HRM Notes

HRM
Contents
Unit Contents Page No.
1 Introduction to HRM
1.1 Definition
1.2 Nature and scope of HRM
1.3 Evolution of HRM
1.4 Challenges of HRM
1.5 HR Profession and HR Department
1.6 Global perspective of HRM
2 Human Resource Planning
2.1 Human Resource
2.2 Demand and Supply Forecasting
2.3 Factors affecting HRP
2.4 Job Analysis and Job Design
2.5 Recruitment and Selection- Recruitment Process
2.6 Sources and Methods of recruitment
2.7 Evaluation of Methods of Recruitment
2.8 Steps in selection
3 Training and Development
3.1 Need and importance of training and development
3.2 Training need analysis and techniques
3.3 Design training program
3.4 Types of training
3.5 Training evaluation
3.6 Executive development
3.7 Concept of career development
4 Wages and Salary Management
4.1 Job evaluation
4.2 Wage determination
4.3 Types of wages
4.4 Salary structure
4.5 Fringe benefits
4.6 Executive compensation
5 Performance Management
5.1Introduction of performance appraisal
5.2Need and importance of performance appraisal
5.3Performance appraisal process
5.4Methods of performance appraisal
6 Employee Relations Management
6.1 Introduction of Employee relations management
6.2 Overview of Employee Relations Management
6.3 Importance of Relations Management
6.4 Employee Relation Management Tools
6.5 Issues in Employee relation Management
UNIT-1 INTRODUCTION TO HRM

OBJECTIVE - After learning this chapter you will be able
 To define human resource management

 To explain the nature and scope and global perspective of HRM.
 To identify the challenges of HRM
CONTENTS -
1.1 Definition
1.2 Nature and scope of HRM
1.5 HR Profession and HR Department
1.1 Definition-
The total knowledge, skill, creative ability, talents and aptitudes of an organization’s workforce
as well as values, attitudes, approaches involved in the organization’s work affairs are
collectively called as Human Resources. Human resource management is the term used to
describe formal system devised for the management of people within organization.
It is the strategic approach to the effective management of organization workers so that they help
the business gain a competitive advantage and commonly referred to as the HR Department.
‘The process of hiring and developing employees so that they become more valuable to the
organization’ is also known as Human Resource management.
In simple sense, human resource management means employing people, developing their
resources, utilizing and compensating the resources in accordance with the requirement of job
and organization contributing towards organizational and social and individual goals.
1.2 Nature and scope of HRM-
1.2.1 Nature of HRM

HR is primarily concerned with the management of people within organization, focusing on
policies and on systems. Human resources overall purpose is to ensure that the organization is
able to achieve success through people. It is strategic approach to the acquisition, motivation,
development and management of the organization’s human resources.
The purpose of HRM is to maximize the productivity of an organization by optimizing the
effectiveness of its employees. HR departments are also responsible for overseeing employee
benefits designs, employee recruitment, training and development, performance appraisal and
rewarding (e.g. managing pay and benefit systems).Human resource management is also
concerned with the organizational change and industrial relations, that is, the balancing of
organizational practices and with requirements arising from collective bargaining and from
governmental laws.
HRM is proactive process which looks forward to what needs to be done to achieve
organizational as well as personal goals. It focuses on the results rather than the rules. It tries to
help employees develop their potential fully and encourages them to give their best to the
organization. HRM mainly tries to build and maintain cordial relations between the employees
working at various levels in the organization.
1.2.2 Scope of HRM
The scope of HRM is very vast and wide. It includes all the activities that come under the title
Human Resource Management. That is, the activities starting from manpower planning till the
employee leaves the company or organization.
Some of its aspects of HRM are:
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1. Personnel Aspect-
This aspect of HRM is concerned with manpower planning, recruitment, selection,
training and development, placement, performance appraisal etc. This simply shows that
Human resource management is not only about hiring and training the workforce but the
important objective of it is to ascertain individual growth, development and effectiveness
which will indirectly contribute towards fulfillment of organizational and social goals.
2. Welfare Aspect-
This aspect of HRM mainly deals with work environment of work place. In this aspect
focus is mainly on providing amenities such as canteens, transport and medical facilities,
safety services, welfare funds and social security etc. This aspect of Human Resource
management also focuses on creating healthy working environment by eliminating work
place hazards, safeguarding machinery, maintaining proper ventilation, sanitation,
lighting etc. Emphasis is also given on providing sickness benefits, employment injury
benefits, and personal injury benefits. It also takes care of finding real needs of
employees and fulfilling them with active participation of both employees and
management.
3. Industrial Relations Aspect-

This aspect mainly includes union management, disciplinary procedures, dispute
settlements etc. Industrial relations being highly sensitive area care must be taken while
interacting with employees or union management. Their grievances must be addressed
and disputes must be solved in effective manner so as to maintain peace and harmony in
the organization. It means that while dealing with this aspect, care has to be taken so that
no negative impact is left on the organization while safeguarding the employee’s
interests.
Pre Industrial Revolution Period - This period was marked with agriculture as main or primary
economy with the limited production. The production of specialized crafts was limited and
generally was carried out in villages or communities with apprentices or workers assisting the
master craftsmen. Also the channels of communication were limited so was the limited scope for
marketing of such products.
Period of Industrial Revolution (1750-1850) – The period of industrial revolution was marked
by the conversion of economy from agriculture based economy to industry based economy.
Increased communication channels and modernization led to the industrial set up and the
department was set up to deal with the issues like workers wages and salaries, their record
maintenance, housing facilities and health care which led to the emergence of personnel
management.
Important event of this period was the emergence and growth of labour unions. At that time
workers used to work for long hours and that to with very less wages. Because of this with
growing unrest workers started protest and lead to establishment of labour unions. Personnel
management department had to be very much capable of handling the labour issues and
management with diplomacy and this led to the establishment of industrial relations department.
Post Industrial Revolution Period- Various studies and experiments conducted in this period
gave HRM altogether a new meaning and importance.
Fredrick Taylor’s principles of scientific management (1857-1911) led to the evolution of

scientific human resource management approach. This approach was used in worker’s training,
maintaining wage uniformity and deciding the strategy to improve the worker’s productivity.
Hawthorne studies which were conducted by Elton Mayo and Fritz Roethlisberger (1927-1940)
shifted the focus of human resource from increasing productivity to increasing work efficiency
through greater work satisfaction.
Douglas McGregor Theory X and Theory Y (1960) and Abraham Maslow’s Hierarchy of needs
(1954) shifted the HRM approach from administrative and personnel management to the more
dynamic HRM approach which considered workers as a valuable resource.
As a result, HRM became increasingly line management function which included some major
functions of Human Resource Department as follows:
1. Recruitment and Selection Of Skilled Workforce

2. Training and Development
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r3. Motivation and Employee benefits
4. Performance Appraisal.
As we know Human Resource Management includes:
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Job design
Manpower planning
Recruitment
Training and development
Performance management
Compensation and benefits
Handling legal issues
While going through all these processes, HR professional faces many challenges. To solve these
issues HR manager has to be capable enough to identify these issues so that he can prevent the
organizational activities being suffered by these challenges. These challenges can be categorized
into three main categories:
1.4.1 Environmental Challenges-
These challenges are also called as external challenges as they arise due to the external forces
that exist in the environment outside the organization and affect the performance of
organizations management. These forces being external to the organization are out of control of
the management of the organization and they have to be handled in proactive manner. Some of
the environmental challenges that human resource management faces are:
1. Changing environment- As the world is rapidly changing; the organizations

management should quickly adopt the changes so that they should not become outdated
from the new market. The human resource management of an organization plays an
important role in this regard and adopt such policies which keeps the organization away
from the emerging threats and helps the organization to avail the new opportunities of the
environment.
2. Political and legal forces – Due to the changes in political parties and rules and
regulation new laws keep coming which have to be followed while doing the business. It
is the responsibility of human resource manager to anticipate the changes and make
necessary adjustments in the organization to cope up with the changing laws so that
organization keeps functioning smoothly.
3. Technology- Technology is changing everyday in today's world and the organizations

have become technology-driven organizations. With the changing technology workforce
in the organization needs to be trained to adopt these changes. New emerging
technologies dominate the older ones and make them outdated. Therefore new skills are
to be developed by the employees and need to de advanced every time the technology
changes. This creates the burden on human resource manager to keep updating the skill
of the employees and technology.
4. Cultural forces - Due to the globalization of businesses, workforce has become more
diverse and multicultural. This increases the pressure on Human resource management to
identify and to adopt to these cultural differences and ignorance to this can lead to
cultural misunderstandings.
5. Economic Forces – Major external factor which affects HRM practices is economic
conditions. Recessions or booms in the economy or rate of inflation affect consumer
demands. Also the financial health of the organization is affected by the economic
conditions. Favourable economic conditions help in expansion of existing programmes
and new programmes can be launched. But if the conditions are unfavourable some
programmes needs to be cancelled. Thus, number of economic factors affects the HRM
practices of the organization influencing its operations.
1.4.2 Organizational Challenges –

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

of company influences human resource practices while managing the workforce in the
organization.
3. Organizational culture – Organizational culture is nothing but the set of basic assumptions,
values and beliefs of organizational workforce. Different companies have distinct cultures
which influence what work is done and how it is done, within organizations.
4. Employee concerns- To implement the effective HR practices and make workers contribute
towards the organizational goals an effective manager needs to take into account the
concerns of their employees.
1.4.3. Individual Challenges –

This aspect includes decisions related to the particular individual employee. Employee’s relation
with the organization affects the organizational issues. Some of the factors which affect the
HRM are:
1. Productivity- Employee’s ability and motivation to do the work greatly influences the
employee’s productivity. To improve the employee’s ability proper training can be given to
them.
2. Empowerment- When an individual employee exerts more control on the work compared to
their superiors this individual control is called as empowerment. Due to this empowerment,
employees work with an enthusiasm and commitment. This empowerment also helps them to
learn new skills as they can make their own decisions while working. But to identify the
capable person to be empowered who can take correct decisions is quite difficult task for
HRM.
3. Job insecurity- Now a day’s most of the employees are looking for secure jobs because in
today's cut throat competition even successful organizations lay off their employees. Also the
restructuring and downsizing of the organizations develop the sense of job insecurity within
the employees of the organization.
4. Work life balance – The issue of work life balance in many companies is gaining
increased attention. The balance between the demands of employee’s personal life and that
of work is called as work life balance. Work life issues can be of any type. It may be taking
care of small children, dealing with traffic or it may be looking after senior citizens at home.
In response to these issues, some progressive companies help their employees out of these by
providing them flexible work schedules. Some companies like Abbott Laboratories provides
the facility of child care center. Company built a $10 million state–of –the-Art child care
center. Also Procter and Gamble operates an onsite center for night workers who cannot
leave their children alone at home in the night.
While establishing such work life balance programs, companies are finding that employees who
enjoy the benefits of such programs remain effective contributors toward company goals. Also
such programs can be a point of attraction for potential job applicants.
1.4 HR Profession and HR Department-
Human resource department of an organization needs to focus on activities that add value to the
company’s bottom line activities such as development of human capital, change management,
strategic planning and corporate culture transition. Human Resource Department of any
organization is responsible for many workforce related issues such as identifying the needs of
staff and trying to meet them. It is also responsible for employee welfare and keeping employee
relations positive. Human resource department also focuses on maintaining healthy and hygienic
working atmosphere. The role of HR as a professional is at the core of a company’s success as
they develops and manages the culture in their company.
HR profession is so diverse in nature that the HR professional has to perform all-encompassing

role. HR professionals have to be multi-knowledgeable and competent in finance, sales,
marketing and operations. The person needs to be competent in legal matters, technical,
cognitive and interpersonal skills. To maintain harmonious relationship between employees and
organization is the prime goal of HR professional because employee’s commitment towards
organization is important for organization. Some of the responsibilities of HR professionals are:
1. To develop the plans and policies and knowledge of corporate culture.
2. Involve in company’s strategy formulation by identifying and evolving HRM strategies.
3. Initiate the changes in an organization as internal change agent and consultant.
4. Identify the problems and develop the solutions in human resource areas.
5. Develop the communication channel between the employees and the organization’s
management.
6. Interviewing the applicants and informing them about job details, benefits and conditions.
To be a successful and highly competent HR professional person needs to be competent in

following areas:
1. Business Mastery – To attain this mastery person should be keen and quick in understanding
and dealing with a business situation with a positive way which will lead to a good outcome.
2. Personal Credibility
3. Change Mastery- HR professional should initiate the changes in the organization in positive
way. Person should be capable of anticipating the changes may it be outside the organization and
prepare the policies in advance to deal with them in harmonious way.
4. HR Mastery – The HR professional needs to be able to handle the workforce related issues
skillfully. To keep the employees motivated different performance appraisal systems needs to be
implemented. Person needs to be knowledgeable to identify need of job and recruit the
appropriate workforce.
Because of globalization, every big or small organization has become global giving rise to diverse
workforce and cultural sensitivities. All this led to the development of global HRM. In most
organizations culture is the driving force. To deal with the issues arising due to these cultural
diversities, employee engagement and retention strategies should be responsive. Reducing the risk of
international workforce and cross cultural issues is the main objective of international or global
HRM.
While working in international organization difficulty arises in implementing HR practices. In host

country while hiring employee, it is difficult to get the right talent at right time. Diverse talent is
available such as local candidates, expatriates. But the problem arises whom to give preference.
Again hiring procedures are dictated by the host countries according to which employee recruitment
has to be done. All these factors have influence on hiring process.
During training and development program emphasis is given on cultural and language training.
Culture and language are the main issues which are to be resolved during training program which
will help employees to adapt to the work culture. While deciding compensation policy appropriate
strategy has to be devised to compensate expatriates. Compensation policy should be such that it will
minimize the pay difference between parent, host and third country nationals. Issues may also arise
due to repatriation of employees.
While working with multinational organization, it is observed that need for parent country and third
country national decreases because more trained local candidates become available. At the same
time there is also the risk of physical safety of employees. When expatriates fail to perform well it
causes financial losses to the firm.
Dealing with the political leaders, economic and social interest groups become difficult for HRM
professional when working for global organization. Also the labour laws changes from one country
to another country. It is quite difficult task to find right people at right time who can adapt to
changes and challenges of working in global organization. To keep the balance of local decisions
and decisions at Head Quarter level is the challenging task.
Summary
 Human resource management is set of activities that focus on effective use of human resource in
an organization.
 It encompasses the activities of recruitment, training and development, salary and wages
management, employee welfare, health and safety management, services and benefits and so on.
 The human resource manager needs to take the decisions to meet the organizations economic and
societal objective by hiring, developing, rewarding and maintaining the workforce in the
organization.
 Successful and competent human resource management is essential for organizational success
and growth.
 The objective of HRM includes finding the right talent, providing them effective motivation and
leadership, paying and treating them fairly and getting them involved in work productively.
 Some of the challenges faced by HR managers are:
1. External challenges (Environmental challenges)- changing environment, political and
legal forces, culture, economic challenges.
2. Internal challenges (Organizational challenges)- company strategy, company
characteristics, organizational culture, employee concerns etc.
3. Individual challenges- productivity, empowerment, job insecurity and work-life balance.
In the light of new challenges, there are indications that HR professional will play an
increasingly important role in an organization’s long range planning and strategies.
Test Questions
1. Explain the nature and scope of Human Resource management.

2. What are the functions that are performed by HR department?
3. Discuss the external factors that affect the HRM practices in the organization.
4. What are the organizational challenges faced by HRM professionals?
UNIT-2 HUMAN RESOURCE PLANNING
OBJECTIVES- After reading this chapter you should be able to
 Explain the importance of human resource planning.

 Describe the internal and external factors affecting labor supply and demand.
 Explain the importance of job design.
 Define recruitment and explain its importance
 Identify multiple sources for recruiting employees and prepare a recruitment
advertisement.
 Evaluate recruitment methods.
CONTENT-
2.1 Human Resource
2.1 Human Resource
HR strategies are developed in a proactive manner with staff attempting to design and develop
appropriate Human Resource system which will meet anticipated business conditions. Human
resource planning is the ongoing process of systematic planning of organizations most valuable asset
i.e. human resource to achieve its optimum use. In organizational planning human resource planning
is a sub system which is also called as strategic manpower planning. It helps significantly in meeting
future personnel needs and shortage of staff strength or surplus of the same clearly indicates the
absence of planning.
Human resource planning being a part of strategic planning serves at both ends of the strategy. At
the first end, it provides inputs in the form of workforce with required skills and numbers and at the
other end once the strategy is set, resource allocation is made according to the need of business
strategy. But to serve these needs manager must anticipate these demands in advance. Thus the
process of estimating the future quantity and quality of people required on the basis of annual budget
and long term business plans is called as HR Demand forecasting. Demand forecasting helps in
preventing the shortage of people.
Human resource planning makes sure that at the right time individuals with required skills are
available where they need to be, to meet organizations future and current demands. An organization
should have perfect balance between the labour demand and available labor supply.
The term labor demand refers to the number of required skilled labor to meet the organizations
current and future needs. The term labor supply refers to the potential skilled employees which are
available to perform the job. This clearly indicates that manager has to look at both the labor demand
and its supply. He should also anticipate the external factors that will affect demand and supply of
labor and make plans accordingly. A labor shortage is faced by the company when labor demand
exceeds the available labor supply. And the labor surplus occurs when supply is more than demand.
When there is shortage of labor, to cope up with the situation managers use various tactics such as
overtime, outsourcing, off shoring etc. to cope up with surplus labor situation managers can use
tactics like lay off and early retirement plans. But before implementing such tactics one has to know
about organizations actual labor supply and demand.
Relative demand and supply for labor is influenced by variety of factors. Manager must study both
organizational and environmental factors that exert the pressure on supply of labor relative to its
demand.
Organizational factors or internal factors-
In the different parts of an organization numbers of employees are always changing due to variety of
reasons. Some of the influencing factors are employee turnover, employee productivity, company’s
performance, firm’s strategic direction etc. Let us discuss these factors in details.
1. Employee turnover-
Employee turnover directly affects the labor demand. Employee turnover occurs due to the
voluntary and involuntary termination of employees. Voluntary termination refers to the
termination initiated by employee itself and involuntary termination refers to the termination
initiated by employer. Organization gets significantly affected when talented employees leave
the organization. Employee co-workers also get affected and it may lead to the slow performance
by the co-workers of an employee. Co-workers of an employee need to pick up to ensure that
work must get done even in the absence of the employee. If the job that worker was performing
is critical to the organization, vacant positions needs to be filled up immediately and to attract the
candidates for this vacant position, manager may need to increase the salary for the same
position. Also the time demand is associated with this decision.
In a company of 1000 people, if employee turnover rate is 10%, it means that in a year
company loses 100 employees. In this situation, to remain competent, management must make
sure that all these vacant positions get filled and their related jobs are completed.
If company is losing 25 people per month, maintaining sufficient staff level will become
more difficult. Because when an employee leaves an organization, very few individuals are there
who will be moved to other positions. In this case, though the existing employees have chances
of promotion, the same will diminish the potential internal labor supply available for higher level
vacant positions within an organization.
2. Employee movements
Within organizations employees are moved from one job to another job. For this purpose
company uses promotion, transfer or even demotion of an employee which changes the job
profile. Promotion is a strategy in which employees are moved to higher level positions with
increased levels of responsibility and authority. Employees can also be transferred to the jobs of
similar level of responsibility within an organization. But management has to be careful that
these movements are not done haphazardly. To track the employee movements some tools can be
used such as replacement charts, succession planning and transfer matrices.
Replacement charts are used to identify potential replacement employee for job opening within
an organization as it shows potential employees who can be moved from one job to another if the
posts are vacant. This kind of tool helps company to make personnel changes on short notice.
Succession planning focuses on identifying most capable employee for top managerial positions
or key jobs within an organization. This kind of tool helps in finding out who is next in line for
key jobs. While preparing this succession planning tool, company also requires filling in
information about a particular skill to be developed for particular job by an employee. Hus,
succession planning not only helps managers but also guides potential employees to develop
appropriate skills for advancement opportunities.
Transition Matrix helps to understand internal movement trends of the organization’s

workforce. It provides model for tracking employee movement throughout an organization which
affects firm’s internal demand and supply of labor. Transition matrix provides data to prepare for
workforce demand in future.
3. Employee productivity- Employee productivity refers to the assessment of the efficiency of an

employee i.e. the level of firms output relative to the inputs used to produce the output. It can be
evaluated in terms of the output of an employee in a given period of time. Productivity of an
employee is assessed relative to an average of employees who performs the similar jobs in the
organization. It is an important consideration for business because success of an organization
depends upon the productivity and efficiency of its workforce.
Productivity ratio shows the number of workers needed to achieve particular output level. This
helps to plan for the future growth or decline in the demand for the products. One can calculate
the ratio by collecting data of an organization’s output level i.e. sales data and amount of
products produced versus the number of employees working for that given period of time.
Table- calculating productivity ratio:
YEAR PRODUCTIVITY NO. OF PRODUCTIVITY RATIO

(UNITS/MONTH) EMPLOYEES (OUTPUT/EMPLOYEES)
2010 4000 80 50
2011 4000 80 50
2012 5200 100 52
2013 5500 100 55
2014 6000 120 50
2015 7000 140 50
2016 7500 150 50
2017 8000 X=156.86=157 AVERAGE RATIO=51
EMPLOYEES
NEEDED
Table shows hypothetical productivity ratio for a manufacturing plant. From the above data we
can see that productivity ratio for year 2010 was 50(4000/80). In this case average productivity
ratio is 51 units per employee. If the estimated productivity output is 8000 units, dividing the
output by average productivity ratio i.e. 51 we get forecasted labor demand of approximately 157
employees. Based on this data company will need to recruit 7 more employees to maintain
current level of productivity.
Such kind of calculation can be performed in different industries. Depending upon the
type of business, companies can use sales data, phone volumes, customer interactions etc.
Companies can change their productivity ratio with the help of more extensive recruitments,
better selection decisions and effective training sessions. This concludes that more talented
workforce in the firm can increase level of productivity per employee.
4. Company Performance- Overall company performance influences the labor demand and
supply. At some point it happens that company realizes that they are facing labor surplus or
shortage of labor. This is a common problem among the poorly performing companies.
Companies don’t need or cannot afford the same number of employees as they did previously
when customer demand for the product gradually decreases or diminishes. But better performing
companies can afford greater number of employees and can pay for top notch employees.
5. Strategic direction- As we know, company strategies always keep on changing. Even

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

Managers can control the factors which are internal to organization. But some external factors
such as labor market, economic conditions, industry trends etc. over which managers have very
less control or they can’t be controlled at all. Let us discuss these factors in detail.
1. Local labor market- Relative size of local market and its composition with individuals
having different skill sets, directly affects the labor potential to serve as a viable source of
labor for companies. Location of company is major driving force of the size and
composition of the labor market. If company is located in urban area, it will have access
to larger labor market as compared to rural area. In certain areas employees will lack the
skills needed by the company which leads to insufficient labor supply to meet company
demands. Similarly in college town, highly educated labor will be available to do a
variety of types of work.
2. Economic conditions- When the economy is in recession, the demand for many products
drop significantly and during high economic growth the demand for products increases.
This fluctuation in demand for consumer products directly affects the labor demand for
companies to meet their customer needs. During the period of high economic growth
consumer demand for product increases and to meet the consumer needs labor demand
also increases. Similarly in recession, the consumer demand drops which leads to the
drop in labor demand by companies. Apart from this, unemployment rate has great
impact on labor availability. It becomes easier for the companies to hire qualified
individuals when unemployment rises. And when the unemployment rate drops, hiring
qualified staff becomes difficult.
For effective management of workforce, firm should anticipate the need of employees in
particular department and balance their demand with their available supply. Once the firm knows
where there is shortage of labor and where labor surplus exists, firm can make next step to
balance them. Let us discuss the labor shortage and labor surplus tactics.
Labor shortage tactics-
1. Employee overtime- It refers to the employees working for additional time period
beyond their normal work schedules. This is the quickest way to overcome labor
shortage. Generally this strategy is used when labor shortage for short period of time.
Sometimes this strategy proves costly when length of anticipated labor shortage
increases. Also when employees work for many overtime hours, they may become
dissatisfied and can lead to employee turnover creating further labor shortage.
2. Outsourcing and contingent labor- Outsourcing refers to getting work done from other
companies. For example, company can outsource the work of floor cleaning, food service
for their cafeteria. Outsourcing not only saves the money but also allows the firm to focus
on the activities they do best to achieve competitive advantage. Apart from outsourcing,
employees are also hired on temporary basis to overcome labor shortage. This kind of
temporary labor is also known as contingent labor. Contingent labor also saves money for
company and provides the firm flexibility in adjusting the available workforce relatively
quickly.
3. Employee retention- Main cause of labor shortage is employee turnover. To overcome

this problem employee retention strategies can be implemented which reduces
recruitment and selection costs, saves time and money on training new recruits.
Ultimately this ensures that productive employees remain with company. This simply
means that the companies having lower turnover rate are industry leaders in terms of
employee productivity and overall company performance.
4. Employee promotions- Existing employees from one department can be moved to

another department where there is shortage of labor. This takes place quickly as
compared to other labor shortage tactics but the drawback is that movement of one
employee from one department to another leaves behind another vacant place with
respective responsibilities. This means that labor shortage is transferred from one
department to another.
5. New recruitment- This is the final tactic used to address labor shortage. Primary benefit
of new hires is that it provides the firm with permanent solution to the labor shortage as
full time workforce is available to the company. This also increases the size of the
workforce of the company, whereas overtime or employee transition focuses on
providing solution with current employees.
If the shortage is temporary, hiring new people can result in a labor surplus over long
period of time. To make a successful decision manager should have knowledge of
whether labor shortage is temporary or permanent. There can’t be single best solution for
labor shortage or surplus because every tactic has its own advantages and disadvantages.
Labor surplus tactics- Some of the labor surplus tactics are layoffs, attrition or hiring freezes,
early retirement programs and movement of employees which managers use to address labor
surpluses. We will discuss these tactics in detail.
1. Layoffs- Layoff refers to quickly reducing no of employees. Primary advantage of this

tactic is that it helps managers to quickly adjust the labor size and its composition. This
results in good balance between employee capabilities and organizational needs. Though
this tactic reduces company’s immediate expenses, it can’t prove beneficial in future.
Also the announcements of layoffs can create feeling of job insecurity among the
employees and this can hamper the employee performance in an organization. Company
giving layoffs to the employees can face harder time attracting new employees in future.
2. Attrition and hiring freezes- These tactics primarily focus on delaying the new
recruitment. Attrition means reduction in employee strength due to normal means such as
retirement and resignation and company’s decision not to fill vacant position. Hiring
freeze means temporary ban on recruiting new employees for particular period of time.
Primary benefit of this tactic is it doesn’t create feeling of job insecurity among the
employees which layoffs do. Disadvantage is that current employees find themselves
over burdened while making up for labor shortage.
3. Early retirement programs- Early retirement programs aims at lowering firms

workforce and labor costs by providing employees with financial incentive to retire early.
But if the program is enticing or attractive, company can result in greater employee
exodus than company has planned.
4. Employee promotions, transfers and demotions- As these tactics can be helpful in

labor shortage, they can also remedy labor surplus. If some part of an organization is
facing labor shortage, surplus employees can be moved to the department where there is
labor shortage. Hence employees will not lose the job, thereby saving company on layoff
related costs.
Human resource planning makes sure that at the right time right individuals with the required skills
are available where they are needed to be, to meet organizations future and current needs. An
organization should have perfect balance between the labor demand and available labor supply.
Following are some of the factors that affect human resource planning.
1. Company strategy – Company strategy affect human resource planning in different ways. To
remain competitive in market, some companies focus on cost effective strategy so as to acquire
large market share. Some companies focus on quality and types of products or services i.e.
product differentiation strategy to achieve the competitiveness.
These kinds of strategies affect how quickly firms deal with labor shortage and labor surpluses.
Companies focusing on low cost finds labor surpluses problematic and reduce surplus by using
tactics such as layoff which quickly reduces the size of workforce.
2. Organizational growth cycle- In smaller companies relative impact of labor shortage or surplus
is relatively greater than in large companies. When organization starts growing need for human
resource planning is felt. Reason is that smaller companies are in much earlier stage of
development and have comparatively less labor slack or excess labor capacity. This lead to
limited internal workforce to cover the tasks and for filling new or vacant positions. If the labor
shortage is to be addressed quickly, employee overtime tactics is more feasible as compared to
new hires as it will take longer time to fulfill the demand.
As compared to companies in earlier growth stage, matured companies experience less
variability and flexibility. As the growth slows down and the workforce becomes old human
resource planning is dominated by retirement and retrenchment plans.
Further human resource planning focuses on labor surplus tactics such as layoffs, retirement or
retrenchment plans to meet the organizational demands. At this stage HR department takes
reactive actions instead of being proactive as the organization experiences serious financial and
sales shocks.
3. Environmental uncertainties- Environmental uncertainties refer to political, social or economic

change. As noted earlier, we know that these factors have great impact on all organizations. To
deal with these kinds of uncertainties, human resource manager should carefully formulate the
recruitment, selection and training and development policies. In addition to this, to balance labor
supply and demand balancing mechanisms such as succession planning, transition matrix, layoffs
etc. are included in the human resource planning.
4. Time horizon- It refers to the time period for which a particular strategy will be implemented in
the organization. As we know that the conditions in which organization is running keeps
changing over the period of time and no one can anticipate for how long particular business
strategy will work. So it becomes relatively difficult for the HR manager to formulate the human
resource planning policies while working in uncertain conditions. When company decides to
expand its business operations, human resource manager focuses on hiring new recruits to fulfill
the demand of organizations according to the expansion plan. This means that according to the
business plans human resource manager needs to keep hiring policies quite flexible.
5. Labor market- It is the market where potential people with required skills are available. If the
company is located in urban area, qualified, trained and skilled labor will be easily available
compared to the rural areas. If company is located in rural areas, human resource manager will
have to depend on external labor market as less educated workforce is available in local area.
6. Outsourcing- Outsourcing refers to get the work done from other companies. When
organization decides to outsource the part of the work, no human resource planning is required.
Job Analysis is a systematic process of identifying the tasks, duties and responsibilities that are to
be performed in a job as well as competencies such as knowledge, skills and abilities which
individuals must possess to perform the job successfully.
Job description involves summary of nature of a job or the tasks that are to be performed,
responsibilities of a job holder and the work conditions in which job holder is expected to work.
Job specification the key competencies which job holder must possess to be successful in the
given job. Job description and job specification are the important tools for employee management
activities. For example, while recruiting employees for a particular job, job analysis provides
accurate knowledge about the competencies that are needed to perform the particular task in
successful way and manager can make correct selection of required employees.
Job design
Job design provides the information about the tasks and responsibilities that an employee is
expected to perform in a particular job. Making use of job design, company goals are translated
into specific actions that employees are supposed to perform. An effective job design help
employees optimize their potential contribution to gain the competitive advantage by focusing on
the tasks and their responsibilities.
While designing job managers need to consider:
1. A task that should be emphasized while designing a job

2. Simplicity or complexity of the tasks
3. Employees’ ability to perform the tasks
4. Flexibility provided to the employees in terms of how and where they perform their tasks.
In addition to this managers must take into consideration the competencies needed to perform
particular job in successful manner.
To enhance company performance is the ultimate goal of job design. To be successful in this
perspective, firm’s managers must understand the role of the job that helps attaining competitive
advantage for the company. Secondly, managers must decide about how employees will perform
their jobs. These decisions shape the nature and extent of employees’ contribution towards
organizational objective.
Job design approaches focus on maximizing employee productivity by different ways.
1. Efficiency Approach- This approach focuses on maximizing employee productivity by
simplifying jobs. This approach is based on Taylor’s scientific management which makes
use of time and motion studies. Techniques used in this approach are job specification
and job simplification.
Job specification refers to breaking down of job into simple core elements which
maximizes employee’s contribution towards achieving competitive advantage.
Job simplification involves removal of decision making authority from the employee
and places them with supervisors which make available wider pool of candidates and
staffing becomes faster.
2. Motivational Approach- This approach focuses on making jobs more interesting

challenging and complex to encourage employees. It uses following methods to improve
employee motivation:
Job Analysis Techniques:
Following are some of the job analysis techniques:
1. Observation- In this technique job performing employees are physically observed and
these observations are further analyzed to determine the main tasks that are performed.
This kind of technique is used to analyze the jobs that involves repetitive tasks e.g.
assembly line.
2. Interview- This is time consuming technique as it involves face to face question and
answer sessions which focuses on identifying the duties and tasks, responsibilities related
to the job, competencies required to perform the job and working conditions.
3. Occupational information network- This kind of technique make use of online

database of all kinds of jobs which includes the information about tasks performed and
related behaviors and the job specification that are needed to perform job.
Recruitment:
It’s a process that occurs over a period of time and begins with identifying the job openings that
managers are supposed to fill. These job vacancies or openings occur due to the reasons such as
employee turnover, promotion or employee movement within an organization. Also new jobs are
created to fulfill the labor demand when new process or new corporate strategy is to be
implemented.
This process is of considerable importance. Suppose, if some jobs become vacant and no
recruitment is done for long period, what will happen? If the job is critical for organization then
someone has to do that work until the new recruit is found. Sometimes, even managers have to
help or do the work until it gets done if the company is small.
To attract the applicants, managers need to use different tactics such as salary hike for that
particular job or change in nature of job. This might lead to the additional and unexpected costs
to the company.
Recruitment Process
To be successful in recruitment process, manager must know the reason for recruiting employees
and what type of employees are needed to fulfill the demand. If the objective for the recruitment
is decided well before, recruitment plan will be successful. Knowledge of the best recruitment
sources and attractive recruitment message helps to make recruitment process successful.
Function of recruitment is to locate manpower sources to fulfill job requirement and
specifications. From the above notes we can say that recruitment is the process of identifying and
attracting potential candidates from outside and within an organization
The selection process gets started once the candidates are identified which includes collection,
measurement and evaluation of candidates information about qualifications needed for the
position.
Once the job analysis is completely done and job specifications are identified, key decision to be
made is about whether to recruit from internal sources or external sources. Internal sources refer
to the existing employees of an organization while external sources refer to the potential
candidates present in the market outside an organization. These external sources can be reached
through employment exchanges, educational institutes, recruitment agencies etc. Which source
to be utilized and by which means recruitment can be done totally depends upon management
policy, types of jobs, labor market etc. Decision about recruitment sources depends upon nature
and size of the company, number and types of vacancies to be filled up and the time available for
filling up the vacancies.
Internal Sources
As mentioned earlier, internal sources refer to the existing workforce of an organization.

According to the job requirement employees can be moved from one job to another job within an
organization through promotions, transfer and or employee demotions.
Advantages of using internal sources are
1. Morale of the existing workforce is boosted as the get promoted.

2. Internal sources prove to be more cost-effective as it saves money on advertisements.
3. It also helps to save money on training and development of external employees as
existing employees are already familiar with organizational culture and its operations.
4. Current employees get chance for job advancement.
5. It increases employee loyalty, commitment towards organization which makes employees
more productive.
Disadvantages of internal sources:
As internal recruitment brings ‘inbreeding’ in the organization, new ideas are restricted from
coming in. When company needs new ideas or changes in the corporate culture and to increase
the workforce diversity, best way to reduce inbreeding is to bring in new employees rather than
promoting current employees. When existing employees apply for the vacant position in the
organization and are not selected, they may become disgruntled, less productive or even may
leave the company. At some point of time, internal recruiting proves to be temporary because
promotions or employee movements leaves behind a vacant positions which can be filled
externally. Internal methods are not sufficient to supply suitable pool of applicants.
External Sources
External sources include employment agencies, educational and technical institutes, employment
exchanges etc. External sources provide wide variety of potential applicants with required skills.
Recruitment using external sources is greatly affected by labor market. Recruitment methods of a
company and the medium through which potential candidates search for a job, are highly
variable. In addition to this lack of labor mobility is another problem which arises due to lack of
knowledge about different job opportunities in labor market. Differences in employer’s ability to
pay, productivity and management attitude towards wage rates, leads to the diversity in wage
rates for the same occupation.
Management must decide whether to make recruitments internally or externally. As the jobs
above the entry level are usually filled with current employees, external recruitment is limited
mostly to the primary or entry level jobs. Different methods that organization uses for
recruitment are:
1. Direct method- In this method recruitment is done at educational institutes. Most

popular direct recruitment method is campus interview. Campus interviews are cost
effective as it saves money on advertisements. Also these interviews are arranged on
short notice and organization gets an opportunity to recruit among the fresh talent
available in the form of large pool of potential candidates. Another direct method is
establishing exhibits at job fairs where different kinds of skilled and potential labor can
be attracted on large scale.
2. Indirect method- Frequently used indirect technique of recruitment is advertising in

local newspaper- the most popular place to advertise the jobs. Though newspaper is
traditional and a viable option for advertisement even today, the advent of internet has
dramatically changed where people go to search for job. Employers are now using
internet more than they use newspaper to post their jobs .Reason for this is that
advertising in newspaper is expensive as compared to the internet. Also posting job on
internet or company websites is more attractive. Organizations can make use of company
websites to recruit the employees. Recruitment websites also provide as a greater tool
than other types of advertising options for posting jobs and company information can be
provided in easy and convenient way 24*7 to the individuals. Use of company websites is
cost effective technique for posting their jobs. Potential candidates are provided with the
all kinds of available openings on one website.
A company shouldn’t only advertise online because many people use internet for their
job searches but everyone do not have internet access. An organization must use multiple
sources to make it sure that organization is reaching most diverse audience possible with
their recruitment message.
3. Third party method- Frequently used third party recruitment methods are
Public employment exchanges- These are not- for-profit agencies which are located in
cities throughout the country. These exchanges not only process unemployment claims
but also helps job seekers by providing career guidance. It also provides employers
access to large pool of both skilled and unskilled potential labors.
Private employment agencies- These agencies provide consultancy services for fees.
Agencies usually provide employers the candidates for management positions or
supervisory positions. Recruiters conduct the initial screening and interview and sets up
interview with the company. For that, agency is paid with certain percentage of hires first
year salary after the hire has worked for at least 30 days.
Recruitment method selection is important decision of human resource department.
Organizational performance is depending on effective human resource management.
Recruitment is major function of human resource management which involves selection
of recruitment method. Selection of recruitment method needs evaluation. Evaluation of
recruitment method is based on organizational need and business strategy. Attracting
more applicants with minimum cost and time is always objective of recruitment process.
Organization has to decide on priority manpower requirement.
2.7.1Parameters for Evaluation of methods of recruitment
1. Time of recruitment-
Very important parameter to evaluate recruitment method is time. How immediate is
need of manpower requirement some methods will help you to fill immediate
requirement.
2. Cost of Hiring - Cost of hiring is one of the important parameters for evaluation of
recruitment method. Effectiveness of recruitment method measured on cost involved in
recruitment process human resource department has to manage cost of recruitment within
the budget.
3. Quality of Hiring- Quality hiring is major task of human resource management.
Organizational performance and productivity is depend on quality of hiring.
Selection is a process of picking the right candidates with prerequisite qualification and
abilities to fill the jobs. It’s quite lengthy and complex process as it involves number of
steps and this process may vary from organization to organization depending upon
urgency of hiring people and job requirements. Requirement process is followed by
selection process. Selection process involves following steps:
1. Preliminary interview or screening applications- Application screening is done to
narrow down the list of applicants worthy of further consideration by completely
removing or weeding out undesirable candidates at the outset. It’s an essential sorting
process in which prospective candidates are informed about the job nature and an
organization. At the same time, necessary information about applicant’s qualification,
skills, experience etc. is elicited. This preliminary interview also helps to observe the
candidates verbal communication skills, which is most useful information if these
skills are essential for successful job performance.
2. Application form- This device helps to collect information from candidates. This
device should be designed so that it will provide all the information relevant to the
employee selection.
3. Selection test- In order to check mental ability, individuals’ attitude and behaviour
certain psychological tests are conducted. E.g. Intelligence test, aptitude test, interest
test, personality test, psychological tests etc. These tests are conducted to judge the
suitability of the candidate for job.
4. Employment interview- This is an essential element of selection procedure without

which selection process is incomplete. In the employment interview information
collected through application form and selection test is cross-checked where
candidates demonstrate their capabilities and strength in relevance to their academic
credentials. This step in interview helps to obtain information about candidates’
background, education and work experience. This step also informs the candidates
about company’s’ human resource policies and specific job profiles.
5. Medical examination- Candidates who have crossed above mentioned stages are sent
for medical examination to company’s physician or medical officer. Medical
examination is conducted to check whether candidate is physically fit for the job or
not. Unfit candidates are rejected. Medical examination also helps to reveal existing
disabilities of candidates and provide a health record of employee at the time of
selection.
6. Reference checks- Firms usually asks the candidates for references to cross check the
authenticity of the information provided by the candidate. References can be previous
employers; educational institutes from where the candidate has completed his/her
education. These people are requested to provide frank opinion about candidate.
7. Final approval- The candidates which are shortlisted by the human resource
department after crossing all the above steps are finally selected by the executives of
concerned departments.
8. Employment- Employment is offered to the candidate in the form of offer letter

mentioning the post to be offered, salary grade and the date by which candidate is
supposed to join and other terms and conditions. Appointment is generally made on
probation period of six months or one year. If candidate gives satisfactory
performance, he is finally confirmed in the job.
9. Induction- Process of introducing new employee to the company and their

colleagues, informing them of the activities, customs and traditions of company is
called as induction. This process is conducted to acclimatize the new employee with
the new working environment.
10. Follow up- This is a stage where employee is asked about how he or she feels about
progress till date. Also employee’s immediate supervisors are asked for the
employee’s performance. If the follow up gives unfavourable report it indicates that
probably there has been a fault in selection process. It is also essential to follow up
new employees to make sure that employee is settled in new work environment or
not.
Summary
 Human resource planning (HRP) is referred to as manpower planning or personnel planning

and is concerned with the utilization of human resources to help achieve organizational goals.
 This is done by assuring that the required manpower is available when needed and utilized
efficiently.
 It is a system of matching the supply of workforce with the organizational demand within a
given time frame.
 To be effective, any human resource plan needs to be derived from long range strategies of
the organization.
 Human resource planning is greatly affected by the factors such as company strategy,
organizational growth cycles and planning, environmental uncertainties and planning, time
horizon, labor market and outsourcing.
 Job analysis help identifying the tasks, duties and responsibilities of the job to be performed
and the competencies required by the job performer or the employee such as knowledge,
skills and abilities.
 A successful Human Resource planning requires joint efforts by the HR department and the
operating workforce or the mangers in the organization.
Test Questions:
1. What is Human Resource Planning? Describe the various factors affecting Human
Resource Planning.
2. Explain the various factors affecting demand and supply forecasting.
3. Discuss the various sources and methods of recruitment.
4. Describe the selection process in detail.
UNIT-3 TRAINING AND DEVELOPMENT

Objectives- After completing this chapter you will be able to
- Know the meaning and importance of training program.

- Know the various training designs.
- Discuss the types of training needed in the organization.
- Develop a way to measure the effectiveness of training.
- Make decisions about training within the context of organizational demands
CONTENTS-
3.2 Training needs analysis and techniques
3.3 Design training program
3.5 Training evaluation
3.6 Executive development
3.7 Concept of career development
Training- It is the systematic process of providing employees with the required

competencies such as knowledge, skills and abilities to perform their current job. For
example, if an employee needs to learn to use new computer software to do his job, he needs
to be trained on the new software. Training can be given in many forms such as on the job
training, online training or classroom training, training by participating in role plays or
simulations or by using these methods in combination.
In contrast development focuses on future aiming at preparing employees for additional

responsibilities in different jobs at higher level. Training and development helps an
organization to equip its workforce with sustained competitive advantage.
Development refers to learning opportunities that helps employees grow. It provides

employees with general knowledge and attitudes which proves to be helpful in higher
position. Training and development proves to be critical activities for success of a company.
Appropriate training and development opportunities increase employee satisfaction and help
them to perform at higher levels and achieve company goals.
3.2 Training Need Analysis and Techniques
Though training is costly and time consuming process, it has potential to improve
employee performance. To conduct a training need analysis is essential task because then
only manager can understand where the need of training lies. Needs assessment helps to
identify the gap between what employees are expected to do and what are they actually
doing and training helps to fill this gap. Training should be designed such way that it
supports the strategic goals of a company. An effective training needs analysis involves
organization analysis, tasks analysis and person analysis.
Organization Analysis- Training needs analysis starts with organization analysis which
aims towards determining the firms’ progress towards its objectives and goals. Training
gaps can be found by SWOT analysis i.e. scanning environment for opportunities and
threats and internal evaluation of strength and weakness.
Organization analysis not only determines where training is needed but also determines
the internal and external factors affecting company performance. In the external
environment, location and size of the labor market determines the availability of the
skilled labor to fulfill the organizational demand. New technologies provide more
efficient and effective processes. But managers need to find out whether there is any gap
between the employees existing knowledge, skills and attitudes and the ones which are
required to cope up with the new technology. To comply with the new laws employees
need to be trained. When company takes new initiative such as expansion of process,
managers should consider whether the employees have capabilities to take advantage of
this opportunity. When company implies labor surplus strategies such as layoffs and hire
freeze, the retained employees needs to be trained to take on additional responsibilities.
In the internal environment, employee turnover, absenteeism, accidents taking place in
the organization are some of the indicators which indicates the need for training. High
absenteeism indicates that lack of proper training creates pressure or stress which can
lead to the employee turnover. Lack of proper safety training causes accidents.
Sometimes employees’ supervisors need training or even their co-workers need to be
trained so that issues such as employee grievances or illegal behaviors such as sexual
harassment do not arise.
Tasks Analysis- Next step to organization analysis is task analysis which is carried out
to find gaps between current KSAs of employees and the KSAs needed to perform the
required work to support organizational objectives. As noted earlier organization
analysis focuses on finding training gaps across organizations’ workforce. Tasks
analysis identifies specific training content which will help to close the gaps between
employees’ current competencies and those which are actually required to make value-
added contributions to their organization.
The gaps can be due to different reasons. The hired employees of the company might not
have required skills. Sometimes job analysis might not be performed properly which can
lead hiring employees for the wrong skill set. When organization changes its direction,
the job needs to be restructured. Sometimes employees with required skill set might not
be available in the labor market. Task analysis reveals the discrepancies between the
employees’ existing KSAs and the ones which are actually required.
Increase in customer complaints, increase in numbers of accidents, low levels of
employees’ performance are some of the indicators which indicate the need for training.
Person Analysis- A person analysis helps to identify which employees need to

participate in training program. Data which is obtained from instruments such as
interviews, performance appraisals, recommendations of supervisors, employee skills
inventories etc. helps to make this decision. Also employees’ skills tests and their
individual production records help to determine which employees need training.
Managers must make it sure that training is addressing the gaps between organizations’
desired outcome and an employees’ individual performance. Some non performing
employees in the organization might have right qualifications but they might not be
willing to use it. This indicates need of person analysis and effectiveness of training.
Person analysis is a great tool to identify the situation in which employees are not
properly trained but it does not overcome the problem of employee motivation. When
there is lack of motivation for employees to perform their job, it indicates the need of
performance management rather than employee training. Sometimes problem is not the
lack of skills, but the problem lies in communication gap regarding organization’s
expectations between managers and employees.
3.3 Design Training Program
Information collected in training need analysis provides information about where training is needed
in the organization, what should be the focus of the training program and which employees needs to
be trained. As this information is valuable to the organization, planning of the training program
should also be of same value and effectiveness. The ultimate goal of the training program is to
bridge the gap between the desired and current performance of employees through the development
of training program.
If the goals of the training program are clearly understood, it will help to plan result oriented training
program which will support the organizational mission. Effective training program includes
instructional objective of a training program, appropriate lesson plans and principles of learning. We
will discuss these in details.
3.3.1 Instructional objective- Instructional objective provides the purpose of training program and
also shows what is included in it. The objective needs to be supportive of organizational goals and
should be clearly communicated to the employees so that they know what they are going to learn
from the training and how it will be utilized in the job. In simpler terms it serves as guide to the
trainer as well as trainees.
3.3.2 Lesson planning- Lesson plan provides a map of what should be covered during each training
session to achieve particular objective. It also provides the details about how the session will be
carried out, what will be taught to the trainees and how, how long each session will last etc. It works
exactly similar to the lesson plans prepared by a school teacher.
3.3.3 Principles of learning- Only the well prepared lesson plan is not necessary for effective
training sessions. Trainers also need to have the knowledge of different methods to train the different
employees, because all people cannot learn in the same way or at the same pace. Some people can
learn through demonstration while others can learn by having it described to them. Many people
learn through actually performing the task. Keeping in mind all these things, training and
development plans should planned according to the learning preferences of employees. We will
discuss some learning principles related to learning styles, learning agility, self-efficacy, training
location and interest in learning.
1. Learning styles- Learning styles refers to how people absorb new information and process it.
Learning styles can be categorized into auditory, visual, tactile and kinesthetic. Auditory
learners are able to process and remember the information by just hearing it. For auditory
learners lectures and discussions are the best training methods. Visual learners when see the
information especially in picture form such as tables or maps, they can easily process it. So
visual and audiovisual demonstrations can be the best methods to train these employees. Some
people can learn better through interacting with the material they are learning. These kinds of
learners are called as tactile learners. Usually these kinds of learners underline what they are
reading and often take down the notes when listening to the speakers. They prefer the training
programs that include writing activities which keeps their hands busy. Learners which learn
through actually doing the things instead of just hearing or seeing it are called as kinesthetic
learners.
We can conclude from all the above information that each employee is comfortable with
particular learning style. Managers need to identify these differences which will help them to use
a variety of training approaches with their employees. This will definitely result into better
trained and more satisfied employees.
2. Learning Agility- Employees who look for new experiences and opportunities to acquire new
knowledge and skills are said to be high on learning agility. They often try to incorporate the
information into how they perform their job. These employees are believed to be high potential
employees.
3. Self-efficacy- It refers to the confidence that you can do something with respect to the
effectively utilize the information gained during training on their jobs. Downside of this learning
aspect is that employees having high self-efficacy may rush through the training activity. On the
other side, employees having low efficacy can work hard to learn the things during training
activity.
4. Interest in learning- Manager needs to be careful while choosing the right training program for
employees because any single training method cannot be equally interesting to everyone.
Training sessions can prove to be effective only when employees are genuinely interested in the
content of the training and are motivated to learn. Enthusiastic trainers and fun learning
experiences increase participants’ interest in the training process. Interesting training programs
ensures that employees complete their training sessions and remember what they are taught.
5. Training location- Training location is the most important factor of the training process. Basic
things such as heat light and comfortable seating affects the training sessions. A room that is too
cold can distract the employees as they try to keep themselves warm and if the room is too warm
can put trainees to sleep. Offsite training programs or the programs sponsored by other
organizations reduces the distractions caused due to daily routines and unexpected events
occurring in their jobs. Whether it is onsite or offsite, location of the training program should be
such that it ensures that environment is conducive to learning and minimizes distractions.
Training methods –
Managers are constantly making the decisions about how employees are performing their jobs
and whether additional training is needed to improve their skills and knowledge. Appropriate
training delivery method suitable for the content and audience increases the value that training
adds. In this section we will discuss about different training methods.
1. On the-job-training – It takes place when co-workers or manager teaches an

employee how to perform a job in the actual job location rather than in a separate
training room. It is frequently used and most cost-effective method of training.
Benefit of this method is that during the learning process employees are productive.
Employees don’t have to take out time to attend the training sessions. This method
proves effective when the trainer has knowledge that all trainees will not learn in the
same way.
Sometimes it can be costly when trainer is not adequately trained to perform certain
tasks. In this case employees will not learn the right way to perform job tasks.
Internships are a type of on-the-job training that is familiar to many students. It involves
students working at organization for a specific period of time which serves the purpose of
learning what a job is like. Students also learn about the relationship between information
learned in the classroom and actual practice in the organization. These internships can be
paid or unpaid. This provides students an opportunity to try out a job of in interest. Best
performing interns often receive full-time job offers when they graduate.
2. Classroom training- It’s a type of traditional learning that includes lectures,

discussions, role plays and other experiential activities and we all are very much
familiar with this. To train the employees lecturing is not an effective method as it
doesn’t always engage people. Lecturing can be used to disseminate simple
information but it doesn’t facilitate behavioral change. Classroom training
experiences can be enhanced by incorporating role plays, discussions and other
experiential activities along with the lectures. Now, computer technologies allow
companies to create virtual classrooms that help to bring together employees from
different locations. Normally classroom training last for a shorter period of time,
perhaps one day instead of five days.
3. E-learning- It involves the use of Internet, computers and many other electronic tools
to deliver the information during training programs. Now, training sessions can be
conducted online, on demand regardless of location of employee. This method of
training helps an organization to train more employees in efficient way and at faster
rate. E-learning can take place in many ways such as web based training, desktop
training, podcast training etc.
Web based learning refers to learning experiences accessed through a secure web site
such as online courses in which employees can log on to a web site and participate in a
webcast.
Desktop training refers to training approach which allows employee to use software
programs housed on their computer or servers to learn new information or skills. It differs
from the web-based training where to learn any information employees need to log on to
secure web site which can be accessed from any computer whereas in desktop training
information is already housed on their computer.
Podcast training refers to the training through digital recordings which can be
downloaded and played back later at any point of time. It reduces the time spent by
employees in classroom and the cost of employees transport to the training location.
Advantage of the e-learning is that it saves time and money needed for the employee
transport to training program location. On the other side, the control of the program is
more in employees’ hands which can help employees to skip some part of the training
session or move quickly through the material. To avoid this kind of malpractices,
company should pilot the training program with small group of employees to make sure
that it achieves the desired goals.
4. Audiovisual training- It refers to the training making use of video presentation of the
information which is usually stored on a DVD and CD. Presentations can be seen
individually or in groups depending upon the objectives and goals of training.
Teaching computer skills using video can be done individually. Training of team
building can be best done in groups which help employees to practice what they are
learning from the video. Video training ensures that employees receive the same
information. These training materials can be prepared by the organization or they can
buy programs off the shelf. Disadvantage is that preparing a training material can be
expensive or even off the shelf programs can also be costly as it involves per-
participant charge each time they are used.
5. Simulations- Simulation based training involves the use of computer software to

create the model of real world scenario. During the training employees are taught how
to perform certain jobs in the real world scenario. Thus simulated training is devised
job training which is not actually on the job but is away from the job. It helps
employees to learn complicated, hazardous and critical jobs and better prepare the
employees for the real life problems. Simulation models are extensively used in
training programs of different sectors right from IT professionals to Astronauts.
Simulation leads to high rate of completion as it keeps the employees engaged in
learning process. Drawback of the method is that developing a simulation is quite
complex process.
6. Blended learning- It refers to the use of multiple modes of training, often with one
part being online to achieve the training goals. In simple words, it is a combination of
offline and online learning in a way that one compliments the other. A student
attending the class in a real-world classroom setting and supplement the lesson plan
by completing online multimedia coursework is the best example of blended learning.
Training can be categorized into four categories such as compliance training, knowledge training,
basic skills training and behavioral training.
3.4.1 Compliance training- It refers to the process of educating employees on company

laws, its policies and regulations. Organizations provide compliance training related
to workplace discrimination and harassment, records management, protecting trade
secrets, bribery etc. Compliance training ensures that employees know about what
they can do and cannot do from legal point of view. Different types of compliance
training are needed for different types of jobs. Supervisors need to have knowledge of
employee laws dealing with discrimination. Supervisors working in manufacturing
plant needs to know about workplace safety laws. These are some of the examples
that show how particular type of job affects the need for compliance training.
3.4.2 Knowledge training- In today’s global business environment to achieve competitive
advantage knowledge is recognized to be the key component. Knowledge can be of
any
type. It can be technical or practical. Information of how machine works is a kind of
technical knowledge where as different approaches to project management is a kind
of practical knowledge. A firm’s job description provides the information to the
employees about required knowledge and training programs are planned accordingly
to fill the identified gaps.
3.4.3 Skills training- To perform any kind of job certain skills are required along with the
knowledge. Skills training include proficiencies needed to actually perform the job.
For example, an administrative executive is trained in how to answer the phone
whereas salesperson is trained in assessment of customer needs and on how to offer
the customer information to make buying decision. A job description which is well
written provides the information about the required skills to successfully perform the
job and a person analysis better describes the extent to which employee have those
skills. When information is available about both of these aspects a training program
can be developed to address the skill gaps.
3.4.4 Behavioral training- Employees need training on the behavioral aspect of the job
which focuses on “how” to get the job done. For example, job which needs to be
performed in a team, team skills need to be taught to the team members. Time
management, leadership development, team training, customer service, sensitivity
training are some of the examples of behavioral training. Employee’s interaction with
customers can be improved through customer service training.
3.5 Training Evaluation-
A successful training program is incomplete without evaluation. Evaluation is the

most important component of the training program. As training programs are
expensive, it is important to make it sure that they are delivering desired results.
Training program is evaluated in four levels.
3.5.1 Reaction- This level focuses on employees’ reaction to the training program.
Employees are asked to rate the aspects of training programs such as extent to which
employees have learned in the sessions, whether the course was challenging, whether
the instructor was motivating, was the training session effective etc. on the scale of 1
to 5. The objective of this level is to measure employee’s reaction to the course of
training i.e. how the employees are feeling about their learning experiences. The
advantage of this level of evaluation is that it can help to find out the problems
particularly related to trainer or content of training program. To be effective,
considering only the reaction of participant is not important as it won’t tell how much
they learned and how effective the training program was. It only tees whether
employees liked it or not.
3.5.2 Learning- Providing new information or skills which will make employees
implement the same to their job is the main goal of the training programs. To
determine whether the learning has occurred during the training process pre-training
and post-training assessment can be conducted. If the results of these tests differs
then the organizations training program needs to be reviewed.
3.5.3 Behavior- Training program should be designed such that it helps to improve
employee performance in current job and it should also help employees to perform
at higher level and do the new things. Through training need analysis and the right
employee selection for training program will definitely improve the employee
performance. If there is high degree of transfer of training employees are more
likely to improve their performance. Transfer of training refers to the degree to
which the training program content actually brings the changes in job performance.
If the training content is more related to the tasks that employees perform on their
job, there will be greater transfer of training. For example, if the training is
conducted on the similar type of software that employees use on their job, transfer of
training in this case will be even more.
3.5.4 Results and return on investments- Different kinds of measures can be used
to evaluate the returns on investment of training program. These measures can
include following factors:
- Total cost of training which includes charges for facilities, course material
provided to the trainees and remuneration to the instructor
- Per participant training costs
- Savings that are generated through reduced costs, reduced errors and improved
customer service
- Projected savings from conducted training program.
3.6 Executive Development
Executive development is aimed for the purpose of development of skills and competencies of
those individuals who has executive positions in an organization i.e. 5% to 10% of top
management. In many organizations we will find special executive training teams which cascade
them through different strategies, goals for the management and overall organization. Executives
must adopt changes for development of organization and future leadership in the organization.
Change is the only constant factor in today's agile business environment. Success of organization
is depending upon executive development strategy of organization. Human resource
management department is responsible for career development of individuals and succession
planning of organization. Executive development programs provide career paths and fast track
career planning for executives. Executive development is solution for employee retention.
Executive development programs aims for developing business acumen, leadership
responsibilities. Training and development activities undertaken under this program for
development of leadership in the organization for meeting global challenges and the major areas
are focused like technology, culture, innovation , cross cultural issues etc.
3.7 Concept of Career Development
Career is the lifelong process which includes series of activities for developing one’s
career. It refers to managing an employee’s career in an intra-organizational or inter-
organizational scenario. It involves skills training, movement to higher responsibility job, and
career change within an organization. Career development is directly linked with individual
goals and objectives. Some companies provide the opportunities for employee career
development where employees need to meet the eligibility criteria and participate in rigorous
selection process. The program includes different activities which increases job related
competencies and support the career planning of an individual. Large companies have well
designed career development program but in smaller companies employees have to take
responsibility of their own career development.
Career counselors, managers, mentors and coaches play an important role in assisting the
employee to acquire the required competencies. Assessment center, career workshops and job
rotation provides the information to the employees about where they are relative to the required
competencies to move into another job.
Summary
 Training is learning process which involves acquiring the required skills, knowledge and
attitudes to enhance employee performance.
 All training activities encompass the three main stages: to identify learning needs, to
deliver the training and to evaluate the results obtained.
 Training effectiveness mainly depends upon the proper diagnosis of training needs and
implementation strategy.
 Training needs analysis involves organizational analysis, tasks analysis and persons
analysis.
 At all levels the analysis of training needs involves defining the job to be performed and
the expected results and identifying the skills, knowledge and attitudes required to
perform the job.
 Various steps involved in the training evaluation are reaction, learning, behavior and
results.
 The concept of career development refers to managing an employee’s career in an intra-
organizational or inter-organizational scenario.
Test questions-
1. What is mean by training need analysis? Explain the process of training need analysis.
2. Discuss the need and importance of training and development program.
3. Explain in detail the process of designing training program.
4. Discuss the different types of training.
5. Explain the different levels of training evaluation program.
UNIT- 4 WAGES AND SALARY MANAGEMENT
Objectives- After learning this unit you will be able to
 Explain the concept, objectives and methods of job evaluation

 Explain the need for compensation structure and its various components like fringe benefits
and executive compensation.
 Understand different types of wages and salary structure.
CONTENTS-
4.1 Job evaluation

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

Job evaluation refers to the administrative method of assessing the different jobs or occupations.
It’s a systematic process of determining the value of a job in relation to another and serves the
objective of determining the correct pay scale. Job evaluation plays an important role in wage
and salary determination. Relative worth of job is determined mainly on the basis of job
description and job specification only. It proves to be the effective means of determining
internal pay relationships and helps to decide the company’s basic pay policies. Job evaluation
sets equitable base-pay relationship which serves as a foundation for bonus or incentive plans. It
also provides basis for employee movements within the organization like transfers, promotion or
even a demotion. Job evaluation helps to control the costs of wages or salaries of the employees.
It also helps managers to reduce the employee grievances and improves employee productivity
through higher morale.
Some objectives of the job evaluation are:
1. To maintain accurate and complete job descriptions of different jobs in the organization.
2. To provide standard procedure determining the relative job worth.
3. To determine fair and equitable pay scale.
4. To obtain internal and external consistency in wages and salaries.
Internal consistency refers to the concept of relative wages within the firm whereas external
consistency refers to a desired relativity of an organization’s wage structure to that of the
industry. Wages and salary surveys are necessary to determine the external consistency which
ultimately helps to serve the objective of employee and employer satisfaction with wages and
salaries paid.
The job evaluation process involves following steps:
1. Collection of Job analysis data- Information is collected through one of the job analysis
methods. While gathering information job analyst must take care that similarities and
differences among the jobs are accurately captured. Because ambiguous, incomplete or
inaccurate job descriptions can result in incorrect job evaluation.
2. Selection of compensable factors- These are the factors that the organization chooses to
reward through differential pay. These factors mostly include skills, knowledge, working
conditions, job responsibility etc.
3. Evaluation of a job- Job is evaluated using fundamental methods of job evaluation such as
quantitative methods and qualitative methods. We will discuss these methods in details later.
4. Assigning pay to the job- Hierarchy of jobs in terms of their relative value to the
organization is the end product of the job evaluation exercise. Assigning pay to the job
hierarchy is referred to as pricing the pay structure which requires a policy decision on how
the organization’s pay levels relate to their competitors.
JOB EVALUATION METHODS-

Some common methods of job evaluation are grouped into two categories such as
Quantitative and Non-quantitative methods. The basic difference between these two
methods is that under non-quantitative methods, a job is compared as a whole with other
jobs in the organization, whereas in case of quantitative methods, the selected key factors of
a job are measured.
1. Non quantitative methods- In this method jobs are compared as a whole with other jobs
in an organization.
a. Ranking method-
It is simplest method of evaluation in which each job as a whole is compared with other
and this comparison goes on until the evaluation and ranking of last job. Job ranking is
done in the order of importance of job from simpler to the harder form and the
importance is judged in terms of responsibilities, duties and demands on the job holder.
The jobs are ranked according to ‘the whole job’ rather than a number of compensable
factors. Application of this method involves following steps:
1. Carry out job analysis and job description to bring out the aspects that are to be used for
job comparison.
2. Identifying the benchmark jobs from all major departments and functions which may be
least or most important, or a job midway between the two extreme ends.
3. To rank the jobs in the organization around the benchmark jobs until all the jobs are
placed in the rank in the order of their importance.
4. Finally all the ranked jobs are appropriately grouped by taking into consideration the
common features of the job such as skills, training recruitments and the duties. And the
jobs of the particular group receive the same wage. Ranking method is used by the small
organizations where jobs are few and simple. This method is also suitable for managerial
job evaluation where contents cannot be measured quantitatively. Being a simple one this
method can be used in the initial stages of organizational job evaluation.
Though this method is simple and quite economical to put into effect it has no definite
standards of judgment and also it has limitations when numbers of jobs to be evaluated
are more. It is less time consuming and little paperwork is involved in it.
b. Classification/Grading method-
In this method jobs are graded or classified depending upon the difficulties or required skills
to perform the job. Job grade is defined as group of different jobs involving similar difficulty
level or which requires similar skills to perform the job. The job analysis provides required
data to classify the jobs. The grades are created by identifying some common factors such as
knowledge, skills, responsibilities etc. Some examples of job grades are clerical and non
clerical jobs, administrative jobs, and skilled jobs and so on. Once the grades are established
jobs are placed into their appropriate category depending upon the characteristics of a job
and series of a job is created. Finally the wage rates are fixed for each grade. This method is
easy to understand and simple to operate and being economical can be used I the small
organizations. Job classification helps to administer pay scale determination problem in easy
manner. This method is usually used for government jobs very rarely can be used in
industries as it cannot deal with the complex jobs.
2. Quantitative methods-
a. Point-Factor method-
This is most popular and widely used method of job evaluation and is considered to be
the extension of factor comparison method of job evaluation. It is analytical and more
objective method. In this method on the basis of various identifiable factors such as skill,
effort, knowledge, responsibility jobs are broken down and points are allocated to each
of these factors according to their importance while performing the particular job. Then
points allocated to various factors are summed up and jobs with similar total of points
are placed in similar pay grades.
Steps involved in determining job points are as follows:
1. Job to be evaluated is determined covering all the levels of responsibility to be
covered by the method.
2. Determine the factors to be used in evaluating the job. Number of factors needs to be
restricted to avoid over-complex scheme with overlapping factors and duplication
between factors.
3. Factors should be clearly defined so that different job raters interpret them in the
same sense.
4. Degrees of each factor are determined and point values are assigned to each degree on
the basis of arithmetic progression.
5. Finally points are added to give the total value of a job and money values are assigned
to points with predetermined formula.
It is the most accurate and comprehensive method of job evaluation as the prejudice and
human judgments are minimized so that system cannot be easily manipulated. Though lot of
clerical work is involved in recording rating scales, the scales developed can be used for
long time. This method is not suitable for managerial jobs as the work involved is not
measurable in quantitative terms. It is quite expensive and time consuming method.
b. Factor comparison method-

It is a combination method of both ranking and point-factor method as the jobs are rated
by comparing them and analyzing by breaking them into compensable factors. This
method is used to evaluate the professional and managerial jobs. Steps involved in this
method are:
1. Initially well recognized key jobs are selected from the cross section of the department
which represents all levels of wages and salaries considered to be fair internally as well as
externally.
2. Various job factors to be considered for comparison are identified which may be mental
requirements, skills, responsibility and working conditions, physical requirements etc.
3. Then each job factor is compared with the same factor of a key job and rank is allotted.
4. By adding the ranks obtained by different factors of jobs the relative worth of a job is
determined. The ranks are then expressed in monetary terms and these monetary values are
added together to determine the correct wage rate for the job.
This method provides more accurate information regarding relative worth of a job as
different factors are compared with the key jobs. Chances of overlapping are reduced as the
limited numbers of factors are compared for the effective job performance. It is quite costly
and time consuming method.
4.2 Wage Determination
Wages refer to any economic compensation paid by the employer to their employees for
services rendered, under the contract of employment. According to A.H. Hansen wages is
the payment to labor for its assistance in production. Wages include practically include
anything of value that employees receive from employers which includes hourly wages,
salary, bonuses, fringe benefits, bonuses etc. Employment benefits such as profit sharing
payments, petrol allowance etc also meet the definition of wages.
Wage determination refers to the listing of wage rates and fringe benefit rates for each labor
category of workers. Wages of the employees in the organized sector in India are
determined by different factor such as wage enactments, prevalent wage rates, influence of
trade unions etc. According to Lantham, following factors have bearing on the wage
formulation:
1. Cost of living- Workers need to be paid the adequate compensation so that they will be
able to maintain the acceptable level of living and the concept of ‘minimum wage rate’
is based on the same justification. However it becomes difficult to maintain the required
level of living due to inflationary spirals which leads to the increased cost of living and
fixed wages. Thus, compensation needs to be fixed or revive in order to offset the
increased cost of living by increasing dearness allowance based on the cost of living
index.
2. Productivity- Productivity is expressed in terms of production in relation to time unit.

According to the principle of payment by performance, if the productivity of the worker
is high, wage rate will be high. Thus, any change in the productivity of worker will have
its effect on the wage rate. Here, one should also consider that increase or decrease in
the productivity is not always due to the workers efforts. It may also due to the changes
in technology, better management by the higher level employees.
3. Prevailing wage rates - To attract and retain the workers in the organization wage rates
need to be fixed as per the prevailing rates in the industry. This is most widely used
criterion for wage rate fixation and is also known as ‘going wage rate’. Thus the
prevailing wage rate is fixed based on inter-firm wage rate comparison.
4. Ability to pay – Organizations tends to fix the wages according to their capacity to pay.
Wages beyond the organization’s affording capacity will not enable the organization to
sustain in the competitive environment especially in the long run. Because such wages
increases the unit cost thus cutting the market share of an organization. In such cases, to
sustain organization follows the strategy of cost cutting by reducing the wages and
salary levels.
5. Attraction and retention of employees – The wages and salary levels can be affected
by the quantity and quality of the employees needed by the organizations. For example,
to retain the skilled employees at highly responsible positions organization can decide to
pay high wage rate for these candidates. But for the scarce jobs wage levels will be low.
4.3 Types of wages-
1. Living Wages:
Living wages refers to the wages that are sufficient to provide for the basic needs as
well as certain amenities for the employee. It means the level of wages that are
sufficient to provide for the basic necessities and such amenities that are considered
necessary for the well-being of the employee and his family members in accordance
with his social status.
The term Living Wages has been defined as “The living wage should enable the earner
to provide himself and his family not just the basic essentials of food, clothing and
shelter but also the prudent comfort including education for the children, protection
against ill health, requirements of essential social needs, and measures of insurance
against the more import misfortunes against old age” by the Fair Wage Committee
Report.
Thus, Living Wage must provide not only the basic necessities, such as—food, clothes
and shelter, but also some comforts and amenities estimated by current human standards
such as—travelling, health, child education, social needs, old age and recreation etc.
2. Minimum Wages:
According to Fair Wages Committee, Minimum Wages should provide not only the basic
necessities to worker but also provide for the maintenance worker’s efficiency. This suggests that
minimum wages must be sufficient to provide for all requirements of education, health and other
essential amenities.
Minimum Wages means the minimum payment to worker so that he will be able to provide basic
needs for himself and his family members and to maintain his working efficiency only.
According to some scholars, minimum wages should ensure a minimum standard of living
considering the health, efficiency and well-being of the worker.
What should be the amount of fair wages is a question for which no specific answer can be
given. It depends upon the economic, social and geographical factors of the country. Besides, it
depends upon the size and paying capacity of the enterprise also.
However, it can be said that minimum wages is the amount that is enough for providing basic
needs of the worker and his family and to enable him to maintain his efficiency.
Objectives of Minimum Wages:

Important objectives of minimum wages are as under:
1. To maintain the efficiency of workers, particularly in the industries where the workers do not
get fair wages.
2. To discourage the strikes, lock-outs and industrial disturbances to maintain industrial peace.
3. To increase the worker’s efficiency and protect their interests particularly in case of
unorganized workers.
4. To strengthen labour unions.
5. To help the employees maintain their standard of living.
6. To check the unhealthy competition among the workers and increase their productivity.
7. To improve the management system and provide economic and social justice to the workers.
3. Fair wages
Fair wages vary from country to country and from time to time, hence cannot be defined in a
précised manner. Therefore, fair wages can be determined only after considering the particular
industry circumstances for which wages are to be determined. According to Encyclopedia of
Social Sciences, fair wages refer to the remuneration paid to the workers for the jobs which
require equal efficiency and difficulty. Fair wage is more than the minimum wage and can be
extended to the paying capacity of an organization.
4.4 Salary Structure
Salary Structure refers to the details of the salary being offered in terms of the breakup of the
various components constituting the compensation. It is the set of parameters that define the
salary. Two people can have the same salary but still get different amounts of money every
month this would happen when the salary structure is different.
Salary structure determines the gross salary, in hand pays, allowances etc. All these
variables are paid to the employee as a part of his/her benefits and compensation. If an
employee does not have details of the components, he/she cannot calculate the in hand
salary.
Salary structure components:
Following are the components of the salary structure:
1. Basic Salary: It is the taxable base income and generally not more than 40% of CTC.
Basic salary forms the basis of salary structure many a times. Most of the components may
be defined as percentage of basic salary.
2. House Rent Allowance: The HRA constitutes 40 to 50% of the basic salary.
3. Special Allowances: Makes up for the remainder part of the salary, mostly smaller than
the basic salary and completely taxable.
4. Leave Travel Allowance: The non- taxable amount paid by the employer to the
employee for vacation/trips with family within India.
5. Gratuity: It is basically a lump sum amount paid by the employer when the employee
resigns from the organization or retires.
6. Provident Fund: Fund collected during emergency or old age. 12% of the basic salary is
automatically deducted and goes to the employee provident fund.
7. Medical Allowance: The employer pays the employee for the medical expenditures
incurred. It is tax free up to Rs.15,000.
8. Bonus: Taxable part of the CTC, usually a once a year lump sum amount, given to the
employee based on the individual’s as well as the organizational performance for the year.
9. Employee Stock Options: ESOPS are Free/discounted shares given by the company to
the employees. This is done to primarily for employee retention.
These are few of the components which can be included in a typical salary structure but it
may vary from organization to organization.
4.5 Fringe Benefits
Fringe benefits are nothing but additional compensation that is provided to employees above and
beyond an agreed-upon salary. Offering fringe benefits not only help employees but also
helps employers from a recruiting perspective. In a similarly focused industry, employers find it
challenging to attract desired talent based on salary alone. By offering fringe benefits, especially
those not available through a competitor, it becomes easier for the employers to attract the
required talent.
Fringe benefits are generally tax-exempt, as long as certain conditions are met. Recipients of
taxable fringe benefits have to include the fair market value of the benefit in their taxable income
for the year.
Common examples of fringe benefits include medical and dental insurance, use of a company
car, housing allowance, educational assistance, vacation pay, sick pay, meals and employee
discounts. Total compensation includes regular income and all of these paid benefits.
Fringe benefits are a major consideration in a total compensation package. Salaries are
important, but employees often accept or leave a job based on the quality of fringe benefits.
Health insurance costs have become very expensive and employees that may have previously left
a job more likely stay for these benefits. Organizations use fringe benefits as a tool to hire and
retain top talent and to help create a motivated workforce.
4.6 Executive Compensation
Executive compensation is the monetary and non-monetary benefits which are given to the
senior management & executives of a company. Executive compensation includes salaries,
perks, incentives, insurances etc. This includes high salaries for executive, insurances, company
shares & other benefits.
Senior management plays a pivotal role in building the company's business and brand. Thus,
organizations look take care of these employees by giving them special compensation and
benefits. Their salaries & compensation is based not only on their experience but also on their
profile, qualification etc.
Components of executive compensation
The various components of executive compensation are –
1. Salary- base salary
2. Short Term Incentives (STI) - for meeting the short term goals
3. Long Term Incentives (LTI) – There are the incentives which are paid after a period more than
a year (usually 3-5 years) like offering restricted stocks
4. Guaranteed Severance Package
5. Perquisites – like club memberships, private planes,
6. Insurance – health insurance for self and dependents
The executive compensation is a part of Corporate Governance and has been an issue of hot
debate for quite a long time especially in western media. The American Executives have often
been criticized for the hefty packages received despite lackadaisical performance of their
companies. There are no legal restrictions on the compensation paid to the executives in Western
Companies.
However, the issue is not that severe in India partly because of the provisions in Indian
Companies Act 1956 and many executives being the promoters of their companies. As per the
Indian Companies Act, a ceiling has been imposed on the executive compensation in public
companies and their private subsidiaries. The compensation cannot exceed 11% of the net profits
of the financial year. Also the compensation of whole time directors cannot exceed 10% of the
profits. However, the executives of private companies have been excluded from these
restrictions.
Summary
 Job evaluation refers to the systematic process of determining the value of a job in
relation to another job to serve the objective of determining the fair and equitable pay
scale.
 It helps to control the costs of wages or salaries of employee and improve their
performance through higher morale.
 Job evaluation process involves collecting job analysis data, selecting compensable
factors, evaluating job and assigning pay scale to the
 Wages refer to the compensation paid by employer to the employee in monetary terms for
the services rendered by them.
 Wage determination process is strongly affected by cost of living, prevailing wage rates,
productivity of an employee and paying ability of an employer.
 Salary Structure refers to the set of parameters defining the salary in terms of the breakup
of the various components constituting the compensation.
Test questions
1. Explain the term job evaluation. Describe quantitative and non-quantitative methods of
job evaluation.
2. Explain the term wages. Discuss the factors affecting wage determination.
3. Write in detail about the different types of wages.
4. Explain the term Fringe benefits in detail.
5. What is executive compensation? What are the different components of executive
compensation?
UNIT-5 PERFORMANCE APPRAISAL

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

5.2 Need and importance of performance appraisal
5.3 Performance appraisal process
5.4 Methods of performance appraisal
5.1 Introduction of performance appraisal
5.1.1 Performance appraisal:
 It is an objective assessment to evaluate individual’s performance against well defined

benchmarks and to understand the abilities of a person for further growth and
development.
 Performance appraisal is a formal and systematic way of measuring and evaluating an
employee’s job related behaviors and outcomes which help to discover how and why the
employee is presently performing on the job. This will also help to improve employee
performance in future so that the objective of individual, organizational and societal
benefit is achieved.
 Factors which are evaluated during this assessment includes job knowledge, output
quality and its quantity, leadership qualities, supervision, co-operation, dependability,
judgment, versatility, health, etc.
5.1.2 Purpose of Performance Appraisal:
• To improve the performance and check how employee is performing and what he is
expected to do to fulfill the organizational goals and his job specification.
• To evaluate the training and development needs of employees.
5.1.3 Objectives of Appraisal:
i. To provide feedback on the performance to the employees.
ii. To identify the training needs and provide the opportunity for organizational diagnosis
and development.
iii. To facilitate the communication between employer and employee.
iv. To improve employee performance through counseling, training and development and
motivating them through recognition and support.
v. To help in creating desirable culture and tradition in the organization.
vi. Effecting promotions and transfers and awarding pay increases to motivate employees.
Appraisal in future aims at improving the performance instead of assessing it through the system
orientation from traditional way.
At the end, appraisal system seeks to evaluate opportunity factors such as work environment for
example ventilation and lightings, available resources as human resource and mechanical
assistance and social process as leadership assistance.
Performance appraisal in other words, provides systematic judgment to back up wage and salary
administration. Performance appraisal is thus, useful for compensation, placement and training
and development purposes.
5.2 Need and importance of performance appraisal:
When appraisals are conducted on the regular basis and with attention to better practices
everyone is benefitted. Performance appraisal gives you the opportunity to correct the poor job
performance and reward excellence. It also helps employees advance their career goals.
Performance appraisal is a prime opportunity which offers constructive criticism to employee on
that aspect of job performance which needs improvement. Performance appraisal serves number
of important functions. If it is done effectively, it offers a large degree of satisfaction for both
employee and employer.
Giving and receiving feedback: An effective performance appraisal provides opportunity to
give the feedback as well as receive it. It provides employee an important information about the
job areas which needs improvement and also the areas in which employee is performing well.
Employees should be allowed to provide their feedback by asking them some open ended
questions designed to encourage them to share their insights.
 What do you think the strength and weaknesses of the organization are?
 Do you feel supported by management to speak up when you have an idea or problem? If
not how can we improve or change that?
 These kinds of questions reassure employees that their insights are truly welcome.
Listening to their responses helps them feel valued and this in turn increases their level of
engagement at work.
1. Goal setting: In addition to review the performance of an employee, the appraisal also
provides a good opportunity to establish new goals. To take the advantage of this opportunity
interviewer should offer specific suggestions to improve the performance, as well as ways in
which management and company can support the employees to achieve the decided goals.
During this appraisal process employee and reviewer can work together to set new goals or
develop a plan to meet the decided goals.
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2. Improving communication: It helps to improve communication between employee and
employer. Open discussion about the job performance and the issues affecting it, helps to
develop the sense of trust between reviewer and employee.
When employees are better equipped to their job, they feel supported by the management and
challenged by their work which enhances the sense of engagement among them. This ultimately
leads to the higher retention rate and increased loyalty towards their job and organization.
3. Measuring recruitment efforts: Performance appraisals help in evaluating the recruitment
practices. For example, the presence of many poor performers in an organization indicates that
recruitment process is lacking somewhere and needs to be revised.
5.3 Performance appraisal process:
Following steps are involved in the performance appraisal process:
1. Establishing performance standards:

First step in the performance appraisal process is establishing the performance
standards which can be used as base to compare the actual performance. In this
step the criteria is set to judge the performance of an employee as successful or
unsuccessful. The standards which are to be set should be clear and
understandable. Standards should be in measurable terms.
2. Communicating standards:
Once the standards are set, it is the responsibility of management to communicate
these standards to the employees. Employees should be informed and standards
should be clearly explained to them which will help them to clearly understand
their roles and what is expected from them. These standards should also be
communicated to the evaluators. At this stage standards can be modified itself
according to the feedback of the employees or evaluators.
3. Measuring the actual performance:

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

Actual performance is compared with the desired performance to check whether
there is deviation in the actual performance of the employees from the standards
set. The result shows that whether the actual performance is more than or less
than the desired performance which depicts a negative deviation in the
organizational performance. This includes recalling, evaluating and analysis of
performance related data of an employee.
5. Discussing results ( providing feedback):

The results of the appraisal are communicated and discussed with the employees
on one-to-one basis with the focus on communication and listening. With the aim
of problem solving and reaching consensus, the result, the problem and the
possible solutions are discussed. The performance appraisal feedback by the
managers should be given to the employees in such a way that it will be helpful to
correct the mistakes done by employees. Feedback should be given to the
employees with the positive attitude so that it will motivate them for better
performance. If the performance feedback task is not handled carefully it may
lead to emotional outburst.
6. Making decision – taking corrective actions:

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

Various methods are used to evaluate an employee performance. Few of them are discussed
below.
5.4.1Past oriented methods:
1 Paired comparison method:
In this method performance of each employee is rated with another employee in the form of
pairs. The number of comparisons may be calculated with the help of the formula: N*(n-2)/2
2 Rating scales:
In this method of performance appraisal criterion such as attendance, co-operation, attitude,
dependability, output etc. are rated on the scale ranging from excellent to poor.
Advantages:
This method is easily adaptable and relatively easy to use. Also the costs incurred are low.
Disadvantages:
Personal bias of the evaluator can affect the outcomes of this method.
3. Forced choice description method:
In this method of appraisal evaluator is given the series of readymade statements arranged in the
blocks of two or more. Evaluator is forced to select out of the given statements to indicate which
of them is more or less descriptive of the employees.
Advantages:
Use of this method avoids the interference of personal bias of the evaluator while rating the
performance of an employee.
Disadvantages:
Statements used may not be properly framed to describe the employee’s performance which may
limit the accurate outcomes.
4. Forced distribution method:
The forced distribution is most widely used and most criticized rating system of performance
appraisal by the companies all over the world.
Each employee is assessed by the supervisor based on certain predetermined parameters and then
they are ranked into three or more categories such as excellent, good and poor.
This method is also called as bell-curved rating or stacked ranking. This method typically
chooses normal distribution curve to represent the performance distribution which ensures that a
small fraction of the entire workforce is to be placed at the extremes, which is outstanding
performers and poor performers.
A relatively large section of employees fall in the middle section of the curve. Image below
illustrates this clearly.
Advantages:
This method is simple to implement and cost effective. It also helps to cultivate high
performance culture in an organization.
Disadvantages:
Sometimes employees may feel that the evaluation is not fair which can lead to unhealthy
competition and rivalry among the employees and loss of morale of the organizational
workforce.
5. Checks lists:
This method uses the checklist of the employee’s traits both positive and negative related to
their job prepared in the form of two columns- viz ‘YES’ column and ‘NO’ column. The
evaluator is just supposed to tick YES or NO in front of the traits being evaluated. And when
points are allocated to the checklist it becomes a ‘weighted checklist.’
Advantages:
This method is easy to administer as the standardized checklists are used. It is also a cost saving
method as very less training to the evaluator is required. It promotes the objectivity and prevents
memory lapses.
Disadvantages:
It does not allow any explanation regarding employee behavior related to the job. Sometimes
answers are more complex than either/or and yes/no, in such cases check list method may not be
the ideal method.
6.Free essay method:
In this method evaluator prepares the statements about the employee to be evaluated. This
statement mainly focuses on the strengths and weaknesses of an employee in the job
performance. An evaluator can edit the statement alone or it can be composed in collaboration
with evaluators.
Advantages:
It is less structured and confining as compared to the rating scale method and allows evaluator to
evaluator any aspect of the job performance. It is open-ended and flexible process and gives
freedom of expression to the evaluator.
Disadvantages:
These methods are time consuming and difficult to execute. Being a subjective process it
becomes quite difficult to compare the results of individuals or draw any conclusion about the
needs of an organization.
7. Critical incidents:
It involves identifying and describing specific incidents where employee did something very well
or something which needs improvement on the basis of description of an incident. The manager
is supposed to describe, in writing, the behavior of an employee during the critical incident
occurred throughout the evaluation process. Manager records the incidents as they occur, and the
incident can be positive or negative. This technique does not rely on the assignment of ratings or
rankings. The critical incidents help employee to improve as the information in them is more
detailed and specific as compared to the rating scales.
Advantages:
This method focuses on the actual job behavior of an employee. Recency bias is reduced as it
depends on the detail records of the incidents.
Disadvantages:
Negative incidents are more noticeable than positive ones.
8. Field review method:
It is conducted by the evaluator who does not belong to the employee’s department. The person
is someone from corporate or HR department.
Advantages:
In this method issues related to the evaluator’s bias are reduced as the evaluator is from the
different department.
Disadvantages:
Evaluator being from the different department is unaware of the working conditions. Also it is
difficult for him to observe the actual behavior of an employee.
5.4.2 Future oriented methods:
1.Management by objectives: The concept of management by objective is put forth by the
management theorist Peter Drucker in 1950. The guiding principle of this method is that the
results can be observed and the employee traits and attributes must be guessed at. In this result
oriented method employee performance is measured by examining the extent to which
predetermined objectives have been met.
In this method objectives are jointly established by the employee and the subordinate manager.
Also the major areas of responsibility of an individual in terms of expected results are defined
and these measures are used as guideline for operating the unit and assessing the contribution of
each of its member. Employees are expected to monitor their own development and progress and
identify the skills needed to achieve their goals.
Advantages:
This approach concentrates on the outcomes instead of assuming the traits required of the
employee. Employees are judged according to their performance and not on the subjective
opinion of their abilities. It can give employees a satisfying sense of autonomy and achievement.
Disadvantages:
Employees lack in reality checking skills which are needed during setting an objective at the
initial stage and for the purpose of self auditing and self monitoring. These skills cannot be easily
conveyed by training. Variable objectives may lead to employee confusion. Activities involved
such as setting goals, measuring progress and providing feedback are time consuming.
2. Psychological Appraisal
Professional psychologist involved in appraisal to asses employs potential with future
orientation for development of executives. This method is not focusing on past
performance. In depth interviews and psychological test conducted with the help of
experts. Final assessment report is prepared after discussion with supervisors and
reviewer. Potential appraisal and future development and strategic goals are main
objective of this method.
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3. Assessment Centers
Assessment center is a central location where potential and performance of employee is
evaluated to identify employee competency for future need of higher position of
organizations. Assessment is done on various parameters for example assertiveness, self
confidence, communication, resistance to change, decision making ability, and creativity
etc. Assessment center involve combination various methods like test, role play, social
events, informal events, assignment, group activity. Normally this type of assessment is
outsourced to professional agency or organization.
4. 360 Degree Performance Appraisal

A systematic process of collection of performance assessment and feedback is developed
from 360 degree for assessment of individual and group performance. All stakeholders
are involved for performance assessment for example immediate supervisors,
subordinates and collogues are involved in rating process. Multiple raters are involved in
performance assessment. It is also known as 360 degree feedback system. Self appraisal
is an integral part of this appraisal method. Self development and future orientation is
major focus of this performance appraisal system.
Advantages
360 Degree performance Appraisal
Favoritism can be minimized with multiple rating. Employee also involved in appraisal
which leads to improve satisfaction level of employees
Disadvantages
This method is time consuming due to multiple raters. Analysis is also time consuming and
difficult process.
Summary
 Performance appraisal is all about the evaluation of employee

 Performance against the well defined benchmarks.
 It helps to identify the need for training and development to improve the employee
performance.
 Performance appraisal provides an opportunity to give and receive the feedback to both
employees and management.
 It also helps to set the new goals and plans to meet them.
 The information obtained through performance appraisal is useful in three major areas
such as compensation, placement and training and development.
 The methods of performance appraisals include rating scales, critical incidents, ranking
methods, and management by objectives, paired comparison method, forced choice
method and many more.
 A sound appraisal system involves assessing employee performance on regular basis.
 A suitable performance appraisal system has to be designed by keeping in view the
requirements and culture of an organization.
Test questions
1. What is performance appraisal? Discuss the need and importance of performance of
performance appraisal.
2. Explain the process of performance appraisal.
3. Write in detail about the Future oriented methods of performance appraisal.
4. Explain in detail past oriented methods of performance appraisal.
UNIT-6 EMPLOYEE RELATIONS MANAGEMENT
CONTENTS-
6.1 Introduction of Employee relations management
6.3 Importance of Relations Management
6.4 Employee Relation Management Tools
6.5 Issues in Employee relation Management
6.1 Employee relations management:
The field of employee relations is also referred to as Industrial relations and it comes under the
umbrella of human resource. Since each and every organization has HR department, it’s a
responsibility of every employer to manage the employee relations to maintain order and
productivity within the organizational workforce. It encompasses the programs and
communication channels that enforce corporate culture and resolves the different issues arising
in the workplace. Employee relations field helps to incorporate fair hiring practices and equal
employment opportunities.
Employee relations can be broken down into different codes of conduct such as:
Workplace behavior - address to the issues related to employee attendance, alcohol or drug
abuse, profane language and disputes etc.
Employee conduct – addresses to the issues related to workplace discipline, dress code and
appearance, discrimination and sexual harassment etc.
Managers having excellent communication skills can effectively manage the employee relations
by encouraging open and frequent dialogues which helps to create healthy work environment
based on trust and mutual respect. Employee relations manager needs to have ability to anticipate
the issues before they happen. He must be capable enough to recommend innovative solutions
and make quick decisions.
Employee relations management helps an organization to maintain the healthy work environment
by minimizing potentially disruptive issues.
Employee relationship management is an information system which supports the relationship

between the company and its employees. It enables the employees to collaborate on particular
managerial tasks with their employers. Employee relationship management aims at aligning the
interests of both, worker and the employer.
The major assets of an organization are employees. It is important that the employees perform
together as a unit and contribute equally towards the realization and achievement of a common
goal. If the individuals are engaged in constant conflicts and misunderstandings no task can be
accomplished. It has been observed that if the employees work together and share a warm
relationship among themselves targets are achieved at a much faster rate. If employees are
comfortable with each other, they can deliver their best and enjoy their work.
ERM refers to managing the relation between the employees in an organization and the
relationship can be between employee and the employer as well as between employees at the
same level. It is an art of effectively monitoring and managing the relation between individuals
either of the same team or from different teams. ERM activity helps in strengthening the bond
among the employees and ensures that each one is equally important and satisfied and enjoys a
healthy relation with each other.
Employee relationship management includes various activities undertaken by the superiors or the
management to develop a healthy relation among the employees and extract the best out of each
team member.
6.2 Importance of Relations Management:
At the workplace every individual shares certain relationship with his co-workers. Being
social animal humans cannot work alone. An individual needs someone to talk to, discuss
and share their ideas and thoughts. An isolated environment spreads negativity and
demotivates employees. To create healthy work environment it is essential that workers
maintain healthy relationship with each other at the workplace.
Work becomes easy when shared among the co-workers. A healthy relation with co- workers
eases the work load on an individual and in turn increases their productivity. One cannot do
everything on his own. To accomplish the assigned tasks within the given time frame
responsibilities must be divided among team members.
There are certain issues on which decisions cannot be taken alone and need of guidance and
advice of other employee arises. While implementing certain plans, pros and cons of it need
to be discussed. And each and every team member has right to express his opinion about the
strategy to be implemented. This will help to accomplish the organizational goals at faster
rate.
In an organization where employees are working closely together, conflicts are unavoidable.
But if the employees are sharing healthy relations conflicts can be easily resolved as they
arise. And this ultimately helps to maintain high office morale. When employees feel that
they are heard and respected, it will boost their morale and make them efficient in their job.
These strong relationships are vital not only to an individual but also to the organization as
whole because the culture of teamwork and mutual motivation makes employee smarter and
more efficient.
6.3 Employee Relation Management Tools:
Poor relationships between management and staff cause many people to dread going to work every
day. This friction between management and staff not only leads to poor attitude and morale but it
also has adverse effects on company’s productivity. There are multiple options available for
managers and workers that can help them work harmoniously to improve their performances and
morale. Some of the basic and important tools are discussed below.
1. Co-operation- Every team member should understand that work performance is not about the
competition, it’s all about coming together and accomplishing the previously decided
organizational goals. Managers should delegate some specific responsibilities to certain
employees linked with the next one in order to provide top quality product and services to the
customers.
Good communication between management and employees helps to build strong co-operation
and understanding among them and building good communication skills between employees and
can be done through the activities such as workshops, seminars, training programs, office
luncheons etc. The employees will take such opportunities as a chance to take a break from the
daily routine and help each other to build their weaknesses into their strengths.
2. Motivation- One should find the ways to bring the teams together. Teams should be informed of
their monthly goals and targets to be achieved and rewards and incentives can be offered to
motivate them to reach the goals. Some of them can be:
 Bonuses
 Free lunches
 Gift vouchers
 Fitness perks etc.
3. Advantage of feedback- While taking certain decisions, inputs of an employee should be
Considered in that regard. Speaking with the employees of the strengths and weaknesses of their
department and how their managers are executing their responsibilities will help the employees
feel more appreciated and valued. This will ultimately improve their productivity.
Another advantage of the employee feedback is that managers can get the fresh mindset on the
particular topic. Therefore, one should not feel too proud to seek the assistance from the
employees.
Taking employee feedback will not only help managers to view the situations rationally from the
alternate perspectives but it will also provide the manager with the various viable options or
alternatives to choose from.
4. Rational conflict resolution- As mentioned earlier, conflicts are inevitable in the organization
but it doesn’t mean that they should not be the top priority. Conflicts arising among employees
easily disrupt the working environment, so it is necessary to resolve them rationally and in timely
manner.
While addressing to the conflict one should not be quick to judge because jumping to the
conclusion without hearing the multiple sides of the incident or an issue may be dangerous for
the organizational health. It is very important to have an open minded approach towards the
situation.
6.4 Issues in Employee Relation Management:
While working in an organization, every employee should ideally be comfortable with his co-
workers so that he will be motivated and stress free. Mostly it is observed that no conclusion
comes out of any dispute; instead it’s wastage of time and it may lead to creating negative
environment in the workplace. Employees are expected to work together as a one unit so that
they can accomplish the goal at much faster rate.
Employees who enjoy warm and healthy relationship with each other tend to discuss the things
among them in the favor of team which ultimately benefits the organization also. But sometimes
it is very difficult to satisfy everyone in the organization as the issues arising while working in
the team may lead to major unrest in the team. This can lead to spoiling the relationship between
the employees.
We will discuss some common issues in the employee relations management.
1. General conflict management- As mentioned earlier in any working environment

conflicts are unavoidable. Efficiently managing conflicts is the most critical skill to deal
with the employee relation issues. Conflicts can arise between management, employees
and workers more frequently and this conflict management is vital for the smooth
running of an organization.
If there is proactive conflict management policy in place and proper process to be

followed, employees will feel satisfied as th.eir issues have been addressed appropriately
in time.
2. Safe working environment- Safety at the work place should be the priority in any
organization. No one wants to meet an accident and get injured. Therefore, every
organization should promote workplace safety and must have safety rules and
regulations.
3. Time and attendance issues- These issues can be major determinant to the organization.
If employees are prone to lateness, continuously remaining absent without acceptable
reasons or they are leaving before stipulated office hours, it’s a loss of money to the
company. This also hampers the individual performance and ultimately company
operations suffer. This can lower the morale of the other team members and if these
issues are not addressed on time it can lead to the termination. However, if there are no
right procedures in place to support termination, demotion or suspension of an employee,
company will have to face the costly lawsuits of unfair business practices.
4. Non compliance- A safe and safety environment needs to be maintained in an
organization. Therefore, when issues arise regarding discrimination and workplace
harassment, or in regards to parental leave or disability or any dispute directly related to
employee rights and compliance violations, opening a case and collecting all supporting
documents is necessary.
It is crucial to employ comprehensive and simple employee relations plan and it will
provide a huge benefit to HR professional. If an organization avoids such type of
common pitfalls using effective communication and automated software will help the
organization operate smoothly with less employee relation issues.
Summary
 ERM refers to the information system which supports the relationship between
the employer and his employees.
 It includes various activities which help to develop the healthy employee-
employer relationship.
 Some of the tools which are used to promote the healthy environment at the
workplace are motivation, co-operation, advantage of feedback and rational
conflict resolution.
 Some of the issues arising during employee relation management are general
conflict management, work safety, time and attendance issues etc.
Test questions
1. What is employee relations management? Explain in brief.

2. Discuss the importance of employee relations management in an organization.
3. Explain different employee relation management tools.
4. Discuss the different issues in the employee relation management.

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HRM

UNIT-1 INTRODUCTION TO HRM

 To define human resource management

1.2 Nature and scope of HRM

1.3 Evolution of HRM

1.4 Challenges of HRM

1.5 HR Profession and HR Department

1.6 Global perspective of HRM

1.2 Nature and scope of HRM-

1.2.1 Nature of HRM

1.2.2 Scope of HRM

3. Industrial Relations Aspect-

1.3 Evolution of HRM

Fredrick Taylor’s principles of scientific management (1857-1911) led to the evolution of

1. Recruitment and Selection Of Skilled Workforce

1.4 Challenges of HRM

As we know Human Resource Management includes:

1. Changing environment- As the world is rapidly changing; the organizations

3. Technology- Technology is changing everyday in today's world and the organizations

1.4.2 Organizational Challenges –

2. Company characteristics- Characteristics such as size of the company, development stages

1.4.3. Individual Challenges –

1.4 HR Profession and HR Department-

HR profession is so diverse in nature that the HR professional has to perform all-encompassing

1. To develop the plans and policies and knowledge of corporate culture.

2. Involve in company’s strategy formulation by identifying and evolving HRM strategies.

3. Initiate the changes in an organization as internal change agent and consultant.

To be a successful and highly competent HR professional person needs to be competent in

1.6 Global perspective of HRM

While working in international organization difficulty arises in implementing HR practices. In host

1. Explain the nature and scope of Human Resource management.

OBJECTIVES- After reading this chapter you should be able to

 Explain the importance of human resource planning.

2.1 Human Resource

2.2 Demand and Supply Forecasting

2.3 Factors affecting HRP

2.4 Job Analysis and Job Design

2.5 Recruitment and Selection- Recruitment Process

2.6 Sources and Methods of recruitment

2.7 Evaluation of Methods of Recruitment

2.8 Steps in selection

2.1 Human Resource

2.2 Demand and Supply Forecasting

Organizational factors or internal factors-

Transition Matrix helps to understand internal movement trends of the organization’s

3. Employee productivity- Employee productivity refers to the assessment of the efficiency of an

Table- calculating productivity ratio:

YEAR PRODUCTIVITY NO. OF PRODUCTIVITY RATIO

5. Strategic direction- As we know, company strategies always keep on changing. Even

Environmental factors or External factors

Labor shortage tactics-

3. Employee retention- Main cause of labor shortage is employee turnover. To overcome

4. Employee promotions- Existing employees from one department can be moved to

1. Layoffs- Layoff refers to quickly reducing no of employees. Primary advantage of this

3. Early retirement programs- Early retirement programs aims at lowering firms

4. Employee promotions, transfers and demotions- As these tactics can be helpful in

3. Environmental uncertainties- Environmental uncertainties refer to political, social or economic

2.4 Job Analysis and Job Design

While designing job managers need to consider:

1. A task that should be emphasized while designing a job

2. Motivational Approach- This approach focuses on making jobs more interesting

Following are some of the job analysis techniques:

3. Occupational information network- This kind of technique make use of online