
@ Educational level and skills in the labour market
@ Type of industry an individual is working
There are various approaches that can be used while designing in-
ternational compensation packages. Two most commonly used ap-
proaches are explained as follows:
Q Going rate approach: In this approach, an organisation considers
the salary structure of the host country for designing the compen-
sation of an expatriate.
Q Balance sheet approach: In this approach, the organisation tries
to equate expatriate’s purchasing power in the host country with
that of the home country.
11.2.8 CONCEPT OF REMUNERATION
Remuneration is payment made to an employee in exchange for work

or services he/she performed. It includes both wages and salary and
other benefits. Remuneration plays an important role in motivating
an employee to perform job efficiently and effectively. It cannot be the
same for all employees as it is influenced by various factors. These fac-

N OT ES
tors can be classified into two categories: external factors and internal
factors. Let us discuss these factors in detail.
Q External Factors: These are uncontrollable factors which exist
outside an organisation. The following are the major external fac-
tors that influence remuneration:
+ Labour market: It refers to the market regulated by the de-

mand and supply of labour. Both demand and supply of labour
have an important role in determining the price of labour. High
demand and low supply results in high labour price, while low
demand and high supply results in low labour price.
Labour union: It refers to an agency/association working to se-
cure the interests of labour in an organisation. The representa-
tives of labour unions fix the remuneration of employees. Howev-
er, in the absence of labour union, employers have freedom to set
remuneration.
Cost of living: It refers the amount of money required by an
individual to sustain a certain level of living to fulfil the basic
and essential needs. These needs must be fulfilled from what
they get out of their remuneration. The employer is required to
provide remuneration that allows an employee meet expenses
in the situations of price rise. However, remuneration cannot
be reduced at the time of price decrease.
Labour laws: These involve various legal requirements estab-
lished by government for preventing the exploitation of em-
ployees. These laws include Minimum Wages Act, the Payment
of Wages Act, the Equal Compensation Act, Payment of Bonus
Act, and Payment of Gratuity Act. Employers are required to
refer to all these acts before fixing remuneration.
Social system: The effect of remuneration provided to employ-
ees is reflected in the prices fixed by the organisation for its
goods and services. Therefore, consumers show interest in the
remuneration decision taken by organisations.
Economic system: The economic system of a nation has its im-
pact on remuneration fixation. The economic system includes
various aspects, such as price index, total output produced, and
current employment conditions in a country. All these aspects
need to be considered while fixing remuneration. For example,
poor countries have less per capita income which may lead to
increase in labour supply at lower remuneration.
Q Internal Factors: These are the factors that exist within the or-
ganisation. Therefore, these factors can be controlled. The major
internal factors are discussed as follows:

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@ Paying capacity: The organisation’s paying capacity greatly in-

fluences remuneration fixation. If an organisation is prosper-
ous and successful, it may pay more than the competitive rate
to attract highly skilled talent.
¢ Employee capability: Remuneration can be decided on the ba-
sis of employees’ performance, experience in a particular area,
skills, knowledge, and competencies.
@ Job requirements: Remuneration is also influenced by vari-
ous requirements of a job such as physical and mental require-
ments. For example, jobs that require higher skills, responsi-
bility, and efforts are highly remunerated.
# Business strategy: The organisation’s business strategy also
affects remuneration. For example, if the strategy of an organi-
sation focuses on rapid growth, it will set higher remuneration
than that of competitors.
1. Which of the following includes pay received by an employee

in the form of wages, salaries, bonuses, and commissions at
regular intervals?
a. Indirect financial compensation
b. Direct financial compensation
ce. Non-financial compensation
d. Rewards
2. An unfair compensation system may create a feeling of
discrimination among employees, which may lead to high
labour turnover. (True/False)
3. involves benefits that are directly paid to
employees.
4. provides relevant information on salary trends,
working conditions, minimum wages and other work-related
issues to employees, employers, and trade unions.
5. Which one of the following refers to the sum of all monetary
benefits received by executives?
a. Long-term incentive plans _b. Short-term benefits
c. Cash compensation d. Perks
List down the types of compensation provided in an IT firm.

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FRINGE BENEFITS AND FRINGE

11.3
BENEFIT TAX (FBT)
To keep employees motivated, organisation offers various benefits

other than salary. These benefits are known as fringe benefits. Thus,
fringe benefits can be defined as non-monetary compensation that is
provided to employees in addition to their regular wages or salaries.
Some common fringe benefits that are provided by organisations to
employees are housing (employer-provided or employer-paid), group
insurance (health, life etc.), disability income protection, retirement
benefits, day-care for employees’ kids, tuition reimbursement, sick
leave, vacation (paid and non-paid), social security, profit sharing, ed-
ucation funding, and other specialised benefits.
Fringe benefits generally sum up approximately 30 % of the total re-

muneration of employees. These benefits are offered with an aim of
attracting eligible and talented candidates and retaining existing em-
ployees by providing them financial security. Fringe benefits are de-
signed based on the following aspects:
Q Statutory requirements: These requirements make an organisa-
tion legally answerable for its actions. Statutory requirements in-
clude numerous legislations which have been incorporated time
and again.
Q Security: It refers to a feeling of safety and fulfilment of social
needs among employees. Security to employees is often granted
in the form of pension, provident fund, and gratuity. Pension pro-
grams are nowadays linked to group insurance as a type of fringe
benefit.
Q Hazards of industrial life: It refers to dangers associated with
working in a specific industry. If working conditions in an industry
are neither safe nor healthy, employers should provide insurance
coverage, medical re-imbursements, and other health care ser-
vices to their employees.
Q Competition: It refers to the business rivalry between competi-
tors. Employers provide special pay allowances and reimburse-
ments to retain the best talent in the industry and gain an edge
over its competitors.
FRINGE BENEFIT TAXES
Organisations also have to pay taxes in lieu of the benefits that they
provide to their employees. These taxes are known as fringe benefit
taxes (FBT). These taxes are levied on a variety of privileges, services,
facilities or amenities, provided by an organisation to its employees

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(current or former). For example, benefits such as telephone reim-

bursements, free or concessional ticket are included under FBT.
Q In India, FBT was introduced under Finance Bill of 2005. It was
set at 30% of the cost of the benefits provided by an organisation.
FBT mainly covered following items:
Q Expenses on entertainment, travel, employee welfare and accom-
modation borne by employer
Q Allowance or provision for transportation for work purpose to em-
ployees
Q Employer’s contributions in superannuation fund
Q Employee stock option plans (ESOPs) from the fiscal year 2007-08.
In the year 2009, FBT was abolished by the government of India asa
part of 2009-10 budget.
6. make an organisation legally answerable

for its actions and include numerous legislations.
7. In India, FBT was introduced under Finance Bill of 2007.
(True/False)
Using the Internet, find various fringe benefits provided in a mar-

keting organisation.
eS REWARD MANAGEMENT
In the present era, rewards have become an important factor in the

development of motivational and retention strategy followed by dif-
ferent organisations. Rewards can be defined as a payment made to
employees in return of their contribution. These rewards are used by
organisations to boost the motivation of employees so that they keep
performing to the best of their capabilities. The following are some
popular definitions of a reward:
In the words of Burack and Boldsmith, Reward and incentive is a

plan or program to motivate individual or group performance. A reward
program is most frequently built on monetary rewards (incentive pay
or monetary bonus), but may also include a variety of non-monetary re-
wards or prizes.

N OT ES
The Free Dictionary.com defines reward as, Something given or re-

ceived in recompense for worthy behaviour or in retribution for evil acts
and the return for performance of a desired behaviour.
In organisations, the rewards can be effective only if they are pro-

vided to the right candidates at the right time. Thus, there should be
some policies and strategies related to rewards formulated and imple-
mented. A process of developing reward strategies and putting them
into practice is called reward management. According to Armstrong
(2010), Reward management is known as the strategy, policies and pro-
cedures necessary to guarantee that the value of people and their contri-
bution for the organization is recognized and rewarded.
11.4.1 NEED FOR REWARDS
Every organisation provides rewards to employees to ensure that their

contribution is valued for uplifting business potential. The following
points explain the need for rewards in an organisation:
Q To enhance the level of productivity in the organisation.
Q To retain employees for a long period.
Q To create a healthy work environment.
Q To minimise the rate of employee turnover.
11.4.2 INTRINSIC AND EXTRINSIC REWARDS
There can be various types of rewards provided by organisations to their

employees. Rewards are broadly classified into two categories, which are:
Q Intrinsic rewards: These are intangible rewards offered to em-
ployees for their intrinsic fulfilment; thereby motivating them to
perform better. For example, providing authority to employees for
making decisions would make them feel motivated to show their
capabilities and accept challenges. Thus, it can be said that intrinsic
rewards are associated with the employee’s activity and behaviour.
Q Extrinsic rewards: These are tangible rewards provided to em-
ployees after they accomplish a given task. These rewards are
mainly related to monetary benefits provided to employees in the
form of bonus, promotion, and other benefits, after they complete
a particular project or assignment within the stipulated time.
8. can be defined as a payment made to employees

in return of their contribution.
9. Name the rewards that are intangible and offered to employees
for their intrinsic fulfilment.

N OT ES
Make a list of various intrinsic and extrinsic rewards offered to em-

ployees in an organisation of your choice.
bey REWARD SYSTEMS
Every organisation requires a strategic reward system at place so that

it can motivate employees towards better performance. A reward sys-
tem comprises standards, rules, and procedures associated with the
allocation of benefits or rewards to employees with an aim to gain
their commitment towards organisational goals. An effective reward
system addresses four main areas, which are compensation, benefits,
recognition, and appreciation.
Reward systems are developed in organisations to recognise the best

performers among all employees. This helps organisations to attract
candidates, retain their existing talent, boost their morale, improve
overall organisational productivity, and so on. The main components
of reward systems are base salary, incentives (both short term and
long term) and other benefits (for example, pension programs, medi-
cal programs).
Different organisations develop different reward systems based on

the performance of their employees, overall budget, etc. For example,
some organisations believe in monetary rewards, while some believe in
non-monetary rewards. Similarly, some organisations reward employees
on the basis of their behaviour, while some believe in rewarding employ-
ees for their contribution towards organisational goals and objectives.
Let us discuss different types of reward systems in the next section.
11.5.1 TYPES OF REWARDS SYSTEMS
There are different ways of rewarding employees containing through

monetary and non-monetary benefits. However, organisations must en-
sure that they reward the right employee at the right time for the right
achievement. Figure 11.4 shows different types of reward systems:
Monetary Reward
zzg ystem
Syste’
w §
5 Non-Monetary Reward
Se System
gn
& Additional Reward
System
Figure 11.4: Types of Reward Systems

N OT ES
Q Monetary reward system: It includes rewards that are given to

employees in the form of money. Monetary rewards are generally
given by organisations when employees exceed the desired per-
formance or complete a project or assignment as per the set stan-
dards. Examples of monetary rewards include bonus and incen-
tives. The following are the benefits of monetary rewards:
@ Monetary rewards influence employees to perform well by mo-
tivating them.
# Monetary rewards serve the purpose for the needy employees
at lower levels.
# Monetary rewards develop healthy competition among em-
ployees to excel each other.
Q Non-monetary reward system: These rewards are given to em-
ployees in the form of restaurant coupons, dry promotions, recog-
nition, appreciation, knick-knack awards, and social acknowledge-
ment. Generally, non-monetary rewards are given to employees
who perform well consistently, maintain the code of conduct, or
learn new skills. The implementation of non-monetary awards
motivates and drives employees to perform consistently well. The
main advantages of non-monetary rewards are:
@ These rewards build self-esteem among employees.
@ Employees develop a feeling of loyalty towards organisation
and strive to maximise their contribution to the achievement
of organisational goals.
@ These rewards are also helpful in creating an environment
conducive to the implementation of change successfully.
Q Additional reward system: It involves rewards other than mone-
tary and non-monetary rewards. Examples of additional rewards
include providing seasonal outfits (such as sweater, raincoat,
T-shirt, umbrella, and jacket) to employees. Although additional
rewards motivate employees, the level of motivation is less com-
pared to the other types of rewards.
11.5.2 EFFECTIVENESS OF REWARD SYSTEMS
Reward systems are said to be effective if they motivate employees

to use the best of their capabilities to meet organisational goals and
objectives. Organisations generally select a combination of monetary
and non-monetary reward systems to satisfy employees’ needs. In the
absence of an appropriate reward system, employees may feel unrec-
ognised for their contribution to organisational goals. Therefore, the
performance of employees must be evaluated using rational criteria
and rewarded accordingly. An effective reward system focuses on:
Q Boosting the morale of employees
Q Improving the performance of employees
Q Developing positive attitude among employes towards work

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Q Increasing overall productivity

Q Reducing employee turnover
EXHIBIT
Employee Stock Options — A New Trend in Compensation
In the modern times, Employee Stock Options (ESOPs) play an im-

portant role in pay and benefit components of an employee’s com-
pensation. Organisations use the practice of rewarding employees
with ESOPs to retain efficient employees and acknowledge the con-
tribution of employees. The ESOP scheme envisages the concept
of sharing wealth among employees created by the organisation.
Further, by exercising this option, employees become shareholders
of the organisation.
ESOPs can be defined as a qualified and defined contribution plan

wherein a portion of capital stock is given to employees of the or-
ganisation. When employees receive rewards in the form of ESOPS,
they are encouraged to align their interests with that of the organ-
isation to maximise returns on stocks. ESOPs are contracts be-
tween the organisation and its employees that empower the latter
to purchase the shares of the organisation at a fixed price and resell
them later at the price currently prevailing in the market. Due to
encouragement to participate or show ownership under this plan,
employees focus on the performance and share price appreciation
of the organisation. This serves as an advantage in improving the
performance of the organisation as well as building the confidence
of employees. The use of ESOPs for retaining and motivating their
employees as well as improving their performance in organisations
is on priority in the current scenario.
The advantages of ESOPs are listed as follows:

Q The concept of wealth sharing created by employers creates
more accountability on the part of employees who become the
shareholders of the organisation.
Q Through ESOPs, tax deductions on dividends are provided to
employees.
Q ESOPS motivates employees to increase their commitment to-
wards their work because the profit of the organisation directly
affects their dividend earnings.
However, the scheme of ESOPs is not free from faults. The follow-
ing are the disadvantages of ESOPs:
Q Due to fluctuations in the market, employees may find this op-
tion attractive only when the prices of stocks are lower than the
market price of shares. When the market value of stocks goes
down, this option will not remain attractive.

N OT ES
Q The scheme of providing ESOPs faces restrictions from Securi-

ties and Exchange Board of India (SEBI) and is subject to other
constraints in case of a listed company.
Q Buying ESOPs requires adequate funding on the part of em-
ployees. If employees do not have sufficient money to purchase
ESOPs, they need to take loans from financial institutions on
which they require to pay interest. This results in additional
cost burden for them.
10. are developed in organisations to

recognise the best performers among all employees.
11. Monetary rewards influence employees to perform well by
motivating them. (True/False)
12. Which of the following is not focused on an effective reward
system?
a. Boosting the morale of employees
b. Improving the performance of employees
ce. Increasing overall productivity
d. Increasing employee turnover
Form a group of four and discuss the advantages and disadvantages

of different types of reward systems.
sR RECOGNITION
In the previous section, you have studied about rewards that act asa
motivation tool. Other than rewards, recognition also plays an impor-
tant role in boosting the motivation level of employees in an organisa-
tion. Recognition is a measure adopted by organisations to appreciate
the efforts and performance of employees. In other words, recognition
is acknowledgement of an employee’s performance.
Organisations adopt various types of recognition programs with an

aim of improving employees’ productivity. Through appropriate rec-
ognition, employees also feel good about their association with the
organisation. Thus, employees’ performance must be immediately ac-
knowledged. For example, a letter of appreciation can be issued to an
employee after he/she has achieved the specified targets well on time.

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While designing a reward program, the following are some of the key
points that must be considered:
Q Organisational goals to be supported by the reward program
should be identified.
Q The desired employee performance or behaviour to be rewarded
should be determined.
Q The criteria for evaluating the performance or behaviour should
be defined.
Q Appropriate recognition measures should be established.
Q The recognition program should be effectively communicated to
employees.
There can be various types of recognition programs depending on or-

ganisation’s needs. Some commonly used recognition programs are
discussed as follows:
Q Structured recognition programs: These programs include regu-
lar recognition events such as employee of the month or year rec-
ognition. For instance, in many organisations, the employee of the
month is selected based on the completion of targets. The picture
of the employee is posted on the employee board as a part of rec-
ognition.
Q Informal recognition programs: These are spontaneous recog-
nition programs that include offering privileges, such as working
from home. Sometimes, additional support is provided to employ-
ees as recognition of their efforts.
Q Symbolic recognition programs: Many a times organisations offer
small gifts, such as plaques or coffee mugs with inscriptions as a
token of sincere appreciation for hard work.
13. is a measure adopted by organisations to

appreciate the efforts and performance of employees.
14, include regular recognition events such as
employee of the month or year recognition.
Visit a restaurant in your nearby area and find out the recognition
programs adopted there.

N OT ES
isha SUMMARY
Q Compensation can be defined as a pay package that employees
receive in exchange of services rendered by them to an organisa-
tion. It includes salary, wages, and direct and indirect rewards and
benefits.
Compensation helps an organisation in various ways, such as facil-
itating recruitment and selection, retaining employees, and elimi-
nating pay discrimination.
Executive compensation can be defined as the combination of
monetary and non-monetary benefits given to employees working
at upper level management of an organisation, such as president,
vice presidents, chief executive officers (CEOs), chief financial of-
ficers (CFOs), and directors.
For the adequate management of compensation, a segment of
HRM, also known as compensation administration is required.
Compensation administration is the management of compensa-
tion costs incurred by an organisation.
International compensation is a combination of monetary and
non-monetary rewards that are offered to expatriates for their
performance. It is often kept high to attract competent and skilled
people from different countries.
Organisations offer non-monetary compensation to employees in
addition to their regular wages or salaries, which are also known
as fringe benefits. Organisations also have to pay taxes in lieu of
the fringe benefits provided to their employees. Such taxes are
known as fringe benefit taxes (FBT).
Rewards are payment made to employees in return of their contri-
bution used by organisations to boost their motivation. These are
broadly classified into two categories; namely intrinsic rewards
and extrinsic rewards.
Reward systems are developed in organisations to attract can-
didates, retain their existing talent, boost their morale, improve
overall organisational productivity, etc.
Recognition is a measure adopted by organisations to appreciate
the efforts and performance of employees. There are three types
of recognition programs used in organisations, namely structured
recognition program, informal recognition program, and symbolic
recognition program.

N OT ES
KEY WORDS
Q Dry promotion: A type of reward wherein an employee is pro-

moted to a higher level without being provided any monetary
benefits.
Q Expatriate: Individuals residing in a country other than their
parent country either temporarily or working purpose.
Q Industrial benchmarking: The process of setting standards for
best practices, products, services, and processes within a partic-
ular industry for evaluating the performance or level of quality
in an organisation.
Q Labour market: A place where workers and employees come
and interact with each other.
Q Tax equalisation: A process of ensuring that the tax paid by an
assignee on an international assignment becomes equal to the
tax would have been at his parent nation.
Discuss the significance of compensation.
List the components of compensation.
NY
What are the steps involved in compensation administration?

KU Pp Ye
AA
Write a short note on fringe benefits.

Differentiate between intrinsic rewards and extrinsic rewards.
Discuss the types of reward systems used in organisations.
Write a short note on recognition.
bE ANSWERS AND HINTS
Topic 2 Cos Answers

Concept of Compensation b. Direct financial compensation
> fe ie
True
Base
Industry compensation
ce. Cash compensation

N OT ES
J kyu 2 a Cs Answers
Fringe Benefits and 6. Statutory Requirements
Fringe Benefit Tax (FBT)
7. False
Reward Management 8. Rewards
9. Intrinsic rewards
Reward Systems 10. Reward systems
aI True
12. d. Increasing employee turnover
Recognition 13. Recognition
14, Structured recognition programs

1. Compensation helps in motivating employees in an organisation
and retaining them for a long time. Refer to Section 11.2 Concept
of Compensation.
The main components of compensation are base compensation
and supplementary compensation. Refer to Section 11.2 Concept
of Compensation.
The steps involved in compensation administration are job
analysis, job evaluation, pay structure development, wage and
salary survey, job pricing, and compensation revision and control.
Refer to Section 11.2 Concept of Compensation.
Fringe benefits are non-monetary compensation provided to
employees in addition to their regular wages or salaries. Refer to
Section 11.3 Fringe Benefits and Fringe Benefit Tax (FBT)
Intrinsic rewards are offered to employees for their intrinsic
fulfilment, whereas extrinsic rewards are tangible rewards
provided to employees after the accomplishment of a given task.
Refer to Section 11.4 Reward Management.
There are mainly three types of reward systems; monetary
reward system, non-monetary reward system, and additional
reward system. Refer to Section 11.5 Reward Systems.
Recognition is used by organisations to appreciate the efforts and
performance of employees. Refer to Section 11.6 Recognition.
BRU SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Aswathappa, K. (2005). Human resource and personnel manage-
ment (1st ed.). New Delhi: Tata McGraw-Hill.

NOTES

Pearson.
Q Pande, S., & Basak, S. (2012). Human resource management
(1st ed.). New Delhi: Dorling Kindersley.
Q Bhattacharyya, D. (2009). Compensation management (1st ed.).
New Delhi: Oxford University Press.
E-REFERENCES
Q Entrepreneur,. (2014). The Best Ways to Reward Employees. Re-
trieved 2 August 2014, from http://www.entrepreneur.com/arti-
cle/75340
Q Hrcouncil.ca,. (2014). Employee Benefits | Compensation & Ben-
efits | HR Toolkit | hrcouncil.ca. Retrieved 2 August 2014, from
http://hreouncil.ca/hr-toolkit/compensation-employee.cfm
Q University, C. (2014). Benefits and Compensation-Human Re-
sources - Carnegie Mellon University. Cmu.edu. Retrieved 2 Au-
gust 2014, from http://www.cmu.edu/hr/benefits/
Q Uri.edu,. (2014). Reward Systems. Retrieved 2 August 2014, from
http://www.uri.edu/research/Ire/scholl/webnotes/Reward_Sys-
tems.htm

HR AUDIT, AND ACCOUNTING
CONTENTS
Introduction
bo
m
iobe
HR Audit
bo
—
Need and Objectives for HR Audit

Role and Significance of HR Audit
Process of HR Audit
Limitations of HR Audit
Activity
HR Accounting
Need and Objectives of HR Accounting
Scope of HR Accounting
Methods of HR Accounting
Limitations of HR Accounting
Activity
HR Information Systems (HRIS)
Need and Objectives of HRIS
Components of HRIS
Types of HRIS
Application of HRIS in HR Management
Limitations of HRIS
Activity
Summary
Descriptive Questions
Answers and Hints
Suggested Readings & References

HRIS IMPLEMENTATION BY BRISBANE CATHOLIC

EDUCATION, AUSTRALIA
Brisbane Catholic Education (BCE) is a learning community com-

prising over 130 schools in Australia. There are more than 64,000
young people registered in their schools and colleges from prepa-
ratory to 12th standard. BCE has a staff of over 9500 employees.
In order to provide effective support to such a large number of
employees, BCE required a more efficient HR management sys-
tem.
In order to improve their human resource, payroll and opera-

tions, BCE approached Talent2, an HR solutions and service
provider. BCE and Talent2 coordinated together to implement
Talent2 HRIS software. BCE selected this software because of its
enhanced system capability and great value. Talent2 HRIS pro-
vided an online user interface platform called Web Self Service,
where employees can access relevant human resource informa-
tion easily. Apart from this, the software also helped BCE with
better report generation and knowledge solutions.
The results of the implementation of the new integrated HRIS

software were found to be extremely positive as employees were
more engaged and actively participated in various events on the
online data sharing platform. BCE has collaborated with Talent2
to ensure all customer queries are addressed and effective solu-
tions are provided. Currently, both BCE and Talent2 are involved
in further developing and improving their HRIS software product
in order to achieve maximum efficiency and return on investment.
In his testimony, Kerry Edwards-Williams, Manager Business In-

formation Services at BCE, stated, “The Web Self Service system
has proven the most popular way for staff to interact with the ap-
plication because of its ease of use and accessibility.”

HR AUDIT, AND ACCOUNTING 281
N OT ES

»— Explain the concept of HR audit
Discuss the process of HR audit
Explain the concept of HR accounting
yy
Discuss the methods of HR accounting

Explain the concept of HRIS
rr
List the components of HRIS
IPA INTRODUCTION
HR audit is a process of examining and evaluating HR policies, proce-
dures, and practices to determine the effectiveness of the HRM func-
tion of an organisation. The main aim of the HR audit is to facilitate
the optimum utilisation of human resource and accurate human re-
source planning in an organisation. HR audit helps organisations in
ensuring compliance with all regulatory norms; correcting existing
gaps in the HRM function; establishing sound HR policies; and so on.
In addition, it enables an organisation to keep pace with changes that
take place in the business environment.
HR accounting is an attempt to estimate the cost incurred on employ-

ees towards their recruitment, training and development, salaries, and
other benefits paid in return for their contribution to organisation’s
profitability. It aims at calculating the total amount to be spent on
acquiring, allocating, developing, and maintaining human resource;
making effective decisions related to recruitment, selection, promo-
tions and transfer, retrenchment, etc.
Both the processes HR audit and HR accounting can only be success-

ful if accurate HR information is available. HR information system is
a set of interrelated components that collects, stores, processes, gen-
erates, and disseminates human resource information for effective
decision making. It manages, analyses, and reports of all information
related to the employees and HR policies of an organisation. In this
chapter, you will study about HR audit, HR accounting, and HR infor-
mation system in detail.
irra HR AUDIT
The term audit can be defined as an unbiased examination and verifi-
cation of an organisation’s financial statements, employee records, etc.
to determine their accuracy and outline any issues that need to be ad-
dressed. An audit can be conducted internally in organisations or by
external agencies. Irrespective of the type, an audit aims at providing

N OT ES
recommendations to an organisation in the form of audit reports based

on the findings. Similarly, HR audits are conducted in organisations to
determine the accuracy of the HRM function of an organisation.
HR audit is a systematic process of examining the policies, procedures,

practices, structure, strategies, employee documents, etc. with respect
to an organisation’s HRM function. It aims to evaluate the strengths,
weaknesses, and developmental needs of employees with a view to
enhance organisational performance. It helps an organisation to de-
termine the effectiveness of its HRM function. The following are some
famous definitions of HR audit:
Jack J. Phillips defined HR audit as an investigative, analytical and

comparative process that attempts to reflect the effectiveness of the hu-
man resource functions.”
David Campbell et al. defined HR audit as an investigation into size,

skill, structure, and all other issues surrounding those currently em-
ployed by the organisation and its future human resource needs.
According to Rosemary Harrison, HR audit is defined as a way of as-

sessing the nature and impact of human resource development activity
at particular points in time.
According to Eric G. Flamboltz, Human Resource Audit is a systematic

assessment of the strengths, limitations, and developmental needs of its ex-
isting human resources in the context of organisational performance.
HR audit plays a crucial role in an organisation as it helps managers to

take decisions on current HR problems so that overall productivity is
not affected. Let us now discuss the need and objectives of HR audit.
12.2.1 NEED AND OBJECTIVES OF HR AUDIT
HR audit is needed to ensure that all HR principles and practices are

correctly followed in the organisation. Moreover, it helps organisa-
tions to monitor the effectiveness of its HRM function. The following
points explain the need for HR audit:
Q HR audit is performed to determine whether HR objectives are
aligned with organisational objectives and employees are commit-
ted towards achieving the organisational goals and objectives.
Q HR audit is needed to determine whether employees follow organ-
isational standards, maintain discipline, and work as per the or-
ganisation’s policies.
Q HR audit is needed to review the effectiveness of various HR pro-
grams, such as selection and recruitment, training and develop-
ment, and performance appraisal, and improve them.
Q HR audit helps to determine whether the HRM function is in com-
pliance with the national and state HR laws.

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Q_ It focuses on identifying gaps or drawbacks in the implementation

of policies, rules, regulations, and other practices of the HR de-
partment and recommending corrective measures.
Q HR audit aims to check all possible documentation with regards to

performance appraisal reports, data related to the functions of the
HR department, manager feedback reports on employees’ perfor-
mance, etc.
12.2.2 ROLE AND SIGNIFICANCE OF HR AUDIT
HR audit focuses on identifying and analysing HR issues; suggesting

action plans for resolving those issues; and ensuring compliance with
HRM guidelines in an organisation. The following points explain the
role and significance of HR audit:
Q HR audit acts as an important tool to determine the effectiveness
of HR policies and procedures.
Q HR audit helps to determine any competency gaps in existing em-
ployees and identify the requirement for hiring.
Q HR audit provides insight into the cost involved in conducting
training and development programs, coaching and mentoring ses-
sions, career development programs, ete.
Q It plays acrucial role in determining employee needs, for example,
whether employees are satisfied, motivated, etc. so that overall or-
ganisational productivity can be maintained.
12.2.3 PROCESS OF HR AUDIT
HR audit is a systematic process that consists of a number of steps.

Figure 12.1 shows the steps in the HR audit process:
Determining the
Objectives of the
HR Audit
—s__
Gathering the
Background Data
se
Formulating the
Audit Plan
—s_
Developing the
Audit Report
—se__
Acting based on
the Report
————
Figure 12.1: HR Audit Process

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1. Determining the objectives of the HR audit: In this step,
the objectives of conducting HR audit are determined. These
objectives can be to finding out whether HR objectives are
aligned with organisational objectives; the HR practices of the
organisation effective; and so on.
Gathering the background data: In this step, the auditor collects
data about an organisation’s internal and external business
environment. The data gathered from the internal business
environment can be employee details, managers’ details, HR
policies and plans, organisation’s mission, vision and business
strategy, etc. On the other hand, the data collected from the
external business environment can bemarket conditions, political
and legal changes, socio-economic and cultural changes, current
positioning of the organisation in comparison to its competitors,
etc. This data can be collected through surveys, interviews, focus
groups, observations and document reviews.
Formulating an audit plan: In this step, the auditor prepares
a plan on how to start, where to start, what sources to be used,
etc. In addition, this step involves deciding the overall budget
of the HR audit process and the number of people required for
conducting the audit.
Developing the audit report: In this step, the auditor prepares
an audit report. This report highlights the strengths of the
existing HR system of the organisation and the areas that require
improvements. The audit report is used by the organisation in
the future for developing new HR policies.
Acting based on the report: This is the final step of the HR
audit process wherein organisations take actions based on the
recommendations given by the HR auditor. The actions can be
redefining HR strategies, restructuring the HR department,
changing HR policies, etc.
Asample HR audit checklist generally used by organisations is depict-

ed in Figure 12.2:

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Prepared by:
Date:
Reviewed by:
Date:
ORGANIZATION NAME
INTERNAL CONTROL QUESTIONNAIRE
PURPOSE: Audits help determine the effectiveness of an HR department and/or

HR systems.
They are a systematic, objective tool to assess regulatory or policy compliance in the
workplace.
The following list of HR audit questions is not meant to be comprehensive to every
organization, merely a representation of the types of questions that may be found in
an HR audit.
Department: Auditable Function: Human Resources

Audit Checklist
Discussed with: Date:
G
Question Yes |No |N/A |Comm =; Lo
Management
1. Are HR goals in line with those of
the organization?
2. Are workweeks identified and de-
fined?
3. Are full-time and part-time hours
defined?
4. Are shifts defined?
5. Is there open communication to and
from the HR department?
Hiring
1. Do job descriptions exist?
2. Are job descriptions up to date?
3. Are 1-9 forms and acceptable docu-
mentation reviewed annually?
Are job openings offered to current
employees?
4. Are applicant references checked?
5. Are turnover rates monitored?
6. Are selection processes used with
reference to the Uniform Guide-
lines?
7. Are all applicants required to fill out
sign an application form?
ICQ.doc
Figure 12.2: Sample HR audit checklist

(Source: http://img.doestoeedn.com/thumb/orig/446840.png)

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The above HR audit checklist shows various questions that can be asked
with regard to management and hiring. The responses are usually given
in Yes/No form and comments are mentioned beside each response.
12.2.4 LIMITATIONS OF HR AUDIT
In the previous section, you have studied that HR audit has a number
of benefits, such as identifying and resolving HR issues and maintain-
ing better work standards. However, there are certain limitations of
HR audit. Some of these limitations are given as follows:
Q HR audit can lack uniformity as auditors tend to follow different
auditing standards and guidelines. This is because there is no set
standard or principles for HR audit.
Q Sometimes HR personnel fail to provide relevant information,
which leads to inaccurate and ineffective audit process.
Q HR audit can turn to subjective in nature when there is a lack of
statistical data.
Q HR auditors may lack the required skills and knowledge, which
may lead toa failure of the audit process.
Q HR auditors sometimes fail to recognise valuable inputs from se-
nior HR personnel which might be useful for the audit process.

1. Which of the following is the second step in the HR audit
process?
a. Formulating the audit plan
b. Developing the audit report
ce. Gathering the background data
d. Acting based on the report
2. HR audit can lack as auditors tend to follow
different auditing standards and guidelines.
83 BXeuasune
Assume yourself to be a junior auditor. You have to carry out an
audit in an esteemed IT company. How will you conduct the audit?
ire HR ACCOUNTING
Human Resource Accounting (HRA) is defined as a system of identi-
fying, collecting and reporting data on investments in human assets.

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In other words, HRA is a future approach that reflects the potential of

human resource in monetary terms. The following are some popular
definitions of HRA:
According to American Accounting Society Committee, Human

Resource Accounting is the process of identifying and measuring data
about human resources and communicating this information to interest-
ed parties.
According to Woodruff, Human Resource Accounting is an attempt to

identify and report investments made in human resources of an organisa-
tion that are presently not accounted for in conventional accounting prac-
tice. Basically it is an information system that tells the management what
changes over time are occurring to the human resource in the business.
Davidson and Roman L. Wheel defined HRA as a term used to describe

a variety of proposals that seek to report and emphasize the importance
of human resources - knowledgeable, trained and loyal employees in a
company earning process and total assets.
According to Eric Flamholtz, Human resource accounting is the mea-

surement of the cost and value of the people for the organisation.
HRA acts as an important tool to human asset control and provides

information to an organisation whether the asset is appreciated, de-
pleted, or conserved. Let us now discuss the need and objective of HR
accounting in detail.
12.3.1 NEED AND OBJECTIVES OF HR ACCOUNTING
Accounting principles and practices often neglect the human resource

aspect. However, the optimum utilisation of other physical assets of an
organisation, such as land, building, plant, and machinery, depends
largely on the efficiency of human resource. Thus, HRA is needed to
enlist human resources as assets. The following points explain the
need and objectives of HRA:
Q HRA helps in estimating the expenses on human resources, listing
the expenses correctly in the book of accounts, and reporting the
record of expenses in financial statements.
Q HRA provides information about cost and value of human resource

to managers. This helps them to take decisions regarding recruit-
ment, selection, and training and development of human resource.
As per Likert (1971), in an organisation, HRA intends to serves the

following objectives:

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It provides information for making decisions related to the acqui-

sition, allocation, and development of human resource to achieve
cost-effectiveness.
Q It allows managers to monitor the utilisation of human resource.
Q It provides a basis of human asset control, that is, whether the as-
set is appreciated, depleted, or conserved.
12.3.2 SCOPE OF HR ACCOUNTING
HRA helps organisations in performing various HR functions, such as

recruitment and selection and training and development. The follow-
ing points explain the scope of HRA:
a HRA helps in recruitment and selection of employees as it pro-
vides managers an estimate of the cost required to hire a new can-
didate and determine whether the organisation needs new hiring.
HRA helps managers to plan and fix the cost of training programs of
new employees and development programs for existing employees.
It also helps managers to determine the cost of any career develop-
ment programs for existing employees of the organisation.
It allows managers determine the performance of employees by
measuring the effectiveness of performance appraisal and the cost
involved in the appraisal process.
12.3.3 METHODS OF HR ACCOUNTING
HRA methods are used for the valuation of human assets. There are
two main methods of HRA, which are shown in Figure 12.3:
Methods of
HRA
Cost-based Value-based
Method Method
Figure 12.3: Methods of HRA
Let us now study these two methods in detail.

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Q Cost-based method: This refers to the total cost incurred by an

organisation on employees starting from their recruitment to sep-
aration from the organisation. There can be three types of costs
incurred on human resource, which are:
¢ Historical cost: This refers to an accounting method in which
assets are listed on a balance sheet considering the value at
which they were bought instead of the present market value.
Historical cost can be of two types, namely acquisition cost and
learning cost. Acquisition cost is incurred on recruitment, se-
lection, and placement of individuals in an organisation. Thus,
this cost is mainly borne by the organisation on new employ-
ees. On the other hand, learning cost is incurred on the train-
ing and development of existing employees. Historical costs
can be calculated easily.
¢ Replacement cost: This cost is incurred on hiring a new em-
ployee to replace an existing employee in an organisation. The
replacement cost is calculated by considering various expens-
es, such as acquisition and learning costs. Measuring replace-
ment cost is quite useful as it provides a fair idea of the total
cost that might be involved in hiring a new employee. However,
the main limitation of this method is that the right replacement
may not be obtained easily on whom a certain amount is spent.
This may lead to operational issues within the organisation.
¢ Standard cost: This refers to a predetermined or estimated
cost of employees for each employee acquisition in a given ac-
counting period. It is used as a benchmark against which the
cost variances and financial performance are measured. The
standard cost of employees varies and can be obtained from
historical data analysis or from time and motion studies.
Q Value-based method: This method is used to determine the value
of human resources and their contribution to the organisations’
profits in monetary terms. There are two value-based methods
commonly used by organisations, which are:
¢ Present value of future earnings: This refers to the estimated
current value of a future amount which is to be received or giv-
en and is discounted at the current market value rate. There
are numerous models used by organisations to estimate the
present value of employees, such as Lev and Schwartz (1971)
model, Eric Flamholtz (1974) model, and Jaggi-Lau’s model.
Among these models, the Lev and Schwartz (1971) model is the
most commonly used by organisations. According to the mod-
el, the value of human capital represented by a person of age ‘r’
is the present value of his/her remaining future earnings from

N OT ES
his/her employment.” Lev and Schwartz devised the following

formula to calculate the value of an individual:
os It)
Ve Gar t-r
Where, V, = The value of an individual r years old

I(t) = An individual’s annual earning up to retirement,
T = Retirement age,
r = Discount rate specific to the person,
t = Active service (in years)
Organisations usually make necessary changes to this model
according to their requirements, for example, discount rates
can be altered to determine the present value of future cash
flows. Therefore, this model helps to identify an employee’s
economic value to the organisation to his future earnings until
his/her retirement. The employee’s expected future earnings
are discounted by an appropriate rate to obtain the present
value of his/her work in the organisation.
¢ Expected realisable value: This refers to the personal attri-
butes, attitude, and behaviour that an employee is expected to
have in an organisation. The employee is judged by the organi-
sation based on these values, which would impact his/her work
performance and the overall productivity.
12.3.4 LIMITATIONS OF HR ACCOUNTING
From the discussion so far, it can be said that HRA is helpful in de-
ciding the total budget of an organisation on human assets. However,
there are certain limitations of HRA:
Q HRA doesn’t have any set accounting standards for measuring
human resource value. Thus, organisations follow their own HRA
standards to measure the values of human assets. This difference
in approaches in organisations leads to non-comparison of values
of human assets.
Q The human asset valuation is dependent on the assumption that
employees stay in organisations for a certain period of time. How-
ever, over the years, human resource mobility has increased; thus,
this assumption might not work in some organisations.
Q Organisations may lose valuable human resource if the valuation
is incorrectly carried out. This situation can also arise if the results
of the valuation of human resource are not utilised effectively.

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Q There are no specific guidelines to determine the cost and value of

an organisation’s human resources as the current methods of HRA
have their own limitations.
Q = The life span of individuals cannot be predicted; thus, their values
are also uncertain.
&e SELF ASSESSMENT QUESTIONS
3. HRA provides information about cost and value of human

resource to managers. (True/False)
4. Which of the following refers to a predetermined or estimated
cost of employees for each employee acquisition in a given
accounting period?
a. Replacement cost
b. Standard cost
ce. Historical cost
Assume you are responsible for conducting HR accounting in a

manufacturing company. Apply the suitable methods of HR ac-
counting and finalise a report.
HR INFORMATION SYSTEMS (HRIS)

Human Resource Information System (HRIS) is a system designed to
provide necessary information for effective management of human re-
source. In other words, HRIS is an online database system that helps
in managing information related to all employees of an organisation at
one place. This information can be related to employees’ salary struc-
ture, appraisal, and leaves, and so on. The following are some popular
definitions of HRIS:
According to Tannenbaum (1990), HRIS is defined as a system that

is used to acquire, store, manipulate, analyse, retrieve, and distribute
information about organisation’s human resources.
Kovach and Cathcart (1999) defined HRIS as a system for collecting,

storing, maintaining, retrieving and validating data needed by an or-
ganisation about its human resources.
Broderick and Boudreau (1992) defined HRIS as a composite of data-

bases, computer applications, and hardware and software that are used

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to collect/record, store, manage, deliver, present and manipulate data for

human resources.
Nel et al. (2008) stated HRIS as a computerised system that collects,

stores, analyses, distributes and retrieves information about employees
and their jobs.
Hedrickson (2003) defined HRIS as integrated systems used to gather,

store and analyse information regarding an organisation’s human re-
sources.
HRIS collects, stores, processes, generates, and disseminates human

resource information for effective business decision making. It pro-
vides information on various HR policies formulated by the organisa-
tion to HR personnel as well as employees.
12.4.1 NEED AND OBJECTIVES OF HRIS
The need for HRIS arises in business organisations having a large

number of employees. In such organisations, it is extremely difficult to
manage and maintain employee data manually. HRIS enable organi-
sations to maintain employee database and retrieve it as and when re-
quired. The following points explain the need and objectives of HRIS:
Q_ Effective planning and policy formulation: HRIS aims to provide
support to managers for future planning and the formulation of
HR policies. This support is extended to both at macro and micro
levels. At the macro level, HRIS is concerned with overall organi-
sational productivity. On the other hand, at the micro level, it spe-
cifically relates to the performance of the HR department.
Q Monitoring and evaluation: In an organisation, HRIS aims to
monitor an organisation’s requirements related to HR demand and
supply. This further helps in preventing the situations of shortage
and excess of human resource.
Q Decision making: HRIS intends to provide inputs to managers in
making strategic decisions related to technological changes, em-
ployee turnover, competency profiling of employees, etc.
Q Increased accuracy: HRIS is free from human errors and pro-
vides accurate information to managers related to employees. This
ultimately leads to sound HR decisions; thereby increasing overall
organisational effectiveness.
Q Increased productivity: HRIS contributes largely to an increase
in organisational productivity by providing information on any
gaps in the skills and competency of employees and training and
development requirements.

NOTES
12.4.2 COMPONENTS OF HRIS
In HRIS, employee information is collected, stored, and recorded with

the help of its three important functional components, which are ex-
plained as follows:
Q Input: This component enters employee data into HRIS. The pro-
cesses and procedures needed for data collection are initially es-
tablished. Once the data is collected, it is entered into the system
in a coded form. Next, the data is validated using validation tables.
The input system of HRIS can change or update the validation
table whenever needed. The working of the input component is
Input Activities
+ Entry
Data Collection yl * Edit
Protection + Validate
| |
Message Table || Acceptance or
(optional) Error Notification|
+] Direct User Access ]

Figure 12.4: Working of Input Component
(Source: http://books.google.co.in/books?id
= Webti-aBy8EC&pg=PA126&dq=compo-
nents+of+hris&hl=en&sa=X&ei=pp3XU-vDCliTuASgjoLgCs&ved=0CFAQ6AEwCA#v=o0-
nepage&q=components%200f%20hris&f=false)
Q Data maintenance: This component of HRIS updates the data

which is stored in the storage device. Although new data is included
in the system, the old data is also kept as a backup. The working of
the data maintenance component is shown in Figure 12.5:
Data Maintenance Actives Basia:

Transaction ¢ Update
From Input -—>} ¢ Create >—) To Output Function
Function e Derive
> Reports
Figure 12.5: Working of Data Maintenance Component

(Source: http://books.google.co.in/books?id= Webti-aBy8EC&pg=PA126&dq=compo-
nents+of+hris&hl=en&sa=X&ei=pp3XU-vDCli7uASgjoLsCs&ved=0CFAQ6AEwCA#v=0-
nepage&q=components%200f%20hris&f=false)

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Q Output: HR managers tend to be more interested in this compo-

nent of HRIS as essential information and reports of human re-
sources are generated. This helps managers to evaluate, perform
calculations, plan and forecast future human resource needs and
development in the organisation. The working of the output com-
ponent is shown in Figure 12.6:
Output Request
Procedures
Figure 12.6: Working of Output Component

(Source: http://books.google.co.in/books?id= Webti-aBy8EC&pg=PA126&dq=compo-
nents+ of+hris&hl=en&sa=X&ei=pp3XU-vDCli7uASgjoLgsCs&ved=0CFAQ6AEwCA#v=o-
nepage&q=components%20o0f%20hris&f=false)
12.4.3 TYPES OF HRIS
Different organisations use HRIS for different purposes. Thus, HRIS

differs across organisations based on their requirements. Figure 12.7
shows different types of HRIS:
Types of
HRIS
Operational Tactical Strategic

HRIS HRIS HRIS
Figure 12.7: Types of HRIS
Let us now discuss about these types of HRIS in detail.

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Q Operational HRIS: This type of HRIS provides information to

managers for making routine HR decisions. Operational HRIS
contains general information about employees, HR policies, gov-
ernment policies, etc. The following are the functions of operation-
al HRIS:
Q Employee database management: Operational HRIS provides
employees’ personal details, such as name, address, sex, minori-
ty status, marital status, educational background, and citizenship
as well professional details like previous experience, employment
history current job title, salary, retirement and health plan choices,
and so on.
Q Recruitment and selection: After recruitment, candidates are
screened, assessed, selected and placed in a specific job position.
Operational HRIS helps HR personnel with such tasks.
Q Performance management: Operational HRIS provides informa-
tion of the performance of employees in terms of their work tar-
gets, deadlines, etc. This information helps managers to decisions
related to retention, promotion, transfers, or termination of em-
ployees.
Q Government reporting and compliance: This system helps to
provide information on the latest government laws, compliance
guidelines to be followed, etc.
Q Tactical HRIS: This type of HRIS helps managers to take deci-
sions on the allocation of human resources in the organisation.
The following are the different functions of tactical HRIS:
¢ Job analysis and design: Tactical HRIS helps managers in
analysing and designing jobs in an organisation by providing
relevant information. This information is collected through job
description, job specification, interviews with supervisors and
workers, action guidelines, government reports, competitors’
executive summaries, etc.
¢ Compensation and benefits management: This system helps

Managers in maintaining a fair and equitable compensation
system by providing information on industrial compensation
standards.
¢ Employee training and development: Tactical HRIS provides
information on any gaps in the skills, abilities and competen-
cies of employees; thereby planning for training and develop-
ment programs.
Q Strategic HRIS: This type of HRIS helps managers to make deci-

sions related to workforce planning, labour negotiations, etc. Such

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decisions are generally taken by managers in case of introduction

of new products, entry in new markets, new locations of operation,
and so on.
12.4.4 APPLICATION OF HRIS IN HR MANAGEMENT
The advent of globalisation and liberalisation has led to an increase in

the number of employment opportunities, which, in turn, has broad-
ened the scope of HR functions. In such a case, it is important for or-
ganisations to automate its HR functions with the help of HRIS. The
following are the applications of HRIS in HRM:
a Job description: HRIS produces reports describing jobs accord-
ing to employee specifications and other information. HRIS offers
flexibility to the user to update and change any job details accord-
ing to the requirements of the specified job. This helps managers
in preparing job descriptions for employees.
Training and development: HRIS provides information on train-
ing courses, location, timings, details of the trainer, list of trainees,
competency levels of trainees, etc. Managers can use these details
to plan training and development programs in the future. HRIS
also provides flexible on-line training courses that employees can
avail from remote locations.
Performance appraisal: HRIS enables managers to conduct re-
al-time performance appraisal by filling online forms, taking feed-
back from various parties on employees’ performance, etc.
Retention strategy: HRIS provides information on employees’
performance, attitudes, behaviour, etc. as reflected in survey
sheets and online reports. This helps managers to decide whether
the employees should be retained or not.
12.4.5 LIMITATIONS OF HRIS
HRIS plays an important role in collecting, storing, and recording em-

ployees’ information in an organisation. However, HRIS has certain
limitations. Some of these limitations are given as follows:
a Costs associated with HRIS implementation: Transaction costs
associated with acquiring the latest equipment and technology for
HRIS may be too high, especially for small and medium-sized or-
ganisations.
Resistance to change: Employees might feel comfortable in the
old paper system of recording HR data. They might find it difficult
to adapt to this change. Organisations then face a tough situation
in making employees understand the benefits of HRIS.

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Q Security: Highly confidential employee information can be mis-

used due to the negligence of the concerned system operator or
the failure to monitor and maintain the system.
Q Data entry errors: Human errors commonly occur while enter-
ing data into the system. If data is wrongly entered, updated or
changed, this might lead to a loss of data and the organisation can
face high costs to rectify the system along with legal complications.
5. HRIS collects, stores, processes, generates, and disseminates

human resource information for effective business decision
making. (True/False)
6. Which of the following HRIS component updates the data
which is stored in the storage
a. device? b. Input
ce. Output d. Data Maintenance
7. Tactical HRIS provides information to managers for making
routine HR decisions. (True/False)
Assume you are a junior executive of the HR department of a med-

ical equipment company. The company wants to install the latest
HRIS software. Provide your recommendations to your manager
regarding the features of all the latest HRIS software that is cur-
rently available in the market.
ire SUMMARY
Q HR audit is a systematic process of examining the policies, proce-
dures, practices, structure, strategies, employee documents, etc.
with respect to an organisation’s HRM function.
Q HR audit focuses on identifying and analysing HR issues; suggest-
ing action plans for resolving those issues; and ensuring compli-
ance with HRM guidelines in an organisation.
Q HR audit can lack uniformity as auditors tend to follow different
auditing standards and guidelines.
Q Human Resource Accounting (HRA) is defined as a system of iden-
tifying, collecting and reporting data on investments in human as-
sets.

N OT ES
Q HRA helps organisations in performing various HR functions,

such as recruitment and selection and training and development.
Q HRA methods are used for the valuation of human assets.
Q Human Resource Information System (HRIS) is a system designed

to provide necessary information for effective management of hu-
man resource.
Q HRIS enable organisations to maintain employee database and re-
trieve it as and when required.
Q The advent of globalisation and liberalisation has led to an in-
crease in the number of employment opportunities, which, in turn,
has broadened the scope of HR functions.
Q HRIS plays an important role in collecting, storing, and recording
employees’ information in an organisation.
KEY WORDS
Q Book of accounts: The cash-books, ledgers, etc. that comprise

accounts of an organisation.
Q Competency profiling: A method of identifying the skills, com-
petencies, and behaviour of an employee needed to perform a
specific task.
Q Compliance: The act of complying or following specific guide-
lines, rules and laws.
Q HR audit: A systematic process of examining policies, proce-
dures, practices, documentation and systems with regards to an
organisation’s HR functions.
Q Retrenchment: The termination of employees by an organisa-
tion to cut down on costs.
Q Time and motion studies: The analysis of the efficiency with

which an organisation’s operations are carried out.
1. Explain the process of HR audit.
2. Discuss the methods of HRA.
3. Elaborate on the applications of HRIS in HRM.

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rae ANSWERS AND HINTS
Wey Ce Q. No Answers
HR Audit 1. ce. Gathering the background data
2m Uniformity
HR Accounting 3. True
4, b. Standard cost
HR Information 5. True
Systems (HRIS)
6. ce. Data Maintenance | ©
7. False

1. The HR audit process involves anumber of steps, i.e. determining
the objectives of the HR audit, gathering the background data,
formulating the audit plan, developing the audit report and
acting based on the report. Refer to Section 12.2 HR Audit.
2. There are mainly two types of methods of HRA, i.e. cost-based
method and value-based method. The cost-based methods
involve historical cost, replacement cost and standard cost
while the value-based method involves present value of future
earnings and expected realisable value. Refer to Section
12.3 HR Accounting.
3. HRIS can be applied in HRM in various ways, for example, job
description, training and development, performance appraisal,
retention strategy, etc. Refer to Section 12.4 HR Information
Systems (HRIS).
IPE SUGGESTED READINGS & REFERENCES
SUGGESTED READINGS
Q Chhabra, N. T. (2005). Human Resource Management: Concepts
and Issues. (1st ed.) New Delhi: Dhanpat Rai & Co. Pvt. Ltd.
Q Durai, P (2010). Human Resource Management. (1st ed.) Noida:
Dorling Kindersley (India) Pvt. Ltd.
Q Biswas, D., B. and Director, S. (2013). How to Use Finance and Ac-
counting in HR (Collection). (1st ed.) New Jersey: FT Press.

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Rao, L., P (2008). Enriching Human Capital through Training and

Development. (1st ed.) New Delhi: Excel Books.
Idea Group Ine. (IGI) (2010). Information Resources Management:
Concepts, Methodologies, Tools and Applications. (1st ed.) Her-
shey: USA
Bhattacharya, K., D. (2006). Human Resource Planning. (2nd ed.)
New Delhi: Excel Books.
Swanepoel, S., P (2008). South African Human Resource Manage-
ment: Theory & Practice. (4th ed.) Lansdowne: Juta & Co. Ltd.
Regis, R. (2008). Strategic Human Resource Management and De-
velopment. (1st ed.) New Delhi: Excel Books.
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CASE STUDIES
CONTENTS
Case Study 1 HRM Practices at RPS Stores

Case Study 2 HRP at Perfact Service Academy
Case Study 3 Job Analysis at XYZ Fast Food Restaurant
Case Study 4 Recruitment for Global HR Interim Head at Lumata
Case Study 5 Orientation Program at TMK Automobile Pvt Ltd
Case Study 6 Competency Mapping at A.F Blakemore and Son Ltd.
Case Study 7 Training and Development at Parth Software Solutions
Case Study 8 Human Resource Developmentat Acasia Pvt. Ltd.
Case Study 9 Succession Planning at Tata
Case Study 10 Employee Performance Appraisal System at Jelly Belly
Case Study 11 Rewarding Employees at Google
Case Study 12 HRIS at Central Queensland University

CASE STUDY 1
HRM PRACTICES AT RPS STORES
This case study discusses the role of HRM in an organisation in in-

creasing employees’ engagement. This is with respect to the Chapter
1 of the book.
RPS Stores is a retail chain that has more than 3000 permanent
employees along with more than 2000 agency and concession em-
ployees. It sells everyday grocery items and is strongly committed
to its customers. Being in the service industry for so long, it is
essential for the company to recruit and retain a dedicated pool
of employees. Though RPS has become a renowned name in the
retail market today, it had faced a plethora of problems in its ini-
tial phase. The question here arises is how and what problems did
the company face.
The company was started by an entrepreneur as an extension of

his family business. The entrepreneur simply started a store with
some basic grocery items and randomly hired some sales execu-
tives who could attend customers and take care of billing count-
ers. After six months of its inception, the entrepreneur was un-
able to see any results in terms of business profits and the store’s
popularity in the market. Even the sales executives were leaving
the organisation. The entrepreneur decided to hire a consultant
to resolve the issue. The consultant was well informed by the en-
trepreneur about all the problems that the store was facing. The
consultant was an experienced person so he decided to hear the
issues faced by both the sides. He performed a quick employee
survey and found out that most of the employees were not even
aware of their job responsibilities. Their job profile was not ex-
plained to them clearly. He also found that the executives were
not happy with the salary that they were getting. A store located
in the same area was following better pay practices compared to
the RPS. So, the consultant suggested the entrepreneur to have
a proper HRM system in place. The owner did some more hiring
of personnel from HR background. The team of four people of dif-
ferent levels was made and the company had its HR department
for the first time.
The HR department then started up with various HRM practices

which have been continued till today making it a grown up and
renowned brand. Various HRM practices that made the business
to survive its tough phase were its effective human resource plan-
ning, recruitment and selection, compensation and benefits, train-
ing and development. The human resource planning helped the
company in determining the exact requirement of the workforce
and the recruitment and selection process helped in selecting

CASE STUDY 1: HRM PRACTICES AT RPS STORES 305
CASE STUDY 1
the most suitable pool of employees for different departments of

the company. Similarly, the training and development programs
helped in building the skills of employees so that they can better
understand the company’s goals and objectives and effectively
perform their job roles. A reasonably fair compensation system
made the company to retain potential employees and attract new
talent. That’s how HRM practices made the company survive the
initial phase and to continuously grow later on.
|g QUESTIONS
1. What happened in the absence of HRM practices in the

initial phase of the company?
(Hint: The store was not able to have potential e
and strategies.)
and responsibilities.)

CASE STUDY 2
HRP AT PERFACT SERVICE ACADEMY
This case study focuses on the importance of HRP in an organisa-

tion. It is with respect to the Chapter 2 of the book.
INTRODUCTION
PerFact Service Academy, established in 2009 in India, is a train-

ing division of Performance Factory, a leading UAE HR and place-
ment solutions provider. PerFact Service Academy offers its ser-
vices through PerFact Consult, PerFact Learn, PerFact Evolve,
and PerFact Tools. PerFact Consult provides HR performa
management and operations management consultancy to its
tomers. PerFact Learn delivers professional skills develo
and leadership training to customers. PerFact Evolve foc
preparing college and university graduates for corpo
PerFact Tools evaluates performance, leadership, and
client organisations.
HRP MODEL
PerFact Service Academy focuses o

an effective HRP model. The mod
helps the organisation in achievi
place in the business environ rom this, the model

helps the organisation to:
Q Understand its bu tegic plan and take actions
accordingly.
Q Perform internal an ernal business environment scans.
Q Forecast HR demand and supply.
Q Align all departments in the organisation in a way that there is
continuity in the flow of communication.
Q Develop HR strategies and link them to the organisation’s
strategies.
Q. Link HR plans with organisational objectives.

CASE STUDY 2
The proposed HRP model of PerFact Service Academy is as follows:
Performance
Management
Training & | Culture Building

lopment Activities
erformance Surveys & .

KC Feedback a |
ww
P Model of PerFact Service Academy
‘ecasting HR demand. As part of its HR demand forecasting

process, PerFact Service Academy has proposed to increase its
urrent training capacity of 480 trainees per year to 1200 trainees
per year. The following table shows the current HR status of Per-
Fact Service Academy to train 480 trainees per year:
TABLE: CURRENT HR STATUS OF PERFACT SERVICE ACADEMY
Permanent Staff
Department Staff (480) | Management Total Ratio
Staff
Marketing 5 1 6 8:1
Operations 3 0 3
HR & Admin 2 1 3 elt
Secretarial 1 0 1 -
Total 11 2 13 5:1
(Source:http://theperfactworld.com/Include/Downloads/LeveragingBusinessHuman
ResourcePlanning.pdf)

CASE STUDY 2: HRP AT PERFACT SERVICE ACADEMY 309
CASE STUDY 2
From the above table, it can be observed that the training cen-
tre at PerFact Service Academy has 13 permanent employees of
which 2 are management personnel. The average ratio is 5:1, i.e.
8 employees per management person. PerFact Service Academy
aims to increase the number of both employees and management
personnel but keeping the average ratio more or less constant to
maintain effective management and supervision.
The following table shows the proposed workforce of PerFact Ser-
vice Academy to train 1200 trainees per year:
TABLE: PROPOSED WORKFORCE OF PERFACT
SERVICE ACADEMY
Permanent Staff
Department Staff (480) Management | Total
Staff
Marketing 10 2
Operations 8 2
HR & Admin 7 1
Secretarial 0
Total 27
(Source: http‘//theperfactworld.com/Include/D.
way that the average ratio of e 1 management person-

: y increasing the num-
ber of employees in vario its significantly but only
marginally increasing t f management people.
CONCLUSION
Using the forecasted HR demand, PerFact Service Academy is able to
prepare further plans for developing training programs. These programs
include a series of functional training for staff and leadership training
for management-level employees, which, in turn, would increase the or-
ganisation’s overall performance and productivity.
QUESTIONS
1. Do you think PerFact Service Academy is successful in

keeping the average ratio of employees and management
personnel constant while forecasting HR demand?
Discuss.
(Hint: Yes, in their proposed plan, PerFact Service
Academy significantly increased the number of employees
while the management personnel were marginally
increased to keep the average ratio constant.)

CASE STUDY 2
2. Suppose PerFact Service Academy has currently 28

permanent staff across all departments to train 420
employees. The following table shows the current
workforce at XYZ Pvt Ltd:
Permanent Staff
Department Staff | Management | Total | Ratio
(420) Staff
Marketing 7 2 9 6:1
Operations 5 0 5
HR & Admin 8 2 10 4:1
Secretarial 4 0 4 -
Total 24 4 28 Seed
Analyse the table table depicting the

way PerFact Serv forecast HR demand
to train 900 e
\cademy can increase the number
all departments while marginally
ent personnel.)

CASE STUDY 3
JOB ANALYSIS AT XYZ FAST FOOD RESTAURANT
The case study discusses the importance of job analysis in an organ-

isation. It is with respect to the Chapter 3 of the book.
XYZ is a fast food restaurant chain having its outlets in different

countries serving more than 68 million customers every day in
119 different countries. Headquartered in the US, the chain op-
erates either as a franchise or as a corporation itself. It employs
more than 18,000 employees. The chain needs to hire and retain
the potential staff that can meet company’s goals and objectives.
There are two types of jobs offered by the restaurant: crew mem-
bers and office jobs. For restaurant jobs, the career path is clearly
defined beginning from a crew member to a crew leader to a floor
manager to an assistant manager to a restaurant manager. Simi-
larly, office jobs are different managerial jobs at entry level, middle
level, and higher level. The company was using the questionnaire
method for its job analysis. It was observed by some managers
that the new recruits were unable to perform the way they are ex-
pected to perform in their respective jobs. This was affecting the
services of restaurants. Managers had to constantly remind their
staff of even the basic roles and duties. The matter was brought
to the notice of the top management and it was decided that the
company must seek external consultation to resolve the matter at
the earliest.
An external consultant was appointed who visited the existing

and new outlets of the chain. These visits led him to conclude that
the performing outlets had a team of employees who were work-
ing for the company for many years. On the other hand, the non-
-performing outlets were new with a team of new recruits in the
‘restaurant jobs’ profile. This reflected that only old employees
were aware of their job roles and duties, while the new recruits
were not well versed with their responsibilities. This was because
the recruitment and selection process was unable to recruit em-
ployees with the right skills and abilities. They either did not have
the right background or were overqualified or experienced for the
job role. The reason behind this was the job analysis method of
the company. The questionnaire method was not enough to anal-
yse and evaluate the job specification and job description of crew
members at the restaurant. The consultant then suggested the
company to include observation and interview methods as well.

CASE STUDY 3
Using these methods, the HR personnel may first observe the ac-
tivities of old crew members, make notes based on the observa-
tion, and may hold interviews with them to collect more informa-
tion. For customer care representatives too, the same combination
of observation and interview methods may be followed. With the
help of this, the company was able to develop better job descrip-
tion and job specification that eventually helped in improved re-
cruitment and selection of employees. This soon reflected in the
performance of restaurant outlets also.
|g QUESTIONS
1. Why the questionnaire met!

XYZ?
(Hint: Restaura
functions of the

CASE STUDY 4
RECRUITMENT FOR GLOBAL HR INTERIM HEAD AT LUMATA
This case study focuses on the importance of recruitment in an or-

ganisation. It is with respect to the Chapter 4 of the book.
INTRODUCTION
Lumata, a London-based leading software and marketing ser-

vices company, was established in November, 2011. It was formed
as a result of a break-out from Buongiorno, a leading company in
B2C entertainment on mobile. Lumata is supported by Francisco
Partners, a leading, $7 billion private equity technology entity.
The core business of the company is mobile marketing. Lumata’s
goal is to provide communication services to customers over mo-
bile through various technical tools. Such type of communication
services is called Mobile Relationship Management. Lumata’s
success is based on providing innovative and quick solutions for
various technical issues, focusing on specific areas of strength of
its employees, and maintaining transparency in its services.
THE CHALLENGE
Soon after Lumata separately formed its own business, i.e. break-
ing away from Buongiorno, it faced a serious issue. Saskia Don-
ald, Global HR Head at Lumata, had plans that her HR team
would manage her duties and responsibilities during her mater-
nity leave. However, this process was not easy and deemed not
feasible due to various organisational re-structuring taking place
at that time. Saskia Donald still had to find a suitable person to
replace her within a very short space of time. There had to be a
person who could effectively lead and manage important global
HR functions effectively and that too at such a crucial time of or-
ganisational change.
THE SOLUTION
Realising the extreme importance of the role, Lumata decided to

take the consultation of Hudson, a leading UK consultancy ser-
vice provider. HR experts at Hudson reviewed Lumata’s issue
and accordingly decided to provide its services. They realised that
shortlisting of candidates has to be carried out quickly in order to
select the best candidate for the demanding job position.

CASE STUDY 4
HR experts at Hudson recommended that Lumata should start a

search process to recruit the most appropriate candidate for the
interim global HR job position. They were also of the opinion that
an unbranded job advertising scheme could also help Lumata
quickly address this issue by placing the job advertisement at a
faster rate. They suggested that this would be an ideal recruit-
ment method due to the nature of the job vacancy.
THE RESULT
The results from the application of these recruitment methods

proved to be extremely positive for Lumata. The company found
that the HR experts at Hudson were able to offer an initial shortlist
of prospective candidates within a three day turnaround period.
The profiles of each candidate were assessed and initial meetings
with candidates were also carried out. Thereafter, Saskia Donald
was able to identify a suitable candidate from the technical and
cultural point of view. Apart from technical competencies, due to
the nature of the job position, i.e. global HR interim head, it was
essential that the cultural knowledge of candidates should also be
assessed.
It was found that there was an excellent candidate who fitted the
job role perfectly. However, an effective benchmark was needed to
measure the competencies of the candidate. Thus, the HR experts
at Hudson provided Lumata the profiles of candidates whose com-
petencies were similar to the shortlisted candidate. Later, after
thorough assessment of the competencies between the shortlisted
candidate and other candidates, it was revealed that the short-
listed candidate best fitted the job requirements for the global HR
interim head. Lumata decided to recruit that candidate after final
consultation with Hudson.
According to Saskia Donald, “Hudson quickly understood what

we were looking for in a candidate. The cultural fit was crucial
given the dynamics of our industry coupled with the business sit-
uation. In addition to this, the tight time scales made this a chal-
lenging project. We were looking for someone suitable to start in
a matter of weeks.
Hudson was able to source a great shortlist in a few days. The

end result was the appointment of a top quality candidate. I was
impressed with how Hudson’s HR consultant really helped me to
see past the CV. She ensured that I only saw the very best people.”

CASE STUDY 4: RECRUITMENT FOR GLOBAL HR INTERIM HEAD AT LUMATA 315
CASE STUDY 4
g QUESTIONS
1. What other sources do you think Lumata can use for its
recruitment process?
(Hint: Lumata can use recommendations from managers,
internal job posting, etc.)
2. Suppose Lumata needs to recruit a full-time marketing
manager for its Moscow office. They have decided to take
the consultation services of Hudson for its recruitment
process. How do you think Hudson can help Lumata in
this matter?
(Hint: HR experts at Hudson can review and shortlis
profiles of candidates who have more local
and are aware of the Russian culture.)

CASE STUDY 5
ORIENTATION PROGRAM AT TMK AUTOMOBILE PVT LTD
The case study discusses the role of an orientation program in an

organisation. It is with respect to the Chapter 5 of the book.
TMK Automobile Pvt Ltd. is a Japan-based automobile manu-

facturer. Headquartered in Japan, it has its manufacturing plants
across the globe. The ever-rising business of the company is adding
production of around 40,000 vehicles every year. This required the
company to set up more manufacturing plants where new employ-
ees were recruited including both the workforce and at manage-
ment level. Having good market opportunities in US for its luxury
models, the company decided to set up a plant there. Even after
having a good infrastructure and a set up plan in place, TMK was
unable to achieve its efficiency and did not yield the desired results.
The management immediately looked into the matter to find out

the reason behind the inefficient performance of the plant even
after having a well-defined and established production process.
It was in the management discussion meeting that the HR man-
ager pointed out the possible cause of the low performance could
be a lack of an orientation program for new employees. The HR
department was immediately asked to develop an orientation pro-
gram to make employees aware of organisational goals and objec-
tives and their roles and responsibilities, which will improve their
efficiency and performance. A five-day orientation program was
developed to welcome and train new recruits. The details of the
orientation program are as follows:
Q Day 1: The first day begins with the welcome note with the
overview of the company and discussion about the organisa-
tional structure and human resource department. The new
employees are informed about the history and culture of the
company and the benefits given to employees. After this, the
company’s policies on teamwork and quality are discussed.
Q Day 2: The second day is devoted to “communication train-
ing” which lays emphasis on the importance of mutual respect,
teamwork, and transparent communication. The later part of
the day is followed by general orientation where employees
are made aware of the issues, such as safety and environmen-
tal affairs of the company’s production system.
Q Day 3: The first part of this day is devoted to communication
training where feedback is collected about the previous day
session on communication. The rest of the day covers matters,
such as company’s problem-solving methods, quality assur-
ance, and hazards.

CASE STUDY 5
Q Day 4: The morning session of the final day focuses on team-

work. The topics in this session include teamwork training,
company’s suggestion system and disaster management that
cover fire prevention and fire extinguisher training.
This way the company started educating employees about how

to work together as a team and what should be the part of each
team member in different jobs in the company. The results of the
orientation program were started to reflect in the performance
of employees as they were well informed and had developed a
sense of belongingness with the company. This also increased the
efficiency of TMK in the US plant making it to yield the desired
results.
The training program lasts for four days and covers

us traditional and contemporary concepts to train
ployees about the company’s ideology and policies.)

CASE STUDY 6
COMPETENCY MAPPING AT A.F BLAKEMORE AND SON LTD.
This case study discusses the importance of competency mapping

in an organisation. It is with respect to the Chapter 6 of the book.
INTRODUCTION
A.F. Blakemore and Son Ltd., established in 1917 in Wolverhamp-

ton, UK, is one of the largest family-owned businesses. The organ-
isation started as a counter-service grocery store but currently
has established itself as a leading food and drink, retail, distri-
bution and wholesale business entity. The organisation focuses
on building strong relations between its suppliers, trade partners,
and customers. Its main aim is to provide excellent customer ser-
vice; thus, lays emphasis on having a loyal and dedicated work-
force. The Blakemore Way, its value statement, outlines that the
long-standing family values will continue to drive successful fu-
ture growth of the organisation.
DESIRED BUSINESS OUTCOMES
A.F. Blakemore and Son Ltd. wants to continue its growth and
expansion plans by following its core values. In keeping with the
core values and culture, the organisation wants to ensure that
corporate responsibility is followed by one and all in the organi-
sation. It also wants to ensure that the performance of its Corpo-
rate Responsibility (CR) specialists is appropriately assessed by
‘Growing You’, the performance management system.
The performance management system of the organisation focuses

on its core values. The system consists of a self-assessment, com-
petency framework, which highlights employees’ behaviour at all
levels. Employees are given an idea of the way their respective de-
partments function and their targets in syne with organisational
targets. Personal development plans are introduced so that em-
ployees can perform better and develop their competencies in the
future.
CHALLENGES
CR is embedded within the value statement of the organisation

and so behaviour and necessary skills of employees are reflected
throughout the organisation’s performance management system.
However, the required skills and behaviours are hardly seen in
traditional performance systems.

CASE STUDY 6
One of the other main challenges of AF Blakemore and Son Ltd.

was that it had a growing CR team, which needed personal devel-
opment in the future. Personal development is essential for the
continued success of the organisation.
HOW THE CHALLENGES WERE OVERCOME

The Business in the Community (BITC) CR Competency frame-
work was used for identifying major CR associated skills or com-
petencies that could be incorporated into the organisation’s
performance system. BITC provides an interactive online CR
Competency Map, which sets out key competencies of CR special-
ists. These competencies include communication, program doc-
umentation and implementation, measuring and reporting, etc.
Each competency will reflect different behavioural patterns like
self-confidence, organisational awareness, commitment, etc.
The competency mapping helped A.F. Blakemore & Son Ltd. to
provide a point of reference for its existing performance manage-
ment system, Growing You. In this way, the organisation will be
able to review and develop the performance management system.
Competency mapping will also help to use the expertise gener-
ated through cross-organisational research consisting nationwide
CR specialists.
Competency mapping also helped to identify the required skills
sets for its CR team and ensure that there is a point of reference
for future training, development, recruitment, etc.
Paul Cowley, Corporate Affairs Manager at A.F Blakemore and
Son Ltd., quoted, “The BITC CR Competency Framework has
provided a great reference point for our existing performance
management system, Growing You, that seeks to promote and
emebed A.F Blakemore’s core values as the company grows and
expands in the future.”
QUESTIONS
1. Do you think that BITC Competency Mapping can also be

applied on HR practitioners? Discuss.
(Hint: Yes, BITC Competency Mapping can help HR
practitioners to perform their work effectively.)
2. Assume you are the manager of a leading retail chain
in your country. How do you think BITC Competency
Mapping will help your retail chain?
(Hint: BITC Competency Mapping will help in training
both existing and new employees.)

CASE STUDY 7
TRAINING AND DEVELOPMENT AT PARTH

SOFTWARE SOLUTIONS
The case study discusses the need and benefits of training and de-
velopment in an organisation. It is with respect to the Chapter 7 of
the book.
Parth Software Solutions is a medium-scale organisation that

provides software packages for both commercial and domestic
users. It was doing well until it observed a lack of cooperation
among its employees and the management, which affected its
business performance. It was observed that employees at vari-
ous levels were either demotivated or were frustrated. The man-
agement asked the HR department to look for a reason behind
the rising number of demotivated and frustrated employees. The
HR manager worked with managers from other departments
and found out that a new technology was introduced by the or-
ganisation around a year back to develop software. Most of the
employees in the organisation were not aware of this technology;
thus, they were having a hard time using it. This reflected on
their performance which eventually leads to unsatisfied apprais-
als, thus increasing frustration among employees and no cooper-
ation with the management.
The HR department was asked to suggest a solution for the prob-

lem as soon as possible. The department then came up with an
idea of conducting a training and development program that
aimed at making employees aware of the new technology so that
they can perform better. The one-week extensive training pro-
gram not only introduced employees to the new technology but
also they were informed about benefits of the new technology to
the organisation and the employees. Apart from this, the program
facilitated open and clear communication within the organisa-
tion; which led to improved cooperation between employees and
the management. The results of the training reflected in just two
months as employees not only started performing well but their
frustration level also reduced. Since then, the organisation has
made it a practice to conduct training sessions for every new tech-
nology or concept being introduced. Besides this, the HR depart-
ment of the organisation has also designed some regular training
and development programs for the purpose of developing and im-
proving the communication skills and abilities of employees so
that they can work as a team.

CASE STUDY 7
QUESTIONS
1. Why the introduction of new technology made employees

demotivated and frustrated?
(Hint: The introduction of new technology was done
without bringing in the notice of employees.)
2. Had you been the HR manager at Parth Software, what
types of training programs you would have suggested?
(Hint: Training programs on IT skills and change
management would have a developed.)

CASE STUDY 8
HUMAN RESOURCE DEVELOPMENTAT ACASIA PVT. LTD.
This case study focuses on the significance of human resource de-

velopment in an organisation. It is with respect to the Chapter 8 of
the book.
INTRODUCTION
Acasia Pvt. Ltd. was established in 2000 by Mr. Fedrix Jones and
is headquartered in Oslo, Norway. It comprises over 50 companies
in various areas, such as information technology, communica-
tion, engineering, energy, and manufacturing. It has a vast global
presence and is well represented in over 100 countries across
the globe. The major Acasia companies are Acasia Motors, Aca-
sia Steel, Acasia Chemicals, Acasia Consultancy Services, Acasia
Power, Acasia Telecommunications, and Acasia Group of Hotels.
Acasia’s companies have over 277,000 people globally. The pur-
pose of Acasia Pvt. Ltd.is to continually improve its products and
services, create long-term stakeholder value, and maintain high
business ethics.
NEW PROJECT
Acasia Pvt. Ltd. has plans to expand its business globally. Many of
its companies have already started new operations in Europe and
South American countries. Now, Acasia Pvt. Ltd. wants to launch
a new project, i.e., opening an automobile plant in Singapore.
CHALLENGES
One of the main challenges of launching the new project was the
unavailability of HR managers at the new location. In order to
avoid the cost of recruiting new local HR managers, Acasia Pvt.
Ltd. wanted to transfer its existing HR managers from Norway
and other locations. Unfortunately, the existing HR managers
were not willing to work in Singapore because of a fear of get-
ting isolated in an alien environment. They were not comfortable
of the different culture, lifestyle, habitat, etc. At the same time,
they had settled well with their families at their current locations,
which was another difficulty for them to move to another place.
The other challenge was that HR managers were required to

mould their skills and competencies according to the needs of the
local environment, together with maintaining a sense of together-
ness in the work group.

CASE STUDY 8
SOLUTIONS
Acasia Pvt. Ltd. managed to overcome these challenges by estab-

lishing an effective Human Resource Development (HRD) sys-
tem. The HRD system of Acasia focused on the following aspects:
Q TheHRD system helped HR managers to adapt to the changes
in the working environment in Singapore.
Q Thesystem enabled HR managers to improve and mould their
skills and competencies so as to enable them to meet high
work demands.
Q HR managers were provided
and counselling so that they
ing in a new environment.
Q The system helped
knowledge about di backgrounds of the local
people ande unication skills, team-work-
ing abilities, e
Q The syste: the learning opportunities of HR manag-
i aware of the local culture, lifestyle, etc.
anagers who were now ready to take on the

king at the new location.
4 QUESTIONS
Discuss some other challenges that affected the launch of

the new project of Acasia Pvt. Ltd.
(Hint: Language was another challenge for HR managers.)
What other ways do you think the HRD system at Acasia
help HR managers to overcome the challenges of working
in an unfamiliar location?
(Hint: Clarification on each manager’s roles,
responsibilities, etc. can help HR managers to perform
well in a foreign environment.)

CASE STUDY 9
SUCCESSION PLANNING AT TATA
This case study discusses the importance of succession planning in

an organisation. It is with respect to the Chapter 9 of the book.
Tata Group is a global enterprise with its foundation dated back

in 1868 with Jamsetji Tata. The group has more than 100 operat-
ing companies in seven business sectors: consumer product and
technology, energy, services, materials, engineering, communica-
tions, and information technology. Tata operates in more than 100
countries across six continents. The group aims at improving the
quality of services across the globe by creating long-term stake-
holder value.
In 2011, the group started looking for the successor as the retire-
ment of Chairman Ratan Tata was due in December 2012. Ratan
Tata inherited the business from his uncle JRD Tata. Since there
was no heir in the family this time, finding a suecessor for the
group became a challenge. For the first time, Tata also started
looking outside the organisation to find a suitable successor. A
succession plan was made to find the next descendant of Ratan
Tata. A committee of five members was announced to accomplish
the task. The committee comprised N. A. Soonawala — Vice Chair-
man of Tata Sons; Shirin Baruch — a lawyer who worked with
the group; R K Krishnakumar-Director Tata Sons; Cyrus Mistry
— Board Member, Tata Sons; and Lord Bhattacharya — Director
WMG, Innovative Solutions.
The committee started search almost after a year of its formation

as it faced various challenges such as whether to look for someone
from Tata Sons (which was the holding company of the group),
will a professional corporate CEO would join and perform in a
privately owned company, and will anyone outside Tata would be
able to take the responsibility. In order to find answers to these
concerns, the committee had to first understand the business of
Tata Sons and Tata Group. After much of hard work the commit-
tee nominated seven different people from various multinational
companies at senior positions. It was concluded by the commit-
tee that Tata needs someone who is a professional CEO and can
also maximise the share values of the group. To the surprise of
the committee, none of the nominated people expressed any en-
thusiasm in funds management. Thus, the successor was finally
selected the successor from the committee itself and Cyrus Mistry
was elected. The following were the reasons given by the commit-
tee in support of their decision of having Cyrus Mistry on board:
1. He was the major stakeholder of Tata Sons.
2. He had experience of being Managing Director of his privately
owned company.

CASE STUDY 9
3. He belonged to Pharsi religion and also had suitable age to

take the position.
4. His career achievement and financial knowledge were in the
favour of the organisation.
5. His family was very close to the Tata family.
6. This is how the committee was able to develop and implement
the succession plan before finally bidding farewell to Ratan Tata.
BA QUESTIONS
1. Why choosing a succes from outside or within the

organisation was a challe
2. Discuss whether the decision taken by the committee in

as a successor was worth?
share in Tata Sons, had sound financial

was known to the Tata family. Today, after
the group is still serving the same values as
he time of Ratan Tata.)

CASE STUDY 10
EMPLOYEE PERFORMANCE APPRAISAL SYSTEM

AT JELLY BELLY
This Case Study discusses about the the importance of a perfor-

mance appraisal system in an organisation. It is with respect to
Chapter 10 of the book.
INTRODUCTION
Jelly Belly Candy Company was originally known as Herman

Goelitz Candy, which was established in 1869 by Albert and Gus-
tav Goelitz. In 1989, Herman Goelitz Candy was renamed as
Jelly Belly Candy Company, a family-owned business in Fairfield,
California, US.
Today, the organisation produces more than 37 million pounds

(17,000 tons) of candy annually in over 50 flavours at its Fair-
field, North Chicago, Illinois, and Wisconsin facilities. It also op-
erates in Thailand, where it produces candies for markets outside
the US. Like every employee-oriented organisation, Jelly Belly
also recognises the contribution of its employees behind its suc-
cess. It believes that employees are more likely to stay with the
organisation when they feel connected with their jobs and are re-
warded properly. Therefore, the performance of employees should
be evaluated fairly to provide them maximum job satisfaction.
Performance appraisal is one such HRM activity that is taken

with utmost responsibility in every organisation. It is the most im-
portant tool to make employees believe that how much they are
valued for their efforts. Jelly Belly also believes that an effective
employee performance appraisal system can help the organisa-
tion to align its priorities and values with that of its employees.
That is why, when Jelly Belly decided to renovate and systematise
its out-dated employee performance appraisal system, it started
looking for an appraisal solution that could give its employees a
fair and accurate performance appraisal.

CASE STUDY 10
CHALLENGE
Jelly Belly’s search for a new employee performance appraisal

system began when two branches of the family business reunit-
ed to get merged into a single organisation. The major challenge
that the organisation faced after its merger was; both the branch-
es were using different methods for performance appraisal. One
branch was using an old performance management software pro-
gram, while the other was using manual methods, such as filling
up paper forms to appraise its employees.
The organisation was feeling a strong urge of automating the per-

formance appraisal system as it was not possible to operate an
organisation with different performance appraisal systems. Be-
sides, the organisation was also feeling that an accurate review
may help employees to better understand what is expected of
them, so that they can set clear, measurable objectives to achieve
targets and improve their performance. According to Jeff Brown,
Jelly Belly’s Director of Human Resources, “When employees feel
they have gotten a thorough and accurate review, it boosts their
morale. It also leads to improved talent management and makes it
easier to retain valuable employees, which management experts
know is a key factor in corporate growth and market leadership.”
SOLUTION
To deal with this challenge, the task of updating and consolidat-

ing the performance management process was given to Margie
Poulos, the HR Manager of Jelly Belly’s Midwest Operations. She
was given a responsibility of finding a single automated system
for all 600 employees of Jelly Belly.
To meet their strategic goals, Poulos and her team created a list of
guidelines that the new appraisal system should meet. Top on the
list was ‘ease of use’. According to Poulos, “We did not want to end
up with a system that is so complicated that the managers would
not use it”. They also focused on making the new system as a one
that could save time and incorporate the core competencies of the
employees into different forms.
Poulos and her team considered various software products from

different vendors. According to Poulos, “We eliminated right away
those that were geared to very large companies and those that
were not web-based. We also eliminated those that offered too
many options for customisation. It is one thing to offer options,
but another thing when the product requires so much customisa-
tion that it becomes overwhelming.”

CASE STUDY 10: EMPLOYEE PERFORMANCE APPRAISAL SYSTEM AT JELLY BELLY 329
CASE STUDY 10
However, after a long research, the HR committee selected Hal-

ogen Software’s Halogen Performance™, a web-based applica-
tion for managing employee performance. “We liked the way it
looked, and we really liked the user-friendliness of it. It is easy for
the managers to use and it is customisable without overwhelming
them,” Poulos said.
Around 50 managers of Jelly Belly received a crash course in us-

ing Halogen Performance and used the software to complete their
annual employee evaluations in May. The organisation was very
relieved with the results. According to Poulos, “The feedback has
been really positive, from both managers and employees as well.
Some staff said this was the best appraisal they have had. They
felt the evaluations were fair and realistic, and supervisors had
the scope to provide more relevant and legitimate comments than
they could before. Rather than just clicking on a bunch of eanned
comments, they were accurately reviewing the employee.”
RESULTS
The new automated employee performance appraisal system com-

pletely systemised the Jelly Belly’s employee evaluation process.
According to Brown, “It allows us to standardise competencies
across job classifications, add signature and comment sections to
make our process more interactive, and increase accessibility for
remote managers.”
The new appraisal system helped managers to regularly update

their online appraisal. It saved their time during the appraisal pe-
riod. Even if managers are in remote or traveling, they could have
access to the forms and the data to evaluate their staff. According
to Brown, “In our old system, a few folks in Chicago would have
access to the system but we have managers in California with Chi-
cago subordinates. It is important that they can share the same
forms across the board. And we have folks who are on the road a
lot or are working out of home offices, so having them be able to
access this is a huge point for us.” In addition to managers, the
new appraisal system also helped employees as now they were
not needed to fill different forms but add comments and sign their
appraisals in one consistent employee evaluation form.
The new system also helped Jelly Belly in tracking the training
and development needs of its employees. According to Poulos,
“We have always had a separate training manual. Now we can go
in to the evaluations and more easily monitor employees’ skills
development, see what training is needed by individuals and
check the due dates for training and renewal. That makes it much
easier for us to keep track.”

CASE STUDY 10
The new employee performance appraisal system has proven to

be a big time-saver for Jelly Belly’s HR team. It helped the or-
ganisation to better align employee goals with the organisation’s
business objectives. According to Poulos, “It has already saved us
a lot of time, and we got everybody’s appraisals done in one shot.”
QUESTIONS
1. What was the biggest challenge in front of Jelly Belly?

(Hint: More than one appraisal system, no accurate
review pattern, finding a single automated system for all
lly overcame its

t your answer.
(Hint: Yes. Jelly B overcame its problems
by adopting r e’s Halogen Performance™,
for managing employee

CASE STUDY 11
REWARDING EMPLOYEES AT GOOGLE
This Case Study discusses the significance of compensation and

rewards in an organisation. It is with respect to Chapter 11 of
the book.
Google, Inc. is a multi-national company engaged in providing

web search and advertising services to customers. It has also be-
come the most popular web site in the world. The word Google
has become so popular that it has found a place (as a verb) in the
dictionary. Google has been recognised as the ‘world’s first one
hundred billion brand’. In 2009, it was regarded as the ‘best place
in the U.S.’ to work by Fortune magazine.
Google, Inc. believes in offering the best to their employees to

keep them motivated. The company has developed a standard
package of fringe benefits for their employees including first-class
dining facilities, gyms, laundry rooms, massage rooms, haircuts,
carwashes, dry cleaning, commuting buses, etc. Google also offers
various intrinsic and extrinsic rewards to its employees.
Stacy Sullivan, Chief Culture Czar (CCO) at Google, is devoted

to make employees happy at their workplace. To do this, Google
Inc. administers the best perks and rewards in the industry. The
company offers various extrinsic benefits to its employees, such
as free health check-ups, flex spending accounts, 401K plans (re-
tirement savings contributions are provided to employees before
taxes are deducted from their salaries), insurance, tuition reim-
bursement, and vacation packages. In addition, there are unique
benefits provided to employees, such maternity benefits up to 18
weeks off at approximately 100% pay. In addition, new mothers
and fathers are also provided with expenses up to $500 for take-
out meals during the first three months. Moreover, the company
provides back-up child care services and conducts Gift Matching
Program for its employees. Google provides financial assistance
for those who wish to adopt a child.
Google has also provided on-site doctors facility for ensuring

the well-being of its employees at headquarters in Mountain
View, California. For employees working at its headquarters,
Google provides additional facilities such as on-site oil change,
car wash, dry cleaning, massage therapy, gym, fitness classes and
bike repair.
Google has also paved a way for providing freedom to its employ-
ees at workplace. In order to maximise creativity, the company
has adopted a flat structure along with no official channels for the
free flow of ideas within groups. Another important perk, which is
offered to employees by Google, is the allowance of time.

CASE STUDY 11
The employees are allowed to spend 20 per cent of their time to

work on their own project independently.
Through various rewards and benefits, Google Inc. has fol-

lowed its belief that no one should leave in order to pursue their
personal passions.
| QUESTIONS
1. Do you think the compensation and reward policies

adopted by Google are effective in retaining employees
for long time? Discuss.
(Hint: Yes, employees d both intrinsic and
extrinsic rewards to satisfy their needs to maximum.)
anies in India that have
tive compensation and

CASE STUDY 12
HRIS AT CENTRAL QUEENSLAND UNIVERSITY
This case study focuses on the role of HRIS in an organisation. It is

with respect to the Chapter 12 of the book.
INTRODUCTION
Central Queensland University (CQU), established in 1992, is an

Australian public university based in Queensland. It has its main
campus in North Rockhampton, Queensland. CQU is among the
top distance learning education providers and rated as ‘one of
the best universities in Australia for the overall education experi-
ence.’ It aims at making higher education and research more ac-
cessible to people, especially those residing in and around central
Queensland.
CHALLENGES
CQU had linked up with Talent2, an HR solutions provider, to

implement Human Resource Information System (HRIS). Ini-
tially, payroll management, personnel administration, applicant
tracking, and leave management modules were included in HRIS.
However, a CQU Review Commission, in 2004, found that the uni-
versity’s HR systems and processes were proving to be a major
hindrance in terms of their ability to operate at necessary strate-
gic or tactical levels. The main elements that were creating prob-
lems were data consistency and timeliness. Further, the CQU Re-
view Commission found that HRIS software was out of date and
no longer supported by the vendor.
OVERCOMING THESE CHALLENGES
In 2006, CQU decided to update its existing HRIS software, upgrade

the overall infrastructure, and activate a data cleanse and scanning
process on both the HR data and the associated processes. By end
of November, 2006, all these changes were implemented.
Additionally, CQU implemented a Talent2’s employee self-ser-

vice online module called ‘Web Self Service’. By 2008, CQU tried
a major Talent2 HRIS upgrade and became the first Australian
university to adopt the new version. Moreover, CQU rolled out all
Talent2 HRIS modules with no customisation and also completed
the Beta testing (2™“level user acceptance testing) of the new ver-
sion of HRIS.

CASE STUDY 12
RESULTS
The changes made to CQU’s core application and ‘Employee Self

Service Online’ modules proved vital in terms of cost and time
saving in data entry and workflow approval processes. A new Per-
formance Management module helped CQU managers to sched-
ule and track meetings as well as remove a manual paper-based
system. The automated system also helped 85 per cent of leave
applications being approved the same day of applying; thus, the
online leave processing removed 12,000 manual leave forms over
a one year period.
The introduction of Payslips O esulted in employees receiv-

ing their payroll details on tim manual handling of
payslips. The employees at CQ’ pdate their address,
ine.
creased the o r of CQU. Currently, HRIS at CQU

forms an inte business systems and operates as
. What do you think were some of the other challenges

that CQU faced by not having the latest version of HRIS
software? Discuss.
(Hint: CQU was not able to train their management
personnel and HR managers to use the system properly
due to its complexity.)
2. Suppose you are a leading consultant at Talent2. You
have been asked to enhance the current HRIS software
version that is provided to CQU. How will you do that?
(Hint: One of the ways you can enhance the current HRIS
software is to include online employee compensation and
rewards module.)

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ESSENTIALS OF HRM

a NMIMS GLOBAL ACCESS

TOC Reviewer Content Reviewer

Author: Mr. Paramjeet Lamba

NMIMS Global Access - School for Continuing Education

CHAPTER NO. CHAPTER NAME PAGE NO.

1 Introduction to Human Resource Management 1

2 Human Resource Planning 21

3 Job Analysis and Job Design 49

4 Recruitment and Selection 81

5 Induction and Orientation 115

6 Competency Mapping and Assessment Centres 133

7 Training and Development 155

8 Human Resource Development 179

9 Career Planning and Succession Planning 199

10 Performance Management 221

11 Compensation and Rewards 249

12 HR Audit, and Accounting 279

13 Case Studies 303

NMIMS Global Access - School for Continuing Education

Introduction to Human Resource Management: Human Resource Management (HRM)- Meaning

Competency Mapping and Assessment Centre: Competency Mapping, Developing Competency

NMIMS Global Access - School for Continuing Education

Performance Management: Performance Management- Nature, Significance , Performance Man-

Compensation and Rewards: Compensation- Need, Uses, Components of compensation, Industry

NMIMS Global Access - School for Continuing Education

NMIMS Global Access - School for Continuing Education

FedEx Corporation, after its inception in 1997, has been provid-

Innovative HR practices with open door policy and fair treatment

Apart from this, at FedEx, an online survey is carried out once

NMIMS Global Access - School for Continuing Education

After studying this chapter, you will be able to:

List the challenges of HRM

Relate strategic management and HRM

Human resource can be defined as people who are employed in an

Human Resource Management (HRM) is a comprehensive process of

NMIMS Global Access - School for Continuing Education

iP HUMAN RESOURCE MANAGEMENT

Human Resource Management can be defined as a comprehensive

1.2.1 MEANING AND DEFINITION

Human resource management can be defined as an organisational

According to Invancevich and Gluek, HRM is concerned with the most

Dessler has defined HRM as The policies and practices involved in

HRM helps employees in meeting their individual expectations,

NMIMS Global Access - School for Continuing Education

1.2.2 EVOLUTION OF HRM

NMIMS Global Access - School for Continuing Education

1.2.3 OBJECTIVES OF HRM

The primary objective of HRM is to ensure the availability of compe-

@ ___ Organisational Objectives |

Let us discuss these objectives in detail.

NMIMS Global Access - School for Continuing Education

Q Functional objectives: The functional objective of HRM is to pre-

1.2.4 SCOPE OF HRM

Earlier, HRM was limited to the selection and recruitment of employ-

Human Resource b=... and

Employee Union etaboue || | oso : esearch

Figure 1.2: Scope of HRM

Let us discuss the scope of HRM in detail.

NMIMS Global Access - School for Continuing Education

Q Job design: It involves defining the content and tasks of a partic-

NMIMS Global Access - School for Continuing Education

1.2.5 STRUCTURE OF THE HR DEPARTMENT